Progressives—Screwing Up Feminist Gains in America Since the Early 1900s

Did you know that many early U.S. labor reformers were motivated more by fear of working women than love for the proletariat? Or that, once upon a time, the slogan “equal pay for equal work”—now a rallying cry for all sorts of new regulations—was once used by feminists to protest government meddling in the marketplace? These are just two of many fascinating tidbits from Jeffrey Tucker’s exploration into the “government’s war on women: 1900-1920.” 

According to pop-history, women didn’t really start entering the workforce en masse until World War II—a workforce from which they were promptly booted when the boys returned from overseas. It wasn’t until Betty Friedan and company started kicking up shit in the early ’60s that second-wave feminism—with its emphasis on women’s economic as well as sexual opportunity—really started to take back the punch clock. 

But there’s trouble with this narrative, writes Tucker. With the industrial revolution came all sorts of new opportunities for women, and by 1910, women accounted for around one-fifth of the entire U.S. workforce. Their wages, while still lower than men’s, were rising quickly: up 16 percent between 1890 and 1920. And female pay relative to men’s pay was also higher in 1920 than it was in 1980.

Yet the early decades of hte 20th century “were also the years in which we first saw government intervention in the labor market, much of it specifically targeting women,” writes Tucker. 

Society must control reproduction and therefore what women do with their lives. So said the prevailing ideology of the age. We couldn’t have a situation in which markets enticed women to leave the control of their families and move to the city.

Though they are called Progressives, the reformers’ rhetoric had more in common with the “family values” movement of the 1970s and ‘80s — with pseudoscientific race paranoia playing the role that religion would later play. In many ways, they were the ultimate conservatives, attempting to roll back the tide of history made possible by the advance of the capitalist economy.

They were incredibly successful. Over a 10-year period between 1909 and 1919, 40 states restricted the number of hours that women employees could work. Fifteen states passed new minimum wage laws to limit entry-level jobs. Most states created stipends for single-parent families, specifically to incentivize women to reject commercial life, return to protected domesticity, and stop competing with men for wages.

Such laws were completely new in American history (and in almost all of modern history) because they intervened so fundamentally in the right of workers and employers to make any sort of contract. … How did all this happen so fast, and why?

See Tucker’s whole piece for an attempt at answering that tricky question. One last thing I want to highlight is how feminist activists once protested against government micromanagement of their working lives. 

Between 1900 and 1920, notes Tucker, “hundreds of laws stifling [working] women were passed in every state and at the federal level,” including limits on what times of day they could work, how many hours they could work, and in what roles. And these laws drew the ire of early feminists across the country. In New York, the Equal Opportunity League lobbied hard for the state to repeal gendered labor laws, stating that “a law that is unconstitutional for a man voter is equally unconstitutional for a woman voter.”  

“Working at night is not more injurious than working in the daytime,” the league argued. “Many women prefer to work at night because the wage is higher, opportunities for advancement greater, and women with children can enjoy being with their child after school hours in the day time.”

In fact, the phrase “equal pay for equal work” was not created to mandate higher wages for women. It was a league slogan invoked to argue against laws that made it “a crime to employ women even five minutes after the eight-hour day.” The phrase emerged as a preferred slogan to protest in favor of free markets, not against them.

Unfortunately, today’s progressives are up to the same old shenanigans. You see it when they say it’s okay for the state to demand hundreds of dollars and a year’s time for the right to paint nails, but it’s criminally exploitative for small-business owners to pay unskilled manicurists only in tips while they’re being trained. You see it when progressive say that the “on-demand economy” comprised of Uber et al. is exploitative because it while it provides people with flexible work, it doesn’t offer health-insurance coverage. You see it when they say that prostitution should be illegal for the good of the women in the sex industry, or when they ask the federal government make all employers offer paid maternity leave. 

Sure, today’s progressives are motivated by different cultural cues. But the impulse (“I know what’s best for any and all people’s lives”) and the results (regulations that depress wages and harm women’s work prospects) are the same. 

There will always be these types of people. But perhaps we’d have an easier time convincing each new generation of their danger if we weren’t operating under a fairy tale version of history. This story “says that during the 20th century, government freed women to become newly empowered in the workplace,” but “the reality is exactly the opposite,” writes Tucker. “Just as the market was granting women more choices, government swept in to limit them in the name of health, purity, family values, and social uplift.”

