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House GOP Files Suit Against Obamacare Implementation

Republicans in Congress, led by Speaker John
Boehner, have been promising to sue President Obama over
implementation of the Affordable Care Act for months, and now
they’ve officially done it. 

As expected, the suit takes aim at the administration’s multiple
delays of the health care law’s employer mandate, which, as I’ve
written before, is almost certainly illegal.

It also challenges the $175 billion in expected spending on
cost-sharing under the law—federal funds paid to insurers to offset
some out of pocket health care costs for lower income individuals.
The suit argues that no funds were appropriated for cost-sharing
expenses, and that the payments being made by the administration
are therefore illegal. 

This part of the challenge wasn’t revealed until today,
and there’s been very little discussion of it up to
now. 

Republicans had some trouble finding an attorney to take
the case; the first two lawyers hired by Boehner quit the case
before the challenge was filed. Earlier this week, however, Boehner
announced that he had hired George Washington University Law
Professor Jonathan Turley, a longtime critic of expansive executive
power, to handle the case. 

You can view the complete complaint below.

House
v Burwell (D D C ) – Complaint (FILED) (1)

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Ronald Bailey: Rand Paul May Regret Voting Against the USA FREEDOM Act

Rand PaulEarlier this week, the USA FREEDOM Act needed the
votes of 60 senators in order for debate on the bill to proceed.
The bill would have reined in aspects of massive domestic spying on
innocent Americans by the National Security Agency. The bill
garnered only 58, and so it did not make it to the floor. One of
the 42 voting against was Sen. Paul. Why? Paul said that he opposed
the legislation on the grounds that it extended three
unconstitutional provisions of the PATRIOT Act. Civil libertarians
were disappointed by Paul’s vote. Reason Science
Correspondent Ronald Bailey worries that the senator has allowed
his advocacy for the perfect to get in the way of the merely
better.

View this article.

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Here’s the most bizarre currency you’ve probably never heard about.

Whiskey Rebellion tax Here’s the most bizarre currency you’ve probably never heard about.

November 21, 2014
Santiago, Chile

John Lynn was bound and gagged, as the angry mob tied him to a tree and poured a barrel of scalding hot tar over his freshly shaven head and coated him in feathers.

It was June 1794 and the crowd was absolutely frantic. They were taking justice into their own hands.

Lynn’s crime, in their eyes, was having extended lodging to a federal tax collector, who’d come down to enforce a recently imposed excise tax on whiskey.

The brand new US government was deeply in debt and starved of revenue sources to pay back their bondholders. So they did what all governments do in that position: they created a new tax.

They targeted whiskey simply because it was far and away the most popular drink in America.

It was so popular that it was even used as a medium of exchange and a store of value.

You could pass a bottle of the stuff to somebody as a payment for debt owed, and farmers would often turn their excess crop into whiskey as a way to store value for the future.

Whiskey is what people had, what people used, and what people wanted. Therefore it was whiskey that was taxed.

This was a dangerous move, as the American-made drink had risen to popularity during the Revolution, giving it a flavor of patriotism and rebellion—which is why the citizens of Western Pennsylvania weren’t going to take this lying down.

So to enforce their tax law, the new government did so at the point of a gun. Going against all the principles that people had just fought for in the Revolution.

It was the first time in US history that this happened, but it certainly would not be the last.

You can learn more about this in today’s podcast as we discuss where this is going and what bankrupt governments are going to tax next.

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Least Transparent Ever – Obama Administration Fighting to Prevent Release of C.I.A. Torture Report

Screen Shot 2014-11-21 at 11.10.34 AMIf you’re already reading this site, you don’t need me to tell you how much of a fraud Barack Obama is. His love affair with cronyism and a devotion to a lack of transparency has been documented in countless venues for many years now. Nevertheless, his actions continue to do irreparable harm to this nation and as much as it has become a tedious affair at times, highlighting his hatred for justice remains an important job.

His latest intervention on behalf of the forces of opacity, revolves around the release of a report on CI.A. torture put together by The Senate Intelligence Committee, which is 6,000 pages long and has been five year in the making. Naturally, the Obama Administration is going to painstaking efforts to block its release.

The New York Times reports that:

continue reading

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The Average Hedge Fund Is Down -1% YTD, And The Redemption Requests Are Now Flooding In

A year ago, when we reported that “Hedge Funds Underperform The S&P For The 5th Year In A Row“, we thought there is no way this underperformance can continue: after all who in their right mind could possibly anticipate that a “risk-free” centrally-planned world could last for 6 years (well, maybe the USSR).

