Month: August 2023

Futures, Bonds Dip As German Inflation Comes In Hotter Than Expected

Futures, Bonds Dip As German Inflation Comes In Hotter Than Expected

US equity futures are lower, following most European bourses and bonds in the red European after the latest round of German regional data suggested inflation may not yet be fully on the retreat in the euro region. As of 7:45am ET, S&P and Nasdaq 100 futures were both down about 0.1% after the S&P 500 jumped by the most since June on Tuesday after unexpectedly weak JOLTS jobs and consumer-confidence readings in the US raised hopes the Federal Reserve may be nearing the end of its tightening cycle.

German 10-year bund yields jumped as much as 7bps points to 2.58% after regional reports showed inflation accelerated in four of six German states in August, ahead of figures for the overall German economy due later Wednesday. A separate report showed Spanish inflation also quickened. The dollar weakened as the session has progressed and is trading lower against most G-10 currencies. Oil prices remain higher but metals are mixed, with copper slightly lower. Today, we get the latest ADP (which has been a terrible predictor of NFP numbers) and GDP revision which JPM expects to be revised down to 2.0% from 2.4%, below the consensus of no revision. China will release PMI-Mfg. and PMI-Srvcs tonight at 9.30pm ET.

In premarket trading, megacap tech names are mostly lower; with NVDA dropping -0.8% after closing at an all time high yesterday. HP Inc. slumped 10% after the technology hardware company cut its full-year cash flow and profit outlook. Treasury yields ticked higher and a gauge of the dollar was steady.  Chinese stocks listed in the US fell in premarket trading, paring gains following a 6% rally in the Nasdaq Golden Dragon China Index in the previous two sessions. Alibaba -1.6%, Baidu -1.3%, PDD Holdings unchanged, JD.com -1.9%, NetEase -1.3%, Trip.com -2.3%, KE Holdings -2.4%, ZTO Express -4.8%. EV stocks lead losses; Nio falls 3.8%, extending a decline since reporting on Tuesday; Li Auto -3.9%, Xpeng -2.8%. Here are other notable premarket movers:

  • Alphabet analysts were positive about the company’s artificial intelligence updates at its Google Cloud Next event. The tech giant also announced a new AI infrastructure and software as part of an expanded partnership with Nvidia. Shares fluctuate.
  • Ambarella drops 21% after its forecast for third-quarter revenue fell short of Wall Street expectations, prompting a slew of price target cuts from analysts.
  • Box falls 9.1% after the infrastructure software company cut its full-year revenue forecast, with analysts flagging pressure on the firm’s clients against a tough macroeconomic backdrop.
  • FibroGen tumbles 22% after the biotech company’s Phase 3 LELANTOS-2 trial of pamrevlumab for the treatment of ambulatory patients with Duchenne muscular dystrophy did not meet the primary endpoint.
  • Globalstar rises 6.1% as the company named former CEO and executive chairman of Qualcomm, Paul Jacobs, as its new CEO.

Investors will monitor reports on US economic growth and private-sector employment later Wednesday, as well as key non-farm payrolls numbers on Friday, to further ascertain the economy’s resilience amid high interest rates. “Data is king right now in terms of market sentiment,” said Susannah Streeter, an analyst at Hargreaves Lansdown Plc. “The non-farm payroll snapshot on Friday will crown the week, and if it points to a fresh slowdown in hiring, we could see another spurt in stock prices.”

Meanwhile, stronger than expected German and Spanish inflation data muddied the waters for European policy makers as they approach the September rates decision. Market pricing implies roughly even odds of a quarter-point increase by the European Central Bank to 4%. Further clouding the outlook was data showing that euro-area economic confidence slowed more than anticipated this month.

European stocks and bund futures are in the red after Spanish and German inflation data kept the possibility of another ECB rate hike firmly on the table. The Stoxx 600 is down 0.3%, led by declines in the utility, technology and consumer sectors. Banks and basis resources gained while utilities led the decline as Orsted A/S plunged more than 20% after the Danish power generator forecast potential impairments of up to $2.3 billion relating to its US portfolio. Among other individual movers, Prudential Plc climbed more than 4% after posting a rise in new business profit. Here are the most notable European movers:

  • Orsted slumps as much as 21%, the most on record, after the Danish power generator forecast potential impairments of up to $2.3b relating to its US portfolio. Jefferies called the update a “clear negative”
  • Delivery Hero shares fall as much as 7.3% to the lowest level since June. Analysts say the food delivery company’s first-half gross margins were slightly below estimates
  • Mining group Eramet SA, oil and gas producer Maurel & Prom and a listed unit of TotalEnergies SE all sank after soldiers seized power in OPEC member Gabon, where the companies have operations
  • Brunello Cucinelli gains as much as 6.2%, the most intraday since March 16, as the Italian luxury company said it expects full-year revenue to rise by about 19%, at the top end of previous guidance
  • Aroundtown rises as much as 8.9% after the German landlord raises its full-year guidance for funds from operations (FFO). Berenberg says aiming for a higher earnings level was a “positive surprise”
  • Prudential rises as much as 4.6% after the insurer reports improved new business profit from its insurance operation. Analysts highlight the company’s strong performance in Hong Kong
  • Opus Global, a Hungarian holding company, fell as much as 12% after announcing it will suspend its share buyback program and may resume purchases after Oct. 2, when it’s due to publish 2Q results

In Asia, the MSCI Asia Pacific Index came off its highs after earlier rising as much as 1%, as the strong rally in Chinese equity markets gradually evaporated. Tech stocks such as TSMC and Samsung were the top contributors to the gauge’s gains. Benchmarks had earlier rallied, with the Hang Seng Index rising as much as 1.4%, after Chinese state-owned lenders were reported to prepare to reduce rates on the majority of outstanding mortgages, as well as on deposits.

  • Hang Seng and Shanghai Comp both opened with gains as the region conformed to the global risk appetite, with the Shanghai Comp on a more cautious footing after US Commerce Secretary Raimondo suggested US firms complain that China is “un-investable”, while participants also awaited the speculated mortgage rates cuts. In other news, China is reportedly exploring ways to make its own AI memory chips despite US sanctions, according to SCMP sources.
  • Australia’s ASX 200 led the gain in the region, rising more than 1% as a slide in the country’s inflation data bolstered prospects for the rate freeze next week.
  • Nikkei 225 saw its machinery sector leading the gains, although the index’s upside is hampered by the recent gains in the JPY.
  • Indian stocks ended flat on Wednesday as banks and utilities declined while technology shares were among gainers. The S&P BSE Sensex Index was little changed at 65,087.25 in Mumbai, while the NSE Nifty 50 Index was flat at 19,347.45. Out of 31 stocks in the index, 17 rose and 14 fell. The Nifty has traded below its 20-day moving average for the fourth session in a row despite positive global cues.

“These little piecemeal policy shifts are probably very good in the short term for sentiment, but they don’t necessarily create this sort of surge in terms of the local economy,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, said on Bloomberg Television. “There are still bigger issues at play here that I think are holding investors back still at this particular point.”

In FX, the Bloomberg Dollar Spot Index rose 0.1%; it dropped 0.4% on Tuesday as bets for a Federal Reserve hike by year-end were pared back significantly following weak US consumer confidence and JOLTS data

  • EUR/USD strengthened after data showed inflation in Germany and Spain accelerated, bolstering possibility that ECB may have to raise rates further. Euro bearish sentiment in options over the next month eases following the latest data out of the US and the euro area.
  • Australia’s dollar fell after weaker-than-expected inflation bolstered prospects that the RBA will stand pat on rates next week. AUD/USD slipped 0.1% after adding 0.8% on Tuesday. The pair briefly fell to 0.6450 earlier Wednesday. Bids for exporters remain layered 0.6440/50, according to traders. Reserve Bank pricing sees an implied rate of 4.164% by the December meeting from 4.175% yesterday

In rates, treasuries were under pressure as the US trading day begins, paced by bunds, where bear-flattening ensued after German inflation rose more than forecast. US yields remain inside Tuesday’s bull-steepening ranges. German 10-year yields rise 6bps to 2.57% while Treasuries also declined, paring some of Tuesday’s rally: yields were higher by 1bp-3bp across the maturity spectrum with the curve steeper, following short-end-led declines of more than 10bp Tuesday. Market-implied expectations for Fed policy are little changed, pricing in just over 50% odds of a quarter-point rate increase in November.  Treasuries may draw support from expectations that month-end index rebalancing late Thursday, estimated to extend its duration by 0.12 year, will spur buying. Focal points of US session include August ADP employment change ahead of broader jobs report Friday, and the second estimate of 2Q GDP, a month after the first one exceeded economist estimates, sparking a bond market selloff.

