No ‘Powell Pivot’: Nomura Warns “The Fed Cannot Risk Getting ‘Arthur-Burns-ed'”

No ‘Powell Pivot’: Nomura Warns “The Fed Cannot Risk Getting ‘Arthur-Burns-ed'”

Almost nothing Powell can say will have the Equities market “hear” anything less than a “de facto dovish” message, versus an impossible “balancing act” expectation that he cannot fulfill without likely easing FCI (re-iterating focus on inflation but unable to ‘Forward guide’ tighter, while also acknowledging slowing growth and fading Commods / Inflation Expectations Surveys as tailwinds to ‘past peak’story)…

Remember, financial conditions are now EASIER than they were when The Fed STARTED TIGHTENING…

all of which is why Nomura’s Charlie McElligott believes Powell’s speech is largely being viewed as a “nothing-burger”.

Accordingly, markets are continuing on their own ways:

  • Equities are seeing an approaching “end to tightening” as an ongoing “stabilization” dynamic which cuts “left tail” Inflation >>> “Policy Error” scenarios, not really putting any credence into the potential for Terminals to move higher from here –ESPECIALLY following this morning’s light prints in Personal Income, Personal Spending and PCE Deflators across boards which “keep hope alive” for an earlier end to tightening

  • Rates act with far more nuance, adjusting to “higher / more restrictive for longer” view, with Terminal now priced for Apr23 at 3.76% (was down to an absurd 3.20% on 7/28), before by end of year adjusting lower to 3.47% by Dec23…but still currently seeing nominal 10Y yields chopping in the middle of their 3 month range (high of 3.497% on 6/14, low of 2.514% on 8/1)

The Nomura strategist warns that the reality is, the Fed cannot risk getting “Arthur Burns-ied” and signal any sort of policy easing pivot preemptively, while “inflation tensions” are likely to remain structurally present for potentially another year +…so the showdown is with the Equities market, which continues to reflexively pull-forward easier financial conditions on the expected exit from “tightening”

The only true “hawkish surprise” path that Powell could go down would be for him to hypothetically tell us “outright” that said Terminal rate is needs to go higher than current market implieds are pricing, which would then risk a snap-tightening in FCI: US Dollar and Real Yields higher, Equities lower, Credit / Spread product wider, Vol up

And…ummmmm…FAT CHANCE of that occurring, without Powell having “hot” future CPI- or NFP- inflation data in-hand (despite having this morning’s LIGHT—thus “bullish Equities” PCE Deflator and Personal Income / Spending data) to allow him …especially when he is also certain to mention the economic “pain” being caused by their inflation fighting efforts as further counterbalance which offsets his usual word salad about the Committee’s prioritization of not allowing for inflation to become unanchored / embedded

In the meantime, the market has already been doing its “de facto dovish” relief trade before the Powell “event” itself even occurs (Equities / Credit / Crypto rally past few days, while this morning, we see modest Curve Steepening and USD lower), as the current belief is that the Fed is becoming less aggressive on the policy rate stance, which is why everybody underexposed to this Equities rally—or, having been sitting on grossed-up “short” books and hedges—has been hurt over the past few months

It went like this: the market’s gaze shifted from the prior focus on “upside inflation risk” during the first six months of the year on the “behind the curve” Fed playing catch-up to inflation…instead then to “growth downside risk” since July by-and-large, as negative Survey- and Housing- data began showing the “variable and lagged” impact of tightening which has already occurred

Ironically, a shift of focus to “growth downside” was a large part of the stabilizing “bull-case” for Equities, as the entirety of the YTD Equities destruction through the lows in June had come via multiple compression (NOT from the earnings side)—so btwn slowing growth data in July, and then ultimately, the first meaningful “downside” miss in inflation data in August, markets finally saw the “light at the end of the (tightening) tunnel” on “past peak inflation = closer to the policy pivot”

And then to further spike the football, you had the bears frustrated by the “not as catastrophically bad as feared” Q2 earnings season, which many thought was going to be the “next shoe to drop” for Equities, and cause that “final” valuation cleanse which they could then rationalize as a “dip to buy” on a push down a historically appetizing level

But of course as noted here repeatedly, it didn’t happen, earnings were okay-ish and many corporates showed pricing-power yet again despite evidence of yes, slowing macro volume / sales…but were propped-up by, you guessed it, “inflation,” and consumers who “middle class and up” took down the pain of higher prices

So what happens next?

While McElligott believes the lows are in for Stocks, he warns that there is still more of the “uncomfortable range chop” to come out in the medium-term, because inflation dynamics are going to remain “tense” due to structural drivers and sticky components, as well as the ongoing re-accleration in Energy prices (OPEC+ vs Iran), with the EU / UK crisis in particular “dragging-up” the rest of world’s costs

  • Another fresh Asian LNG benchmark record high overnight

  • Brent Crude back above $100/bbl

  • US Nat Gas nearing a re-test of its own record high

  • German and French 1Y Ahead Electricity prices yet-again making record highs overnight as well, with hedging costs become excruciating

With these Energy dynamics continuing to run in the background, the Fed and other Central Banks thus will remain stuck “higher for longer” than most can appreciate currently, especially with Labor so tight / Wages so high—which alongside “max cap” QT impact set to kick-off in September, we should continue getting those “Rate Vol” impulses (into year-end funding / tight balance sheet risks) occurring simultaneously that we see much “harder economic slowdown” being evidenced in the data…

…but still with inflation “sticky higher” and not fully capitulating back to target, despite local signs of ongoing easing supply chain dynamics, slowing growth and inventory bullwhip disinflationary effects.

This is my late 4Q22 / 1Q23 stagflationary “now what?!” scenario, one last Equities scare, with growth going lower and heading south with Jobs…but versus inflation which is “off peak,” but def not back to target either

This is why I truly believe that the Fed being “more hawkish now” would be a counter-intuitive ultimate POSITIVE for risk-assets – just get it over with, stop slow-playing it (and risking the “Arthur Burns 1970’s” scenario), hit it harder than most expect, take the pain to get demand crunched – so that the exit can be pulled-forward… BUT “WHAT MAKES SENSE” IS A VERY DIFFERENT CONVO THAT “WHAT’S GOING TO HAPPEN”

In the meantime, McElligott sees this current “valuation” range trade “chop” continuing, which is 18 x’s $240 = 4320 upper end, which coincides with us back near the 200dma of 4310 as well…

…where maybe if that Q3 “negative earnings revision” were to hit from the Consumer and Volumes / Sales drags, we could see that 18 x’s $220 = 3960 downside.

