A. Barton Hinkle on How New York City’s Steep Cigarette Taxes Create Crime and Grow Big Government

Thanks to New York’s laughably high
cigarette taxes ($4.35 state plus another $1.60 in the city) and
higher prices generally, a pack of smokes in New York City costs
$14 or more. That creates a powerful incentive to smuggle smokes in
from states such as Virginia, where you can buy a pack for a third
of that price. Fill a Ford Econoline van with a few hundred cartons
and you can make a nice five-figure profit in a weekend. Some
people do.

The robust cigarette smuggling irritates officials in New York,
because they miss out on a lot of tax revenue. The trade irritates
officials in Virginia for the same reason, because smugglers buy
wholesale to avoid the retail sales tax.

There’s an easy fix for all of this, writes A. Barton Hinkle:
Cut those taxes.

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ISM Services Surges To 4th Highest On Record (As Services PMI Plummets)

On the heels of 5 months of weakness in Services PMI, and 2 months of weakness in ISM Services, it only makes sense that ISM’s Services print would massively beat expectations at 59.3 (against 57.5). All ISM subindices rose – apart from employment (which dropped to 4 months lows)! Just 15 minutes after one survey indicates a drastic slowdown in domestic demand for services, another one says it has almost never been better…

 

Huge beat in ISM Services…

 

What a difference 15 minutes makes…

 

Charts: Bloomberg




via Zero Hedge //feedproxy.google.com/~r/zerohedge/feed/~3/cmwhFVHNAec/story01.htm Tyler Durden

Reason Writer’s Book Declared Notable, Highbrow, and Brilliant

MMA meets MFA.Congratulations to former Reason staffer
Kerry Howley, whose recent book Thrown—in
which a fictional grad student narrates a tale about real
mixed martial arts fighters—was just included on The New York
Times
‘s
annual list
of the year’s notable books.

Thrown also made it onto New York
magazine’s latest
Approval Matrix
, where it appears in the Highbrow/Brilliant
quadrant—the exact opposite, apparently, of SantaCon.

Howley talked with Reason about Thrown

here
, and the rest of her Reason archive is here. Her website
is here. The New York
Times
‘s full-length review of Thrown is
here
.

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change the world in a libertarian direction. For details on giving
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now
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US Servces PMI Tumbles For 5th Month As “Domestic Demand Weakens”

For the 5th month in a row since the record-breaking June highs that proved the recovery narrative was working, US Services PMI dropped. At 56.2 (missing expectations of 56.5), this is the lowest in 7 months. As Markit notes, this is a problem, since “whereas the manufacturing slowdown was largely linked to weaker global demand and a renewed fall in export orders, moderating growth in the service sector is a sign of domestic demand weakening.” This points to a significant slowdown in GDP growth to a mere 2.5% from a hopeful 3.9% in Q3.

 

 

Commenting on the PMI data, Chris Williamson, Chief Economist at Markit said:

“The final PMI data confirm earlier flash readings that the US economy is likely to have slowed further in the fourth quarter. GDP looks set to rise at an annualised rate of 2.5%, down from 3.9% in the third quarter.

 

“Whereas the manufacturing slowdown was largely linked to weaker global demand and a renewed fall in export orders, moderating growth in the service sector is a sign of domestic demand weakening.

 

“The concern is that, with new business across manufacturing and services collectively growing at a much reduced rate compared to the summer months, companies could become more hesitant in taking on staff unless demand picks up again soon.

 

“However, at present, the slowing is still only modest, and leaves the economy growing at its approximate long-term trend rate. Importantly, growth is also sufficiently strong to create new jobs in impressive numbers. The survey data remain consistent with another month of non-farm payrolls rising by at least 200,000 in November.

 

“Price pressures have meanwhile fallen, meaning policymakers can enjoy a ‘goldilocks’ scenario of robust growth and low inflation, providing greater leeway to hold off with raising interest rates.”

*  *  *




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For Sale: Ambassador’s Slot. Competence Optional

Colleen Bell seems like a nice
enough person. She’s certainly been successful in the television
industry as a producer of “The Bold and the Beautiful” (a spin-off
of “The Young and the Restless,” which, like the show she produces,
was also created by her in-laws). She even speaks conversational
Spanish, which might not be as helpful as she’d wish in her new
posting as ambassador to Hungary. But she’s been really effective
at packaging donations to the political campaigns of Barack Obama,
which is not the sort of thing that hurts your prospects of a
political appointment when Obama is president of the United
States.

