The GOP Primary Debates Are Starting Way Too Early


A wide shot of a Republican presidential debate stage | JIM RUYMEN/UPI/Newscom

The first votes in the Republican presidential primary are scheduled to be cast by caucus-goers in Iowa on January 15. That’s 145 days from today, when the first debate in the contest will be held in Milwaukee, Wisconsin.

To put that in context, it would be like holding the first debate for next year’s general election—scheduled for November 5—in late March. That would be obviously absurd. Tonight’s event is no less so.

In fact, the math is even less kind than it might seem at first blush. The Iowa caucuses aren’t really equivalent to November’s general election. They are weird, sparsely attended, and unlikely to be dispositive. The same is true for the Nevada caucuses scheduled for February 8. Republicans will have their first true primary on February 28 in South Carolina, but the date that really matters is March 5, when 13 states plan to hold their GOP primaries.

That’s 195 days away. It would be like holding a general election debate in early February.

America, we don’t have to do this to ourselves.

Every year, social media is full of people complaining about stores decorating for Christmas at seemingly earlier and earlier points. It’s happening already this year. But holiday season–creep has got nothing on election season–creep, which is more expansive and less productive. Holding a debate tonight is like decorating for Christmas well before the Fourth of July (a gap of 174 days).

It’s worth asking: Who is tonight’s debate for? Is there one voter in the entire country who will hear something tonight that convinces him or her to vote for Vivek Ramaswamy or Nikki Haley—and then will never be swayed from that choice over the next six months? Perhaps, but there certainly aren’t many more than one.

At best, tonight’s debate is a glorified preseason football game—an unwatchable spectacle that no one ought to enjoy. Like in many preseason games, the star player is on the bench. In his absence, the prospective backups will compete to earn what’s unlikely to be anything better than a third-string spot on the final roster.

In fact, if reports are to be believed, some of them aren’t even trying to earn the starting role.

But even that comparison flatters what we’re doing here. There are a mere 192 days between the first snap of the preseason and the scheduled kickoff of this year’s Super Bowl.

The way-too-early start of the presidential primary season creates some practical problems too. A less insane schedule—say with the first debates happening in early January, still two months out from the first real primary—would give voters, donors, and candidates a better sense of the shape of the race. We’d have more information about former President Donald Trump’s legal issues, for one. Candidates who simply couldn’t hack it would have already packed up and gone home for lack of money. And the stakes that will define the 2024 general election would be more clear. Messages could be more carefully honed, questions tailored, and with limited time before voting starts the candidates would have a stronger incentive to actually debate one another.

And that is, of course, the point. Debates are crucial to democracy, but they’re more useful when held in formats and at times that allow voters (who have better things to spend their time on) to grasp distinctions between candidates. For all the many, many problems with the Commission on Presidential Debates, which runs the general election presidential debates, it basically gets the scheduling part right. There are usually three debates, all held in the final weeks of the campaign.

A silver lining, albeit a faint one, might be Trump’s absence from tonight’s debate. With the clear front-runner absent, fewer people will tune in to watch. Perhaps those lower ratings send a market signal to the cable news stations that plan and host these primary debates.

Trump’s threatened absence from future debates might even cause a reconsideration about how many there should be. For now, there’s only one more officially scheduled (September 27 in California), though many more are likely.

That’s probably a naive hope. Still, no matter what Fox News and the other Republican candidates decide to do, remember that you have a choice too. You can spend time with your family. You can play with your pets. You can watch an endless cornucopia of other shows, movies, and sporting events on television. You can read a magazine.

There are 145 days before anything that’s said tonight will matter, if anything said tonight ever does.

The post The GOP Primary Debates Are Starting Way Too Early appeared first on Reason.com.

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To Tackle Highest Housing Costs in the Country, Hawaii’s Governor Declares YIMBY Martial Law


reason-honolulu |  Izabela 23/Dreamstime.com

The loss of life from the deadly wildfires on the Hawaiian island of Maui has been made even worse by the loss of shelter. Some 2,000 homes have been destroyed so far, leaving thousands more homeless or displaced.

The fire has only worsened an insufficiency of homes on the island and in the state more broadly. In Hawaii, median home prices are close to $1 million and regulations on adding new supply are incredibly strict.

Weeks before the fires, Democratic Gov. Josh Green had already proclaimed a statewide housing emergency with the purpose of slashing through all that regulation to get thousands of new homes built.

