Feds Keeping Homeland Secure with Fake Sex-Trafficking Busts

As America debates how to handle terrorist attacks like the one in New York City yesterday, the U.S. Department of Homeland Security (DHS) and the FBI are busy helping small-town police arrest people for prostitution and marijuana.

In Louisiana this week, the FBI helped arrest—and publicly ridicule—57 men who responded to fake (adult) prostitution ads. Meanwhile in North Carolina, DHS has pitched in to help round-up people with small amounts of marijuana or cocaine on them.

Local media described the DHS efforts as a “human trafficking case.” But the only offenses any suspects were arrested for were drug possession, driving with a revoked license, and parole violations—all state-level offenses, and mostly misdemeanors.

The stunt—which the Burlington Times-News describes as a “covert investigative/outreach operation focusing on human trafficking”—took place Monday with assistance from the Alamance County Sheriff’s Office, the North Carolina Bureau of Investigation, North Carolina Alcohol Enforcement, police officers from three local departments, and a group called Alamance for Freedom. About 30 law enforcement personnel were involved, according to the sheriff’s office.

What this alliance did was just an old-fashioned prostitution sting, with undercover detectives luring sex workers to appointments with a “customer” and cops pouncing when they arrive.

It yielded no human-trafficking arrests, no children were found, and no victims of sex trafficking were rescued.

Nonetheless, police still found cause to arrest some of the people they lured to their “secure location.” Two women, ages 22 and 46, were charged with possession of cocaine and possession of drug paraphernalia; the younger woman was also booked for driving with a revoked license. A 22-year-old and a 31-year-old were arrested for misdemeanor marijuana possession. Two other individuals were arrested as well, both for probation violations.

CBS North Carolina reported it as “a human trafficking ring” bust.

Alamance County Sheriff Terry Johnson has been using human trafficking for a while now to garner good PR for his department—which certainly needs it. In 2012, Johnson was the subject of a Department of Justice lawsuit for allegedly targeting Latinos. North Carolinans compare Johnson to disgraced Arizonan Sheriff Joe Arpaio.

Just last week, Johnson settled with a former deputy for $600,000 in a lawsuit alleging that the deputy was fired in retaliation for his testimony against the sheriff in the federal civil rights case. In addition, Alamance County has paid more than $400,000 over the past three years in lawsuits from former staff.

But as long as Johnson slaps “human-trafficking bust” on his shenanigans, he doesn’t need to actually catch any traffickers, or any illicit sex at all, to trigger hero headlines from local press.

At least Johnson’s motivations here make sense, even if they don’t make him commendable. But why are we, week after week, wasting federal resources on enforcing small-town misdemeanor vice laws?

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Another Grim Report About the Afghanistan War. Is There Anyone Who Cares?

For a particularly grim portrait of the U.S. war in Afghanistan, which started 16 years ago last month, read the latest quarterly report from the Special Inspector General for Afghanistan Reconstruction (SIGAR).

Before we discuss what’s in that document, let’s pause to note what’s not in it. Information that these reports used to include—how many Afghan troop casualties there have been, how large the Afghan armed forces are, how well they’re recruiting, how well they’re equipped—is missing this time. This administration apparently believes that Americans need to be kept in the dark about the conduct and progress of the war, so as to let military leaders make the decisions they want.

Nonetheless, the information that the SIGAR report does provide makes a powerful case that any advantages to the U.S. presence in Afghanistan expired long ago. The Afghan government now controls less territory and population than at any point since SIGAR started tracking that data. More than 10 percent of Afghans now live in areas “under insurgent control or influence,” according to the report. This has happened even though the U.S. has dropped more munitions in Afghanistan than at any time since 2012. (The U.S. alone conducted more than 2,400 air strikes in the country this year.)

Meanwhile, the United Nations Assistance Mission in Afghanistan (UNAMA) says civilian casualties in air strikes conducted by the U.S. and its allies have gone up 50 percent since last year. Two-thirds of those casualties are women and children. (UNAMA attributes 177 civilian casualties this year to coalition air strikes. The United States military disputes that estimate, saying it has confirmed only 43 civilian casualties.)