In commodities, crude futures advance, with WTI rising 0.6% to trade near $81.70. Spot gold rises 0.1%.

Bitcoin is under modest pressure despite the relatively directionless USD action. Currently, BTC resides at the low end of USD 27.29-27.75k parameters, which are well within Tuesday’s more pronounced USD 26-28.14k bounds.

To the day ahead now, and data releases include the German and Spanish CPI readings for August, UK mortgage approvals for July, whilst in the US there’s the ADP’s report of private payrolls for August, the second estimate of Q2 GDP, along with pending home sales for July. Today’s earnings releases include Salesforce.

Market Snapshot

  • S&P 500 futures down 0.1% to 4,501.00
  • MXAP up 0.3% to 161.60
  • MXAPJ up 0.3% to 508.58
  • Nikkei up 0.3% to 32,333.46
  • Topix up 0.4% to 2,313.38
  • Hang Seng Index little changed at 18,482.86
  • Shanghai Composite little changed at 3,137.14
  • Sensex up 0.4% to 65,352.93
  • Australia S&P/ASX 200 up 1.2% to 7,297.75
  • Kospi up 0.4% to 2,561.22
  • STOXX Europe 600 down 0.1% to 459.35
  • German 10Y yield little changed at 2.56%
  • Euro down 0.1% to $1.0865
  • Brent Futures up 0.2% to $85.70/bbl
  • Gold spot down 0.1% to $1,936.26
  • U.S. Dollar Index up 0.11% to 103.64

Top Overnight News

  • Leading BOJ hawk Naoki Tamura hinted that the central bank may attain its long sought-after goal of 2% inflation on a stable basis by early 2024, which may pave the way for higher rates. He hopes the bank will have a “higher resolution” picture around January to March. Economists surveyed by Bloomberg still see April as the most likely month for a policy change. BBG
  • China has asked two of the nation’s biggest financial firms to examine the books of Zhongrong International Trust Co., potentially paving the way for a state-led rescue of the troubled shadow lender. BBG
  • Australia’s CPI in Jul moved down to +4.9% from +5.4% in June and below the Street’s +5.2% forecast. BBG   
  • Spain’s CPI for Aug ran slightly hot, with the core number coming in at +6.1% (down from +6.2% in Jul but ahead of the Street’s +6% forecast) and headline +2.4% (up from +2.1% in Jul and inline w/the Street’s +2.4% forecast). BBG
  • Ukrainian drones struck seven Russian regions overnight, destroying several military cargo planes, in Kyiv’s most sweeping unmanned aerial attack inside enemy territory since Moscow invaded last year. FT
  • Soldiers seized power in OPEC member Gabon, canceling an Aug. 26 presidential election that was set to extend the Bongo family’s 56-year hold on power. The military takeover is the ninth in sub-Saharan Africa since 2020 and follows a coup in Niger last month, raising concerns of further regional instability. BBG
  • US oil stockpiles slumped by 11.5 million barrels last week, the API is said to have reported. That would cut total holdings to the lowest this year if confirmed by the EIA. Supplies at Cushing dropped 2.24 million to the least since early January. BBG
  • Founders and venture capitalists who flocked to artificial-intelligence startups are learning that turning the chatbot buzz into successful businesses is harder than it seems. Almost a year into the boom ignited by the November launch of ChatGPT, some startups that epitomized the zeal for so-called generative AI are now navigating layoffs and reduced user interest. WSJ
  • Amazon is being threatened with legal action from the US medicines watchdog over the sales of “unapproved” drugs on its online site, as the tech giant faces scrutiny while seeking to break further into the $4tn American healthcare industry. FT

A more detailed look at global markets courtesy of Newsuawk

APAC stocks traded positively across the board following the JOLTS-induced gains seen on Wall Street and in the run-up to month end. ASX 200 saw its upside driven by the industrial sector and closely followed by its gold sector, with a further boost seen from the softer-than-expected Aussie CPI data. Nikkei 225 saw its machinery sector leading the gains, although the index’s upside is hampered by the recent gains in the JPY. Hang Seng and Shanghai Comp both opened with gains as the region conformed to the global risk appetite, with the Shanghai Comp on a more cautious footing after US Commerce Secretary Raimondo suggested US firms complain that China is “un-investable”, while participants also awaited the speculated mortgage rates cuts. In other news, China is reportedly exploring ways to make its own AI memory chips despite US sanctions, according to SCMP sources.

Top Asian News

  • BoJ Board Member Tamura said BoJ will take steps to curb an excessive rise in interest rates, such as increasing bond buying if BoJ sees speculative and sharp moves that deviate from fundamentals. BoJ Board Member Tamura said he personally feels that sustained and stable achievement of the 2% inflation target is in sight, and it is appropriate to keep easy policy now given uncertainty on hitting the price goal; does not expect 10yr JGB yield to rise to 1.0%. There is a good chance Japan’s economic growth will exceed expectations, he said.
  • China is reportedly exploring ways to make its own AI memory chips despite US sanctions, SCMP sources said; “China’s top DRAM maker, ChangXin Memory Technologies, is the country’s best hope for specialist chips, but it may take up to four years to deliver products”.
  • Country Garden (2007 HK) will raise HKD 270mln via new share issues at HKD 0.77 each, according to Reuters.
  • Chinese regulators urge money brokers to ensure data security, according to Reuters.
  • PBoC injected CNY 382bln via 7-day reverse repos with the maintained rate at 1.80% for a CNY 81bln net injection.
  • PBoC holds a meeting with private firms in order to promote their financing, according to Yicai.

European bourses are in the red, Euro Stoxx 50 -0.6%, with stocks generally soft after yesterday’s upside. The current session’s pressure is a function of more hawkish ECB expectations for September after German-state and Spanish metrics. Sectors are mostly in the red with Tech underperforming as yields rise, a narrative which is supporting Banking/Insurance names. Stateside, futures are modestly softer, ES -0.2% ahead of a busy US agenda; NQ -0.3% lags incrementally given the mentioned yield moves.

Top European News

  • EU Chamber of Commerce President says “uninvestable” is not a term that we would use to describe China; China is under-invested in terms of the FDI it has been able to attract for Europe.
  • ECB’s Centeno says EZ economic growth indicators have been surprising on the downside recently, downside risks for growth outlined in June projections are materialising. Not seeing de-anchoring of inflation expectations. Seeing a degree of flexibility in the labour market that was not evident in the past.

FX

  • Greenback steadier after a collapse on lower job openings and loss of consumer confidence.
  • DXY attempts to form a base around 103.50 – Kiwi cedes ground to Buck along with Yen and Aussie following weak Antipodean data and somewhat mixed BoJ rhetoric
  • NZD/USD pivots 0.5950, USD/JPY reclaims 146.00+ status and AUD/USD tests 0.6450 from a peak above 21 DMA.
  • Euro underpinned as German state CPIs imply upside bias to national outturn.
  • EUR/USD approaches 1.0900 and the top of the band of expiries.
  • PBoC sets USD/CNY mid-point at 7.1816 vs exp. 7.2773 (prev. 7.1851)

Fixed Income

  • Broad debt retracement from Tuesday’s US data-inspired highs, with EGBs leading the way and peers down in sympathy.
  • Bunds below the prior session low within 131.83-132.56 range.
  • T-note towards base of 110-18+/28 bounds and Gilts trying to stay afloat between 94.35-91 parameters.
  • Australia sells AUD 700mln 2.75% 2028 Bonds: b/c 3.25x (prev. 5.70x), average yield 3.8331% (prev. 3.5188%)
  • UK DMO intends to schedule 11 conventional Gilt auctions and four I/L in the October-December period.

