Congress Wants to Let Cops Wiretap Sex Workers, the CDC Study Them, and Homeland Security Screen Them

So far this year, federal lawmakers have introduced more than 30 bills related to “sex trafficking,” which many in government now define to mean all prostitution. This week alone brought three new efforts. And following the familiar pattern of the drug war, these measures mostly focus on giving federal law enforcement more “tools” to find, prosecute, and punish people for actions only tangentially, if at all, connected to causing harm.

One such measure would expand state and local government authority “to seek wiretap warrants in sexual exploitation and prostitution cases” (emphasis mine) and mandate the Centers for Disease Control and Prevention and National Institute of Justice conduct a “study on the long-term physical and psychological effects of the commercial sex trade.” It would also give the Department of Homeland Security a mandate to develop protocols “for implementation across federal, state, and local law enforcement” on how to screen people “suspected of engaging in commercial sex acts” for the possibility that they have been trafficked. The screening process would also be applied to people suspected of working in violation of any labor regulations, including occupational licensing rules.

Homeland Security would also train crimefighters nationwide on how investigate prostitution customers for their alleged “roles in severe trafficking in persons.” And Attorney General Jeff Sessions would be required to instruct law enforcement across the land that their efforts to fight human trafficking must “include a demand reduction component”—i.e., must target prostitution customers. Sessions would also have to declare “that commercial sexual exploitation is a form of gender-based violence,” opening the way for possible hate-crime enhancements for anyone who tries to pay for sex.

This bill, known as the Abolish Human Trafficking Act (S. 1311), was introduced by Sen. John Cornyn (R–Texas) on June 7 and already has 12 co-sponsors, including such prominent politicians as Marco Rubio (R-Fla.), Bob Corker (R-Tenn.), Dianne Feinstein (D-Calif.), and Amy Klobuchar (D-Minn.). In a statement, Rep. Klobuchar invoked a rise in the number of calls received by the National Human Trafficking Hotline—a government-funded telephone service that fields everything from unfounded anonymous tips about suspected streetwalking to general requests for information, with a vast number of calls coming from government officials—as evidence that the supposed sex trafficking epidemic is growing.

A companion bill (H.R. 2803), sponsored by Republican Reps. Ted Poe of Texas and Ann Wagner of Missouri, was introduced in the House on Wednesday. A statement from Rep. Poe said his bill would stop “modern slavery” by giving law enforcement the tools to stop “dastardly criminals from exploiting others, whether they be the buyer or seller.”

The official soundbites from almost all of these bills’ co-sponsors mention the benefits for cops and prosecutors, showcasing our government’s lopsided approach to sexual exploitation. While lip service is paid to the “victims,” it’s law enforcement agencies that get all the consideration and tools—tools that help them conduct ever more intrusive investigations in the service of less and less deserving targets, wring whatever money and assets they can from defendants, and collect laurels as they ship convicts off to fill federal-prison beds.

Here are a few more key things that S. 1311 and H.R. 2803 would do:

• Add sexual abuse, human trafficking, and “transportation for prostitution or any illegal sexual activity” to the crimes which could establish someone as part of a “criminal street gang.”

• Enhance maximum penalties—not for folks who actually force others into sex or other work, mind you, but for those who transport people for “immoral purposes,” anyone who interferes with or impedes a sex trafficking investigation in some way, and anyone who entices, persuades, or induces someone into a situation where traffickers victimize them. The bill would raise the maximum penalty for the latter from 20 to 30 years, and the maximum penalty for obstruction from 20 to 25 years. It would also stipulate that anyone found guilty of a Mann Act violation—that is, of transporting for immoral purposes—could see his maximum term of imprisonment tripled if he had a prior sex-offense conviction of any kind.

• Permanently authorize the Obama administration’s Federal Human Trafficking Advisory Council.

• Place “Human Trafficking Justice Coordinators” at every U.S. Attorney’s Office in the country and in the Department of Justice.

• Let federal law enforcement take people’s property if they can’t otherwise pay required fines.

The third June bill, known as the Trafficking Victims Protection Act of 2017, was introduced by Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and is co-sponsored by Feinstein, Cornyn, and Klobuchar, among others. The authorities “have made some strides in combating [trafficking] since the passage of the original Trafficking Victims Protection Act, or TVPA, over 15 years ago,” Grassley said in a statement. “The bill I’m introducing this week updates and extends a number of these programs.”

American efforts to “eradicate” the sex trade have shown little promise in the nearly two decades since their federal institutionalization with the original TVPA (and its regular reauthorizations), but—alas—that isn’t slowing the pace at which lawmakers aggressively pursue more of the same.

Grassley’s bill cobbles together a host of changes that give federal prosecuting agencies more power. Among other things, it would create a federal mandate to fight “sextortion” (without defining what this means); ask the quasi-governmental National Center for Missing and Exploited to assist the government in identifying “misleading domain names” and “misleading words or digital images on the Internet”; and more than quadruple annual appropriations for grants related to these activities.