The last year has also seen a big increase in so-called “insider attacks” on U.S. and Afghan personnel by other Afghan personnel—there were 54 through August 15 of this year, 26 more over the same period last year. Another recent SIGAR report finds that over the last 12 years, more than 47 percent of the foreign military trainees who have gone AWOL after being brought to the U.S. were from Afghanistan. In 2016, 13 percent of Afghan trainees brought to the U.S. went AWOL. This casts yet more doubt on the effectiveness of the intervention, which in recent years has been premised on the need to train Afghan forces.

Perhaps the president’s decision to be less transparent about the war will motivate his opponents to do something about it. Or perhaps we’ll just sink deeper into the quagmire. So far, the war is still mostly just forgotten.

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Markets Shrug At ‘Neutral’ Fed Statement – Dec Rate-Hike Odds Hold At 87%

The wishy-washiest Fed statement ever was met with a nothingburger response from the market. December rate-hike odds are very modestly higher at 87%…

Stocks are unchanged, and bonds and gold are modestly lower with a slightly higher dollar.

As Bloomberg Intelligence Rates Strategist Ira Jersey noted:

The Fed’s policy statement was as boring and expected as could be.

 

The Treasury market focus will now be on the FOMC Chair and other Board of Governor nominees, to digest whether the committee might as a whole (and particularly at the top) incrementally or significantly change direction.”

The dollar index is up for now but really can’t decide…

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Majority Of Americans Say Trump Era Is “Lowest Point In US History”

How quickly Americans forget…

According to a recent survey by the American Psychological Association, a majority of Americans believe that we are currently living through the lowest point in US history that they can remember…eclipsing such watershed moments in US history like the Watergate Scandal, the Bush administration’s dishonest justification for a war with Iraq, and – oh yeah – World War II and Vietnam, according to Bloomberg.

The APA’s eleventh “Stress in America” survey found that 60% of respondents believe the early Trump era is the lowest point in US history, while a slightly larger percentage – 63% – say they are stressed about the nation's future.

Almost two-thirds of Americans, or 63 percent, report being stressed about the future of the nation, according to the American Psychological Association’s Eleventh Stress in America survey, conducted in August and released on Wednesday.  This worry about the fate of the union tops longstanding stressors such as money (62 percent) and work (61 percent) and also cuts across political proclivities. However, a significantly larger proportion of Democrats (73 percent) reported feeling stress than independents (59 percent) and Republicans (56 percent).

 

The “current social divisiveness” in America was reported by 59 percent of those surveyed as a cause of their own malaise.

 

When the APA surveyed Americans a year ago, 52 percent said they were stressed by the presidential campaign. Since then, anxieties have only grown.

 

A majority of the more than 3,400 Americans polled, 59 percent, said “they consider this to to be the lowest point in our nation’s history that they can remember.” That sentiment spanned generations, including those that lived through World War II, the Vietnam War, and the terrorist attacks of Sept. 11. (Some 30 percent of people polled cited terrorism as a source of concern, a number that’s likely to rise given the alleged terrorist attack in New York City on Tuesday.)

 

The economy (35 percent) and trust in government (32 percent) also ranked highly, as did hate crimes (31 percent) and crime in general (31 percent).

The survey didn’t specifically ask about President Trump, and APA Chief Arthur Evans said the “acrimony in the public discourse” and “the general feeling that we are divided as a country” were cited as being more important than any particular person or political party. However, it’s difficult to imagine, given the divisiveness of his policies, that Trump didn’t loom large over these answers.

“We have a picture that says people are concerned,” said Arthur Evans, APA’s chief executive officer. “Any one data point may not not be so important, but taken together, it starts to paint a picture.”

Ironically, Some 43 percent of respondents said healthcare was the largest source of stress – this after President Trump and his Republican Congress have repeatedly failed to repeal and replace Obamacare. This result is more evidence that Americans are deeply dissatisfied with the contemporary US health-care system after a series of debilitating insurance-rate hikes that have been imposed across the country since the law took effect.

