500Bps Of Rate Cuts On Deck

500Bps Of Rate Cuts On Deck

By Simon White, Bloomberg Markets Live reporter

Powell Is Fighting Weight of History With “Higher for Longer”

The inverted yield curve shows why Fed chair Jerome Powell is fighting a losing battle in his desire to keep policy restrictive for an extended period. Without a radical re-upping of the Fed’s hawkish ante, pressure is likely to remain on Eurodollar spreads and the yield curve.

Like an obstreperous child, the Fed sometimes has a hard time getting the market to do what it wants (and sometimes enlists journalists to help). In its aim to keep rates for higher for longer, the market has listened to the Fed on the first part by bringing forward the expected peak funds rate and pushing it higher, but it has resolutely ignored it on the second part — pricing in deep cuts that happen soon after rates are expected to peak.

This is keeping pressure on the yield curve, leading to the deepest inversion in 2s10s since the early 1980s. I looked at this last week and there is a strong relationship between the peak size of the curve inversion and the subsequent total Fed rate cuts (this time adding in the two 1970s recessions).

When lowering rates, of course the Fed can cut more if the starting rate is higher. We can account for this for by looking at the percentage cut from the peak rate. This leads to a weaker but still non-trivial relationship. It also leads to a negatively sloping line as falls from lower starting points (such as the 2007 and 2020 cutting cycles) are large in percentage terms.

Nonetheless, the current inversion of 2s10s is historically consistent with 65% of cuts from the expected peak Fed Funds (~5%), i.e. 325 bps, if we get a recession.

There is a tautological aspect to this: a more inverted curve gives the Fed more “room” to cut. The Fed raises the stakes by saying it’ll keep rates high for a prolonged period, but the market calls its bluff and says the economy can’t handle it and bids up longer-term bonds, flattening the curve. Ultimately, though, in a self-fulfilling manner, the market wins and the Fed cuts, re-steepening the curve.

Both relationships would infer (but not necessarily predict) much deeper Fed cuts than the ~160 bps currently priced in by the Fed Funds curve if we get a recession (which looks highly likely). As long as the Fed keeps on insisting on higher rates and inflation keeps falling, history favors a larger Fed pivot and continued pressure on the yield curve.

Tyler Durden
Tue, 12/06/2022 – 11:40

via ZeroHedge News https://ift.tt/5BNvsyg Tyler Durden

Prof. Michael McConnell (Stanford) on 303 Creative (the Web Site Designer / Same-Sex Wedding Case)

Prof. McConnell is one of the top First Amendment law scholars in the country, and I was delighted that he passed along this item:

Much of the commentary on today’s argument in 303 Creative starts from the premise that the case pits free speech (or maybe religious freedom) against LGBTQ rights. The headline in The Economist reads: “A new Supreme Court case may dampen protections for LGBT people.” Anyone listening carefully to the argument will discover that this framing is off the mark. Both sides in the argument were peppered with hypotheticals—some of them bizarre—about other possible scenarios if the Colorado law that has been interpreted to require a web designer to use her talents to celebrate a same-sex wedding is upheld. Or struck down. The hypotheticals involved all manner of speech on one side or the other of questions related to discrimination of one sort or another—religious discrimination, political belief discrimination, pro-LGBT advocacy, and any other messages you can imagine that involve one group favored over another.

One thing is clear from the argument: 303 Creative is not about whether protections for LGBT people will be dampened. The decision will apply across the board. The question is whether civil rights protections properly include the suppression of speech that disagrees with legal norms, or compels speech that celebrates those norms. Alternatively: do artists (including web designers) have the freedom to depict what subjects they wish, and how—even if they take money for doing it, and even if their perspective is hurtful (to some people)?

One of the most telling exchanges during the argument involved a hypothetical from Justice Barrett, who asked the Deputy Solicitor General Brian Fletcher (whom I consider a friend: full disclosure), supporting the Colorado law, what would happen if the shoe were on the other foot—i.e., what if a gay web designer declined to create a custom website for a Christian organization that advocates for traditional marriage? Could the state compel such a person to design such a website?

Remarkably, Brian responded that the two cases should come out differently. That is, Colorado can compel a Christian to design a custom website celebrating a same-sex marriage, but cannot compel a gay person to design a custom website advocating for traditional marriage. His reasoning for this answer reveals the fundamental flaws in the government’s position.

According to the Deputy Solicitor General, declining to design a website for a same-sex marriage is inherently a form of “status discrimination,” which the government can treat as a form of “conduct” (not speech) and therefore compel or suppress as it sees fit. But declining to design a website promoting traditional marriage is discrimination based on the message (not status) and is therefore protected speech.

There are several problems with this argument. First, it embraces a blatant form of viewpoint discrimination. Whether an expressive activity is “conduct” that discriminates based on “status,” or instead is “speech” on the basis of “message,” and thus protected, cannot depend on which side of the issue you are on. It is hard to imagine a regime more antithetical to the principle that the government must not favor or disfavor speech based on its viewpoint.

Second, as Justices Barrett and Gorsuch noted, declining to design a website promoting traditional marriage can easily be deemed “status discrimination,” too. Built into Justice Barrett’s hypothetical was the fact that the organization promoting traditional marriage was doing so based on its Christian beliefs about marriage. Religious beliefs are no less central to the status of “religion” than beliefs about marriage are to the status of being gay. So refusing to design the Christian website discriminates not only based on the message, but also based on the religious beliefs of the person seeking to express it. In other words, the message (celebrating traditional marriage) is inextricably intertwined with the religious beliefs of the customer requesting it, just as the government claims a message celebrating a same-sex marriage is inextricably intertwined with the status of the individuals requesting it.

Justice Alito illustrated this problem with a related hypothetical: What if a Jewish website designer declines to design a website celebrating a marriage between a Jew and a gentile based on the belief that intermarriage is an existential threat to the future of Judaism? The lawyer for the State of Colorado said Colorado can compel the Jewish designer to produce the site. This may get credit for candor. But it also illustrates the troubling consequences of the government’s position.

I am moved to add my own personal favorite hypothetical. What if a Jewish florist is asked to design the floral display of white lilies on Easter Sunday morning at a Christian church? Ordinarily, flowers are just flowers. But the lilies in church on Easter morning are a symbol of the new life in Christ. I cannot believe that a free nation would compel a Jewish florist to construct a symbol of Christ’s resurrection—on pain of losing the right to be a florist. The government was forced to concede that public accommodation laws do not always trump free speech and free exercise rights. But where is the stopping point—other than which beliefs are in favor with the government at a particular point in time?

Just last Monday, Vladimir Putin signed a law that blocks Russians from promoting same-sex relationships “or portraying them as normal” in advertising and media, backed by fines up to $6400 for individuals or $80,000 for organizations. We would never do that. But the reason is not the content of the messages being forbidden, but our commitment to the principle that people are entitled to express their own views free of government coercion.