Back then we explained this now chronic, “new abnormal”, regime as follows: “hedge funds are “hedge” funds and appear to have done a great job managing performance over time… but in the new normal world in which we live, where downside risk is irrelevant (until it runs you over), all that matters is return (not risk-reward).”

And yes, as the chart below shows we were wrong: because as of this moment the average hedge fund is not only underperforming the market for a record, 6th year in a row…

 

But as Goldman pointed out last night, the return of the entire hedge fund universe as of NOvember 19 is… negative 1%.

 

Why? Because virtually the entire hedge fund community was positioned incorrectly going into, and then continuing in 2014, thanks to a massive bond short, which every time it appears to start working, an exogenous shock forces round after round of short covering sprees.

That and, of course, the fact that the Fed has inverted the cost of capital, and the worst of the worst companies can issue junk debt at 5%.

Ironically, it was Goldman which was at the forefront of the sellside crew pushing hedge funds to short the 10Year because any minute now the economy would soar.  Instead we now have the BOJ, The ECB, the Fed and as of last night, the PBOC, all engaging in collective easing.

Here is Goldman’s mea culpa-cum-explanation:

A combination of macro and micro headwinds has challenged hedge funds in 2014, putting most on pace for another year of disappointing returns. The average hedge fund has posted a negative 1% return YTD, compared with +13% for S&P 500 and +11% for the average large-cap mutual fund. According to HFR data through Nov. 19, macro funds have fared best (+4%), while equity long/short funds have averaged a +1% return

 

 

Low volatility and dispersion have posed obstacles to fund returns this year, and we expect this trend to continue in 2015. Low dispersion, measured as the cross-sectional standard deviation of S&P 500 stock returns, indicates that the potential alpha to be gained from stock picking is small. Historically, low volatility and return dispersion have coincided with poor relative returns of both hedge funds and mutual funds. Market timing has also been a challenge: at the start of 4Q, funds were operating at 54% net long exposure, a new record high, just before the October pullback.

 

 

Strong US economic growth has historically been associated with low dispersion, and we expect both trends will continue in 2015. S&P 500 return dispersion hit historical lows in 2014. While dispersion should be modestly higher in 2015, our forecast of abovetrend US GDP growth suggests that both dispersion and volatility will remain below historical averages, implying another challenging year for fund performance lies ahead.

 

Unusual underperformance of the most popular hedge fund long positions highlights the challenges from sector positioning. Our VIP list (Bloomberg: GSTHHVIP) has outperformed S&P 500 by 60 bp in 2014 (13.5% vs. 12.9%) after outperforming by 9 pp in 2013 and 7 pp in 2012. One drag on returns has been Consumer Discretionary stocks, which account for 24% of the basket and 21% of net fund positioning (page 13). The list also contains no Utilities, the second best-performing sector YTD. Hedge funds were also overweight the Energy sector at the start of 4Q, even as oil prices had begun to plummet.

Yes, that’s all great, however for the average hedge fund PM, who is about to collect zilch on its 20% “incentive fee”, Goldman’s attempt at justification doesn’t buy that Christmas trip to Fiji.

And neither will this. Because while we have been skeptical for the need for hedge funds under a centrally-planned market when the Fed and its central bank peers are the biggest risk managers around, and where one can just buy the S&P for zero cost and outperform 98% of hedge funds, investors are finally noticing.

Which is probably why as Reuters reports, the redemption flood has finally arrived and “client requests to take out money from hedge funds rose to an 11-month high in November, data released on Thursday showed.”

The SS&C GlobeOp Forward Redemption Indicator, a snapshot of hedge fund clients giving notice to withdraw cash expressed as a percentage of assets under administration, rose to 5.05 percent in November from 3.12 percent in October and the highest since December last year. The index is compiled by fund administrator SS&C Technologies Holdings Inc and is based on data provided by its fund clients, who represent about 10 percent of the assets invested in the hedge fund sector.

Our condolences to the hedge funds, most of them, who for the 6th year in a row failed to outperform stocks: it probably will be your last. But feel free to send your complaints to the No Rat’s Asses to Give Here Department at the Marriner Eccles building c/o Janet Yellen and her Princeton- and MIT-educated central-planning peers around the globe.

And look at the bright side: since in the current risk-free, centrally-planned environment, virtually all hedge funds are assured a quiet, painless (one hopes) death, you will at least have a head start on your peers, who are still in the industry betting it all on lucky year 7, and maybe learn an actual skill that has practical uses in the real world aside from just clicking a red or green button.