Tyler Durden
Fri, 08/26/2022 – 09:40

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Your Last Minute Jackson Hole Preview

Your Last Minute Jackson Hole Preview

Here is your last minute Jackson Hole preview, courtesy of Newsquawk and Goldman.

SUMMARY:

  • Powell will be gauged for his assessment on Fed rate path, specifically, September’s hike increment (50 or 75), the terminal rate, and how long terminal is held.
  • Expected to balance commitment to getting inflation back to target whilst guiding for a reduction in the pace of tightening.
  • Powell expected to push back on dovish signalling from FOMC minutes, but the plateau of survey data and the housing market keeps risks balanced.

FOCUS: Chair Powell’s speech at the Jackson Hole symposium Friday will be gauged for clues on the Fed’s rate path after the July FOMC and minutes saw the case made for a slowing of the pace of tightening – a case strengthened after the softer-than-expected July CPI and PPI data.

SCHEDULE:

RECENT SPEAKER COMMENTS:

HIKE SIZE: A focal point will be guidance on the size of the rate hike at the September FOMC, with markets priced between 50bps and 75bps, but Powell will likely refrain from any explicit guidance, with the Fed chair will likely continue to frame the central bank’s reaction function on incoming data; ahead of the September gathering, data releases include August’s CPI, NFP, and ISM. Powell can be expected to reaffirm the Fed’s commitment to price stability, balancing that message against its guidance for a reduction in the tightening pace.

HAWKISH TILT: There has been chatter that Powell will look to affirm hawkish signalling after the July FOMC and accompanying minutes saw some balanced comments, noting a risk of overtightening, which saw a subsequent easing of financial conditions as markets priced a greater likelihood of a Fed ‘pivot’ and moved away from 75bps September hike pricing.

PREVIEW FROM NICK TIMIRAOS AT WSJ: “They are likely to weigh whether to raise rates by a half-point or 0.75 point at their next meeting, Sept. 20-21, after achieving consensus this summer that rates would need to reach levels that slow the economy’s growth to dampen investment, spending and hiring. Mr. Powell isn’t expected to deliver a strong argument for either option, analysts said, because the central bank has said it is being guided by coming data on inflation, growth and employment.”

QUICK THOUGHTS FROM GOLDMAN TRADER RICH PRIVOROTSKY:  “Think in a lot of ways the market has pre-traded a not as hawkish as feared Powell. Felt like the bar was simply set too high and Powell in his usual measured/balanced approach may not be able meet the markets expectations for a hawkish anti-inflation message. Still of the view that it will be difficult for him to be “hawkish enough” to emphasize the need to tackle inflation while removing the conditionality he injected at the July FOMC. Rightly or wrongly by removing forward guidance the markets interpretation put incrementally more emphasis on the pace of economic growth relative to inflation compared to where it had been ex-ante. To put the toothpaste back in the proverbial tube he will have to be closer to the George comments yday “We have to get interest rates higher to slow down demand…We want financial conditions to tighten along with the direction we are moving around policy,”. Anything short of that probably means dollar lower and equites higher knee jerk but again the risk is far less asymmetric after the last two days of equity strength. It’s been prudent to head into this event with powder dry, think little chance the Fed chair is actually dovish it’s just a question of if he is hawkish enough? Hence rallies still are meant to be faded especially in the context of a.) lack of cta demand (asymmetry all to the downside and b.) any further rally in equites and fixed income will only increase pension rebalancing into end of month.”

RECENT MINUTES: While the Fed will have found the market reaction to the minutes as unhelpful, it’s worth noting that easing has already pared – Fed Speak in wake of the minutes has looked to push back on dovish expectations. Furthermore, given the dip in the August Flash PMIs and other US survey data, Powell could be cognizant not to “over hawk” the speech as economic leading indicators begin to turn, with housing data already seeing notable declines.

MARKET PRICING: Current market pricing, as of August 24th, has a 75bps September hike c. 60% priced in vs 40% for 50bps, whilst year-end Fed Funds are priced at 3.62% with the terminal rate priced at 3.79% in March 2023. On how the market could react, SGH Macro’s Tim Duy believes, “market participants would like to take on a solid, one direction trade as they return from summer breaks, and if they want to focus on the hawkish messaging, they can take short term rates higher.”

TERMINAL: Additionally, traders will be looking for any views on the terminal rate; more specifically, where officials estimate it is (the June SEP forecast 3.75-4.0%; markets priced in the 3.75-4% range), when we will get there (before the end of the year is possible), and how long will the Fed be able to hold rates at terminal as they claim they will. BMO Capital Markets offer us some historical context, noting that the Fed has typically stayed at terminal for between 3-15 months, with the average being around 6.5 months. The upshot is that if terminal is achieved by year-end, it could imply a rate cutting cycle will begin in H2-2023.

 

Tyler Durden
Fri, 08/26/2022 – 09:25

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Courts Split on Whether the Feds Can Overturn These State Abortion Bans


surgical patient

Can the federal government prevent some state abortion bans from taking effect? Two new court rulings offer mixed opinions on this issue, following the Biden administration’s claim that existing federal law prohibits state abortion bans that don’t contain exceptions for women’s health.

The Department of Justice (DOJ) sued to stop such a ban in Idaho, where a 2020 law set to take effect in August would outlaw abortion except in cases where a doctor had a copy of a police report of rape or could show by a “preponderance of the evidence” that “the abortion was necessary to prevent the death of the pregnant woman.” The DOJ said Idaho’s ban goes against provisions of the Emergency Medical Treatment and Labor Act (EMTALA), which requires hospitals receiving Medicare funds (i.e., most U.S. hospitals) to provide stabilizing treatment.

“Idaho’s criminal prohibition of all abortions, subject only to the statute’s two limited affirmative defenses, directly conflicts with EMTALA and stands as an obstacle to the accomplishment of EMTALA’s federal objectives of providing stabilizing care and treatment to anyone who needs it,” said the DOJ in a press release.

