As Oklahoma’s Attorney General Calls for Clemency, the State Keeps Planning to Execute Richard Glossip


Richard Glossip

Richard Glossip has been on Oklahoma’s death row for almost 25 years. In that time, considerable doubt has been raised about the state’s case against him—including two damning investigations that lead even the state’s attorney general to advocate for a new trial. But none of that has been enough to stop the state’s plan to execute Glossip later this month.

Richard Glossip was convicted for the 1997 murder of his boss, Barry Van Treese. However, no one claims Glossip himself actually killed him. Instead, the state asserts that Glossip, who had been working as the manager of a motel owned by Van Treese, convinced 19-year-old maintenance man Justin Sneed to beat Van Treese to death with a baseball bat as part of an elaborate murder-for-hire scheme. While Glossip claims he was not at all involved in the murder, Sneed—as part of a plea deal with prosecutors to avoid the death penalty—testified during Glossip’s trial that Glossip had masterminded the crime.

Soon after Glossip’s conviction, the weaknesses of the case began to show. In 2001, Glossip’s conviction was overturned, and he was granted a new trial after an appeals court found that “the evidence at trial tending to corroborate Sneed’s testimony was extremely weak.” However, in 2004, he was reconvicted and resentenced to death. In the following years, Glossip has narrowly avoided death several times—coming so close that he has received three last meals.

However, in the past two years, a spate of new inquiries into Glossip’s case has sparked hope that he may receive a new trial. In 2021, a bipartisan group of legislators requested an independent investigation into the case. When it was finished in July 2022, it revealed staggering misconduct on behalf of the state, including that a county district attorney’s office had directed police to destroy physical evidence favorable to Glossip.

The investigation also “uncovered police contamination of the state’s star witness, Justin Sneed, the actual killer, who implicated Glossip only after the detectives mentioned Glossip’s name to Sneed six times during his interrogation,” wrote investigators in a 2022 press release. “Likewise, the investigation uncovered additional evidence, never presented to the jury or to any court, that would likely have led to a different outcome in the case.”

Last month, after the results of a second investigation into the case, Oklahoma’s Attorney General Gentner Drummond announced that he was requesting that Glossip’s conviction be overturned and that he be granted a new trial.

“After thorough and serious deliberation, I have concluded that I cannot stand behind the murder conviction and death sentence of Richard Glossip,” said Drummond in an April 6 statement. “Considering everything I know about this case, I do not believe that justice is served by executing a man based on the testimony of a compromised witness.”

However, the attorney general’s intervention hasn’t been enough to stop the state’s plans to execute Glossip. Last month, an appeals court declined to vacate Glossip’s conviction, concluding that Glossip “has not provided this Court with sufficient information that would convince this Court to overturn the jury’s determination that he is guilty.”

Making matters worse, last week, an Oklahoma parole board seemed to put to rest all hope that Glossip may finally escape death row. On April 26, the board declined to grant Glossip clemency and cleared the way for his execution, now set for May 18.

Drummond himself made the unusual step to testify before the parole board to argue for clemency. “I want to acknowledge how unusual it is for the state to support a clemency application of a death row inmate,” Drummond said during the parole board’s hearing. “I’m not aware of anytime in our history that an attorney general has appeared before this board and argued for clemency. I’m also not aware of any time in the history of Oklahoma when justice would require it. Ultimately that is why we are here.”

But even this wasn’t enough, and the board narrowly voted to deny Glossip clemency.

“The public support for Mr. Glossip is diverse, widespread, and growing, including at least 45 death penalty supporting Republicans in the Legislature who also reached the conclusion that there is too much doubt to execute Mr. Glossip,” said Don Knight, Glossip’s attorney. “It would be a travesty for Oklahoma to move forward with the execution of an innocent man.”

The state made grave errors in its prosecution of Richard Glossip—errors that several investigations have argued could have caused his conviction. But since those errors were discovered, it has proved nearly impossible to correct them—and nearly impossible to stop the ever-ticking execution countdown.

As the Los Angeles Times editorial board noted yesterday, “The bureaucracy of death has a schedule to keep…. Those impatient to keep the state’s killing on track correctly note that Glossip’s case has gummed up the works for decades.” Rather than granting Glossip a new trial once the state’s errors had been revealed, “the execution bureaucracy” decided that “it’s better, in this cruel and bloodthirsty nation of equal justice under the law, to kill people now. We can always sort out the truth later.”

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New Column in ABA Journal: “Law schools face an inflection point with diversity, equity and inclusion”

The reaction to my first ABA Journal column was, to my pleasant surprise, quite positive. I’ve heard from many current and former leaders in the organization who recognize the problem. I’ve also been invited to participate in a caucus looking to improve viewpoint diversity within the ABA. I’ll report back on how that experience goes. And, also to my pleasant surprise, the ABA Journal allowed me to publish a second column.