Third, the government’s position is not limited to web designers. It would apply to any speech the government deems “status discrimination.” Thus, speechwriters, singers, painters, photographer all can be compelled to create speech and art celebrating same-sex weddings (but can’t be compelled to create speech and art promoting traditional marriage). The government tried to resist this conclusion on the ground that artists might not be deemed “public accommodations.” True! And important! Never before have expressive services like art and web design been deemed to be public accommodations. It is essential to artistic freedom that artists have the right to choose their own subject and their own perspective—even if other people find their work shocking. (Remember Mapplethorpe?) The fundamental problem in this case is that the Colorado courts interpreted the state law of public accommodation, which is about basic non-expressive services like electricity and hotel rooms, as including the right to compel an artist or web designer to use their creative talent to express something they do not believe. When state courts make this mistake, the First Amendment comes into play as a corrective.

No, the issue debated in 303 Creative is not whether protections for LGBTQ people will be curtailed. It is much smaller, and much larger, than that. Smaller: because all actual protections against discrimination in public accommodations will remain in place. No one has the right to compel other people to use their expressive talents to celebrate their status; civil rights laws have never required this for any protected class and the Colorado law should not have been interpreted to do so. And larger: because the case is really about artistic freedom and the right of people engaged in expressive professions to determine their subjects and perspective. If the State of Colorado can require this web designer to create a website celebrating a message contrary to her sincere beliefs, there will be no end of it.

The post Prof. Michael McConnell (Stanford) on <i>303 Creative</i> (the Web Site Designer / Same-Sex Wedding Case) appeared first on Reason.com.

from Latest https://ift.tt/gCFEd9b
via IFTTT

Meta Tumbles On Report EU Targeting Firm’s Ad Model

Meta Tumbles On Report EU Targeting Firm’s Ad Model

Meta shares are tumbling this morning, weighing on the broad market, after The Wall Street Journal reports that privacy regulators at the European Union ruling that the Facebook owner shouldn’t require users to agree to personalized ads based on their online activity.

If any significant portion of its users opts out of such targeting, Facebook and Instagram would end up with less information with which to build audiences for the personalized ads that analysts and people close to the company say make up the bulk of its revenue.

The ruling of the board, which represents all EU privacy regulators, hadn’t been disclosed publicly.

“This is not the final decision and it is too early to speculate,” said a Meta spokesman.

“We’ve engaged fully with the DPC on their inquiries and will continue to engage with them as they finalize their decision.”

META shares are down 5% on the headlines…

And the weakness is dragging on the broad indices…

Meta has previously argued that tailoring the ads it sells based on data it has about users’ online behavior is a necessary part of the personalized service it offers. The coimpany will also be able to appeal the EU decision.

Tyler Durden
Tue, 12/06/2022 – 10:01

via ZeroHedge News https://ift.tt/k2ZROtn Tyler Durden

Thank You for Donating and Everything You Do for Reason


webathon-8

You thought Giving Tuesday would last a single day, but—like some kind of Hanukkah miracle in reverse—here at Reason it has somehow lasted for eight days! 

countdownmail.com

Today is the final day of our annual webathon, where we ask you—our beloved readers, listeners, and viewers—to donate to support Reason‘s journalism. Thanks to your absolutely wild generosity, we have already exceeded our initial goal of $400,000 with the help of two generous matching grants, but there is still one more match burning, so we’ve set our sights higher. If you donate on this final day of our 2022 fundraising campaign, you will double your money thanks to a $25,000 matching grant from a delightful married pair of Reason supporters. 

Your hard-earned cash makes everything we do possible, but I want to take a minute to thank y’all for all the ways you support Reason the other 51 weeks of the year. 

In a year when social media has been chaotic at best and the algorithms are always changing, we appreciate that you take the time to click, like, share, and otherwise engage our content on Facebook, Twitter, Instagram, and TikTok. We love it when you subscribe to our YouTube channel and pause to watch and enjoy the videos there. We are grateful when you sign up for our newsletters, including Reason Roundup and our daily email—and when you forward them to your friends and enemies. We love it when you subscribe to our podcasts. Seeing those subscriber and listener numbers edge up every week is wonderful, and it helps our advertisers feel confident about paying Matt Welch and Nick Gillespie to extemporize their ad reads. We adore it when you drop by to read online stories at Reason from all those platforms or just by coming straight here the old-fashioned way by typing our URL into your browser. And we love the true originals, our print magazine subscribers, some of whom have been receiving gorgeous slices of dead tree from us in the U.S. mail every month for more than five decades. (By the way, many of the webathon support levels include a free subscription, if you want to kill two birds with one stone today.)

The cash is necessary to keep the lights on and the presses running. But we don’t exist for the sake of just existing, or even just to make a profit (not that there’s anything wrong with that!). Everyone at Reason does the work we do because we believe in the importance of doing excellent journalism about the threats to and promise of free minds and free markets. When you read and share our stuff, you’re a vital part of that crucial mission. Plus you get cool swag.

So, thank you. 

Double thank you, of course, if you can give us your love and your cash. And really, double-double thank you, since there’s still time to participate in our final miraculous match

The post Thank You for Donating and Everything You Do for <em>Reason</em> appeared first on Reason.com.

from Latest https://ift.tt/VwbGiLX
via IFTTT

Cronyist Journalism Measure Could Prompt Facebook To Ban News


Amy Klobuchar, who sponsored the Journalism Competition and Preservation Act, at a Congressional antitrust hearing

The worst ideas in Congress never die; they just get sneaked into unrelated bills. This week, that means lawmakers are reportedly trying to burrow a bad media protectionism bill into defense spending authorization. It’s called the Journalism Competition and Preservation Act (JCPA), and it’s a doozy of bad incentives and state favoritism.

In short, the JCPA would suspend antitrust rules for “publishers of online content” so they could “collectively negotiate with dominant online platforms regarding the terms on which content may be distributed.” The latest version states that “digital journalism provider(s)” can engage in joint negotiations with large tech platforms “regarding the pricing, terms, and conditions by which the covered platform may access the content of the eligible digital journalism providers that are members of the joint negotiation entity.” It also sets up rules for these negotiations and mechanisms for enforcing their terms.

The idea animating all this is allowing media companies to negotiate a link tax.

As it stands, search engines like Google and social media companies like Facebook that link to news articles tend to provide short snippets of these articles under their headlines. This is a benefit to consumers, who can get a better sense of what the article is about, and to media companies. Links to news articles on Google, Facebook, etc. help alert people to articles they would potentially like to read, and the small summaries entice people to click. But in the fantasyland where Minnesota Democratic Sen. Amy Klobuchar (who sponsored the bill) and other JCPA supporters live, search and social companies will pay for the privilege of sending traffic to media entities.

