Deutsche Bank: “We Expect The S&P To Be Between 1925 To 2100 Until The Election”

Deutsche Bank may have gotten the corporate bond QE from the ECB that it so desired (even if it means another drop in negative rates) even if that did not help its stock rebound anywhere near to pre-crash levels, and its economist department may be gripped by a bout of raging schizhophrenia as erstwile permabull Joa LaVorgna is now one of the market’s bigger bears contrasted with super optimistic DB strategist Torsten Slok (who is seemingly unaware of what his year end bonus was) but that doesn’t prevent the bank from having a very outlook of where the market will be come the November general election, namely “range bound between 1925 to 2100.”

Here is the latest outlook from DB’s strategist David Bianco

We expect the S&P 500 to be range bound between 1925 to 2100 until after the US general election. We do not expect the S&P to fall back into correction territory as a double-dip correction already happened and it would likely take clear signs of an impending US recession or a new global shock to cause renewed investor panic.

 

While April into May is usually a strong period for S&P 500 performance, we think upside is capped given that 1Q S&P EPS will be down y/y and likely sequentially, Fed speak is likely to be more hawkish especially upon further market gains, Brexit vote risk, and the usual summer softness especially given Presidential campaign headline and geopolitical risks.

 

We are more comfortable that the dollar will not surge nea -term given the Fed lowered its 2016-2017 rate forecasts and the ECB and others acknowledge the limited benefits of negative interest rates and currency devaluation. However, we do not expect the dollar to fall as nothing like the Plaza Accord of 1985 has occurred. Moreover, we doubt a strong rebound in commodity prices.

 

If the S&P 500 doesn’t reach a new low, then Feb 11 2016 marks the trough of this market correction. During this double dip correction, S&P was sold off -14.2% from May 21 2015 to Feb 11 2016 (183 trading days). It has been 28 trading days since the market trough, this compares to 119 average trading days between 5%+ S&P dips since 1960. This is supportive, but summer and fall are often weaker than usual in election years.


* * *

What is unsaid is that if DB’s forecast is just a little too optimistic, and if stocks indeed proceed to tumble, guess which European bank will be scrambling to get a bailout by a very unhappy German taxpayer…


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Next Came Death: What The Moment Before A Bombing Looks Like

Belgium. Iraq. Pakistan.

Each of those countries was rocked by at least one horrific suicide blast last week. In Belgium, it was a crowded airport and metro. In Iraq, a soccer field. In Pakistan, a park popular with women and children.

The combined death toll from those attacks alone: more than 130.

Terrorism, by its very nature, is meant to instill fear. That means terrorists must be unpredictable, and to a certain extent indiscriminate in who and what they target. But today’s terror is in some ways fundamentally different in character than that which the world has witnessed in the past. Al-Qaeda, for instance, did not target the World Trade Center because they hated tall buildings and if their sole purpose was to kill 4,000 people, they could have figured out a far simpler way to do it.

In Bin Laden’s eyes, the towers were an ostentatious symbol of capitalism – a monument to everything the “infidels” stood for, cherished, and sought to force upon the Muslim world. For him, more important than the number of people killed were the indelible images that will forever remain seared in America’s collective consciousness. Although civilized society likes to pretend that the victims will remain in the public’s thoughts and prayers for all eternity, Bin Laden knew that wasn’t true. Rather, he wanted to make sure that the phrase which is so often repeated after a tragedy – i.e. “we will never forget” – actually meant something when it came to his legacy. That necessitated the destruction of symbols, not people. Sure, you can’t make an omelette without breaking a few eggs so “some” (maybe even several thousand) people would have to die, but the final number didn’t matter. It could have been 30, 300, 3,000, or 30,000. The point was to send a message. Does that make it any less horrific or in any way excuse it? Obviously not, but that isn’t the point.