The title of my column is Law schools face an inflection point with diversity, equity and inclusion. The piece was largely inspired by Judge Duncan’s protest at Stanford, as well as the shenanigans at Yale Law School last year. I try to tie together why these debacles occurred with the rise of DEI on college campuses. I explain that DEI, as understood by officials at elite institutions, is inconsistent with the mission of higher education.

I offer five concrete suggestions of how deans and faculty can restore the proper balance of power between academic departments:

Universities and faculties in particular should take decisive action to prevent future Steinbachs and Eldiks from subverting the core principles of academic inquiry. At this inflection point, I propose a five-course action plan. First, every faculty should adopt, or reaffirm, a free speech policy that clearly spells out the university’s commitment to a diversity of viewpoints. That policy also should delineate the consequences for heckling speakers. Students should be given a stern warning at orientation, so they are on clear notice about the rules.

Second, universities should restructure DEI departments. For starters, DEI deans should be tenured members of the faculty, rather than untenured staff. Faculty members generally have a long-term commitment to the institution and are attuned to how professors, students and other stakeholders approach sensitive issues. If the DEI dean is a faculty member, it is more likely that the faculty will have some visibility of the various DEI activities.

Moreover, the institution should define the jurisdiction of DEI departments and ensure that student-facing deans remain neutral and do not endorse any particular ideology. And yes, beliefs about “privilege,” “anti-racism” and “unconscious bias” are not objective truths; they are contested ideologies. A law school administration could no more endorse critical race theory than it could endorse originalism. Educational institutions must remain neutral.

Third, faculty governance should assert oversight of DEI departments. For example, any DEI programming that students are required to attend should be approved by the faculty curriculum committee. Any diversity mandates imposed on hiring or admissions should be approved by the faculty committees on appointments and admissions. Academic institutions are faculty-governed. DEI should not issue edicts to the faculty; the faculty should provide approval to DEI.

Fourth, DEI staffers should be required to attend training on free speech and academic freedom. These classes can be provided by the constitutional law faculty or by outside groups like the Foundation for Individual Rights and Expression. The Duncan debacle should be a case study of what not to do. Employees like Steinbach who see free speech as subordinate to DEI values, should seek other employment. They have no place in an institution of higher education.

Fifth—and this one is key—universities should commit themselves to hiring ideologically-diverse professors. It is regrettable that Stanford has one right-of-center public law scholar—Judge McConnell. Yale has zero. Conservative students at Stanford and Yale are jurisprudential orphans. If more conservative scholars are hired, progressive students will invariably learn how to deal with those they disagree with—cross-cultural competency in modern lingo—and may realize that the divide between right and left isn’t as large as they thought. Harvard, which has a handful of conservative faculty members, has unsurprisingly stayed out of the headlines. Other schools should follow the hiring practice started more than a decade ago by Dean Elena Kagan.

I look forward to engaging further on this topic. My next column, hopefully, will be about Supreme Court ethics.

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Bonds, Bitcoin, & Bullion Battered After Bank Bailout, Stagflation Scare

Bonds, Bitcoin, & Bullion Battered After Bank Bailout, Stagflation Scare

Weak macro data, re-accelerating inflation (prices paid), no progress on the debt-ceiling, and a bank bailout that literally does nothing to calm fears of more bank runs (or superwalks).

Macro data disappointment continues…

Source: Bloomberg

ISM Manufacturing signaled stagflation with prices paid rising but activity and new orders still in contraction…

Source: Bloomberg

“Stagflation is looming,” said Bruce Liegel, a former macro fund manager at Millennium Partners LP who’s been working in financial markets since the early 1980s. He advised buying short-duration Treasuries, such as the 2-year note. Rates are high now and will remain high at maturity — so investors can pick up new debt at that time at even higher rates. He also expects value stocks to outperform growth during this time as well.

“We are set to have higher rates, and higher inflation for at least three to five years,” said Liegel, who writes a monthly global macro report.

“The growth we had seen in the past was based on low interest rates and leverage. And now we are unwinding all that, which is going to be a headwind for growth for years.”

The debt-ceiling “game” in Washington remains stagnant and the T-Bill curve’s kink is becoming more and more cliff-like…

If everything’s so awesome, why are big- and small-bank stocks down today…

Source: Bloomberg

JPM, of course, outperformed as its now even too-biggest-to-fail, but BofA, Goldman, and MS were all red on the day…

Source: Bloomberg

Interestingly, with banks “fixed” and stagflation scares ascendant, we saw rate-hike expectations lift modestly hawkishly today with the terminal rate in June (but very marginally above this Wednesday – hence the 25% odds of a June hike). NOTE (off the chart because of scaling) that December is expected to be 25bps below current levels!

