Tesla shares look as if they are about to spontaneously combust in pre-market trading, set to plummet below $200 for the first time in three years, after Wedbush published a research report saying that the company faces a “Kilimanjaro-like uphill climb” to hit its profitability goals for the second half of the year, according to Bloomberg. In the Sunday report, analyst Dan Ives also slashed his price target from $275 to $230 and calling the company‘s current state of affairs a “code red situation”.
Ives had previously been one of the most bullish analysts on the name, but now looks to be the latest sell-sider finally accepting a much needed dose of reality. In his note, he claimed that he has “major concerns around the trajectory of Tesla’s growth prospects and underlying demand on Model 3 in the U.S. over the coming quarters.”
Tesla shares were hit to start the week Monday morning, collapsing 4% in pre-market trading, meandering deep inside margin call territory, and setting up the company to test the key $200 level, the lowest price since December 2016.
On Friday, the stock had already closed at a near 2 1/2 year low, barely over $210.
And as this bad news continues to break for the embattled automaker, Tesla still has not amended its guidance for 90,000 to 100,000 cars delivered in the second quarter, which Ives referred to as a “Herculean task”. Tesla skeptics and short sellers have widely written this guidance off as near-impossible for the quarter. Ives sees annual production coming in at 340,000 to 355,000 vehicles for the year, versus the company’s 360,000-400,000 guidance.
Ives concluded: “Additionally, with a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser-focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound.”
As a reminder, the “profitability goals” referred to by Ives are what Elon Musk sold to investors in a recent $2 billion convertible financing. When Musk was reportedly asked on a conference call what he was going to do with the $2 billion he was raising, he casually told investors: “We don’t expect to spend this capital. We expect to fund our activity out of our growing cash flow…”
This statement isn’t just at odds with Ives’ analysis, either. Noted Tesla skeptic, Paul Huettner, recently pointed out on Twitter that the comment stands in stark contrast to some of Musk’s statements made in a publicly leaked employee email this past week.
Elon’s pledge to “not use this money” & “to fund our activity out of our growing cash flow” differs SIGNIFICANTLY from his email, sent just two weeks later on 5/16 where he stated that it will take a “hardcore” effort to break even & be “financially sustainable”. h/t @lorakolodny
— Paul Huettner, CFA (@Paul_M_Huettner) May 18, 2019
All in all, it should be a very exciting week ahead, if rather stormy, in Longsville.
via ZeroHedge News http://bit.ly/2YE1oLj Tyler Durden
Reacting to a New York Times story about Deutsche Bank staff flagging ‘suspicious’ activity in Trump’s and Kushner’s accounts, President Trump again blasted the “Failing New York Times” for daring to suggest that Trump only banked with Deutsche Bank and Capital One because other banks didn’t want to work with him.
Repeating a prediction that the NYT will ‘pass away’ when he leaves office in six years, Trump insisted that this notion is “WRONG”; He didn’t work with other banks because he “didn’t need the money,” not because they wouldn’t do business with him after his infamous string of bankruptcies in the 90s.
The Failing New York Times (it will pass away when I leave office in 6 years), and others of the Fake News Media, keep writing phony stories about how I didn’t use many banks because they didn’t want to do business with me. WRONG! It is because I didn’t need money. Very old
….fashioned, but true. When you don’t need or want money, you don’t need or want banks. Banks have always been available to me, they want to make money. Fake Media only says this to disparage, and always uses unnamed sources (because their sources don’t even exist)……
Trump added that the mainstream media has never been “as corrupt and deranged” as it is today, which is why it won’t cover the “real” Russia hoax (the provenance of the Steele Dossier).
The Mainstream Media has never been as corrupt and deranged as it is today. FAKE NEWS is actually the biggest story of all and is the true ENEMY OF THE PEOPLE! That’s why they refuse to cover the REAL Russia Hoax. But the American people are wise to what is going on…..
As for his relationship with Deutsche, Trump said they were “highly professional.”
…..was very good and highly professional to deal with – and if for any reason I didn’t like them, I would have gone elsewhere….there was always plenty of money around and banks to choose from. They would be very happy to take my money. Fake News!
He concluded with a prediction that the MSM would soon shift its narrative to questioning where Trump’s cash came from, and whether Russia was involved.
….Now the new big story is that Trump made a lot of money and buys everything for cash, he doesn’t need banks. But where did he get all of that cash? Could it be Russia? No, I built a great business and don’t need banks, but if I did they would be there…and DeutscheBank……
And if you thought some of these tweets seemed a little disjointed, Trump confirmed that a couple of tweets from this thread never posted – he blamed some unspecified issue with Twitter – but that he wouldn’t tweet the threat over because “only Democrats get do-overs!”
Though he later deleted that tweet, here’s a screenshot.
via ZeroHedge News http://bit.ly/2WZy41K Tyler Durden
When the semiconductor index was soaring in the past few weeks even as semi shipments and revenue forecasts plunged to the lowest since the financial crisis, many said that the market knew something other didn’t.
In retrospect, the market was absolutely clueless and semi stocks and tech names are freefalling today following the overnight news that in the aftermath of Trump’s ban of Huawei, some of the Chinese telecom giant’s biggest suppliers such as Intel, Qualcomm, Xilinx and Broadcom, told their employees they would not supply Huawei till further notice, while Google cut off the supply of hardware and some software services to Huawei smartphones.
As a result of this latest escalation against China’s crown tech jewel, an early push higher in S&P futures fizzled and futures slumped, dropping alongside European stocks, while bonds pared an earlier loss and crude oil advanced. In fact, after some early strength, global markets became a sea of rad with Nasdaq futures leading U.S. declines and pointed to a weak opening in New York…
… while software and chip maker shares helped pull the Stoxx Europe 600 index lower as chipmakers Infineon Technologies, AMS and STMicroelectronics dropped sharply after Nikkei Asian Review reported that German chipmaker Infineon had halted shipments to Huawei.
Stocks took a leg lower just after 4am EDT after twitter account @Money_China published unverified rumours that there had been a break down in US-China trade discussions, and that China will suspend business with all suppliers who have agreed to halt supplying Huawei.
Investor Jim Rogers told the Reuters Global Markets Forum that he believed Washington and Beijing would soon announce a trade deal, although the current spat would not be the last time Trump tried to exploit the prospect of a trade war: “These are negotiating tactics from Mr. Trump at the moment. What will happen is we will have some good news, the market will have a rally. It will probably be the last rally.”
Others, such as former SNB governor and current vice chairman at BlackRock, Philipp Hildebrand, told Bloomberg TV that “the baseline scenario is not bad” for global growth. “It’s really a risk story. So far we don’t see much of it being manifested in the hard data. It’s really the re-ordering of the global trading system that’s at stake here.”
Equities were mixed across Asia, with regional shares playing catch up to the US, and managing to reverse some of last week’s heavy losses on Monday, after the United States said it would lift tariffs in North America, as investors cheered apparent wins by Conservative incumbent parties in elections in Australia and India. Stocks rallied in Australia and the nation’s currency jumped after a surprise election victory for conservative Prime Minister Scott Morrison.
As we reported on Sunday, Australia’s ruling Coalition led by PM Morrison is set to remain in power for a 3rd consecutive term following the Federal election on Saturday with the incumbents having at least 75 seats vs. 67 seats for Labor, while other reports suggested that the Coalition has managed to obtain a majority
While the Shanghai Composite posted another modest drop (down -0.4%), China’s offshore yuan strengthened, providing a glimpe of hope after the trade war dragged down the currency to a five-month low. The euro steadied after five days of declines as elections for the European Parliament approached. Treasury 10-year note yields erased an earlier advance to trade little changed.
“Market volatility continues to stem from announcements and interpretations of what is going on in trade disputes between the U.S. and its trading partners, but principally China,” said Jasper Lawler, head of research at London Capital Group. “Whilst the latest headlines over Canada are supportive of sentiment, a news bite which increases risk aversion could be just around the corner. Investors know this and are on edge right now. That won’t change overnight. China are unlikely to take Google’s suspension of business with Huawei lying down.”
