Month: September 2023

“Fed’s Last Hike” Triggers Q3 Carnage; Traders ‘Sell All The Things’ In September

“Fed’s Last Hike” Triggers Q3 Carnage; Traders ‘Sell All The Things’ In September

The third quarter of 2023 was the first quarter of tightening financial conditions since 2022 with September the biggest monthly tightening of conditions in a year.

And if you’re wondering why? It’s simple, the low came at almost exactly the time of the last Fed hike (July 26)…

Source: Bloomberg

That tightening of financial conditions in Q3 corresponded to a collapse in ‘hard’ data (its biggest quarterly plunge since Q4 2020) while ‘soft’ survey data soared (its biggest quarterly jump since Q1 2020)…

Source: Bloomberg

And that left the dollar higher in Q3, but everything else lower (bonds and bitcoin worst, gold and stocks bad)…

Source: Bloomberg

Since making YTD highs in mid-July (last Fed hike), NDX is down 8 of 11 weeks for a cumulative selloff of 7%. Over the same time frame, US 10-year note yields have risen from 3.79% to 4.58% – probably not a coincidence.

This was the worst quarter for the S&P and Nasdaq since Q3 2022.

All the majors are in the red to close Q3 with Small Caps the laggard and Dow the prettiest horse in the glue factory…

Source: Bloomberg

September was the worst month for the S&P and Nasdaq since Dec 2022.

September saw losses accelerate after the FOMC meeting…

Source: Bloomberg

On the week, the Nasdaq ended unchanged, Small Caps eked out a small gain; The Dow was the biggest loser and the S&P was down around 1%…

The energy sector was the only equity cohort to end the third quarter in the green with Utes and Real Estate the ugliest horse in the glue factory…

Source: Bloomberg

Similarly, September was even uglier overall with Energy managing to hold green but every other equity sector slammed (again led by Utes and Real Estate)…

Source: Bloomberg

“Most Shorted” stocks dumped for the second month in a row in September (the biggest 2mo drop since Dec 2022). Q3 was the first quarterly drop in ‘most shorted’ stocks since Q2 2021…

Source: Bloomberg

Bonds were battered in Q3 with the long-end yields up over 90bps…

Source: Bloomberg

September was a US bond market bloodbath with the entire curve dramatically higher in yield. The last week has seen the short-end outperform, steepening the yield curve…

Source: Bloomberg

Bonds were battered…globally

  • US 2s10s inversion dropped to May’s lows

  • 5y US yield highest since 2007

  • 10y US yield highest since 2007

  • 30y US yield highest since 2010

  • 10y German yield highest since 2011

  • Japan 10y highest since 2013

  • Japan 20y highest since 2014

  • Japan 30y highest since 2013

  • That US 30-year yields extended April 2022’s break out of a downtrend that’s lasted since the 1980s is probably the most significant economic development of the current era.

Rate change expectations for 2023 are basically unchanged for Q3 (green lines) but the expectation for rate-cuts in 2024 (blue line) has fallen dramatically (hawkishly higher expectations for rates)…

Source: Bloomberg

The dollar rallied for the second straight month in September to its highest close since Nov 2022. Q3 was the dollar’s first positive quarter since 2022…

Source: Bloomberg

Crypto was basically unchanged in September, rallying back in the last couple of days to erase the puke at the end of August. However, While Solana and Ripple outperformed in Q3, Ethereum and Bitcoin were battered, down 10-11%…

Source: Bloomberg

In commodity-land, Q3 was a great one for crude markets. NatGas also gained… but copper and PMs basically went nowhere…

Source: Bloomberg

September was a shitshow across commodities with energy (crude and natgas soaring) while copper (growth) and precious metals (tightening policy) dumped. Silver was clubbed like a baby seal to end the month…

Source: Bloomberg

Gold suffered ‘Death Cross’ this week…

Source: Bloomberg

Oil has extended its gains since its ‘Golden Cross’ in August, trading back at pre-Putin-Invasion levels…

Source: Bloomberg

The massive outperformance of crude over copper pushed it up to historically key resistance level…

Source: Bloomberg

Also, Gold is at its cheapest to crude in a year and also at a key support level…

Source: Bloomberg

Finally, the disconnect between real yields and the S&P 500’s P/E valuation came into the month at a noted extreme. And while the index has repriced ~5% lower, real yields increased, too…

Source: Bloomberg

As Powell said at Jackson Hole last year, there’s more pain to come here.

Tyler Durden
Fri, 09/29/2023 – 16:00

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“Soft Landing” Hope By The Fed Is Likely Optimistic

“Soft Landing” Hope By The Fed Is Likely Optimistic

Authored by Lance Roberts via RealInvestmentAdvice.com,

The Fed’s “soft landing” hopes are likely overly optimistic. Such was the context of the recent #BullBearReport, which discussed the long record of the Fed’s economic growth projections. To wit:

“However, there is a problem with the Fed projections. They are historically the worst economic forecasters ever. We have tracked the median point of the Fed projections since 2011, and they have yet to be accurate. The table and chart show that Fed projections are always inherently overly optimistic.