Source: Bloomberg

So what did all that mean for stocks? Well BTFD of course  – durr, as 0DTE vol plunged at the open once again. But, they could not hold it and stocks faded late on into the red as major negative delta flow from 0DTE hit the market starting around 1200ET…

Source: SpotGamma

On the day the pump was met with a dump leaving the majors basically unchanged (Small Caps spiked into the green in the last few mins)…

Another day, another VIX compression (VIX his 15.60 lows intraday) and VIX1D dump and pump…

Source: Bloomberg

Treasury yields soared, despite equity’s general malaise as a holiday-thinned session was dominated by heavy corporate supply (META $8.5 billion for example). The entire curve was basically up 13-15bps…

Source: Bloomberg

Also bear in mind that Europe was largely closed today for Labor Day.

We wouldn’t be betting too hard on today’s yield surge holding as the corporate calendar easing up and rate-locks lifted…

Source: Bloomberg

The dollar was higher, reversing overnight weakness, pushing back up to Friday’s highs…

Source: Bloomberg

Crypto was clubbed like a baby seal for no good reason again. Bitcoin tried to tag $30k again but was punished, puking back to the Mt.Gox ‘fake news’ spike lows…

Source: Bloomberg

Gold was crazy today – with Futs spiking up to $2105 intraday on the JPM rescue then puking it all back because we can’t have the barabrous relic hinting that systemic shit is bad…

Oil was down on the day but WTI seemed to find support at $75…

Finally, well done Jim Cramer…

Source: Bloomberg

That “CNBC Pro” sub was well worth the money.

Tyler Durden
Mon, 05/01/2023 – 16:01

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Wagner Chief Threatens To Quit Bakhmut Unless His Men Get More Munitions

Wagner Chief Threatens To Quit Bakhmut Unless His Men Get More Munitions

The head of Wagner Group and Russia’s defense ministry have continued their public spat over war strategy and the mercenary firm’s role in Ukraine operations. 

On Sunday Wagner’s outspoken chief Yevgeny Prigozhin threatened to withdraw his fighters from the strategic eastern city of Bakhmut, where fighting has raged for several months, at a time Russian forces control something like eighty to ninety percent of the city.

“I am appealing to Sergei Shoigu with a request to issue ammunition immediately,” he said in reference to Russia’s defense minister. “Now if this is refused … I deem it necessary to inform the commander-in-chief about the existing problems, and to make a decision regarding the feasibility of continuing to station units in the settlement of Bakhmut, given the current shortage of ammunition,” Prigozhin warned.

By many accounts, Wagner has spearheaded successful operations in Donetsk, especially in the capture of nearby Soledar, which created the necessary momentum to control most of Bakhmut, though Ukraine has still committed to the wrecked city’s defense.

Prigozhin is now saying his supplies have dwindled to the point his forces can only sustain operations for a mere days longer. “Do we go on with our assaults or not? Do we stay or go?” he said, but still vowed to fight “until the very last round of ammunition.”

On Monday he followed with a video post to his Telegram channel, saying he needs at least 300 tonnes of artillery shells each day in order to take the city. “Three hundred tonnes a day is 10 cargo containers – not a lot at all … But we are being given no more than a third of that.” 

Prigozhin has been charging the regular military command with “betraying” his fighters by withholding ammunition, in an ongoing spat which became public with the Russian seizure of Soledar. A Wagner statement at the time declared victory over the city for itself, but controversially didn’t acknowledge the role of the regular military. The rift has increasingly been out in the open since then.

For this reason, Russian generals might actually welcome Prigozhin taking a backseat – though a full withdrawal of Wagner forces from Bakhmut could prove a devastating setback for the Russian side, if he were to actually go through with it.

Tyler Durden
Mon, 05/01/2023 – 15:20

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Rivian Continues To Hemorrhage Money Despite $1.5 Billion in State Incentives


A white Rivian R1S all-electric SUV sits parked on the street in New York City.

The market for electric vehicles in the U.S. continues to grow: In January 2023, 7.1 percent of all new light-duty vehicles registered were electric, a 74 percent year-over-year increase. During that same period, Tesla’s market share dropped from 72 percent to 58 percent, a sign of serious competition in the space.

Unfortunately, not every company is reaping the benefits: According to a report from Bloomberg, market analysts are increasingly skeptical about the future prospects of Rivian, maker of luxury all-electric trucks and SUVs. In the years since its founding, the company has received multi-billion-dollar investments from established firms like Ford and Amazon, and the state of Georgia is giving as much as $1.5 billion in state incentives for Rivian to build a factory there.

Last month, Reason reported that after a successful November 2021 initial public offering (IPO) that saw its balance sheet swell to $18.1 billion in cash and a market cap of more than $150 billion, “Rivian’s stock lost 80 percent of its value, making it 2022’s worst-performing stock on the NASDAQ 100.” Additionally, by December 2022, “Rivian’s cash on hand had fallen 36 percent, to $11.6 billion.”