It wasn’t all bad news: as Reuters notes, on the positive side, a U.S. decision on Friday to remove tariffs on Canadian steel and aluminum prompted Canada’s foreign minister to vow the quick ratification of a new North American trade agreement. The MSCI index of world shares rose 0.08% in early trading, but that gain was almost certain to become a loss by EOD. It remains some 3.6% below its 2019 highs as the sudden return of trade war jitters sent the stock market’s strong rally into reverse.
In rates, 10Y US Treasurys were unchanged at 2.39% after climbing 2bps earlier, while European bonds edged lower with the region’s parliamentary elections in focus this week. German government bond yields moved slightly higher. That followed a fall toward new 2-1/2 year lows last week after investors flocked to safe-haven debt. Austrian yields held firm after a scandal prompted Chancellor Sebastian Kurz to pull the plug on his coalition with the far right at the weekend, raising the chances of a snap election.
In FX, the Australian dollar was the biggest winner, jumping nearly 1% after the center-right Liberal National Coalition pulled off a shock win in a federal election, beating the center-left Labor party. The Indian rupee also rallied after exit polls pointed to a majority for Prime Minister Narendra Modi’s Bharatiya Janata Party and allies. The rupee was last up 1.1%.
China’s offshore yuan rebounded after touching its weakest against the dollar since November on Friday. It last traded up 0.1% at 6.9441 per dollar. Sources told Reuters China’s central bank is expected to use foreign exchange intervention and monetary policy tools to stop it weakening past the 7-per-dollar level in the near term. Meanwhile, the dollar slipped slightly against the euro to $1.1161. Sterling recovered 0.3% to $1.2751 after suffering its biggest weekly loss since 2017 after an apparent collapse in Brexit talks in London.
In commodities, oil prices jumped after Saudi Energy Minister Khalid al-Falih said that there was consensus among the members of the OPEC to maintain production cuts to “gently” reduce inventories (although Russia did not sound nearly as confident). Both U.S. crude and Brent crude jumped more than 1.1% on Monday, with West Texas Intermediate fetching $63.5 a barrel and Brent crude at $73.04 per barrel. Rising tensions in the Middle East, which have supported oil prices, ratcheted up another notch on the weekend as Trump issued new threats, tweeting that a conflict with Iran would be the “official end” of that country.
Expected data include Chicago Fed National Activity. Pinduoduo and International Game report earnings.
Market Snapshot
S&P 500 futures down 0.2% to 2,857.00
MXAP up 0.4% to 154.63
MXAPJ up 0.6% to 505.86
Nikkei up 0.2% to 21,301.73
Topix up 0.04% to 1,554.92
Hang Seng Index down 0.6% to 27,787.61
Shanghai Composite down 0.4% to 2,870.60
Sensex up 3.4% to 39,217.80
Australia S&P/ASX 200 up 1.7% to 6,476.10
Kospi unchanged at 2,055.71
STOXX Europe 600 down 0.1% to 381.11
German 10Y yield rose 2.0 bps to -0.084%
Euro up 0.04% to $1.1162
Italian 10Y yield fell 2.4 bps to 2.287%
Spanish 10Y yield rose 0.7 bps to 0.882%
Brent Futures up 0.6% to $72.67/bbl
Gold spot down 0.2% to $1,275.32
U.S. Dollar Index down 0.03% to 97.97
Top Overnight News from Bloomberg
Top U.S. corporations from chipmakers to Google have frozen the supply of critical software and components to Huawei Technologies Co.
The shock election win by Australia’s center-right government and its agenda of sweeping tax cuts have cast doubt on the outlook for interest-rate cuts. Traders are pricing in a 57% chance of a reduction in the cash rate in June, down from 70% Friday, as the Reserve Bank prepares to release minutes of this month’s meeting Tuesday
Prime Minister Narendra Modi’s ruling coalition is poised for victory in India’s general elections, exit polls showed, giving it another five years running the world’s fastest-growing major economy despite a jobs crisis and struggling rural sector
Amber Rudd, the U.K. work and pensions secretary, will lead a group of 60 Tories seeking to stop bookmakers’ favorite Boris Johnson from succeeding PM May and pursuing a chaotic no-deal exit from the European Union
President Donald Trump warned Iran not to threaten the U.S. or face ruinous consequences as tensions mount between Washington and Tehran
Japan’s economy beat expectations with growth during the first quarter of the year, but a look under the hood shows that its engine is far from robust as policy makers brace for a sales tax hike in October
Australian Prime Minister Scott Morrison’s center-right government will command a parliamentary majority with his Liberal-National coalition securing 77 seats in the 151-member lower house
The People’s Bank of China warned that the escalating trade war could destabilize the global economy, and vowed to continue with targeted stimulus at home while keeping the currency steady
The Trump administration’s threats to choke Huawei Technologies Co. is hitting some of the biggest component-makers. Blocking the sale to Huawei of critical components could also disrupt businesses of American chip giants like Micron Technology Inc. and hamper the rollout of critical 5G wireless networks worldwide
China’s yuan, already battered by the U.S. trade dispute, will soon have a catalyst for further depreciation. Offshore-listed Chinese companies will sell the yuan to buy foreign currencies and fund their $18.8 billion dividend bill due from June to August, according to Bloomberg calculations
Asia equity markets were somewhat mixed as lingering trade uncertainty clouded over a buoyant start to the week. ASX 200 (+1.7%) and Nikkei 225 (+0.3%) were rampant at the open with the Australian benchmark at its highest since 2007 following a surprise win by PM Morrison’s ruling Coalition which defied the opinion polls to beat the Labor party and even reportedly secured a majority, while Tokyo sentiment was underpinned by a weaker currency and after much better than expected GDP growth for Q1. However, some of the gains were later pared as China entered the fray in which Shanghai Comp (-0.4%) and Hang Seng (-0.6%) resumed their losses amid US-China trade tensions after reports suggested negotiations were in flux and that talks have stalled, while comments from China were also concerning as Foreign Minister Wang warned the US to not go too far. Finally, 10yr JGBs were lower amid a lack of demand for safe-havens in Japan and after the better than expected GDP numbers, while an enhanced-liquidity auction for longer-dated bonds also saw slightly weaker demand from prior. China Foreign Minister Wang Yi said recent words and actions by US have harmed interests of China and its enterprises, while he added that China oppose these actions and warned the US to not go too far. Wang added that the trade dispute must be solved through negotiation on an equal footing and hopes both sides will avoid escalating tensions.
Top Asian News
Australia’s Morrison Leads Conservatives to Shock Election Win
Japan’s Economy Grows in 1Q Despite Global Headwinds
China Says ‘Wait and See’ on Huawei Countermeasures
Rupee Jumps With Stocks and Bonds as Exit Polls Signal Modi Win
European equities have kicked off the week on the backfoot [Eurostoxx 50 -1.2%] following on from a mixed lead in Asia with sentiment in Europe dampened on speculation that China will retaliate against Huawei measures [NOTE: THIS IS UNVERIFIED] after Google suspended Huawei from Android access. As such, broad based losses are seen across European equities with Italy’s FTSE MIB (-2.0%) the clear laggard amid a slew of large cap ex-divs. Sectors are mostly lower with defensive sectors buoyed by the risk-averse tone whilst energy names are supported by the price action in the complex. On the downside, material and IT names are the clear underperformers with the former subdued by price action in base metals. Meanwhile, the latter is pressured amid a decline in semiconductor names following reports via the Nikkei that Infineon (-4.6%) reportedly halted shipments to Huawei, in turn moving fellow chip names lower in sympathy including Dialog Semiconductor (-3.4%), ASM (-3.0%) and STMicroelectronics (-8.3%). On the flip side, the aforementioned Google/Huawei news supported Huawei’s European competitors with Nokia (+2.0%) and Ericsson (+1.0%) shares underpinned by the reports. Finally, in terms of individual movers, Ryanair (-2.7%) fell as much as 5% at the open following earnings coupled with a downbeat fares outlook. Elsewhere, Deutsche Bank (-3.0%) shares slid after anti-money laundering specialists at the Co. flagged up suspicious financial transactions involving legal entities controlled by US President Trump and his son-in-law Kushner. Turning to some analysis from Nomura, Quant Insights note that CTAs seem to be looking for opportunities to unwind long positions in US equity futures. Nomura also predicts that this week, US equities “looks likely to be influenced less by trend-following trading based on systematic rules than by fundamental trading based on discretionary calls.”, given the current supply/demand balance.
