TrimTabs Issues Warning After A Record $98 Billion Flood Equity ETF Since The Election

Having recently (before the election) found that stock buybacks have tumbled to the lowest level in 5 years, coupled with the lowest amount of insider buying since 2011, this morning TrimTabs Investment Research reported what regular readers already know, namely that U.S. equity exchange-traded funds received a record $97.6 billion from Tuesday, November 8 through Thursday, December 15, promptly TrimTabs to ask if “investors are all-in on US stocks?

“The stampede into U.S. equity ETFs since the election has been nothing short of breathtaking,” said David Santschi, chief executive officer at TrimTabs.  “The inflow since Election Day is equal to one and a half times the inflow of $61.5 billion in all of last year.  One has to wonder who’s left to buy.”

Well, there is also the BOJ, SNB, the GPIF and a variety of other official and unofficial institutions who can print money at will to adjust their cost basis…

In a research note, TrimTabs points out that the inflow into U.S. equity ETFs since Election Day is equal to 6.3% of these funds’ assets.  December’s inflow has already reached $43.4 billion, putting this month’s inflow on track to surpass the record monthly inflow of $50.7 billion set in November.

TrimTabs also noted that buying has been persistently heavy since the election.  U.S. equity ETFs have had outflows on only three trading days, and inflows swelled to $27.8 billion on the five days ended Thursday, December 15, the highest weekly inflow in four weeks.

This, however, is far from a bullish sign according to TrimTabs, which issued the following warning as a result of the “breathtaking” inflows: “ETF flows tend to be a good contrary indicator when they become extreme, so the buying frenzy doesn’t bode well for U.S. equities,” said Santschi.  “The market also could get a nasty jolt in January, when investors who’ve been postponing stock sales this year in anticipation of lower tax rates next year start to sell.”

Bullish or not, one thing is certain: active investors, who are one of the primary “sources of funds” as this massive capital reallication has taken place, would be happy with even a fraction of this number going to them; alas so far the 2 and 20 model continues to be broken, as increasingly more investors

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Chuck Schumer Redux: Demands Recall of E-Cigarettes, Again…

It’s long been known that the most dangerous place in Washington is anywhere that’s between New York Sen. Charles Schumer and a TV camera.

The latest outburst from the man who has attacked (in no particular order) Four Loko and Joose, yoga mats, breakfast cereal prices, Bitcoin, 3D-printed guns, drones, payday lenders, laundry detergent that looks good enough to eat, video games, and so much more? Electronic cigarettes, which are helping people quit smoking traditional tobacco products and might potentially save a billion lives.

The proximate cause for Schumer’s latest crusade? Malfunctions involving battery packs that have apparently led to sometimes serious injuries. Reports the Daily News:

“Where there’s smoke, there’s fire and that seems to be the case, again and again, for many popular e-cigarettes that have injured dozens of people,” Schumer said.

“With any other product, serious action would have been taken, and e-cigarettes should be no exception. Despite the explosions, no recalls have been issued. It’s radio silence from both the industry and the feds.”

OK, what’s the frequency of such incidents, to get some perspective?

More than 2.5 million Americans are using e-cigarettes, according to industry estimates. According to the FDA, there were 92 incidents of overheating, fire or explosion in e-cigarettes across the country between 2009 and September of 2015.

The FDA said 45 incidents injured 47 people, and 67 incidents involved property damage beyond the product.

More here.

Manufacturers of defective and dangerous devices should be held accountable (and doubtless will be, if their products are poorly designed and systematically dangerous). But the incident rate is hardly grounds for industry-wide recalls and the sort of clamp-down that Schumer supports. But then again, Schumer has long been anti-vaping and e-cigarettes, so he’s happy to use any and every incident to push his longstanding agenda. Now that he’s Senate Minority Leader, get used to him being in the news even more than usual. For the next four. long. years.

Read Anthony Fisher on one of Schumer’s rare moments of restraint: when it came to tracking bad cops.