According to Bloomberg, the company’s market cap “now stands at less than $12 billion after a 93% stock wipeout, reflecting almost no value beyond the company’s cash hoard,” which it cited as “cash and equivalents of $11.6 billion and debt of $1.6 billion.” First-quarter revenue projections “have fallen more than 25% since the end of December.” And despite struggling to fill its own orders amid rising interest rates, the company may have to come up with even more cash, and quickly.

Ivana Delevska, chief investment officer at SPEAR Invest, told Bloomberg that Rivian “still needs to invest several billion dollars to prove out its business model.” Similarly, Alexander Potter of investment bank Piper Sandler said that while the company “shouldn’t abandon its strategy,” it would likely need to raise at least $4 billion by 2025 to fund its projected growth.

There’s a problem with that: Rivian is required to invest at least $5 billion in its Georgia factory by the end of 2028 in order to qualify for the full $1.5 billion in state incentives. Even under the company’s own best estimates, that’s a gamble. CEO R.J. Scaringe told The Atlanta Journal-Constitution that the company’s future was inextricably tied to the Georgia factory, saying “There’s not another option…. This must work.” Further, the company doesn’t expect to be able to manufacture any vehicles from the Georgia plant until at least 2026.

Rivian’s own CFO doesn’t expect the company to be profitable until sometime in 2024, and even then, it’s not clear that those profits will be enough to make up for the losses the company has already accrued. Meanwhile, the state of Georgia will still have committed hundreds of millions of dollars, or more, in taxpayer-funded incentives.

Americans tend to keep their cars for around 12 years on average. Since the majority of motorists will be in the market within a given decade, electric vehicles are a relatively easy way to introduce clean, climate-friendly technology into widespread usage. And with growing demand in the market, numerous automakers are stepping up to fill that need. But it’s important to let the market lead the way forward, not government planners. Unfortunately, Rivian—and Georgia’s risky bet on a growth-stage company—may serve as a cautionary tale on central planning.

The post Rivian Continues To Hemorrhage Money Despite $1.5 Billion in State Incentives appeared first on Reason.com.

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Minnesota Is Poised To Join 22 Other States in Legalizing Recreational Marijuana


marijuana plants

It looks like Minnesota will soon be the 23rd state to legalize recreational marijuana. On Friday, the state Senate narrowly approved a bill that would allow adults 21 or older to possess marijuana for personal use. It also would create a system to license and regulate commercial production and distribution. The state House of Representatives passed similar legislation last Tuesday, and Minnesota’s Democratic governor, Tim Walz, has indicated that he will sign the plan into law once the differences between those two bills are reconciled. The legalization of recreational use would take effect on August 1.

The negotiations between the House and Senate, both of which are controlled by Democrats, illustrate the policy choices confronting legislators across the country as they decriminalize a psychoactive plant that remains contraband under federal law. The debate about the details of legalization shows that, despite all the talk of treating marijuana like alcohol, legislators remain reluctant to fully embrace that model.

State Sen. Warren Limmer (R–Maple Grove) inadvertently made that point as he vainly tried to stop his chamber from approving legalization. Among other things, Limmer argued that the Senate bill‘s two-ounce limit on public possession is excessive. But he undermined his own argument by asserting that “two ounces is equivalent to three joints.”

That remark provoked much mockery, since it implied that the amount of marijuana in a typical joint is about two-thirds of an ounce, or roughly 19 grams. The actual amount seems to be more like a third of a gram. So Limmer should have said that two ounces is equivalent to more than 170 joints, which would have better illustrated the point he was trying to make.

The House bill imposes the same restriction on public possession, which is more generous than the typical limit of one ounce but less generous than the caps imposed by several states. Both bills also would allow noncommercial sharing of two ounces or less among adults. Whatever the specific limits, the very existence of such rules shows that legislators are not really prepared to treat marijuana like alcohol. After all, you can buy as much booze as you want at a liquor store, and no one has to worry that he will be fined for transporting too many bottles in his car.

One point on which the House and Senate bills differ is the amount of marijuana that Minnesotans will be allowed to possess in their homes. The House bill says 1.5 pounds, while the Senate bill says two pounds. The latter bill raises the limit to five pounds (more than 7,000 joints!) for people who grow marijuana at home.

From Limmer’s perspective, all of these allowances are recklessly high. But again, there is no equivalent rule for alcoholic beverages. No one is expected to keep track of exactly how much beer, wine, and liquor he has accumulated at home, lest he face civil or criminal penalties for exceeding an arbitrary threshold set by state legislators.

Supporters of such limits think they are necessary to curtail the unauthorized distribution of marijuana and help state-licensed merchants supplant black-market dealers. The same concern underlies the debate about home cultivation.

Most states that have legalized recreational use allow people to grow marijuana at home. But Delaware legislators, who recently voted to legalize recreational marijuana, decided that was too risky. So did Illinois, New Jersey, and Washington. And in New York, where recreational legalization was approved in 2021, home cultivation won’t be allowed until mid-2024.