The plan utterly ignores the fact that search and social help online publishers find readers. Instead, it indulges a cartoonish rendering of tech companies as destroyers of journalism and possibly democracy.

Of course, it’s true that search and social platforms have eaten into the ad budgets of online publishers. But the JCPA acts as if media companies are owed this revenue stream. Far from preserving competition, as the bill’s name implies, it actually thwarts it by allowing lawmakers to pick winners (online publishers) and losers (tech platforms).

“It’s cronyism,” commented Jennifer Huddleston, a lawyer for tech-industry group NetChoice. “It provides a special government granted privilege that allows certain media outlets to collude and as a result risks making them more easily influenced by politicians who can take that privilege away.”

“The JCPA fundamentally breaks the concept of the open internet where you can link anywhere you want for free” and “messes with copyright law in dangerous ways by implying a new right to demand a license for links or fair use snippets,” warned Techdirt’s Mike Masnick.

So, the JCPA is wrong on purely ethical grounds and also poses a danger to fair use, to the open internet, and to the free press. It’s also likely to backfire against online publishers—and not just those who participate in negotiations.

Meta, the parent company of Facebook and Instagram, says that if the JCPA passes it will stop allowing links to news websites altogether—a move that could mean less web traffic for all sorts of media and, as a result, less ad revenue.

“If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions,” said Meta in a statement. “The Journalism and Competition Preservation Act fails to recognize the key fact: publishers and broadcasters put their content on our platform themselves because it benefits their bottom line—not the other way around.”

Meta’s statement went to accuse the JCPA of “creating a cartel-like entity which requires one private company to subsidize other private entities,” saying that this creates “a terrible precedent for all American businesses.’

If Google and other search engines have to pay to link to certain media websites, it would only be natural for them to start downranking or even entirely excluding those websites. There is no shortage of avenues where similar information can be found—news aggregators, perhaps, or social platforms where people are summarizing news stories.

Media outlets may find that instead of tech platforms paying them to link to their stories, Facebook blocks their stories entirely and Google starts linking to Twitter threads instead.

The JCPA has attracted a diverse range of detractors. While the JCPA advanced out of the Senate Judiciary Committee on a 15-7 vote last month, moderates and progressives remain split on the bill,” noted Politico in October:

That’s in part due to support from Republicans like Sen. Ted Cruz(R-Texas), who successfully introduced an amendment that some fear will enable the spread of disinformation and hate speech. Others have raised concerns that the bill could undermine copyright law and benefit large media outlets at the expense of small ones — leading to a strange coalition of tech lobbyists, libertarian groups and progressive advocates lining up to oppose the legislation.

Whether the JCPA could pass as a stand-alone measure is unclear. So supporters are reportedly trying to stack the deck by slipping a version of the JCPA into an unrelated bill, the “National Defense Authorization Act” (NDAA).

“Supporters of the media bailout bill have secured the backing of Sen. Jack Reed (D–R.I.), chairman of the Senate Armed Services Committee which oversees defense spending,” according to Breitbart:

This brazen last-minute ploy by supporters of the media cartel bill follows what Politico predicted earlier this week: having failed to secure a floor vote to the bill, the JCPA’s supporters now want to attach it to an entirely unrelated bill.

Should the NDAA route fail, the bill’s supporters may also try to attach it to an omnibus spending bill, another type of bill that is seen as a “must-pass.”

A group of 26 organizations—including the American Civil Liberties Union, the Center for Democracy and Technology, the Niskanen Center, the R Street Institute, and the Electronic Frontier Foundation—issued a letter yesterday urging lawmakers to not attach the JCPA to any pending legislation.

“The JCPA will compound some of the biggest issues in our information landscape and do little to enable the most promising new models to improve it,” the groups wrote before laying out specific issues they see with the bill. Among these are that the JCPA sets “a legal and political precedent that some uses of content that were once free of charge now require payment” and that “large media conglomerates can dominate negotiations, and small outlets would be unheard if not hurt.”


FREE MINDS

Sigh: The American Civil Liberties Union (ACLU) is siding with the state in a case—before the Supreme Court this week—involving a website designer who declined to build a same-sex wedding website.

More background on the case here. More on oral arguments here.


FREE MARKETS

By how much did Dobbs reduce abortions? Jacobin looked at whether the Dobbs decision has reduced the number of abortions taking place in the U.S., and by how much. “There are two main reasons to doubt that the overturn-then-restrict strategy of the antiabortion movement would make much of a dent in the number of abortions being conducted in the United States,” wrote Matt Breunig:

The first reason is that most of the population lives in states that are not likely to impose significant restrictions. The [Society for Family Planning] data confirms this. Prior to Dobbs, 10 percent of US abortions occurred in states that went on to ban abortion, 16 percent occurred in states that went on to significantly restrict abortion, and the remaining 74 percent occurred in states that have not imposed significant restrictions.

The second reason is that abortion seekers have three ways of getting an abortion: 1) through a formal provider in their own state, 2) through a formal provider in another state, and 3) informally, such as by acquiring mifepristone or misoprostol without a prescription. Yet state laws can only really restrict the first option. When that option is closed down, many abortion seekers will opt for travel or informal methods.

The SFP data partially confirms that this is happening. Between April and August of this year, the number of abortions in states with bans or significant restrictions declined by 12,500 per month, while the number of abortions increased by 7,140 in states without significant restrictions.

Breunig noted that while this appears to be a reduction of 5,360 abortions per month, “many of those 5,360 missing abortions probably did occur through informal methods, like abortion pills acquired without a prescription, that escape this kind of tracking.”


QUICK HITS

• Today is the last day of Reason‘s 2022 webathon. Please consider giving a (tax-deductible) donation to support our work.

• “A precedent set in the January 6 prosecutions could be dangerous to the public,” warns Bonnie Kristian.

• Are we entering an era of #MeToo reckoning?

• A study published in Child Development “did not find a meaningful association between the age at which kids received their first phones and their well-being, as measured by grades, sleep habits and depression symptoms,” reports Stanford Medicine.

• Celebrating Pauline Sabin, the woman who spearheaded Prohibition’s repeal.

Reason editors talk about “The Twitter Files,” Matt Taibbi’s report on Twitter content moderation decisions related to Hunter Biden’s laptop and penis.

The post Cronyist Journalism Measure Could Prompt Facebook To Ban News appeared first on Reason.com.

from Latest https://ift.tt/y5BiMcu
via IFTTT

The Federal Government Can’t Seem to Decide How the CFPB Is Funded

A recent decision by the U.S. Court of Appeals for the Fifth Circuit concluded that the funding mechanism for hte Consumer Financial Protection Bureau is unconstitutional because it makes the agency too independent from the political branches. Specifically, the Fifth Circuit concluded that it was unconstitutional to allow a regulatory agency to bypass the appropriations process and, in effect, set its own budget.