As shown, in 2022, the Fed thought 2022 growth would be near 3%. That has been revised down to just 2.2% currently and will likely be lower by year-end.”

As we noted, the Fed’s outlook for more robust growth allowed them to keep one rate hike on the table. While the prospect of further rate hikes spooked the stock and bond markets immediately following the announcement, as we discussed, such was needed to keep markets in line.

“The Fed projecting one last rate increase is also a way of preventing investors from immediately turning to the next question: When will the Fed cut? The risk is that as soon as investors start doing that, rate expectations will come down sharply, and with them, long-term interest rates, providing the economy with a boost the Fed doesn’t want it to receive just yet.

That is right. Since October last year, the market has been hoping for rate cuts and increasing asset prices in advance. Of course, higher asset prices boost consumer confidence, potentially keeping inflationary pressures elevated. Keeping a rate hike on the table keeps the options for the Federal Reserve open.“

Are the Fed’s “soft landing” hopes wrong?

Soft-Landing Hopes And Economic Realities

“On the eve of recessions in 1990, 2001, and 2007, many Wall Street economists proclaimed the U.S. was on the cusp of achieving a soft landing, in which interest-rate increases corralled inflation without causing a recession.” – Nick Timaros, WSJ

Similarly, the combination of easing inflation and a cooling labor market has fueled “soft landing” hopes among economists and Federal Reserve officials. However, soft landings are elusive as the Fed often holds rates too high for too long. Eventually, something breaks financially, economically, or both, leading to recessions and bear markets.

The Fed and most economists were wrong in 2022 when they forecasted an economic contraction. Economic growth, the labor market, and consumer spending proved unexpectedly resilient despite rising interest rates and elevated inflation. Much of that growth remains from the massive monetary liquidity still flowing through the economy.

With the restart of student loan payments, the UAW strike, and still high prices eating into consumer’s excess savings, that support is fading. However, other measures with near-perfect track records predicting recessions also suggest “soft landing” hopes are likely wrong.

Leading Indicators Lead

The Leading Economic Index is one of those indicators that should not be dismissed. As its name suggests, the data is forward-looking. With a negative reading for 17 months straight, the recession warning is quite evident. As shown, a recession occurred whenever the Fed hiked rates, and the 6-month rate of change in the LEI was negative by more than 2%.

However, our own Economic Output Composite Index, which comprises more than 100 data points of hard and soft, leading and lagging indicators, confirms the warning of the leading economic index.

Notably, since we know that increases in interest rates impact economic growth, it is unsurprising that when the annual rate of change in interest rates spikes, economic growth slows. Given the magnitude of the current rate of change in interest rates on a heavily indebted economy, the “soft landing” hope seems to be a stretch.

But one indicator suggests recession is most prominent in the second half of 2024.

The Risk Of Recession In 2024 Is Likely

Of all the economic indicators we regularly review, one has continually preceded economic recessions. While “soft landing” hopes are high, the inversion of multiple yield curves suggests those hopes are misplaced. As discussed previously, the media always assumes this time is different regarding yield curve inversions because a recession didn’t occur immediately upon the inversion. There are two problems with this way of thinking.

  1. The National Bureau Of Economic Research (NBER) is the official recession dating arbiter. They wait for data revisions by the Bureau of Economic Analysis (BEA) before announcing a recession’s official start. Therefore, the NBER is always 6-12 months late, dating the recession.

  2. It is not the inversion of the yield curve that denotes the recession. The inversion is the “warning sign,” whereas the un-inversion marks the start of the recession, which the NBER will recognize later.

As discussed in “BTFD Or STFR,” if you wait for the official announcement by the NBER to confirm a recession, it will be too late. To wit:

“Each of those dots is the peak of the market PRIOR to the onset of a recession. In 9 of 10 instances, the S&P 500 peaked and turned lower prior to the recognition of a recession.“

While many analysts will focus on one yield curve inversion, we monitor and track ten different yield spreads affecting various economic areas. Currently, 90% of the yield spreads we monitor, shown below, are inverted, which historically is one of the best leading recessionary indicators. However, even then, it was several months before the economy slipped into recession.

When these yield spreads turn negative, and a recession doesn’t occur immediately, the media discounts the risk. Such is why, before previous recessions, there were “soft landing” hopes. As shown, a recession followed an inversion of 50% or more of the tracked yield curves. Note that during the 1995 “soft landing,” yield curves never inverted. (Read this for a complete history.)

