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Brexit Process Getting More Complicated

A ruling by England’s High Court has called into question whether the government of the United Kingdom will follow through on the results of the Brexit referendum and actually withdraw from the European Union. The High Court ruled that the British government could not invoke Article 50 of the EU Lisbon Treaty, which governs separation from the EU, without a vote of approval in Parliament.

Conservative Prime Minister Theresa May, who was in favor of the United Kingdom remaining in the European Union but says she is now committed to Brexit and making the UK a “fully-independent, sovereign country” again, intends to appeal the ruling to the Supreme Court, established in 2005. May telephoned the European Commission President, Jean-Claude Juncker, Germany Chancellor Angela Merkel, and other EU leaders insisting her government was working to invoke Article 50 by next March. The EU and the UK will have two years from the day Article 50 is invoked to negotiate a British withdrawal from the European Union before an automatic withdrawal kicks in.

The European Union, started as a common market, has become the most complex supra-national government in world history. While its foundations are the free movement of people, goods, services, and capital within its broader borders, a vast political bureaucracy has also been built.

If May loses the appeals, her government will have to submit legislation to Parliament. Nick Clegg, former deputy prime minister and the Europe spokesperson for the Liberal Democrats, indicated his party would try to amend the legislation in order to keep the United Kingdom in the European Union’s single market, and that he’d like to see the public get “a say” on the final deal. Given Article 50 starts a clock on withdrawal, it’s unclear how a second referendum would work. The EU has signaled it will not start Brexit negotiations until the British government invokes Article 50. In order to accommodate a second referendum, the EU would have to indicate that the British government was allowed to go back on Article 50.

The June referendum in which British voters narrowly chose to leave the European Union, was a “consultative” referendum that did not have the force of law. Opponents of the results insist because it was consultative it requires a vote in Parliament before government action. Some members of parliament have suggested a snap election prior to such a vote.

Before the Brexit vote, David Cameron, prime minister at the time, told the House of Commons that a vote to leave meant triggering Article 50 and that “the British people would rightly expect that to start straight away.” While the prime minister, who campaigned for Remain, insisted throughout that the vote was not a referendum on him, he resigned after the Leave campaign won. Some leave campaigners hinted that it was possible to use a Leave vote to renegotiate better terms with the EU without invoking Article 50, but after the vote EU leaders, looking to discourage other populations from making a similar democratic decision, insisted the UK was obliged to invoke Article 50 and that no more renegotiations of membership would take place.

Opponents of Brexit have also pushed the idea that voters made the wrong choice or that in some other way the results didn’t matter. They say a small amount of voters may have changed their mind and point at the slim margin of victory (about 4 points)—this could be a good point. Britain has long had a complex relationship with the EU different from other member states that more easily ceded more of their sovereignty to European institutions. This vote was framed as the end of that dance—either the UK would commit to the European project or it wouldn’t. Under such conditions perhaps it would have been a lot fairer to require a two thirds majority to pass. Consent is important, and if British voters are being asked to make more permanent the ceding of their sovereignty from their Parliament to Brussels, perhaps half or almost half of them saying no is something that should stop such a significant and transformational transaction.

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“This Is Simply Abnormal” – RBC Explains The “Current Insanity Of Single-Stock Behavior”

After 8 consecutive days of declines in the S&P – a losing streak that however will likely end today absent a big surprise toward the end of trading today – traders are rightfully asking themselves, what’s going on, and why is the widely promised “election rally” not here? One attempt to answer what may be taking place in a suddenly very strange market is courtesy of RBC’s head of X-asset strategy, Charlie McElligott, who points out that some of the moves seen in recent days are “simply abnormal” and more concerningly warns that what we are seeing now is reminiscent of what took place in the market almost exactly one year ago:

Interestingly, it’s starting to rhyme a bit with late last year—longs being built in banks on higher rates expectations against a desire to underweight the bond proxies (as we see desire to short USTs again on inflation expectations / rate hike / curve steepening talk from CB’s all conspiring against them), and despite this recent risk drawdown, we have seen tech and high-beta flying of late.  Something to be mindful of, as the last three Januarys have seen CRUSHING contrarian moves (stocks sharply lower, USTs massively ‘bid’).

If McElligott is right, then any relief rally to follow the Tuesday election will likely be faded. Of course, if the market does crash on Wednesday morning in a “Brexit rerun”, then it will be up to the Fed to reinvigorate animal spirits, which however will certainly not happen with a rate hike just one month later.