More recently, Trump has cancelled federal subsidies to insurers, virtually guaranteeing that the pain felt by consumers will only worsen unless the law is scrapped. However, some of that anxiety could be due to the aging of the Baby Boomer generation.

The APA chalked the stress up to “policy uncertainty” – an antiseptic explanation that ignores the fact that most Americans don’t pay attention to “policy”, unless it directly affects them in a way that’s impossible to ignore.

“Policymakers need to understand that this is an issue that is important to people, that the uncertainty is having an impact on stress levels, and that stress has an impact on health status,” Evans said, pointing out that the relationship between stress and health is well-established.

But in perhaps the most telling revelation from the study, most Americans—56 percent—said they want to stay informed, but the news causes them stress, while even more, 72 percent, said “the media blows things out of proportion” – suggesting that the alarmist news coverage that has prevailed on cable news networks since the election is having a deleterious impact on the American psyche.

Women are also feeling more stressed than men, according to the study. While women normally report higher levels of stress than men, stress rates have in the past typically risen in tandem. However, this year, they diverged: On a 10-point scale, women reported a slight increase in stress, rising from an average 5.0 in 2016 to 5.1 in 2017, while the level for men dropped, from an average 4.6 to 4.4.

Racial divides also exist in reported stress. While the levels among blacks and Hispanics were lower in 2016 than the year before, they rose for both groups in 2017, to 5.2 for Hispanic adults and 5.0 for black adults. Among whites, meanwhile, the average remained the same, at 4.7.

However, there’s at least one silver lining: 51 percent of Americans say they have been inspired to volunteer due to the current state of the nation.
 

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FOMC Leaves Policy Unchanged, Upgrades Growth To “Solid” From “Moderate”

In perhaps the least anticipated FOMC statement in months – with expectations of no rate-change and normalization on path – all eyes were on inflation/growth wording. Some feared a more dovish Fed might upset the exuberant growth narrative that is embedded into equity valuations (but not the yield curve), but The Fed seemed slightly more positive (and perhaps hawkish) by upgrading the economy from growth "moderately" to "at a solid rate" even as it cautioned that "Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft."

As a result of the neutral wording, a December rate hike now appears guaranteed, and the 85% rate hike odds reflect that.

Furthermore, the Fed unanimously voted to leave policy unchanged.

Additional highlights:

  • Fed says economic activity rising at solid rate despite storms
  • Fed: inflation for items other than food, energy remained soft
  • Fed: storms unlikely to alter economy’s medium-term course
  • Fed: labor mkt continued to strengthen, unemployment declined
  • Fed: spending rising at moderate rate, investment picked up
  • Fed repeats mkt-based inflation compensation gauges still low
  • Fed repeats sees inflation stabilizing around 2% medium term

And nothing from Yellen on Trump or Powellbut he reiterated that "Yellen is excellent."

The bottom line is that this was a very neutral statement with no surprise, and the three key phrases coming in precisely in line with "neutral" expectations:

  • "Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize"   
  • "Near-term risks to the economic outlook appear roughly balanced"   
  • "The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate"

Following this statement, much will depend on Friday’s average hourly earnings number and the subsequent FOMC statement in December.

Some initial, kneejerk observations from Stone McCarthy:

  • As expected, FOMC maintained the fed funds rate target range at 1.00%-1.25%. Forward guidance still for "gradual increases" in rates, depending on data. A rate hike in December is widely expected in markets, but the statement offered no substantive hints beyond the usual language.
  • There as a nod to the start of balance sheet normalization as "proceeding", but it has retreated into the background of monetary policy as policymakers emphasize that the fed funds rate target is the primary tool to adjust short-term rates.
  • The assessment of economic conditions was more upbeat with "solid" growth and continued strengthening labor market and a decline in the unemployment rate. Hurricanes caused short-term interruption in payroll gains in September, but at the same time the unemployment rate fell.
  • Hurricane impacts were touched on as "disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term," but still "unlikely to materially alter" the economic fundamentals.
  • Inflation anticipated to "remain somewhat below" objective "in the near term, but to "stabilize" over the medium term. Inflation expectations largely unchanged.
  • Near term risks "roughly balanced", "monitoring inflation developments closely".
  • In the absence of an update to the Summary of Economic Projections (SEP) and/or press briefing from Chair Yellen, attention will shift to the December 12-13 FOMC meeting. Markets have a strong anticipation of a hike of 25 basis points from 1.00%-1.25% to 1.25%-1.50%. We agree that a third hike in 2017 is probable given the strength of the economic data in spite of hurricane disruptions. We look for two more in 2018.