It’s not just Schumer who’s trying to crack down on vaping, of course. The World Health Organization (WHO) is leading the charge, especially in developing nations where tobacco is still a growing industry. Which makes no sense at all.

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VIX Slammed To 11 Handle But Stocks Not Surging

Following Friday’s quad witch VIX puke, this morning’s open has extended that volatility collapse as the ‘fear’ index just broke to an 11 handle. However, the high correlation between stocks and VIX is back as stocks are not as exuberantly running as VIX would imply…

Another VIX slam…

 

But stocks not exactly loving this…

 

VIX has not seen an 11 handle since 12/9 (when The Dow was 250 points lower).

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Two Options: Reform The Economic System Now Or The Populists Will

Submitted by Michael Shedlock via MishTalk.com,

Financial Times writer Wolfgang Münchau says Reform the Economic System Now or the Populists Will Do It.

“It is one thing to say, as some of us have done, that the western liberal elites should stop doubling down when faced with a populist threat. But beyond that, what should they actually do?” asks Münchau.

Münchau cites Marine le Pen in France, but misses the far greater threat of Beppe Grillo’s Five Star Movement in Italy. I am sure he would agree Italy is a bigger threat right now.

When I first read his article, loaded with Keynesian references, I thought he was proposing more Keynesian bullsheet.

On second glance, I am not quite sure what he proposes, if anything.

Autopilot

Münchau writes “We should put fiscal policy off the autopilot and challenge the tyranny of the ubiquitous 2 per cent inflation target. And we should start making a distinction between the interests of the financial sector and the economy at large. Failure to do so was one of the reasons for the Brexit vote.”

I wholeheartedly agree, but is Münchau asking for more inflation or less inflation?

A correct approach would be to get central banks out of the equation altogether. Central banks’ push for two percent inflation in a price deflationary world is madness.

Romer’s Gibberish

Münchau also cites Paul Romer, chief economist of the World Bank, who compared macroeconomics with string theory in physics in a devastating critique of his economics profession.

Romer’s article is nothing but economic gibberish. I cannot even tell whether Münchau agrees or disagrees.

I do know all the Keynesian models are wrong. I also know that the idea that a group of alleged economic wizards can sit in a room and divine the correct interest rate to achieve a dual mandate of low unemployment and high growth is absurd.

If this same group of individuals decided to set the price of orange juice, everyone would be shocked. In reality, it’s much harder to set the correct interest rate because policy errors on interest rates become obvious only after it’s too late to do anything about them. The housing bubble is a classic example.

Three economic bubbles in quick succession are proof enough of central bankers’ ineptitude.

The wizards have tried everything to get inflation in a deflationary world. If I read Romer correctly, he wants even higher inflation targets.

I have a better idea: Let the free market set interest rates because central bankers have proven beyond a shadow of a doubt they are clueless.

Structural Problems

What ails Italy, Greece, and France is not lack of fiscal stimulus, but government interference in everything combined with high tax rates that everyone struggles to avoid.

When it is too difficult to fire workers, businesses will not hire them in the first place. When Government makes it too hard to start a business, businesses don’t start.

By what shade of idiocy does France insist on a 35 hour work week, with no work on Sunday?

Agricultural tariffs in France to save the French way of life costs the rest of Europe dearly. Mindless sanctions on Russia cost Europe dearly, especially Italy.

Bailing out banks at taxpayer expense cost everyone but the bankers dearly. Because of structural differences between Italy, France, Spain, Greece, and Germany, there is no such thing as an ideal interest rate in the Eurozone.

Interest rate policy for Greece should not be the same as interest rate policy for Germany. That’s a problem Münchau does not even mention, but again I believe he knows.

Economic Challenge to Keynesians

Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.

I have commented on this many times and have been vindicated not only by sound economic theory but also by actual historical examples.

My article Deflation Bonanza! (And the Fool’s Mission to Stop It) has a good synopsis.