Top European News
Merkel Pressured by Her Successor to Resign After EU Vote
Labour’s Corbyn Moves Closer to Backing Second Brexit Referendum
ECB Has to ‘Keep Going’ on Inflation, Knot Says: Corriere
Salvini’s Chief Aide Turns Against Italy PM Before European Vote
In FX, AUD enjoyed a sharp rebound from recent multi-month lows vs its US counterpart following the weekend Australian election that saw PM Morrison upset the pre-vote odds to secure a 3rd term in office and his coalition gain a majority over the Labour Party. Aud/Usd has reclaimed 0.6900+ status in response having traded down to 0.6862 last week in wake of disappointing jobs data that heightened the prospect of a June RBA rate cut.
NZD – The next best G10 currency as the Kiwi catches a bid on the coattails of its antipodean peer, albeit hampered by Aud/Nzd cross-flows up to 1.0600 at one stage. Nevertheless, Nzd/Usd hit a 0.6550 overnight high compared to 0.6521 at worst and last week’s 0.6512 base (Friday), as the US Dollar loses momentum broadly after its post-data/survey and China trade war related rally. On that note, the DXY has topped out just above 98.000 and ahead of resistance including a 98.035 Fib and the early May high of 98.102.
GBP – The Pound has also pared some losses partly on the aforementioned Dollar downturn, but also against a lagging Euro, with Cable bouncing off a 1.2723 trough to just over 1.2750 and Eur/Gbp easing back to 0.8750 from 0.8775. Brexit and UK political uncertainty are still to the fore, but Sterling appears to be benefiting from some short covering/profit taking alongside technical buying, with a Fib in the cross sitting at 0.8779.
CHF/CAD – Also benefiting from the Buck fade, as the Franc rebounds through 1.0100 and Loonie further from 1.3500+ lows amidst more reports that a deal is done to lift US steel and aluminium tariffs. The Cad may also be gleaning traction from a post-JMMC bounce in crude prices, like the NOK, which is outperforming its Scandi rival with the Eur cross back down under 9.8000 vs Eur/Sek at 10.7600.
EUR/JPY – As noted above, the single currency is a relative underperformer as Eur/Usd struggles to recover between 1.1168-51 parameters despite reports of bids/support at 1.1150 protecting near term support at 1.1135 and the 1.1112 ytd low. Decent option expiry interest may be keeping the headline pair in check given almost 1 bn running off from 1.1150 to 1.1160 at today’s NY cut, while chart resistance resides at 1.1190-1.1200 in the form of 100 and 200 HMAs. Meanwhile, the Yen has lost a bit more of its safe-haven allure following overnight Japanese Q1 GDP that topped consensus considerably, with Usd/Jpy up over 110.00 and as high as 110.31 at one stage.
EM – The Turkish Lira has failed to sustain recovery gains towards 6.0000 and higher vs the Greenback yet again after weekend comments from President Erdogan suggesting that it may bring forward its planned purchase of S-400 missiles from Russia rather than delaying the order amidst opposition and the threat of sanctions from the US.
In commodities, the energy complex is ultimately in the green, albeit off highs, as sentiment dampened amidst unconfirmed reports of a deteriorating relationship between US and China. WTI (+0.2%) and Brent (+0.4%) prices are underpinned in the aftermath of the JMMC meeting as key oil figureheads noted that concerns of rising stockpiles outweighed supply issues from Iran and Venezuela. Thus, energy ministers hinted at their dedication to extend the OPEC+ output pact beyond June, although any revisions to the current deal will be decided at next months meeting. Rhetoric from the energy ministers deviated slightly, with sources stating that Saudi Arabia is in no rush to increase production as the Kingdom is satisfied with oil around USD 70/bbl, whilst its Russian counterpart noted that all options are still on the table ahead of June, including a hike in production. Furthermore, sources noted that the Russian and Saudi oil figureheads reportedly discussed two options for June. The first scenario would see an elimination of over compliance currently over 150%, equating to an output cuts just under 2mln BPD, according to calculations. This would mean a continuation of the current deal and an increase in production of around 0.8mln BPD. The second scenario would see an ease of the agreed cuts to 0.9mln BPD from 1.2mln BPD.
Elsewhere, gold (-0.2%) prices lost more ground to the rising Buck with prices now flirting with the 1275/oz mark. Meanwhile, copper prices extended losses amid the souring risk tone given the aforementioned unconfirmed reports regard US/China. Furthermore, last week money managers increased their net short positions in COMEX copper by almost 8.5k lots, holding a net short of 35.3k lots, whilst speculators increase gross shorts by 4.8k lots and liquidated 3.6k gross long positions over the week.
US Event Calendar
8:30am: Chicago Fed Nat Activity Index, est. -0.2, prior -0.1
9:30am: Fed’s Harker Speaks About Management Science in Boston
1pm: Clarida, Williams Take Part in ‘Fed Listens’ Event in New York
7pm: Powell Speaks at Atlanta Fed Financial Markets Conference
DB’s Jim Reid concludes the overnight wrap
The job of an analyst is pretty hard work and stressful with your market calls exposed to all who read. So when you get something spectacularly correct it takes a lot of will power not to boast about it. We don’t have any such will power or false modesty so this morning we are patting ourselves on the back for a wonderful call on Friday in the EMR. Yes we correctly predicted that the UK would finish bottom of Eurovision. SPOILER ALERT…… congratulations to the Netherlands. Talking of spoilers, today is about making it through the day without finding out what happened in the final ever Game of Thrones which finished only an hour or so before I type this. 73 episodes, 8 years and one or two casualties later the story has come to a close. This series has generally got slated by the army of fans but I’ve really enjoyed it. I hope I’m still saying that after we watch tonight. Please don’t worry as they’ll be no spoilers in tomorrow’s EMR.
In market terms the real Game of Thrones at the moment is the escalating trade war between the US and China. There’s a lot at stake but at least there aren’t White Walkers. Outside of trade we also have a few interesting events this week. Most fascinating could be the European Parliament elections (Thursday and through to the weekend) although results won’t filter through until Sunday. We also have the key flash May PMIs which may offer some early insight into the impact of trade escalation on sentiment. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.
Looking at these in a little more detail now. The European Parliament elections will be an interesting barometer of the current strength of anti-EU and populist party support, and with it how much they can distrust mainstream (generally EU friendly) legislation. For a full preview, our economists in Europe have written a series of notes. See part 1 , part 2 , part 3 and part 4 here. In the UK, we face the prospect of the newly founded Brexit party winning the most votes (according to recent opinion polls) which will be an uncomfortable outcome for both the UK and Europe.
As for the data, this week sees the start of surveys that cover the trade-escalation period. The highlight will be the flash May PMIs in Europe and the US on Thursday. A reminder that last month the manufacturing reading for the Eurozone bounced an albeit modest 0.4pts off the recent low to 47.9. The consensus for this Thursday is a further modest improvement to 48.2. The services reading is also expected to rise 0.2pts to 53.0 putting the consensus for the composite at 51.8 versus 51.5 in April. For Germany, the manufacturing reading is expected to improve 0.4pts but to a still lowly 44.8, while France is expected to flatline at 50.0. For the US, the manufacturing reading is expected to rise 0.4pts to 53.0. Obviously any signs that trade is denying sentiment will be seized on.
Also worth watching this week given we’re all waiting for the impact of trade on sentiment is the May IFO survey in Germany on Thursday and May confidence indicators in France on the same day.