“We don’t have enough houses for our people. It’s really that simple,” said the governor at a press conference last month, where he promised “bold action to streamline processes for creating thousands of affordable housing units.”

Green is in fact taking bold action by suspending whole sections of state and local laws and regulations that relate to homebuilding.

Local governments are given far more flexibility to expedite housing approvals, while developers will have the chance to route around basically all existing regulations on home building to get housing projects approved.

It’s a radically deregulatory approach that’s received praise from across the political spectrum.

“This is probably the single most significant state-level action on accelerating housing production maybe in the whole country, maybe ever,” Sen. Stanley Chang (D–Honolulu) tells Reason.

“Hawaii has probably the most regulated land on the planet,” says Robert Thomas, a former Hawaii real estate attorney who now works at the Pacific Legal Foundation, a libertarian public interest law firm. The governor’s proclamation “cuts through the Gordian knot” of red tape, he says.

At the same time, Green’s sweeping invocation of executive, emergency powers—a sort of “yes in my backyard” (YIMBY) martial law—is provoking concern from an equally bipartisan group of critics.

Civil Beat reports that environmental groups have already denounced the proclamation’s potential to allow for high-rises in residential neighborhoods. Others support the substance of the order, but question the governor’s sweeping use of emergency powers.

Keli’i Akina, director of the Honolulu-based Grassroot Institute, a free market think tank, says the governor is correct in identifying government regulation as the primary cause of Hawaii’s astronomical housing costs.

The proclamation nevertheless “puts the governor in the position of being a super legislator. He’s basically eliminating longstanding laws in one fell swoop without the input of the legislature and therefore the people,” he says. “The long-term impact on the balance of power will have to be considered. It may create some constitutional liability.”

Key to the governor’s proclamation is the creation of a Beyond Barriers Working Group made up of representatives of both state and local agencies, the legislature’s housing committees, housing advocacy groups, and environmentalists. The working group will review individual housing projects and determine whether they’re eligible for regulatory relief.

The working group would consider whether a project’s sponsor had the experience and financing necessary to start construction within three years and whether their project would avoid “irreversible and irretrievable” impacts on environmental and cultural resources.

If a project satisfied these criteria, the group could then ink a development agreement with the builder allowing them to proceed with a project without having to comply with Hawaii’s thicket of regulations.

Developers with a working group–certified project wouldn’t have to comply with normal zoning restrictions. They wouldn’t have to go through Hawaii’s cumbersome environmental review process (which can add months or years to a project’s approval). They could avoid historic preservation regulations, and get relief from normal impact fees and taxes. They could also skip the need to get approval from the state’s Land Use Commission—a duplicative zoning body.

In sum, homebuilders would theoretically have the opportunity to build housing projects of unlimited density almost anywhere all while skipping normal layers of review and process.

This arrangement wouldn’t quite be a regulatory free-for-all. Developers would still need to go through an expedited historic and environmental review process laid out in the proclamation. They’d also have to pay their workers prevailing (union) wages and host at least one public meeting about their project.

While the proclamation doesn’t require projects to include below-market-rate units, the working group is directed to prioritize projects that do include some affordable housing.

More broadly, the governor’s proclamation would also allow local governments to hire private parties to sign off on building permits, expand urban growth boundaries, and permit residential development in commercial areas without having to get the typical state sign-offs.

Many people have criticized the governor’s proclamation for the way it suspends the state’s Sunshine Law—which establishes sweeping transparency requirements for government meetings and decisions—if its provisions “delay the expeditious action, decision, or approval of any board or agency.” That would seemingly relieve the working group of the need to hold open meetings, respond to records requests, publish agendas ahead of time, and refrain from ex parte negotiations.

A governor-appointed lead housing officer would also have the power to call the working group into session at a time and place of their choosing. Its decisions would only need a majority vote of those members present. “Its fiat powers to approve development could be politically influenced and subject to accusations of favoritism or waste or cronyism,” says Akina.

Green has said his proclamation could lead to the construction of 50,000 homes within the next few years. Chang says that the proclamation, which has to be renewed every 60 days, would be most helpful for projects already in the works. In particular, he says it could really expedite the approval of thousands of public housing units that have already been proposed.

That’s all assuming that there’s no successful legal or constitutional challenge to the emergency proclamation. Lawsuits challenging the order are almost inevitable, said one Maui land use attorney to Civil Beat. “There’s no disagreement that we need more affordable housing. But using the state constitution as toilet paper isn’t the right approach,” he told the publication.