Conclusion

Most importantly,it is NOT the inversion of the yield curves that denote the onset of a recession. It is when the yield curve UN-inverts that marks the start of the recession. When the longer duration yields begin to fall, such will coincide with a decline in economic activity. Then, the “soft landing” hopes will fade into an economic recession reality.

The yield curve is sending a message that investors should not ignore. Furthermore, “risk-based” investors tend to act sooner rather than later. Of course, the contraction in liquidity causes the decline, eventually exacerbating the economic contraction. 

Despite commentary to the contrary, the yield curve is a “leading indicator” of what is happening in the economy. However, the Fed remains focused on economic data that is “lagging” and subject to massive revisions.

While consumers may continue to support economic growth, such will change dramatically when job losses occur. As job losses increase, there is a rapid change in psychology.

Using the “yield curve” as a “market timing” tool is unwise. However, dismissing the message it is sending entirely is just as foolish.

History has not been kind to those that do.

Tyler Durden
Fri, 09/29/2023 – 15:45

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X Shreds Threads As Active Users Hit Record High; Legacy Media Fails To Kill ‘Free Speech’ Platform

X Shreds Threads As Active Users Hit Record High; Legacy Media Fails To Kill ‘Free Speech’ Platform

How it started. 

How it’s going? 

Meanwhile… 

By mid-July, a little more than a week after Meta launched Twitter-clone Threads on July 5, we noted (read: here) a startling trend of the keyword “Twitter Killer” being used by corporate press ahead, during, and after launch. This was a coordinated attack – as the corporate press, and now even some in the Biden administration, want to cancel the free-speech billionaire. 

Have some in the corporate press given up on their Twitter X attacks?

“It’s okay to admit defeat, especially when something is not working out,” Forbes said this week as Threads has lost a whopping 80% of its users since launch. 

And Musk has made it a mission to be that ‘asteroid’ to make legacy, dinosaur media extinct: “I hope people around the world engage in citizen journalism, so we know what’s truly happening and we get real-time, on-the-ground coverage!”

One X user said, “You’d be surprised how many people still don’t notice the bias Let’s give it another year, citizen journalists will continue to expose mainstream media.” 

Tyler Durden
Fri, 09/29/2023 – 15:25

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“It Feels Like A Storm Is Coming”: Gloom Of 2023 Confronts Upbeat End-Of-Year History

“It Feels Like A Storm Is Coming”: Gloom Of 2023 Confronts Upbeat End-Of-Year History

By Michael Msika, Bloomberg Markets Live reporter and strategist

Coming off a rough quarter and with clouds hanging over the continent’s economic outlook, stock investors aren’t getting excited about the remaining months of the year, which have historically been strong.

After three consecutive quarters of gains, the Stoxx 600 is set to end the July-September period with negative returns. The peak interest rate narrative has taken a hit as central banks continued to send hawkish messages, with more work likely needed to bring inflation back to the 2% target.

While the Stoxx 600 only experienced modest declines during the quarter, a heavy sector rotation has played out, with investors taking profit on winners from the first half of the year, such as luxuries, tech and travel, while soaring oil propelled energy stocks higher.

“It feels like a storm is coming,” says Freddie Lait, managing partner at Latitude Investment Management. Investors should “avoid very hot sectors or at least take some money off the table.”

The latest Bank of America fund managers survey showed that overall, they are still pessimistic in the near term. Some 63% of European-based investors predicted downside for the market in the coming months, a consequence of monetary tightening as well as earnings downgrades. The cautious view is echoed by strategists who see range-bound returns at best in the last quarter.

That would come as sharp contrast to the historical returns of the Stoxx 600. Seasonality shows that European equities’ perform best over the last three months of the year. October in particular can be volatile, but the benchmark ended with positive returns in 18 of the past 25 years. This year, however, more losses are likely before a potential rebound.

“A bottom for the stock market is likely to happen during the fourth quarter,” says Matthias Born, equity chief investment officer and portfolio manager at Berenberg. “Sentiment is getting more and more negative, flows are going to cash, positioning is low, which could also create a buying opportunity in a similar way to what we saw last October.”

High rates remain a major problem for stocks, as bonds and cash are now offering a very competitive yield and less risk, especially if earnings estimates start to come down. That in turn would pressure valuations, making stocks more expensive than they currently look.

“Amid peak central banks’ hawkishness and downside risks to the economy, bonds are looking more reasonably priced now and increasingly attractive versus equities,” says Barclays strategist Emmanuel Cau. “History shows that yields tend to move lower after the Fed stops hiking rates, and if the low PMIs are indeed a reliable indicator of growth, equities could have catch-down potential” to bonds.

With no clear signs of recovery, economic surprises in Europe remain negative, while composite PMI has been in contraction since June. Still, earnings are showing resilience, providing a floor to equities, according to Cau. He expects earnings to determine the trajectory of the broader equity market, rather than the direction or the level of rates. 