These bills come on the heels of eight new sex-trafficking bills introduced in Congress in May: the Sex Trafficking Demand Reduction Act, the Empowering Law Enforcement to Fight Sex Trafficking Demand Act, the Enhancing Detection of Human Trafficking Act, the Secure our Skies Act, the Empowering Educators to Prevent Trafficking Act, the Put Trafficking Victims First Act, the Department of Homeland Security Blue Campaign Authorization Act, and a “bill to require the Attorney General to designate Human Trafficking Coordinators for Federal judicial districts.” In April, federal lawmakers introduced the Allow States and Victims to Fight Online Sex Trafficking Act (discussed in more detail here), the Frederick Douglass Trafficking Victims Prevention and Protection Reauthorization Act, and two versions of the End Banking for Human Traffickers Act, from Rep. Edward Royce (R-Calif.) and Sen. Elizabeth Warren (D-Mass).

from Hit & Run http://ift.tt/2rJTRgJ
via IFTTT

Bring on the Crazy Summer Television Shows: New at Reason

'Blood Drive'The motto “Sun’s out, guns out” has never been more appropriate than when examining some of the bizarre, violent, and ultimately disposable summer shows that make their way to television each year. Critic Glenn Garvin takes a look at Claws and Blood Drive, coming to TNT and SyFy:

Good popcorn TV movies and shows are, as they used to say on one of its first exemplars, faster than a speeding bullet, the better to distract you from its innate stupidity. Claws (which, I was momentarily disappointed to discover, is not a modern blood-and-boobs remake of the epochal 1957 popcorn masterpiece Attack of the Crab Monsters) sets some kind of record in that regard.

Set in a small-town Florida nail salon, it starts out like a Tyler Perry party-hearty sitcom, with astronomical numbers of tattoos, big butts, and random shouts of “Off the hook!” and “Shake it!” But within minutes it morphs into an entertaining, if slightly idiotic, action-suspense drama: The salon offers the full menu of traditional Florida services running from erotic asphyxiation to money-laundering to off-site drug hootchie-ism to murder.

View this article.

from Hit & Run http://ift.tt/2smMTzg
via IFTTT

Withdrawing From Paris Accord Helps America’s Most Vulnerable

Authored by Blaine Conzatti via The Mises Institute,

Are you concerned about the poor’s economic welfare? If so, you should celebrate President Trump’s announcement that the United States will withdraw itself from the Paris Agreement.

The Paris climate accord, which was ratified last year, attempts to “brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.” Supporters of the agreement claim it is necessary to avert the disastrous consequences of climate change.

Regrettably, the plan’s supporters are committing the greatest economic fallacy, which Henry Hazlitt, the acclaimed economics writer, warned about in his most prominent work, Economics in One Lesson (1946):

The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of the proposed course; the good economist looks also at the longer and indirect consequences.

While laypeople, pundits, scientists, and economists have focused their attention on what Trump’s decision might mean for climate change, these groups have largely ignored the effect of the agreement on poorer American households. Here are three reasons why withdrawing from the Paris Agreement is good for the poor:

The Paris Agreement raises energy costs for hardworking American households.

Under the agreement, the United States pledged to reduce its greenhouse gas emissions by 26-28% below its 2005 level by 2025. This would be accomplished by transitioning from fossil fuels to renewable sources of energy.

Although renewable energy will likely become the technology of the future, prematurely transitioning to “greener” sources creates a problem for Americans struggling to make ends meet.

Right now, these alternative sources of energy are far more expensive (and less reliable) than traditional sources. A study published last year found that “electricity from new wind and solar power is 2.5 to 5 times more expensive than electricity from existing coal and nuclear power.”

Until the cost of green energy declines through technological advances and increases in productivity, transitioning to renewable energy too hastily will necessarily cause energy prices to skyrocket. Rising energy prices disproportionately affect those who already have the hardest time affording energy.

Every additional dollar that lower-income families spend on lighting and heating their homes is a dollar that is now no longer available to pay for housing, food, clothes, and books. By raising energy prices, the Paris Agreement would make it harder for these families to afford the things they need.

Regulations promulgated under the aegis of the Paris Agreement increase prices and harm the economy.

The Paris Agreement saddles producers with burdensome regulations that increase the cost of doing business. Ultimately, these costs are either passed to consumers or are absorbed by businesses, resulting in lower employment and less investment for the capital goods necessary to produce the goods consumers need.

Furthermore, developed economies like the United States rely on affordable, accessible, and reliable energy. Machines on the assembly line and the trucks transporting goods alike require energy to produce and deliver products to consumers.

Most affected by onerous environmental regulations are energy, manufacturing, and shipping firms. Imagine the mom and pop machining shop that would have to pay tens of thousands of dollars to comply with increased regulations originating from the Paris accord. That’s tens of thousands of dollars that now cannot be used to raise wages for their workers, hire new employees, purchase more inventory, or invest in capital (think: technology and machines) to produce tomorrow’s goods.