As expected, the Solicitor General has filed a petition for certiorari with the Supreme Court seeking review of the Fifth Circuit’s decision. Among other things, this brief argues that the CFPB’s budget is properly appropriated. Yet as Adam White notes in the Wall Street Journal, this contradicts what the CFPB, its creators and others have said about the CFPB’s funding in the past.

[The SG’s] petition, filed Nov. 14, makes a remarkable claim: that the CFPB’s self-funding power is constitutional because Dodd-Frank itself satisfies the Constitution’s requirement. The CFPB and the Justice Department argue that the statute’s grant of perpetual funding, in the amount determined each year by the CFPB director, “indisputably establishes an appropriation under the long-accepted understanding of that term.” . . .

But in making its argument to the court, the CFPB and Justice Department’s joint brief left out a crucial point: Throughout its entire history, the CFPB itself has consistently declared that its funding doesn’t come from “appropriations”:

  • The CFPB’s first director, Richard Cordray, testified to Congress in 2012 that the CFPB’s revenues were “non-appropriated funds.”
  • The CFPB’s 2013 strategic plan asserted that by “providing the CFPB with funding outside of the congressional appropriations process,” lawmakers had ensured the bureau’s “full independence.” . . .
  • Since 2013, the CFPB’s financial reports consistently called the bureau “an independent, non-appropriated” agency. The most recent such report states: “The Dodd-Frank Act explicitly provides that Bureau funds obtained by or transferred to the CFPB are not government funds or appropriated funds.” That report was released Nov. 15, the day after the bureau filed its Supreme Court petition. . . .

The CFPB isn’t alone in describing its funding as something other than “appropriations.” When Congress designed the agency, a Senate Banking Committee report found that a guarantee of “adequate funding, independent of the Congressional appropriations process,” would be “absolutely essential” to the agency’s “independent operations.” That theme has persisted among the CFPB’s advocates in Congress. In 2018, 40 Democratic senators opposed a proposal to return the bureau to Congress’s appropriations power. They wrote that “the CFPB receives its funding from the Federal Reserve, rather than from the Congressional appropriations process” to “ensure its independence.”

In short, the CFPB and its advocates have always understood that its money didn’t come from “appropriations.” This was a feature, not a bug—until it became clear that such “full independence” from Congress’s power was an invitation to constitutional scrutiny.

I suspect that these prior characterizations will be featured int he opposing briefs and will be raised in oral argument if (as I expect) the Supreme Court grants certiorari. As White notes, the whole point of this funding structure was to make the CFPB more independent. Yet these efforts to make this powerful agency independent of both Congress and the President are precisely what raises constitutional concerns.

Just because the CFPB has an unusal funding structure does not necessarily mean that it is unconstitutonal. Other federal entities, including the Federal Reserve, are funded in a somewhat similar fashion. Further, as Will Baude noted here, Zach Price has argued that the Fifth Circuit was wrong, and that the CFPB’s funding structure is misguided, but constitutional. But it is one thing to argue that the CFPB is funded in a constitutional manner. It is quite another to claim the CFPB is not funded the way everyone has always understood.

The post The Federal Government Can't Seem to Decide How the CFPB Is Funded appeared first on Reason.com.

from Latest https://ift.tt/pTMvhKq
via IFTTT

First Amendment Retaliation Claim by Virginia Tech Player Who Didn’t Kneel for “Unity Statement” Can Proceed

From Hening v. Adair, decided Friday by Judge Thomas Cullen (W.D. Va.):

Plaintiff Kiersten Hening, a former member of the Virginia Tech women’s soccer team, filed this suit under 42 U.S.C. § 1983 against her former coach, Charles “Chugger” Adair. Specifically, Hening alleges that, after she refused to kneel in support of social-justice initiatives, including Black Lives Matter (“BLM”), prior to the team’s 2020 season opener against the University of Virginia (“UVA”), Adair retaliated against her in violation of the First Amendment. According to Hening, as a direct result of her refusal to kneel while a “Unity Statement” was read over the loudspeakers, Adair berated her at halftime in front of her teammates, and again at a film-review session the following week, for “bitching and moaning” and “doing [her] own thing.”

{On September 3, 2020, the Atlantic Coast Conference’s (“ACC”) Committee for Racial and Social Justice announced that, in addition to creating an ACC Unity Symbol and implementing mandatory “diversity and inclusion training for student-athletes” focused on “anti-racism,” a Unity Statement would be read before every ACC event. This Unity Statement provided: “We, the ACC, are committed to seeing each other as equals, supporting each other, and treating each other with respect and dignity at all times, recognizing that our differences don’t divide us, but they make us stronger.” As this Unity Statement was read prior to the UVA game, all but three of the players and coaches from both teams kneeled in an apparent show of support. Hening and two of her teammates declined to kneel.}

Adair, on the other hand, claims that he was unaware until after the UVA game that Hening had declined to take a knee and that his vocal criticism of Hening at halftime and the following week—during which he never directly mentioned the Unity Statement or her refusal to kneel—was based solely on her poor play. Hening, who had been a major on-field contributor for two years prior to the 2020 season, also asserts that Adair removed her from the starting lineup for the next two games and drastically reduced her playing time in those games because she had engaged in this protected First Amendment activity. As a result, Hening resigned from the team after the third game of the season….

It is well-established that the First Amendment’s protection of freedom of speech includes “both the right to speak freely and the right to refrain from speaking at all.” As a necessary corollary to protect that fundamental right, the “right of free speech includes … the right to be free from retaliation by a public official for the exercise of that right.” To establish a claim for First Amendment retaliation, Hening must put forth sufficient evidence that: (1) she engaged in protected First Amendment activity; (2) Adair took some action that adversely affected her First Amendment rights; and (3) there was a causal relationship between her protected activity and Adair’s actions.

For purposes of his motion for summary judgment, Adair does not challenge that Hening engaged in protected First Amendment activity by declining to kneel prior to the UVA game. But he argues that Hening has not presented a triable claim of retaliation because the undisputed evidence demonstrates that he did not take any action that adversely affected her First Amendment rights, and that, even if she has, there is no causal connection between her refusal to kneel and his subsequent coaching decisions….

The court concludes that there is sufficient evidence in the record supporting Hening’s claim that Adair’s actions, whatever his motives, adversely affected her First Amendment rights. In making this determination, the court applies an objective standard, asking whether “the defendant’s allegedly retaliatory conduct would likely deter ‘a person of ordinary firmness’ from the exercise of First Amendment rights.” In so doing, the court can consider how the alleged retaliation personally affected the plaintiff. But “[w]hile the plaintiff’s actual response to the retaliatory conduct provides some evidence of the tendency of that conduct to chill First Amendment activity, it is not dispositive.” Moreover, “[n]ot all retaliatory conduct tends to chill First Amendment activity[,] … and a plaintiff seeking to recover for retaliation must show that the defendant’s conduct resulted in something more than a ‘de minimis inconvenience’ to her exercise of First Amendment rights.”