The FOMC meeting minutes from the April 30-May 1 meeting are due on Wednesday. A reminder that at that meeting Chair Powell emphasised that a good portion of the weakness in core inflation was due to transient factors and pointed to the trimmed mean inflation rate being at the Fed’s 2% target. Powell also sounded more upbeat on the growth outlook, noting a dissipation in downside risks with financial conditions accommodative. That appeared to disappoint the market at the time which was leaning towards a more dovish outcome. The rest of the week ahead is published at the end today.
Turning now to the latest news on the trade war. Bloomberg is reporting this morning that top US corporations including Intel Corp., Qualcomm Inc., Xilinx Inc., Broadcom Inc. and Google have now frozen the supply of critical software and components to Huawei as companies respond to the new US rules. Asian markets are trading mixed with the Nikkei (+0.25%) and Kospi (+0.52%) up while the Hang Seng (-0.43%) and Shanghai Comp (-0.59%) are down. Australian markets (S&P ASX +1.61%) and the currency (+0.73%) are up on the surprise re-election of Prime Minister Scott Morrison in the weekend election. The Indian rupee is also up +0.93% this morning alongside Indian markets as exit polls showed yesterday that the incumbent Modi government is expected to retain power later this week. In terms of overnight data releases, Japan’s preliminary annualised Q1 GDP came in at +2.1% qoq vs. (-0.2% qoq expected) while the previous quarter was revised down to +1.6% qoq from +1.9% qoq. The biggest driver was imports falling much faster than exports thereby signalling that net exports fuelled the growth; however, declining imports signal that underlying demand in the economy remains weak so most analysts see the beat as anomalous. Elsewhere, futures on the S&P 500 are up +0.31% while China’s onshore yuan is +0.14% this morning. Overnight, oil prices (WTI +1.35% and Brent +1.41%) are up as Saudi Arabia and other OPEC+ members signalled their intentions to keep supplies constrained for the rest of the year. A weekend tweet from US President Trump that “If Iran wants to fight, that will be the official end of Iran” is also helping keep the oil price elevated.
In other news, the deputy governor of the PBOC, Pan Gongsheng, said over the weekend that China has the confidence and capability to keep its foreign exchange market stable and ensure that the yuan trades at a reasonable and equilibrium level. Elsewhere, the PBOC said in its quarterly monetary policy report that the escalating trade war could destabilise the global economy, and vowed to continue with targeted stimulus at home while keeping the currency steady. The report said that the government still has room for maneuver with the fiscal policy, while the PBOC will remain supportive without flooding the economy with cash. The report also added back language on structural deleveraging, likely signalling renewed focus on debt risks even amid a darkening outlook.
In terms of Brexit, the Labour Party leader Jeremy Corbyn moved closer to fully backing a second Brexit referendum, saying it was reasonable that the public should be given a choice on any deal to leave the European Union. This is change in Corbyn’s earlier stance where he has previously said that the country should be offered a vote on PM May’s Brexit deal whereas on Sunday, on the BBC’s Andrew Marr show, he seemed to be calling for a vote on any Brexit package, including one proposed by the Labour party. He also said on the show that freedom of movement would be “open for negotiation” if he were in charge of determining the UK’s future relationship with the EU, thereby moving away from the Labour’s 2017 election manifesto, which said, “Freedom of movement will end when we leave the European Union.”
Turning back to Friday’s and last week’s action now. This was understandably dominated by trade developments. The news on Friday was universally negative as far as the US-China negotiations were concerned. First, the Chinese state media outlet the People’s Daily suggested that Chinese authorities will not continue negotiating until the US shifts its current position. That suggests that further escalation is likely before any resolution can be found, an angle that was later reiterated by the recently-ubiquitous Hu Xijin (China Global Daily editor-in-chief) on Twitter, who said that “China will certainly retaliate for barbaric suppression Huawei received. It’s a unanimous attitude of officials and ordinary people.” A Reuters article about China’s currency also received some attention, since the headline suggested that Chinese authorities won’t let the yuan depreciate beyond 7.0 per dollar. However, the details of the article were much less firmly stated. One source said that the PBoC would resist depreciation “in the immediate term” and another said that the currency would be allowed to weaken if supported by fundamentals. Overall, DB’s FX team saw no reason to change their bearish yuan view as a result. The yuan ended the week -1.44% weaker (-0.23% on Friday), taking its 2-week loss to -3.03% which is the sharpest two-week depreciation since the devaluation in August 2015 which caused shockwaves around the world.
Late in the NY afternoon on Friday, a CNBC headline broke saying that “US trade talks with China have stalled.” While that certainly was not “new news” to anyone, it nevertheless sparked a -0.52% drop in the S&P 500, driving almost the entire Friday drop of -0.58%. That sent the index -0.76% lower on the week even with a strong rebound in the middle 3 days of the week. The NASDAQ and DOW ended the week -1.27% and -0.69% (-1.04% and -0.38% Friday), respectively, as the more China-exposed tech sector continues to get hit. The Philadelphia Semiconductor index, many of whose constituents rely on Chinese customers (including Huawei), and could be impacted by new US barriers, fell -5.20% (-1.96% Friday). Chinese and EM equities fell as well last week, with the Shanghai Composite down -1.94% (-2.48% Friday) and the MSCI EM index -4.00% lower (-1.78% Friday).
In fixed income, treasuries, bunds, and gilts rallied by -7.5bps, -5.9bps, and -10.1bps, respectively for the 5 days. The front end rallied as well, but marginally less sharply, causing yield curves to flatten, though the US 2y10y curve remains in its recent range at 19.2bps. The 3m10y curve briefly inverted earlier in the week and ended the week -3.6bps flatter (+0.2bps Friday), but remained marginally in positive territory at +0.5bps. The dollar continued its advance against both domestic and emerging market currencies, with the dollar index up +0.68% (+0.14% Friday). The euro shed -0.67%, but the worst G10 performer was the British pound, which dipped -2.15% (-0.59% Friday) as Brexit talks continued to deteriorate. An index of EM currencies fell -1.26% (-0.42% Friday), with losses fairly widespread. The Mexican peso dropped -0.39% (-0.28% Friday), which was actually a healthy outperformance as the country reached an agreement with NAFTA partners to allow the US to remove its steel and aluminium tariffs ahead of the likely ratification of the USMCA. One other exception in the EM space was the Russian ruble, which gained +0.53% on the week (-0.19% Friday) as WTI oil gained +1.72% (-0.24% Friday).
via ZeroHedge News http://bit.ly/2EnMBgm Tyler Durden
President Trump never really stopped campaigning. His MAGA rallies regularly dominate news cycles and rattle markets.
But with a $30 million campaign war chest already at his disposal, and the Democratic primary already well underway, the president is preparing to formally launch his reelection campaign, which Axios reports will begin next month with a flurry of swing-state rallies.
And it’s looking increasingly likely that the official kick off will be June 16, four years to the day that he launched his bid for the Republican nomination, which became one of the most memorable campaigns in American political history. Though since that day is also Father’s Day, Trump might position the launch in the days before or after June 16.
Trump’s campaign approach, according to Axios, is to ‘dominate the news so the national discussion hovers on his turf’…so exactly what he did last time. But in 2020, with so many candidates vying for attention on the Democratic side, Trump will ensure that challengers get as little oxygen as possible early in the race.
We already know that Trump has picked Brad Parscale to be his 2020 campaign manager, which suggests Trump will build a reliable machine this time around, rather than the shoestring operation that evolved as Trump started winning primaries.
via ZeroHedge News http://bit.ly/2VSGefB Tyler Durden
With its hoped-for merger with Commerzbank in ruins, and the future of its investment bank uncertain, Deutsche Bank shares tumbled to a new all-time low on Monday after an analyst at UBS downgraded DB shares to a sell with a price target of €5.70 ($6.40) – that’s the second-lowest price target on Wall Street.
After Monday’s selloff, shares aren’t far from that level.
UBS analysts led by Daniele Brupbacher wrote that operating conditions for Germany’s biggest lender are expected to remain “difficult” and its strategic options are “limited.” The bank remains vulnerable to “external events.”
