Morning Report: Trust in government is at a record low 7/5/16

Markets are lower this morning as bond yields push lower globally. Bonds and MBS are up, with the 10 year trading below 1.4%. The German Bund now yields negative 16 basis points.

We have a short week, but a lot of data. The biggest events will be the FOMC minutes on Wednesday and the jobs report on Friday. Given the Brexit backdrop, I see the FOMC minutes as a nonevent, and the jobs report shouldn’t be market moving unless wage inflation accelerates.

This morning, the ISM New York Index rose from 37.2 to 45.4. Still, a reading below 50 is indicative of a slowing economy.

Economic Optimism slipped in July to 45.5 from 48.2 a month ago.

Factory Orders fell 1% in May after increasing 1.8% in April. Durable Goods orders fell 2.3% while capital goods orders, which is a proxy for business capital expenditures, fell 0.3%.

Last week stocks rallied as it looks like Brexit didn’t trigger a financial crisis. Bonds continued their march higher and yield curves flattened, which is a recessionary pattern. Generally speaking, when the stock market and the bond market disagree, the bond market is usually right. That said, Italy is injecting more capital into its weak banking system, but that issue predates Brexit.

Speaking of Italy, they may be the next one out of the EU, as they have issues with their banks and cannot come to the aid of banks without giving investors a haircut according to EU rules. Since about half of Italian bank debt is held by ordinary Italians, no politician wants to suggest that investors lose money on a bailout. Plus their debt to GDP ratio is 1.3x, which gives them little maneuvering room.

Brexit and the rise of Donald Trump are symptoms of a bigger problem: a lack of trust in government and institutions like the media. Some say we need to learn to trust the government. Other say we need to push Facebook to use its algorithms in order to show opposing viewpoints more often. Bottom line, we are more polarized than ever before, and no matter who wins in November, gridlock will be the name of the game. Both parties are focused on one thing: a potential 3 or 4 Supreme Court nominees, which would ideologically skew the Court for a generation.

Home prices rose 5.9% in May, according to Corelogic.

Loan performance increased in the first quarter, according to the OCC. Performing loans are up 0.7% YOY, while foreclosures have declined to 0.4% to 0.9%.

53 Responses

  1. Frist!

    And people should not trust their government. That’s a very healthy instinct. Good news!

    Like

  2. Heh.

    Liked by 1 person

    • This seems so minor in the pantheon of why not to trust government, it hardly registers for me. Of course, I never expect partisans on the same side to seriously prosecute each other, unless it’s purely for show.

      Like

  3. Double heh.

    Liked by 1 person

    • Which to me is a reflection on, if not the morality, than certainly the rational capacities or collective intelligence of those in charge. So, should I trust that intelligence? Should I trust their reason over my own? I don’t believe that I should, as I have seen nor heard any compelling evidence that they are smarter than me or more knowledgable or, if they are more knowledgeable, that that additional knowledge in any way improves their decision-making faculties.

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  4. “Some say we need to learn to trust the government”

    This is just stupid. You should only trust what you can verify. How is it scientific or logical or rational to trust people you don’t know and know very little of who do not know you and work in a system that has no incentives for them to be trustworthy or to look out for your best interest without independent verification?

    You should not “trust” the media. You should not “trust” the government. Believe what you can verify, preferably from multiple vectors.

    Trust them to act in their own interests. You can trust that.

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    • Actually that article was just a liberal wish-list… Raise taxes, increase spending, target inequality, override local zoning laws, more early childhood care, blah blah blah…

      People will trust the government if you social engineer the piss out of them and give them free shit…

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  5. ” Both parties are focused on one thing: a potential 3 or 4 Supreme Court nominees, which would ideologically skew the Court for a generation.”

    I appreciate the optimism of the right, I suppose, but I see no way we aren’t going to lose the court entirely and horribly. Congress either needs to step out and start providing a check-and-balance to the court, or the next 30 years will be a non-stop wish list of of leftism benevolently imposed by an enlightened court.

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  6. Triple heh.

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  7. And she beats the rap. Figured there would be no prosecution of HRC, but I am surprised that all the aides skated.

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  8. Democrats operate under a different set of laws…

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    • it’s good to be the King

      Liked by 1 person

    • As you know, Brent, I did not think there could be an underlying crime, without evil intent, which was not going to be easy to prove, so that my only thought about an indictment was that she had to get caught lying to the FBI.

      Well, she got caught lying to everyone else and was stupidly reckless. The FBI report is actually worse for her than I thought it would be – too much classified stuff on multiple servers and use of insecure servers while in arguably hostile nations. A high probability that classified stuff was intercepted.