Many of the attacks we see today cannot be justified by an appeal to the kind of perverse, psychopathic logic that Bin Laden and his ilk so often employed. Bombing women and children at a crowded park in Lahore, killing fans at a soccer match, and targeting civilians standing in line at an airport Starbucks are senseless acts of violence – meaningless even in the minds of the murderous. Consider for instance that before his death, Bin Laden himself derided the brutal, indiscriminate violence employed by Abu Musab al-Zarqawi, the leader of al-Qaeda in Iraq which was the precursor to ISIS.

None of this is to say that one terrorist is “better” than another, or that the world should long for the days when terrorism “made sense.” Rather, it’s simply to say that now more than ever, tragedy can strike anytime, anywhere. The term “targets” is now meaningless. The question isn’t “who or what should we hit?”, it is “who or what can we hit?”

With that as the backdrop, consider the following collection of visuals from artist Simon Menner who, after combing through hours of footage from suicide bombs, car bombs and attacks, captured the following images of the very last frame before tragedy struck.

From The Washington Post:

“It is very absurd, but apparently the war needs a PR department to function,” artist Simon Menner said. Many new battlefields and weapons of war — drones, surveillance, snipers, cyberterrorism — are invisible and rely even more on media to affirm their existence and threat.

 

Menner’s ongoing project, “Last Frame Before Blast,” dwells in invisible warfare. In combing through hours of found footage from suicide bombs, car bombs and attacks around the world, what he found most striking was the moment before a blast. A Russian street scene–the white car is about to blow up. A government office in Sri Lanka–a woman reaches into her sari to detonate her explosive vest.

 

A photograph takes a split second in time, and stretches it into eternity. For those caught in Tuesday’s horrific attacks in Belgium, many would probably like nothing more than to return to that last moment of normalcy before the bombs shredded the Brussels airport.

 

Menner’s frames captures a bit of this wistfulness. But they are also heavily pregnant with anxiety about where the blast will come from, and the knowledge that everything is about to change. “Once you perceive the threat it is almost indistinguishable from the real threat,” Menner said via email.


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Climate Campaigner Bill McKibben’s Misleading Anti-Fracking Crusade

McKibbenClimate campaigner Bill McKibben is against fracking shale to produce natural gas. In a new article, “Global Warming’s Terrifying New Chemistry,” over at The Nation, McKibben claims that recent research suggests that leaking methane is offsetting the reductions in carbon dioxide emissions that come from switching from coal to gas to generate electricity. Burning methane produces about half the carbon dioxide that burning coal does. However, methane in the short run is a more potent greenhouse gas than carbon dioxide and so much is supposedly escaping into the atmosphere from fracking that shale gas could be worse than coal for the climate. As a consequence, McKibben wants to ban fracking.

McKibben is chiefly relying upon a study by Harvard researchers that claim to have detected a 30 percent increase in U.S. methane emissions over the period 2002-2014 using satellite and other data. Such an increase would basically offset the Environmental Protection Agency’s claims that U.S. greenhouse gas emissions have been declining since 2005. This would mean that the U.S. is far from meeting President Obama’s pledge to cut U.S. emissions by 17 percent below its 2005 emission levels by 2020.

McKibben’s article is misleading argues Ted Nordhaus, one of the founders of the eco-modernist Breakthrough Institute think tank. Nordhaus points out that McKibben failed to note or cite another study on recent atmospheric methane trends published in Science in early March. In that study, New Zealand researchers were able to distinguish sources of methane based on the presence of various carbon isotopes. The researchers report that the increases in atmospheric methane since 2006 have come almost entirely from biological sources, e.g., wetlands, rice farming, and livestock. If this is the case, then a ban on fracking would be counter-productive since it would deny people access to a cheap and lower-carbon fuel source. Nordhaus notes that McKibben must have been aware of this high-profile study that contradicts his anti-fracking thesis.

To make the methane situation even more confusing, another study from German researchers was published one day after the Science article in the journal Atmospheric Chemistry and Physics that used ethane emissions as a way to trace methane sources. They concluded that “at least 40% of the worldwide methane concentration increase after 2007 have to be attributed to the oil and gas sector and that the emissions took place in the northern hemisphere.”

McKibben’s bottom line:

One of the nastiest side effects of the fracking boom, in fact, is that the expansion of natural gas has undercut the market for renewables, keeping us from putting up windmills and solar panels at the necessary pace.