And my Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.

There is no answer because history and logic both show that concerns over consumer price deflation are seriously misplaced.

The BIS did a study and found routine deflation was not any problem at all.

Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.

It’s asset bubble deflation that is damaging.

And in central banks’ seriously misguided attempts to fight routine consumer price deflation, central bankers create very destructive asset bubbles that eventually collapse.

When those bubble burst, and they will, it will trigger debt deflation, which is what central banks ought to fear.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Meanwhile economically illiterate writers bemoan deflation, as do most economists and central banks. The final irony in this ridiculous mix is central bank policies stimulate massive wealth inequality fueled by soaring stock prices.

The Solution

This is what it comes down to: There was a credit explosion to the benefit of banks and the wealthy once Nixon closed the gold window. At that point, governments could print at will, and they did.

tcmdo-2016-12-18

Central bank policy cannot fix structural problems, only the free market can. And that includes a truly free market in money as well.

Also see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold’s Honest Discipline Revisited.

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Service PMI Drops To Three Month Low, But Job Creation Jumps As Input Costs Soar

Following a series of exuberant sentiment surveys since the Trump election, moments ago we got what may have been the first disappointing read in the past 2 months, when Markit reported that the December Service PMI dropped from 54.6 to a three month low of 53.4, missing expectations of a bounce to 55.2.

Adjusted for seasonal influences, the Markit Flash U.S. Services PMI Business Activity Index posted 53.4 in December, down slightly from 54.6 in November but above the 50.0 no-change value for the tenth consecutive month. The average reading for the final quarter of 2016 (54.2) pointed to the steepest upturn in service sector output since Q4 2015. The rate of new business growth eased from November’s recent peak, but remained one of the fastest seen over the past 12 months. Survey respondents commented on improving domestic economic conditions and a general upturn in willingness to spend among clients.

The slightly disappointing headline print was offset by underlying strength in the jobs number as the payrolls numbers had their strongest rise since March.  The December data highlighted a renewed rise in backlogs of work across the service economy, largely driven by stronger sales volumes and associated pressures on operating capacity. This encouraged greater staff hiring during the latest survey period, with the rate of job creation the fastest since March.

As Markit notes, U.S. service providers indicated a solid upturn in business activity at the end of 2016, although the rate of expansion eased further from October’s recent peak amid a slightly softer rise in new work. The latest survey nonetheless revealed an acceleration in jobs growth for the third month running and a stronger degree of optimism about the year-ahead business outlook.

Meanwhile, the threat that the Fed is behind the inflationary curve reemerged after Markit reported that cost pressures intensified in December, with the latest rise in input prices one of the fastest seen since mid-2015. Input cost inflation picked up in December to its second-fastest since July 2015. Survey respondents commented on rising raw material costs, and increased food prices in particular. A robust and accelerated rise in operating costs resulted in higher prices charged by service providers in December. Although only modest, the latest increase in prices charged was one of the largest seen since June 2015.

Finally, the recurring theme of strong optimism about 2017 was once again noted as service providers reported a strong degree of optimism regarding the year-ahead business outlook in December.

The latest reading was well above the survey-record low seen in June, but still slightly weaker than the average recorded since the survey began in late-2009. Anecdotal evidence suggested that stronger pipelines of new work and an expected rebound in U.S. economic conditions had underpinned service sector optimism about the outlook for 2017.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“Although service sector growth cooled in December, the PMI surveys indicate that the economy continued to show solid, steady growth at the end of the year. The surveys are consistent with GDP rising at an annualised rate of 2.0% in the fourth quarter, fuelled mainly by improving domestic demand.

 

“The December slowdown looks likely to be a temporary blip, not least because firms took on staff in increasing numbers in the expectation of rising workloads in 2017. The two flash PMI surveys are signalling a respectable 190,000 increase in nonfarm payrolls in December.

