At CPAC, Pro–Criminal Justice Reform and Anti–Death Penalty Activists Make Their Case

The GOP is no longer monolithically the tough-on-crime party many think of it as being. As the debate rages on over whether or not we’re living through a “libertarian moment,” it’s worth noting that conversations around criminal justice reform are featuring prominently this weekend at the Conservative Political Action Conference (CPAC) in National Harbor, Maryland.

Groups like Right on Crime and Conservatives Concerned About the Death Penalty (CCATDP), once viewed mostly as novelties within the movement, are now fixtures of CPAC. What’s more, they’re making the case for rethinking the party line on criminal justice issues in decidedly conservative terms.

“The first year we got a lot of weird looks,” CCATDP’s advocacy coordinator, Marc Hyden, says. “But since we keep coming back, we’re accepted as just another part of the umbrella of conservatism. Nobody questions whether I’m a conservative or not—I’m talking about pro-life policies, fiscal responsibility, and limited government, and the death penalty just doesn’t work with that.”

Right on Crime Deputy Director Derek Cohen also has a playbook for reaching his fellow conservatives—and different messages work for different groups, he says. When talking to fiscal conservatives, he likes to point out that the same government that runs the post office runs the prison system. “Not exactly a model of efficiency,” he says. In Texas, where Right on Crime is based, a move toward giving low-level offenders probation or parole instead of prison time has allowed the state to forgo spending $2 billion on new prison infrastructure.

Social conservatives, on the other hand, “tend to appreciate the human value” and the “redemptive quality” of in-facility programs that help people—including people who have made serious mistakes—better themselves. “Even for serious crimes, even for violent crimes, when we send someone away for a long time, their life is fundamentally altered,” Cohen says. “That could be altered for the better, but that’s only if we’re putting in the rehabilitational elements that reduce recidivism.”

He conjures the example of a father and husband who gets caught with a little bit of heroine. His prison sentence under the old scheme would likely be just long enough to cause him to lose his job and experience problems at home. For social conservatives genuinely nervous about the decline of the family, that’s clearly a sub-optimal outcome. If instead people like that get intensive probation, “they’re at work. They’re at their kids’ ballgames.”

There’s some evidence policy is moving in tandem with the increased support among conservatives. Houston’s district attorney recently introduced guidelines whereby most first-time low-level drug offenders are diverted into community programs instead of locked up, for example.

We’re seeing progress on capital punishment as well. Just yesterday Florida’s legislature passed an overhaul to make it less likely that offenders will end up on death row. On the same day a judge ruled that Alabama’s execution system, like Florida’s before it, is unconstitutional. Last year Nebraska abolished its death penalty, and on Wednesday of this week the Utah state senate voted to do the same. “Now it’s heading over to the [Nebraska state] House,” Hyden says, “and the speaker of the House is against the death penalty! So we may get another red state to repeal the death penalty, which proves that Nebraska wasn’t an anomaly.”

The piecemeal nature of these victories can also be used to appeal to conservatives, he says. “I look at it through a Tenth Amendment framework—change should be done at the state level. If it’s not expressly mentioned in the Constitution, it should be done by the states.”

***

Reason TV caught up with CCATDP’s Hyden at CPAC last year. See what he had to say below.

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Weekend Reading: Is The Bear Market Over Already?

Submitted by Lance Roberts via RealInvestmentAdvice.com,

“The Bear Market Is Dead, Long Live The Bull.” 

You could almost hear the chants from the always bullish biased media this week as the markets ripped higher on “first day of the month” portfolio rebalancing and short-covering by fund managers.

The rally, as discussed this past weekend, was not unexpected:

“The good news is that the market was able to break above 1940, and the 50-dma, which now clears the way for a push to the 1970-1990 where the next levels of resistance will be found.

 

The bad news is that the markets are once again extremely overbought and still confined inside of an overall downtrend.”

(Chart updated through Thursday close)

SP500-MarketUpdate-030416-2

Is this rally, which looks a whole lot like other rallies we have seen repeatedly in recent months, a true return to a bull market? Or is this another trap being set by the bears?

While it is too early to know for sure, with risks still mounted to the downside a little extra caution might not be a bad idea.

This week’s reading list takes a look at various views on the market, economy and what to expect next. What is interesting is that being overly bullish at the moment carries more portfolio risk (loss of capital if you wrong) than being bearish (missing out on early gains).