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Campus Crime Alerts Now Come with Trigger Warnings

ShowerIf the purpose of a campus crime alert is to warn students about a dangerous person or situation, and the purpose of a trigger warning is to deter students from consuming information that might bother them—well, aren’t the two things in conflict?

And yet, the University of Iowa saw fit to add a trigger warning to a campus-wide email about a sexual deviant on the loose. Do administrators want to protect students’ bodies or their feelings?

According to The Daily Iowan, a man was spotted trying to videotape a female student while she took a shower in a dormitory bathroom. A police officer fought the man, but he escaped. The university’s public safety department then sent out an alert prefaced by the following disclaimer, according to The College Fix:

Trigger Warning: This warning addresses a report of sexual misconduct. Resources are available on and off campus to provide assistance. Contact RVAP for 24/7 support at (319) 335-6000 or at http://rvap.uiowa.edu/.

What followed was a description of the incident and instructions to students to contact the authorities if they had any information about the perpetrator. But if officials actually wanted students—victims of sexual misconduct, in particular—to be aware of the potential threat, they shouldn’t have warned them not to read it. As The Tab’s Matt McDonald wrote:

If there was a miscreant with an iPhone skulking around my campus trying to perve on unsuspecting freshmen, I’d want to know about it. I’d want to know my campus police force are working to keep me physically safe – not warning me off important information for fear of offending me.

If an email about an active investigation is important enough to send to a whole college, don’t send it wrapped in cotton wool. If people need to know, tell them.

Quite right. Do administrators want safe spaces for their students, or do they want them to actually be safe? 

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Should You Believe The Vampire Squid On Gold?

Submitted by Jim Quinn via The Burning Platform blog,

I find it fascinating the mainstream corporate media and Wall Street shysters spend SO MUCH time talking down gold and spending an inordinate amount of electronic ink trying to convince the masses that only nutjobs would buy it. I believe less than 2% of people have gold in their investment portfolio, so why the endless articles bashing it?

The suppression of gold prices through the paper market since 2011 by the Fed and their Wall Street bank co-conspirators has thus far been successful, but it is fraying at the edges as China continues to accumulate physical gold and pushing the ponzi scheme towards its inevitable conclusion. Soaring gold prices tells the masses central bankers are a fraud, that’s why they are desperate to keep the price capped.

With zero and negative interest rates throughout the world, gold should be skyrocketing. It is showing signs of calling the central banker bluff. Jesse’s comments below should be heeded. The stock market dead cat bounce and the holiday manipulation of gold down $30 will fail.

 

Chart of the Day

 

Gold Daily and Silver Weekly Charts – Goldman Says Have No Fear and Buy Our Paper

Goldman analyst Jeffrey Currie came out this morning with a ‘sell gold’ recommendation for Ma and Pa Muppet.

 

I was fortunate enough to hear his explanation for this in his own words on Bloomberg TV, which had touted his gold call about every fifteen minutes all day.

 

The net summary of Mr. Currie’s forecast is that Goldman’s economists think that there ought to be no fear in the financial paper markets, since there is an historically low chance of a recession, less than fifteen percent, and he sees no real possibility of negative interest rates.

 

Therefore, since in his mind gold is strictly a ‘fear trade’ and since Goldman says to have no fear one ought to therefore sell gold.

 

Do with that what you will.

 

As for my own forecasts, I see the world economy fraying substantially throughout the year, with the domestic risk of inflation unusually high relatively speaking, and the geopolitical risks to be also rather elevated.

 

But at the end of the day, gold is now trading as a currency, and Uncle Buck was on a no fear tear this morning.   And no matter what Mr. Currie may be saying, I am watching what Asia is doing.

 

So far so good on the charts as noted below.

 

It may be a bit of time before one might determine whether the lip of the cup is straight horizontal or slanted IF the chart continues to develop.

 

There was very little action at The Bucket Shop on the PM delivery front, and some silver was shoved around the plate and taken out of the warehouses.   Not much happened in other words.  What a surprise.  The Bucket Shop is a monumental mausoleum for what has gone wrong in the US markets.

*  *  *

If there is a lesson from the Big Short, do the opposite of what Goldman says to do.