 

“With the new year bringing a change of government and a shift in emphasis towards fiscal stimulus, economic growth and the labour market look set to strengthen further in 2017. We expect GDP growth to accelerate to a steady but unexciting 2.3% in 2017, accompanied by three further quarter point rate hikes by the Fed.” 

With the PMI number suggesting that the economy continues to run near full employment, at least according to the Fed’s own calculations, coupled with a spike in input prices, the risk of a more aggressive tightening cycle once again emerges.

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Trump Makes Two Solid Cabinet Picks: New at Reason

Andrew PuzderJudging from the reaction to some of Donald Trump’s Cabinet choices, there are two types of businesspeople Democrats distrust: those who behave as you would expect businesspeople to behave and those who don’t. Neither Andrew Puzder nor Rex Tillerson has found many champions in the opposition party.

Puzder, chosen to head the Department of Labor, is head of CKE Restaurants, parent company of the Hardee’s and Carl’s Jr. fast-food chains. In that job, he has learned a lot about hiring and managing employees—the “labor” that is the focus of the department’s activities.

For some reason, it comes as a shock to many people that Trump would nominate someone who opposes big increases in the minimum wage. “Instead of creating a living wage,” Puzder wrote last year, “the fight for dramatic minimum-wage increases could leave millions with no wage at all.” Steve Chapman analyzes Puzder’s wisdom, along with that of secretary of state nominee Tillerson.

View this article.

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Deutsche Bank Shares Stumble As DoJ Settlement Looms

Deutsche Bank shares are sliding this morning after headlines from CNBC reporting a settlement is close with the US Justice Department over mortgage fraud. With analyst expectations/hopes in the $2 to $5 billion range (against the initial $14 billion fine), reports say the bank is set to pay "less than $14 billion" which has perhaps spooked investors with its uncertainty.

Deutsche Bank settlement with U.S. Dept of Justice could come as early as Wednesday, CNBC says, cites Reuters.

  • Deutsche Bank to pay less than $14b
  • Deutsche Bank spokesman declines to comment on DOJ RMBS report

And for now the stock is fading…

 

As a reminder, a DB spokesman confirmed back in July that negotiations had been initiated with the DOJ though no estimates had been provided on the size of any potential settlement before today.  That said, the Wall Street Journal notes that DB's attorneys had privately suggested that a $2 – $3 billion settlement with the DOJ was probably in the ballpark.  Meanwhile, wall street analysts had estimated settlements in the $2-$5 billion range.  Any fines paid pursuant to current negotiations would be in addition to the $1.9 billion already paid in 2013 to settle other U.S. claims related to mortgage-backed securities.

Per the table below, as of June 30, DB had reserved a total of €5.5 billion for civil litigation and regulatory penalties on it's balance sheet.

DB

The size of the proposed settlement is also bad news for other European banks that remain under investigation by the DOJ including Barclays, Credit Suisse, UBS and RBS.  Lawyers working with other banks have indicated that DB's settlement would likely set the precedent for what other Euro banks might be expected to pay.

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Trump Nominates Billionaire Virtu Founder Vincent Viola As Secretary Of The Army

Add another billionaire to the ranks of individuals in Donald Trump’s administration.

President-elect Donald Trump has announced the nomination of Vincent Viola as secretary of the Army. Viola is a retired paratrooper, former chairman of NYMEX, founder of HFT trading powerhouse Virtu Financial and current owner of the NHL’s Florida Panthers team. The Brooklyn-born Viola graduated from West Point in 1977 and served in the 101st Airborne Division. After his active service ended, he worked as a trader at the New York Mercantile Exchange (NYMEX), where he became chairman in 2001. In 2008, he founded Virtu Financial.

The nomination of the Virtu strongman likely means that any hopes of a crackdown against HFT in the current administration can be postponed indefinitely.

From the press release:

?President-elect Donald J. Trump today announced he intends to nominate former U.S. Army infantry officer and current Virtu Financial Founder and Executive Chairman Vincent “Vinnie” Viola as Secretary of the Army.