They also cut EPS estimates for 2020 to 2022 by 25%, 18% and 12% respectively, based on lower revenue assumptions.
via ZeroHedge News http://bit.ly/2WS6ovq Tyler Durden
For the last four years, I have been serving as an Adviser to an ongoing American Law Institute project, Principles of the Law: Policing. This week, the ALI membership is considering key parts of the Principles at its Annual Meeting in Washington, D.C. I can’t make it to the Annual Meeting, so I figured I would explain here some of my concerns with the Principles. My concerns leave me lukewarm on the project, including some of the key parts to be considered this week.
Let me start with the big picture. The ALI is perhaps best known for its Restatements of the law and the Model Penal Code. The Principles is more like the Model Penal Code than Restatements. It is an effort to develop normative principles of how police agencies should do their jobs. That’s a tricky goal because the law of policing in the United States is primarily federal constitutional law—and in particular Supreme Court interpretations of the Fourth and Fifth Amendments. Federal constitutional law sets the floor, and legislatures, state courts, and policing departments are then free to add additional restrictions as they feel appropriate. The basic goal of the Principles is to set out ways in which the ALI thinks that the police should restrict themselves beyond what existing law requires.
I think it’s fair to say that the Principles reflects the views of its Reporters, and selected Advisers, that the Supreme Court’s interpretations of the Constitution don’t go nearly far enough in restricting police practices. The Principles therefore set out to recommend a set of best practices that they feel the police should follow that go beyond the restrictions that the Supreme Court has required under the Constitution.
That basic idea of recommending non-constitutional limits on policing practices is certainly commendable. Indeed, the role of non-constitutional limits on policing is a theme of my own academic work. But main problem with the Principles is that it tries to impose a one-size-fits-all answer. It reflects a particular view of what limits would be appropriate for all policing, and it confidently recommends that police departments adopt those limits.
My own view of policing is more cautious. I’m not sure that one-size-fits-all works beyond the constitutional floor. There is an incredibly broad range of police agencies in the United States. There are federal agencies, state agencies, and local agencies. Some agencies are enormously large, and others are very very small. Some have broad mandates, and others have very narrow ones. In some areas, like eyewitness identification, we have social science that leads to useful rules to recommend. But in most areas, we don’t. And I’m skeptical that it works to recommend a single set of rules for every agency outside that context.
My concerns often leave me unsure of whether a significant number of the rules proposed by the Principles are wise. Some of the rules strike me as sound. Others are probably useful in some settings. A few of the rules may be good guidance in some settings but I think go too far in other settings. And that leaves me playing Justice Harlan to the Reporters’ Warren Court criminal procedure revolution, unable to be on board some of the key recommendations that the Principles make.
The draft under consideration this week is 162 pages long, and the ALI may threaten legal action if I post it, so unfortunately I can’t show the full draft. But I want to give few examples of the provisions that implicate the concerns I have. I’ll start with some of the sections on search and seizure. I’ll then turn to the Miranda interrogation rules.
Section 4, The Search and Seizure Rules
Let’s start with Section 4.03, which discusses when the police should stop and arrest individuals and how they should interact with people when they do. This section reflects the concerns of procedural justice theory, which focuses on perceptions of police legitimacy and trust in policed communities. In light of those concerns, this section contends that police citizen encounters should generally be limited. “[A]gencies should limit the overall use of initial encounters, stops, and arrests, to circumstances in which they directly promote public safety and minimize harm to the public.” And when officers take such actions, they should explain to individuals what they are doing and why to ensure that the police action is likely to be deemed fair:
Officers should establish the legitimacy of their encounters with members of the public by treating individuals with dignity and respect, explaining the basis for the officers’ actions, giving individuals an opportunity to speak and be heard, and engaging in behaviors that convey neutrality, fairness, and trustworthy motives.
This is usually good advice. But should it always be required? Procedural justice is important, but I’m not sure it needs to apply to every police citizen interaction to achieve its benefits.
Similarly, Section 4.04 limits police questioning during a Terry stop to inquiries “necessary to investigate the crimes or violations for which the officer has reasonable suspicion, or as necessary to ensure officer safety.” The officer shouldn’t stop a person for one reason and then ask questions that aren’t necessary to investigate the matter that provided the constitutional justification for the stop.
This is done to prevent pretextual stops, the comments explain. Without such limits on questioning, “those secondary intrusions may themselves become the goal of the stop, leading to unnecessary and perhaps unnecessarily intrusive encounters between officers and the public.” (The Reporter’s Notes suggest that section is merely a summary of existing Fourth Amendment law, but that’s not correct: The Supreme Court expressly rejected this rule in Muelher v. Mena. This limit on questioning would be a major shift in practice.)
I understand the concerns with pretextual stops. But I would think there are at least some circumstances when we would want them, and when we would want questioning outside the justification for the stop. For example, say there has been a string of recent robberies in the neighborhood, and the officer pulls over a car for speeding. The driver seems to match the rough description of the participants in the robbery, but there isn’t enough evidence that creates proper reasonable suspicion to detain the driver for those crimes. Is it clear that we don’t want the officer to ask any non-speeding questions in that situation?
Next, the black letter rule of Section 4.06 suggests that police agencies should consider adopting a rule that officers cannot ask for consent unless they first have reasonable suspicion. The comments to the rule replace this suggestion with a more categorical rule: “Officers should not seek consent to conduct a search unless they have reasonable suspicion to believe that the search will turn up evidence of a crime and unless they can explain to the individual why they would like to conduct a search.” Again, this is often a good approach. But won’t there be many circumstances when an officer has suspicions that don’t amount to “reasonable suspicion”? And should we want officers to be categorically barred from asking for consent in those circumstances?
Similarly, Section 4.07, on search incident to arrest, would prohibit full searches of a person incident to arrest unless “there is reasonable suspicion to believe that the arrestee is concealing a weapon or evidence that would not be uncovered through a pat-down search.” Again, the goal seems to be to avoid pretext searches: Agencies should enact policies on searches incident to arrest so that such searches “are not used as pretext to look for evidence of a crime or violation that is unrelated to the offense for which the individual was arrested.” I agree that, in some cases, such pretexts will be harmful. But are they always harmful? I wouldn’t think so.
Chapter 11, the Miranda/Interrogation Rules
The materials on interrogations take some steps that I find troublesome. Let me focus on two.
Section 11.03 discusses when Miranda warnings should be given. The rule states: “Officers should inform suspects of their right to refrain from answering and their right to counsel, and ensure that any waivers of those rights are meaningfully made.” At first that seems unobjectionable, as it’s basically Miranda law but with a higher pre-Berghuis waiver standard.
But if I’m reading the materials correctly, there appears to be something very different going on. As I understand Chapter 11, officers are supposed to inform people of these rights whether or not they are in custody, and indeed whether or not they are suspects at all. That’s a rejection of the basic idea of Miranda, which was that warnings were required only when a suspect is in custody.
Here’s what the comments say, in Section 11.01, about why, as the Reporter’s notes put it, the Principles aim to “move beyond the unwieldy concept of custody” in interrogation law:
A detailed body of constitutional law applies to police questioning of suspects. One important area of constitutional law—the Miranda doctrine—draws a line by asking whether a person is deemed to be in “custody.” See Miranda v. Arizona, 384 U.S. 436, 444 (1966). . . . The focus in constitutional law on the issue of “custody” can be quite formalistic, and remote from the concerns that motivate these Principles. For example, an innocent person who is not formally in custody still may face great pressure to confess falsely. A vulnerable person, such as a juvenile or mentally ill person, may receive unfair treatment that implicates concerns of legitimacy, even if not considered a suspect and not formally deemed to be in custody during the questioning. That said, the concerns with accuracy, coercion, and legitimacy may well be greater in the settings in which more formal custodial questioning occurs. No matter in what form or setting questioning occurs, police professionals ought to have an abiding interest in getting it right. Thus, these Principles do not take as their starting place the line between custodial and noncustodial interviews. Rather, the focus is on obtaining accurate statements with minimal coercion.