Nordhaus’s bottom line: 

So long as the climate movement is limited to NIMBY fracking opponents, anti-nuclear greens, and renewables fabulists, it is unlikely to achieve either the broad social consensus that will be necessary to advance aggressive action, nor action that is particularly likely to achieve the levels of carbon reduction that will be necessary to significantly mitigate climate change. 

Nordhaus is right.

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After Emory: Will University Presidents Tell Thin-Skinned Students the Truth About Feelings?

TrumpUniversity presidents need to do the right thing and stop sheltering students from the harshness of the real world. So says Instapundit Glenn Reynolds in his latest USA Today column, which quotes Jesse Singal, Conor Friedersdorf, and me on “the chalking” at Emory University: 

If I were to offer one piece of advice to university presidents, it would be to watch the scene from The Social Network in which Harvard President Larry Summers tells the Winklevoss twins to grow up and stop complaining about the actions of other students. “This action,” says Summers, “the two of you being here, is wrong.” 

That’s precisely the response that university presidents should give to students who come, claiming fear and trembling, to see university presidents because they’re unhappy with the speech of other students. Instead, all too often, these students are indulged in a way that the Winklevoss twins were not, with consequences for the university, for higher education — and, actually for the complaining students themselves — that are likely to prove disastrous. 

The latest example of this phenomenon can be found at Emory University in Atlanta. 

Emory students, you might recall, thought chalk scribblings of “Trump 2016” constituted literal violence, even though the expression is clearly political speech. (In fairness, the perpetrator did violate the private university’s rules on public displays, however.) Emory’s president, James Wagner, offered only a tepid endorsement of free speech while doing everything in his power to assuage the hurt-feelings of protesters. 

This is a mistake, writes Reynolds: 

When students at Emory University — annual cost of attendance, $63,058 per year — act so foolishly , and worse, are indulged by those who are supposed to supply adult guidance, it gives the appearance that higher education is largely a waste of societal resources. That’s not a good place to be, right now. University presidents, take note. 

Full thing here

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U.S. Lifted The Crude Oil Export Ban, And Exports Went… Down

Submitted by Charles Kennedy via OilPrice.com,

Just over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S. has actually exported less this year than it did over the same period the year before, when the ban was still in place.

According to Clipper Data market intelligence cited by the Financial Times, we’ve seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.

And there’s no official data yet—not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January, the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.

An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven’t really picked up pace since then.

January’s cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau. Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February’s shipments is released by the U.S. Census Bureau.

The immediate beneficiaries of the ban suspension are gas and oil companies such as Chevron and Exxon Mobil—among the most tireless lobbyers against the ban—and oil trading giants such as Vitol Group BV and Trafigura Ltd Pet.

Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used in a refinery in Switzerland. Dutch media outlets reported in January that a tanker from Houston had reached Rotterdam port, but this remains just a drop in the global export bucket.

In Asia, even China’s state-run Sinopec—the world’s second-largest refiner—has imported a consignment of U.S. oil, according to a Reuters source. Japan's Cosmo Oil was the first Asian buyer of U.S. oil, purchasing some 300,000 barrels of U.S. crude in mid-January, which will be delivered to its refineries in mid-April.

The very first South American country that will import U.S. crude oil is Venezuela. In early February, Venezuela’s state-run oil company PDVSA imported a 550,000-barrel cargo of West Texas Intermediate (WTI) through its U.S.-based Citgo Petroleum affiliate. Venezuela started importing foreign crudes in 2014 amid a fall in its own production – buying mostly Angolan and Nigerian light grades.

WTI is also expected to be exported to Israel, where Swiss commodities house Trafigura will ship some 700,000 barrels. Atlantic Trading & Marketing, the U.S. trading unit of French Total SA, has been planning an export cargo of U.S. crude from Cushing.

Also, earlier this month, Exxon became the first U.S. oil company to export U.S. crude, sending a tanker from Texas to a refinery it owns in Italy.