As Secretary of the Army, Viola will combine a deep background in national security affairs with an impressive track record of leading and managing high-performing teams within the military and the private sector. Viola is a West Point graduate and U.S. Army veteran. He was trained as an Airborne Ranger infantry officer and served in the 101st Airborne Division. Viola has long been engaged with national security issues even after his military service.

Following the terrorist attacks on September 11, Viola worked tirelessly to support the Army philanthropically in the areas of counterterrorism, cybersecurity and leadership development, including helping to found the Combating Terrorism Center at West Point. He has also founded multiple high-value companies, including Virtu Financial, and chaired the New York Mercantile Exchange. Viola’s business experience makes him well positioned to help guide a Fortune 10-sized company, the U.S. Army, to accomplish its broad mission in the most innovative and efficient way possible.

“I am proud to have such an incredibly accomplished and selfless individual as Vincent Viola as our Secretary of the Army,” said President-elect Donald J. Trump. “Whether it is his distinguished military service or highly impressive track record in the world of business, Vinnie has proved throughout his life that he knows how to be a leader and deliver major results in the face of any challenge. He is a man of outstanding work ethic, integrity, and strategic vision, with an exceptional ability to motivate others. The American people, whether civilian or military, should have great confidence that Vinnie Viola has what it takes to keep America safe and oversee issues of concern to our troops in the Army.”

“It is an honor to be nominated to serve our country as President-elect Trump’s Secretary of the Army,” said Viola. “If confirmed, I will work tirelessly to provide our President with the land force he will need to accomplish any mission in support of his National Defense Strategy. A primary focus of my leadership will be ensuring that America’s soldiers have the ways and means to fight and win across the full spectrum of conflict. This great honor comes with great responsibility, and I will fight for the American people and their right to live free every day.”

Viola is living proof of the American dream. He was born and raised in an Italian immigrant family in Brooklyn, and his father worked a truck driver. Viola was inspired to join the military after witnessing his father’s service in the U.S. Army in World War II. Viola was the first member of his family to attend college, and after graduating from the U.S. Military Academy at West Point in 1977, he was commissioned a second lieutenant in the U.S. Army that same year. After graduating from the Infantry Officer Basic Course and Ranger School, Viola reported to duty with the 101st Airborne Division. Viola remained a member of the U.S. Army Reserve after the completion of his active duty service. In 1983, he received his J.D. from New York Law School.

In the 1980s, Viola worked as a trader on the New York Mercantile Exchange (NYMEX) and also founded the first of many business ventures, including Pioneer Futures and the Independent Bank Group. After a long and influential career, Viola was appointed Chairman of NYMEX in March 2001.

Viola’s leadership of NYMEX on and after 9/11 resulted in the board of Exchange recognizing his actions with a citation that included this statement: “His heroic leadership served as a beacon to thousands of Exchange members and staff, providing us with the fortitude to resume operations and preserve the efficiency of the American economy and global energy and metals markets in the face of this great tragedy.” In 2008, Viola founded Virtu Financial, a global leader in electronic market making, and took the company public in 2015.

Viola has also been deeply involved in a number of philanthropic causes. Viola has endowed the Avery Cardinal Dulles, S.J. Chair in Catholic Theology at Fordham University and is a major supporter of the Catholic Leadership Institute and its mission to provide world-class leadership formation to bishops, priests and deacons. He is also the owner of the NHL’s Florida Panthers.

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Yes, Political Correctness Helped Elect Trump: What Skeptics Need to Know

TrumpMcGill University political scientist and occasional Reason contributor Jacob T. Levy raises some good points in an interesting but flawed piece for the Niskanen Center. Levy criticizes the notion that Donald Trump’s election to the presidency is a backlash against political correctness. He identifies me as one of the chief proponents of this theory, and accuses me of succumbing to the “pundit’s fallacy”—of attributing Trump’s victory to something that I already thought was bad.