In the long run, total production will decrease, employees will make less money in wages and benefits, and consumers will face higher prices at the market. There will be less wealth, less prosperity, and fewer opportunities, especially for those struggling to find jobs or climb the economic ladder.

The Paris Agreement redistributes wealth from American taxpayers to international corporations and less developed nations.

The Paris Agreement also initiates a massive redistribution of wealth from developed countries to less developed countries. This will be orchestrated through the United Nations Green Climate Fund, which seeks to help developing countries purchase and construct alternative energy infrastructure.

The Green Climate Fund is the worst form of crony capitalism, guaranteed to benefit politically connected firms, especially those that stand to make millions of dollars in selling green energy technology. Like all government infrastructure programs, it will likely be highly inefficient and rife with corruption.

To make matters worse, the Paris Agreement assures that a significant portion of the multi-billion dollar budget for the Green Climate Fund will be financed by American taxpayers. Astoundingly, the agreement places American taxpayers on the hook for bankrolling pricey green energy technologies for other nations.

Where do supporters of the agreement think this money will come from? Have they forgotten that the United States is already $20 trillion in debt with unfunded liabilities (promises of future services) totaling over $200 trillion?

Remember that every dollar taxed by government is a dollar that American families and businesses cannot use to purchase the things they need. Taxes divert money and resources from the private sector, where it is spent more efficiently and according to the needs of consumers, to the public sector, where it is spent inefficiently on programs (like green energy) deemed “worthy” by central planners (in this case, the international community) without concern for the needs of the people in these different countries.

The eventual result of increasing taxes will be less capital available to meet the future needs of producers and consumers. There will be fewer total goods produced and fewer jobs. Prices will rise, and families and small businesses will find it harder to get the credit they need for mortgages and small business loans.

Decades ago, Henry Hazlitt alerted his contemporaries about the error of ignoring unintended consequences when analyzing policies. His warning still rings true today:

The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.

Regardless of the truthfulness of claims made by climate alarmists, it is important to look beyond good intentions to see how policies, like those springing from the Paris Agreement, would affect the most vulnerable people in society in unintended ways. It is tragic that government policies designed to alleviate one problem create further problems that end up harming people.

It is indisputable that the Paris Agreement would have negatively affected lower-income American families. Fortunately for them, the United States is no longer beholden to the agreement, and it can now pursue environmental policies it considers to be in the best interests of Americans.

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

Retired FBI Special Agent Blows the Whistle on the Real Robert Mueller

Shortly after former FBI Director Robert Mueller was announced as the special counsel for the Russia investigation, the screeching hordes of America’s “always wrong about everything” punditry class cheered in near unison, lauding the man as some sort of second coming. This sort of thing should always be seen as a red flag, and thanks to an excellent article written by retired FBI special agent Coleen Rowley, everyone can now know exactly why.

But first, who is Coleen Rowley?

Coleen Rowley, a retired FBI special agent and division legal counsel whose May 2002 memo to then-FBI Director Robert Mueller exposed some of the FBI’s pre-9/11 failures, was named one of TIME magazine’s “Persons of the Year” in 2002. Her 2003 letter to Robert Mueller in opposition to launching the Iraq War is archived in full text on the NYT and her 2013 op-ed entitled “Questions for the FBI Nominee” was published on the day of James Comey’s confirmation hearing.

It’s important to be aware of that background as you read the following excerpts from the excellent post published at CounterPunch titled, Comey and Mueller: Russiagate’s Mythical Heroes:

continue reading

from Liberty Blitzkrieg http://ift.tt/2r3IX2c
via IFTTT

Tillerson Tells Arab States To Lift Qatar Blockade: “It’s Hindering The Campaing Against ISIS”

Secretary of State Rex Tillerson called on the Saudi Arabia-led coalition, which includes UAE, Bahrain and Egypt and others, to lift its blockade of Qatar, saying that the cutoff is hindering the fight against the (Qatar-funded) Islamic State. Tillerson also said the blockade had led to food shortages and forced families to uproot themselves and pull their children from school.

“We believe there are unintended consequences, especially during this holy month of Ramadan but they can be addressed immediately,” Tillerson said.

The secretary of state said the Emir of Qatar has made progress in countering terrorism but needs to do more.  He added that after speaking to Gulf nations, he believes the countries involved in the dispute – all U.S. allies – are stronger together, and “the elements of a solution are available.” Even so, he said, Qatar must do more to combat extremism.

The Qatar crisis – the result of Saudi Arabia and its Atab allies severing diplomatic ties as well as land, sea and air travel with Qatar – has thrust the U.S. into a delicate position, because of its alliances with all sides, and because Qatar hosts the nerve center for U.S. air operations in the Middle East, including the fight against Islamic State. Making this more awkward is the widespread knowledge that both Qatar and Saudi Arabia are the biggest sponsors of terrorism in the region.