However, storage is now at the highest level in at least a decade. U.S., crude storage levels hit 487 million barrels in early November, closing in on the 80-year high of 518 million barrels in the last week of February. According to the EIA, about 60 percent of the U.S. working storage capacity is filled.

Globally, the picture isn’t much better, with the International Energy Agency (IEA) saying that 1 billion barrels were added to storage in 2015 alone. OPEC has reported that crude oil stockpiles in OECD countries currently exceed the running five-year average by 210 million barrels.


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2015 Ends With a Stratospheric P/E Multiple Of 23x

The Q4 earnings season is over and the numbers are in the bag. The GAAP numbers that is, not the non-GAAP garbage that lately everyone from Warren Buffett, to Factset, even to the SEC (and of course this site since 2013) has been bashing.

We wonder if they will continue bashing the GAAP numbers once they learn what they are, because as the charts below show, the earnings carnage on a real, unadjusted is simply unprecedented. Case in point: Q4 GAAP EPS just dropped even more from our previous estimate, and using IBES data, it is now down from 21 to 19.7, the lowest quarterly print since Q1 2010 when GAAP earnings were just 19.4 (and when the S&P was roughly half where it is now).

 

What about on an LTM and full year basis? As the chart below shows, the growing trailing 12 month divergence in the past few quarters between GAAP and non-GAAP has grown to proportions not seen since the financial crisis. What one can say with absolute certainty is that unless oil rebounds, and does so fast, all those “one-time, non-recurring” pro forma addbacks which have kept the non-GAAP EPS of the S&P500 flat while GAAP has plunged, will very soon be revised sharply lower.

 

Which brings us to the full year snapshot: what if Buffett, and Factset, and the SEC (and of course this website) are right and GAAP is the proper way of looking at earnings? Then we have a big problem, because instead of the 118.0 in 2015 non-GAAP S&P earnings, which translate into a P/E multiple of 17.3x as of today’s 2037 market close, the real, GAAP EPS of just 88.9 for the full year 2015 means the P/E multiple is now a gargantuan 22.9x!

It also means that GAAP earnings for the broader market are at a level last seen in 2010 when, as noted earlier, the S&P 500 was trading at about half where it closed today.


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Easter Terrorist Attack Leaves Christians, Other Minorities Worried About Future in Pakistan

Even as the off-shoot of the Pakistan Taliban that claimed responsibility for Easter Sunday’s suicide bombing at a Lahore park stressed they were targeting Christians in the attack that killed at least 70 people, local authorities insist the attack was not aimed at Christians specifically.

“The target was not the Christian community in particular,” a senior police official said according to Pakistan Today, pointing out that Muslims were also killed in the attack.

Human rights activist Hussain Naqi told Pakistan Today that statement amounted to a “cover-up” by a government “trying to downplay the incident to hide its own failure at protecting Christians and minorities”.

Activists point to a string of terrorist attacks aimed at Pakistan’s minority Christian community, as well as blasphemy laws and their use by Muslims to settle personal scores. Activists told Pakistan Today Christian community leaders have been worried about a terrorist attack since the February execution of Mumtaz Qadri for the assassination of Salman Taseer for his opposition to the country’s blasphemy laws, which also carry the death penalty.

Qadri was Taseer’s bodyguard when he shot and killed him in March 2011. Two months later the country’s minorities minister, Shahbaz Bhatti, the only Christian in the cabinet, was also assassinated. He opposed the country’s blasphemy laws as well.

There have been protests over Qadri’s execution recently, with Islamist activists having planned prayers over the past weekend in support of Qadri, who they want declared a martyr. Protesters and police clashed in Islamabad yesterday, and there were more demonstrations over Qadri’s execution today.

Protesters are also calling for the execution of Aasia Bibi, who was prosecuted under the country’s blasphemy laws after drinking from the same water as her Muslim coworkers and asking them what Mohammed ever did to save humanity while defending her religion to them. She was sentenced to death in 2011, and both Taseer and Bhatti were among her most vocal supporters.