That’s a fair criticism, and Levy has a point when he writes that I perhaps overstated the case for the backlash theory in the headline of my post, “Trump Won Because Leftist Political Correctness Inspired a Terrifying Backlash.” But in his zeal to acquit political correctness, he misses some key details that make my theory more compelling.

“There is a powerful temptation to attribute the surprising and dramatic fact of Trump’s win to some issue about which one had some preexisting ax to grind,” writes Levy. True enough, it’s important to keep in mind that a variety of factors help explain why Trump won the 100,000 collective votes he needed in Michigan, Pennsylvania, and Wisconsin. And journalists ought to be more careful about bias confirmation.

That said, if there’s a danger in embracing the backlash theory because it confirms my negative impression of political correctness, there’s also a danger in rejecting the theory simply because one would prefer to see political correctness and the related but distinct issue of identity politics as irrelevant, or even positive, social forces.

Levy writes, “A lot of butterflies flapped their wings to bring about the November 8 result, but we have particularly little reason to think that [political correctness] was one of them.”

Here I don’t agree—in large part, because I’ve actually talked to Trump voters, and they give me every reason to believe that political-correctness-run-amok caused them to vote for Trump. Indeed, they said so explicitly. Consider this email I received from a 60-year-old Midwestern Trump voter:

I support most of the cultural revolutions that form the basis of the political correctness issue that you raised. However the backlash for dissenting on certain items was incredible. For example, I support gays marriage and transsexual people’s rights. However, I do not support them to the exclusion of other citizen rights. Without elaborating on my views… I will say that I was subjected to a form of political correctness by friends and others that brooked no argument for the rights of the others. This blind adherence to political correctness was my main issue in the recent political arena.

He added that my article on this subject “captured my feelings succinctly” and that he voted for Trump “for the exact reason you stated.”

His was among a torrent of emails I received from people after I wrote that article. Another person, a 52-year-old self-described hillbilly, wrote, “If you explain in a considered and respectful way why what I am saying is hurtful or wrong, I will take it on board and try to change. If you talk down to me and tell me what a horrible person I am in the process—maybe not so much.” She continued:

Political correctness is NOT “being kind and having good manners”. I am southern. I am always kind and I have impeccable manners. What political correctness is to me is an unreasonable expectation of your fellow man. To expect him to have arrived where you are while having completely different life experiences. Contempt is always hurtful. Bullying is always bad. It is ironic that people who bully people for being politically incorrect don’t even recognize it as bullying or as just another way of demonizing people who are different than you. They are engaging in the exact same behavior they excoriate. It’s ok to be different in the way they are different but not in any other way.

She added that she works three jobs and doesn’t have much time to educate herself about the linguistic and cultural requirements of modern progressivism.

Levy writes that the Trump campaign’s darkest moments came when he attacked Judge Gonzalo Curiel because of the man’s Mexican heritage, and when the Access Hollywood tape was released. Levy says this damages my theory, because these were examples of Trump’s political incorrectness, and they hurt rather than helped him. The above emails, I think, address this aspect of Levy’s criticism. When Trump voters say they want someone who is politically incorrect, they do not necessarily mean that they want someone who is an abusive, racist, sexist bully. If Trump’s racist and sexist antics gave them pause about supporting him, maybe it’s because they don’t see themselves as racists and sexists and resent being associated with racism and sexism. This doesn’t confuse their opposition to political correctness; it complements it.

I don’t want to overstate the representative nature of two emails, but more than one person writing me in response to an article is a fairly rare occurrence. A great many people writing me—and all saying that I described their feelings perfectly—is something I’ve rarely experienced, and so I must conclude that what I wrote has some merit.

I’m not sure why Levy or anyone else finds this notion so insane. I’m not saying people were right to feel this way, or to turn to Trump in their frustration. I’m only saying that they did—because that’s what they are telling me.