“Europe is facing macro headwinds with anemic growth and stubborn inflation,” says Andrew McCaffery, global CIO at Fidelity International in his third quarter view. “Activity is slowing and the outlook for equities is cloudy.”

Tyler Durden
Fri, 09/29/2023 – 15:05

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Supreme Court Will Review Fifth Circuit Ruling that Creates a Catch-22 for Takings Claims Against State Governments


Fifth Amendment | NA
(NA)

Today, the Supreme Court agreed to hear Devillier v. Texas, an important takings case. Together with the Cato Institute, I filed an amicus brief urging the Court to take and reverse this terrible decision by the US Court of Appeals for the Fifth Circuit. I hope they will now do exactly that!

I previously wrote about the issues at stake in this case here:

In its important decision in Knick v. Township of Scott (2019), the the Supreme Court reversed Williamson County Regional Planning Commission v. Hamilton Bank, a 1985 decision that made it almost impossible to bring takings cases against state and local governments in federal courts….

In a forceful opinion for the Court, Chief Justice John Roberts denounced this “Catch-22” and emphasized that “[a] property owner has an actionable Fifth Amendment takings claim when the government takes his property without paying for it….”

Access to federal court is crucial to protecting constitutional rights against violation by state and local governments….

Unfortunately, a recent decision by the US Court of Appeals for the Fifth Circuit (which covers the states of Texas, Louisiana, and Mississippi) goes against the principles outlined in Knick and threatens to create a new Catch-22 keeping takings claims out of federal court.

In Devillier v. Texas,…. a Fifth Circuit panel ruled that federal courts have no jurisdiction to hear takings claims against state governments because the Fifth Amendment doesn’t create such jurisdiction, and there is no federal statute establishing it either….

What the court says is simply false. The Fifth Amendment does indeed create a “direct cause of action” against state governments, no less than other provisions of the Bill of Rights do. Nothing in the text or original meaning of the Constitution suggests otherwise….

Even worse, the Fifth Circuit ruling creates precisely the kind of Catch-22 that Knick forbids. Indeed, it may be even worse! This case ended up in federal court in the first place, because—after the plaintiffs initially filed in state court—the state of Texas removed the case to federal court under 28 U.S. Code Section 1441, which allows defendants to remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.”

Under the approach adopted here by the Fifth Circuit, takings claims against state governments cannot be brought in federal court. And if they are instead brought in state court, the defendant state can remove them to federal court and then force their dismissal!….

This is actually even worse than the Williamson County regime, under which takings claims could at least be litigated in state court (though some lower courts did permit the kinds of removal shenanigans the Fifth Circuit blessed here).

If the Supreme Court upholds the terrible lower court ruling, it would essentially give state governments a ready-made path to taking private property without having to pay compensation, as the Fifth Amendment requires. They could simply follow Texas’ example of removing Fifth Amendment takings cases to federal court and then getting them dismissed under 28 U.S.C. Section 1441.

The flaws of the Fifth Circuit ruling are covered in greater detail in my earlier post about this case, and in our amicus brief urging the Supreme Court to hear the case. The Cato Institute and I will likely be filing another amicus brief on the merits, now that the justices will be hearing the case.

The post Supreme Court Will Review Fifth Circuit Ruling that Creates a Catch-22 for Takings Claims Against State Governments appeared first on Reason.com.

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Short Circuit: A Roundup of Recent Federal Court Decisions

Please enjoy the latest edition of Short Circuit, a weekly feature written by a bunch of people at the Institute for Justice.

Happy Friday! IJ is going back to the big show! Read all about it. Or listen to a past episode of the Short Circuit podcast about the case.

And speaking of the Supreme Court: For the latest edition of the Short Circuit podcast, we head over to Stanford Law School to visit with some friends at the Supreme Court Litigation Clinic there.