“Federal law is clear: patients have the right to stabilizing hospital emergency room care no matter where they live,” said Department of Health and Human Services (DHS) Secretary Xavier Becerra. “Women should not have to be near death to get care.”

In July, HHS issued new guidance stating that EMTALA’s provision for stabilizing treatment includes a right to an abortion in some circumstances. “If a state law prohibits abortion and does not include an exception for the health or life of the pregnant person—or draws the exception more narrowly than EMTALA’s emergency medical condition definition—that state law is preempted,” the agency said.

No existing abortion ban lacks an exception for a mother’s life, but some do omit exceptions for women’s health. And determining whether something counts as a life-threatening emergency—as opposed to a mere health-threatening emergency—isn’t so clear-cut. Many pregnancy complications could become life-threatening while not being necessarily or immediately so. The HHS guidance attempts to provide clarity, stating that regardless of what a state law says, physicians must provide an abortion if one is necessary to address an emergency medical condition (including, but not limited to, ectopic pregnancy or severely high blood pressure).

Texas sued over the HHS directive. Joined by the American Association of Pro-Life Obstetricians and Gynecologists (AAPLOG) and the Christian Medical and Dental Association (CMDA), the state sought to have the HHS “abortion mandate” declared “unlawful, unconstitutional and unenforceable” and for the court to issue a preliminary injunction on its enforcement.

On Wednesday, the U.S. District Court for the Northern District of Texas denied the federal government’s motion to dismiss the complaint and granted a preliminary injunction against enforcing the mandate against Texas and AAPLOG or CMDA members. The order stopped short of declaring the mandate unenforceable across the United States.

“Texas law already overlaps with EMTALA to a significant degree, allowing abortions in life-threatening conditions and for the removal of an ectopic or miscarried pregnancy,” noted U.S. District Judge James Wesley Hendrix in the court’s decision (which is heavy on language about “unborn children”):

But in Dobbs‘s wake and in an attempt to resolve any potential conflict with state law, the Department of Health and Human Services issued Guidance purporting to remind providers of their existing EMTALA obligations to provide abortions regardless of state law. That Guidance goes well beyond EMTALA’s text, which protects both mothers and unborn children, is silent as to abortion, and preempts state law only when the two directly conflict. Since the statute is silent on the question, the Guidance cannot answer how doctors should weigh risks to both a mother and her unborn child. Nor can it, in doing so, create a conflict with state law where one does not exist. The Guidance was thus unauthorized. In any event, HHS issued it without the required opportunity for public comment. As a result, the Court will preliminarily enjoin the Guidance’s enforcement against the plaintiffs.

A court in Idaho came to a very different decision related to EMTALA and abortion.

In an August 24 ruling, the U.S. District Court for the District of Idaho granted the Justice Department’s request for a preliminary injunction against enforcing the Idaho abortion ban. The injunction took effect immediately and remains “in full force and effect through the date on which judgment is entered in this case.”

The court noted the difficult position doctors are put in by the contradictory requirements of Idaho’s abortion ban and EMTALA when it comes to pregnant patients facing health emergencies:

If the physician provides the abortion, she faces indictment, arrest, pretrial detention, loss of her medical license, a trial on felony charges, and at least two years in prison. Yet if the physician does not perform the abortion, the pregnant patient faces grave risks to her health—such as severe sepsis requiring limb amputation, uncontrollable uterine hemorrhage requiring hysterectomy, kidney failure requiring lifelong dialysis, hypoxic brain injury, or even death. And this woman, if she lives, potentially may have to live the remainder of her life with significant disabilities and chronic medical conditions as a result of her pregnancy complication. All because Idaho law prohibited the physician from performing the abortion.

Granted, the Idaho statute offers the physician the cold comfort of a narrow
affirmative defense to avoid conviction. But only if she convinces a jury that, in
her good faith medical judgment, performing the abortion was “necessary to
prevent the death of the pregnant woman” can she possibly avoid conviction. Even
then, there is no certainty a jury will acquit. And the physician cannot enjoy the benefit of this affirmative defense if she performed the abortion merely to prevent
serious harm to the patient, rather than to save her life.

Back to the pregnant patient in the emergency department. The doctor
believes her EMTALA obligations require her to offer that abortion right now. But
she also knows that all abortions are banned in Idaho. She thus finds herself on the horns of a dilemma. Which law should she violate?

Fortunately, the drafters of our Constitution had the wisdom to provide a clear answer in Article VI, Paragraph 2 of the Constitution—the Supremacy Clause. At its core, the Supremacy Clause says state law must yield to federal law when it’s impossible to comply with both. And that’s all this case is about. It’s not about the bygone constitutional right to an abortion. This Court is not grappling with that larger, more profound question. Rather, the Court is called upon to address a far more modest issue—whether Idaho’s criminal abortion statute conflicts with a small but important corner of federal legislation. It does.

The discordant rulings could force the issue back before the Supreme Court, if appeals courts in each district concur with the lower courts.

Appeals are expected for both cases “and would be heard by separate appeals courts, one based in San Francisco with a reputation for leaning liberal and another in New Orleans known for conservative rulings,” notes Reuters.


FREE MINDS

Taxing Tech Companies for the Failure of the News Industry Is Just Unfair.” Politico‘s Jack Shafer details what’s wrong with Sen. Amy Klobuchar’s (D–Minn.) proposed Journalism Competition and Preservation Act. “The legislation isn’t actually a tax bill, but if enacted would ding the two top tech-media companies, Google and Facebook, for millions and perhaps billions of dollars a year that would go to the news industry,” Shafer points out. But while the idea of taking from tech giants to give to struggling newspapers might appeal to many people, “the Klobuchar bill unjustly punishes the tech giants by making it prop up an industry that has largely failed to address its business problems and has been decaying for decades,” he writes:

It would be nice to blame all of the news industry’s problems on the tech behemoths, but the undoing of the newspaper industry began well before the web’s advent. Newspaper circulation’s per capita decline started in the post-WWII era, as did the industry’s share of ad spending, thanks to competition from radio and TV. Total advertising revenue peaked in 2005. Some savvy newspaper investors, like Warren Buffett, predicted the industry’s coming decline in 1992, a good half-decade before the commercial Internet was a thing. The newspaper audience and ad buyers had already begun migrating to other mediums, like TV and cable….