      Thee was a fine article in ars technica about how “entitled” executives are constantly doing this crap.

      http://arstechnica.com/information-technology/2016/05/clintons-e-mail-scandal-another-case-of-the-entitled-executive-syndrome/

      And I believe that while most people will think she got away with a crime, the really juicy campaign issue is that she was proved a liar and reckless about affairs of state, and Comey’s ringing and stinging words can be played over and over near the election. See this:

      https://www.washingtonpost.com/news/the-fix/wp/2016/07/05/hillary-clintons-email-problems-might-be-even-worse-than-we-thought/

      If the Rs were running a Romney or a similarly normal nominee he or she would now be poised to CLEAN UP.

      I do think that if Johnson gets any stage at all he can make a lot of hay against both the con artist and the “entitled” one who was “extremely reckless” [with security], without doing anything but repeating what is known in a mellow voice.

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      • If the Rs were running a Romney or a similarly normal nominee he or she would now be poised to CLEAN UP.

        Do you really believe that?

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        • Do you really believe that?

          Yep, I do. Elections are won and lost on less than this when it comes down to it. Except if a Trump is running. Then the election is about him, and he will see to it that it stays that way.

          Liked by 1 person

      • Comely said she was “extremely careless” rather than the (criminal) “gross negligence.”

        What’s the difference?

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      • Mark:

        I did not think there could be an underlying crime, without evil intent

        Isn’t gross negligence defined by the absence of evil intent?

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        • Like

        • Hah. That’s excellent.

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        • Scott and George – I thought this was the relevant statute:
          18 USC 798

          (a) Whoever knowingly and willfully communicates, furnishes, transmits, or otherwise makes available to an unauthorized person, or publishes, or uses in any manner prejudicial to the safety or interest of the United States or for the benefit of any foreign government to the detriment of the United States any classified information—
          (1) concerning the nature, preparation, or use of any code, cipher, or cryptographic system of the United States or any foreign government; or
          (2) concerning the design, construction, use, maintenance, or repair of any device, apparatus, or appliance used or prepared or planned for use by the United States or any foreign government for cryptographic or communication intelligence purposes; or
          (3) concerning the communication intelligence activities of the United States or any foreign government; or
          (4) obtained by the processes of communication intelligence from the communications of any foreign government, knowing the same to have been obtained by such processes—
          Shall be fined under this title or imprisoned not more than ten years, or both.
          (b) As used in subsection (a) of this section—

          The term “classified information” means information which, at the time of a violation of this section, is, for reasons of national security, specifically designated by a United States Government Agency for limited or restricted dissemination or distribution;

          The terms “code,” “cipher,” and “cryptographic system” include in their meanings, in addition to their usual meanings, any method of secret writing and any mechanical or electrical device or method used for the purpose of disguising or concealing the contents, significance, or meanings of communications;

          The term “foreign government” includes in its meaning any person or persons acting or purporting to act for or on behalf of any faction, party, department, agency, bureau, or military force of or within a foreign country, or for or on behalf of any government or any person or persons purporting to act as a government within a foreign country, whether or not such government is recognized by the United States;

          The term “communication intelligence” means all procedures and methods used in the interception of communications and the obtaining of information from such communications by other than the intended recipients;

          The term “unauthorized person” means any person who, or agency which, is not authorized to receive information of the categories set forth in subsection (a) of this section, by the President, or by the head of a department or agency of the United States Government which is expressly designated by the President to engage in communication intelligence activities for the United States.
          (c) Nothing in this section shall prohibit the furnishing, upon lawful demand, of information to any regularly constituted committee of the Senate or House of Representatives of the United States of America, or joint committee thereof.
          (d)
          (1) Any person convicted of a violation of this section shall forfeit to the United States irrespective of any provision of State law—
          (A) any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation; and
          (B) any of the person’s property used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, such violation.
          (2) The court, in imposing sentence on a defendant for a conviction of a violation of this section, shall order that the defendant forfeit to the United States all property described in paragraph (1).
          (3) Except as provided in paragraph (4), the provisions of subsections (b), (c), and (e) through (p) of section 413 of the Comprehensive Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. 853(b), (c), and (e)–(p)), shall apply to—
          (A) property subject to forfeiture under this subsection;
          (B) any seizure or disposition of such property; and
          (C) any administrative or judicial proceeding in relation to such property,
          if not inconsistent with this subsection.
          (4) Notwithstanding section 524(c) of title 28, there shall be deposited in the Crime Victims Fund established under section 1402 of the Victims of Crime Act of 1984 (42 U.S.C. 10601) all amounts from the forfeiture of property under this subsection remaining after the payment of expenses for forfeiture and sale authorized by law.
          (5) As used in this subsection, the term “State” means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States.

          What are y’all referring to?

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        • There was a separate statute for military documents but I did not think that came into play here.