Separately Qatar’s foreign minister, Sheikh Mohammed bin Abdulrahman Al Thani, said that sanctions imposed upon his country violate international law, calling the moves by Saudi Arabia and other Arab nations an “unjust siege.”

speaking in the German town of Wolfenbuettel on Friday alongside German Foreign Minister Sigmar Gabriel, Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani also said that his nation’s hope was for diplomacy and dialogue.

He asked: “What crime did Qatar commit to deserve such a punishment that violates international law?”

Well, funding and supporting terrorism for once.

Gabriel said it was important to prevent any “further escalation” and that Germany was willing to help with any negotiations, noting that other diplomatic efforts were already being made by the U.S., Kuwait and others, and that he was “optimistic” they would be able to organize talks.

via http://ift.tt/2sm67VO Tyler Durden

How Theresa May’s Snap Election Backfired

Theresa May’s Conservative Party ended up losing 13 seats in Britain’s elections yesterday. That wasn’t the outcome the prime minister expected when she called a snap election in March, back when her party’s lead over Jeremy Corbyn’s Labour stood at 20 percent and May hoped a larger Tory majority would strengthen the United Kingdom’s negotiating position on Brexit.

The Conservatives fell 7 seats short of a majority, and May announced today that she would form a coalition government with the Democratic Unionist Party (DUP), the socially conservative majority party in Northern Ireland. The Guardian reports that May will hold onto her main cabinet ministers as she assembles the new government. Prior to the election, there was speculation that May would use the opportunity to reshuffle the cabinet; last night it was unclear if May would survive the election results.

Despite the Conservatives’ poor showing, the election shouldn’t be seen as a referendum on Brexit. The Liberal Democrats, who served in a coalition government with the Conservatives from 2010 to 2015, campaigned vigorously on an anti-Brexit platform. The issue didn’t resonate on the campaign trail, and it didn’t resonate at the ballot box either: The party got a slightly smaller percentage of the vote than last time. And while they gained four seats, they expected their anti-Brexit campaign to net them dozens. Meanwhile, one LibDem who lost was the party leader, former deputy prime minister Nick Clegg.

While DUP opposes same-sex marriage and abortion, its focus in Westminster may be more on issues specific to Northern Ireland. The Unionists are “likely to be concerned that attacking the status of rights under the European Convention on Human Rights might destabilise the Good Friday Agreement between the UK and Ireland,” explains David Feldman, a professor of law at Cambridge University. The DUP is also interested in maintaining access to the European single market and in keeping the post-Brexit border between Northern Ireland and Ireland—an EU member—as open as possible.

The new dispensation may also give May less room to pursue some of her other goals, such as rolling back the human rights laws that get in the way of her counterterrorist and anti-“extremist” efforts. “With a minority government, and a very heavy programme of legislation needed to make necessary arrangements for paving the way for Brexit, there is likely to be little time or inclination to embark on an unnecessary battle over human rights,” Feldman says. (He adds that even if such legislation were to pass the House of Commons it could run aground in the House of Lords, “particularly as such legislation did not form part of the Conservative Party’s election manifesto.”)

BBC presenter David Dimbleby claimed last night that the United Kingdom has “reverted to a two-party system,” as the two parties combined to receive a higher share of the popular vote than in any election since 1970. The U.K. Independence Party, which won 12.6 percent in the last election, saw its vote share collapse: It earned just 2 percent of the vote and lost its only seat in Westminster. Meanwhile, the Scottish National Party lost 21 seats. Following the failed 2014 independence referendum, the Nationalists won 54 out of 57 Scottish seats in 2015; a key component of their campaign this time was to get a new independence referendum as early as next March. A referendum any time before Brexit is complete is now highly unlikely.

Brexit negotiations will continue until March 2019. According to EU law, the U.K. will be removed from the union at that time even if negotiations have failed to produce an exit deal. Jean-Claude Juncker, the president of the European Commission, has said that yesterday’s elections would have “no impact on negotiations.”

from Hit & Run http://ift.tt/2rak9tJ
via IFTTT

LGBT Pride Parade Turns Away Gay Trump Supporters

Pride flagsGay pride parades are generally celebratory affairs, but they’ve also almost always had a political side too. “I’m here and want to have fun!” had an inherent political edge to it when the right to be openly gay or transgender was still being litigated in courts of both law and public opinion.

The right to be gay is all but settled as a legal matter these days, and transgender acceptance has been dramatically increasing. One might expect, then, that the pride parades of summer might start to grow less political and more like other cultural celebrations.

Apparently not. LGBT leaders’ opposition to President Donald Trump has made the parades more political. In at least one case, parade organizers have rejected a float. Even though Brian Talbert is gay, the organizers of Charlotte, North Carolina’s pride event have told him he can’t participate with a float touting his support for Trump.

Talbert’s story is picking up national attention. From The Washington Post:

Reached by email, Charlotte Pride released a statement saying the organization “reserves the right to decline participation” at events to groups that do not reflect the mission and values of the organization.

The statement said that policy is acknowledged in its parade rules and regulations, and noted that in the past, organizers have made “similar decisions” to decline participation from “other organizations espousing anti-LGBTQ religious or public policy stances.”