If the goal is to suppress the black market, those less tolerant approaches are risky. When a state eliminates penalties for recreational use a year or two before licensed pot shops start operating but does not allow home cultivation, cannabis consumers must continue to rely on the black market. The conspicuous proliferation of unlicensed marijuana merchants in jurisdictions like New York City shows what happens in that situation, which is the opposite of what legislators say they are trying to achieve.

In Minnesota, the House and Senate bills both would allow home cultivation of up to eight plants, including four that are mature. But legislators in the two chambers evidently differed in their estimates of how much marijuana those plants could be expected to produce, since they set different limits on private possession.

Theoretically, an indoor plant grown in soil might produce as much as 600 grams, meaning that four plants could yield five pounds, the limit set by the Senate bill. The substantially lower limit set by the House bill (1.5 pounds) seems to be based on the assumption that Minnesota’s home growers generally will not have the skill to maximize their yields. Other states have avoided the need for such a calculation. Colorado, for example, allows up to three mature plants, plus “possession of the marijuana produced by the plants.”

Unlike the possession limits, the restrictions on home production do have parallels in laws dealing with alcohol. Under federal law, for example, homebrewers are limited to 100 gallons of beer per adult annually. Minnesota, by contrast, allows “brewing of beer in the home for family use” without any explicit quantity limit. The federal limit on home cultivation of marijuana, of course, is set at zero. So is the federal limit on home production of distilled spirits, which is still a felony punishable by up to five years in prison.

Home distilling is also a crime under Minnesota law. Arguably consistent with that policy, the House and Senate marijuana bills both would prohibit home production of cannabis concentrates.

In addition to different limits on private possession, the House and Senate bills propose different taxes on cannabis products. The House bill prescribes an 8 percent tax on gross receipts, while the Senate bill sets the rate at 10 percent. Both rates are toward the low end of the taxes collected by other states that have legalized recreational marijuana, which is consistent with the goal of displacing the black market. Not so consistent with that goal, the Senate bill would allow local governments to cap the number of marijuana businesses within their borders. The House bill would not.

Both bills mandate expungement of criminal records for marijuana-related conduct that is no longer illegal. The expungement deadline under the House bill would be this August, while the Senate bill would delay expungements until 2025.

“Minnesota is ready for cannabis legalization,” said state Sen. Ryan Winkler (DFL–Golden Valley). “People know adults can make responsible decisions for cannabis and the system of prohibition for so long hasn’t worked.”

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The First Scalia Oral Argument Since 1976?

Antonin Scalia heard hundreds of cases as an Associate Justice before the Supreme Court. But he argued one, and only one case, as a Supreme Court advocate: Alfred Dunhill Of London, Inc. v. Cuba in January 1976. You can listen to it here.

Today, the Supreme Court granted cert in Murray v. UBS Securities. Counsel of record for respondents is Eugene Scalia. For the longest time, Justice Scalia’s son had recused himself from Gibson Dunn’s Supreme Court practice. I believe the firm even had to exclude the partner from earning any proceeds from any SCOTUS litigation. But since Justice Scalia’s death, Eugene Scalia has participated in Supreme Court advocacy. Will Eugene argue the case, his first before the high Court? If so, it would be the first Scalia at the podium since 1976.

In related news, Professor Jane Ginsburg of Columbia, RBG’s daughter, is also filing amicus briefs now. Indeed, Lisa Blatt mentioned her brief by name during oral argument in Warhol v. Goldsmith. Such a move would have been forbidden while RBG was still on the bench.

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The Economy Is A Powder Keg, Boiling Over And Ready To Blow

The Economy Is A Powder Keg, Boiling Over And Ready To Blow

Submitted by QTR’s Fringe Finance

A long time ago, in a different lifetime, I used to work at an industrial plant that operated several 20-ton chemical processes. Our processes operated using a closed-loop system, in the absence of oxygen, and were not pressurized.

We monitored each aspect of our processes using an array of gauges, pressure sensors, thermocouples, and other devices to make sure things were running smoothly at any given point.

Near the midpoint of each process, we had a blowoff valve — a long piece of piping that led to the outside of the building, fitted with a seal that was set to blow out when it reached a certain pounds per square inch (PSI) threshold. The valve was meant to be a safety mechanism so that if, inadvertently, pressure started to build up inside of the process, it would “blow off” outside the building, instead of turning our process into a 20-ton pressure bomb waiting to explode. It’s the same principle that causes a kettle to scream when the steam reaches a certain pressure inside: the whistle only goes off once the water gets hot enough to create enough steam.