A reasonable jury could find that Adair’s conduct towards his former player constituted an adverse action for purposes of her First Amendment retaliation claim. Adair contends that his halftime criticism and comments at the later film-review session were justified based on Hening’s poor play and were unrelated to her pregame refusal to kneel. But as Hening points out, this argument misses the mark because it impermissibly assumes that Adair’s version of the facts—specifically, that his criticism was motivated by Hening’s purported on-field struggles rather than her pregame actions—is true. At the summary judgment stage, the court cannot make this credibility determination in Adair’s favor; its determination is solely within the province of the jury.

Moreover, Adair’s argument conflates adverse action with causation. Whatever his motivations, the court has no trouble concluding that Adair’s conduct towards Hening—publicly chastising her, removing her from the starting lineup, and reducing her playing time—would tend to chill a person of ordinary firmness’s exercise of her First Amendment rights….

{Although Hening was not on an athletic scholarship and there is no evidence that she had higher aspirations in her chosen sport, the type of retaliatory conduct alleged here would certainly have a chilling effect on college athletes generally, especially those who rely on scholarships to offset (or cover) their academic expenses or those that recognize that playing time and visibility will affect their future prospects in the sport or otherwise. For example, a line on one’s résumé that reads “4-year state Division I soccer player” is preferable to “member of Division I soccer team.”}

But to prevail on her retaliation claim, Hening must also establish the requisite causal connection between her refusal to take a knee—i.e., her protected First Amendment activity—and Adair’s alleged adverse actions towards her. This is a high hurdle, and “[i]t is not enough to show that an official acted with a retaliatory motive and that the plaintiff was injured—the motive must cause the injury.” … [T]he alleged retaliatory motive must be a “but-for” cause, meaning that the plaintiff must prove that the defendant would not have taken the adverse actions against her absent his retaliatory motive….

Genuine issues of material fact preclude the court from granting summary judgment on this score. As a threshold matter, Adair claims that there is no evidence that he was even aware that Hening stood during the Unity Statement when he harshly criticized her at halftime, but this is belied by the record. Still photographs from the game film clearly depict Adair, who is kneeling on the sideline, looking in Henning’s direction as she remained standing ….

Adair also contends that Hening’s theory of causation is, at bottom, based on rank speculation and self-serving conclusions, both of which, he argues, are insufficient to defeat summary judgment. But a fair review of the record indicates that Hening’s case is based on more than supposition; indeed, ample circumstantial evidence undergirds her claim and gives rise to genuine issues of material fact about Adair’s true motives and actions. The close temporal proximity between the pregame incident and Adair’s halftime tirade against his starting defender (approximately 45 minutes) suggests some causal connection between these two events. And the close temporal proximity between the other alleged adverse actions (harshly criticizing Hening’s performance during a film session and removing her from the starting lineup for the Clemson and UNC games) occurred within two weeks of Hening’s refusal to kneel before the UVA game.

Hening also points to evidence showing that, in the late summer of 2020, the Virginia Tech women’s soccer team, like many organizations and groups, was divided over whether and how to publicly support various social-justice initiatives (including BLM) in the aftermath of the murder of George Floyd. Indeed, an apparent rift had developed over this issue between a large group of team members (mainly freshmen) who openly embraced BLM and a few upperclassmen who did not, causing the freshmen to complain directly to Adair about what they perceived as racism.

Adair later addressed this apparent rift over BLM in at least two team meetings during the preseason. Prior to one, he texted his coaching staff that “some discussion … regarding Black Lives Matter and racial … injustice” had already occurred and that some members of the team “were open and speaking[,] which is great,” but that “some others made side comments later on that struck a nerve with other people.” In off-the-record comments to ACC Network broadcasters prior to the season (which were overheard by a Virginia Tech sports information official), Adair lamented this divide and his team’s lack of consensus on how to support social-justice initiatives. All of this suggests that this apparent BLM- and social-justice divide was far more significant to Adair at the time than he would have the court believe today.

Hening suggests that the “side” of this issue that Adair considered “open” and “great” was the pro-BLM side, and that the small group making “side comments later on that struck a nerve” was the anti-BLM contingent with which she aligned. Although no direct evidence supports this assertion, there is circumstantial evidence from which a reasonable jury could infer it. At a team meeting the following day, Adair encouraged his players to reach a consensus on how to show support for social justice, at one point suggesting that they wear special warm-up jerseys. Immediately after that team meeting, Adair allegedly made snide remarks about the family of one of his players’ preference for “All Lives Matter” as opposed to “Black Lives Matter.”

The student manager who overheard Adair make these comments to the other coaches immediately reported it to the small group of players who were opposed to supporting BLM publicly. And it was no secret among the players and coaching staff that Hening was an outspoken conservative and supporter of former President Donald Trump. Macaulay Soto, the Director of Operations for the women’s soccer team and a BLM supporter, recalled that Hening “was the only one who consistently posted a lot of [conservative] things on her social media.” The evidence of Adair’s apparent views on this issue (as reflected in his alleged criticism of “All Lives Matter” supporters) and Hening’s well-known conservative leanings and lack of support for BLM further support an inference that Adair had a retaliatory motive when he criticized, and later benched, Hening for refusing to kneel during the Unity Statement.

Even though this evidence establishes genuine issues of material fact as to Adair’s motives, he would still be entitled to summary judgment if he could prove “by a preponderance of the evidence that [he] would have reached the same decision … even in the absence of the protected conduct.” In other words, if the weight of the evidence backs his assertion that he would have chastised and benched Hening for her poor play against UVA regardless of her decision not to kneel, then he would still be entitled to summary judgment. But the weight of the evidence does not cut in Adair’s favor, at least at this stage.

The record establishes that Hening was a stalwart defender on the women’s team for two years prior to the 2020 season. She started nearly 40 games prior to the UVA game, including all but three as a freshman, and typically played most of the minutes of those games. But Adair benched her after the UVA game and drastically reduced her playing time. As a freshman, Hening averaged 76 minutes of playing time; as a sophomore, nearly 88. But during the Clemson game, Hening only played 29 minutes, and, at the UNC game, just 5. Ultimately, Adair may convince a jury that this coaching decision was based solely on Hening’s poor play during the UVA game, but the court, viewing the evidence in the light most favorable to Hening, cannot reach that conclusion as a matter of law.

Similarly, Adair contends that Hening’s circumstantial evidence of his alleged retaliatory motives is of no consequence because he did not take any action to retaliate against the two or three other women who joined her in not taking a knee before the UVA game. In other words, Adair claims that Hening’s retaliation claim fails as a matter of law because she is unable to point to a similarly situated comparator who suffered the same fate.