  • Puerto Rican drug trafficker is arrested, and the ensuing search turns up a 9mm pistol. Whoa! It’s been modified to fire fully automatic—it’s a machine gun! The trafficker is charged with possession of a machine gun in furtherance of a drug crime, which carries a 30-year sentence. He objects that he had no idea the pistol was modified—he was holding it temporarily for his boss—and asks for a jury instruction requiring the gov’t prove he knew the pistol had been modified. The district court denies the instruction, and he’s convicted. First Circuit: Vacated. “The contention that an injury can amount to a crime only when inflicted by intention is … as universal and persistent in mature systems of law as belief in freedom of the human will and a consequent ability and duty of the normal individual to choose between good and evil.”
  • In which the Second Circuit determines that Connecticut’s state-law claims against ExxonMobil for unfair trade practices—allegedly misleading consumers about climate change—belong in state court.
  • Man who fled war in Bosnia at age six wrecks his car on the highway and is convicted of DUI. Deport him? BIA: Yup, he was high on pot, which is federally illegal. Third Circuit: Reversed! It’s the elements of his state DUI conviction, not the underlying conduct, that trigger deportation. And the elements of his conviction did not identify a specific drug.
  • The National Labor Relations Board is an interesting administrative animal. It is an inferior tribunal to federal courts of appeals but follows precedent that it itself has made and that has been expressly disagreed with by … federal courts of appeals. This dynamic was at play in this Third Circuit opinion about a Pittsburgh newspaper that discontinued some of its paper editions and consequently laid off some of its unionized “paperhandlers.”
  • Parties to a dispute about dredging at a Lake Charles, La. port agree to have their case heard by a magistrate judge. After a 20-day bench trial, the magistrate sides with the plaintiff, awarding them more than $124 mil. Uh oh! Nobody told the defendant that plaintiff’s counsel was a groomsman at the magistrate’s wedding, or that the magistrate had officiated the wedding of one of plaintiff’s counsel’s daughters three months before the lawsuit was filed. Fifth Circuit: Which means defendant’s consent to magistrate-judge referral may have been constitutionally insufficient. Remanded for discovery into how close the judge and plaintiff’s counsel really were.
  • Berrien, Mich. officers take incoherent, agitated man—who is accused of damaging property—to ground. He dies of asphyxia. Sixth Circuit (unpublished, over a dissent): A jury should decide if the officers used excessive force after he was on the ground.
  • Illinois has a points-based system for scoring applicants for licenses to operate cannabis dispensaries, but there are far more applicants with perfect scores than there are licenses, so the state holds a lottery limited to applicants with perfect scores. But the only way to get a perfect score is to be an Illinois resident, severely harshing the vibes of two out-of-state cannabis entrepreneurs. They sue, alleging a violation of the dormant Commerce Clause. District Court: And they’re basically right, but they waited to sue until two years after the application deadline and eight months after the lottery results were announced; it would be inequitable to unwind the results now. Seventh Circuit: Quite right. And since Illinois has now removed the bonus for state residents, plaintiffs’ other claims also fail.
  • In which the Seventh Circuit savages a New York-barred lawyer who has spent much of his career getting into trouble in Illinois. In honor of the Seventh Circuit’s fierce aversion to advocates’ mentioning the names of authoring judges when discussing judicial opinions, we will refrain from naming the authoring judge. (But yes it’s exactly who you think it is.)
  • ZoomInfo is an online directory of professionals and their employment information. If you look someone up on their website, you’ll see a “teaser profile,” providing the person’s name, employer, and job title, along with a subscription link to view the full profile. A California labor organizer files a class action, alleging that ZoomInfo violated her (and everyone else’s) right of publicity by using her name and likeness to promote its product without permission. ZoomInfo seeks dismissal under California’s anti-SLAPP law, but is denied. Ninth Circuit: As it should have been. Concurrence 1: We shouldn’t even hear interlocutory appeals of anti-SLAPP denials! Concurrence 2: I also think that!
  • University of Arizona football player—whom the university knew repeatedly and violently assaulted two female undergraduates the previous year—repeatedly and violently assaults female student in off-campus house he shares with other players. She sues under Title IX. Ninth Circuit (en banc): Her case can go forward. She’s sufficiently alleged the university had substantial control over the context in which the assault occurred, that the university knew about it, and that it was deliberately indifferent. Multiple dissents: She didn’t, and we’re really stretching Title IX here.
  • Huntsville, Ala. officers: When we told man—who we suspected of messing with a car that wasn’t his—to produce ID, he jumped up and waved his hands in a physically threatening manner! Which gave us arguable probable cause to arrest. Eleventh Circuit: The four separate video cameras that captured this moment show nothing of the sort. No qualified immunity.
  • After TASER International, Inc. successfully sued Phazzer Electronics for various violations of its intellectual property, the owners of Phazzer, in plain violation of the court’s injunction, just wouldn’t stop selling stun guns! Eventually, a federal court holds them and a former Phazzer employee in criminal contempt. The former employee challenges her conviction on the grounds that, as a former employee, she isn’t bound by the injunctions. Eleventh Circuit: And she successfully dodges this TASER. She might possibly have been subject to criminal contempt for aiding and abetting someone still bound by the injunction, but the gov’t didn’t present that theory.
  • And in en banc news, the Fifth Circuit will reconsider its opinion holding that Mississippi’s felon-disenfranchisement law violates the Eighth Amendment’s prohibition on cruel and unusual punishment.
  • And in amicus brief news, IJ is urging the Seventh Circuit to take probable cause seriously in the context of warrantless roadside automobile searches, including here, where an Urbana, Ill. police officer searched a car based on the alleged smell of “a little bit of weed,” ultimately turning up an illegal handgun. Since weed and hemp are both legal in Illinois, this smells more like the sort of general searches that led the Founders to enact the Fourth Amendment.