Bell is certainly not the first political appointee to grace the
State Department—nor the least likely.
Noah Mamet’s appointment
as ambassador to politically volatile
Argentina, a country he’s never visited, seems just as
eyebrow-raising. And let’s not forget Shirley Temple Black’s roles
as ambassador to Ghana and Czechoslovakia under President Ronald
Reagan (though both countries could, no doubt, have benefited from
a cheery rendition or two of “On the Good Ship Lollipop”).

In fact, ambassadorships have long been effectively for sale.
The American Foreign Service Association—basically the labor union
for career diplomats—tracks ambassadorial
appointments
and breaks them down by career and political, with
a note as to whether nominees are political campaign bundlers. Bell
and Mamet are both bundlers. So far, 35.2 percent of President Obama’s
appointments
to ambassadorial posts have been political rather
than career. That compares to 29.8 percent for George W. Bush and
28.6 percent for Bill Clinton.
Yes, political appointments are pay-offs for services rendered. For
her part, Bell’s services include
$500,000 or so
in bundled donations, coupled with what is
apparently total ignorance about Hungary’s role in the greater
scheme of things (hint: it’s near Russia).

If you’re curious, Colleen Bell’s Certificate of Demonstrated
Competence for the role of Ambassador to the Republic of Hungary is

here
(a full list for appointees is here). Yesterday, she
and Mamet were confirmed by the Senate.

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Russian Central Bank Defends Record Low 55 Level, Bonds Tumble

Since the top in oil in June, crude has dropped around 37%… and so has the Russian Ruble. Monday saw the Russian Central Bank (rumored) to intervene to protect the 54 Ruble to the USDollar level. Yesterday saw weakness resume as oil prices slipped and today it appears 55 is the new line in the sand as the USDRUB was smashed 2 handles lower earlier today (only to begin selling off once again since). Russian 10Y bond yields are leaking higher however, +20bps to break the 11% line in the sand.

 

Russia appears to be tracking crude almost perfectly…

 

It appears the Russian Central Bank is active again today…

 

as Bond yields are surging

 

Charts: Bloomberg




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Housing Fraud is Back – Real Estate Industry Intentionally Inflating Home Appraisals

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values, according to Allterra Group LLC, a for-profit appraiser-advocacy firm based in Salisbury, Md. That figure was 37% in the survey for the previous year.

 

“If you thought what was happening before was an embarrassment, wait until the second time around,” said Joan Trice, Allterra’s chief executive and founder of the Collateral Risk Network, which represents appraisers employed by lenders and other companies and has been meeting with regulators to discuss concerns about appraisers being pressured into inflating values.

 

– From the Wall Street Journal article: Dodgy Home Appraisals Make a Comeback

When in doubt, just make shit up.

That seems to be the mantra of the U.S. real estate industry. A place where home values must always rise no matter what. After all, there’s nothing better for an economy than pricing out average citizens from their means of shelter.

As the WSJ reports, inflated home appraisals have become such a concern that the Office of the Comptroller of the Currency is looking into it. Which means precisely nothing will be done to stop it. After all, it is official government policy to encourage risky loans to keep housing bubble 2.0 inflated. Recall: Mel Watt, Federal Housing Finance Agency Head, is Pushing Banks to Make Extremely Risky Home Loans.

The WSJ reports:

Home appraisers are inflating the values of some properties they assess, often at the behest of loan officers and real-estate agents, in what industry executives say is a return to practices seen before the financial crisis.

 

An estimated one in seven appraisals conducted from 2011 through early 2014 inflated home values by 20% or more, according to data provided to The Wall Street Journal by Digital Risk Analytics, a subsidiary of Digital Risk LLC. The mortgage-analysis and consulting firm based in Maitland, Fla., was hired by some of the 20 largest lenders to review their loan files.

 

The firm reviewed more than 200,000 mortgages, parsing the homes’ appraised values and other information, including the properties’ sizes and similar homes sold in the areas at the times. The review was conducted using the firm’s software and staff appraisers.

 

Bankers, appraisers and federal officials in interviews said inflated appraisals are becoming more widespread as the recovery in the housing market cools. While home prices are increasing generally, their appreciation is slowing, and sales have been weak despite low interest rates. The dollar amount of new mortgages issued this year is expected to be down 39% from last year, at about $1.12 trillion, according to the Mortgage Bankers Association.

 

That has put increasing pressure on loan officers, who depend on originating new mortgages for their income, as well as real-estate agents, who live on sales commissions. That in turn is raising the heat on appraisers, whose valuations can make or break a sale. Banks generally won’t agree to a mortgage if the purchase price or the refinancing amount is higher than the appraised value.