Thomas says that Hawaii courts have generally been unwilling to second-guess the governor’s use of emergency powers. Numerous lawsuits challenging emergency proclamations during the pandemic all failed. “COVID taught us that [the state’s emergency statute] is extremely robust,” he tells Reason. “It is essentially a political question is how the Hawaii Supreme Court has treated it.”

At the same time, Thomas does suggest that a court might look differently on the use of emergency powers to address something like Hawaii’s housing shortage. “Maybe it’s an emergency but it’s one that’s been festering for 50 years. It’s been on the longest fuse one can imagine,” he says.

Chang argues that displacement caused by Hawaii’s high housing costs is the textbook definition of an emergency.

“As a result of housing prices skyrocketing, we’ve entered seven straight years of population decline. About half of all native-born Hawaiians live outside of Hawaii,” he says. “If you had 15,000 people leaving because of flooding or a hurricane or earthquakes or volcanic eruptions, I think that would certainly qualify for an emergency. The severe [housing] shortage constitutes an emergency as well.”

Green has said he’ll keep his proclamation in effect for one year. (Hawaii’s emergency statute requires it to be renewed every 60 days, nonetheless.)

All parties agree that the governor’s proclamation is a temporary solution to Hawaii’s longstanding housing affordability problems and that it is incumbent on the legislature to enact permanent fixes.

Thomas argues the proclamation offers the opportunity to see what Hawaii would look like without its existing morass of development regulations: “At the end of the [proclamation], if there’s anything close to the 50,000 new units on the market the governor predicted and the sky’s not black with pollution, the waters look like they do today, that’s going to provide some empirical proof that it was these [regulations] getting in the way.”

The post To Tackle Highest Housing Costs in the Country, Hawaii's Governor Declares YIMBY Martial Law appeared first on Reason.com.

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Wagner’s Prigozhin Dead After His Business Jet With 10 People On Board ‘Crashes’

Wagner’s Prigozhin Dead After His Business Jet With 10 People On Board ‘Crashes’

The internet has exploded with an avalanche breaking reports that Wagner chief Yvgeny Prigozhin’s business jet has crashed over Russia’s Tver region.

Unconfirmed reports say anywhere from seven to ten people were on board, all presumed dead – but it’s as yet unclear if Prigozhin himself was on board at the time. Russian media sources are now suggesting that he his indeed dead.

This has led to immediate speculation that the private plane could have been shot down upon Putin’s orders.

The Kremlin has quickly issued confirmation that the aircraft did indeed belong to the controversial Wagner leader who led a mutiny against the defense ministry June 23-24. Per official news wires out of Russia

  • RUSSIA SAYS 10 PEOPLE KILLED AFTER PRIVATE JET CRASHES IN TVER REGION NORTH OF MOSCOW
  • RUSSIA SAYS EVGENY PRIGOZHIN COULD BE ON BOARD OF PLANE THAT CRASHED IN TVER REGION NORTH OF MOSCOW – TASS

Russian official sources are confirming, including RT

KOMMERSANT: PRIGOZHIN HAS DIED IN THE PLANE CRASH IN RUSSIA’S TVER, RUSSIA’S FEDERAL AIR TRANSPORT AGENCY SAYS

Below is another video widely circulating of what is purported to be the Wagner chief’s plane going down:

developing…

Tyler Durden
Wed, 08/23/2023 – 13:09

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Russia Fires General Who Ran Ukraine War, In Wake Of Wagner Mutiny Events

Russia Fires General Who Ran Ukraine War, In Wake Of Wagner Mutiny Events

After significant internet rumors emerged Tuesday, Russian state news agency RIA confirmed Wednesday that Gen. Sergei Surovikin has been fired as head of the country’s air force. He has been “missing” – or believed under house arrest, since the Wagner mutiny events of June 23-24. He had for months prior overseen Russia’s war efforts in Ukraine.

“The ex-Commander-in-Chief of the Aerospace Forces of Russia Sergei Surovikin has now been relieved of his post, Colonel General Viktor Afzalov, Chief of the General Staff of the Aerospace Forces, is temporarily acting as Commander-in-Chief of the Aerospace Forces,” RIA reported based on single unnamed source.

According to NBC, the news first emerged Tuesday after “The Izvestia newspaper, known for its pro-Kremlin view reported what it said was Surovikin resignation from the post, citing its own unnamed sources.”

