Month: June 2022

Authored by Jonathan Turley,

Below is my column on the growing attacks on the legitimacy of the Supreme Court after the decision to overturn Roe v. Wade. As the Court ends its term, Democratic leaders are calling for removing justices, packing the Court, and other extreme reactions to the decision in Dobbs v. Jackson Women’s Health Organization.

Here is the column:

For justices, the end of a Supreme Court term usually brings welcomed vacations and speaking engagements out of town. This week it seemed more like the justices were fleeing the jurisdiction with a mob at their heels. Six justices (and their homes) are targeted because they dared to interpret the Constitution in a way that is opposed by many in the political, media, and academic establishment. After the overturning of Roe v. Wade, many called for impeachments, court packing, and “disciplining” justices. What is chilling, however, is that these calls have not come from extremist groups but political and media figures who are challenging the very  “legitimacy” of the Supreme Court.

The Madisonian democracy is based on the premise that, despite our factional divisions, the Constitution creates an interest in all groups in preserving the system. While the Constitution does not guarantee that your views will prevail in Congress or the courts, it has proven the most stable and successful democratic system in history.  We are all invested in that system which has achieved transformative changes over time in our laws and our society.

The Constitution is neither poetic nor pretentious in its language. It was written by the ultimate wonk in Madison. It has only one thing to recommend it: we are still here.  We have survived periods of war, economic collapse, and social discord that broke other systems.

Politicians and the press have thrived under this system and have historically defended its legitimacy even when demanding major changes in our laws. We are now witnessing a crisis of faith with the political and media establishment declaring the highest court to be illegitimate. All because they disagree with a constitutional interpretation adopted by the majority of its members.

Sen. Elizabeth Warren, D-Mass, has declared the Supreme Court illegitimate and has called to pack the Court for rending opinions against “widely held public opinion.”

Rep. Alexandria Ocasio-Cortez, D-N.Y., even questioned the institution’s value: “How much does the current structure benefit us? And I don’t think it does.” She has now demanded the impeachment of Justices Kavanaugh and Gorsuch based on the entirely false claim that they lied under oath in their confirmation hearings. After the Dobbs decision, Ocasio-Cortez demanded “there must be consequences” for the Court.

Other leaders like Sen. Jeanne Shaheen, D-N.H., issued a warning to the Supreme Court: Reaffirm Roe v. Wade or face a “revolution.”

The media has amplified these extreme calls. In the New York Times, columnist Jamelle Bouie wrote an outline of how Democrats could rein in the high court in a piece titled, “How to Discipline a Rogue Supreme Court.” He wrote that the Supreme Court does not exist above the constitutional system and added that the “rogue” court “cannot shield itself from the power of other branches.” Bouie’s discipline includes impeaching or removing justices as well as packing the court.

Notably, like many others demanding radical changes to the Court, Bouie previously advocated the change that is most responsible for creating the Court’s current composition. Like many liberals, Bouie demanded that the Senate kill the filibuster rule for Supreme Court nominees.

At the time, some of us warned the Democrats that the move was uniquely short-sighted and that they would rue the day that they took such a moronic step. As predicted, the Democrats soon found themselves in the minority without the protection of the filibuster rule and could not block nominees. They gained comparably little from the change given what they lost, including ultimately Roe v. Wade.

Rather than admit that their prior attack on the filibuster backfired, liberals are now demanding even more radical moves like a bad gambler at Vegas who just keeps doubling down in the hopes of winning a hand.

It does not matter that the Court is not as rigidly ideological or dysfunctionally divided as widely claimed. If anything, it has shown fewer divisions in most cases. Before the opinion, ABC admitted that “67% of the court’s opinions in cases argued during the term that ends this month have been unanimous or near-unanimous with just one justice dissenting.That compares to just 46% of unanimous or near-unanimous decisions during the 2019 term and the 48% average unanimous decision rate of the past decade.” Yet, after the decision, ABC’s legal analyst Terry Moran described the term as a “new era” of the “activist court.”

This crisis of faith is evident in other key constituencies in our system, including in our law schools. Law professors like Berkeley Dean Erwin Chemerinksy have called the justices “partisan hacks” while others have supported targeting the individual justices at their home. Georgetown Law Professor Josh Chafetz declared that “when the mob is right, some (but not all!) more aggressive tactics are justified.” Most recently, the dean and chancellor of University of California Hastings College of the Law David Faigman questioned the legitimacy of the Court after the ruling in Dobbs v. Jackson Women’s Health Organization.  