From RBC’s Charlie McElliggott:

RBC Big Picture: Stranger Things

THE CURRENT INSANITY OF SINGLE-STOCK BEHAVIOR: Apologies to pure macro readers for so much stocks focus of late, but it continues to be accurate to say that all of the action is taking place in equities right now…and stick with me, because there is  some good macro thought-below.  Man was yesterday a bizarre one in US equities….and even stranger, it’s happening in a relative vacuum, as the rest of the macro / cross-asset universe is lulled to sleep with much tighter ranges on the day.

The behavior in equity vol is one thing (as tails were massively bid yesterday—SPX 1m 80% moneyness was +10.2% on the session, while ‘vol of vol’ is now +34 vols / +40.1% over the past 8 sessions)…but the price-action in single-stock was the stuff we haven’t seen since the Q1 market-neutral factor unwinds ripping through the pod-shops…where for a stretch in late Jan / early Feb, teams / books were being blown-out on daily basis around the Street.

Back then, it was ‘bad-positioning’ from the buyside based on macro impact on style factors. 

  1. Everybody came into January ‘16 long growth & momentum (and thus, “high beta”), aka “story stocks” in tech and discretionary, along with major healthcare sector overweights (biotech / spec pharma / generic drug makers).  Similarly, there was a huge belief in “short bonds” to start the year too–as seemingly the Fed’s long-awaited rate-hiking cycle had just begun the month prior–as such,
  2. there was a massive long in financials / banks on expectations of higher rates.  And to put the cherry on top,
  3. there was a major quant / stat arb long in energy, anticipating a January ‘mean reversion’ (a tried-and-true back-tested phenomenon). 

In hindsight, it is absolute insanity how ‘bad’ that all was—you couldn’t construct it any worse.  As such, the pain trade “went to 11,” as risk-assets were purged under the weight of the deflation scare: China came out of the gates with further Yuan devaluation, crude was -10% on the month, and UST 10Y yields were absolutely obliterated, moving from 2.30 the last day of Dec ’15 to 1.65 by Feb ’16. With all of this, growth and momentum came unglued, the move lower in rates not only crushed bank longs but also too saw a massive rotation into the (dreaded) ‘bond proxies’—‘low vol’ factor, dividend yield, defensive sectors.  You know the rest…

So fast-forward to now: what’s so incredible about the behavior witnessed over the past few days ‘under the hood’ is that relative to all of our recent drawdowns being so clearly macro-driven (deflation / reflation events of the past two years—Yuan deval, crude spasms, Yellen “weak USD policy pivot” / “Shanghai accord,” CB coordinated messaging on “curve steepening” intent, the inflation impulse bond-beatdown etc)…is that this equities move started as simple “de-risking in front of a ‘fluorescent swan’ of a binary US Presidential election”…that has now crescendo’d into a really bad VaR outbreak. 

While on the benchmark index level we saw a “barely a paper-cut” 9-handle move in SPX yesterday(-0.4%)…we saw 29 US Composite names with market caps north of $25B dollars which traded -1.5% or (much) greater on the day—heavy-hitters like Kellogg, Apple, AbbVie, Humana, Liberty Global, Intel, Kraft Heinz, Charter Comm, Constellation Brands, HCA Holdings, Starbucks, Target, Anthem, Pfizer, Estee Lauder, Amgen, Lockheed Martin, CVS Health, Kroger (-3.7%), AIG (-4.0%), Allergan (-4.0%), McKesson (-4.6%) and index mega-weight Facebook (5th largest weighting in SPX, -5.6% on day).  Other popular longs like CHD (-6.6%) and THS (-19.5%!) got smoked too, while more idiosyncratic political drama crushed the generic drug maker space, with PUNISHING capitulation in MYL (-7.0%), ENDP (-19.5%) and TEVA (-9.5%) amongst others. 

The tech sector has been “THE” hiding place recently for investors, on account of folks getting increasingly nervous about riding their cyclical longs much further here after the run they’ve been on (and crude rolling over sharply -9% on the WTD as the OPEC “deal” looks like anything but)–but also being hyper-cognizant of the inflation base-effect’s lagging-impact on bond prices (higher yields) and purportedly a Fed still committed to a Dec hike (with a steady-state world of course) makes putting back on the ultra-expensive ‘bond proxy’ / ‘low vol’ factor / defensive trade look quite unattractive as well.  So despite tech being such a ‘stud’ recently (XLK +10.2% in Q3), it’s received the ‘rented mule’ treatment as effectively an “ATM” of late (with ‘FANG’ -4.4% over the past 5 sessions, XLK -2.6% over past 5 sessions). 
 