 

Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values, according to Allterra Group LLC, a for-profit appraiser-advocacy firm based in Salisbury, Md. That figure was 37% in the survey for the previous year.

 

“If you thought what was happening before was an embarrassment, wait until the second time around,” said Joan Trice, Allterra’s chief executive and founder of the Collateral Risk Network, which represents appraisers employed by lenders and other companies and has been meeting with regulators to discuss concerns about appraisers being pressured into inflating values.

 

Digital Risk found that some appraised values were off the mark based on discrepancies that appeared unintentional, though, “at other times, the appraiser’s selection of [comparable properties]…is very hard to justify,” said Thomas Showalter, chief analytics officer at Digital Risk. The firm saw cases where values for decades-old homes were determined based on sales prices for newly constructed ones, and homes blocks from shorelines were compared with waterfront properties, he said.

 

Brandon Boudreau, chief operating officer at Metro-West Appraisal Co. LLC, a national firm based in Detroit, says he and his appraisers often feel pressured by aggressive real-estate agents.

Much of the pressure, appraisers say, is being applied by companies hired by banks to assign appraisal work, known as appraisal-management companies, or AMCs. A much larger share of appraisals have been filtered through these companies since the introduction of new financial rules and other requirements that seek to prohibit appraiser coercion.

 

Tom Allen, who says he has been an appraiser for 44 years, recalled appraising a house in April for about $450,000 for a loan application with J.P. Morgan Chase & Co. About a week later, Mr. Allen, 68 years old, says he received a request from the appraisal-management company to use two different properties as comparables that had recently sold for around $525,000 and $540,000. Mr. Allen says he refused because the homes were larger, in a more expensive neighborhood and built about 10 years after the property in question. Since then, Mr. Allen says he mostly accepts appraisal requests for homes that have several similar nearby sales.

 

A J.P. Morgan spokesman declined to comment.

Of course they did.

Freddie Mac has found cases of appraisers submitting a suspiciously high number of reports in one day, as well as reports for properties in places where they aren’t certified or licensed to operate, according to a spokesman. It has also received tips from employees at lenders and other insiders warning of inflated valuations, he said.

Is there any price in this economy that isn’t completely rigged?




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Say Goodbye To Mid-2015 Rate Hikes: Revised “Hourly Compensation” Crashes

But all the clever talking heads (the same ones that to-a-man saw rising rates this year) keep telling us that wage inflation is coming any minute, it has to right, and will create escape velocity and nirvana on American soil. Sorry, nope. Unit labor costs dropped 1.0% in Q3 against a 0.3% preliminary print and expectations of a mere 0.2% drop (the 4th missing quarter of th elast 5 and lowest growth since Q4 2013. What is more problematic is real hourly compensation was revised drastically lower – quite a plunge.

Unit Labor costs dropped for the 2nd quarter in a row…missing for the 4th quarter of the last 5…

 

This is how the BLS just “revised” everyone wages on paper to match what is going on in reality:

In the third quarter of 2014, nonfarm business productivity increased 2.3 percent, rather than 2.0 percent as reported November 6. The revised figure reflects an upward revision to output that was partially offset by a small  upward revision to hours. Unit labor costs were revised down, and decreased 1.0 percent rather than increasing 0.3 percent, reflecting both the upward revision to productivity and a 1.0 percentage point downward revision to hourly compensation growth.

 

In the second quarter of 2014, nonfarm business productivity, output, and hours were unrevised. Unit labor costs fell 3.7 percent, rather than 0.5 percent as previously reported, the result of a large downward revision to hourly compensation.

Which leads us to the all important Real Hourly Compensation, most likley the only metric which Yellen looks at now considering unemployment data has become a complete farce, is was revised drastically lower as a result a negative(!) revision to Business and Durable Manufacturing hourly earnings which were down to -0.5% and -0.3%, from 0.5% and 0.7%, respectively.

 

… busting the myth of wage inflation induced rate hikes and “self-fulfilling escape velocity growth any second” now meme.




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Texas to Execute Severely Mentally Ill Man Tonight Despite Public Outcry

Tonight at approximately 6 p.m. CST Texas is scheduled to
execute Scott Panetti, a man who has suffered from schizophrenia
and other mental illnesses for over 30 years.


First diagnosed
with schizophrenia in 1978, Panetti was
hospitalized over a dozen times by 1992 and involuntarily committed
to a mental hospital at least twice. On one such occasion in 1986,
Panetti had buried his furniture in the backyard because he
believed the devil was inside it.