1) This Is A Suckers Rally by Michael Kahn via Barron’s

“Chip Anderson, president of StockCharts.com, wrote in a recent newsletter to users that current “emotional short-term reactions are really just part of a larger pattern.” According to his analysis, “The market has topped and is generally moving lower based on a rounding top pattern and the downward movement of the 40-week (200-day) moving average.

Michael-Kahn-030316

But Also Read: Bears Have Their Backs Against The Wall by Avi Gilburt via MarketWatch

And Read: Top 10 Reasons Investors Should Sell Now by Doug Kass via Real Clear Markets

2)  March Is Best Chance For Market Rally by Sue Chang via MarketWatch

“March may be the best chance yet for an S&P 500 rally if you ask Jeffrey Saut, chief investment strategist at Raymond James. History and an energy shift at the market’s gut level could be the triggers.

 

Saut believes the stock market bottomed in February. ‘The first week of March should see the market’s ‘internal energy’ rebuilt for another try on the upside,’ he said in a report.”

But Also Read: March Madness by Lance Roberts via RIA

SP500-Best-WorthMonth-Analysis-030116

3) Weak Economic Data Aligns With Market by Chris Ciovacco via Ciovacco Capital

“The shorter-term data tracked by our market model has seen noticeable improvement over the past two weeks. The longer-term picture, looking out weeks and months, continues to be concerning. Therefore, until more meaningful improvement starts to surface, our allocations will continue to have a defensive slant.”

Also Read: Two Reasons Stocks Are Headed Higher by Anthony Mirhaydari via Fiscal Times

But Don’t Miss: 2008 Revisited by Nouriel Roubini via Project Syndicate

4) Three Weeks Later, Gundlach Cashes Out Of Rally by Tyler Durden via Zero Hedge

“In an interview with Reuters Jennifer Ablan after DoubleLine Capital’s February flow figures were released (it was a $2.2 billion inflow) , Gundlach said the firm is now considering closing out some of its long positions in the stocks that they purchased three weeks ago.

 

Is the bond trader now just a closet equities daytrader? We wond’t know, but since the S&P 500 has jumped 8% in that period, why not takes some profits.

 

“That’s what we’re talking about,” Gundlach said about booking some gains after their short-term rally.

 

Gundlach still maintains that the U.S. stock market is in a bear market but had made those equity purchases because the conditions in the second week of February with “wickedly negative equity sentiment were such that risk/reward favored a potential tradable rally and also made such a low allocation less advisable.”

 

The time to buy the dip, however, has passed: “I am bearish. There are just wiggles and jiggles in the markets.

Also Read: The Best Offense Is A Good Defense by Adam Koos via MarketWatch


CHART OF THE DAY: McCellan Oscillator Over 90 by Northman Trader

Northman-McClellan-Oscillator-030316


5) Sunshine, Lollipops And… by Bill Gross via Janus Capital

If negative interest rates fail to generate acceptable nominal growth, then the Milton Friedman/Ben Bernanke concept of helicopter money may be employed. How that could equitably be distributed nationally or worldwide I have no idea, but the opinion columns are mentioning it more and more often, and on Twitter, the “Likes” are increasing in numbers. Can any/all of these policy alternatives save the “system”? We shall find out, but current evidence of the past 7 years’ experience would support only a D+ report card grade. Barely passing. As an investor though – and as a citizen in this election year – you should be aware that our finance based economic system which like the Sun has provided life and productive growth for a long, long time – is running out of fuel and that its remaining time span is something less than 5 billion years.

 

Investment implications? Do not reach for the tantalizing apple of high yield or the low price/ book ratio of bank stocks. Those prices are where they are because of low/negative interest rates. And too, do not reach for the seemingly momentum driven higher prices of Bunds and Treasuries that negative yields have produced. A 30 year Treasury at 2.5% can wipe out your annual income in one day with a 10 basis point increase. And no, you can’t go to a bank and demand your cash for a fear of being labeled a terrorist. Seems like you’re cornered, doesn’t it?