The prime minister of Pakistan, Nawaz Sharif, canceled a trip to Washington in the wake of the Lahore attack and said the government would be stepping up counterterrorism efforts, including with the use of Rangers, provincial paramilitary units that will be granted the authority to conduct raids, searches, and interrogations.

Sharif said the Lahore attack was a sign Pakistan was defeating the terrorists. “I know terrorists are attacking soft targets like public places and parks, killing innocent citizens in desperation because security forces have deprived them of their hideouts, training facilities and terrorist infrastructure,” he said Monday in a televised address.

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Anti-Unisex Bathroom Law in North Carolina Challenged in Lawsuit

I would gladly move to the Democratic People’s Republic of Korea—North Korea—if that would guarantee that I’d never have to read another story about the existential threat to the American Way of Life posed by letting the  estimated 0.03 percent of trans people pick whichever toilet they feel like using. Call me naive, but I assume such issues are beneath the concerns of the god-like Kim Jong-un, who like his father doesn’t need to defecate or urinate.

The latest battleground in bathroom panic is North Carolina, where, as Scott Shackford noted, the city of Charlotte was on the verge of passing legislation that would have banned discrimination in housing and public accommodations (including restaurants, hotels, movie theaters, and the like) on the basis of “sexual identity and gender identification.” So naturally the Republican-controlled legislature pushed through a law, happily signed by Gov. Pat McCrory, that bars all Tarheel municipalities from extending any anti-discrimination protections to lesbians, gays, bisexuals, and trans (LGBT) people.

Within 48 hours of passage, “The Public Facilities Privacy and Security Act,” is already the target of a lawsuit with plaintiffs who range from a student, a staffer, and a professor at various branches of the University of North Carolina and claim the law traffics in “invidious discrimination.” “Lawmakers made no attempt to cloak their actions in a veneer of neutrality, instead openly and virulently attacking transgender people, who were falsely portrayed as predatory and dangerous to others” reads part of the lawsuit.

But supporters of restrictive bathroom laws usually insist its not because they dont dig the LGBT crowd, you understand. Theyre just really worried about gender-integrated toilets. As the press release issued by the governors office put it, Governor McCrory Takes Action to Ensure Privacy in Bathrooms and Locker Rooms. You might expect McCrory and his conservative brethren in the state legislature to defer to the wisdom of local elected officials. Thats part of the Republican catehcism, isnt it? Devolve power to the most local and hence most representative level possible.

But not in this case, because we’re talking about…basic bodily functions, which clearly and absolutely need to be legislated by the top men in Raleigh and not by the uncivilized rubes in Charlotte. “This new government regulation defies common sense and basic community norms by allowing, for example, a man to use a woman’s bathroom, shower or locker room,” explained the governor, who then exhorted those same incompetents to get back to work. “The mayor and city council took action far out of its core responsibilities…It is now time for the city of Charlotte elected officials and state elected officials to get back to working on the issues most important to our citizens.”

Yeah, whatevs. As if its a core responsibility of any governent at any level to tell us where we can shit, shower, and shave. As a libertarian, Im not fond of anti-discrimination legislation that moves beyond dictating terms to governments and publicly funded operations. So, for instance, I believe that as long as governments insist on being in the marriage-certifying business, they should issue licenses to any two people who request them. Publicly funded schools, hospitals, parks, and the like should also be held to strict non-discrimination standards even as I dont think the government should have the right to tell private businesses who they can or cannot serve, hire, or fire.

Thats not because I long for the days of segregated lunch counters but because I fear a government powerful enough to tell us how to run our business will start to, I dont know, dictate how we can do our business. Indeed, it might even force us to buy health insurance in heavily regulated exchanges and forbid us from even offering unisex bathrooms (like the ones most of us have in our homes) in our businesses.
In fact, as my Reason colleague Elizabeth Nolan Brown wrote in 2014, widespread gender segregation of bathrooms isn’t a fact of nature, as anyone who has traveled abroad or grew up in a single-family household could tell you. In the United States, it’s actually been mandated in most places by an ever-increasing thicket of federal, state, and local laws that got their start in 19th-century Massachusetts. “In many places,” wrote Brown, “businesses are legally prohibited from offering only gender-neutral restrooms.  A small restaurant, coffee shop, or bar with only two (separate, enclosed) toilets must designate one for women and one for men. New York City only made it permissible in 2012 for restaurants and coffee shops with just two water closets to make these unisex, and only then for places with a total occupancy of 30 or fewer. Washington, D.C., is one of the few places where it’s actually illegal to designate single-occupancy restrooms as male- or female-use only.”