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Why Banks Should Not Be Allowed To Manipulate Metals Markets In 4 Simple Points

As Day 2 of Carl Levin’s Senate hearing on the fact that banks did indeed corner and rig the physical commodity markets – with the erosion of the line separating banking from commercial activities leading to the detriment of consumers and the financial system – we thought the world needed a ‘dummy’s guide’ to why the biggest banks should not be allowed to do this… or in legalese, here are the four most negative effects of allowing FHCs to engage in Complementary Commodity Activities.

 

Re: Comment letter on Advanced Notice of Proposed Rulemaking regarding “Complementary Activities, Merchant Banking Activities, and Other Activities of Financial Holding Companies related to Physical Commodities” (Docket No. R-1479)

Dear Mr. Frierson:

Questions 16 and 17 of the ANPR ask whether allowing FHCs to engage in Complementary Commodities Activities creates “conflicts of interest” or other “adverse effects.” We believe a number of adverse effects have arisen in the aluminum market due to FHCs simultaneously owning physical metal, trading in metal derivatives, and owning official LME storage warehouses of the metal. We further believe the negative dynamics occurring in the aluminum market also appear in the markets for other industrial metals, and could appear in markets for other commodities.

Four negative effects of allowing FHCs to engage in Complementary Commodity Activities stand out in particular (and for further detail, please see http://ift.tt/1t7R1J6):

1) FHCs have been permitted to own an outsize share of official LME metals warehousing. With such warehouse market power, they can exercise manipulative control over aluminum prices and stifle competition. Anyone who buys metal on the LME and wishes to take possession of it is forced to do so through an LME warehouse. Warehouse owners with such outsize market power have driven up wait times for these buyers to hundreds of days, and have increased rents on their metal during the wait. This behavior constricts supply and drives up the costs of getting metal out of the LME system. In turn, this creates a distortive force on the broader market for metal—thereby driving up industrial costs, which are passed down to consumers in the form of higher prices. The LME system—a so-called market of last resort—should be a force for keeping industrial premiums down, but it has ceased to function in this role.

Additionally, with the profits from higher rents flowing from longer queues, FHCs can incentivize producers to sell more aluminum into their warehouses, and thereby compete with industry and bid up the price of metal—again, driving up aluminum prices. As J. Christopher Giancarlo said in a confirmation hearing before the United States Senate Committee on Agriculture, Nutrition, and Forestry, “Absolute dominance can lead to absolute abuses.” Sharon Bowen, at the same hearing, echoed these sentiments: “Any time you can control both the demand and supply of a commodity, that. . . needs to be looked at, because it could be recipe for manipulation,”

2) Allowing FHCs to own metal, trade derivatives, and own the LME warehouses in which metal is stored gives FHCs the ability to gain insider information about the future moves of metal in and out of the market, and then trade on such information. The rest of us, who don’t own warehouses, cannot do the same. Insider trading in equities markets is illegal. Those laws are designed to prevent individuals from profiting from non-public information. But no such laws exist in commodities markets, thereby misaligning incentives, and, most importantly, eroding public trust in commodities markets. If a CEO can’t sell his company’s shares because he knows the company is about to report small profits, why can a trader sell metals futures right before he knows his company is about to dump large amounts of metal on the market?

3) Allowing FHCs to own metal, trade derivatives, and control warehouses allows FHCs to profit by quickly moving large amounts of metal in and out of the LME market system. When large quantities of metal leave or enter the system, the broader market perceives shifts in supply and demand. A FHC with outsize stocks of metal could take advantage of such a scenario by buying futures, moving a large quantity of metal off LME warrant (signaling a greater demand and reduced supply, causing prices to rise), and then selling the futures at a higher price. But the metal may have never left the warehouse at all. There is, in reality, no industrial demand for the metal, but its price has gone up.

4) And all of this behavior is financed by the American taxpayer. Owning and trading in physical metal requires significant upfront capital, which is typically borrowed. Because FHCs have access to the discount window, and benefit from an implied “too big to fail” loan guarantee, they have a government subsidized advantage over industrial buyers and smaller traders who must pay higher financing fees. Quite ironically then, it is the American taxpayer who is subsidizing FHC activity that causes higher prices on the everyday goods purchased by those same taxpayers.

 

Source: Manal Mehta of Sunesis Capital

Alum




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Immigration and the Constitution: Does Obama Have the Law of the Land on His Side?

As Robby Soave previously
noted, libertarian George Mason University law professor (and
sometime Reason contributor) Ilya
Somin has written
a constitutional defense of President Barack Obama’s unilateral
immigration action. I wanted to highlight one particular prong of
Somin’s argument. He writes:

the immigration laws covered by the president’s executive order
may go against the original meaning of the Constitution. Under the
original understanding, Congress did not have a general power to
restrict immigration (though it did have power over
naturalization). That may not matter to adherents of “living
constitution” theories of legal interpretation. It also should not
matter to those who believe that the Constitution generally means
whatever Supreme Court precedent says it means. Immigration
restrictions have been deemed permissible under longstanding
precedent dating back to 1889.