Also Read: This Is Nuts, When’s The Crash by David Keohane via FT Alphaville


OTHER GOOD READS


“Bull markets die with a whimper, not a bang.” – Anonymous


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P.M. Links: Romney vs. Trump, L.A. Police Investigating Knife Found on O.J. Simpson Property, U.S. Naval Forces Dispatched to South China Sea

  • Donald Trump likes to say that if he’s elected president he’s going to build a border wall and make Mexico pay for it. Mexican Finance Minister Luis Videgaray thinks not. “Under no circumstance will Mexico pay for the wall that Mr. Trump is proposing,” Videgaray said this week. “It is an idea based on ignorance and has no foundation in the reality of North American integration.”

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Stocks Surge On Biggest Bear Market Short-Squeeze Since Nov 2008

They are pulling out all the stops on this one…

 

Another chaotically wild week…

  • Small Caps (Russell 2000) up 4.65% – biggest week since Oct 2014

  • S&P 500 up 3% – best week in 3 months
  • Dow Transports up 3.7% – best week since Dec 2015
  • "Most Shorted" stocks up 8.8% – biggest short squeeze since Nov 2008 (and in 3 weeks "Most Shorted" are up 19.8% – the most ever)

  • HYG (high yield bond ETF) up 2.3% – best week in 5 months (best 3 weeks since Dec 2011)
  • 2Y, 5Y, 10Y, 30Y biggest weekly surge in yields in 4 months
  • 7Y biggest weekly surge in yields in 9 months
  • Aussie Dollar soared 4.25%  – the biggest week since Dec 2011
  • Oil up 9.6% this week – 2nd biggest week since August
  • Oil up 21.2% in 2 weeks – biggest 2 weeks since Jan 2009
  • Copper up 7.2% – biggest week since Dec 2011
  • Gold up 3.5% to 13 month highs
  • Silver up 5.8% – biggest week since May 2015

 

Ahead of China's National People's Congress, Chinese stocks were 'lifted', but as is clear, the intervention was aimed at mega caps and not the tech-heavy small caps of ChiNext and Shenzhen…

 

Which lifted stocks into the payrolls print…and then the chaos began

 

After the initial weakness, stock were panic-bought only to snap at 2pmET on possible Fed limits on banks…Dow tops 17000 at the close, but S&P lost 2000 right at the bell.

 

Still a crazy week… with Trannies and Small Caps dramatically outperforming…

 

Dow 17000

S&P 2000

 

As Most Shorted soared again…

 

Energy & Financials outperformed… but note that when The Fed headlines hit, things stalled…

 

The reaction to payrolls was all over the place…

 

For the first time in 2 months, XIV (inverse VIX ETF) is trading below VXX (VIX ETF)…

 

Treasury yields spiked after the "better-than-expected" jobs data with the belly underperforming in the week (and 2s adn 30s outperforming – though still out 10bps)…

 

5Y yields touched the 50DMA back within their 4 year range…

 

The USD Index dropped (led by strength in EUR and cable, but Aussie Dollar was the big mover)

 

In fact Aussie Dollar was the biggest gainer of all major FX this week – up a shocking 4.25% – the most since Dec 2011, to 8 month highs…

 

Commodities were all on fire this week…But crude just melted up…

 

Gold closed at its highest in 13 months…

 

Finally, we note several risk assets at or near their 200 Day Moving Average: Credit Suisse comments on the slightly uncanny fact that so many risk assets now at their 200DMA (just highlights further the high level of correlation between asset classes).  Brazil is now +26% from its lows and sitting right on its 200d. Glencore +104% from its lows, and on its 200d. Kumba Iron Ore +225% from its lows and on its 200d. Turkish equities +14% from their lows and on the 200d. Copper is only 2% below its 230 level. S&P500 only 1% below its 200d, so perhaps more interesting are two assets that stick out as still having significant upside: OIL 200d is at $43 and finally the ESTOXX AT 3300

 

Charts: Bloomberg


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HY Credit Spreads Have Never Been This High Outside Of A Recession

Today marked the 13th consecutive day of positive HY fund flows (bringing total to $8.6bn)…

 

But as Credit Suisse explains, the nature of this demand is 'different'…

Investors likely using the ETFs as a placeholder for cash in the absence of new supply, with HY issuance down ~74% year on year.

 

With ballooning ETF inflows the past few weeks, the liquid sector has become increasingly vulnerable to ETF cash rotating out upon the availability of new supply.