Although Klobuchar’s bill doesn’t use the word “reparations,” it proceeds as if Google and Facebook injured the news industry by taking something that rightfully belonged to them and should pay annual damages. We can concede that Google makes some money from news headlines and snippets — one independent analyst puts it at $1 billion a year while the news industry’s trade group says more like $4.7 billion. But as writer Frederic Filloux has put it, this is how the market works: Better and cheaper products replace what went before. In the Google and Facebook examples, the two companies did two things. First, they almost completely divorced advertising from editorial or entertainment content, making web ads more like billboards than newspapers. Second, they transformed advertising from a wasteful, crapshoot business that ran campaigns in newspapers, on TV and on billboards with almost zero feedback on effectiveness into an efficient, targeted enterprise whose success could be measured instantly. The analogy isn’t perfect, but what Google and Facebook did to the ad industry was transformative, akin to what digital cameras did to Kodak and personal computers did to typewriters. The newspaper industry had the resources to create something like Google or Facebook but didn’t. The onus for missing what was coming should fall on the news industry, not Google or Facebook. The news industry never had an inherent right to advertising dollars. To imagine they deserve any form of reparations because tech displaced them in the ad marketplace is laughable.

More here.


FREE MARKETS


QUICK HITS

• Comments that Facebook founder Mark Zuckerberg makes in an interview with podcaster Joe Rogan showcase how the government doesn’t need to make direct (and unconstitutional) censorship requests to get tech companies to suppress information. It has threatened social media companies so much (with congressional hearings and investigations, new regulations, antitrust lawsuits, etc.) that their leaders are willing to suppress all sorts of stuff preemptively.

• “Virtually everything since the Supreme Court overturned Roe v. Wade back in June suggests Republicans have a political problem on their hands now that they’ve obtained their long-sought goal of being able to severely restrict and even ban abortion,” writes Aaron Blake at The Washington Post. “And if you look closely, you’ll see signs of potential buyer’s remorse creeping in.”

• The American Civil Liberties Union of Arizona and media outlets are suing over a new Arizona law that makes filming near police a crime.

• A Missouri school district is bringing back paddling students.

• More from Reason on President Joe Biden’s student loan debt forgiveness plan:

• “Before I got arrested, I had never really thought about how medical care worked behind bars—and I had no idea how bad it could be and often was,” writes Keri Blakinger at CNN.

• Millions in COVID-19 aid went to training veterans. But “only 397 landed jobs,” reports The Washington Post.

• A new White House order will change the way federally funded research is published:

The post Courts Split on Whether the Feds Can Overturn These State Abortion Bans appeared first on Reason.com.

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Protecting People from Their Own Religious Communities: Judicial Evaluation of a Religious Community’s Qualities

This new article of mine will be coming out next year in the Journal of Law and Religion, and I thought I’d serialize it here; there’s still plenty of time for editing, so I’d love to hear people’s feedback. Here’s Part III (Part II is more doctrinal, so I’m skipping it for now, but you can read it in the PDF, if you’d like).

[* * *]

Weighing a person’s religious community membership in deciding whether to let the person remain pseudonymous might thus not be unduly burdensome or unfair to litigation adversaries [in violation of the Establishment Clause]. But might it be unfair to the religious community?

Consider, for instance, two of the cases described in Part I.A, plus a third one which strikes me as a plausible hypothetical:

    1. A woman whose family and friends are Trinidadian Muslims seeks pseudonymity in suing over an alleged rape.
    2. A woman whose family and friends are Southern Baptists seeks pseudonymity in an employment lawsuit stemming from her work as a stripper.
    3. A man whose family and friends are Orthodox Jews seeks pseudonymity in a domestic violence case stemming from a consensual adulterous relationship.[1]

To begin with, a judge would have to determine not just whether the plaintiffs would be stigmatized within that community, but whether they would be unusually stigmatized compared to ordinary litigants. The risk of some such stigma, after all, isn’t by itself generally enough to justify pseudonymity in litigation or as to public licenses or records. [2] And even the particular attributes in these three examples—having been sexually assaulted, being a stripper, or being an adulterer—are often stigmatized even outside particular religious communities.

Many within the religious communities might think the stigma is not materially greater in those communities than elsewhere, and might resent the implication that it is. Our religion calls us on to be loving and forgiving, they might say. Certainly it doesn’t condemn women who were attacked. It might condemn stripping and adultery, but it acknowledges that everyone is a sinner, and that all we can do is repent and strive to change, and to encourage our friends and families to do the same.

True, there might be some unduly judgmental people who won’t take such a kind view; but all communities have unpleasant folks such as that. Why are you making us out to be particularly harsh? In the course of claiming that we unfairly stigmatize certain people—and do so more than society generally does—might you be unfairly stigmatizing us?

Moreover, the magnitude of religious communities’ condemnation of these litigants is hard to measure; decisions are likely to be guesswork, based mostly on the judge’s perception of the group’s reputation. There may well be an affidavit from the litigant,[3] and perhaps from some others, making claims about such condemnation; but such self-serving claims—or claims that support a friend or family member—aren’t likely to be terribly reliable. There may be media accounts,[4] but those may well be one-sided, or based on the author’s own views. Community members might thus plausibly believe that they are being incorrectly tarred as especially judgmental, retrogressive, and intolerant based simply on outsiders’ stereotypes (e.g., of Muslims or of conservative Christians).[5]

To be sure, in traditional religious exemption cases, courts are supposed to accept claimants’ assertions that the law substantially burdens their religious practices, at least so long as the courts conclude the claimants are sincere.[6] But that makes sense because the burden relevant to those cases turns on the claimant’s own subjective beliefs. Here, the claimants are making assertions about the likely actions of coreligionists, assertions that, if believed, reflect badly on the character of those coreligionists.