          George, are you thinking of Court Martial offenses?

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        • Mark:

          This was from the 6th paragraph of Comey’s statement today:

          Our investigation looked at whether there is evidence classified information was improperly stored or transmitted on that personal system, in violation of a federal statute making it a felony to mishandle classified information either intentionally or in a grossly negligent way

          https://www.fbi.gov/news/pressrel/press-releases/statement-by-fbi-director-james-b.-comey-on-the-investigation-of-secretary-hillary-clintons-use-of-a-personal-e-mail-system

          Comey then went on to say that when considering whether to bring charges, they would consider the strength of the evidence “especially regarding intent.” That seems to me a rather bizarre thing to “especially” consider when contemplating a charge in which no criminal intent is required.

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        • George, that is what I vaguely recalled as the military documents statute but I did not think that applied here.

          But that is the statute that criminalizes gross negligence, for sure. So the question, I suppose, is whether there were military documents or “defense information” among the classified documents, or not. If there were, and if there were a pattern of recklessness wrt the “defense information” there should have been an indictment.

          I confess that I never thought this statute was in play at any time and am surprised that it is being mentioned by Comey or anyone else. I did not believe that defense information or the types of military documents in this statute were at all what SecState handled.

          Color me surprised.

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        • Mark:

          I did not believe that defense information or the types of military documents in this statute were at all what SecState handled.

          The statute refers to “information relating to the national defense”, which I would imagine is much more broad than simply military documents. Presumably one of the primary reasons for keeping information classified, especially Top Secret, is because it relates to the defense of the nation. So I would be surprised if the statute didn’t apply.

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        • I’m pretty sure some of the emails she was grossly neglig..,, er, extremely careless with were satellite and drone images from the DoD.

          I would still like to know the difference between “extremely careless” versus “grossly negligent”?

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        • McWing:

          I would still like to know the difference between “extremely careless” versus “grossly negligent”?

          It does seem like a strange distinction to have drawn.

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        • “I would still like to know the difference between “extremely careless” versus “grossly negligent”?”

          According to folks at PL, they are “exactly opposite ” terms. So, grossly negligent is awful, while “extremely careless” is noble and dignified, exactly how such things should be handled, presumably.

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  9. Scott Adams latest take:

    “Let me be perfectly clear about this: In a contest for the office of the Presidency of the United States in 2016, crooked beats racist every time. So if things stay the same, Clinton wins in November.”

    http://blog.dilbert.com/post/146945783646/the-crook-versus-the-racist

    Like

    • That’s some serious cognitive dissonance.

      Re: Clinton. After thinking about It I think it came down to “too big to jail”

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      • Yup. Also, I suspect Comey did not want the FBI to become a target of a future Clinton administration, or to define the FBI as having the responsibility of ultimately policing the email of everybody in the federal government.

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        • KW:

          Also, I suspect Comey did not want the FBI to become a target of a future Clinton administration

          After hearing Comey detail all of the ways in which HRC had violated the law, followed by the remarkable claim that “no reasonable prosecutor would bring such a case”, Major Bennett Marco came to mind.

          “Raymond Shaw is the kindest, bravest, warmest, most wonderful human being I’ve ever known in my life.”

          The Clintonian Candidate, perhaps?

          Liked by 1 person

        • Heh. All I know is, if I were him, I would not have wanted to be in Clinton’s crosshairs, nor would I have wanted to straddle the line between discussing what was done and not becoming a sworn enemy of the future president. HRC is nothing if not Nixonian.

          Ultimately, not my decision. The handling of the email would have been a “sanctions” thing to me, plus a memo to government that they shouldn’t run private email servers. While there is a good argument that Hillary had something to hide, hence the private email server, I also find that weak because having a private email server is actually a bad way to hide things. 😉

          Also, while it may not be true, I find the excuse that she had a private email server because she didn’t want to deal with new technology or wanted to keep using what she was familiar with, thus decided the rules didn’t apply to her and her job would conform to her, not the other way around, not necessarily prosecutable but certainly a bad sign, and perhaps ought to be a seen as a sign of megalomania in line, if slightly less overt, with Trump’s.

          Like

      • I think the threshold to indict a presumptive major party candidate in an election year is higher than that for everyone else.

        That’s not necessarily a bad thing. I’d compare it to the same political norm that typically discourages the current administration from launching criminal investigations of previous administrations.

        My new thinking is that if HRC is elected, I hope that they are the most corrupt administration ever, but nothing can be done because the Democrats circle the wagons to protect them. They should be totally brazen about it and refuse to hold a single press conference. I want them to stand as a shining example of the current state of the Democratic party and the progressive movement, and watch all of them have to defend them day after day.