A simple look at how the market performed on FOMC days with a presser and without this year shows you what to expect:

  • The S&P 500 gained an average 0.23%, the DXY dollar index fell 0.33%, and the 10-year rose 7 bps after FOMC meetings in March, June and September.
  • For the non-presser meetings in February, May and July, the returns were -0.02% and 0.01%, and 0.2 bps, respectively.

*  *  *

Here's The Fed's big problem… no matter what they say or do.. the market keeps sending financial conditions easier and easier….As Goldman points out – the financial conditions index has moved as if the fed has eased three times not hiked!

A December rate-hike is now pretty much baked in the cake with the 85% probability before the announcement rising just barely to 87.5%.

Since The last FOMC meeting, Treasury yields have risen but the yield curve has collapsed – signalling the market's utter disbelief in The Fed's ability to birth any kind of real sustained recovery…

(Notably the chart shows that while banks may have ben flying – they have actually merely matched the market's performance since the September Fed)

The Dollar Index has been alsmot straight up since the last FOMC meeting…

Gold has lagged since the September FOMC statement while stocks have soared (along with 2Y yields)…

 

Full Statement with redline comparison:

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Social Media Executives Echo Politicians’ Hysteria About ‘Russian Disinformation’

Yesterday representatives of Facebook, Google, and Twitter testified before a Senate subcommittee about online “Russian disinformation,” sounding a note of alarm that echoed legislators’ concerns and therefore grossly exaggerated the threat. “When it comes to the 2016 election,” said Facebook General Counsel Colin Stretch, “the foreign interference we saw is reprehensible and outrageous and opened a new battleground for our company, our industry, and our society. That foreign actors, hiding behind fake accounts, abused our platform and other internet services to try to sow division and discord—and to try to undermine our election process—is an assault on democracy, and it violates all of our values.”

The idea that Russian ads on Facebook, Russian tweets on Twitter, and Russian videos on YouTube “undermine our election process” and constitute “an assault on democracy” (let alone that such propaganda “violates all of our values”) is hard to take seriously given what we know about the nature and scale of this operation. Social media platforms have every right to insist that users follow their terms of service, which in Facebook’s case ban phony source descriptions (falsely identifying a Russian’s posts as an American’s, for example). But the expectation that Facebook, Twitter, and Google will police political discourse to minimize “Russian influence” is not just impractical but, if backed by the threat of legislation, contrary to the First Amendment.

It is important to keep in mind that we are not talking about direct interference with the election process (by hacking computers that tally votes, say). We are talking about efforts to persuade people—or, as seems to have been more common, reinforce their pre-existing opinions—through words and images. While some of these messages can fairly be described as “disinformation” (such as a fake letter posted on Twitter supposedly documenting a $150 million contribution to Hillary Clinton’s campaign by the conservative Bradley Foundation), some (such as reports about police shootings) were entirely accurate, while others were expressions of opinion on subjects such as racism, LGBT issues, immigration, and gun rights.

Except for the fact that the messages appear to have been sponsored by the Russian government, there was nothing especially sinister or insidious about them. Cases of broken English and awkward phrasing aside, they were indistinguishable from the mixture of facts, lies, and blather that constitutes good, old-fashioned, American-produced political discourse. So when The New York Times reports that Russian-sponsored “political ads and other content” (including videos from the government-sponsored news outlet RT) “were meant to sow discord or chaos,” it is either being hysterical or ascribing absurdly unrealistic ambitions to the Russian government. Our social and political order is not one viral video or inflammatory tweet away from catastrophic collapse.