“Charlotte Pride envisions a world in which LGBTQ people are affirmed, respected, and included in the full social and civic life of their local communities, free from fear of any discrimination, rejection, and prejudice,” the statement added.

But Trump has notably not espoused antigay policy stances and has, in fact, resisted efforts to do so within his administration. So far, Trump is probably the most LGBT-friendly Republican president we’ve had.

That doesn’t mean that Trump supports the same policies that progressive LGBT leaders would like. That’s really the crux of the problem: Trump’s administration doesn’t want to use the federal government to advance anti-discrimination policies that cover LGBT people. His Department of Justice has withdrawn federal guidance ordering public schools to accommodate transgender students’ gender choices for bathrooms and other facilities.

Put in historical context, that’s a relatively mild decision, though it must feel awful for transgender students who are affected (and ultimately it may be decided by the courts, not Trump’s administration, anyway). Despite LGBT activists’ fears, the administration is not scaling back executive orders forbidding government contractors from engaging in LGBT discrimination. Life is still improving for LGBT people.

The Los Angeles pride parade and festival is this weekend, but apparently it’s no longer the same pride parade people are used to. It’s been transformed into an anti-Trump “resistance” march, under the odd and incorrect assumption that being part of the LGBT community inherently requires you to embrace of a host of political positions. New York, Austin, Seattle, and D.C. are joining them. L.A. Weekly quotes one of the march organizers:

“#ResistMarch was built around the concept of standing in solidarity for all human rights,” explains Brian Pendleton, a CSW board member. “The march is meant to be a celebration of humanity that is all part and parcel of the LGBTQ community. We are immigrants, we are women, we are seniors, we are communities of color, and on and on. Very few communities encompass so many different types of Americans.”

That’s true. But it also means the community encompasses Trump voters and other types of conservatives. Even here in the extremely liberal city of Los Angeles, I know at least one gay Trump supporter. What Pendleton is promoting isn’t a celebration of humanity. It’s a policing of political values. It’s remarkable that parades that have revolved around an insistence that LGBT people should be allowed to participate in society and be public about who they are wants to excluding participant for their political affiliations.

This isn’t ultimately about Trump himself; it’s about the inability or unwillingness of people with highly different political interests to engage with each other. It’s easier to cast gay Trump voters out of the movement than to engage with them over the fundamental philosophical differences that divide them. (My Trump-supporting gay acquaintance moved to L.A. from a Rust Belt state, and that no doubt influenced his vote.) There’s nothing about being gay or transgender that requires support of unrelated policy positions on everything from immigration to abortion, and I say this as somebody who identifies more frequently with the left on those two issues. Making the parades into anti-Trump rallies tells tens of thousands of LGBT people that this festival that’s supposed to be about them is actually deliberately excluding and opposing them.

Talbert has said he’s going to sue Charlotte Pride for discrimination, which is also a terrible response. Charlotte Pride should be allowed to include or exclude any participants it wants. It’s their parade. And there’s already a Supreme Court decision that affirms that parade organizers have the right to exclude participants with messages they do not support.

But Charlotte Pride’s organizers should remember something. That Supreme Court case was about a very long fight by LGBT groups to be included in St. Patrick’s Day parades. And they’re only just now, in this decade, convincing the Catholic organizers of those events to allow them in. To turn around and treat another group of gay people the same way is pretty terrible. Let them into the parade. Let the audience boo them, support them, or ignore them, and then move on. It shouldn’t be a big deal.

from Hit & Run http://ift.tt/2sLw8Li
via IFTTT

RBC’s Mean Reversion Model Is “Exploding Higher” As The “Rotation” Begins

RBC's head of cross-asset strategy, Charlie McElligott warns that "it’s now clear that as I’ve been anticipating, there is a significant amount of equities buy-side discomfort as consensual positioning is now driving the first period of sustained market underperformance in some time, all on account of the flagged factor-rotation I’ve been focused-upon."

Having detailed his thesis consistently (and most recently this morning – see notes below), McElligott's quick message this afternoon should be heeded by many staring at the tumble in FANGs and surge in Small Cap Financials – something big just changed…

As I’ve been pushing over the past few weeks, the over-extension of positioning and factor relative ratios (most notably ‘value : growth’) sent up the ‘red flags,’ and the moment that rates began to lose that downside momentum, we made the call that the rotation was officially beginning.

Here are the optics of the ensuing scramble, obviously still early stages, but with plenty of room to run as long as rates continue to cooperate (higher).  Worth noting on that point, that we are seeing fast-money re-engage in fixed-income shorts again today on rates / futures desk…which as I’ve stated is mission-critical to sustain this reversal.

The trick TODAY from a ‘performance-perspective’ as opposed to yesterday, where just the ‘shorts’ / ‘underweights’ squeezed higher against ‘the masses’…today we are now seeing the consensual longs begin to ‘suck wind’ in addition to the short / underweight outperformance, just as I’ve anticipated, as ‘growth’ / ‘momentum’ /  ‘low vol’ turn into a ‘source-of-funds’ to rotate into the ‘cyclical’ / ‘value’ / ‘size’ (small caps) stuff.