But it should matter to those who consider themselves
constitutional originalists, which includes many of the
conservatives who have been most vehement in opposing Obama’s
actions today. If you believe that the Constitution should be
interpreted in accordance with its original meaning, and that
nonoriginalist Supreme Court decisions should be overruled or at
least viewed with suspicion, then you should welcome the use of
presidential discretion to cut back on enforcement of laws that
themselves go against the original meaning.

I am no fan of the Obama administration’s approach to
constitutional interpretation. In too many instances, the president
really has acted illegally and undermined the rule of law – most
notably by starting wars without congressional authorization. But
today’s decision isn’t one of them.

This is a compelling argument. America’s current immigration
regime does raise significant constitutional questions and should
therefore be viewed with suspicion by constitutional originalists.
Unfortunately, the Obama administration is not making that
argument. In fact, the White House has done its best to undermine
Somin’s position and hinder its future success.

How? By repeatedly embracing a sweeping theory of congressional
power that would certainly cover the federal immigration policies
at issue here. For example, in the 2012 litigation over the Patient
Protection and Affordable Care Act, the Obama administration fully
embraced the Supreme Court’s notorious 2005 decision in Gonzales
v. Raich, which said that California residents using
medical marijuana legally under state law are nonetheless still
subject to criminal sanction under the federal Controlled
Substances Act. Why? Because the Commerce Clause allows Congress to
“regulate activities that substantially affect” the nation’s
commerce. And according to Raich, such activities include
the purely local act of cultivating and consuming a plant entirely
within the confines of a single state.

Well, if that sort of activity now falls within the reach of
Congress via the Commerce Clause—which covers both interstate
commerce and “Commerce with foreign Nations”—it’s hard to see how
today’s immigration controls would not also fall within the White
House’s broad conception of congressional power. Foreign migrants
arriving in the United States have at least as much of a
substantial commercial impact as do medical marijuana patients
whose local treatment is sanctioned by state law. The original
Constitution may not have granted Congress the authority to impede
immigration as it does today, but that document also did not grant
Congress the power to regulate purely local economic activity as it
does today. The modern Commerce Clause interpretation endorsed by
the White House, however, would seem to cover both.

To be sure, Professor Somin has identified a strong originalist
argument for use against today’s federal immigration system. Too
bad the Obama administration lacks the constitutional understanding
to make that argument stick.

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Buffalo Police Shot 92 Dogs Since 2011; More Than a Quarter By One Cop Alone

CindyPolice in Buffalo have shot 92 dogs since January
1, 2011, 72 fatally, according to WGRZ, which requested use of
force reports for its report on police puppycides in Buffalo.

WGRZ begins with an incident from
June of last year, when police shot an Iraq war veteran’s
six-month-old pitbull Cindy—an incident still being investigated
internally.

It gets worse:

During the time period analyzed by WGRZ-TV, one individual
officer shot 26 dogs, killing nearly all of them. In the years 2011
and 2012 alone, this officer killed as many dogs in the line of
duty as the entire NYPD.

The Buffalo Police Department does not train specifically for
canine encounters, according to Richards, even though dozens of
other police departments across the United States have recently
implemented new training procedures to deal with dogs. Unlike other
departments, officers in Buffalo do not use Tasers, spray or other
tools to contain animals in a non-lethal manner.

“It has not come to that point in Buffalo,” Richards said, “that
we’ve implemented any of those other techniques.”

Police, and WGRZ, attribute many of these shootings to
“high-intensity raids and search warrant executions, which often
involve split-second decisions and fast-paced pursuits of armed and
dangerous subjects.” The police department says it’s executed 357
search warrants this year, and claims to respond to 1,000 calls a
day.

WGRZ compared Buffalo’s dog shooting total, which comes out to
23 per year from 2011 to 2014, to other cities. Cincinnati, of
similar size, saw 7 dog shootings per year in the same time period.
WGRZ also found 36 dog shootings by the NYPD in 2011 and 2012, with
only 21 fatalities in that period, at least 90 per year in Chicago
between 2008 and 2013, at least 50 police shootings of dogs in
Milwaukee between 2000 and 2008, and at least 37 per year from 2009
to 2012 in Southwest Florida.

Some police departments train their officers how to interact
with dogs using live animals, but Buffalo’s police chief rejected
that idea, saying he’s never heard of it. He should WGRZ’s whole
report, and so should you,
here.

h/t sarcasmic

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