Russian participation in the online U.S. political debate looks even less scary when you consider how tiny its footprint seems to be. On Monday a Times headline proclaimed that “Russian Influence Reached 126 Million Through Facebook Alone,” which sounds impressive unless you realize that an ad can “reach” people without being noticed or read, let alone persuading anyone. What the headline really meant, as the Times explained in its report on yesterday’s hearing, is that “more than 126 million users potentially saw inflammatory political ads bought by a Kremlin-linked company, the Internet Research Agency.” Yes, and since the post you are reading is available on the internet, it could potentially be seen by 3.6 billion people.

No doubt Vladimir Putin would love to determine the outcome of presidential elections by spending $100,000 on Facebook ads. It is far less clear that he (or anyone else) has the power to do that, no matter how big the ad buy. As Brian Doherty noted here on Monday, the evidence suggests that politicians and campaign “reformers” greatly overestimate the effectiveness of political advertising.

According to Facebook, the ads bought by the Internet Research Agency represented “four-thousandths of one percent (0.004%) of content in News Feed, or approximately 1 out of 23,000 pieces of content.” The Times concedes that “Russia-linked posts represented a minuscule amount of content compared with the billions of posts that flow through users’ News Feeds every day.” Between 2015 and 2017, the paper notes, “people in the United States saw more than 11 trillion posts from pages on Facebook.”

The Russian contribution on other platforms looks similarly unimpressive. Twitter Acting General Counsel Sean Edgett testified that “the 1.4 million election-related Tweets that we identified through our retrospective review as generated by Russian-linked, automated accounts constituted less than three-quarters of a percent (0.74%) of the overall election-related Tweets on Twitter at the time.” The Times admits that tweets by Russian operatives posing as Americans “may have added only modestly to the din of genuine American voices in the pre-election melee,” and “many of the suspect posts were not widely shared.”

Still, the paper insists, the tweets “helped fuel a fire of anger and suspicion in a polarized country.” As Ed Krayewski noted a few weeks ago, the headline over another Times story breathlessly claimed that “Russia Harvested American Rage to Reshape U.S. Politics.” Talk about disinformation.

Richard Salgado, Google’s senior counsel on law enforcement and information security, testified that the company found 18 YouTube channels offering about 1,100 videos with political content that were “uploaded by individuals who we suspect are associated with this [Russian] effort.” The videos, which totaled 43 hours on a platform where 400 hours of content are uploaded every minute and more than 1 billion hours are watched every day, “mostly had low view counts,” with less than 3 percent attracting mored than 5,000 views.

“While this is a relatively small amount of content,” Salgado hastened to add, “we understand that any misuse of our platforms for this purpose is a serious challenge to the integrity of our democracy.” I assume Salgado was trying to placate senators outraged (or pretending to be outraged) by “Russian interference in our electoral process.” But if our democracy cannot survive another 43 hours of political videos on YouTube, it is already doomed.

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It’s Official: October Was The Calmest Stock Market Month… Ever

As traders commemorated the 30th anniversary of Black Monday, amid the rising uncertainty of US tax reform, European sedition, MidEast tensions, ongoing Asian sabre-rattling, and global monetary policy hawkishness, US equity markets experienced the quietest month in their history.

Despite historically being the most volatile month of the year…

 

The CBOE Volatility Index recorded the lowest monthly average in its history, according to data compiled by Bloomberg.

 

With China's National Congress over, we wonder if all that complacency is about to change?

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Dovish, Neutral Or Hawkish: Here Is Your Last Minute FOMC Cheat Sheet

As we previewed earlier this morning, today’s FOMC announcement will most likely be a snooze-fest, with consensus expecting the Fed to leave its target range for the federal funds rate unchanged at 1.00-1.25% as it continues to evaluate to what degree recent disinflation is temporary or persistent.