Friends, as you may know from this very newsletter, we at IJ have sued the FBI twice already over the same March 2021 seizure: taking money and other valuables owned by people who are not suspected of any crime from hundreds safe-deposit boxes in Los Angeles. (Instead, it was only the business that owned the vaults that was suspected of wrongdoing.) Well, hold onto your hats, because we have just now filed a THIRD separate lawsuit arising from a third distinct outrage: The FBI has lost some of the valuables it seized, including a whopping $123k worth of gold coins from one client. Just up and vanished! And while the FBI so far maintains they haven’t done anything wrong, we maintain that … they really, really have. Click here to learn more.

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On Guns, Drugs, and National Security, Dianne Feinstein Was Consistently Authoritarian


Sen. Dianne Feinstein at a hearing | Graeme Sloan/Sipa USA/Newscom

During Supreme Court Justice Brett Kavanaugh’s 2018 confirmation hearing, Sen. Dianne Feinstein (D–Calif.) asked him to “reconcile” his conclusion that “assault weapon” bans are unconstitutional with “the hundreds of school shootings using assault weapons that have taken place in recent history.” It was a classic Feinstein moment, combining her steadfast support for arbitrary gun laws with blatant misinformation and a logical non sequitur.

Feinstein, who died Thursday night at age 90, wrote the 1994 federal “assault weapon” ban, which prohibited the importation, manufacture, distribution, and possession of semi-automatic guns that she falsely claimed were uniquely suitable for mass murder. Although the distinctions drawn by that law never made much sense, Feinstein was determined to reinstate the ban after it expired in 2004, proposing a series of new, supposedly improved versions. Her dedication to a logically, practically, and constitutionally dubious gun control policy was of a piece with her diehard support for the war on drugs, her embrace of mass surveillance in the name of national security, and her willingness to restrict speech protected by the First Amendment, all of which reflected her consistently authoritarian instincts.

Feinstein’s exchange with Kavanaugh was a window into the way she thought about public policy. Feinstein demanded an explanation for Kavanaugh’s dissent from a 2011 decision in which the U.S. Court of Appeals for the D.C. Circuit upheld the District of Columbia’s “assault weapon” ban. As he noted in that opinion, the D.C. law (like Feinstein’s bills) covered a “haphazard” set of arbitrarily selected guns “with no particular explanation or rationale for why some made the list and some did not.” Kavanaugh concluded that the ban was inconsistent with District of Columbia v. Heller, the 2008 case in which the Supreme Court recognized that the Second Amendment guarantees an individual right to armed self-defense.

As Kavanaugh explained to Feinstein, Heller says the Second Amendment protects the right to keep handguns for self-defense, while allowing that bans on “dangerous and unusual” weapons—firearms that are not “in common use” for “lawful purposes”—would be constitutional. “Most handguns are semi-automatic,” Kavanaugh observed. “The question was can you distinguish, as a matter of precedent,” between semi-automatic handguns and semi-automatic rifles. He noted that “semi-automatic rifles are widely possessed in the United States; there are millions and millions.” To Kavanaugh, that meant the guns that Feinstein wanted to ban were “in common use” for “lawful purposes” such as self-defense and hunting, so possession of them was protected by the Second Amendment.

But Feinstein was not actually interested in Kavanaugh’s legal reasoning. “How do you reconcile what you’ve just said with the hundreds of school shootings using assault weapons that have taken place in recent history?” she asked. In addition to wildly inflating the actual number of mass shootings at schools (with or without “assault weapons”), the question was nonsensical. Although handguns are by far the most common kind of weapon used in firearm homicides (including mass shootings), the Supreme Court in Heller nevertheless had upheld the constitutional right to own them for self-defense. There is obviously a difference between the empirical question of how often a particular category of firearms is used to commit crimes and the legal question of whether that category is covered by the Second Amendment.

Feinstein either did not understand or was determined to obscure that distinction, preferring an emotional appeal to anything resembling a constitutional argument. She showed the same impatience with legal niceties in a 2013 exchange with Sen. Ted Cruz (R–Texas), who had the temerity to join Kavanaugh in questioning the constitutionality of her pet legislation. “I’m not a sixth-grader,” she said, objecting to Cruz’s “lecture.” Although “I’m not a lawyer,” she added, “I’ve been up close and personal to the Constitution.” But aside from her suggestion that “assault weapon” bans fell under “exceptions” recognized in Heller, Feinstein’s purported intimacy with the Constitution did not yield any relevant insights.