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Goofus and Gallant on Encryption and Government Intrusion

Tom CottonGoofus, despite all historical warnings that this trade-off doesn’t work out well for citizens, demands that we all choose security over privacy:

“Apple chose to protect a dead ISIS terrorist’s p‎rivacy over the security of the American people. The Executive and Legislative Branches have been working with the private sector with the hope of resolving the ‘Going Dark’ problem. Regrettably, the position Tim Cook and Apple have taken shows that they are unwilling to compromise and that legislation is likely the only way to resolve this issue. The problem of end-to-end encryption isn’t just a terrorism issue. It is also a drug-trafficking, kidnapping, and child pornography issue that impacts every state of the Union. It’s unfortunate that the great company Apple is becoming the company of choice for terrorists, drug dealers, and sexual predators of all sorts. “

Gallant pays attention and understands that encryption protects citizens from both private fraud and crime, as well as civil rights abuses from governments, both domestic and abroad:

Amash

Amash

Not up to speed on what’s going on? Read here

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As “Plan A” Fails, This Is What The Fed’s “Plan B” Would Look Like

As you might have noticed, the Fed made a policy mistake in December.

We could delve deeply into the specifics, but quite frankly it all boils down to this: Yellen hiked right into a recession.

There’s more to it than that obviously, including the fact that EM is circling the drain amid the global commodities rout, meaning excessive USD strength is especially damaging and the fact that the uncertainty swirling around the depth of the ongoing yuan devaluation has markets on edge from Shanghai to London to New York.

Put simply: nothing has gone as it should since liftoff. Stocks sold off dramatically in January signaling the Fed failed to convey a sense of confidence in the US economic recovery (which, if good news was indeed good news again should have triggered risk-on sentiment) and yields on the 10-year have plunged since the start of the year (Marc Faber has been exactly right so far).

Meanwhile, the monetary policy divergence between the Fed and the BoJ and ECB has only grown and we learned late last month that the US economy only managed to grow at a 0.69% pace in Q4 (we suppose the BEA are “fiction peddlers”). 

So with the pressure mounting, and with Janet Yellen having failed (miserably) to reassure the market with her testimony on Capitol Hill earlier this month, what’s in the cards for the Fed if the situation (both in financial markets and in the real economy) continues to deteriorate?

Here to explain “Plan B” (i.e. the steps the Fed will take “when push comes to shove”), is BofA.

*  *  *

From BofA

As they scramble to come up with a “plan B,” the Fed has been rather cagey about how they would respond to a serious weakening of the economy or financial conditions. There are two related paths for policy: measures designed to help market functioning, and macro policies designed to stimulate the economy and reverse a market meltdown. On the former, Dodd-Frank has limited the Fed’s room to maneuver; in particular, they can’t take actions that involve absorbing credit risk. However, we would expect them to adopt a variety of liquidity tools if market functioning becomes erratic. Vice Chair Fischer gave a speech last week detailing the options available to the Fed and noting that “broad-based facilities… could still be introduced under our new regulation if they were needed.” At the extreme there could be some easing of recent regulatory rules that have hurt liquidity in the bond market.

In terms of “macro” policy we would expect the following sequence:

  1. Soft guidance: this is essentially where the Fed is now, underscoring data dependence and hinting that they are unlikely to hike in a turbulent environment.
  2. On hold: the Fed is getting close to signaling an indefinite lag before its next policy move. This next step would also involve a more forceful statement of policy options (ie, they will tell us more about what steps 3, 4, 5 and 6 are).
  3. Cut rates back to near-zero and strong guidance: if the equity market drops into a full bear market (or there is some other equivalent financial tightening) or if growth seems to be slowing to a sustained 1%, the Fed would likely cut and remain on hold until the financial/economic weakness reverses. They could introduce a nominal income growth target or price level target to signal an accommodative path for rates well into the future.
  4. Operation twist two: actively manage the Feds portfolio to extend duration, similar to the 2012 Maturity Extension Program. With $408 bn in assets maturing over the next two years the Fed could do the twist by either reinvesting these assets at the long end or, if they want to be more aggressive, also selling short-dated assets before they mature.
  5. QE4: begin buying Treasury assets at least at the $40bn per month pace of QE3. Could also buy agency-based debt and MBS if the housing market wobbled. (The Fed purchased $45bn per month of MBS during QE3.) Like QE3, purchases would be open-ended and would conclude once a sustained recovery in economic and/or financial conditions occurs.
  6. Negative rates: if all else fails, they would move into the uncertain world of negative rates. If banks are under serious stress, such a move could be delayed or shelved.