Nor am I the only one privy to this information. When reporters have asked Trump voters about his appeal, they have consistently named political correctness as one of the most important reasons to vote for him. To take just one example, The Washington Post published statements from 29 Trump supporters: just 3 of them used the words “political correctness” explicitly, but a number of others invoke closely-related grievances like the arrogance, bullying, and scolding of the Clinton machine, liberal elites, and left-leaning media figures. Trump supporters told reporters again and again that they like how he speaks his mind and tells it like it is. In other words, they like his explicit rejection of political correctness.

That’s the other major thing Levy misses in his article: Trump, more than any other successful political figure in history, self-identified as an icon of resistance to political correctness. “We can’t afford to be politically correct anymore,” wasn’t just Trump’s response to the mass-shooting in Orlando—it was the refrain of his entire campaign. His constant rejection of political correctness distinguished him from Republican rivals of the past and present. When asked about a problem to which he did not know the answer—a frequent occurrence, to be sure—the answer was always the same: The media is lying, everyone in government is stupid and incompetent, and if we just stopped being so politically correct and admitted the truth about globalism, about immigration, about Islamic radicalism, we would be safer and more prosperous. Trump complained that he was named TIME‘s “Person of the Year” instead of “Man of the Year.” He has promised to save “Merry Christmas.”

But, Levy writes, the backlash explanation fails because the voters who gave the election to Trump probably haven’t heard about the kinds of politically-correct excesses that I write about for Reason. According to Levy:

Soave covers disputes about political correctness for a living. Other media professionals, as well as academics, might read this and nod worriedly; they follow the flare-ups about cultural politics and freedom of speech on university campuses, or disputes about which celebrity has said or done something “problematic,” routinely. But these remain obscure to the vast majority of voters. And the important thing to know about voters who are still undecided a week or two before a presidential election is that they know exceptionally little about politics. To a first approximation, we should guess that they know nothing about any particular political dispute that isn’t on national television that day.

But cable news and talk radio routinely cover the political correctness beat. Even local news and local radio stations wade into the territory when it overlaps with a relevant story at an elementary school or nearby college. You can’t seriously believe that media elites are the only people paying attention to the fate of Memories Pizza, or Chip and Joanna Gaines. Some people aren’t familiar with those incidents, sure—but some of those people have encountered similar examples in their personal lives.

To say that people are ignorant about the best examples of political-correctness-run-amok seems wrong to me. These examples are highlighted constantly, and some of the most persuasive ones are encountered in everyday life.

Lastly, recall that, as Levy admits, Trump lost educated white voters but made significant gains among non-educated whites—the exact group of people one would expect to be especially motivated by political-correctness-run-amok.

To recap, Trump narrowly won the presidency in part because he did better among less-well-educated working class whites in three key Obama states, and these sorts of voters say they are furious about political correctness when you ask them, and Trump exploited concerns about political correctness more than any other candidate in history, and people who voted for Trump consistently list his anti-PC attitude as one of the most admirable things about him.

For these reasons, I stand by my assertion that the election of Trump is, in part, a backlash against political correctness. The most anti-PC guy won, and he won by inveighing against political correctness constantly, and Trump voters like him because he did that.

The second half of Levy’s essay is dedicated to the idea that the related phenomenon of identity politics is getting a bad name and, more provocatively, that the cause of liberty is actually advanced by identity politics. I have less to say about this—I’m open to being persuaded on this front, but I’m not yet moved by Levy’s case.

Take Black Lives Matter. Levy cites the BLM movement as a successful identity-based coalition:

Black Lives Matter has provided the first truly large-scale political mobilization against police violence and mass incarceration since the War on Drugs began. …

It’s true that it’s possible to offer those analyses in a race-neutral way. But given that the policies aren’t race-neutral, it shouldn’t surprise us that opposition to them isn’t either, and that the real political energy for mobilizing against them would be race-conscious energy.