So if I’m reading the Principles correctly, everyone gets Miranda warnings. It seems that suspects and non-suspects, those in custody and those out of it, all receive the same warnings. And people questioned are required to be informed that they have a right to counsel to be present for questioning even when they have no such rights—as they don’t unless they’re being interrogated in custody, when Miranda provides it. Do we really want the police to always give Miranda warnings any time they ask questions to people? That seems a quite remarkable legal rule.
One last example. Section 11.04 explains how interrogations should be conducted. It states:
When questioning individuals, officers should:
(a) minimize the length of questioning;
(b) avoid leading questions and disclosing details that are not publicly known;
(c) avoid threats of harm to the individual or others or, conversely, avoid making promises of benefits to the individual or others;
(d) avoid the use of deceptive techniques that are likely to confuse or pressure suspects in ways that might undermine accuracy of evidence;
(e) ensure the individual has access to basic physical and personal needs, including food, water, rest, and restrooms; and
(f) not question the individual in an environment that is unduly uncomfortable.
The comments to the rule explains that the point is to minimize the coercive nature of police questioning, both to avoid false confessions and to respect the dignity of those questioned. And some of these are certainly good rules.
But others seem overly restrictive, at least assuming the requirement to “avoid” those facts is meant as a serious limit and not just a small thumb on the scale. For example, is it necessarily problematic for the police to ask leading questions? (“You killed him, didn’t you?”) Isn’t it often useful and unproblematic to provide details that are not publicly known? (“Your husband was shot today in his driveway by someone at point blank range. I regret to tell you that he died. Do you know anything about it?”) Are deceptive techniques that might “pressure” suspects necessarily problematic? (“Your friend just confessed and says you pulled the trigger, what do you have to say about that?”)
Of course, interrogators should be aware of the risks that these techniques may pressure suspects in ways that lead to problematic interrogations. But those same techniques may be very effective, and I’m skeptical that the right line between permitted and banned is a general rule that those techniques should be avoided.
I don’t know if my concerns will resonate with the broader ALI membership. But I thought I would raise them for members and others who may be interested.
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Do I vaccinate my son? You bet—and not just against the usual motley mix of physical childhood ailments. Almost every day our homeschooling curriculum offers a boost to his immunity against excessive respect for meddlers and control freaks.
In the course of teaching Anthony, I’ve discovered that inoculation against veneration of government happens almost inevitably. If you honestly teach history and analyze policies and their outcomes, education is something like a chicken pox party to build anti-state immunity. Over the last few years, he and I have delved into the dehumanizing effects of slavery and the Indian wars; President Woodrow Wilson’s racism, nationalization of industry, and suppression of dissent; the presumption and failure of Prohibition and the war on drugs; the internment of Japanese Americans during World War II; the body count of militarism; the hubris of economic regulation; and much more.
If you’re looking to dispel any starry-eyed misconceptions your kids may hold about war, the PBS American Experience episode about the 1968 My Lai massacre is a good place to start. It doesn’t hold back on graphically documenting the grim events.
“That was pretty emotionally wrenching,” I admitted to Anthony after advising him that the U.S. military generally conducted itself better than many rivals, who might treat such atrocities as par for the course. “Why don’t you take the rest of the day off?”
The next morning, I emailed him a link to an article arguing that many school textbooks sanitize communism’s missteps, treating it as a flawed economic approach rather than a totalitarian horror show. To illustrate the point, I added a well-documented piece about the Holodomor—an engineered famine inflicted on the Ukrainian people in 1932–33 by the Soviet government—and a short biography of thuggish lefty heartthrob Che Guevara. The readings combined into a powerful overview of both the sins of governing systems that seek to exercise total control and the foibles of the educational establishment.
OK. Maybe that was a bit much all at once.
Our lessons aren’t solely a trail of tears through history. We also discuss the enrichment of our lives through the efforts of innovators, explorers, and entrepreneurs, and how their contributions stand in stark contrast to the damage often inflicted by politicians and government officials. We spend a lot of time on the high points of life, including advances in the arts and technology. Research about great inventors—along with labs duplicating some of their work—and a vacation tour of Ernest Hemingway’s Key West house are examples of our generally upbeat educational experience.
It’s not all classroom learning, either. I firmly believe that if you want people to be resistant to authoritarianism, you need to teach them not only an appreciation for freedom but also the skills and self-confidence to put it to use. Competent people are less likely to bow to masters than those who doubt their own abilities.
A couple of years ago, my wife and I gifted Anthony with a basic home tool set—screwdrivers, hammers, a level, an eggbeater drill, a utility saw, and the like. He habitually does small repairs around his own room, and he and I take on bigger tasks around the house together. Neither one of us wanted to gut and rebuild a balky toilet, but it’s good to know that we’re both up to the task and not reliant on others when the plumbing goes south.
Sometimes Anthony names a skill that he’s eager to acquire. Then off we go into the desert to shoot rifles and pistols, or to the dining room table to see how fast we can pop a pin tumbler lock open with a pick and a tension wrench.
The throwing knives were my wife’s idea. They offered a fine exercise in hand-eye coordination.
Like lots of kids, my son has a fascination with fire. And now he knows how to build one by constructing a teepee of tinder, kindling, and fuel. He can light it with a magnifying glass or from sparks thrown by a fire steel. And he can pitch a tarp under the stars so he has a place to sleep by the crackling flames.
This summer, after almost nine years of effort, Anthony will test for his black belt in taekwondo. It’s the culmination of his own sweat, blood, and perseverance. That dedication to the martial arts has been a huge boon to his self-confidence as well as his physical conditioning.
Each of my son’s accomplishments—the lessons learned, the skills mastered, the growing awareness of his own competence—is part of the development of a smart, self-reliant kid who is prepared, to the extent possible, to take on the challenges that the world throws his way. If my wife and I and Anthony himself have properly done our jobs, he’ll be equipped to take care of himself and to offer aid to others. And he’ll be thoroughly immunized against the promises, lies, and temptations of demagogues.
I only wish more people would work with us to build up a herd immunity to the plague of intrusive government.
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For the last four years, I have been serving as an Adviser to an ongoing American Law Institute project, Principles of the Law: Policing. This week, the ALI membership is considering key parts of the Principles at its Annual Meeting in Washington, D.C. I can’t make it to the Annual Meeting, so I figured I would explain here some of my concerns with the Principles. My concerns leave me lukewarm on the project, including some of the key parts to be considered this week.
Let me start with the big picture. The ALI is perhaps best known for its Restatements of the law and the Model Penal Code. The Principles is more like the Model Penal Code than Restatements. It is an effort to develop normative principles of how police agencies should do their jobs. That’s a tricky goal because the law of policing in the United States is primarily federal constitutional law—and in particular Supreme Court interpretations of the Fourth and Fifth Amendments. Federal constitutional law sets the floor, and legislatures, state courts, and policing departments are then free to add additional restrictions as they feel appropriate. The basic goal of the Principles is to set out ways in which the ALI thinks that the police should restrict themselves beyond what existing law requires.
I think it’s fair to say that the Principles reflects the views of its Reporters, and selected Advisers, that the Supreme Court’s interpretations of the Constitution don’t go nearly far enough in restricting police practices. The Principles therefore set out to recommend a set of best practices that they feel the police should follow that go beyond the restrictions that the Supreme Court has required under the Constitution.
That basic idea of recommending non-constitutional limits on policing practices is certainly commendable. Indeed, the role of non-constitutional limits on policing is a theme of my own academic work. But main problem with the Principles is that it tries to impose a one-size-fits-all answer. It reflects a particular view of what limits would be appropriate for all policing, and it confidently recommends that police departments adopt those limits.
My own view of policing is more cautious. I’m not sure that one-size-fits-all works beyond the constitutional floor. There is an incredibly broad range of police agencies in the United States. There are federal agencies, state agencies, and local agencies. Some agencies are enormously large, and others are very very small. Some have broad mandates, and others have very narrow ones. In some areas, like eyewitness identification, we have social science that leads to useful rules to recommend. But in most areas, we don’t. And I’m skeptical that it works to recommend a single set of rules for every agency outside that context.