It is hard to summarize all these actions into one statistic. The Fed could cut the funds rate by say 88 bp (from 38bp to -50 bp), although the net benefit of going negative may be quite low. But that is not all. US 10 year yields are about 150 bp higher than yields in Germany and Japan. Roughly speaking, we think the Fed has Fed funds-equivalent of about 150 to 200 bp of easing. That is small relative to the normal recession response, but much bigger than the normal response to financial stress or a “growth recession.”

*  *  *

Yes, 150 to 200 bps most certainly is “small” compared to the counter-cyclical maneuverability policy makers would have had before the world went Keynesian crazy, but thanks to eight years spent chasing down the Krugman rabbit hole, there’s nothing left but NIRP. 

If the abysmal pace of global growth and trade as well as the severity of the disinflationary impulse is any guide, Janet Yellen is going to need a bigger “Plan B.” 


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SEC Suspends Deutsche Bank Research Analyst For “Not Meaning What He Said”

Over a decade ago, Henry Blodgett was barred from the securities industry for promoting dot com companies which he personally though were a “piece of crap.” And while nothing has changed since then, and sellsiders dutifully pump companies which deserve to be dumped, but refuse to do so over fears of ruining relationships with management – as a reminder, the only function sellside research provides to the buyside community is arranging one on one meetings with CEOs during which material inside information is often disclosed – today for the first time in years, the SEC fined and suspended a now former Deutsche Bank analyst (who has also worked for JPM and Sterne Agee) for “not meaning what he said.”

Specifically, the former analyst, Charles Grom, did not downgrade the stock for discount retailer Big Lots Inc from a “buy” reco in March 2012, despite having concerns about the company, because he wanted to provide value in the only way he could: maintain his relationship with Big Lots management.

According to the SEC, the March 29, 2012 research report about discount retailer Big Lots which was supposed to accuretly reflect his own beliefs about the company and its securities… did not, because in private communications with Deutsche Bank research and sales personnel, Grom indicated that he didn’t downgrade Big Lots from a “BUY” recommendation in his report because he wanted to maintain his relationship with Big Lots management.

According to the SEC, this is what happened:

  • Grom violated the analyst certification requirement of Regulation AC, which requires research analysts to include a certification that the views expressed in a research report accurately reflect their own beliefs about the company and its securities.
  • Grom and Deutsche Bank hosted Big Lots executives at a non-deal roadshow on March 28, 2012.  Grom became concerned by what he believed to be cautious comments by the Big Lots executives.
  • After the roadshow concluded, Grom communicated with a number of hedge fund clients about Big Lots.  Four of the hedge funds subsequently sold their entire positions in Big Lots stock.
  • The next day, Grom issued a research report on Big Lots in which he reiterated his BUY rating.  As required by Regulation AC, Grom signed an analyst certification included at the end of the report stating, “The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer.”
  • During an internal conference call with Deutsche Bank’s research and sales personnel within hours after the publication of his report, Grom said, among other things, that he had maintained a BUY rating on Big Lots because “we just had them in town so it’s not kosher to downgrade on the heels of something like that.”
  • On April 24, 2012, during another conference call with Deutsche Bank research and sales personnel, Grom discussed disappointing first quarter sales figures at Big Lots and stated, “I think the writing was on the wall [that] we were getting concerned about it, but I was trying to maintain, you know, my relationship with them. So, that’s why we didn’t downgrade it a couple of weeks back.”

The SEC’s take on this matter:

“When research analysts tell clients to buy or sell a particular security, the rules require them to actually mean what they say.  Analysts simply cannot express one view publicly and the opposite view privately,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

And yet they do that every single day in a world in which the average number of Buy recommendations outnumber the Sells anywhere between 10 and 20 to 1.

To be sure, the SEC could have discovered just that about any other sellside analyst; the fact that it picked a former DB staffer is perhaps an indication that the troubles for the German banks are nowhere near over.


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The Case For Outlawing Cash

Submitted by Bill Bonner via Bonner & Partners,

Investors are losing confidence…

They’re probably losing confidence in corporate managers, for instance.

Who wants to own stock in companies run by numbskulls who buy back shares in their companies at record prices just before a major selloff?

Or maybe they’re wondering whether the world’s $200 trillion in total debt (roughly 300% of total output) can possibly be paid back?

Or maybe they’re beginning to puzzle out how scammy and fraudulent the Fed’s policies are.

But watch out! Reeling from the jabs of the last two weeks, expect a strong counterattack from the zombies and their allies.