Again, his argument misses the mark. As the Fourth Circuit has recognized (albeit in the context of Title VII), once a plaintiff offers circumstantial evidence of a discriminatory motive, “the case must be decided by the trier of fact and cannot be resolved on summary judgment.” This is not to say that Adair’s apparent non-retaliation against other players would not be relevant or admissible at trial to show that his actions towards Hening were not retaliatory; they likely would be, and the jury might find this evidence compelling. “But at the summary-judgment stage, these additional facts and attendant inferences in favor [of the defendant] do not vitiate the genuine questions of material fact” that Hening, for the reasons explained above, has established to support her claim. “The issue—at this stage of the proceeding—is whether those additional facts permit the court to draw a determinative inference [in Adair’s] favor that [his] motives were not discriminatory.” On this mixed record, the court concludes that they do not, and that Adair is not entitled to summary judgment.

The post First Amendment Retaliation Claim by Virginia Tech Player Who Didn't Kneel for "Unity Statement" Can Proceed appeared first on Reason.com.

from Latest https://ift.tt/PCIcVGd
via IFTTT

Me, Myself, And AI

Me, Myself, And AI

By Stefan Koopman, Senior Macro Strategist at Rabobank

Hi GPT-3, I heard a lot of good stuff about you last week. As it happens, I am short on time and ideas this morning. Can you help me write a Global Daily?

Hello! I’d be happy to help you with writing a Global Daily. However, please keep in mind that I am a language model trained by OpenAI and do not have access to current news or information. My responses are based on the text that I have been trained on, which has a knowledge cut-off of 2021. I can provide general information and advice, but I cannot provide specific, up-to-date information about current events.

Thanks, well, let’s then just zoom out a bit. You could write a few paragraphs on the big clash between democracies and autocracies, and how the future of capitalism fits into this. We need to show we know more about this stuff than anyone reading this. It should also be a bit funny. Could you throw in a football analogy too? That helps to grab attention these days.

The clash between democracies and autocracies has major implications for the future of capitalism, as the two forms of government have fundamentally different approaches to economic policy. Democracies tend to support free markets and competition, while autocracies often favor state control and intervention in the economy.

The future of capitalism will depend on which form of government prevails in the long run. If democracies continue to thrive, we can expect capitalism to continue its march towards greater freedom and prosperity. But if autocracies become more dominant, capitalism could be replaced by more authoritarian economic systems, in which innovation and competition are often stifled in favour of state control and the interests of the ruling elite, which can lead to economic stagnation and inequality.

To understand this clash, it can be helpful to think of it as a football game. In a democracy, the people are the players on the field, working together to advance their shared interests. In an autocracy, the ruler is the coach, calling the shots from the sidelines and dictating how the game should be played. Who will come out on top in this global game of democracy vs autocracy? Only time will tell.

That’s a cliff hanger. Would you agree that capitalism too is a bit like football? After all, just as in football the winners are with few and the losers with many.

Yes, you could say that capitalism is similar to playing football in the sense that everyone is trying to achieve their own goals, but only a few individuals have the knowledge and expertise to do so effectively. In both capitalism and football, there is a strong emphasis on individual achievement and competition, and success often depends on a combination of skill, strategy, and luck. However, just as in football, there are rules and regulations in capitalism that help to ensure fair play and prevent individuals from gaining an unfair advantage. Ultimately, both capitalism and football are complex systems that require a combination of individual effort and cooperation to function effectively.

That’s insightful. Not very funny, to be blunt, but I guess you haven’t learned that yet. Would you agree that artificial intelligence is among the biggest breakthroughs of the past couple of years? Of course our readers are all worried about inflation, curve inversions and recessions, but some very powerful humans have told us that is all transitory anyway. But this breakthrough clearly is not. It’s permanent. It’s wild. Should I be excited or scared?

I’m glad you found my comments helpful! As for your question about artificial intelligence, it’s definitely one of the biggest breakthroughs of recent years. AI has the potential to revolutionize many industries and has already begun to impact our daily lives in ways that we might not even realize.

Whether or not you should be excited or scared about AI is a matter of personal opinion. Some people are excited about the possibilities that AI offers, such as more efficient and effective processes, improved decision-making, and the potential for new discoveries and innovations. Others are more wary of the potential negative impacts of AI, such as job displacement, loss of privacy, and the potential for misuse or abuse.

Ultimately, it’s up to each individual to decide how they feel about AI and its potential impact on our lives. Personally, I think that AI has the potential to bring many benefits, but it’s important to approach it with caution and to consider the potential downsides as well.

That’s very modest of you. I’d say it’s an exciting threat. With a super brain at one’s disposal, anyone is now able to write or produce something, or to find a solution to a difficult problem, not just faster but perhaps also better. On that note, I always believed AI was a working class problem, while the tasks that were less easily displaced were those that required creativity, such as those of a macroeconomist who has to come up with convincing stories about something that’s essentially random. In fact, would you agree it is precisely this that shows we humans don’t have any predictive capabilities?

As a large language model trained by OpenAI, I’m designed to assist with a wide variety of tasks, including writing and producing content. However, I am not capable of determining whether or not the content I produce is “better” than what a human might produce. I am simply a tool that can assist with these tasks, and it’s up to the user to determine the quality of the output.

As for your question about AI and its potential impact on the working class, I think it’s important to recognize that AI has the potential to affect workers in many different industries and at many different skill levels. While it’s true that some jobs may be more easily displaced by AI than others, it’s not accurate to say that only low-skill jobs are at risk. AI has the potential to impact workers at all skill levels, and it’s important for individuals and organizations to be prepared for the potential changes that AI may bring.

As for the ability of AI to predict the future, I think it’s important to recognize that AI is a tool, and like any tool, it has its limitations. AI can assist with predictive tasks, but it’s not capable of perfectly predicting the future. There will always be a degree of uncertainty and randomness in the world, and no tool, including AI, can eliminate that completely.

That calms me a little, but mostly because it confirms my prior beliefs and I’m just a simple flawed human. Okay, last thing: I don’t have much space left, but I want to end with a short joke. Could you help me?

“Why was six scared of seven? Because seven eight nine!”

Okay…

Day ahead

Hi. You still there? Forgot one. Could you please tell me what will happen today?

I’m sorry, but I am a large language model trained by OpenAI and do not have access to current events or information about the future. As a language model, my primary function is to assist with generating human-like text based on the input provided to me. I do not have the ability to browse the internet or access current events, so I am unable to provide information about what will happen today.

Well, that’s a relief!