Commodities

  • Currently, WTI Oct’23 and Brent Nov’23 are at the top-end of sub-USD 1/bbl parameters, a peak which printed in proximity to Idalia getting upgraded to a category four hurricane.
  • Spot gold is unchanged in extremely narrow circa. USD 3/oz bounds as the DXY struggles to meaningfully deviate from the neutral point ahead of a packed afternoon agenda; base metals mixed.
  • US Energy Inventory Data (bbls): Crude -11.5mln (exp. -2.9mln), Gasoline +1.4mln (exp. -1.4mln), Distillate +2.5mln (exp. +0.1mln), Cushing -2.2mln.
  • NHC says Idalia rapidly intensifies into a Category 4 Hurricane, catastrophic storm surge and destructive winds are nearing Florida Big Bend region. “Idalia could continue to strengthen before it reaches the Big Bend coast of Florida in a few hours. While Idalia should weaken after landfall, it is likely to still be a hurricane while moving across southern Georgia, and near the coast of Georgia or southern South Carolina late today. Idalia should emerge off the southeastern United States coast early on Thursday and move eastward through late week.”
  • Japanese PM Kishida says aims to bring down retail gasoline prices to around JPY 175/litre in October (currently JPY 185/litre).

Geopolitics

  • Explosions were reported at Pskov Airport in western Russia, near the border with Estonia, according to BNO Newsroom.
  • The Chinese Embassy in the US said China is working to ease market access further and treat foreign firms in the same manner as domestic firms, and added that China will only open its doors wider to the outside world. The embassy noted cyber security review on Micron (MU) is necessary for safeguarding national security, according to Reuters.
  • Senior Gabonese military officers appear on television and claim they have taken power and borders are closed until further notice; Gabon soldiers announce the cancellation of elections, and the dissolution of institutions on TV, via AFP.

US Event Calendar

  • 07:00: Aug. MBA Mortgage Applications, prior -4.2%
  • 08:15: Aug. ADP Employment Change, est. 195,000, prior 324,000
  • 08:30: 2Q GDP Annualized QoQ, est. 2.4%, prior 2.4%
    • 2Q GDP Price Index, est. 2.2%, prior 2.2%
    • 2Q Core PCE Price Index QoQ, est. 3.8%, prior 3.8%
    • 2Q Personal Consumption, est. 1.8%, prior 1.6%
  • 08:30: July Retail Inventories MoM, est. 0.5%, prior 0.7%
  • 08:30: July Advance Goods Trade Balance, est. -$90b, prior -$87.8b, revised -$88.8b
  • 08:30: July Wholesale Inventories MoM, est. -0.3%, prior -0.5%
  • 10:00: July Pending Home Sales (MoM), est. -1.0%, prior 0.3%
    • July Pending Home Sales YoY, est. -15.7%, prior -14.8%

DB’s Jim Reid concludes the morning wrap

I was back in the office yesterday after two weeks high up in the French Alps. For our entire trip it was mostly over 30 degrees even at altitude. However the day after we got back it snowed there. I think it would have blown the kids’ mind to have seen that after the weather we had. Talking of the kids, my twins were 6 yesterday. The biggest problem with that is that we bought them new bikes, plus one for Maisie. However this is the first ones we’ve bought that have not come preassembled. So last night my wife and I cursed, swore, and injured ourselves in the pursuit of building three bikes. If you happen to see me in the next few days I guarantee if you look closely enough you’ll see oil somewhere on me that I haven’t been able to get out.

It’s certainly not been a dull second half of August in my absense. To be fair the first half when I was around wasn’t dull either. Markets have swung from narrative to narrative with the soft landing one winning out handsomely yesterday or as a minimum the narrative that the Fed is more likely than not to be done hiking. Although with two whole days left of this choppy month, there’s plenty of time for that to change again.

The big driver yesterday was the latest JOLTS report which showed a further, and large, softening in the US labour market. That came alongside a weak consumer confidence print from the Conference Board, where the present situation component fell to a 9-month low. Together, those two releases led to growing hopes that the Fed would call it a day on their rate hikes, which sent yields on 10yr Treasuries down -8.2bps on the day to 4.12% with 2yrs falling a sizeable -15.4bps, the largest yield decline in nearly 4 months. Equities also rallied strongly on the back of those headlines, with the S&P 500 having its best day since early June (+1.45%) as it advanced for a third day in a row to 2-week highs.

In terms of the details of the JOLTS report, the main headline was that job openings fell to 8.827m in July (vs. 9.5m expected), which was the lowest it had been since March 2021. That meant that the ratio of job openings per unemployed individuals fell back to 1.51 as well, which is the lowest since September 2021, although above the levels around 1.2 seen before the Covid-19 pandemic. The other big story from the release was the decline in the quits rate of those voluntarily leaving their jobs, which is also a good metric for how confident workers are feeling about their prospects. That fell back to 2.3% in July, which is the first time it’s been back at its pre-pandemic level since the current surge in inflation began.

So far at least, this decline in job openings has occurred even as unemployment has remained at historically low levels. Or in other words, the fall in job openings doesn’t appear to have been at the expense of jobs, which is exactly what the Fed are wanting to see. But once these metrics have started falling in the past, it can be hard to know when they’re going to stop, not least since monetary policy operates with time lags that make it hard to feel your way through in real time. So outside of a sudden shock, any path to a hard landing will almost certainly be via signs of a soft landing first.

If you have that concern it would have been heightened by the Conference Board’s latest consumer confidence print. It showed a decline in the headline measure to 106.1 (vs. 116.0 expected), with drops in the present situation and expectations components as well. On top of that, there was another signal that the labour market was weakening, since the gap between the number saying jobs were “plentiful” compared to those saying they were “hard to get” fell to the narrowest since April 2021. So this print and the JOLTS numbers set the stage nicely for Friday’s payrolls.

For now the data put an abrupt stop to the growing narrative that the Fed would still deliver another rate hike in the current cycle. Indeed, the chance of another rate hike by November fell from 71% immediately before the JOLTS report to 51% by yesterday’s close.

For equities, the prospect of fewer rate hikes outweighed any concerns around the data being weak. The S&P 500 saw a near-continuous rally during the day to rise by +1.45%, its strongest gain since 2 June, ironically the last time we saw a strong US payrolls beat. So for a completely opposite reason. All 24 industry groups of the S&P 500 gained, with tech stocks leading the advance. This helped the NASDAQ (+1.74%) to hit a 3-week high, whilst the FANG+ Index rose +3.10% (its largest gain since late May).

Back in Europe, there was also a decent market rally following the releases, with yields on 10yr bunds (-5.3bps), OATs (-5.6bps) and BTPs (-7.2bps) all falling back. Likewise for equities, the STOXX 600 (+0.97%) posted a strong advance, although that was helped by the UK’s return from holiday, since the FTSE 100 (+1.72%) caught up with the previous day’s gains. Today however, attention will turn to the flash CPI numbers for August, with the country releases from Spain and Germany out today ahead of the Euro Area-wide release tomorrow. That’s the biggest remaining input for the ECB’s next decision in a couple of weeks’ time, with markets still narrowly expecting that the ECB will finally pause their hiking cycle after 9 consecutive increases.

In the cryptocurrency space, Bitcoin saw its strongest gain in two months, up +7.15% to $28,005, as the prospects for a first spot Bitcoin ETF improved after a court ruling in the US. It was also a positive day for commodities, with Brent crude (+1.27% to $85.49/bl) moving back above $85 for the first time in two weeks. Across asset classes, the US dollar was the one notable loser of the day, with the broad dollar index (-0.51%) having its weakest day in over three weeks.