Writing in his official capacity, Faigman went as far as to claim that “this decision turns back the clock not just to 1973, but to a century when women did not have the right to vote and were, largely, treated as property . .  . the world today is so much less generous and inclusive than it was just yesterday. I tremble for my granddaughters.” Faigman declared that the “the Court itself, which is a product of political gerrymandering—raises basic questions regarding the legitimacy of the Court itself.”

From Congress to the press to academia, the very foundation of the Court is being challenged. What is notable is that these are also the voices of some of the most powerful figures in our society. Rather than seek to moderate the mob, they are fueling the rage with such reckless rhetoric. There are good-faith objections to this decision but those objections challenge the legitimacy of the holding, not the institution itself. As Benjamin Franklin noted “The U. S. Constitution doesn’t guarantee happiness, only the pursuit of it. You have to catch up with it yourself.”

As we detailed earlier in the week, the latest weekly release has pushed the SPR below the 500 million barrels mark for the first time since 1986…

And as the chart above shows, the plummeting SPR is not having the impact on prices that President Biden hoped (which explains why he is blaming everyone and everything else for the rise in gas prices – as it becomes clear it’s a refining capacity issue as much as anything else).

While that is ominous by itself, we note that in the context of US demand, it is even more of a concern as based on the latest Department of Energy estimate of Implied Crude Demand, there is just 27 days of supply left in the emergency oil reserve… a record low…

“Congress has been irresponsibly selling the SPR down,” said Bob McNally, who in the early 2000s oversaw the Energy Department’s efforts to replenish the SPR under former President George W. Bush, adding that “draining the reserve leaves the country and the world more vulnerable to geopolitical shocks.”

Finally, we note that in response to growing concerns about the depleted reserve, the Department of Energy revealed plans to replenish emergency stocks.

This fall, it will launch a buyback process to repurchase 60 million barrels of oil, or one-third of the six-month 180-million-barrel emergency release.

As Andrew Moran writes at The Epoch Times, although the White House is exploring multiple avenues, such as urging OPEC to open the taps and pushing gasoline stations to diminish the pain at the pump, the best solution is greater North American output, says Tortoise Senior Portfolio Manager Rob Thummel.

“The best solution remains increasing oil and natural gas production from reliable supply sources like U.S. and Canada that will assist in balancing the global energy markets and reduce the geopolitical risk premium embedded in global oil and natural gas prices resulting in lower prices at the pump,” Thummel stated during a recent TortoiseEcofin QuickTake podcast.

Biden announced last week that he is encouraging Congress to lift the 18-cent federal gas tax for three months…

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

The share of American adults who say they’re optimistic about the future of the country has dropped to a new tracking low, according to a poll by Morning Consult, which comes on the heels of a closely-watched consumer confidence gauge that fell to its lowest level on record.

The Morning Consult survey, carried out on a representative sample of 2,210 U.S. adults between June 16–20, shows that 45 percent of respondents said they were “very optimistic” or “somewhat optimistic” about the future of the United States.

This is a record low as far as this particular data series is concerned, which goes back to October 2020. By comparison, a series high was reached in March 2021, when 65 percent of U.S. adults expressed optimism about the future of the country.

Consumer Confidence Plummets

While the Morning Consult’s data series goes back only two years, a separate measure of U.S. consumer confidence from the University of Michigan, which goes back to the mid-1970s, has plunged to a record low.

The Michigan consumer sentiment index fell from a reading of 58.4 in May to just 50.0 in June, an all-time low, with soaring inflation a key factor behind the surge in pessimism.

“While consumers still appear relatively optimistic about the stability of their incomes, their perceptions of the economy are much more strongly influenced by concerns over inflation,” according to University of Michigan economist Joanne Hsu, director of the consumer confidence survey.

All components of the University of Michigan sentiment index declined in June, but the sharpest drop was in the year-ahead outlook for the U.S. economy, which fell 24 percent between May and June, according to Hsu.

Inflation Expectations Ease a Little

One bright spot in the University of Michigan survey was that longer-term inflation expectations among U.S. consumers eased slightly to 3.1 percent over the next five to ten years, down from an earlier preliminary reading of 3.3 percent.

Hsu told Bloomberg that the downward revision in longer-run inflation expectations was driven by a jump in the share of respondents who said they expect “extremely low inflation in the years ahead,” with around half of those expressing “bleak views about the risks of recession or unemployment.”

Growing concern about the prospect of a recession as the Fed tightens monetary conditions could be a factor in the easing of the University of Michigan inflation expectations, as price pressures tend to ease during economic contractions.