Feinstein instead appealed to her personal experience with gun violence, starting with the day in 1978 when Dan White used a revolver to kill San Francisco Mayor George Moscone and Supervisor Harvey Milk. “Senator, I’ve been on [the Senate Judiciary Committee] for 20 years,” she said. “I was a mayor for nine years. I walked in. I saw people shot. I’ve looked at bodies that had been shot with these weapons. I’ve seen the bullets that implode [sic]. In Sandy Hook, youngsters were dismembered.” In short: If you think Americans have a right to own guns that can be used to kill innocent people, you hate children and want them to die.

When it came to drug policy, Feinstein was equally undaunted by facts and logic. She not only pushed the pseudoephedrine restrictions that have incommoded cold and allergy sufferers across the country without having any impact on methamphetamine use; she joined Sen. Chuck Grassley (R–Iowa) in proposing legislation aimed at the mythical threat of candy-flavored meth. She not only opposed legalization of recreational marijuana in California; she worried that the Justice Department was not responding aggressively enough to legalization in Colorado and Washington.

Even on medical use of marijuana, which 38 states currently allow, Feinstein did not yield an inch. In 2015, she was the only Democrat on the Senate Appropriations Committee who voted against a spending rider that bars the Justice Department from interfering with such laws.

Feinstein argued that the violence fostered by prohibition was a good reason for the government to redouble its efforts to discourage drug use. She was ever eager to expand the war on drugs, whether the target was imitation marijuana or Four Loko.

In addition to gun violence and drug abuse, Feinstein worried a lot about national security, an area where she likewise displayed little concern for civil liberties. She dismissed revelations about the National Security Agency’s mass, warrantless collection of information about Americans’ telephone calls, saying it was “just metadata.” She thought WikiLeaks founder Julian Assange should be prosecuted for publishing classified information of clear public interest, even though that is something journalists who cover national security routinely do. Caught up in the hysteria about Russian trolls, she warned social media companies they had better “do something” about “disinformation,” or else “we will.” Combining two of her interests, she said anyone “appropriately suspected” of involvement in terrorism should lose his Second Amendment rights based on “a reasonable belief” that he “may” use a gun “in connection with terrorism.”

Based on her votes, the Institute for Legislative Analysis reports that Feinstein adhered to a “limited government” position 5 percent of the time. The best that can be said about her long career as a politician is that she pursued policies she honestly thought would work in the name of causes she genuinely cared about. But her good intentions produced positions that almost always seemed to err in favor of more government power and less individual freedom.

The post On Guns, Drugs, and National Security, Dianne Feinstein Was Consistently Authoritarian appeared first on Reason.com.

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S. Ct. Will Consider Constitutionality of Laws Limiting Social Media Platform Moderation Decisions

The Supreme Court has just agreed to hear these cases, limited to these questions (as articulated by the Solicitor General’s brief for the federal government):

These cases concern laws enacted by Florida and Texas to regulate major social media platforms like Facebook, YouTube, and X (formerly known as Twitter). The two laws differ in some respects, but both restrict platforms’ ability to engage in content moderation by removing, editing, or arranging user-generated content; require platforms to provide individualized explanations for certain forms of content moderation; and require general disclosures about platforms’ content-moderation practices. The questions presented are:
1. Whether the laws’ content-moderation restrictions comply with the First Amendment.
2. Whether the laws’ individualized-explanation requirements comply with the First Amendment.

The Court declined to grant review on two other questions, though they might still indirectly play a role in the analysis of the first two questions:

3. Whether the laws’ general-disclosure provisions comply with the First Amendment.
4. Whether the laws violate the First Amendment because they were motivated by viewpoint discrimination.

I’m traveling today, so I don’t have much to add right now, but I thought I’d put up a post so our readers can discuss the matter. I’ve also written a law review article on this general topic, in Treating Social Media Platforms Like Common Carriers?

The post S. Ct. Will Consider Constitutionality of Laws Limiting Social Media Platform Moderation Decisions appeared first on Reason.com.

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Positive Term Premia Drive Yields And Steeper Curve

Positive Term Premia Drive Yields And Steeper Curve

Authored by Simon White, Bloomberg macro strategist,

Rising term premia, which have recently turned positive again, has been driving the rise in yields and the bear steepening in the yield curve, with more likely to come.

After spending most the past six years negative, bond risk premia, aka term premia, are positive again on long-dated Treasuries (measures such as the ACM term premium is shown in the chart below; Kim and Wright term premium also recently turned positive).

Term premia have fallen relentlessly since the GFC, driven by central-bank appetite for bonds through QE, and from the appeal of fixed-income as a portfolio hedge.

But with the stock-bond correlation positive again, driven by elevated inflation and inflation expectations, bonds are losing their efficacy in the traditional 60/40 approach to portfolio investing. Term premia are rising to reflect this.

As colleague Ed Harrison just noted, it’s not only the change in Fed expectations that’s driving the move in yields. When it comes to the yield curve, it is term premium’s rise that’s been behind the recent bear steepening. The yield curve and term premium have tracked each other very closely over the last 30-40 years.