Further based on the same reporting

Alexei Venediktov, former head of the Ekho Moskvy, a prominent independent radio station that was shut down by authorities within days of the Ukraine invasion was the first to report that Surovikin had been dismissed on Tuesday, but said the general was being “retained by the defense ministry.”

The man known as ‘General Armageddon’ is believed to have come under Kremlin scrutiny as Putin cracked down on the military chain of command over handling of the short-lived rebellion led by Yevgeny Prigozhin. That’s when he was effectively ‘disappeared’ from public view.

In late June American intelligence officials told The New York Times that at the highest ranks of Russia’s military command, a key general had foreknowledge that an armed Wagner uprising was coming. In particular, the report claimed had Surovikin advanced awareness of the mutiny plot.

The anonymous US intel officials had taken the claims even further, suggesting potential active plotting and co-conspiracy within the defense ministry. “The officials said they are trying to learn if Gen. Sergei Surovikin, the former top Russian commander in Ukraine, helped plan Mr. Prigozhin’s actions last weekend, which posed the most dramatic threat to President Vladimir V. Putin in his 23 years in power,” said the June NYT report.

But some analysts pointed to red flags regarding the claims of US intel officials, as it seemed a coordinated attempt of Washington to sow distrust, paranoia, and further discord in the Kremlin. 

Surovikin hasn’t been heard from publicly or in any online or official statement since then. His security detail has also not been seen. Given the prior reports of house arrest, his dismissal had been seen as likely or as imminent. He will reportedly be transferred elsewhere within the defense ministry or Russian government, but very little details are known.

Tyler Durden
Wed, 08/23/2023 – 12:45

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Peter Schiff: BRICS Nations Will Blunt Western Dominance

Peter Schiff: BRICS Nations Will Blunt Western Dominance

Via SchiffGold.com,

The BRICS summit is underway with talk of expanding the economic block and speculation about a “new currency.” Peter Schiff appeared on Real America with Dan Ball to talk about these developments, saying the BRICS nations will blunt Western dominance.

Brazil, Russia, India, China, and South Africa make up the BRICS block. It accounts for about 40% of the global population and a quarter of the global GDP. Peter pointed out that not only does the BRICS block supply a lot of goods to America, but it also loans the US a lot of money.

The interest that we have to pay on that debt is soaring.”

Peter noted that Treasury bond yields were at the highest level in 16 years. That’s a big problem when you have a $32.7 trillion national debt and massive budget deficits month after month.

This backup in the yield on the 30-year Treasury — mortgage rates are going to hit 8% pretty soon. Think about that for a minute. When was the last time anybody was looking at an 8% mortgage? Just a year ago, they were in the threes. So, everybody is going to be paying more.”

And things don’t appear to be on track to get any better.

We are broke as a nation, and the inflation genie is out of the bottle. We’ve had more than 10 years of reckless money printing. There’s no way these rate hikes are going to do anything about that. So, high inflation is here to stay. And it’s going to get even higher.”

President Biden keeps saying the economy is strong. Peter asked how he could make that assertion.

We’re the world’s biggest debtor nation. We have record trade deficits, record budget deficits, and inflation that’s about to run out of control. I don’t think the economy has ever been this weak.”

Given the current state and the trajectory of the economy, the US is ripe to fall from its perch as the world’s economic superpower. And the BRICS block is in a position to further undermine the American economy.

Dan said he thinks the West’s response to Russia’s invasion of Ukraine pushed the BRICS nations into a corner and forced them to look more closely at an alternative to the US dollar. Peter said he agreed.

The blowback from those sanctions is going to be a disaster.”

When the Biden administration started imposing sanctions, we reported that there were possible long-term consequences for using the dollar as a tool for war — that it could accelerate de-dollarization globally and even threaten the dollar’s role as the world’s reserve currency. As Peter explained, this would be a gut punch for the US economy.

The US really depends on the dollar as the reserve currency. But what we did with those sanctions — we gave the world a powerful reason not to want to be a part of that system anymore because we demonstrated the downside, the risk that you take in holding dollars and being part of this dollar payment system. We gave everybody another reason, as if they needed more, to de-dollarize. So, that whole process has been sped up. The last thing we should have done was punish Russia for doing exactly what we wanted them to do. We wanted Russia to hold dollars because that benefits us. That keeps our prices down. That keeps our interest rates down. And then we punished Russia for doing exactly what we wanted them to do. Now, what kind of message are we sending to the rest of the world?”