Thus, my ‘mean reversion’ model is EXPLODING HIGHER +185bps, while my generic ‘equity long-short’ model (capturing consensus positioning) is -65bps!

MEAN REVERSION MODEL = RIPPING HIGHER AT +185BPS ON SESSION:

WHILE MY ‘CONSENSUS’ EQUITY LONG-SHORT MODEL NOW IS SPANKED -65BPS:

SHOWN ANOTHER WAY—GENERIC EQUITY L/S POSITIONING IS EFFECTIVELY ‘LONG TECH / SHORT ENERGY’ OR ‘LONG GROWTH, SHORT VALUE’ (note: the data / chart does not reflect today’s reversal).

EQUITY QUANT FACTOR STRATEGY ROTATION INTO ‘VALUE’ MARKET-NEUTRAL (LONG VALUE, SHORT GROWTH) AND ‘SIZE’ (SMALL OVER LARGE) SEE YTD-LEADERSHIP REVERSAL, ESPECIALLY WITH ‘ANTI-BETA’ (LONG LOW BETA, SHORT HIGH BETA) STRATEGY NOW PLUMMETING, IN ADDITION TO ‘MOMENTUM’ AND  ‘GROWTH’ NOW AS APPARENT ‘SOURCE OF FUNDS’:

*  *  *

And by way of background, here is full breakdown of the rotation disucssion as we noted earlier…

Amid yesterday's "nothing-burger" from the big-three event risks, the market initially shrugged off any worries. However, as RBC's head of cross-asset strategy, Charlie McElligott notes, "all of the juicy stuff continues to occur under the surface within the US equities complex."

OVERNIGHT: Annnnnnd…one big ‘nothing done.’  Completely unsurprisingly, yesterday’s “risk-event trifecta” laid an egg, where even the lone ‘surprise’ of the three—the loss of an outright majority for the UK Conservatives (nonetheless with largest share of the vote), meaning a ‘hung parliament’—drives only a modest rally in Gilts (back to Wednesday’s closing levels) while GBP weakness (as expected with Labour closing the gap) again sends the FTSE 100 higher +0.8%, as the largest UK corporates benefit from the weaker currency (same response as Brexit, just on far-lesser scale).

Hilariously, GBP 3m10y implied vols still sit close to all-time lows, with 1 month realized vol at ~2.5bps / day.  The only real global markets ramification is a modestly higher USD via the weaker GBP, which in turn only means ‘flat’ EMFX basket–color me utterly underwhelmed, again.  VIX is -2.0% overnight, while Gold and USTs are modestly weaker (2.20, 2s10s at +88bps), against global equities higher: Spooz are +10bps (while again today we see further small cap O/P with Russell +30bps early), the Nikkei closed +50bps, Eurostoxx is currently +20bps and DAX is +40bps, while GBP IG OAS trades a lame +1.5bps wider / GBP HY +2.5bps and having little impact on risky EU Xover and US CDX HY.  Zzzzzzzzzzz.

WHERE THE ACTION IS: With US rates avoiding outright breakdown and settling-back into a tight 4bps range over the past two days while even spastic Crude chills out ($0.50 band over two sessions!), all of the juicy stuff continues to occur under the surface within the US equities complex.

Yesterday in fact just might have kicked-off ‘the beginning of the end’ of the YTD equities ‘risk barbell’ trade (long ‘growth,’ long ‘defensives,’ short ‘cyclical beta’ / ‘value’ / ‘small caps’), as my much-discussed theme of a pending equities factor-rotation began to gain significant-steam.  Let’s call it “first inning” (thank you, Jon Simon).

For my cross-asset readers not into the wonk / micro of equities, this is relevant in the sense that it could have a significant reversal in current consensual buyside positioning (driving strong equity fund performance YTD), which is based upon the consensual view that US growth is ‘okay but slowing’…and slowing into a tightening regime at that.  And for clarity-sake, by no means is this burdgeoning and likely tactical shift into ‘cyclical equities’ (or ‘value’ factor as it currently stands) equivalent to the outright ‘reflation’ trade euphoria of late last year / start Q1 this year, which was based-upon a larger global recovery and acceleration off the energy ‘base-effect,’ Chinese credit-pumping driving much of the inflation impulse via the supply chain and CB willingness to allow curves to steepen…PLUS the siren-song hopes of US fiscal policy benefits post the Trump election.

BUT it does rhyme somewhat, as a reversal in the equities-regime is largely dependent upon higher rates driving economically-geared leadership as opposed to the current regime, where equities investors are either piling into companies that are able to grow ‘secularly,’ not ‘cyclically….or conversely, piling into ‘low volatility’ bond-proxies for their yield or ‘income.’  The losers in this scenario have been the ‘value’ stuff that’s been left for dead after 8 years of ZIRP and QE-induced low rates and flat curves—again, ‘cyclical’ stuff.