Asian equity markets are also trading higher with the S&P/ASX 200 (+1.36%) leading gains across the region as Australia’s inflation softened in July (more below) with the Nikkei on track for its third consecutive day of gains (+0.94%), with the KOSPI (+0.62%) and the Hang Seng (+0.47%) also trading in positive territory. Elsewhere, stocks in mainland China are struggling to gain traction with the CSI (+0.04%) and the Shanghai Composite (+0.03%) both just above flat after losing earlier gains. S&P 500 (+0.17%) and NASDAQ 100 (+0.27%) futures are edging higher again. 10yr USTs (+1.37 bps) yields have edged back up a bit after the big rally yesterday.

Coming back to Australia, data showed that the inflation rate moderated to +4.9% y/y in July (v/s +5.2% expected), its lowest level in 17 months as against a level of +5.4% in June thus reducing the possibility of the Reserve Bank of Australia (RBA) raising interest rates again. Following the release, the Australian dollar lost ground against what has been a weak 24 hours for the US dollar and is down -0.14% at $0.6472 as I type.

News from various sources (like Bloomberg) are indicating that some Chinese state-owned banks are preparing to slash interest rates on existing mortgages and deposits very soon as Beijing is ramping up its efforts to revive growth in the world’s second-largest economy. So watch for headlines there.

Back to yesterday and the other US data release was on housing for June. According to the 20-City index from S&P CoreLogic Case-Shiller, prices were up another +0.92% that month (vs. +0.80% expected), which is the third consecutive month that prices grew by at least +0.9%. Clearly, housing is only one sector of the economy, but it’s highly sensitive to interest rates, and this is a further sign that it’s picking back up again. On a year-on-year basis, the 20-city index is now only down by -1.17% (vs. -1.60% expected). That said, the house price resilience may be as much about the drag from higher rates on supply of housing in a still solid economy as it as sign of resilient demand.

To the day ahead now, and data releases include the German and Spanish CPI readings for August, UK mortgage approvals for July, whilst in the US there’s the ADP’s report of private payrolls for August, the second estimate of Q2 GDP, along with pending home sales for July. Today’s earnings releases include Salesforce.

Tyler Durden
Wed, 08/30/2023 – 08:11

via ZeroHedge News https://ift.tt/iI5ltsy Tyler Durden

Professor’s Claim That She Was Fired for Objecting to Superiors About Mask Mandate Can Go Forward

From Griffin v. University of Maine System, decided Aug. 16 by Chief Judge Jon Levy (D. Me.):

Plaintiff Patricia Griffin’s employment as a [tenured] Professor of Marketing at the University of Southern Maine was terminated by the University of Maine System … in September 2021…. Griffin asserts that her termination was unlawful retaliation for her having spoken out against the University’s facemask and vaccination policies adopted in response to the COVID-19 pandemic….

On August 18, 2021, in preparation for the University’s fall semester, the Chancellor of the University of Maine System announced a mandatory mask policy (the “Policy”). On August 24, Griffin participated in a luncheon meeting via Zoom at which Cummings was a speaker. She alleges that during the event, [University President Glenn Cummings] did not wear a mask. On the same day, Griffin sent an email to the Dean of the College of Management and Human Service pertaining to the University’s recently implemented mask and vaccine policies. The email reads in pertinent part:

I first want to say how much I love teaching at [the University of Southern Maine] as well as working with such a great faculty. It really has been the highlight of my career and I owe a lot to you for sticking with me. The reason for this email is because I have been following the science, data, and evidence regarding SARS-CoV-2 and searching for anything that will support wearing a mask while indoors as well as vaccinating an entire school population as the optimal method for stopping the transmission of the virus. The reality is that my research has found no evidence to support these measures. I wanted to share the information I gathered and relied upon when making my decision regarding these mandates before the start of classes next Monday to see that my decisions are science, evidence, and data based. However, I do not want to cause any issues, especially for you, if I come to campus on Monday morning to teach my one face to face class so I wanted to give you enough time.

Griffin attached a separate letter to her email, also addressed to the Dean, summarizing the results of her research on the effectiveness of mask mandates and vaccines. She concluded the letter as follows:

In conclusion, I have followed the science, data, and evidence and cannot find any overwhelming support for the wearing of masks nor the mandating of vaccines, especially since the overall survival rate is 99.7% if infected with Covid. And finally, from a legal perspective, asking for my vaccination status is a violation of HIPAA.

My expectation is the University of Southern Maine will appreciate a faculty member who embraces critical thinking and applies both inductive and deductive reasoning rather than emotions when making decisions. I am teaching three courses this fall, two online and one face to face. I welcome any evidence you can provide to the contrary of what I have found which will convince me that my conclusions about the efficacy of wearing a mask and vaccinating an entire population are wrong.

On August 25, Griffin met with the Dean via Zoom, where she reiterated her request for data supporting the University’s Policy and vaccination requirement and asserted her view that Cummings had violated the Policy at the luncheon. Griffin alleges that she never refused to wear a mask and never stated that she would violate the Policy.

Griffin asserts that immediately following the Zoom meeting, her fall semester courses— one face-to-face class and two asynchronous online classes—were removed from the fall class list. Two days later, University administrators convened a pre-disciplinary conference at which Griffin was present and at which she reiterated her request for data supporting the Policy. The administrators allegedly told her that she would not be allowed to teach courses 100% online unless she resigned and accepted a part-time position….

On September 8, 2021, Griffin received a letter from Cummings suspending her and informing her that the University would be moving to terminate her employment. Griffin alleges that the letter falsely asserted that her email to the Dean had indicated that she refused to comply with the Policy, and that the letter included additional false assertions about her refusal to wear a mask and her intention to violate the Policy. She alleges that the letter caused her severe emotional distress and that it was sent in retaliation for her earlier communications with the Dean. University administrators scheduled a Grievance Hearing, and Griffin learned that Cummings would attend the hearing. Because she had previously filed a Human Resources complaint alleging that Cummings had created a hostile work environment, Griffin asserts that she felt intimidated by Cummings’s presence and did not feel comfortable attending the hearing. The hearing went forward in Griffin’s absence, resulting in the termination of her employment effective September 22, 2021….

The court allowed Griffin’s First Amendment case to go forward, to the extent that it sought reinstatement rather than damages (which were barred by Eleventh Amendment immunity and qualified immunity):

Griffin asserts that she engaged in protected speech when she made her requests to the Dean seeking data supporting the University’s COVID-19 policies, and that she was speaking as a citizen on a matter of public concern. Accordingly, she contends that the Defendants violated her First Amendment rights by terminating her employment in retaliation for that speech.

To establish a prima facie case of retaliation under the First Amendment, a plaintiff must show that: “(1) she engaged in protected conduct; (2) she suffered an adverse employment action; and (3) … ‘a causal nexus exists between the protected [conduct] and the adverse action.'” The “threshold inquiry” to determine whether a public employee engaged in protected speech is “whether [the employee] spoke as a citizen on a matter of public concern.” If the answer is no, the employee has no First Amendment retaliation claim. If the answer is yes, then the possibility of a First Amendment claim arises. “In order to survive a motion to dismiss, a plaintiff need not conclusively establish that her speech was made as a citizen; ‘it is sufficient that the complaint alleges facts that plausibly set forth citizen speech.'” …

“Speech involves matters of public concern ‘when it can “be fairly considered as relating to any matter of political, social, or other concern to the community,” or when it “is a subject of legitimate news interest; that is, a subject of general interest and of value and concern to the public.'””The Defendants argue that Griffin’s speech “was not plausibly lodged on a matter of public concern … [but] was lodged as a complaint regarding her employer’s policy.” However, the Defendants do not meaningfully dispute that the underlying subject matter of Griffin’s speech—the COVID-19 pandemic and the response of public institutions to it—has generated significant public debate and controversy in Maine and elsewhere over the last three years. Thus, the decisive question here is the other element of the threshold inquiry: whether Griffin’s speech was made in her capacity as a public employee or as a private citizen….