Tyler Durden
Wed, 08/23/2023 – 12:25

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Another Downward Revision: BLS Confirms US Payrolls At Least 306,000 Lower Than Previously Reported

Another Downward Revision: BLS Confirms US Payrolls At Least 306,000 Lower Than Previously Reported

This morning, we said that in a year that has seen every monthly payrolls report revised lower…

… which is hardly a fluke since under Biden, every single data point ends up being revised lower eventually, with today’s new home sales getting the same treatment and every month’s new home sales data was also revised lower…

… the last pillar of Bidenomics was about to be revised away even more, as the BLS confirmed what we have been saying for much of the past year, namely that hundreds of thousands of US jobs were nothing more than a figment in the BLS’s imagination, and politically motivated excel spreadsheets.

That’s precisely what happened when according to the Bureau of Labor Statistics’ preliminary benchmark revision projection published this morning, US job growth was far less robust in the year through March than previously reported, and according to the BLS the number of workers on payrolls will be revised down by at least 306,000, and likely much more when the final revisions take place in early 2024.

The revision results from a comparison between reported nonfarm payrolls and a (near) universe count of employment from unemployment insurance records. In last year’s benchmark revision, the BLS revised up nonfarm payrolls by 506k.

The BLS table below shows the March 2023 preliminary benchmark revisions by major industry sector. While the preliminary benchmark revisions are calculated only for the month of March 2023 for major industry sectors, the data for all CES series will be updated when the final benchmark revision is issued.

The background, for those who missed it: once a year, the BLS benchmarks the March payrolls level to a more accurate but less timely data source called the Quarterly Census of Employment and Wages (QCEW) that’s based on state unemployment insurance tax records and covers nearly all US jobs. When the March payrolls figures are aligned to that count, the change is proportionally distributed across the year ended in March. First-quarter QCEW figures were also released Wednesday.

QCEW is used as the benchmark because it is a more comprehensive count of jobs than NFP. It aims at a complete count of all 11 million establishments/workplaces in the US and has a 90%+ response rate, compared to 660k establishments surveyed by NFP with a 43% response rate.

While the preliminary downward adjustment was smaller than some economists expected – of note, Std Chartered’s Steven Englander had expected at least 650,000 jobs to be revised out – keep in mind this is only the first revision; the final revision – which is incorporated into the data series with the release of the January jobs report in February 2024 – and in keeping with the Biden admin’s stealthy downward revisions, expect at least another 300K or so jobs to magically disappear from the total, which will “gradually” come down to the cumulative household survey which remains about 1 million lower than the market-moving, if extremely inaccurate and politically sensitive, establishment survey.

By then, however, nobody will care since US payrolls in early 2024 will have slumped deep into negative territory and the Fed will be in full-blown freakout/easing/QE mode.

Tyler Durden
Wed, 08/23/2023 – 12:05

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Rick Doblin: ‘Welcome to the Psychedelic ’20s!’


rick-doblin | Illustration: Lex Villena; Midjourney

Welcome to the psychedelic ’20s!” Rick Doblin, founder of the Multidisciplinary Association for Psychedelic Studies, or MAPS, proclaimed in his keynote speech to open the Psychedelic Science 2023 conference. At the event organized by MAPS in Denver this June, a reported 13,000 people gathered to talk about what seemed like every possible topic related to the productive use of these substances.

Founded in the late 1980s, MAPS has spent decades working to get approval from the Food and Drug Administration (FDA) for MDMA-assisted therapy for PTSD and related conditions.

The payoff for those decades of work are coming to fruition. The FDA is expected to approve therapy using psilocybin—the psychoactive ingredients in magic mushrooms—and MDMA—the drug also known as ecstasy and molly. And Oregon and Colorado have decriminalized the recreational use of plant-based psychedelics.

Watch Nick Gillespie’s full interview with Doblin, which was featured in Reason‘s 32-minute documentary on the psychedelic renaissance, discussing the long path to FDA approval and what comes next in the world of psychedelic legalization.

The post Rick Doblin: 'Welcome to the Psychedelic '20s!' appeared first on Reason.com.

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Watch: Drone Smashes Into Central Moscow As Attacks Become Daily

Watch: Drone Smashes Into Central Moscow As Attacks Become Daily

Closter to the opening of the Ukraine war it seemed unthinkable that a scenario of foreign drones reaching deep inside Russian territory to strike Moscow would become ‘normative’ – but this is now what’s happening, as Ukrainian drone attacks on Russia become daily.