Some Fed governor will come forth – maybe even Janet Yellen – and tell us not to worry about a return to more “normal” interest rates anytime soon.

We’re way too far into the weird to get anywhere near normal now. And surely Wall Street shills will be in the news explaining how markets become unreasonably fearful from time to time. They will tell investors that it is time to hunt for bargains.

Dow 25,000! Why not?

And they may be right. There’s bound to be an inflationary blow-off waiting somewhere ahead.

Stocks will soar. But not before they crash.

Retiring Another “Barbarous Relic”

In the meantime, watch your rear: There’s a serious counterattack coming.

It will be an attack on our supply lines. The cronies and the feds will attempt to cut off our finances and our line of retreat, trapping us between the anvil of the market’s deflation and the hammer of the Fed’s inflation. There will be no escape, no way out.

Last week, the influential Financial Times newspaper ran an article calling for the abolition of cash. It was titled, “The case for retiring another ‘barbarous relic.'” And it claimed that cash causes “a lot of distortion in the economic system.”

Can you believe it?

Cash causes economic distortions! From the Financial Times:

The existence of cash – a bearer instrument with a zero interest rate – limits central banks’ ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory.

The article also repeated the familiar claims that cash is also what finances terrorism, tax evasion, and the black market. Making cash illegal, it says, would “make life easier for a government set on squeezing the informal economy out of existence.”

You see where this is going, don’t you, dear reader?

If the feds are able to ban cash, they will have you completely under their control. You will invest when they want you to invest. You will buy when and what they want you to buy.

You will be forced to keep your money in a bank – a bank controlled, of course, by the feds.

You will say that you have “cash in the bank,” but it won’t be true. All you will have is a credit against the bank (bank deposits are nothing more than IOUs from your bank to you).

A Tax on Your Bank Deposits

As it is now, your bank will have some cash on hand in its vaults, but not nearly enough to satisfy all the claims against it.

If this new attack succeeds, by law, it will have no access at all to cash. And neither will you…

You will be completely surrounded. If the feds want to force you to spend…or invest…your money, they will simply impose a “negative interest rate.” They will do this by simply imposing a fee, or tax, on deposits greater than the interest rate you receive on your savings.

In 2001 in Argentina, they closed the banks. When they reopened, dollar holdings had been converted to pesos, with a loss of roughly two-thirds!

In 2013 in Cyprus, they whacked large accounts with a 50% tax to help recapitalize the banks.

And in the U.S., JPMorgan Chase recently sent a letter to its large depositors telling them that, as of May 1, it would start charging what it called a “balance sheet utilization fee” of 1% a year. This pushed the net interest rate those depositors were earning into negative territory.

As stocks decline, you can expect more and more people to want to hold cash. If stocks go down 10%, the “opportunity cost” of holding cash goes down by the same amount.

People will want to hold cash. But if this encirclement maneuver works, you will be unable to get your hands on it. All you will have is a claim against some of the most insolvent debtors in the whole economy.

Cut Off from Cash

In 2008, almost every major U.S. bank was on the edge of bankruptcy.

But if the feds succeed in cutting us off from cash, that will never happen again. Because the banks will just whack us all – with the full approval of the Fed, the cronies in Congress, and zombies everywhere – to make themselves whole again.

Already, several readers have reported that they have had trouble getting cash from their own accounts.

Banks stall. They impose withdrawal limits. They want you to come in-person, etc., etc.

Right now, being unable to get cash promptly is merely a nuisance…but just wait. It won’t be long before new initiatives are announced to “stimulate demand.”

Perhaps negative interest rates will do it. Maybe a more general tax. But sooner or later, the next credit crisis will hit hard…

Then your inability to get cash will be more than a nuisance. It will be a deathblow. You will be locked into a bank account with a bankrupt institution.

And the feds and their bank cronies will tell you when and how you can have access to your own money.

The feds will announce a “bank holiday.” They may ban transfers to gold sellers or foreign currency accounts. Or maybe it will just take time – while your money loses value rapidly – to get your money out.

If this new campaign succeeds, it will be almost impossible to protect yourself.


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Apple Vows to Defend Its Customers as the FBI Launches a War on Privacy and Security

Screen Shot 2016-02-17 at 10.28.43 AM

Some would argue that building a backdoor for just one iPhone is a simple, clean-cut solution. But it ignores both the basics of digital security and the significance of what the government is demanding in this case.