Our economy nowadays is similarly a process with lots of variables — though far more toxic than our green process used to be. Regarding our economy, you could throw a dart and pick any variable to monitor: CPI, GDP, the money supply, the price of equities, the price of commodities, or even things like average number of potato chips contained in a $0.99 bag. Just like the economy is trillions of transactions taking place every day, there are similarly an endless number of variables that one could monitor to try and forecast the health of our financial closed loop process.


Two “variables” that happened to catch my eye on Friday were (1) another regional bank collapsing, and being put into receivership and (2) the price of equities continuing to move higher as though nothing is wrong. Each of these effects had their causes: the bank collapsed because, like Silicon Valley Bank, it lost confidence when it announced it would likely need to sell billions in assets, and the price of equities moved higher because of skewed behavioral market psychology that’s a residual effect of 15 years of horrifically arrogant monetary policy and easy money policies.

The juxtaposition of these two variables — the fact that markets didn’t care and/or notice that another bank had just collapsed — is tough to overlook.

It’s especially tough when put into context. Since March, five major banks have collapsed: Silicon Valley, Silvergate, Signature Bank, Credit Suisse and now First Republic.

For 10 years, I’ve been ranting about how the stock market isn’t the economy, and laying out why one can move without affecting the other, but this odd relationship between equity markets and economic reality just seems like an insult to the natural laws of economics and free markets. The CDS market seems to understand this.

Chart: Zero Hedge

But I digress, I’m not here to fight the trend of markets or claim that I’m right when the market is clearly proving me wrong. Rather, what I reminded myself of on Friday, is that there are an infinite number of other economic “blow off valves” that can bear the dire reality of the economic disaster that is unfolding, and that equity prices seem to be eluding.

What I mean is that equity prices could remain high, but something else is going to have to give if that’s going to be the case, as I’ve written about in the past.

Put it this way: if interest rates and equity prices were the only two economic variables in the entire macro system, the market would be down 80% off its highs by now, at least. But they’re not. Instead, we have to contend with things like the money supply and market psychology, not to mention commodities, Fed bond buying (and selling), and numerous other “wild cards”. This never-ending list of things we must contend with also means there is a never-ending list of alternate items where the turmoil that should be showing up in equity markets will be diverted to.

The most likely candidates to “blowoff” are precious metals, in my opinion (and maybe even bitcoin).


Right now, the Federal Reserve is the person at the party who is so drunk, they’re the only one that thinks they’re in control. The rest of the party is just looking on in horror and embarrassment.

It is beyond disturbing that the government right now is bailing out banks left and right, with a ho hum attitude, as if it’s no big deal. That attitude has grown on the Treasury Secretary and Fed like a mold, left over from the damp blanket of hubris-laden monetary policy we draped the economy with over the last 15 years.

Remember in 2008 when we actually had to have a debate about whether or not to bail out the global economic system because of — oh, you know, moral hazard and the general idea that maybe we don’t want to walk a path that could lead to the collapse of our currency?

Well that bailout set a nasty precedent. If we were faced with the same type of decision to make today, it would be signed, sealed, delivered and finished with Powell and Yellen smiling as though they saved the world, in under an hour. There is no moral hazard debate. There is no U.S. dollar debate. There is no debate about abusing our “privilege” of being able to print money. There’s no debate at all. Bailouts and printing are simply an assumption now. Like Caesar, we may now be in for massive consequences for crossing a small rubicon.


As an investor, this setup continues to point me toward owning gold and miners.

I can sit back and watch those investments hopefully flourish, as confidence erodes in the sanctity of the U.S. as global reserve currency. And even if the dollar holds up as reserve currency, I don’t understand how it can be taken seriously for much longer. The BRICS nations are mounting a challenge and when the world is ultimately forced to choose between a debt based U.S. system and a commodity/gold backed BRICS system, the choice is going to be obvious. When the dollar becomes the “fix all” for the U.S. economy in coming quarters — for markets crashing, banks collapsing and, eventually, the bond market failing — precious metals will officially become the blowoff valve.

Our cavalier attitude toward bailouts and money printing, under the guise of “maintaining a stable economy”, is one of the most perverse and arrogant cons ever perpetrated — and gold, with its 5,000 year track record of demand and limited supply, remains the great equalizer.

And if the abuse of the dollar was the only thing we had to worry about, that would be one thing. But it isn’t — this lackadaisical attitude about simply bailing out whoever needs it, at any time, with no limits — comes at a time when the rest of the world is openly challenging the U.S. dollar in a way they never have before. The impetus for this challenge, as I have noted before, was the seizing of Russian reserves and weaponizing the U.S. dollar.

Guys like Brent Johnson may wind up being right: the dollar may survive as global reserve currency, and it may even wind up maintaining its value against a basket of other DXY currencies. But given the unique and precarious nature of the global economy and the fact that BRICS nations are all but guaranteed to start their own commodity/gold based system, means that the dollar will for certain depreciate against gold.