If Black Lives Matter is “identity politics,” then identity politics has provided one of the most significant political mobilizations in defense of freedom in the United States in my lifetime. That doesn’t belong on the “to be sure” exception side of a rule that is driven by the politics of gender pronouns. It’s precisely the other way around.

BLM is a great example of identity politics in action. But is it a great example of identity politics being harnessed for good? I’m unconvinced that BLM has been a net positive, and I say that as someone who embraces most of its goals. Has BLM done the work of persuading people who did not already support criminal justice reform? Is criminal justice reform now closer to being a reality, or further away? I’m worried that by making criminal justice reform about doing what’s right for people of color, rather than doing what’s right for society in general, BLM might have driven winnable voters into the arms of the law-and-order candidate: Trump. Certainly, if the nation is plagued by racial resentment to the degree the average media liberal seems to think it is, then making criminal justice reform a racial cause was a self-defeating tactic.

When I try to convince older, right-leaning folks to support criminal justice reform, I make a variety of arguments: The War on Drugs doesn’t work at all; a free society wouldn’t do this; we can’t afford to spend so much time and effort putting people in prison; we can’t even make prisons drug-free; states should be able to decriminalize drugs; what you smoke in your own home is your business; sentences are too long and it’s because of meddlesome federal laws; there’s such a thing as the Bill of Rights; etc., etc.

The least convincing argument is the one that goes like this: These policies hurt black people, and you, by extension, are racist for not having denounced them.

To be sure, that’s an oversimplification of what BLM is doing. I appreciate that the movement has called attention to the undeniable fact that aggressive policing disproportionately impacts minorities. But I already knew that. Is this approach bringing new people on board? It seems like more of an open question than Levy realizes.

Levy’s essay concludes, “Members of disadvantaged minorities standing up for themselves aren’t to blame for the turn to populist authoritarianism; and their energy and commitment is a resource that free societies can’t do without in resisting it.”

Of course they aren’t to blame. But U.S. politics have turned toward populist authoritarianism, and those of us who lament this development should think critically about what form our anti-authoritarian activism must take. I’m not saying I know the answer. But if what we were already doing created a powerful, sustained, illiberal backlash, then some reflection is called for, no?

Perhaps the Cato Institute’s Jason Kuznicki puts it best. “I am sorry that the current backlash against minority identity politics has taken the form of white people doing identity politics, but now even harder, and using the vehicle of a demographically typical winning Republican presidential coalition to do it,” he writes. “But that is where we are. Isn’t it?”

For more on this subject, read this New York Times op-ed by Columbia University Professor Mark Lilla, with whom Levy also takes issue. Lilla speaks with Vox here.

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IMF Head Lagarde Convicted Of Negligence, Faces No Jail Time

International Monetary Fund Managing Director Christine Lagarde was found guilty of one count of negligence by a French court today, according to Bloomberg News. She was accused of failing to prevent a massive government payout to businessman Bernard Tapie eight years ago, while serving as France’s finance minister, but most surprising, she will face no fine or jail sentence.

International Monetary Fund chief Christine Lagarde convicted of one count of negligence by Paris court over her handling of a multi-million dispute when she was France’s finance minister.

  • 60-year-old IMF managing director convicted at the Cour de Justice de la Republique, over events that occurred nearly a decade ago
  • Lagarde won’t face fine or jail sentence, judge says
  • Lagarde was negligent in 2008 decision not to appeal arbitration, judge says
  • Lagarde decided in mid-2008 not to appeal a 285 million-euro ($303-million) arbitration award for businessman Bernard Tapie that led to a massive government payout
  • Lagarde was cleared of second count related to her 2007 decision to take Tapie dispute to arbitration Story Link: Lagarde Faces Setback as Critic Says Payout Was Scandalous (1)
  • Case stems from former state-owned bank Credit Lyonnais’s disagreement with Tapie over the 1993 sale of Adidas AG, which he owned

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