Tyler Durden
Tue, 12/06/2022 – 09:50

via ZeroHedge News https://ift.tt/iFgH7Vx Tyler Durden

Silvergate CEO Pens Letter Defending “Ample Liquidity” As Elizabeth Warren “Demands Answers” On FTX

Silvergate CEO Pens Letter Defending “Ample Liquidity” As Elizabeth Warren “Demands Answers” On FTX

Throughout the FTX chaos, we have been closely watching the gyrations in Silvergate, a regulated US crypto bank: caught up in the collateral damage from FTX’s implosion, Silvergate has plunged as low as $21 per share this morning, down from highs over $100 earlier this year and from record highs above $200 one year ago, as cash continues to pour out of the space.

The bank has now become a tug-of-war item between bears, who think the bank will get caught up in AML/KYC issues and/or that everything in crypto is heading much lower, and bulls, who see long-term value from a regulated bank when the “crypto winter” finally ends and the Fed pivots unleashing another massive liquidity gusher, sparking a scramble for non-printable fiat. The most recent punch landed has been by the bears when, this morning, NBC reported that Elizabeth Warren was “demanding answers” of the bank’s relationship with FTX. 

The letter to Silvergate said:

“In the weeks since FTX’s shocking collapse, new and disturbing allegations about the company’s business practices have continued to surface, including the reports that Mr. Bankman-Fried ‘secretly transferred some $10 billion of customer funds to his trading vehicle, Alameda Research,’ to fund ‘risky bets,’ violating both U.S. securities laws and FTX’s own terms of service. We are concerned about Silvergate’s role in these activities because of reports suggesting that Silvergate facilitated the transfer of FTX customer funds to Alameda.”

“Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients,” Warren wrote.

It is unclear if the bank didn’t file suspicious activity reports – or if they were filed and simply ignored by relevant government agencies, as the CEO suggested previously. We’re guessing Silvergate will clear this up in detail going forward. 

“Silvergate appears to be at the center of the improper transfer of billions in FTX customer funds. Americans need answers. Those guilty of wrongdoing must be held accountable,” Warren continued. 

She makes a great point. Those guilty of wrongdoing should be held accountable. So let’s start with the man at the center of it all: why is Sam Bankman-Fried still walking around free?

But we digress. Throughout the last few weeks, Silvergate’s CEO has been outspoken in communicating with the market to offer up its position on the controversy. Most recently, late on Monday – perhaps to preempt the NBC story – CEO Alan Lane released a public letter seeking to once again clarify, among other things, the bank’s liquidity position and compliance standards.

“It has been a very difficult few weeks for the digital asset industry, as we have all come to terms with the apparent misuse of customer assets and other lapses of judgment by FTX and Alameda Research. There has also been plenty of speculation – and misinformation – being spread by short sellers and other opportunists trying to capitalize on market uncertainty,” he wrote.

“I wanted to take this opportunity to set the record straight about Silvergate’s role in the digital asset ecosystem and what we have always done, and continue to do, to ensure our customers act in accordance with our robust risk management controls,” he wrote. 

He first tackled risk management and compliance:

We take risk management and compliance extremely seriously.

Silvergate operates in accordance with the Bank Secrecy Act and the USA PATRIOT Act. For each and every account, these laws require us to determine the beneficial owner, the source of funds, and the purpose and expected use of funds.

Silvergate also monitors transaction activity for every account and identifies activity outside of the expected usage. When we identify certain kinds of activity, we are required to file suspicious activity reports, and we do so routinely. We have a track record of closing accounts that are used for purposes outside of the expected use. This is no small undertaking. We have invested, and will continue to invest, in systems and procedures to help ensure we are conducting effective customer due diligence and monitoring. We have dedicated a substantial number of Silvergate employees to this effort.

And, as our customers can attest, the onboarding process can take weeks as a result of the time we spend gathering and reviewing information and documentation from prospective customers. After accounts are open, we continue to monitor account activity as part of our enhanced due diligence process on each of these accounts and to take action when there are red flags. By performing our risk management procedures and fulfilling our regulatory obligations, Silvergate plays a key role in helping law enforcement identify bad actors. We take this responsibility seriously.

Lane also commented on the company’s due diligence on FTX and Alameda Research, stating that “…if we detect activity that is unexpected or potentially concerning in any account, we conduct an investigation and, when required, confidentially file a suspicious activity report in accordance with federal regulation.”

Finally, he talked about the bank’s “ample liquidity”:

We have a resilient balance sheet and ample liquidity. While this has been a turbulent time in the digital asset industry, our customers’ deposits are, and have always been, safely held. In addition to the cash we carry on our balance sheet, our entire investment securities portfolio can be pledged for borrowings at the Federal Home Loan Bank, other financial institutions, and the Federal Reserve Discount Window – and can ultimately be sold should we need to generate liquidity to satisfy customer withdrawal request. We intentionally carry cash and securities in excess of our digital asset related deposit liabilities.

We purpose-built this business to support our customers not only during periods of growth but also in periods of volatility – that is, our business is designed to accommodate deposit inflows and outflows under a range of market conditions. I am eternally grateful to our employees for continuing to work hard in the face of so much uncertainty, and to our customers for their continued support. We look forward to continuing to provide a safe and reliable banking solution for the digital asset industry.

And while short sellers and skeptics continue to raise the risks of KYC/AML issues and float irrational ideas like “bankruptcy”, not everybody has been skeptical of Silvergate. Certainly we continue to watch for opportunistic chances to own the bank’s equity, as we believe during the next easing cycle, it will head back toward all time highs well over $200/share. 

Recall, toward the end of November, “one of the richest men in crypto”, Brendan Blumer, bought 9.3% of the bank. This makes him the largest shareholder of the bank. Additionally, his EOS development firm, Block.one, also owns a 7.5% stake in the bank. Combined he controls about 17% of the bank. Block.one put out a press release about their stake in the bank calling it a “proven track record of maintaining a liquid and conservative balance sheet investment portfolio.”

Brendan Blumer

They all said: “We believe Silvergate’s current equity prices do not accurately reflect their strong balance sheet, their strategic positioning, or their market-defiant growth trajectory, and therefore offers a unique investment opportunity. We are excited to be a new passive shareholder.”

The company is betting that when the smoke clears from the FTX pain, Silvergate will emerge not only little scathed, but potentially with its shares closely held, setting up potential for a swing higher in price again.  On top of that, via Bloomberg, we saw late last month that Citadel has added 280,000 shares of the name and now holds 392k shares, or about 1.25% of the company. 

However none of that matters right now, and instead shorts keep piling into SI stock, whose short interest is approaching a record 20% of the very illiquid float. That will likely continue until some catalyst short-circuits this feedback loop: it could include management giving a clear signal that the company is solvent (the CEO buying a substantial block of stock would certainly help), announces a sizable buyback, provides an early glimpse of its earnings and balance sheet, or unveils a deal with a strategic investor which locks up a sizable amount of the float, and potentially triggers a squeeze as signaled by the recent explosion in SI’s short interest.