Hence, personally, I continue to consistently buy miners and add to positions in GDX and SIL. As I’ve said on Palisades Gold Radio before, the one thing that concerns me is the idea of nationalizing the miners if my thesis plays out and the economic system starts to collapse. As Jeff Clark said in this excellent episode out days ago, there will be a “sweet spot” to sell — after catching the upswing of this cycle and when mania kicks in — but before government decides to nationalize miners.

Already we’ve seen bitcoin become the target of government under the guise of protecting investors after blowups like FTX. But everyone knows there is a thread under Democrats’ new push to ban crypto that simply doesn’t want competition for the (digital, soon) U.S. dollar. Crypto is the low hanging fruit to go after now – gold will be a much more difficult challenge down the road – but that doesn’t mean that it won’t happen.

I’d be interested in hearing from my readers what they believe will be the coming blowoff valve for the economy, should equity prices decide to hold up with rates nearing 5%. Here is my April portfolio review and the names I continue to like, buy, own and dislike.

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QTR’s Disclaimer: I am not a guru or an expert. I am an idiot writing a blog and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning and generally trade like a degenerate psychopath. This is not a recommendation to buy or sell any stocks or securities or any asset class – just my opinions of me and my guests. I often lose money on positions I trade/invest in and I’m sure have lost more than I’ve made in my time in markets. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. Positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it three times because it’s that important.

Tyler Durden
Mon, 05/01/2023 – 15:00

via ZeroHedge News https://ift.tt/lqo2txD Tyler Durden

Blackstone’s BREIT Suffers Sixth Consecutive Month Of Withdraws As CRE Deteriorates

Blackstone’s BREIT Suffers Sixth Consecutive Month Of Withdraws As CRE Deteriorates

Blackstone has limited investor redemption requests from its $70 billion real estate trust for high-net wealth investors for six consecutive months while storm clouds gather over commercial real estate markets.

According to an investor letter published Monday, the CRE giant and the world’s largest commercial landlord said investors asked to pull out more than $4.5 billion in April from Blackstone Real Estate Income Trust (BREIT). Out of the request, the firm only allowed $1.3 billion to be withdrawn, or approximately 29% of the amount requested. 

The firm restricts withdrawals to about 5% a quarter, or about 2% monthly caps, leaving investors with a narrower path out of the non-trade REIT. 

“We remain confident that BREIT’s portfolio will continue to be well-positioned to deliver strong long-term performance and consistent distributions, while providing investors access to the diversification benefits of high-quality real estate as a core portfolio holding,” Blackstone told investors. 

However, if this were the case, why do BREIT investors continue to panic exit? Recall last December, Blackstone sent a letter to financial advisors to keep their clients calm. Read the bizarre letter here

The continued high level of withdrawal requests is an ominous sign that investors are limiting their exposure to the CRE space, as higher borrowing costs risk sending some commercial property values into a tailspin. We’ve pointed out (“New “Big Short” Hits Record Low As Focus Turns To $400 Billion CRE Debt Maturity Wall“) that the regional banking crisis kick-started the coming CRE turmoil. JPMMorgan Stanley, and Goldman Sachs have all joined the CRE gloom parade. 

Despite the cracks in the CRE’s office space sector, Blackstone asserts that BREIT has “virtually no exposure” to struggling office buildings and malls and emphasizes it has a strong balance sheet. 

Still, investors want out of BREIT. The latest BofA Fund Managers Survey (available to pro subs in the usual place) shows institutional players are most bearish on real estate since 2009. 

*   *   *

Read the BREIT investor letter. 

Tyler Durden
Mon, 05/01/2023 – 14:20

via ZeroHedge News https://ift.tt/Vy2FTlC Tyler Durden

Why Future Market Returns Could Approach Zero

Why Future Market Returns Could Approach Zero

Authored by Lance Roberts via The Epoch Times,

What if I told you that future market returns could approach zero? This seems hard to believe, considering young investors piling back into the markets since the beginning of the year. As I discussed previously, this behavior follows the clubbing many received in 2022.

A recent Wall Street Journal article discussed how retail traders that made millions during the pandemic trading the market are now mostly wiped out.

A quick search of headlines from the end of 2022 confirms that much of the retail spirit was broken:

At the end of 2022, it seemed fairly clear that retail investors were done as they ‘hit the bid” to liquidate stocks at a record pace.

However, that was 2022. Since January, retail investors returned with a vengeance to chase stocks in 2023, pouring $1.5 billion daily into U.S. markets, the highest ever recorded.

This chase for equity risk since the beginning of the year was built on the premise of a Federal Reserve “pivot” and a “no recession” scenario. In this scenario, economic growth continues as inflation falls and the Federal Reserve returns to a rate-cutting cycle. However, as discussed in “No Landing Scenario at Odds With Fed,” that view has a fatal flaw.

What Would Cause the Fed to Cut Rates?

  • If the market advance continues and the economy avoids recession, the Fed does not need to reduce rates.