During the afternoon of the US session Thursday, we saw at peak a 2 standard deviation move to the upside in the 1 day-performance of 12m ‘value market-neutral’ (what I've been banging the drum on for a while now, nobody really 'there' for this trade and will be source of pain IF a rally in cyclicals was to sustain—Financials, Industrials, Materials and Energy as four of the S&P’s top six performing sectors on the day), juxtaposed against a 2 SD move to the downside in 'anti-beta' mkt-neutral (defensives coming unglued today, with REITS, Telcos, Staples and Utilities as four of the S&P’s five worst performing sectors on the session).

ANTI-BETA MKT-NEUTRAL 2 SD MOVE TO DOWNSIDE, WORST DAY SINCE NOVEMBER 30TH:

 

LARGEST POSITIVE MOVE IN ‘VALUE’ MARKET-NEUTRAL SINCE DECEMBER 1ST:

This of course is a major reversal of YTD-trend.  As I’ve been saying, ‘value’ has been 2017’s whipping boy (for the right reasons, as rates retrenched and inflation expectations have again faded lower), while ‘anti-beta’ has, along with ‘growth’ / ‘momentum’ / ‘quality,’ been a ‘hiding place’ for equities investors—especially with the never-ending AUM inflows into behemoth income fund / divy yield / low volatility products.  So as noted in yesterday morning’s note, when you see such a robust reversal in a very clear outright YTD theme—AND ON MULTIPLE-FRONTS–you need to pay attention to it as a potential signal of change being afoot.

Directly being affected by this reversal in ‘value’ / ‘cyclical beta’: small caps (Russell 2000 outperforming SPX by an astounding +150bps on the day), which are of course enormous YTD laggards but more importantly, ‘cyclically-geared and high-beta.’  The fact that 28% of the Russell weighting is financials too adds some ‘ooomph’ to the move obviously as well.

Perhaps just as important is that we are seeing EVER-so-slight signs of ‘growth’ beginning to fatigue.  Not even in the stratosphere of being used as an outright ‘source-of-funds’ right now—but to see the equity world’s most crowded overweight not doing the heavy-lifting on index could be read two ways: that it is a HEALTHY thing on the index-level to see other sectors pick-up the slack; or, conversely, that it’s a WORRYING thing when your leadership is losing momentum, and that two of the key ‘growth’ sectors (healthcare and consumer discretionary as the 2nd and 3rd best performing sectors YTD) are underperforming the S&P index by -30bps and -70bps, respectively, on the Thursday session.

Again, this isn’t causing performance issues right now, because again, you’re not seeing the ‘pukes’ in tech longs or mega-squeezes in, say, placeholder underweights like Energy—hard to imagine that occurring with WTI sitting still with a $45 handle.  Most importantly, and to be fair for ‘context,’ we see this move higher in US rates STILL only +8bps from YTD lows made a few days ago.  As I will keep saying—a more meaningful / ‘stickier’ factor-rotation (where ‘value’ can sustainably outperform ‘growth’) is going to require a true rates reversal with higher outright nominal yields.

As such, ‘higher rates’ may seem like a pipe-dream at this juncture, in light of the multi-month ‘slow-flation’ case I have been making on global shift ‘tighter’ bleeding into downgraded global growth projections and lower inflation expectations.  Piling onto this, recently slowing US data adding a bit more ‘equilibrium’ to previously ‘hawkish’ Fed-speak; 2) China’s recent open market operation LIQUIDITY INJECTIONS to counter disruptions created by their own deleveraging efforts (always gets a chuckle out of me); and 3) today’s ECB meeting, which pivoted BACK-TO a rather dovish stance, certainly relative to recent broad ECB-messaging as well, off the back of the downgrade of the ‘balance of risk’ assessment post French election and the obvious recent upward trajectory of PMIs.  It’s entirely logical to think that this modicum of ‘dovish backpedaling’ means rates are seemingly going nowhere for a while, especially with US fiscal policy outright being ‘left for dead’ in the collective market psyche as the Trump investigation quagmire saps legislative efforts.

Again though, this game is about positioning imbalances and expectations overshoots—and it’s possible we’re nearing the pendulum having swung a bit too far in the other direction…soon.  Just as rates shorts and duration underweights have been covering / adding USTs at such a clip in recent weeks, the asymmetry risks turning in the opposite direction—especially when it is synchronized with the potential ‘crowding’ into the NOW CONSENSUS VIEW of slower growth, and the implications this will have on the Fed (market pricing-in significantly more ‘dovish’ scenarios than recent past).

With the potential for a seasonal uptick in US economic surprises experienced every month on average in H2 over the past seven years, this overly pessimistic positioning both with regards to the ECONOMIC EXPECTATIONS overshooting to the downside—plus, in the view of Tom Porcelli, a Fed that is resolute in two more hikes plus a balance sheet taper–you have the catalyst for higher rates fireworks potentially ‘in hand.’