My concerns often leave me unsure of whether a significant number of the rules proposed by the Principles are wise. Some of the rules strike me as sound. Others are probably useful in some settings. A few of the rules may be good guidance in some settings but I think go too far in other settings. And that leaves me playing Justice Harlan to the Reporters’ Warren Court criminal procedure revolution, unable to be on board some of the key recommendations that the Principles make.
The draft under consideration this week is 162 pages long, and the ALI may threaten legal action if I post it, so unfortunately I can’t show the full draft. But I want to give few examples of the provisions that implicate the concerns I have. I’ll start with some of the sections on search and seizure. I’ll then turn to the Miranda interrogation rules.
Section 4, The Search and Seizure Rules
Let’s start with Section 4.03, which discusses when the police should stop and arrest individuals and how they should interact with people when they do. This section reflects the concerns of procedural justice theory, which focuses on perceptions of police legitimacy and trust in policed communities. In light of those concerns, this section contends that police citizen encounters should generally be limited. “[A]gencies should limit the overall use of initial encounters, stops, and arrests, to circumstances in which they directly promote public safety and minimize harm to the public.” And when officers take such actions, they should explain to individuals what they are doing and why to ensure that the police action is likely to be deemed fair:
Officers should establish the legitimacy of their encounters with members of the public by treating individuals with dignity and respect, explaining the basis for the officers’ actions, giving individuals an opportunity to speak and be heard, and engaging in behaviors that convey neutrality, fairness, and trustworthy motives.
This is usually good advice. But should it always be required? Procedural justice is important, but I’m not sure it needs to apply to every police citizen interaction to achieve its benefits.
Similarly, Section 4.04 limits police questioning during a Terry stop to inquiries “necessary to investigate the crimes or violations for which the officer has reasonable suspicion, or as necessary to ensure officer safety.” The officer shouldn’t stop a person for one reason and then ask questions that aren’t necessary to investigate the matter that provided the constitutional justification for the stop.
This is done to prevent pretextual stops, the comments explain. Without such limits on questioning, “those secondary intrusions may themselves become the goal of the stop, leading to unnecessary and perhaps unnecessarily intrusive encounters between officers and the public.” (The Reporter’s Notes suggest that section is merely a summary of existing Fourth Amendment law, but that’s not correct: The Supreme Court expressly rejected this rule in Muelher v. Mena. This limit on questioning would be a major shift in practice.)
I understand the concerns with pretextual stops. But I would think there are at least some circumstances when we would want them, and when we would want questioning outside the justification for the stop. For example, say there has been a string of recent robberies in the neighborhood, and the officer pulls over a car for speeding. The driver seems to match the rough description of the participants in the robbery, but there isn’t enough evidence that creates proper reasonable suspicion to detain the driver for those crimes. Is it clear that we don’t want the officer to ask any non-speeding questions in that situation?
Next, the black letter rule of Section 4.06 suggests that police agencies should consider adopting a rule that officers cannot ask for consent unless they first have reasonable suspicion. The comments to the rule replace this suggestion with a more categorical rule: “Officers should not seek consent to conduct a search unless they have reasonable suspicion to believe that the search will turn up evidence of a crime and unless they can explain to the individual why they would like to conduct a search.” Again, this is often a good approach. But won’t there be many circumstances when an officer has suspicions that don’t amount to “reasonable suspicion”? And should we want officers to be categorically barred from asking for consent in those circumstances?
Similarly, Section 4.07, on search incident to arrest, would prohibit full searches of a person incident to arrest unless “there is reasonable suspicion to believe that the arrestee is concealing a weapon or evidence that would not be uncovered through a pat-down search.” Again, the goal seems to be to avoid pretext searches: Agencies should enact policies on searches incident to arrest so that such searches “are not used as pretext to look for evidence of a crime or violation that is unrelated to the offense for which the individual was arrested.” I agree that, in some cases, such pretexts will be harmful. But are they always harmful? I wouldn’t think so.
Chapter 11, the Miranda/Interrogation Rules
The materials on interrogations take some steps that I find troublesome. Let me focus on two.
Section 11.03 discusses when Miranda warnings should be given. The rule states: “Officers should inform suspects of their right to refrain from answering and their right to counsel, and ensure that any waivers of those rights are meaningfully made.” At first that seems unobjectionable, as it’s basically Miranda law but with a higher pre-Berghuis waiver standard.
But if I’m reading the materials correctly, there appears to be something very different going on. As I understand Chapter 11, officers are supposed to inform people of these rights whether or not they are in custody, and indeed whether or not they are suspects at all. That’s a rejection of the basic idea of Miranda, which was that warnings were required only when a suspect is in custody.
Here’s what the comments say, in Section 11.01, about why, as the Reporter’s notes put it, the Principles aim to “move beyond the unwieldy concept of custody” in interrogation law:
A detailed body of constitutional law applies to police questioning of suspects. One important area of constitutional law—the Miranda doctrine—draws a line by asking whether a person is deemed to be in “custody.” See Miranda v. Arizona, 384 U.S. 436, 444 (1966). . . . The focus in constitutional law on the issue of “custody” can be quite formalistic, and remote from the concerns that motivate these Principles. For example, an innocent person who is not formally in custody still may face great pressure to confess falsely. A vulnerable person, such as a juvenile or mentally ill person, may receive unfair treatment that implicates concerns of legitimacy, even if not considered a suspect and not formally deemed to be in custody during the questioning. That said, the concerns with accuracy, coercion, and legitimacy may well be greater in the settings in which more formal custodial questioning occurs. No matter in what form or setting questioning occurs, police professionals ought to have an abiding interest in getting it right. Thus, these Principles do not take as their starting place the line between custodial and noncustodial interviews. Rather, the focus is on obtaining accurate statements with minimal coercion.
So if I’m reading the Principles correctly, everyone gets Miranda warnings. It seems that suspects and non-suspects, those in custody and those out of it, all receive the same warnings. And people questioned are required to be informed that they have a right to counsel to be present for questioning even when they have no such rights—as they don’t unless they’re being interrogated in custody, when Miranda provides it. Do we really want the police to always give Miranda warnings any time they ask questions to people? That seems a quite remarkable legal rule.
One last example. Section 11.04 explains how interrogations should be conducted. It states:
When questioning individuals, officers should:
(a) minimize the length of questioning;
(b) avoid leading questions and disclosing details that are not publicly known;
(c) avoid threats of harm to the individual or others or, conversely, avoid making promises of benefits to the individual or others;
(d) avoid the use of deceptive techniques that are likely to confuse or pressure suspects in ways that might undermine accuracy of evidence;
(e) ensure the individual has access to basic physical and personal needs, including food, water, rest, and restrooms; and
(f) not question the individual in an environment that is unduly uncomfortable.
The comments to the rule explains that the point is to minimize the coercive nature of police questioning, both to avoid false confessions and to respect the dignity of those questioned. And some of these are certainly good rules.
But others seem overly restrictive, at least assuming the requirement to “avoid” those facts is meant as a serious limit and not just a small thumb on the scale. For example, is it necessarily problematic for the police to ask leading questions? (“You killed him, didn’t you?”) Isn’t it often useful and unproblematic to provide details that are not publicly known? (“Your husband was shot today in his driveway by someone at point blank range. I regret to tell you that he died. Do you know anything about it?”) Are deceptive techniques that might “pressure” suspects necessarily problematic? (“Your friend just confessed and says you pulled the trigger, what do you have to say about that?”)
Of course, interrogators should be aware of the risks that these techniques may pressure suspects in ways that lead to problematic interrogations. But those same techniques may be very effective, and I’m skeptical that the right line between permitted and banned is a general rule that those techniques should be avoided.
I don’t know if my concerns will resonate with the broader ALI membership. But I thought I would raise them for members and others who may be interested.
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The Commerce Department officially blacklisted Huawei and dozens of its affiliates Friday afternoon, and one business day later, we’re starting to see some major Western companies severing their business ties with Huawei, a trend that could have seriously dire consequences for the Chinese telecoms giant.