One possible solution, of course, would be to pseudonymize the religious group, by saying that the defendant belongs to a group that condemns certain behavior without naming the group. But that would deny the public (and future litigants and their lawyers) important information about the basis for a judge’s decision. How, after all, can the public effectively “oversee and monitor the workings of the Judicial Branch,”[7] if it isn’t told the true basis for a judge’s decision?[8]

Another solution might be for the judges to take pains to note that they are just speaking of the views of some religious community members, and not talking about the religious group as a whole. But still, any decision allowing confidentiality for (say) a conservative Muslim alleged rape victim when such confidentiality would be denied for someone from a different religious community would necessarily imply that there are at least many such conservative Muslims—a higher share than among the public as a whole—who would view being a rape victim as shameful.

This sort of decisionmaking thus risks the sort of government disapproval of religion that some of the Court’s Establishment Clause have condemned. Consider, for instance, a litigant’s claim that, say, she “comes from a strict Muslim household where under their cultural beliefs and traditions such a sexual assault would have the tendency to bring shame and humiliation upon her family,”[9] and that she is therefore subject to “social stigma”[10] beyond that faced by a typical litigant. A judicial determination endorsing this claim may well be seen as critical of conservative Islam, even if the judge doesn’t expressly condemn the group for such views. After all, wouldn’t many of us disapprove of a group that blames the victim this way?

To be sure, the Court’s recent American Legion decision repudiated the endorsement test as a formal Establishment Clause doctrine,[11] and the prohibition on disapproval of religion has generally been closely linked to the prohibition on endorsement.[12] Still, even American Legion condemned government speech that “‘deliberately disrespect[s]’ members of minority faiths.”[13]

Of course, one might argue that an impartial determination of the facts about a religious group is as a matter of law not disrespectful: Find the facts and let the chips fall where they may. But a determination based on little more than an outsider judge’s perception of the group, coupled with a litigant’s own affidavit (or even the affidavits of some of the litigant’s supporters), will often risk stemming from disrespectful stereotypes and not just objective reality.

And in any event, even if such determinations aren’t unconstitutional, they seem to me best avoided, for the reasons given above. Certainly the American law of religious exemptions generally avoids having to decide what Southern Baptist or Muslim or Jewish communities are like, focusing instead on the beliefs of the individual claimant and not generalizations about a group.[14]

The notable exception there is Wisconsin v. Yoder, where the Court’s exemption of Amish objectors from the requirement that parents must send all children to school until age 16 stemmed in part from “evidence … show[ing] that the Amish have an excellent record as law-abiding and generally self-sufficient members of society,” and that “the Amish community has been a highly successful social unit within our society.”[15] But this feature of Yoder has been criticized,[16] and I think rightly so.

 

[1] Cf. Complaint, Doe v. Sebrow, No. 2:21-cv-20706, § 17 (D.N.J. filed Dec. 23, 2021) (plaintiff seeking pseudonymity in a lawsuit stemming from alleged libels by his ex-lover, and noting that he “practices Orthodox Judaism and is involved in various activities in that social and religious environment,” at ¶ 17).

[2] See Volokh, supra note 1, at pt. III.F. Many plaintiffs and even more defendants risk some degree of stigma if their identities are revealed. Usually, though, that’s not enough to overcome the strong presumption in favor of public litigation. If I’m sued for sexual harassment, fraud, or even malpractice, that would surely expose me to “shame and humiliation,” even if I claim that it’s unmerited because I’m actually innocent. Likewise if I sue for wrongful firing, and my employer’s defense is that I was really fired for sexual harassment, fraud, or malpractice. Nonetheless, I generally can’t litigate such cases pseudonymously. And while plaintiffs alleging sexual assault often will be allowed to litigate pseudonymously, not all courts take that view. See id. at Apps. 2a & 2b.

[3] See, e.g., Declaration of Jane Doe, Doe v. Neverson, No. 1:20-cv-20016-UU, ¶¶ 7–8 (S.D. Fla. Jan. 10, 2020) (ECF. No 7-1 app. A).

[4] See, e.g., Motion for Leave to Proceed Under Pseudonyms, Doe v. Georgetown Synagogue—Kesher Israel Congregation, No. 1:16-cv-01845-ABJ, at 7 (D.D.C. Sept. 15, 2016).

[5] In asylum cases in which an applicant raises the risk of religious persecution, immigration courts and Article III courts may have to consider some religious groups’ mistreatment of other groups. See, e.g., Sihotang v. Sessions, 900 F.3d 46, 51 (1st Cir. 2018) (noting evidence that” “Islamic fundamentalist fervor seems to have intensified, such that evangelical Christians may now be at special risk in Indonesia,” both risk of discrimination by government and of private violence). But that at least involves courts reporting on conditions in foreign countries, usually bolstered by authoritative “State Department country conditions reports,” id. at 52. The cases described in the text involve courts passing judgment on communities within the United States, usually based on affidavits by litigants coupled with conventional perceptions of those communities.

[6] Thomas v. Review Bd., 450 U.S. 707, 715 (1981).

[7] Doe v. Public Citizen, 749 F.3d 246, 263 (4th Cir. 2014).

[8] To be sure, this is a decision about pseudonymity, not about a decision about the bottom-line result in a case. But pseudonymity decisions are indeed significant, because they affect public rights—indeed, in the view of some courts, the public’s First Amendment rights. See Volokh, supra note 1, at pts. I.A–.B.

[9] Doe v. Neverson, 820 F. App’x 984, 988 (11th Cir. 2020) (cleaned up).

[10] Id.

[11] American Legion v. American Humanist Ass’n, 139 S. Ct. 2067 (2019).

[12] See, e.g., Cty. of Allegheny v. ACLU, 492 U.S. 573, 620 (1989).

[13] 139 S. Ct. at 2089.

[14] Thomas v. Review Bd., 450 U.S. 707, 715 (1981).

[15] 406 U.S. 205, 212–13 (1972).