Overnight, a drone again reached central Moscow, slamming into a high rise building in the capital’s business district, authorities confirmed Wednesday, in what’s a sixth consecutive night of aerial attacks on Moscow.

This particular attack was caught on video from multiple angles. Though likely a small drone, the explosion upon impact was significant and left visible damage on one or more floors of the large building.

Russia’s defense ministry said it downed at least two other inbound drones, in the Mozhaisky district and one in the Khimki district of the heavily populated Moscow oblast. 

Overnight, commercial air traffic was halted at all Moscow airports, including Vnukovo, Sheremetyevo and Domodedovo airports, but operations later resumed as normal.

Aftermath of overnight drone attack, via TASS

Moscow Mayor Sergei Sobyanin said of the fresh attack that “several windows were smashed in two adjacent five-story buildings.”

The somewhat meaningless attacks suggest growing desperation on the part of Ukraine forces, given the counteroffensive is now widely acknowledged to be a failure, and so the aim seems to be to put the Russian population on edge, and to disrupt ‘normalcy’ and stability of major cities like Moscow as much as possible

But the cross-border attacks are likely to escalate Russia’s missile attacks on Ukrainian cities in return, at a moment the front-lines are largely stalemated, but with Russian forces for the most part in firm control of the four territories now declared part of the Russian federation, a key part of Putin’s objective.

Tyler Durden
Wed, 08/23/2023 – 11:45

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Bond Traders And Their Bearish Stories

Bond Traders And Their Bearish Stories

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

“China, Japan, inflation, deficits, and QT, oh my!” – The chant of bond traders watching yields creep higher.

Despite the highest yields in 15 years, some bearish bond traders think they can go much higher. In their minds, China, Japan, burgeoning fiscal deficits, inflation, and QT, present tailwinds for much higher yields.

We have written several articles explaining why entrenched long-term economic growth trends and associated low inflation, coupled with high and increasing leverage, all but ensure lower interest rates. This article defends our thesis and helps us better appreciate the bearish concerns weighing on bond traders.

As the quote below from Peter Atwater states, the “easiest explanation” is usually the most popular, but that doesn’t make it correct.

The concerns we discuss make for good headlines and may temporarily affect bond yields, but are they worthy of much higher yields?

Our Bullish Bond Thesis

We have written extensively on our bullish thesis for bonds. Before reviewing the recent concerns of bearish bond traders, we provide links and quotes from our most recent bond articles.

As Rates Rise, Why I Personally Doubled Down on Bonds  8/19/2003

Over the last couple of weeks, I have discussed bonds and why the many concerns of higher, sustained interest rates are not likely. I hope this week’s newsletter better clarifies why I am willing to place a longer-term bet on that outcome.

Stocks Versus Bonds: Allocating For The Next Ten Years  8/2/2003

History, analytical rigor, and logic argue that long-term buy-and-hold investors should shift their allocations from stocks toward bonds.

The Government Can’t Afford Higher For Longer, Much Longer  7/26/2003

If you disagree with our economic rationale for lower rates, this analysis may persuade you that the Fed and government don’t have any options but lower interest rates.

Government Bonds or Stocks?   8/15/2003

In other words, the most hated asset class of 2022 may perform much better than stocks when a recession occurs. So, yes, individuals have a significant value opportunity to buy government bonds today.

China

Rumors are circulating that China will sell U.S. Treasury securities to support its currency. China is the second largest foreign holder of Treasuries.

Might China sell some of its Treasury securities? Yes, their holdings of U.S. bonds fluctuate all the time. However, such action could do more harm than good for China.

The yuan now sits at 2007 lows. (The graph charts how much yuan it costs to buy one dollar. Therefore, the recent upward trend is a devaluation of the yuan.)

Unlike the post-pandemic U.S. economic surge, China’s recent reopening has done little to revitalize growth. In mid-August, China unexpectedly cut interest rates to spur activity. China’s struggling economy and actions to combat it further weakened the yuan.

China risks further currency devaluation if they stimulate economic activity with lower rates and fiscal spending. A weak yuan versus the dollar is good for China as it promotes exports.

However, it also incentivizes capital outflows, putting additional pressure on the yuan. If, instead, China decides to support the yuan, it will likely have to sell Treasury securities. Such could prove detrimental if U.S. bond yields increase, further enticing capital outflows.