For purposes of the First Amendment, public employees do not speak as citizens when they “make statements pursuant to their official duties.” …

The Supreme Court has recognized that not all speech that “simply relates to public employment or concerns information learned in the course of public employment” is deprived of First Amendment protections. This is because certain speech—for example, a public employee’s sworn testimony related to misuse of public funds—has “special value precisely because [an] employee[ ] gains[s] knowledge of matters of public concern through their employment.” Speech by public employees related to their employment holds “special value” because “[g]overnment employees are often in the best position to know what ails the agencies for which they work,” and because they “‘are uniquely qualified to comment’ on ‘matters concerning government policies that are of interest to the public at large.'”

Accordingly, the fact that the speech at issue here related to Griffin’s employment is not dispositive of whether she was speaking pursuant to her official duties as a public employee. Instead, as set forth by the First Circuit in Decotiis, several non-dispositive factors must be evaluated:

[(1)] [W]hether the employee was commissioned or paid to make the speech in question; [(2)] the subject matter of the speech; [(3)] whether the speech was made up the chain of command; [(4)] whether the employee spoke at her place of employment; [(5)] whether the speech gave objective observers the impression that the employee represented the employer when she spoke (lending it “official significance”); [(6)] whether the employee’s speech derived from special knowledge obtained during the course of her employment; and [(7)] whether there is a so-called citizen analogue to the speech.

The factors suggest that the context in which a public employee speaks bears heavily on whether the employee was speaking pursuant to her or his official job responsibilities.

As applied to the allegations of Griffin’s Amended Complaint,4 an evaluation of the first two Decotiis factors—whether the employee was commissioned or paid to make the speech in question, and the subject matter of the speech—produces a mixed result. Because Griffin was employed to teach students, and not to analyze and assess the University’s health and safety policies, her speech can fairly be treated as outside the ordinary scope of her duties and instead merely related to her duties. Viewed in this light, although Griffin’s email and letter were related to her employment at the University, that is, without more, insufficient to deprive her speech of First Amendment protections …. On the other hand, a practical inquiry into her employment duties, beyond her official job description, suggests otherwise. The subject matter of her email and letter concerned what she might do in the classroom and expressed concerns regarding the University’s internal policies and the conditions the University had imposed on her in-person teaching responsibilities, thus bearing directly on matters within the scope of her employment.

The third and fourth Decotiis factors—whether the speech was made up the chain of command, and whether the employee spoke at her place of employment—support the conclusion that Griffin’s speech was communicated in her capacity as an employee and not as private citizen. All of the speech at issue was communicated by Griffin directly up the chain of command to the Dean of the College of Management and Human Services. Further, the speech was communicated exclusively within the channels of her employment via her official work email account and at face-to-face meetings with the Dean and other university administrators…. [A] complaint or concern “made up the chain of command … is the quintessential example of speech that owes its existence to a public employee’s official responsibilities.” {I do not address the fifth factor, as there were no objective observers of Griffin’s speech.}

The sixth Decotiis factor—whether the employee’s speech is derived from special knowledge that she obtained during the course of her employment—weighs against concluding that Griffin spoke as a private citizen. Griffin does not allege that she was “uniquely qualified,” to share information about the effectiveness of mask mandates and vaccine requirements as a result of her employment, nor did she obtain special information regarding the Policy through her position. Accordingly, Griffin’s speech does not hold that “special value” of protected speech that pertains to an employee’s official responsibilities ….

The seventh Decotiis factor—whether there is a so-called citizen analogue to the speech—ultimately weighs in favor of a finding that Griffin’s speech was made outside the scope of her employment. On one hand, unlike a letter to a newspaper or other “kind[s] of activit[ies] engaged in by citizens who do not work for the government,” Griffin’s email and letter were sent directly to her superior through her University email account and pertained to her disagreement with the Policy and its impact on her face-to-face teaching conditions. Similarly, the communication that occurred during Griffin’s meeting with the Dean was plainly a private, employment-related encounter. Moreover, Griffin states in her email that she had made a “decision regarding these mandates,” from which one could fairly infer that she was informing her employer that she might not comply with the Policy based on her research.

However, at the motion to dismiss stage I must draw all reasonable inferences in Griffin’s favor. In that light, it is also possible to infer that Griffin’s “decision” represented the conclusion or conclusions she had drawn regarding the Policy and its efficacy, and not a final decision not to comply with it. The substance of Griffin’s email and letter also communicated her concerns about the University’s response to the pandemic and the efficacy of mask mandates on college campuses. Viewed in this manner, Griffin’s speech could be considered “sufficiently analogous to the speech of other citizens in the community troubled,” by facemask and vaccine policies implemented by public institutions during the COVID-19 pandemic, thus warranting a conclusion that there is a plausible citizen analogue to Griffin’s speech.

Assessing the allegations of Griffin’s Amended Complaint in relation to the Decotiis factors produces an uncertain result. However, accepting all of Griffin’s factual allegations as true, the question that I must ultimately decide at this preliminary juncture is whether the Complaint has provided “enough facts to state a claim to relief that is plausible on its face.” …

Here, Griffin has pleaded sufficient facts to make it more than merely possible that once fully developed, the facts will support the conclusion that although Griffin’s speech related to her official duties as a public employee, the subject matter of her speech pertained to a matter of great public concern and was outside the scope of her duties as a professor of marketing. Whether the same conclusion may be true after the parties have completed discovery is another matter for another day. “[I]t is entirely possible that additional facts might show” that Griffin is not entitled to the relief that she seeks, but “absent factual development, dismissal is unwarranted” at this stage….

Note that Griffin’s allegation “that she never refused to wear a mask and never stated that she would violate the Policy” seems quite central here; it wouldn’t violate the Free Speech Clause to fire her for not wearing a mask, or for refusing to wear a mask, but her claim is that she was fired simply for arguing that the policy was unsound.

The post Professor's Claim That She Was Fired for Objecting to Superiors About Mask Mandate Can Go Forward appeared first on Reason.com.

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Can a Controversial User Really Get Kicked off the Internet?

(This post is part of a five-part series on regulating online content moderation.)

When it comes to regulating content moderation, my overarching thesis is that the law, at a minimum, should step in to prevent “viewpoint foreclosure”—that is, to prevent private intermediaries from booting unpopular users, groups, or viewpoints from the internet entirely. But the skeptic—perhaps the purist who believes that the state should never intervene in private content moderation—might question whether the threat of viewpoint foreclosure even exists. “No one is at risk of getting kicked off the internet,” he might say. “If Facebook bans you, you can join Twitter. If Twitter won’t have you, you can join Parler. And even if every other provider refuses to host your speech, you can always stand up your own website.”

In my article, The Five Internet Rights, I call this optionality the “social contract” of content moderation: no one can be forced to host you on the internet, but neither can anyone prevent you from hosting yourself. The internet is decentralized, after all. And this decentralization prevents any private party, or even any government, from acting as a central choke point for online expression. As John Gilmore famously said, “The Net interprets censorship as damage and routs around it.”

But while this adage may have held true for much of the internet’s history, there are signs it may be approaching its expiration date. And as content moderation moves deeper down the internet stack, the social contract may be unraveling. In this post, I’ll describe the technical levers that make viewpoint foreclosure possible, and I’ll provide examples of an increasing appetite to use those levers.

To illustrate these concepts, it’s helpful to think of the internet not as a monolith but as a stack—a three-layer stack, if you will. At the top of the stack sits the application layer, which contains the universe of applications that make content directly available to consumers. Those applications include voice and video calling services, mobile apps, games, and, most importantly, websites like Twitter (X), YouTube, Facebook, and Medium.

But websites do not operate in a vacuum. They depend on infrastructure, such as computing, storage, databases, and other services necessary to run modern websites. Such web services are typically provided by hosting and cloud computing providers like WiX, Google Cloud, Microsoft Azure, or Rackspace. These resources form the infrastructure layer of the internet.

Yet even infrastructural providers do not control their own fate. To make internet communication possible, such providers depend on foundational resources, such as networks, IP addresses, and domain names (DNS). These core resources live in the bottommost layer of the internet—the core infrastructure layer.