[16] See, e.g., Peter J. Riga, Yoder and Free Exercise, 6 Journal of Law and Education 449, 466 (1977) (“What the Court has done in Yoder comes dangerously close to that examination of beliefs which, in itself, is a violation of free exercise.”); Mark Tushnet, Of Church and State and the Supreme Court: Kurland Revisited, 1989 Supreme Court Review 373, 379 (“It is not unfair to read [Yoder] as saying that the claims of the Amish prevailed because they were a ‘good’ religion.”); Lisa Biedrzycki, “Conformed to This World” : A Challenge to the Continued Justification of the Wisconsin v. Yoder Education Exception in A Changed Old Order Amish Society, 79 Temple Law Review 249, 267–68 (2006) (faulting Wisconsin v. Yoder for relying on “beatific stereotypes” of the Amish); Nicholas J. Nelson, A Textual Approach to Harmonizing Sherbert and Smith on Free Exercise Accommodations, 83 Notre Dame Law Review 801, 811–12 (2008) (“The Yoder Court was even rather explicit about its function as a stamp of government approval or disapproval of specific religious beliefs. . . . The Court even hinted that it would not be so kind to religious views it found less appealing . . . .”); James M. Oleske, Jr., Free Exercise (Dis)honesty, 2019 Wisconsin Law Review 689, 717–18 (2019).

The post Protecting People from Their Own Religious Communities: Judicial Evaluation of a Religious Community's Qualities appeared first on Reason.com.

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What The Fed Sees & What The Market Sees Are Very Different

What The Fed Sees & What The Market Sees Are Very Different

Authored by Simon White via Bloomberg,

The Fed and the market appear to have very different views about how close we are to the end of the tightening cycle.

That’s a set up for a big disappointment.

The wait is over, with Powell’s speech at Jackson Hole later bringing and end to suspense. The general expectation is that he renews the Fed’s hawkish vows, but of course no-one knows for sure what he’ll say.

So let’s focus on what we do know.

This has been a unique tightening cycle. So soon after the Fed started hiking, rarely have long rates seemingly peaked out. Rarely has the yield curve flattened so aggressively. Rarely has the term premium started falling.

Furthermore, the peak real Fed Funds rate is still less than zero, which is dumbfounding when you consider that inflation is at its highest level in forty years. In the last tightening cycle in 2015-2019, the peak real rate topped out at around +2%, when inflation got no higher than 3%.

We don’t know for sure what’s going on, but here’s a guess.

Perhaps the Fed is living in an arithmetical world and the market in a geometrical one. In the Fed’s case, this would mean rates have risen by 225 bps but, compared to previous tightening cycles, could yet go a lot further.

But the market is well accustomed to looking at things geometrically. (All those years dealing with compound interest!)

On that basis, rates are up 10x since the Fed started hiking, whereas in the median tightening cycle rates barely double. In a geometric world, there’s already been a massive tightening.

So what matters more, magnitudes or changes?

Thus far inflation is still high and financial conditions are not excessively tight, which doesn’t really fit with the 10x tightening of the geometrical world.

The market seems to be assuming the Fed has already tightened a lot, and it only needs to do a little more to pacify inflation. Growth will cool, requiring rate cuts as early as next May.

The market is still in Kansas, but we’re not there any more — which leaves a lot of room for disappointment either today, or very soon.

Tyler Durden
Fri, 08/26/2022 – 08:46

via ZeroHedge News https://ift.tt/n8BcaRi Tyler Durden

Fed’s Favorite Inflation Indicator Cools Modestly From 40-Year-Highs, Savings-Rate Hits 13-Year-Low

Fed’s Favorite Inflation Indicator Cools Modestly From 40-Year-Highs, Savings-Rate Hits 13-Year-Low

The Fed’s favorite inflation indicator – PCE Deflator – was expected to slow in July data and it did with the headline dropping from +6.8% YoY to +6.3% YoY (cooler than the +6.4% YoY expected). Core PCE also slowed from +4.8% YoY to +4.6% YoY (also below expectations)…

Source: Bloomberg

As a reminder, headline PCE remains very close to 40 year highs, though this is the first MoM drop in the headline PCE since the peak of the COVID lockdown crisis in April 2020…

Source: Bloomberg

Americans’ personal income and spending (on a notional basis) were expected to rise in July and they did but missed expectations dramatically, rising just 0.2% MoM and 0.1% MoM respectively (vs +0.6% MoM and +0.5% MoM respectively). That is the weakest MoM growth in incomes since January and weakest spending since December…

Source: Bloomberg

On the income side, both private sector and govt wage growth slowed in July:

  • Private worker wages up 11.0% Y/Y in July, down from 11.4% and lowest since March 2021

  • Govt worker wages up 4.1% Y/Y in July, down from 5.0% and lowest since March 2021

Finally, all of this means the savings rate fell further to 5.0% – the lowest since August 2009

Source: Bloomberg

And we suspect Powell’s messaging of further hikes and more pain to come will mean less saving and more credit card spending to cover the cost of living… and that doesn’t end well for anyone.

Tyler Durden
Fri, 08/26/2022 – 08:37

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Europe Is Now “Powerless” And Its Inflation And Recession Are About To Get Even More Brutal

Europe Is Now “Powerless” And Its Inflation And Recession Are About To Get Even More Brutal

By Bas van Geffen, senior macro strategist at Rabobank

In yesterday’s daily, we noted how an increasing number of US households is struggling to pay their utility bills. Yet, this situation pales in comparison to the price hikes that European consumers are facing. As a case in point, the OFGEM, UK’s energy regulator, lifted the energy price cap to £3,549 as of 1 October (from £1,971), adding a warning that prices could get “significantly worse” through 2023.

Indeed, yet another sharp move in European energy prices took benchmark rates to new record-highs. The 1 month forward Dutch TTF contract jumped to €311/MWh, while the 1 month French electricity contract reached a mindboggling €750/MWh. The fact that nobody wants to be short power right now certainly doesn’t help either as it reduces liquidity in the market – which may have been exacerbated by ICE’s decision to increase margin requirements on European gas futures.

These unfathomable price rises are adding pressure on European leaders to come up with a solution for the unfolding energy crisis that will stress many households. The Czech Prime Minister said he wants to push for an EU-wide response. One of the options that is being considered is a price cap on gas, but that leaves many risks and questions regarding the design and implementation of any such proposals.

All in all, these developments in the energy complex in Europe suggests that the acceleration in inflation that we pencilled in for Q4 may get more brutal – but so may the recession, if companies shut down production ‘voluntarily (i.e., due to production being uneconomical) or because they are forced to (i.e., rationing).

Even though monetary policy is powerless in such a situation –in the sense that higher rates will not solve the energy shortage– central bankers continue to debate over the value (or damage) of going an additional 25bp at their next policy meeting. The accounts of the July ECB meeting suggested that the central bank won’t slow its pace in the near-term as inflation continues to elude the central bank and risks becoming entrenched in expectations.