 

This is particularly a concern now as the visible issuance calendar for the next few months has grown sizeably (~$35bn)

So put another way – given that the calendar is set to pickup, this huge inflow of 'placeholder' cash will flow out of high yield ETFs (pushing prices lower) and into the new issuance.

But, as Edward Altman warns Goldman Sachs, however, that we are already at the end of the benign cycle or nearing it.

We are in the bottom of the 8th or 9th inning, and unless the Fed steps in to add liquidity to the market, which seems unlikely, I don’t expect extra innings.

 

I define a benign cycle as having four ingredients:

  1. default rates below their historical average,
  2. relatively high recovery rates in the event of defaults, making the loss given default low,
  3. low yields, giving borrowers incentives to utilize debt financing, and
  4. ample liquidity. Liquidity is difficult to measure, but in benign cycles, firms of almost any credit quality are able to borrow easily.

Looking at those four factors, three are pointing toward the end of the benign cycle. Recovery rates are below their historical average, mainly driven by the oil and gas sector. Spreads are above their historical average—currently around 750bps in high yield vs. a historical median of about 520bps—meaning that investors are no longer providing capital at cheap rates; and liquidity is much more restricted than even a few months ago, with the marginal company having all sorts of problems raising capital at low interest rates. The only indicator that isn’t implying a complete end of the cycle is the default rate on high-yield bonds or leveraged loans, which remains below the historical average. However, it is climbing and—according to my forecast and most economists and market observers—likely to rise above the historical average this year for the first time since 2010.

 

Therefore, by just about any metric, the benign cycle seems to be over, so we are entering more of a stressed cycle. We are not yet at point of crisis or distress, though, and it remains to be seen whether we will get there.

And the bubble has plenty of room to burst…

To some extent, this bubble reached a high point in the third quarter of 2015. Starting in the fourth quarter, new issuance dropped and very risky companies, B- and CCC companies with very low Z-scores and very high yield spreads, were no longer able to raise money at almost any rate. As a result, new issues since then have not been as poor in credit quality. But the bubble is still sitting there—even if it isn’t getting bigger—and is pretty inflated, though not necessarily ready to burst unless we have a recession. People say that as long as the economy remains relatively robust, we don’t have to worry about a bubble. I am not quite as confident. But if we do have a recession in the US or a very major downturn in China in the next 12-18 months, there is no question that the bubble will burst, resulting in a mini or not-so-mini credit crisis.

And the corporate bond market is not small…

Recent improvement notwithstanding, IG and HY net leverage ratios remain above the medians of the last three decades… and high yield bond spreads have not traded at these levels outside of a US recession…
 

 

And even with recent strength, levels remain extreme…


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The Last Time The Market Was This Overbought, This Happened

The last 3 weeks have been a near unprecedented rip higher in stocks… as markets anticipated G-20 cooperative actions (and then BoJ and ECB follow-through) creating a vicious short-squeeze bounce..

 

This has sent The McClellan Oscillator to its most overbought since January 2009…

 

What happened then?

The Group of 20 leaders from major developed and emerging economies had pledged on their meeting on Saturday short-term measures such as fiscal stimulus in order to try to keep the global economy from falling into a deep slump and promised to look at ways to tighten regulations to prevent future crisis.

Which sent stocks soaring in another major short-squeeze hope bounce

 

That did not end well!


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NYPD No Longer Making Arrests For Drinking in Public, But Still Using Stop-and-Frisk

The New York Police Department (NYPD) will no longer arrest people for minor infractions such as consuming alcohol in public, urinating in public, littering, or taking up more than one seat on the subway. NYPD Cheese!

Manhattan District Attorney Cyrus Vance Jr. said earlier this week that his office will no longer prosecute these misdemeanors, a move which they hope will ease the burden on the courts currently “bogged down with minor offenses committed by those who pose no threat to public safety.” 

Mayor Bill de Blasio added in a statement: 

Today’s reforms allow our hardworking police officers to concentrate their efforts on the narrow group of individuals driving violent crime in New York City. This plan will also help safely prevent unnecessary jail time for low-level offenses.

Fewer citizens with criminal records, a less clogged-up court system, more resources for cops to fight actual crime (the kind where there’s actual victims). What’s not to love?

Well, criminal justice reforms are only worth celebrating when they’re actually executed, and a recently issued report by a federal monitor states that the NYPD is a few years behind on successfully implementing a very high-profile court-ordered reform.