There’s likely more to come. Inflation expectations remain historically elevated, and point to term premia’s rise continuing.

Tyler Durden
Fri, 09/29/2023 – 14:25

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“Something Dangerous Is Happening In America” – Biden Warns Of Trump’s “Extremist Movement”, Blasts Republicans’ Silence

“Something Dangerous Is Happening In America” – Biden Warns Of Trump’s “Extremist Movement”, Blasts Republicans’ Silence

Authored by Emel Akan via The Epoch Times (emphasis ours)

President Joe Biden delivered a speech about democracy on Sept. 28 in Arizona, a key battleground state for the 2024 election. He took aim at his predecessor, President Donald Trump, and expressed concerns about a “dangerous” trend unfolding in the United States.

“As I’ve always been clear, democracy is not a partisan issue. It’s an American issue,” President Biden said.

“But there is something dangerous happening in America. There is an extremist movement that does not share the basic beliefs of our democracy. The MAGA Movement.”

President Joe Biden gives a speech at the Tempe Center for the Arts on Sept. 28, 2023, in Tempe, Arizona. (Rebecca Noble/Getty Images)

According to the White House, this is the fourth speech by the president focused on democracy.

President Biden began his speech by honoring the legacy of his late friend and colleague Sen. John McCain (R-Ariz.) and announcing the creation of the McCain Library.

Mr. McCain’s family and Arizona Gov. Katie Hobbs, a Democrat, were among those in attendance during his speech in Tempe, Arizona.

“I have come to honor the McCain Institute and Library because they are home to a proud Republican who put country first,” President Biden said.

“Not every Republican—not even the majority of Republicans—adhere to the extremist MAGA ideology. I know because I’ve been able to work with Republicans my whole career.

“But there is no question that today’s Republican Party is driven and intimidated by MAGA extremists.”

The president delivered his speech a day after the second Republican debate in California, during which the candidates displayed no signs of narrowing the gap with former President Trump, the Republican frontrunner for 2024.

On Sept. 28, the House Oversight Committee held the first hearing of its impeachment inquiry into President Biden.

It focused on President Biden’s potential involvement in his son’s business dealings during his tenure as vice president under President Barack Obama.

The challenges don’t end there for the 46th president. President Biden faces continued low approval ratings as the majority of Americans are unhappy with his handling of the economy.

In a mid-September NBC News poll, independent voters gave President Biden a dismal 36 percent approval rating.

More than 3 in 5 Democrats and Democratic-leaning independents say they would prefer a nominee other than President Biden, according to a recent Washington Post–ABC News poll.

‘Silence Is Deafening’

President Biden spoke out against the former president’s recent social media post in which he accused the chairman of the Joint Chiefs of Staff, Gen. Mark Milley, of committing treason.

President Trump suggested that Gen. Milley had colluded with China, a conduct he said would have once resulted in death.

“This is an act so egregious that, in times gone by, the punishment would have been death!” President Trump wrote on Sept. 22 on his Truth Social platform.

“Although I don’t believe the majority of Republicans think that, the silence is deafening,” President Biden said during his speech in Arizona. “Hardly any Republican called out such hated statements.”

He later urged Democrats, Republicans, and independents to stand up for democracy.

“Put our country first. We can’t take democracy for granted,” President Biden said.

Ambassador Cindy McCain speaks prior to President Joe Biden’s remarks at the Tempe Center for the Arts in Tempe, Arizona, on Sept. 28, 2023. (Rebecca Noble/Getty Images)

Prior to President Biden’s speech, U.S. diplomat Cindy McCain, the widow of Sen. John McCain, took the stage and highlighted the friendship between her late husband and the president.

“President Biden and Mrs. Biden introduced me to my husband, and I’m so grateful for that,” Ms. McCain said.

During his visit to Vietnam on Sept. 11, President Biden stopped by the John Sidney McCain III Memorial to honor his late friend and colleague, whose plane was shot down over Hanoi in 1967 during the Vietnam War.

“It was an emotional trip,” President Biden said in Arizona. “As I stood there, paying my respects, I thought about how much I miss my friend.”

A climate activist interrupted President Biden during his speech and urged him to take action against fossil fuels.

“I’ll tell you what. If you shush up, I’ll meet with you immediately after this. OK?” the president said.

Republicans criticized the president for refusing to visit the southern border.

“Today, President Biden is in Arizona, but instead of visiting the border to get a firsthand look at the crisis, he’ll be at a campaign fundraiser,” Sen. Katie Boyd Britt (R-Ala.) wrote on Sept. 28 on social media platform X, formerly known as Twitter.

“He can fly to his beach house on the weekends, but he can’t fly less than 30 minutes to the border?”

Tyler Durden
Fri, 09/29/2023 – 13:45

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