In today’s digital world, the “key” to an encrypted system is a piece of information that unlocks the data, and it is only as secure as the protections around it. Once the information is known, or a way to bypass the code is revealed, the encryption can be defeated by anyone with that knowledge.

The government suggests this tool could only be used once, on one phone. But that’s simply not true. Once created, the technique could be used over and over again, on any number of devices. In the physical world, it would be the equivalent of a master key, capable of opening hundreds of millions of locks — from restaurants and banks to stores and homes. No reasonable person would find that acceptable.

The government is asking Apple to hack our own users and undermine decades of security advancements that protect our customers — including tens of millions of American citizens — from sophisticated hackers and cybercriminals. The same engineers who built strong encryption into the iPhone to protect our users would, ironically, be ordered to weaken those protections and make our users less safe.

We can find no precedent for an American company being forced to expose its customers to a greater risk of attack. For years, cryptologists and national security experts have been warning against weakening encryption. Doing so would hurt only the well-meaning and law-abiding citizens who rely on companies like Apple to protect their data. Criminals and bad actors will still encrypt, using tools that are readily available to them.

– From Apple CEO Tim Cook’s letter: A Message to Our Customers

I’ve spend most of the morning reading as much as possible about the explosive battle between the FBI and Apple over consumer rights to digital privacy and security. I came away with a refined sense of just how monumental this case is, as well as a tremendous amount of respect for Apple CEO Tim Cook for his public stance against the feds.

Before I get into the issue at hand, some background is necessary. The feds, and the FBI in particular, have been very vocal for a long time now about the desire to destroy strong encryption, i.e., the ability of citizens to communicate privately. A year ago, I wrote the following in the post, By Demanding Backdoors to Encryption, U.S. Government is Undermining Global Freedom and Security:

continue reading

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Pension Reform Efforts Succeed in Arizona—With the Help of the Reason Foundation

"Surely they don't have stock art of a piggy bank in the desert ... OMG!"Some rare good news about the state of public employee pensions is coming out of Arizona this week. Republican Gov. Doug Ducey has just signed legislation to help fix the state’s underfunded pension system for public safety employees. It’s legislation that has support from all sides—a difficult challenge given how implacably public sector unions have fought any changes to pension systems.

The Reason Foundation (the non-profit that publishes Reason.com) played a big role in making it all happen. Leonard Gilroy (director of government reform), Pete Constant (director of the Reason Foundation’s Pension Integrity Project) and Anthony Randazzo (director of economic research) explained how the process all came together:

Reason Foundation was a key player from the beginning of the process, with its Pension Integrity Project team providing education, policy options, and actuarial analysis for all stakeholders. We also facilitated the development of consensus among stakeholders on the conceptual design and framework of the reform. Further, more than once we resorted to shuttle diplomacy to keep stakeholder parties at the table when negotiations became difficult or threatened to break down.

Arizona’s public safety associations—led by the Professional Fire Fighters of Arizona, the state lodge of the Fraternal Order of Police, and the Phoenix Law Enforcement Association—also deserve major credit for recognizing the need for reform early on and proactively bringing reform ideas to the table that ultimately led to the launch of the stakeholder collaboration process.

The result was three bills sponsored by Republican State Sen. Debbie Lesko that passed with bipartisan support. Right now Arizona has more than $6 billion in unfunded pension liabilities. Here are some of the ways the new laws attempt to help fix the problems:

  • Cost of living increases (COLA) will be based on the consumer price index for Phoenix and capped at 2 percent and will be pre-funded (which is currently not happening).
  • New hires will be able to choose between defined contribution plan (like a 401(k)-style savings plan) or a hybrid defined benefit plan rather than the traditional pension system.
  • New hires will have the salary cap for pension calculations reduced from $265,000 to 110,000 per year, seriously limiting incentives for finding ways to “spike” pensions with bonuses or unused vacation time to jack up what retiring employees will be receiving.
  • The eligibility age for new hires will be increased from 52.5 to 55.
  • New employees will have to pay 50 percent of plan costs if the plan doesn’t meet return assumptions.
  • Employers (that is to say, the government) will be forbidden from having “pension holidays,” where they stop paying into pension funds when they are overperforming (which then turns into a crisis when pensions later underperform).

The Reason Foundation predicts that the changes will save taxpayers $1.5 billion over the next 30 years and reduce retirement costs per new employees by 20 to 43 percent. More importantly, the shifts reduce risks borne by taxpayers by 50 percent and the accrual of pension liabilities by 36 percent.