According to the report, the NYPD’s use of stop-and-frisk (ruled unconstitutional by a federal judge in 2013) continues to be deployed throughout the city. Though its use is on a much smaller scale compared to the days of Mike Bloomberg’s administration, many officers and supervisors are simply unaware of the change in policy and thus continue to use the tactic. 

Addidtionally, the Civilian Complaint Review Board (CCRB), an independent entity responsible for vetting claims of police malfeasance, announced in a review that over a five-year period, NYPD officers made at least 157 illegal searches of homes. The methods they used to enter the homes included threats of violence, as well as brute force.

Miranda Katz writes in Gothamist:

…the police arrested a young man for a drug-related crime and took him to the precinct, where they took his house keys and sent officers back to his home to search for drugs…Police entered his home with his house keys and encountered his mother, who repeatedly refused to sign a form allowing the officers to search the place without a warrant. At one point, an officer said, “Goddamn it, you fucking Haitian, just do it.”

In a 2013 case, a man was woken up by repeated banging on the door, which he opened to find himself face-to-face with the barrel of an officer’s gun. Police had traced the signal of a stolen phone to the barbecue grill outside his house, and they accused the man’s son of stealing the phone. When the man said that his son was at basketball practice and that the officers could not search his home, one said, “You’re fucking lying…I can do anything I want,” before entering and searching the house with his gun drawn while the man’s five-year-old son and daughter looked on. Police later determined that an unknown person of no relation to the residents of the house had placed the stolen phone in the grill.

Any day the mayor and district attorney of a major city propose locking up fewer people is a good day, but a better day would be one where the civil servants charged with protecting and serving the citizenry are aware of the laws they are bound by.

Watch my 2013 report on the trial that should have ended the practice of stop-and-frisk below:

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John Kasich Deplores Political Gibberish in Presidential Campaign—Then Relies on It to Sell His Own Record on Obamacare

John Kasich is frustrated with the GOP presidential race.

The Ohio governor, who has yet to win a state and is currently running behind in both delegates and national polls, complained about the tone and substance—or lack thereof—in an appearance at the Conservative Political Action Conference (CPAC) today.

Kasich declared that Donald Trump, the current frontrunner in the GOP race, “will not be beaten by smearing him.” Instead, Kasich argued that the path to victory was to demonstrate a record of leadership and policy success.

“The key is: Who’s got a record and a vision, and not just political gibberish,” he said, insisting that he had already shown his propensity for both as governor of Ohio. Indeed, Kasich said he was the only candidate left in the race who was running on his record, and he encouraged voters to check it out.

It’s true that Kasich, the only governor still running, stresses his record more than any other candidate. But he has also repeatedly misrepresented it, most prominently on his decision to expand Medicaid in the state under Obamacare.

Just days before the New Hampshire primary, Kasich released an ad insisting that he had not expanded Obamacare in Ohio.

This is a claim he has made repeatedly. It is completely untrue.

As governor, Kasich decided to expand Medicaid in Ohio under the law, which provided funds for states to expand the jointly run federal/state health program for the poor and disabled. Indeed, the Medicaid expansion is in some sense the foundation of the president’s health law: A majority of the newly covered under Obamacare were covered via Medicaid. In Ohio, about 76 percent of Obamacare’s newly covered fall under the program.

The Medicaid expansion was initially all-but-required for states, but thanks to a 2012 Supreme Court decision, states were allowed to decide whether or not to participate in the program, and Kasich went ahead with it. Moreover, this was Kasich’s decision alone: He overrode the state’s legislature, which objected to the expansion, in order to implement the Medicaid expansion. Since then, he has defended his decision to ignore the legislature on the grounds that the state’s elected representative secretly wanted him to override them.

Kasich has defended his decision on budgetary grounds, saying that it didn’t weaken the state’s budget. What he doesn’t say is that the decision to expand Medicaid has cost $6.4 billion—it’s just that the spending has gone on the federal tab, rather than the state tab, because, well, that’s the way it works under Obamacare, which finances state expansions of Medicaid. 

Kasich’s position that presidential candidates should display leadership and vision instead of just spouting political gibberish would be more convincing if he were not rely on misleading political gibberish to defend his own record. 

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