The same drama that is playing out in North Carolina is being staged in various ways all across the country, especially as the trans community becomes more visible. Last year, a Florida state legislator would have forced business owners to make sure that patrons only used bathrooms for the sex designated on their birth certificates or else be open to lawsuits from offended customers. Last fall in Houston, voters flushed an anti-discrimination initiative aimed at adding LGBT residents to already protected categories after a steady of dose of bathroom scare stories. Dont you know, said the opponents, that this will encourage men to dress up as ladies, camp out in bathrooms, and then attack your daughters (as one political ad on the matter explicitly argued)? 

Strangely, despite a steady growth in unisex bathrooms—over 150 universities now provide gender-neutral showers and bathrooms in residence halls, and some major cities are relaxing their building codes–that bathroom-based crime wave never seems to appear, does it? When I was in college in the early-to-mid 1980s, the idea of shared bathrooms and showers was unthinkable. The floors in my dorms at Rutgers had boys and girls living on them, but the bathrooms and showers were also kept for one gender only. Lo and behold, when my older son started college four years ago, his residence hall at Ohio State had single-seat bathrooms and single-stall showers that any gender could use. Problem solved.

In fact, despite the panic in North Carolina, there are signs of sanity breaking out on the issue. A few weeks ago, South Dakota’s Republican Gov. Dennis Daugaard vetoed a bill banning trans students from using locker rooms and bathrooms that didn’t match their birth sex. His reason was the obverse of North Carolina’s McCrory. A state-wide policy, he said, “does not address any pressing issue concerning the school districts of South Dakota. As policymakers in South Dakota, we often recite that the best government is the government closest to the people. Local school districts can, and have, made necessary restroom and locker room accommodations that serve the best interests of all students, regardless of biological sex or gender identity.”

That sounds about right to me. What’s the old libertarian saying? Get government out of the boardroom–and the bedroom! Sadly, we need to add and the bathroom these days, due to panicked conservatives whose understanding of government’s “core responsibilities” too often leads them into places that are none of their business.

Will there be some difficult practical issues in figuring out how to live in a world beyond gender-segregated bathrooms and locker rooms? Sure, but given the overwhelming comfort that most Americans already show toward the trans population—a 2011 poll poll found that 86 percent of Republicans agreed that “transgender people deserve the same rights and protections as other Americans”!—that doesn’t seem like much of an obstacle to making the world a slightly more welcoming place for people who really need to relieve themselves.

And if it proves an intractable issue—Ted Cruz is no shrinking violet on this matter—there’s always North Korea, where the lack of food means you really don’t use the bathroom that often (even if you’re not nation’s celestial being of a leader) and the lack of media freedom means the topic would never come up in the first place.

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Remembering Tibor Macham: New at Reason

Last week, Reason Foundation co-founder Tibor Macham died. Manny Klausner, another co-founder, remembers him:

Tibor gave me excerpts from Atlas Shrugged to read. Although he was a devoted admirer of her work, Tibor had been “excommunicated” by Rand in the 1960’s for a letter he sent to her to clarify a question he had. But he kept in contact with Nathaniel Branden, who actively marketed Rand’s work and developed an international movement for her philosophy of Objectivism.

Tibor arranged to interview Branden for Reason in 1971—a significant journalistic achievement, because it was Branden’s first public statement after his dramatic split with Rand in 1968. We actively promoted the Branden interview, and this led to a major increase in new subscribers for Reason.

At the time, no one had any sense of “the libertarian moment.” Rather, it wasn’t unusual to be referred to as a libertine—and I was once even mistakenly introduced as a librarian.

View this article.

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