Alphabet has announced that it will cut off Huawei Mobile’s access to most of its Android operating system offerings, which could hurt sales of Huawei phones outside China. Intel,Qualcomm, Xilinx and Broadcom have all said they will stop selling chips to Huawei because of Trump’s executive order.
Huawei will only be able to access the public version of Google’s Android mobile operating system, the world’s most popular smartphone software. It won’t be able to offer proprietary apps and services from Maps and search to Gmail, said the person, who requested anonymity speaking about a private matter. That will severely curtail the sale of Huawei smartphones abroad, though it’s unclear when those apps – which are popular mainly outside of China – will become unavailable.
Huawei, the world’s largest smartphone brand after Samsung Electronics Co., was one of a select few global hardware partners to receive early access to the latest Android software and features from Google. Outside of China, those ties are critical for the search giant to spread its consumer apps and bolster its mobile ads business.
Washington announced last week that it would impose new prohibitions on Huawei, including a ban on US companies selling components or services to the telecoms giant. The seriousness of these actions is difficult to understate, as Rosenblatt Securities analyst Ryan Koontz explained. If Huawei is pushed to the brink of collapse, Beijing might label this ‘an act of war’.
“The extreme scenario of Huawei’s telecom network unit failing would set China back many years and might even be viewed as an act of war by China,”Koontz wrote. “Such a failure would have massive global telecom market implications.”
But bringing a massive global Chinese firm to its knees is one way to demonstrate to Beijing, and the rest of the world, which ignored Washington’s warnings about Huawei, the true reach of American economic power. And it’s one way to put a timer on talks with Beijing, ensuring that the trade skirmish won’t drag on until the height of campaign season.
American firms weren’t the only ones to act. In Europe, German chipmaker Infineon Technologies said it would suspend deliveries to Huawei, at least until it has had a chance to determine the significance of Washington’s executive order.
Since hostilities with the US began, Huawei has been stockpiling components. It now has enough of a buffer supply to keep its business running without interruption for at least three months. Nikkei reported late last week that Huawei had reportedly asked suppliers to help it build up enough stockpiles to last it a year, but it’s unlikely that Huawei has accumulated enough buffer stock to last it anywhere near as long.
If Washington refuses to back down, this three-month window might become the next critical deadline for the trade talks.
If it wasn’t clear before, we now know that President Trump wasn’t kidding when he said late last year that Huawei could become ‘a bargaining chip’ in the trade skirmish. Whether the prosecution of Meng Wanzhou factors into it remains to be seen, but President Trump did tell Fox News over the weekend that he wouldn’t allow China to surpass the US on his watch.
Huawei’s odds of finding replacement suppliers are slim, as Koontz explained. Huawei “is heavily dependent on U.S. semiconductor products and would be seriously crippled without supply of key U.S. components.”
It’s clear where Beijing stands on this. We wouldn’t be surprised to see a ‘consumer movement’ emerge in China where middle-class consumers ditch foreign phones and proudly proclaim their support for Huawei.
On Sunday afternoon, President Trump threatened Iran with military intervention via tweet. Yet, analysts blamed the growing pressure on Huawei for the risk-averse trading atmosphere.
US stocks were on track to open more or less flat. Meanwhile, Huawei’s dollar-denominated corporate bonds tumbled again on Monday after one of their biggest declines in recent memory on Friday. The selloff comes as fears of a Huawei bankruptcy are beginning to intensify.
Beijing has maintained its aggressive posture, with its Ministry of Foreign Affairs warning in response to news of the Google ban that China would do what it needed to do to protect its companies’ “legitimate rights”, and also hinted at legal actions it might take. Over the weekend, Beijing compared the trade skirmish with its actions in the Korean War, about as clear a sign as any that we’re in for a protracted conflict.
Whatever happens, it looks like the showdown over Huawei has eclipsed the broader trade-war narrative. So much for the Huawei crackdown being a ‘separate issue’ from the trade talks, like Trump officials had previously insisted.
Bottom line: If we don’t get a deal by the end of June, this trade war is going to really heat up.
via ZeroHedge News http://bit.ly/2QezORQ Tyler Durden
Do I vaccinate my son? You bet—and not just against the usual motley mix of physical childhood ailments. Almost every day our homeschooling curriculum offers a boost to his immunity against excessive respect for meddlers and control freaks.
In the course of teaching Anthony, I’ve discovered that inoculation against veneration of government happens almost inevitably. If you honestly teach history and analyze policies and their outcomes, education is something like a chicken pox party to build anti-state immunity. Over the last few years, he and I have delved into the dehumanizing effects of slavery and the Indian wars; President Woodrow Wilson’s racism, nationalization of industry, and suppression of dissent; the presumption and failure of Prohibition and the war on drugs; the internment of Japanese Americans during World War II; the body count of militarism; the hubris of economic regulation; and much more.
If you’re looking to dispel any starry-eyed misconceptions your kids may hold about war, the PBS American Experience episode about the 1968 My Lai massacre is a good place to start. It doesn’t hold back on graphically documenting the grim events.
“That was pretty emotionally wrenching,” I admitted to Anthony after advising him that the U.S. military generally conducted itself better than many rivals, who might treat such atrocities as par for the course. “Why don’t you take the rest of the day off?”
The next morning, I emailed him a link to an article arguing that many school textbooks sanitize communism’s missteps, treating it as a flawed economic approach rather than a totalitarian horror show. To illustrate the point, I added a well-documented piece about the Holodomor—an engineered famine inflicted on the Ukrainian people in 1932–33 by the Soviet government—and a short biography of thuggish lefty heartthrob Che Guevara. The readings combined into a powerful overview of both the sins of governing systems that seek to exercise total control and the foibles of the educational establishment.
OK. Maybe that was a bit much all at once.
Our lessons aren’t solely a trail of tears through history. We also discuss the enrichment of our lives through the efforts of innovators, explorers, and entrepreneurs, and how their contributions stand in stark contrast to the damage often inflicted by politicians and government officials. We spend a lot of time on the high points of life, including advances in the arts and technology. Research about great inventors—along with labs duplicating some of their work—and a vacation tour of Ernest Hemingway’s Key West house are examples of our generally upbeat educational experience.
It’s not all classroom learning, either. I firmly believe that if you want people to be resistant to authoritarianism, you need to teach them not only an appreciation for freedom but also the skills and self-confidence to put it to use. Competent people are less likely to bow to masters than those who doubt their own abilities.
A couple of years ago, my wife and I gifted Anthony with a basic home tool set—screwdrivers, hammers, a level, an eggbeater drill, a utility saw, and the like. He habitually does small repairs around his own room, and he and I take on bigger tasks around the house together. Neither one of us wanted to gut and rebuild a balky toilet, but it’s good to know that we’re both up to the task and not reliant on others when the plumbing goes south.
Sometimes Anthony names a skill that he’s eager to acquire. Then off we go into the desert to shoot rifles and pistols, or to the dining room table to see how fast we can pop a pin tumbler lock open with a pick and a tension wrench.
The throwing knives were my wife’s idea. They offered a fine exercise in hand-eye coordination.
Like lots of kids, my son has a fascination with fire. And now he knows how to build one by constructing a teepee of tinder, kindling, and fuel. He can light it with a magnifying glass or from sparks thrown by a fire steel. And he can pitch a tarp under the stars so he has a place to sleep by the crackling flames.
This summer, after almost nine years of effort, Anthony will test for his black belt in taekwondo. It’s the culmination of his own sweat, blood, and perseverance. That dedication to the martial arts has been a huge boon to his self-confidence as well as his physical conditioning.
Each of my son’s accomplishments—the lessons learned, the skills mastered, the growing awareness of his own competence—is part of the development of a smart, self-reliant kid who is prepared, to the extent possible, to take on the challenges that the world throws his way. If my wife and I and Anthony himself have properly done our jobs, he’ll be equipped to take care of himself and to offer aid to others. And he’ll be thoroughly immunized against the promises, lies, and temptations of demagogues.
I only wish more people would work with us to build up a herd immunity to the plague of intrusive government.
from Latest – Reason.com http://bit.ly/2VLLj9D
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