But maybe the strangest thing experienced was seen amongst seemingly popular and thus theoretically winning short positions, where we saw huge outlier downside moves—BW (-10.3%), FSLR (-15.0%), FIT (-33.6%) and DPLO (-42.1%).  This is simply abnormal.  How do I rationalize this?  Well in ‘max pain trade’ fashion, I think that sadly many had actually given-up on these shorts over the outrageous daily-grind higher period in Q3—remember, SPX was +3.3% on the qtr, Russell 2k was +8.7% and (drumroll please….) the GS Most Shorted Basket was +14.5% on the quarter.  So what we’re seeing this week is that the right ideas that folks once had on in their short books—but were forced to capitulate on during the face-ripping rally in Q3—actually saw their short theses play-out to a tee.  The companies reported terrible quarters, and as such, were promptly hammered and punished / re-deployed by guys who originally had the trade right…but had sadly ‘tapped out!!!’  Just gutting stuff…

Ironically though this time around, we see equity market neutral funds performing very well relatively speaking to long-short or long-only.  Take a look at one widely followed quant’s open-end market neutral fund against the HFR Equity Long / Short Index, ‘High HF Concentration basket’ and ‘Mutual Fund Overweights’ baskets over the past two months:

Ironically though this time around, we see equity market neutral funds performing very well relatively speaking to long-short or long-only.  take a look at one widely followed quant’s open-end market neutral fund against the HFR Equity Long / Short Index, ‘High HF Concentration basket’ and ‘Mutual Fund Overweights’ baskets over the past two months:

Broken-record, but another ‘strike’ for active managers…as not for nuthin,’ we see equity mutual funds registering another $3.5B of net outflows last week per last night’s AMG data.  This is the 34th consecutive week of outflows this year, and makes only 3 inflow weeks YTD against a total of 44 weeks. 
 
Interestingly, it’s starting to rhyme a bit with late last year—longs being built in banks on higher rates expectations against a desire to underweight the bond proxies (as we see desire to short USTs again on inflation expectations / rate hike / curve steepening talk from CB’s all conspiring against them), and despite this recent risk drawdown, we have seen tech and high-beta flying of late.  Something to be mindful of, as the last three Januarys have seen CRUSHING contrarian moves (stocks sharply lower, USTs massively ‘bid’).

via http://ift.tt/2fCOxaC Tyler Durden

Live Report from Dakota Access Pipeline Protest

By Robert Barsocchini. Washington's Blog.

20161102_12565320161102_10064220161102_112400

A group of Christians came to the camp this morning to ally with the native water protectors. They said there were 524 of them, representing the 524 years since the Doctrine of Discovery. They then offered a copy of the doctrine to the native elders to burn, and marched to the barricades, which is unfolding now.

 

The peaceful activists, who are singing songs like ‘Wade in the Water’ and praying, currently far outnumber the present and visibly deployed pipeline militants.

 

Robert Barsocchini is an internationally published author who focuses on force dynamics, national and global, and also writes professionally for the film industry. Updates on Twitter. Author’s pamphlet ‘The Agility of Tyranny: Historical Roots of Black Lives Matter’.

 

via http://ift.tt/2fjPJvQ George Washington

Live Report from Dakota Access Pipeline Protest

By Robert Barsocchini. Washington's Blog.

20161102_12565320161102_10064220161102_112400

A group of Christians came to the camp this morning to ally with the native water protectors. They said there were 524 of them, representing the 524 years since the Doctrine of Discovery. They then offered a copy of the doctrine to the native elders to burn, and marched to the barricades, which is unfolding now.

 

The peaceful activists, who are singing songs like ‘Wade in the Water’ and praying, currently far outnumber the present and visibly deployed pipeline militants.

 

Robert Barsocchini is an internationally published author who focuses on force dynamics, national and global, and also writes professionally for the film industry. Updates on Twitter. Author’s pamphlet ‘The Agility of Tyranny: Historical Roots of Black Lives Matter’.

 

via http://ift.tt/2eHbZ1w George Washington

Chris Christie’s Former Chief of Staff, Port Authority Official Convicted in ‘Bridgegate’ Trial

The former chief of staff to New Jersey Gov. Chris Christie and a former deputy executive director at the Port Authority of New York were convicted Friday on charges related to the politically motivated closure of lanes on the George Washington Bridge in 2013.

Bridget Anne Kelly, who served in the Christie administration since 2010, and Bill Baroni of the Port Authority were found guilty on seven charges including conspiracy, fraud and civil rights deprivation. Prosecutors said Baroni and Kelly helped orchestrate the closure of lanes as an act of political retribution against the mayor of Fort Lee, New Jersey, who refused to endorse Christie during the governor’s reelection bid in 2013.