The below figure depicts this three-layer model of the internet.

With this structure in mind, we now turn to content moderation. As we’ll see, content moderation has evolved (and thereby become more aggressive and more concerning) by capturing more real estate within the internet stack. In the following discussion, I divide that evolution into four primary stages: classic content moderation, deplatforming/no-platforming, deep deplatforming, and viewpoint foreclosure. And to make the concepts relatable, I’ll use a running case study of a fictional internet user who finds herself a victim of this evolution as she is eventually chased off the internet.

Classic Content Moderation

In the typical, classic scenario, when a website takes adverse action against a user or her content, it does so because the user has violated the provider’s terms of service through her onsite content or conduct. For example, if a user—let’s call her “Jane”—posts an offensive meme on her timeline that violates Facebook’s Community Standards, Facebook might remove the post, suspend Jane’s account, or ban her altogether.

Here we see classic content moderation in action, as defined by two variables: (1) the scope of concern and (2) the scope of action. At this point, Facebook has concerned itself only with Jane’s conduct on its site and whether that conduct violates Facebook’s policies (scope of concern). Next, having decided that Jane has violated those policies, Facebook solves the problem by simply deleting Jane’s content from its servers, preventing other users from accessing it, or terminating Jane’s account (scope of action). But importantly, these actions take place solely within Facebook’s site, and, once booted, Jane remains free to join any other website. Thus, as depicted below, classic content moderation is characterized by a narrow scope of concern and a narrow scope of action, both of which are limited to a single site.

Deplatforming / No-Platforming

If Jane is an obscure figure, then the actions against her content might stop at classic content moderation. Even if Facebook permanently suspends her account, she can probably jump to another site and start anew. But if Jane is famous enough to create a public backlash, then a campaign against her viewpoints may progress to deplatforming.

As one dictionary put it, to “deplatform” is “to prevent a person who holds views that are not acceptable to many people from contributing to a debate or online forum.” Deplatforming, thus, targets users or groups based on the ideology or viewpoint they hold, even if that viewpoint is not expressed on the platform at issue. For example, in April 2021, Twitch updated its terms of service to reserve the right to ban users “even [for] actions [that] occur entirely off Twitch,” such as “membership in a known hate group.” Under these terms, mere membership in an ideological group, without any accompanying speech or conduct, could disqualify a person from the service. Other prominent platforms have made similar changes to their terms of service, and enforcement actions have included demonetizing a YouTube channel after its creators encouraged others (outside of the platform) to disregard social distancing, suspending Facebook and Instagram accounts for those accused (but not yet convicted) of offsite crimes, and banning a political pundit (and her husband) from Airbnb after she spoke at a controversial (offline) conference. Put differently, deplatforming expands the scope of concern beyond the particular website in which a user might express a disfavored opinion to encompass the user’s words or actions on any website or even to the user’s offline words and actions.

Moreover, in some cases, the scope of action may expand horizontally if deplatforming progresses to “no-platforming.” As I use the term, no-platforming occurs when one or more third-party objectors—other users, journalists, civil society groups, for instance—work to marginalize an unpopular speaker by applying public pressure to any application provider that is willing to host the speaker. For example, Jane’s detractors might mount a Twitter storm or threaten mass boycotts against any website that welcomes Jane as a user, chasing Jane from site to site to prevent her from having any platform from which to evangelize her views. As depicted below, the practical effect of a successful no-platforming campaign is to deny an unpopular speaker access to the application layer altogether.

Deep Deplatforming

“But Jane couldn’t be booted entirely from the application layer,” you might say. “Surely some website out there would be willing to host her viewpoints. Or, worst case, she could always stand up her own website.”

As long as content moderation remains confined to the application layer, those sentiments are indeed correct. They capture the decentralized nature of the internet and the putative ability of any enterprising speaker to strike out on her own.

But they become less true as content moderation expands down into the infrastructure layer of the internet. As explained above, that layer contains the computing, storage, and other infrastructural resources on which websites depend. And because websites typically rely on third-party hosting and cloud computing vendors for these resources, a website might be able to operate only if its vendors approve of what it permits its users to say.

Thus, even if Jane migrates to some website that is sympathetic to her viewpoints or that is simply free speech-minded—”nichehub.xyz” for purposes of this case study—NicheHub itself might have dependencies on WiX, Google Cloud, Microsoft Azure, or Rackspace. Any of these providers can threaten to turn the lights out on NicheHub unless it stops hosting Jane or her viewpoints. Similarly, if Jane decides to stand up her own website, she might be stymied in that effort by infrastructural providers that refuse to provide her with the hosting services she needs to stay online.

These developments characterize “deep deplatforming,” a more aggressive form of deplatforming that uses second-order cancelation to plug the holes left by conventional techniques. As depicted below, deep deplatforming vertically expands both the scope of concern and the scope of action down to encompass the infrastructure layer of the internet stack. The practical effect is to prevent unpopular speakers from using any websites as platforms—even willing third-party websites or their own websites—by targeting those websites’ technical dependencies.

Perhaps the best-known instance of deep deplatforming concerned Parler, the alternative social network that styled itself as a free speech-friendly alternative to Facebook and Twitter. Following the January 6 Capitol riot, attention turned to Parler’s alleged role in hosting users who amplified Donald Trump’s “Stop the Steal” rhetoric, and pressure mounted against vendors that Parler relied on to stay online. As a result, Amazon Web Services (AWS), a cloud computing provider that Parler used for hosting and other infrastructural resources, terminated Parler’s account, taking Parler, along with all its users, offline.

The above figure also introduces a new concept when it comes to evading deplatforming: the scope of control. As long as Jane depends on third-party website operators to provide her with a forum, she controls little. She can participate in the application layer—and thereby speak online—only at the pleasure of others. However, by creating her own website, she can vertically extend her scope of control down into the application layer, thereby protecting her from the actions of other website operators (though not from the actions of infrastructural providers).

Viewpoint Foreclosure

“Ah, but can’t Jane simply vertically integrate down another layer? Can’t she just purchase her own web servers and host her own website?”

Maybe. Certainly she can from a technical perspective. And doing so would remove her dependency on other infrastructural providers. But servers aren’t cheap. They’re also expensive to connect to the internet, since many residential ISPs don’t permit subscribers to host websites and don’t provide static IP addressing, forcing self-hosted website operators to purchase commercial internet service. And financial resources aside, Jane might not have the expertise to stand up her own web servers. Most speakers in her position likely wouldn’t.

But even if Jane has both the money and the technical chops to self-host, she can still be taken offline if content moderation progresses to “viewpoint foreclosure,” its terminal stage. As depicted below, viewpoint foreclosure occurs when providers in the core infrastructure layer revoke resources on which infrastructural providers depend.

For example, domain name registrars, such as GoDaddy and Google, have increasingly taken to suspending domain names associated with offensive, albeit lawful, websites. Examples include GoDaddy’s suspension of gab.com and ar15.com, Google’s suspension of dailystormer.com, and DoMEN’s suspension of incels.me.

ISPs have also gotten into the game. In response to a labor strike, Telus, Canada’s second-largest internet service provider, blocked subscribers from accessing a website supportive of the strike. And in what could only be described as retaliation for the permanent suspension of Donald Trump’s social media accounts, an internet service provider in rural Idaho allegedly blocked its subscribers from accessing Facebook or Twitter.

But most concerning of all was an event in the Parler saga that received little public attention. After getting kicked off AWS, Parler eventually managed to find a host in DDoS-Guard, a Russian cloud provider that has served as a refuge for other exiled websites. Yet in January 2021, Parler again went offline after the DDoS-Guard IP addresses it relied on were revoked by the Latin American and Caribbean Network Information Centre (LACNIC), one of the five regional internet registries responsible for managing the world’s IP addresses. That revocation came courtesy of Ron Guilmette, a researcher, who, according to one security expert, “has made it something of a personal mission to de-platform conspiracy theorist and far-right groups.”