Yesterday’s accounts noted that “a very large number of members agreed that it was appropriate to raise the ECB’s key interest rates by 50 basis points”, although “some members argued in favour of 25bp” as this would be consistent with the Council’s earlier communication. As we already concluded after the meeting, this suggests that there was an intrinsic desire even amongst moderate doves to implement a bigger hike, and that it wasn’t a trade-off with the hawks in return for a more potent Transmission Protection Instrument. And even though President Lagarde described the 50bp move as ‘frontloading’, there was nothing in the accounts that suggested that this frontloading should be limited to just the previous meeting or that the ECB is now done with 50bp moves.

In fact, if anything, the discussion regarding the inflation outlook sounded quite hawkish. In summary, the Council concluded that inflation risks had intensified. But whereas Lagarde’s press conference mostly seemed to focus on increased short-term risks, the accounts show growing concern about the medium-term inflation outlook. According to some, even a recession would not necessarily diminish upside risks to inflation – and we would agree to the extent that higher gas prices are now the driving factor behind the worsening outlook for both prices and growth.

The ECB is clearly worried about inflation becoming entrenched in expectations. Although the Council concluded that there were no signs of significant second-round effects yet, repeated upward inflation surprises are increasing the probability of such effects. The ECB particularly seemed concerned about the latest surveys and market-based indicators of inflation expectations: “The probability that markets assigned to high inflation outcomes of above 4% over a five-year horizon five years ahead had risen steadily since the start of the year”, and nearly 20% of the SPF respondents saw inflation remain above 2.5%.

Moreover, the ECB acknowledged that the weak EUR/USD rate is currently mostly a headwind to the Eurozone, as more expensive energy outweighs the benefits of exporters becoming more competitive globally. Interestingly, some members seem to believe that they can prop up the currency with tighter policy. The ECB estimates that about half of the EUR’s depreciation since the start of the year could be attributed to the policy divergence between the Fed and the ECB. This could be another reason for the ECB to maintain -or even increase- the pace of hikes ahead. However, we still believe that this is futile. Given the current macroeconomic backdrop, it’s hard to see how bigger ECB hikes would fundamentally support the EUR – although the ECB may be able to stem the currency’s bleeding.

Day ahead

To that extent, Powell’s keynote speech at Jackson Hole today will be closely watched for hints of direction. With markets still somewhat hopeful that the Fed will make a “dovish pivot” before next summer, Powell’s remarks could make for an unwelcome hawkish wake-up call. That would also be a challenge for the ECB, to the extent that they continue to subscribe to the view that monetary policy differentials –rather than the weak Eurozone outlook and global risk aversion–are a key force behind EUR’s weakness, and hence imported inflation .

Tyler Durden
Fri, 08/26/2022 – 08:24

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California Lawmakers Are Being Hypocritical About ‘Harm Reduction’ Policies


vaping smoking tobacco harm reduction California

Some California Democrats have recently discovered the concept of “harm reduction” when it comes to a variety of drug-related matters. As the National Harm Reduction Coalition explains, this idea “accepts, for better or worse, that licit and illicit drug use is part of our world and chooses to work to minimize its harmful effects.”

Harm reduction is largely a reaction to the nation’s failed War on Drugs, which treated drug use—including addictive and destructive hard drugs as well as non-addictive drugs that people use for recreational and medical purposes—as criminal matters. Unfortunately, many of the same people who tout this anti-Prohibitionist idea only apply it selectively, but more on that later.

In 1996, the conservative National Review noted that the War on Drugs “is diverting intelligent energy away from how to deal with the problem of addiction, that it is wasting our resources, and that it is encouraging civil, judicial, and penal procedures associated with police states.” Harm reductionists agree with those prescient points.

Californians often get things wrong, but they have been right on this score. The same year National Review published that piece, our voters legalized medical marijuana. Then voters legalized recreational cannabis in 2016, although the new system is so highly taxed and regulated that the black market still thrives. Recently, legislators have proposed harm-reduction measures aimed at less-accepted drugs.

The California state legislature passed Senate Bill 57, which allows supervised injection sites in Los Angeles and San Francisco. The goal is to reduce drug overdoses by recognizing that certain people are going to use dangerous drugs no matter what. The governor vetoed the bill this week. Based on similar thinking, the state has operated syringe-exchange programs for decades.

San Francisco Sen. Scott Wiener’s Senate Bill 517—delayed for consideration until next year—decriminalizes the use of plant-based psychedelics. The senator pitches his “mushroom bill” as a criminal-justice matter. He finds it foolhardy to arrest people for using these substances. I appreciate his non-Prohibitionist approach toward illicit substances, regardless of their potential ill effects.

Nevertheless, during a recent interview, Wiener doubled down on his co-sponsorship of Senate Bill 793, a new state law that bans the sale of flavored tobacco products. The tobacco industry has qualified for the November ballot Proposition 31, which is a referendum on the new law. As with all referenda, the law has been put on hold until voters decide.

By banning flavored tobacco, the state is criminalizing the sale of almost all vaping products except the few that taste (blech) like tobacco, as well as the sale of lower-harm smokeless tobacco products such snus and Zyn, which typically come in flavors (peppermint, cinnamon, coffee). This is the opposite of the harm-reduction approach.

When it comes to hard drugs, the state’s Democrats insist that we shouldn’t judge people who use them, but should instead seek ways to help them and certainly not arrest them. They argue that legalizing or at least decriminalizing some drugs (cannabis, psychedelics) reduces potentially dangerous encounters with police. With tobacco, they are trying to criminalize a legal product.

That means more efforts by police to crack down on black-market sellers. It means sting operations, fines, and even potential jail time for lawbreakers (especially in African American neighborhoods, where menthol cigarettes are popular and will likely be sold illegally on street corners as “loosies”). Menthol smokes are dangerous, but the crackdown ensnares the less-dangerous products that smokers use to break their deadly habit.

Progressive supporters of the flavored-tobacco ban use the same “it’s for the children” lingo that old-time right-wing drug warriors used. The referendum, said SB 793 sponsor Jerry Hill, is Big Tobacco’s attempt to “buy for themselves the right to market highly addictive nicotine products to our kids.” By contrast, I suppose the people who sell heroin to supervised drug users are just public-spirited individuals.