U.S. District Judge Susan D. Wigenton set the sentencing date for Feb. 21. Baroni and Kelly face a maximum of 20 years in prison, but are likely to serve far less under federal sentencing guidelines, according to NJ.com.

Emails and text messages released in January of 2014 form the basis of the charges, CNN reported. In one of those emails, Kelly wrote to former Port Authority official David Wildstein: “Time for some traffic problems in Fort Lee.”

Most of the political fall-out from Bridgegate will continue to concern Christie. The scandal was a major weight around his neck during the 2016 Republican primaries (though there were plenty of other reasons for voters to dislike Christie, ranging from his unquestioning support of the drug war to his terrible record on fiscal issues), and may have cost him a shot at being Donald Trump’s pick for VP.

The Port Authority has so far avoided the same level of blame, even though top officials at the agency were directly involved in the scandal. Maybe that’s because a multi-state transportation authority isn’t as interesting as a loudmouthed governor, but the Port Authority deserves plenty of scorn for being, as Jim Epstein wrote in Reason in 2014, “a bastion of power, patronage, and bureaucracy that violates commuters and taxpayers on both sides of the bridge every day of every year.”

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ACLU Suit Aims to Stop Debtors’ Prison in Texas Town

Prison cellThe tiny town of Santa Fe, Texas (population 12,000), found not far south of Houston, has a big problem with using low-level misdemeanor citations to pad its revenue and threatening low-income citizens with jail time unless they cough up some money.

It’s a debtors’ prison shake-down, according to the Texas chapter of the American Civil Liberties Union (ACLU), and they’ve just filed a class-action lawsuit to try to stop it.

The lawsuit, representing three men so far, alleges that Santa Fe jails people for normally non-jailable offenses (like traffic violations) unless they shell out money for fines without any sort of consideration of whether these people are able to pay them. The system is designed to keep the accused from getting counsel if they can’t afford it and pushes those caught up in it to plead “no contest” in order to be permitted on a monthly payment plan that would allow them to avoid jail. The ACLU claims in the suit it’s all about the money and the city knows it:

The Municipal Judge allows budgetary considerations to color his judgment about whether to dismiss cases. The judge recently identified dozens of cases in which the prosecutor could not prove the charges against the accused. The judge nevertheless declined to dismiss those charges, because of the negative impact on overall fines owed to the City. If a person is arrested under an open warrant in one of these cases, it is likely that the court will accept her no contest plea and entered a conviction against her—despite the judge’s knowing that the prosecutor would be unable to prove his case.

Santa Fe actually jacked up fines last year in order to help deal with a $600,000 budget shortfall. The lawsuit notes that the city participates in a Texas “warrant round-up” to wring fines out of citizens timed to coincide when residents are getting their annual tax refunds.

And there’s more. Santa Fe, after tossing people charged with low-level misdemeanors into jail cells for days, is starving them, the ACLU contends. If you end up in Santa Fe’s jail, your breakfast is one single Pop Tart. Your lunch is the second Pop Tart from that package. Your dinner is a microwaved Hungry Man meal:

The City of Santa Fe’s projected spending on jail supplies, for the most recent year for which that statistic is available, was $1500.00 per year. Even if the entirety of this budget went toward food, Santa Fe limited the total spending on food for all people in the Chief’s custody to just $4.11 per day. This is only slightly more than the City’s projected spending on supplies for dogs in the Police Department’s canine unit, which was $3.84 per day.

They also calculated out the caloric intake of such a feeding schedule. It worked out to 720 calories, which is even less than the amount of food a 1-year-old child is supposed to eat daily (The ACLU even provides handy charts in the lawsuit). That’s assuming people get fed anything at all. Apparently the record-keeping in all this is so bad that several people say they sometimes didn’t even get their “meals.”

Santa Fe is the latest in a new push for legal action against municipalities. The need for a new wave of action got massive amounts of publicity from the unrest in Ferguson, Missouri, over the fatal police shooting of Michael Brown. Lest folks forget, the anger wasn’t just over whether police were justified in shooting Brown, but over the larger issue of small St. Louis County municipalities using fines and citations to drain money from residents to pay bankroll themselves and line their pockets. These were typically poor minorities who did not have the resources to resist, and municipal judges and governments took advantage of that reality.