If no website will host a user like Jane who holds unpopular viewpoints, she can stand up her own website. If no infrastructure provider will host her website, she can vertically integrate by purchasing her own servers and hosting herself. But if she is further denied access to core infrastructural resources like domain names, IP addresses, and network access, she will hit bedrock. The public internet uses a single domain name system and a single IP address space. She cannot create alternative systems to reach her audience unless she essentially creates a new internet and persuades the world to adopt it. Nor can she realistically build her own global fiber network to make her website reachable. If she is denied resources within the core infrastructure layer, she and her viewpoints are, for all intents and purposes, exiled from the internet.

While Parler did eventually find its way back online, and even sites like Daily Stormer have managed to evade complete banishment from the internet, there can be little doubt that the appetite to weaponize the core infrastructural resources of the internet is increasing. For example, in 2021, as a form of ideological retribution, certain African ISPs publicly discussed ceasing to route packets to IP addresses belonging to an English colo provider that had sued Africa’s regional internet registry. And in March 2022, perhaps inspired by the above examples, Ukraine petitioned Europe’s regional internet registry to revoke Russia’s top-level domains (e.g, .ru, .su), disable DNS root servers situated in Russian territory, and withdraw the right of any Russian ISP to use any European IP addresses.

In sum, while users today are not necessarily getting kicked off the internet for expressing unpopular views, there are technical means to do just that. It also seems that we are moving toward a world in which that kind of exclusion may become routine.

The post Can a Controversial User Really Get Kicked off the Internet? appeared first on Reason.com.

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Polls Offer Little Comfort for Supporters of Gun Control


A handgun sits atop a row of folded shirts in a dresser drawer. | Tommaso79 | Dreamstime.com

People who advocate restricting gun ownership cite polls showing support for tighter firearms laws, but they’re slow to point to evidence of support for owning the means of self-defense. For example, a majority of respondents in a recent poll say it’s too easy to get a gun, but those who own them say having one makes them feel safer, and many non-owners are open to acquiring firearms. Further complicating matters for anti-gunners is that Americans overwhelmingly see threats to their safety in the government officials who enforce restrictive laws.

Cold Comfort for Prohibitionists

“A majority of Americans (61%) say it is too easy to legally obtain a gun in this country, while 30% say the ease of legally obtaining a gun is about right; 9% say it is too hard,” Pew Research reported earlier this month. That’s what gun control advocates like to hear, but it’s really the only nugget of comfort they’ll find in the survey.

“72% of U.S. gun owners say protection is a major reason they own a gun. That far surpasses the shares of gun owners who cite other reasons,” the report adds. “And while a sizable majority of gun owners (71%) say they enjoy having a gun, an even larger share (81%) say they feel safer owning a gun.”

Even more challenging for advocates of civilian disarmament, “about half of Americans who don’t own a gun say they could never see themselves owning one (52%) while nearly as many could imagine themselves as gun owners in the future (47%).”

In fact, many of those who “don’t own a gun” but “could imagine themselves as gun owners” may already have joined the ranks of those who do. While roughly one-third of respondents consistently tell pollsters they own guns, that almost certainly undercounts the total. Rutgers University’s New Jersey Gun Violence Research Center recently assembled profiles of gun owners, applied them to those who claimed to not own guns, and concluded that the gun-owning share of the population is probably much higher than the official figure.

“It may be that a percentage of firearm owners are concerned that their information will be leaked and the government will take their firearms or that researchers who are from universities that are typically seen as liberal and anti-firearm access will paint firearm owners in a bad light,” the authors noted.

When the Enforcers Are the Threat

Lying to researchers out of concern the government will obtain and misuse survey responses emphasizes a major challenge to gun control advocates: Americans overwhelmingly obtain firearms as a safety measure and also view the government itself as dangerous.

“Public trust in government remains low, as it has for much of the 21st century. Only two-in-ten Americans say they trust the government in Washington to do what is right ‘just about always’ (2%) or ‘most of the time’ (19%),” Pew noted last year.

“Fifty-eight percent (58%) of voters believe that the federal government today is a threat to the freedom and liberty of individual Americans,” pollster Scott Rasmussen found in 2021.

“Two in three Americans (67%) identify big government as the country’s biggest threat,” according to Gallup in 2017.

Undoubtedly, much of the negative feeling toward government has to do with who wields its power. That means politicians who already are widely distrusted. But in our political system it especially means representatives of hostile political factions who gain office as one election gives way to another. According to 2022 NBC News polling, roughly 80 percent of Republicans and Democrats alike say the other political party “poses a threat that if not stopped will destroy America as we know it.”

If you distrust the government and view it as a threat to your liberty—especially when, inevitably, control of its vast power falls into the hands of a political faction you fear—you’ll probably see submitting to government attempts to track and limit civilian arms as a risky move. For a population that seeks safety in gun ownership, complying with restrictive firearms laws is a step in the wrong direction—no matter what survey respondents favor in the abstract.

Don’t Forget Mundane Criminal Threats

Of course, protection isn’t just about forting up against an overbearing state or enemy partisans. The desire to shield our families and ourselves from crime has long driven self-defense efforts. Crime rates and concerns about rising crime surged amidst chaos caused by COVID lockdowns and the social tensions of recent years. Video clips of flashmobs looting stores and stories of businesses closing their doors fuel the belief that many places, especially cities, are dangerous.

Fortunately, violent crime appears to be declining again as it was before pandemic-era disruptions. So are most property crimes other than car theft (which is up by a third over the same period last year). But that improvement is unlikely to boost confidence in the powers-that-be who are largely blamed for the mess.

“The ramifications of Covid policies advising people to abandon their offices are only beginning to be understood,” John Chachas, the owner of luxury department store Gump’s, wrote in an much-discussed open letter to the people of San Francisco. “Equally devastating have been a litany of destructive San Francisco strategies, including allowing the homeless to occupy our sidewalks, to openly distribute and use illegal drugs, to harass the public and to defile the city’s streets.”

There’s that trust issue again. If government officials can’t be trusted to protect the public, if instead they are thought to support policies that disrupt society and put people at risk, why would Americans obey limitations on their ability to protect themselves promoted by those same officials?

More Guns, Little Compliance with Restrictions

Gun sales are down from their peak according to analyses of FBI background check data. But Americans are still purchasing more than a million firearms per month. They’re purchasing guns which 74 percent of owners told Pew researchers in 2017 are essential to their freedom, and which 72 percent now tell those same researchers are key to their protection. They’re lying about owning firearms to researchers who they fear might identify them to government officials and political opponents they don’t trust.

To put it bluntly, this is not an encouraging environment for advocates of gun restrictions. They might pass laws in jurisdictions under their control, but getting people to obey is an uphill battle.

“Data shows massive noncompliance with the assault weapon registration requirement,” HudsonValleyOne reported in 2016 after New York tightened its laws, but before the rising tensions of recent years. “Based on an estimate from the National Shooting Sports Federation, about 1 million firearms in New York State meet the law’s assault-weapon criteria, but just 44,000 have been registered.”

“Compliance appears to have gotten worse,” The Buffalo News noted last year. “While the Safe Act also required assault weapon owners to re-register their guns every five years, just 14,056 residents have submitted applications for recertification,” down from 23,487 owners who registered in 2015.

That’s discouraging for advocates of any sort of restrictions, though good news for those of us who prefer minimal government intrusion into people’s lives. It also could have been predicted by anybody who knows the history of prohibitions—and of governments despised by their subjects.

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Purchasing Power Of Homebuyers Has Taken A Big Hit

Purchasing Power Of Homebuyers Has Taken A Big Hit

Redfin’s latest report reveals that skyrocketing mortgage rates, the highest in twenty years, have dramatically eroded the purchasing power of homebuyers over the past 18 months. 

A homebuyer on a $3,000 monthly budget can only afford a $429,000 home with a 30-year fixed mortgage rate of around 7.3%. That buyer lost $71,000 in purchasing power since August 2022, when they could’ve afforded a $500,000 home with an average rate of around 5.5%. In December 2020, that same buyer could’ve afforded a $629,000 home. 