Black market sellers of anything aren’t particularly careful about checking the age of buyers, whereas regulated markets do a better job keeping adult-only substances away from youth. And it’s bizarre to ban legal products to keep them away from underage people who already are not legally allowed to buy them. But for some reason, substance wars distort the thinking of normally sensible people.

When it comes to drugs, harm reduction supporters argue that we shouldn’t follow the federal government’s lead, given that the slow-moving feds still consider marijuana a Schedule 1 drug “with no currently accepted medical use” similar to heroin. When it comes to tobacco, they insist that the Food and Drug Administration’s failure to recognize vaping as a tobacco-cessation strategy is the Gospel truth.

Instead of sympathizing with smokers who want to reduce smoking’s harm, they belittle them by insisting that the only appropriate harm-reduction approaches are abstinence—or the dreary ones (patches, pills, inhalers) approved by the FDA. No wonder a cynic might conclude that many supporters of drug-related harm-reduction policies simply are hypocrites.

This column was first published in The Orange County Register.

The post California Lawmakers Are Being Hypocritical About 'Harm Reduction' Policies appeared first on Reason.com.

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California Lawmakers Are Being Hypocritical About ‘Harm Reduction’ Policies


vaping smoking tobacco harm reduction California

Some California Democrats have recently discovered the concept of “harm reduction” when it comes to a variety of drug-related matters. As the National Harm Reduction Coalition explains, this idea “accepts, for better or worse, that licit and illicit drug use is part of our world and chooses to work to minimize its harmful effects.”

Harm reduction is largely a reaction to the nation’s failed War on Drugs, which treated drug use—including addictive and destructive hard drugs as well as non-addictive drugs that people use for recreational and medical purposes—as criminal matters. Unfortunately, many of the same people who tout this anti-Prohibitionist idea only apply it selectively, but more on that later.

In 1996, the conservative National Review noted that the War on Drugs “is diverting intelligent energy away from how to deal with the problem of addiction, that it is wasting our resources, and that it is encouraging civil, judicial, and penal procedures associated with police states.” Harm reductionists agree with those prescient points.

Californians often get things wrong, but they have been right on this score. The same year National Review published that piece, our voters legalized medical marijuana. Then voters legalized recreational cannabis in 2016, although the new system is so highly taxed and regulated that the black market still thrives. Recently, legislators have proposed harm-reduction measures aimed at less-accepted drugs.

The California state legislature passed Senate Bill 57, which allows supervised injection sites in Los Angeles and San Francisco. The goal is to reduce drug overdoses by recognizing that certain people are going to use dangerous drugs no matter what. The governor vetoed the bill this week. Based on similar thinking, the state has operated syringe-exchange programs for decades.

San Francisco Sen. Scott Wiener’s Senate Bill 517—delayed for consideration until next year—decriminalizes the use of plant-based psychedelics. The senator pitches his “mushroom bill” as a criminal-justice matter. He finds it foolhardy to arrest people for using these substances. I appreciate his non-Prohibitionist approach toward illicit substances, regardless of their potential ill effects.

Nevertheless, during a recent interview, Wiener doubled down on his co-sponsorship of Senate Bill 793, a new state law that bans the sale of flavored tobacco products. The tobacco industry has qualified for the November ballot Proposition 31, which is a referendum on the new law. As with all referenda, the law has been put on hold until voters decide.

By banning flavored tobacco, the state is criminalizing the sale of almost all vaping products except the few that taste (blech) like tobacco, as well as the sale of lower-harm smokeless tobacco products such snus and Zyn, which typically come in flavors (peppermint, cinnamon, coffee). This is the opposite of the harm-reduction approach.

When it comes to hard drugs, the state’s Democrats insist that we shouldn’t judge people who use them, but should instead seek ways to help them and certainly not arrest them. They argue that legalizing or at least decriminalizing some drugs (cannabis, psychedelics) reduces potentially dangerous encounters with police. With tobacco, they are trying to criminalize a legal product.

That means more efforts by police to crack down on black-market sellers. It means sting operations, fines, and even potential jail time for lawbreakers (especially in African American neighborhoods, where menthol cigarettes are popular and will likely be sold illegally on street corners as “loosies”). Menthol smokes are dangerous, but the crackdown ensnares the less-dangerous products that smokers use to break their deadly habit.

Progressive supporters of the flavored-tobacco ban use the same “it’s for the children” lingo that old-time right-wing drug warriors used. The referendum, said SB 793 sponsor Jerry Hill, is Big Tobacco’s attempt to “buy for themselves the right to market highly addictive nicotine products to our kids.” By contrast, I suppose the people who sell heroin to supervised drug users are just public-spirited individuals.

Black market sellers of anything aren’t particularly careful about checking the age of buyers, whereas regulated markets do a better job keeping adult-only substances away from youth. And it’s bizarre to ban legal products to keep them away from underage people who already are not legally allowed to buy them. But for some reason, substance wars distort the thinking of normally sensible people.

When it comes to drugs, harm reduction supporters argue that we shouldn’t follow the federal government’s lead, given that the slow-moving feds still consider marijuana a Schedule 1 drug “with no currently accepted medical use” similar to heroin. When it comes to tobacco, they insist that the Food and Drug Administration’s failure to recognize vaping as a tobacco-cessation strategy is the Gospel truth.

Instead of sympathizing with smokers who want to reduce smoking’s harm, they belittle them by insisting that the only appropriate harm-reduction approaches are abstinence—or the dreary ones (patches, pills, inhalers) approved by the FDA. No wonder a cynic might conclude that many supporters of drug-related harm-reduction policies simply are hypocrites.

This column was first published in The Orange County Register.

The post California Lawmakers Are Being Hypocritical About 'Harm Reduction' Policies appeared first on Reason.com.

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Today in Supreme Court History: August 26, 1964

8/26/1964: Lyndon B. Johnson nominated as Democratic candidate for president. He would make two appointments to the Supreme Court: Justices Abe Fortas and Thurgood Marshall.

President Johnson’s appointees to the Supreme Court

The post Today in Supreme Court History: August 26, 1964 appeared first on Reason.com.

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