A number of Wall Street analysts recently raised their forecasts for the odds of a U.S. recession, with Goldman Sachs predicting a 30 percent chance of the U.S. economy contracting over the next year, up from 15 percent in an earlier projection.

‘Quite Eye-Catching’

Still, U.S. inflation expectations as reflected in the 10-year breakeven inflation rate per the St. Louis Federal Reserve data jumped on Friday to 2.56 percent following a three-day downtrend that touched a multi-month low of 2.50 percent.

Policymakers fret over future inflation expectations—not just actual price growth—as they are a barometer of potential pressure building in the wage-price spiral. A de-anchoring of inflation expectations could fuel stronger demand for wages, driving a feedback loop that sees inflation pushing higher.

The dreaded wage-price dynamic was at play during the economic upheaval of the 1970s, which led then-Fed chief Paul Volcker to raise interest rates sharply, taming inflation but also sparking a recession.

Current Fed Chair Jerome Powell recently noted the University of Michigan’s preliminary inflation expectations reading—which he called “quite eye-catching”—as one of the factors that drove policymakers to hike rates by 75 basis points on June 15, the biggest jump since 1994.

‘Unimaginable Fed Pivot’

While an early signal, the slight easing of inflation expectations takes some pressure off the Fed to keep hiking rates aggressively, some analysts say.

Last week’s rally in stocks and other risk assets could reflect a shift in investors’ view of the Fed’s future path in light of inflation expectations.

“The market is telling us it is salivating at the prospect of a currently unimaginable Fed pivot,” analyst Sven Henrich wrote in a series of tweets, referring to a potential reversal of the Fed’s current monetary tightening cycle.

“Perversely, we may enter a period where bad news is good news as ever slowing growth will raise recession expectations and cause yields to drop (bullish stocks),” he added.

Henrich argued that any type of rollover in inflation data over the summer would “be massively positive” for equities, though the risk of a full-blown recession remains with the risk for new lows in stock markets remaining “extremely high.”

One month ago, Snapchat shares cratered after the company unexpectedly slashed guidance for the second time in under one month (it had guided lower in late April and said that since then “the macroeconomic environment has deteriorated further and faster than anticipated.”)

Well, fast forward to today when moments ago RH – aka Restoration Hardward – just pulled a Snapchat and just three weeks after the company with the outspoken CEO saw its shares tumble after it guided lower for Q2 and the full year despite sold Q1 results, RH just cut guidance again with CEO Gary Friedman saying that “the deteriorating macro-economic environment has resulted in lower than expected demand since our prior forecast, and we are updating our outlook, particularly for the second half of the year.”

Taking into account the macro-economic conditions and our current business trends, RH provided the following outlook for the second quarter and full year, which assumes demand will continue to soften during the remainder of fiscal 2022:

• Fiscal 2022 net revenue growth in the range of (2%) to (5%), with adjusted operating margin in the range of 21.0% to 22.0%.
  • Previously the company had seen revenue growth of 5% to 7% and operating margin of 23.0% to 23.5%, so a huge hit to both the top-line and profit margins.
• For Q2, RH sees net revenue growth in the range of (1%) to (3%), with adjusted operating margin in the range of 23.0% to 23.5%. The second quarter outlook remains unchanged versus our prior forecast due to faster backlog relief offsetting lower than expected demand.

Friedman’s catastrophic forecast continued, “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year.”

Friedman concluded, “While we anticipate the next several quarters will pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift, shed less valuable market share as we continue to raise our quality, and choose not to promote our business while we navigate through the multiple macro headwinds, we continue to believe our long-term investments will enable us to drive industry-leading performance over a longer term horizon.”

The Company also noted that it has not repurchased any shares since announcing the expansion of its common stock repurchase authorization on June 2, 2022.

Which reminds us that just two weeks ago we wrote that “the debate is now over on the dismal state of the US consumer“, after Morgan Stanley unloaded on the driving force behind 70% of US GDP. It now appears that this particular realization is starting to finally trickle through to the rest of the economy.

RH stock, of course, tumbled, 5% taking its decline for 2022 to a new low of 55%, and down much more than half from its 2021 all time high of $744

As for the broader implications, in case this needs to be said again – the US consumer is now, and has been for months, in a recession, one which has shocked corporate America with its size and speed, and it’s only a matter of time before we get a deflationary tsunami for most non-food and energy goods and services. And, as we have said previously, we also fully expect that the Fed will recognize said recession just around the time of this year’s Jackson Hole symposium where recession will become the new Fed baseline.