Currency manipulation would not likely be prolonged or entail too much Treasury selling. Further, they will probably sell short-term bills to limit realizing losses on their long-term bonds. Additionally, Treasury securities make up a quarter of their foreign reserves, meaning they have other dollar assets to sell beyond Treasuries.

Bottom line: even if China sells bonds, the effect will be temporary, and they would likely sell short-term bills that have little impact on long-term yields. If they instead focus on the economy, a weaker yuan will stimulate their economy and increase capital flows from China which could bolster U.S. bonds on the margin.

Japan

The Bank of Japan (BOJ) recently changed how they manage yields, aka yield curve control (YCC). They will now conduct “flexible” market operations. The BOJ had a hard cap on ten-year yields at 0.5%. Consequently, they would intervene in markets when yields hit 0.50% to ensure they did not rise above 0.5%.

The new policy increases the cap to 1.0% but allows them to manage markets so yields don’t immediately rise to 1.0%. Given Japan’s high indebtedness, rising inflation, poor demographics, and negligible economic growth trends, they risk economic catastrophe if they lose control of yields.

Over the last 20-plus years, the BOJ has used massive amounts of liquidity to keep interest rates extremely low. Low Japanese yields, and poor stock market returns, incentivized many Japanese individuals and pension funds to buy U.S. assets. Many such investors bought U.S. Treasury bonds. Additionally, a weak yen and meager rates allowed hedge funds to borrow yen, convert to dollars, and buy U.S. assets in a carry trade. Some of this capital from Japan ended up in the U.S. Treasury markets.

Bottom line: Higher yields in Japan may cause some Japanese investors to sell U.S. bonds and buy Japanese bonds. However, even at 1%, the yield is still woefully below U.S. bonds at 4-5%. Further, the yen has been weakening. A weakening yen incentivizes Japanese investors to keep money in dollars. Lastly, the carry trade is often short-term in nature. Short-term borrowing rates in Japan are still near zero percent. Unless that changes, most carry trades are likely to persist.

Part 1 Summary

China and Japan may cause temporary dislocations in the bond markets. However, we stress any such events are likely to be very short-lived with inconsequential longer-term effects.

Further, if their actions create liquidity issues or bond yields spike, the Fed and Treasury may take action to minimize their effect on bond markets.

We maintain a strongly convicted view that bond yields will fall in the medium term. It’s highly doubtful that monetary or currency policy actions taken by China or Japan to stabilize their economy or markets will alter our view.

Part 2 will focus on the domestic factors that give bearish bond traders hope that higher yields are in order. 

Tyler Durden
Wed, 08/23/2023 – 11:25

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UPS Workers Overwhelmingly Approve “Richest National Contract”

UPS Workers Overwhelmingly Approve “Richest National Contract”

Unionized UPS workers ratified the Teamsters-negotiated labor deal reached last month, including wage increases, better working conditions, and air conditioners in all new package delivery vehicles. The five-year contract covers 340,000 employees and ends a labor standoff that could’ve crushed supply chains nationwide. 

The agreement passed on Tuesday with the highest-ever contract vote in Teamsters’ history at UPS:

 “Today, Teamsters voted by an overwhelming 86.3 percent to ratify the most historic collective bargaining agreement in the history of UPS,” the union wrote in a press release. 

“Our members just ratified the most lucrative agreement the Teamsters have ever negotiated at UPS. This contract will improve the lives of hundreds of thousands of workers,” said Teamsters General President Sean M. O’Brien.

O’Brien continued, “Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry. This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention.”

Teamsters General Secretary-Treasurer Fred Zuckerman said, “This is the richest national contract I’ve seen in my more than 40 years of representing Teamsters at UPS.” 

The new contract means the average full-time delivery driver makes $170,000 annually in pay and benefits, while part-time workers will make upwards of $21 per hour. As a result of the new contract, Americans are panic searching how to become a UPS driver

Zuckerman said, “There are more gains in this contract than in any other UPS agreement and with no givebacks to the company. But the hard work doesn’t end here. We will continue to fight like hell to enforce this contract and make sure UPS lives up to every word of it over the next five years.” 

The bad news is UPS slashed its full-year revenue and margin forecasts “primarily to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement.” Plus a souring outlook means the company won’t be hiring en masse anytime soon. 

Tyler Durden
Wed, 08/23/2023 – 11:05

via ZeroHedge News https://ift.tt/0QI8xSF Tyler Durden