And if you get those, even just tactically over a couple of months, these ‘growth : value,’ ‘quality : size,’ ‘anti-beta : beta’ dynamics are certain to reverse.

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

“It’s A Perfect Storm”: List Of Retailers In Danger Of Bankruptcy Hits Record 22

The US retail sector continues to sink at an alarming rate, and according to the latest iteration of Moody‘s list of retailers who are in danger of filing for bankruptcy, there are now 22 distressed retailers whose troubled financials the rating agency believes could make them potential bankruptcy candidates in the near future, up substantially from just two months ago, and topping the 19 recorded at the peak of the Great Recession.

According to Moody’s analyst Charles O’Shea, legacy retailers such as Sears, Neiman Marcus and others on the rating agency’s retail distress list, face a “perfect storm” and warned that “you’re on the Andrea Gail right now, and the water’s starting to get very choppy.” The worst could be yet to come as the Moody’s analyst writes that “the ranks of distressed retailers is set to keep growing over the next 12 to 18 months amid a secular shift in the industry.”

Moody’s list consists of all retailers which have ratings of Caa or lower. That number has grown to 22, or approximately 15%, of the firm’s retail and apparel universe. “When you’re down there in C-a land, bankruptcy is a real possibility,” O’Shea said.

“The majority of retailers remain fundamentally healthy,” said O’Shea, “But as select groups of retailers continue to deteriorate — in particular department stores and specialty retailers — we believe the distressed ranks will keep growing, fueled in part by distinct vulnerabilities within the B2/B3 retail population.”

Focusing on those retailers with imminent default risk, Moody’s adds that of 42 B2/B3 rated issuers (as of April 30, 2017), seven face $1.1 billion of maturities for asset-based loans and revolving credit facilities over the next year- elevating the risk of default for already-stressed and distressed issuers should the strong refinancing pace driving recent high-yield issuance recede. Such a risk is underscored by Moody’s US speculative-grade default forecast, which predicts a decline in the overall US speculative-grade default rate to 3% by April 2018 from 4.5% today, even as spec-grade retail and apparel default forecasts trend significantly higher, at 6.7% and 6.8%, respectively.

Some of the highliights from the latest Moody’s report

  • Competitive challenges are intensifying and the credit erosion among more challenged retail sectors and individual retailers is crystallizing rapidly as more issuers file for bankruptcy and miss payments
  • The competitive challenges weighing on earnings performance for bigger retailers like Amazon.com, Walmart Stores, Best Buy and Target will have potentially devastating ripple effects for smaller, more challenged retailers over the next several quarters
  • Common characteristics of retail and apparel companies with lower credit ratings include stressed liquidity, weak quantitative credit profiles, challenged competitive positions, sponsor ownership and erratic management structure
  • Liquidity is typically the driving force in the assessment of credit risk, and a key determinant in any drop into Caa/Ca territory. “Risk becomes more acute when a company is facing a meaningful debt maturity.”

Some names that figured previously on Moody’s list have already filed for Chapter 11 protoection: among them discount footwear company Payless ShoeSource and Rue21, a teen fashion retailer, both filed for bankruptcy recently, while Gymboree, a specialty seller of children’s apparel, missed its June 1 interest payment and is expected to announce its bankruptcy filing shortly.

While landing on the distressed list of “super fallen angels” is not a death sentence, recently JC Penney managed to crawl out of it, the probability that a company will end up in bankruptcy rather than get its financial in orders is orders of magnitude greater.  “There are companies that come out of that,” said O’Shea, who noted that iconic retailer J.C. Penney “was down there, and is now out,” with an improved rating.

Doing the math here, with one company “out” and everyone else eventually filing, restructuring lawyers are finally going to be busy after a nearly decade-long hiatus.

Below is the full list of deeply distressed retailers:

  • Boardriders SA  – sporting subsidiary of Quiksilver
  • The Bon-Ton Stores – parent of department store chain
  • Fairway Group Holdings – food retailer
  • Tops Holding II – supermarket operator
  • 99 Cents Only Stores – discount retailer
  • TOMS Shoes – footwear company
  • David’s Bridal – wedding dresses and formalwear seller
  • Evergreen AcqCo 1 LP – parent of thrift chain Savers
  • Charming Charlie – women’s jewelry and accessories
  • Vince LLC – clothing retailer
  • Calceus Acquisition – owner of Cole Haan footwear firm
  • Charlotte Russe – women’s clothing
  • Neiman Marcus Group – luxury department store
  • Sears Holdings – owner of Sears and Kmart.
  • Indra Holdings – holding company owner of Totes Isotoner
  • Velocity Pooling Vehicle – does business as MAG, Motorsport Aftermarket Group
  • Chinos Intermediate Holdings – parent of J. Crew Group
  • Everest Holdings – manages Eddie Bauer brand
  • Nine West Holdings – clothing, shoes and accessories
  • Claire’s Stores – accessories and jewelry
  • True Religion Apparel – men’s and women’s clothing
  • Gymboree – children’s apparel

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