  • More important, there is also no reason for the Fed to stop reducing liquidity (quantitative tightening) via its balance sheet.

  • Also, a “no-landing” scenario gives Congress no reason to provide fiscal support, providing no boost to the money supply.

In other words, if the hope of zero interest rates and a return to quantitative easing is whetting retail investor appetites, then the “no landing” scenario is problematic.

This also is why future returns may approach zero.

Why Future Returns May Approach Zero

The speculation of outsized returns by retail investors is unsurprising, given that most have never seen an actual bear market. Many retail investors today didn’t make their first investments until after the financial crisis of 2008–09 and, since then, have only seen liquidity-fueled markets supported by zero interest rates. As discussed in “Long-Term Returns Are Unsustainable:”

“The chart below shows the average annual inflation-adjusted total returns (dividends included) since 1928. I used the total return data from Aswath Damodaran, a Stern School of Business professor at New York University. The chart shows that from 1928 to 2021, the market returned 8.48 percent after inflation. However, notice that after the financial crisis in 2008, returns jumped by an average of four percentage points for the various periods.

“After more than a decade, many investors have become complacent in expecting elevated rates of return from the financial markets. However, can those expectations continue to get met in the future?”

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Of course, those excess returns were driven by the massive floods of liquidity from the federal government and the Federal Reserve, including trillions in corporate share buybacks and zero interest rates. Since 2009, there has been more than $43 trillion in various liquidity supports. To put that into perspective, the inputs exceed underlying economic growth by more than 10-fold.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

However, after a decade, many investors became complacent in expecting elevated rates of return from the financial markets. In other words, the abnormally high returns created by massive doses of liquidity became seemingly ordinary. As such, it is unsurprising that investors developed many rationalizations to justify overpaying for assets.

Commitment to Growth

The problem is that replicating those returns becomes highly improbable unless the Federal Reserve and government commit to ongoing fiscal and monetary interventions. The chart below of annualized growth of stocks, GDP, and earnings show the outsized anomaly of 2021.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Since 1947, earnings per share have grown at 7.72 percent, while the economy has expanded by 6.35 percent annually. That close relationship in growth rates is logical, given the significant role that consumer spending has in the GDP equation.

The market disconnect from underlying economic activity over the last decade was due almost solely to successive monetary interventions leading investors to believe “this time is different.” The chart below shows the cumulative total of those interventions that provided the illusion of organic economic growth.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

Over the next decade, the ability to replicate $10 of interventions for each $1 of economic seems much less probable. Of course, one must also consider the drag on future returns from the excessive debt accumulated since the financial crisis.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

That debt’s sustainability depends on low-interest rates, which can only exist in a low-growth, low-inflation environment. Low inflation and a slow-growth economy do not support excess return rates.

It is hard to fathom how forward return rates will not be disappointing compared to the last decade. However, those excess returns were the result of a monetary illusion. The consequence of dispelling that illusion will be challenging for investors.

Does this mean that investors will not make any money over the decade? No. It just means that returns will likely be substantially lower than investors have witnessed over the last decade.

But then again, getting average returns may “feel” very disappointing to many.

At 4 Percent, Cash Is King

Another problem weighing against potential future returns is the return on holding cash. For the first time since 2009, the alternative to taking risks in the stock market is just “saving money.” Obviously, “safety” comes at the cost of the return, but at 4 percent or more, savers now have an alternative to investing. However, this works against the Fed’s goal of increasing the wealth effect in the financial markets.

Following the financial crisis, then-Fed chair Ben Bernanke dropped the federal funds rate to zero and flooded the system with liquidity through quantitative easing. As he noted in 2010, those actions would boost asset prices, thereby lifting consumer confidence and creating economic growth. By dropping rates to zero, “risk-free” rates also dropped toward zero, leaving investors little choice to obtain a return on their cash.

Today, that narrative has changed, with current risk-free yields above 4 percent. In other words, it is possible to save your way to retirement. The chart below shows the savings rate on short-term deposits versus the equity-risk premium of the market.

(Source: Federal Reserve Bank of St. Louis / RealInvestmentAdvice.com chart)

One of the problems with the cash hoard in 2023 is that there is no incentive to reverse savings into risk assets unless the Fed drops rates and reintroduces quantitative easing.

However, as discussed in “Banking Crisis Is How It Starts,” if the Fed reverses to accommodative policies, it will be because something “broke.”

Then it won’t be the time to take on more risk, but less.

When you start considering the implications of a market plagued by high valuations, slow growth, and the potential for less liquidity, it is easy to make a case for lower future returns.

While that does not mean returns will be zero every year, we may, by the end of the decade, look back and ask what was the point of investing to begin with?

Tyler Durden
Mon, 05/01/2023 – 14:00

via ZeroHedge News https://ift.tt/0xufHoL Tyler Durden