The combination of a high monthly mortgage and low inventory has levitated home prices, sparking an affordability crisis. 

Last week, the Mortgage Bankers Association reported that US mortgage rates rose to the highest level since late 2000, sending a key measure of demand down to the lowest in nearly three decades. 

We noted in July the entire housing market is in “paralysis,” with the lowest turnover rate on record. In other words, homeowners are reluctant to move and take on a higher mortgage rate, while prospective homebuyers can’t afford pricey homes. 

Mortgage rates tend to track Treasury bonds. Rates on swap contracts referencing future Fed policy meetings suggest the federal funds rate could be hiked an additional 15 bps by year-end. 

While Bloomberg macro strategist Simon White recently noted US inflation is poised to begin re-accelerating again, Morgan Stanley Chief Asia Economist Chetan Ahya pointed out an opposing view that China could enter a debt-deflation loop that will spread disinflation worldwide. 

There is some good news for the housing market, though it might be 2024/25 story: Looking To Buy? New Report Forecasts Housing Market Affordability Set To Return In 2025.

Tyler Durden
Wed, 08/30/2023 – 07:45

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Credit Is Least Priced For A Recession

Credit Is Least Priced For A Recession

Authored by Simon White, Bloomberg macro strategist,

Credit spreads, high yield and investment grade, are the major assets least reflecting a recession based on their behavior before previous downturns, with stocks not far behind.

Recession talk has gone out of fashion, replaced by soft-landing chatter (yesterday’s weaker-than-expected JOLTS and consumer data just released might help change that though).

But the underlying data has not changed significantly enough that we can all go back to sleep, ready to be awoken by the next boom.

Manufacturing is in recession, and services are turning down, based on both the ISM and PMI surveys.

At their current rate of decline, each survey will be under the 50 contractionary level very soon.

GDI – gross domestic income – is consistent with a recession. Further, GDP and GDI have shown the largest discrepancy in over 20 years, with the average of the two close to 0%.

Moreover, my Recession Gauge – which captures when a whole swathe of economic and market data start to look recessionary at the same time – has been indicating a recession all year. Also, unemployment and continuing claims by US state are consistent with a near-term recession.

The Atlanta Fed’s GDPNow is one of the most positive indicators, currently expecting 3Q23 annualized real GDP to be 5.9%. But it’s worth noting that in its short 12-year history it has never been tested in a (non-pandemic) recession – precisely when data is often most wrong and has to be significantly revised.

Recessions tend not to happen gradually, bur precipitately.

Hence the relative economic calm should not be taken as a sign to become less vigilant. That is doubly the case now when most assets are pricing in a low probability of a recession.

Credit is the asset class most untroubled by recession risks, with global and US equities not far behind (based on each asset’s behaviour around previous recessions). As I discussed yesterday, credit spreads are already very divergent to the burgeoning number of bankruptcy filings in the US.

In this sort of environment, the costs of hedging recession risk are cheap(er) precisely because the risk has gone off most people’s radar.

Thus even if the economy manages to skirt a slump, the opportunity cost of insuring against one is relatively low – unless of course risk takes off again, but liquidity conditions are becoming less conducive to that happening.

Tyler Durden
Wed, 08/30/2023 – 07:20

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Hurricane Idalia Now Category 4 Storm As Florida Landfall Imminent

Hurricane Idalia Now Category 4 Storm As Florida Landfall Imminent

Hurricane Idalia intensified into a Category 4 storm early Wednesday morning as it is expected to make landfall near Florida’s Big Bend area. 

As of 0600 ET, the National Hurricane Center said Idalia was about 55 miles west-northwest of Cedar Key and 95 miles south-southeast of Tallahassee, moving north-northeast at 17 mph. The storm has maximum sustained winds of 130 mph. 

“Idalia could continue to strengthen before it reaches the Big Bend coast of Florida in a few hours,” NHC said, adding, “While Idalia should weaken after landfall, it is likely to still be a hurricane while moving across southern Georgia, and near the coast of Georgia or southern South Carolina late today.”

Catastrophic and life-threatening storm surges are expected between the Wakulla/Jefferson County line and Yankeetown. NHC said these areas could expect a wall of water up to 16 feet. 

The National Weather Service in Tallahassee called Idalia “an unprecedented event.” The destructive winds have already led to 70,000 utility customers without power in Florida, according to online outage tracker PowerOutage.us.

Images of flooding along Florida’s Gulf Coast are already being reported on X. 

Florida Gov. DeSantis provides an update on Idalia… 

*Developing 

Tyler Durden
Wed, 08/30/2023 – 06:55

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German Real Curve Shows Why ECB May Not Be Able To Stop Hiking

German Real Curve Shows Why ECB May Not Be Able To Stop Hiking

Authored by Ven Ram, Bloomberg cross-asset strategist,

The European Central Bank may have reached a point of hesitancy in its fight against inflation, but real rates suggest that it won’t be able to put a full stop to its tightening just yet.

At the heart of the ECB’s efforts will be how much of a restraint its policy rate poses on the economy, with inflation-adjusted rates set by the markets providing the most direct read-out.

For instance, inflation-adjusted rates in Germany are only mildly positive as you go further out the curve, in sharp contrast to the US, where the rates are significantly positive.

Germany’s two-year bonds are now trading at a premium to where they are indicated on my model, which reflects skepticism that the ECB will go the distance to quell inflation.

However, against a backdrop where core inflation is still holding above 5%, the ECB will find that terminating its hiking cycle when its policy rate is at 3.75% is predicated more on a prayer than on arithmetic.

Later this week we will know how inflation in the euro zone evolved in August. Economists forecast that core inflation slowed to 5.3% from 5.5%, though even an outcome as estimated won’t be enough to offer the ECB much comfort.

Which is why it wasn’t surprising that Governing Council member Robert Holzmann warned this week:

“We aren’t yet in the clear when it comes to inflation. If there aren’t any big surprises, I see a case for pushing on with rate increases without a pause.”

Should data on Thursday show that inflation is here to stay, real rates and German front-end bond yields may both tick higher.

Tyler Durden
Wed, 08/30/2023 – 06:30

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Less Than 1/3rd Of Canadians Have “High Trust” In Their Government

Less Than 1/3rd Of Canadians Have “High Trust” In Their Government

Trust in the government in Canada, and the government’s handling of public health, is waning, according to a new piece of in-house research conducted by the Public Health Agency of Canada (PHAC).

The report was called “Use Of Public Health Measures, Advice And Risk Assessment Survey” and it was conducted seeking out the opinions of 6,200 people across Canada and nine Federal focus groups. 

The new report says that: “Trust, particularly in the government and health care sector, is central to the effectiveness of public health measures.” It adds: “While respondents have a lot of trust in hospitals and health care workers, trust in the federal government (e.g., the Public Health Agency) is much lower.”

According to a new article from The Epoch Times, the only people who scored lower in “trust” than the Federal Government were large media companies and celebrities. 

The research asked Canadians to express their trust level in institutions and entities using a 1 to 10 scale, with 10 being the highest. Responding to a question about the Federal Government, just 32% of Canadians said they had “high trust”.

52% of respondents said they had high trust in doctors and nurses, while 56% said they had high trust in scientists. 42% of respondents said that they had high trust in family and friends. Journalists and large media companies secured 26% of the high trust ratings, followed by 18% for “ordinary people”, 12% for “people I follow on social media” and 8% for celebrities. 

PHAC said: “Celebrities and the people respondents follow on social media are trusted the least by respondents.”

The Epoch Times noted that on June 8, a report called “The Impact Of The Pandemic Experience On Future Vaccine-Related Intentions And Behaviour” had first noted that public mistrust toward Federal experts increased through and after the pandemic. 

“Asked what the remedy might be for restoring trust, participants suggested being honest and admit your mistakes,” the report concluded.

And well…we all know that’s not going to happen. 

Tyler Durden
Wed, 08/30/2023 – 05:45

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