The lawsuit notes that efforts to stop behavior like what we see in Santa Fe have cropped up in nine other states and in other Texas cities. Brian Doherty previously wrote about a lawsuit in Arkansas to stop similar tactics. The Institute for Justice is going after a St. Louis suburb for trying to use loads of absurd city codes (like having mismatched curtains) to try to extract money from citizens.

Read the ACLU’s lawsuit here, and drive very carefully if you find yourself in Santa Fe, Texas.

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“Nothing Good Can Come Of This Election” …And That’s Good

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

We the citizens and voters have to stop being enablers of systemic corruption.

The overwhelming consensus of the punditry across the political spectrum is that "Nothing Good Can Come of This Election"–and that's a very good thing. The handwringing goes like this: The country is deeply divided by schisms that cannot be bridged, every institution from the two parties to the mainstream media to the Department of Justice has been tarnished by cover-ups, collusion or worse; whomever wins the election will enter the presidency without a mandate, and so on.

Why is "nothing good can come of this" good? Because ridding the nation of its political corruption will require hitting bottom.

Just as an alcoholic or drug addict is incapable of making any truly positive changes until he/she hits absolute bottom, so it is with our tolerance of a corrupt political system that is poisoning the nation, one injection of corrupt cash, collusion and pay-to-play at a time.

If our rotten-to-the-core politics as usual is indeed flying off the cliff to complete destruction, that is an unalloyed good.

Just as alcoholics continue down their self-destructive path with the aid of enablers, so too has the corrupt political order expanded with the aid of the Mainstream Media, insiders in the Department of Justice, K Street lobbyists and a veritable army of well-paid lackeys, pundits, academics, apparatchiks and assorted toadies in the organs of governance and in the big-money private sector and philanthro-capitalist dynasties of pay-to-play foundations.

The only way anything will truly change in the political order is if every Establishment insider politico loses every election, from the presidency to dogcatcher. Nothing will change until the mere existence of a private foundation like the Clinton Foundation triggers a landslide loss for the politico with ties to such corruption.

Nothing will change until the collusion of the mainstream media (supplying the insider candidate with debate questions, etc.) alone causes the colluding candidate to lose by a landslide.

Nothing will change until candidates who refuse to accept any donation larger than $100 from anyone or any entity beat the Goldman Sachs/Saudi prince-funded insider candidates by a landslide.

Nothing will change until candidates who fund costly negative TV advertising campaigns with millions in pay-to-play "contributions" from Goldman Sachs et al. lose by a landslide.

You get the point: we the citizens and voters have to stop being enablers of systemic corruption. We have to stop being bamboozled by insiders with promises of "hope and change" and the usual negative TV blitzes funded by corrupt big money.

It's easy to blame lax campaign laws or the corrupted candidates and their insider toadies, but ultimately we're responsible for enabling corruption, collusion, pay-for-play and a political and financial Elite that's above the law.

From the point of view of the corrupted, colluding insiders, MSM flunkies, Department of Justice lackeys and well-paid parrot-pundits, nothing good can come from this election because half the voters may actually cast off the shackles of the nation's corrupt and corrupting political and financial Elites.

This mass rejection of the politics as usual of corrupt and corrupting political and financial Elites is the highest possible good–a public good that eludes the hand-wringing corrupt insiders, pundits and toadies who have sucked up fortunes from the trough of putrid systemic corruption.

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WTI Crude Tumbles Back To $43 Handle As Saudi Threat “Denial” Is Denied

What a farce…

First, Reuters reports that Saudis threatened to increase output if Iran disrupts any agreement.

Then we hear from OPEC…

  • *SAUDIS DIDN’T THREATEN TO RAISE OUTPUT AT VIENNA MTG: BARKINDO

And now:

  • SENIOR GULF OPEC SOURCE SAYS ALL PRODUCERS INCLUDING SAUDI AND GULF OPEC MEMBERS COULD RAISE OUTPUT IF THERE IS NO AGREEMENT

And WTI tumbles…

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Movie Review: Doctor Strange: New at Reason

StrangeDoctor Strange signals the launch of what could be a very fun franchise. The movie isn’t perfect—it’s the origin story of a character from the Marvel JV universe, so there’s setup involved; and it’s a little light in the villain department; and the rampant computer imagery—some of it pretty spectacular—is maybe a little too rampant. But the occult flourishes beamed in from Steve Ditko’s 50-year-old comic-book series—the “Cloak of Levitation,” the “Eye of Agamotto,” the trippy “Mirror Dimension”—give the story a rich, pulpy, Indiana Jones-like charge that’s highly enjoyable, writes Kurt Loder.

View this article.

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