In 1992, shortly after Panetti stopped taking his medication, he
shaved his head, dressed in army fatigues, and
killed his in-laws
with a hunting rifle in front of his wife
and three-year-old-daughter. He turned himself in shortly after,
and
told police officers
that “Sarge” was responsible for the
killings.

After a jury found him competent to stand trial, a judge allowed
him to represent himself in court. At his trial,
Panetti wore a cowboy costume and a purple bandana
and
attempted to subpoena Jesus Christ, John F. Kennedy, and the Pope,
along with 200 others. His statements were often incoherent and
rambling, and at one point he even fell asleep. In 1995, Panetti
was convicted of the murders and sentenced to death.

The central issue at hand—one which Panetti’s lawyers and the
state of Texas have been arguing over for decades—is whether
Panetti is insane and therefore ineligible for legal execution. In
1986, the United States Supreme Court ruled that executing a
mentally insane prisoner violated the Eighth Amendment to the U.S.
Constitution. However, the court never defined what constituted
mental “competency.”

The Fifth Circuit Court of Appeals, which has jurisdiction over
the state of Texas, thus developed its own test for competency,
which requires prisoners facing execution to have factual
awareness
of the impending execution and the state’s reasoning
for it, or that they’re able to say they understand they’re being
executed by the state because of the crimes they’ve committed,
regardless of whether they believe it or not. Because Panetti knew
that he committed two murders, was set to be executed, and was
aware of the state’s reason for executing him, the Fifth Circuit
court ruled in 2004 that he was competent to be executed. However,
witnesses for the state, a psychologist, and a clinical
psychiatrist testified that Panetti believed the real reason the
state wanted to execute him was to stop him from “preaching the
gospel.”

That competency test wasn’t good enough for the U.S. Supreme
Court. In 2007, the Court reversed the Fifth Circuit’s decision and
ruled that to stand competent for execution, a prisoner must also
have rational understanding of the state’s reason for
execution. This meant the state must now prove that Panetti’s
schizophrenic delusions don’t inhibit him from understanding the
reason for his punishment.

In 2008, the Fifth Circuit held a second competency hearing for
Panetti. Like in 2004, multiple expert witnesses testified Panetti
believed the state was executing him to stop him from preaching the
gospel. Despite their testimony, the court found Panetti had “both
a factual and rational understanding of his crime, his impending
death, and the casual retributive connection between the two,” and
once again ruled him competent to be executed.

The state’s reasoning behind their ruling relied not on the
expert witnesses testimony, but on secretly-taped conversations
between Panetti and his parents in which, according to the court,
he “initiates a very rational, organized conversation with his
parents about various states abolishing the death penalty,” among
other things. The statements made in these taped conversations
prove Panetti has rational understanding of the state’s rationale
for his execution, the court said.

Panetti has not had a competency hearing since 2008, though
lawyers assert his mental state has deteriorated since then. It’s
clear that they’re not the only ones who believe Panetti is too
mentally ill to be executed. In recent months, Panetti’s case has
generated huge amounts of outcry from groups and individuals
normally silent about the death penalty in Texas, including former
Texas Gov. Mark White,
who called Panetti’s trial a “sham,”
and 55 evangelical leaders.
Even
Ron Paul wrote
to Gov. Rick Perry asking he grant Panetti
clemency.

It’s unknown as to whether or not any of this outcry will help
stop the execution from taking place. Currently, appeals are
pending with the Fifth Circuit Court as to whether a new hearing
will be granted in lieu of his execution tomorrow. Unless the court
allows another competency hearing to take place, Gov. Perry issues
a 30-day reprieve to review the case, or the U.S. Supreme Court
intervenes, Panetti will be strapped to the gurney come 6 p.m.
tonight.

If Panetti’s execution is carried out, it won’t be the first
time Texas has executed a mentally ill prisoner. In 2004, the state
executed Kelsey Patterson despite his history of psychotic
behavior. During both his competency hearing and trial, Patterson
testified
that devices implanted in him by his lawyers were
controlling his actions remotely.

Regardless of whether Panetti is ultimately executed, the entire
process that’s played out in his case represents a gross
miscarriage of justice. “This is a case where we’ve had cascading,
catastrophic error and it all concerns the criminal justice
system’s failure to protect a severely mentally ill man,” Kathryn
Kase, one of Panetti’s lawyers, told me yesterday afternoon.
If Texas carries out the execution this evening, it will be an
outrage.

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