Note the heavy references to “new hires.” That was clearly the compromise to get the unions on board. Current employees will not see the kinds of massive changes in store for newer hires, so the savings will not be immediate.

The one bill that does change existing pensions, the cap on COLAs, is going to have to go before a public vote in May for additional approval. According to the Arizona Republic, the public safety unions are on board and will be encouraging voters to come out to the polls and approve the changes.

Read more details about Arizona’s pending changes directly from the Reason Foundation here

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Explaining The “General Violence Of The Market’s Extreme Moves”

Earlier today we reported that based on various internal metrics, the market-neutral quant space is suffering one of the most violent deleveraging episodes since the infamous quant blow up in August 2007.

But what is really going on below the surface to force these dramatic moves which may not seem like much to the untrained eye, but to PMs managing 10x levered market neutral funds are earthshattering. For the answer we go to the head of US cash trading at RBC, Charlie McElligott, who has given the most succint explanation yet.

Big Picture: HF Positioning/13Fs/Macro Unwinds

  • Another macro trade reversal today, with stocks / crude / EM / HY sharply higher, against USTs / bunds / EDs / vol lower,  as we see a ‘risk-ON’ pivot from an under-positioned / over-cashed market.
  • Taking this a step further, ‘micro’ within stocks shows further market-neutral and long-short ‘lunging,’ which is of course predicating on extremely ill-timed / wrong-footed ‘grossing-up’ of short books, while net exposure was cut to multi-year lows (via selling longs).  All of this of course, into the teeth of a 100+ point face-ripper in Spooz.  

Currently today shows approx. 100 to 150bps of short book proxy outperformance vs index, and about 100 to 150bps of outperformance versus ‘favorite long’ proxies—almost a mirror-image of yesterday/ See the monitor:

As a matter of fact, MS PB data shows that Tuesday was the largest cover day since Oct 2014, driven by both fundamental accounts AND quants.  Which segues nicely into the next point

As highlighted last night in the special post-close version of “RBC Big Picture,” the extent of the recent equity market-neutral deleveraging (and concurrent pnl destruction) is on par with the US debt downgrade / Lehman / Bear trades.  Again a repeat from last night’s piece but this returns histogram captures it perfectly:

When you see multiple periods of -1% returns consecutively, against AUM leveraged at 10 to 14x’s, the sheer enormity of notional $$$’s plowing ‘into’ shorts on covers and ‘out of’ longs is insanely huge, and dwarfs other flows.  Thus, the general violence of these extreme moves—these market forces are not just huge, but due to the nature of many of the equity quant models being derived from the same ‘core’ theses, the amplification / ‘echo’ of these books sees inherent ‘crowding’ / ‘herding.’

13Fs: Q4 filings showing the extent of the hedge fund wide destruction.  Look at the positioning into start of ‘16, per the most heavily weighted Q4 sectors / allocations–Financials at 21.2%, Info Tech at 20.1%, Consumer Discretionary at 16.8% and Health Care at 13.2%:

Now, look at the S&P worst performing sectors YTD—Cons Disc, Info Tech, Health Care and Fins:

THE HUMANITY.  Obviously, this goes hand-in-hand with the points above on the extent of the performance-pain, dragging down all equities players.
 
Turning to another equities tailwind, how about the $22B of US IG issuance unleashed yesterday?!  For context, it was the second largest day off paper YTD.  This is most notable for the equities crowd not just because it shows money being ‘put to work,’ but becausethe majority of that debt was ear-marked for stock repurchases (AAPL, IBM).   GS data is showing us that YTD buyback announcements are off to their strongest start ever at $132B—last week alone saw 47 new BBs totaling $42B authorized. 
 
Piling-onto the squeeze-theme is the ‘turn’ in CTA / managed futures positioning: price momentum has shifted in SPX, crude and USTs / EDs, and need be monitored for further break-out.  This certainly would add considerable fuel to the equities melt-up, as remember, being ‘price insensitive’ goes both-ways…but can also add to performance-issues, with much of that stock short base still built via Energy, Industrials and Materials.  Ouch.
 
Also worth noting, Atlanta Fed Q1 GDP tracker today is at +2.7% (up from 0.7% in January).  This ‘growthier’ move could definitely catch those who have positioned for disinflation /deflation or the dreaded recession AWFULLY upside-down.


via Zero Hedge http://ift.tt/1oKrtq2 Tyler Durden