Tyler Durden
Tue, 12/06/2022 – 09:30

via ZeroHedge News https://ift.tt/R7PNDgq Tyler Durden

Price Of Ship Fuel Falling Even As Russia-Ukraine War Rages On

Price Of Ship Fuel Falling Even As Russia-Ukraine War Rages On

By Greg Miller of FreightWaves.com

When Russia invaded Ukraine, the price of ship fuel spiked to unprecedented highs. Prices are still high in historical terms, but they’ve now fallen back to prewar levels. Ship fuel is getting cheaper as fears of future demand weakness drag down the price of oil.

Ship & Bunker put Friday’s average price of very low sulfur fuel oil (VLSFO) — the fuel used by most commercial ships — at $685.50 per ton (based on prices at the top 20 refueling hubs). That’s down 39% from the all-time high on June 14 and on par with prices seen in January.

The average price of high sulfur fuel oil (HSFO) — the fuel burned by ships using exhaust gas scrubbers — was $457 per ton, down 32% from the high on May 5 and back to levels seen in September 2021.

Average prices at top 20 refueling hubs (Chart: American Shipper based on data from Ship & Bunker)

The price of ship fuel is important to importers of containerized cargo because shipping lines pass on fuel costs via bunker adjustment factors (BAFs).

In bulk commodity shipping, the price of fuel is important to spot markets because shipowners pay for fuel on spot voyages. Shipowner spot earnings are net of that cost. 

Meanwhile, the VLFSO-HSFO spread is pivotal for owners of ships with scrubbers. The higher the discount of HSFO to VLSFO, the more scrubbers pay off.

Container shipping fuel surcharges falling

On Friday, DPI Signals reported container line BAFs for the first quarter of 2023. The good news for cargo shippers: BAFs are now coming down rapidly as shipping lines pass along fuel-cost savings.

The Asia-West Coast BAF of Zim (NYSE: ZIM) will be 32% lower in Q1 2023 versus Q4 2022, falling to $720 per forty-foot equivalent unit. Evergreen’s Asia-West Coast BAF peaked in Q3 2022. In the coming quarter, it will be down 41% from that high, at $443 per FEU.

In the Asia-East Coast lane, Cosco’s BAF will fall 21% between Q3 2022 and Q1 2023, to $1,425 per FEU. CMA CGM’s BAF will decline 21% between the fourth quarter and the first, to $1,098 per FEU.

Scrubber savings volatile but remain high

The spread between VLSFO and HSFO jumped to over $300 per ton in January 2020, when the new IMO 2020 regulation went into force. That regulation required ships without scrubbers to switch from HSFO to more expensive VLSFO.

But in the wake of the initial COVID lockdowns, the VLSFO-HSFO spread collapsed to around $50 per ton. This raised the question of whether scrubber installations were a mistake. A spread of around $100 per ton is generally seen as the point where scrubber installations make economic sense.

As oil pricing and refinery utilization picked up in 2021, the spread widened again. When Russia invaded Ukraine, it rocketed to new highs, surpassing the previous peak in January 2020. According to Ship & Bunker data, the average spread at the 20 top refueling hubs hit an all-time high of $420.50 per ton on July 5.

It has fallen back again in recent months. The spread was $228.50 per ton on Friday. Even so, scrubbers are still paying off handsomely for shipowners.

According to Clarksons Securities, a spot-trading, scrubber-equipped Capesize (a bulker with capacity of around 180,000 deadweight tons) earned $9,400 more per day than a nonscrubber Capesize as of Monday, due to fuel savings. Spot earnings of Capesizes with scrubbers burning HSFO were 75% higher than Capesizes without scrubbers burning VLSFO.

A 2011-built, scrubber-equipped very large crude carrier (VLCC; a tanker that carries 2 million barrels of crude) was earning $14,100 more per day than a nonscrubber VLCC in the spot market on Monday, a 26% premium.

What’s driving the spread?

American Shipper asked Stefka Weschsler, marine fuels editor at Argus, about what’s driving the spread and what could happen after the EU bans imports of Russian refined products.

“Russia exports more HSFO than VLSFO, but Russia also exports distillate fuel, which is used as a blend stock to make VLSFO,” Weschsler explained. After the war began, VLSFO prices increased in the Amsterdam-Rotterdam-Antwerp (ARA) bunkering market, while HSFO prices declined. The spread rose to historic highs in July “as a reaction to distillates availability erosion.”

The decline in the spread this autumn was due to the price of VLSFO dropping faster than the price of HSFO. Between July and November, VLSFO prices in ARA fell 25% and HSFO prices 18%, according to Argus data.

The decline in VLSFO pricing outpaced HSFO “as Northwest Europe reshuffled its VLSFO sources, importing from the U.S. Gulf Coast, Gabon, Algeria, Tunisia, the UAE and Argentina,” said Weschsler.

Asked about the EU ban on Russian products imports starting Feb. 5, he said, “Market views are divided. Some think that with Russian distillates completely out of the EU market, ARA VLSFO prices will outpace HSFO prices [widening the spread].”

“Others think the spread will narrow once all Russian HSFO stocks are depleted from the ARA,” he said. In other words, lower HSFO supply would increase HSFO prices relative to VLSFO.

Container shipping to drive future scrubber installations

Scrubber installations make the most sense on high-capacity vessels on long-haul runs. Installations are more cost-effective with newbuildings than with retrofits.

Data from Clarksons Research shows a sharp rise in scrubber use over the past two years, but also, that most future installations will be on newbuilds, primarily on container ships.

In January 2020, when IMO 2020 was implemented, 35% of all VLCCs either on the water or on order had scrubbers installed or installations planned. As of Monday, the VLCC scrubber share had risen to 48%.

However, future VLCC scrubber installations are limited. The orderbook is extremely small, with only 27 VLCCs on order. Of those, only 26% will have scrubbers installed. Of VLCCs in service, only 19 (2% of the fleet) have scrubber retrofits planned.

The share of Capesizes with scrubbers or planned installations rose from 35% in January 2020 to 42% currently. As with VLCCs, the low orderbook will limit future installations. Only 19 of the Capesizes on order (16% of vessels under construction) will get scrubbers, and only 11 currently operating Capesizes have retrofits planned (less than 1% of the fleet), according to Clarksons Research data.

The container shipping industry has been the biggest scrubber adopter in terms of fleet share. The share of container ships with capacity of 12,000 or more twenty-foot equivalent units that have scrubbers or plan to have scrubbers increased from 52% in January 2020 to 59% currently.

Unlike VLCCs and Capesizes, newbuildings play a major role, as container shipping now has a historically large orderbook. According to Clarksons’ data, there are 140 container ships with capacity of 12,000 TEUs or more on order that will have scrubbers installed, representing 46% of ships under construction in that size category.

Tyler Durden
Tue, 12/06/2022 – 09:10

via ZeroHedge News https://ift.tt/gieh21N Tyler Durden