As several trading desks have opined, the committee is likely to look favorably at the underling components of the Q3 GDP report, while Friday’s jobs report, which Goldman said presents “upside risk to our nonfarm payrolls forecast of +325k” following today’s stronger than expected ADP report, will likely underscore the Fed’s commitment to continue rising rates for the near future. As a further reminder, the market is almost fully pricing in (over 85% odds) another 25bps hike in December. There will be no updated economic projections, nor will there be a press conference from Fed Chair Janet Yellen.

Still, as BBG’s Mark Cudmore explained earlier today, there is potential for a dovish – if not so much hawkish – surprise today.

Here is a quick and dirty cheat sheet, courtesy of TD, laying out what to look for in today’s FOMC statement to decide if the Fed is leaning dovish, hawkish or neither, and what the most likely kneejerk reaction will be.

And, as a bonus, here is another cheat sheet from ING, looking at the various scenarios on how to interpret subtle word changes…

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Multiple Casualties As Cab “Plows Into Shoppers” In Central London; Police: “Not Terror Related”

Update: Police on scene at Covent Garden dealing with serious injury accident involving a taxi. Not Terror related.

*  *  *

As we detaield earlier, on the heels of yesterday's deadly terror attack in southern Manhattan, there is panic in central London tonight according to The Express, as a taxicab has "mounted the pavement and ploughed into people." For now it is unclear if this is an accident or intentional but there is a heavy police presence and multiple casualties.

Photos from the scene this evening showed the black cab on the pavement with people comforting at least one person on the ground.

 

And there is a heavy police presence already…

Developing story…

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Gen Z and Millennials Are Better Than Their Parents at Delaying Gratification

New research provides more evidence that despite all the doomsaying about the post-millennial generation, “Gen Z” is doing just fine—perhaps even better than its predecessors. John Protzko, a psychologist at the University of California, Santa Barbara, analyzed 50 years of data on the famous “marshmallow test,” which ostensibly measures children’s ability to delay gratification. Protzko found that from the 1960s to this year, American kids have gotten steadily better at waiting to get what they want.

In the marshmallow test, a child is left alone in the test room with a marshmallow or some other edible treat. Subjects are told that they can eat the treat now, but also that if they wait a few minutes until the researcher returns they’ll get a second treat too. Researchers measure not only whether a child eats the treat before the researcher returns but, if so, how long he or she waits before doing so.

When Protzko asked cognitive development scholars whether they believed children’s ability to delay gratification had been diminished over the past half century, 52 percent predicted a decrease and 20 percent predicted no change. Only 16 percent expected kids’ capacity to delay gratification to have improved. Many cited modern children’s use of computers, phones, tablets, and similar technologies as a reason for the expected decline.

But such concerns “may be overblown,” according to the (pre-publication) paper. “Overall, contrary to not only popular wisdom, but also expert prediction, kids these days are better at delaying gratification on the marshmallow test—and they are getting better,” the researchers found.

For Protzko’s analysis, researches looked at the results of marshmallow tests in both published and unpublished research from the past 50 years. All the children who participated were under the age of 10. The increase in the ability to delay gratification held true “for all children, not [just] those at the bottom of ability…for those at the top of the ability.”

The length of time kids were able to resist the marshmallow increased an average of six seconds per year, or around a minute per decade. “This is a little less than a fifth of a standard deviation per decade,” the authors note, which “corresponds to the fifth of a standard deviation per decade observed in increases in IQ”—otherwise known as the Flynn Effect.

As Reason‘s Ron Bailey pointed out in 2011, years of research on the effect, first identified by James R. Flynn in the 1980s, showed that IQ scores have been rising among both the lowest and highest scorers. Much of the explanation for “this dramatic across the board increase in intelligence” can be attributed to television. (For more on the why behind the Flynn Effect, see this Michael Shermer piece from Reason‘s archives.) Perhaps digital culture is having similarly positive effects.

“While it is easy to look at kids these days and deride their inability to control themselves and decry the downfall of civilization, it is much harder to accurately recall our own selves as children,” Protzko’s paper points out. But “contrary to historical and present complaints, kids these days appear to be better than we were. A supposed modern culture of instant gratification has not stemmed the march of improvement.”

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