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        • Here’s Comey when he used to think that being powerful wasn’t a good enough reason not to prosecute.

          Like

        • “To be clear, this is not to suggest that, in similar circumstances, a person who engaged in this activity would face no consequences,” he said after announcing that the FBI is not recommending criminal charges. “To the contrary, those individuals are often subject to security or administrative sanctions. But that is not what we are deciding now.”

          This is my sense of the history of these investigations. “Extremely careless” describes general conduct. The kind that leads to firing. HRC should have been reprimanded as SecState and fired when she did not change her conduct.

          The “gross negligence” language is here:

          (f) Whoever, being entrusted with or having lawful possession or control of any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, instrument, appliance, note, or information, relating to the national defense,

          through gross negligence permits the same to be removed from its proper place of custody or delivered to anyone in violation of his trust, or to be lost, stolen, abstracted, or destroyed, or (2) having knowledge that the same has been illegally removed from its proper place of custody or delivered to anyone in violation of its trust, or lost, or stolen, abstracted, or destroyed, and fails to make prompt report of such loss, theft, abstraction, or destruction to his superior officer—

          Shall be fined under this title or imprisoned not more than ten years, or both.

          There are a bunch of elements to that. If Comey says no prosecutor would take and make this case, I believe him.

          But I in no way think HRC is “vindicated”.

          She repeatedly lied to the public.

          1] “Never emailed classified material.”
          2] That information in the emails was classified retroactively and that none of the emails were marked as containing classified information when she received them.
          3] “There were definitively no security breaches”.
          4] That she turned over all work-related emails to the State Department.
          5] That the set-up was driven by convenience [although I might give her a bit of leeway on that as a lie, just using any device available and running stuff over chrome rather than say, TOR, is certainly “convenient” as would be publishing on Facebook. It’s just incredibly stupid, from a security POV].
          6] The FBI was conducting a mere “security review”.

          If you think of some more, pile on. Anybody who “trusts” HRC should be reminded of this list.

          I have my DJT list, as well. These lists, e-mailed, may become my major contribution to Johnson’s campaign.

          Like

        • Mark:

          If Comey says no prosecutor would take and make this case, I believe him.

          This morning his former assistant was on CNBC and, despite professing great respect and admiration for Comey, was utterly bewildered by that statement. It was pretty clear that as a prosecutor he would have taken that case.

          There are a bunch of elements to that.

          For the gross negligence part, there are only two elements. First, that the information was removed from its “proper” place. That that happened does not seem to be in dispute at all. And second, that it was “gross negligence” which caused it to be removed from its “proper place”. Comey says that it did happen through extreme carelessness. So he must be drawing a distinction between “extreme carelessness” and “gross negligence”.

          Like

        • I guess “extreme carelessness” isn’t “gross negligence” like “rape” isn’t “Rape, rape”.

          http://jezebel.com/5369395/whoopi-on-roman-polanski-it-wasnt-rape-rape

          Like

        • Scott, I am not trying to play a game here, but the first question you must ask is was she still the proper custodian of the documents if they were on her own server? Think about it this way: Can a SecState keep a written document or a copy of it on her person or must it remain within a file in the State Department? No one would argue seriously that her possession of the document moved it out of her custody as SecState.

          Thus the first question of carelessness, that is, keeping documents on a non .gov server, can be answered “yes” for careless, but “no” as an element of a crime.

          Then the second question is which of the classified-before-the-fact documents were defense related. I don’t know the answer and neither do you. Assuming there are some, did she share them with persons who were unauthorized to see them (the Petraeus issue)?

          That she shared them over insecure connections is ridiculously careless, but if they were (by intent) shared with authorized persons only, persons whose security clearance permitted them to see the material, there is no criminal gross negligence.

          In other words,if she routinely copied unauthorized persons on these specific defense documents that were previously classified, or if she had copied Putin on these docs, even by accident, even once, then you can nail gross negligence. But if it takes the act of a third person to intercept these communications than you have technically bad carelessness but not criminal gross negligence.

          At least, that is how I see the actual cases lining up.

          It’s possible that she routinely copied an unauthorized person with defense info that was previously classified – which would meet a gross negligence standard, I think, like drunken driving.

          But the question of “what server” is not a question in and of itself of grossly negligent custody – SecState has legit custody of the docs wherever she may be; I think that can be fairly argued.

          So you have elements of “defense info”, “proper custodian”, and “unauthorized recipient” to begin with.

          Don’t confuse general carelessness in the internet sense with gross negligence wrt pre-classified defense info properly in her custody transferred by her to unauthorized recipients.

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        • Mark:

          But the question of “what server” is not a question in and of itself of grossly negligent custody – SecState has legit custody of the docs wherever she may be; I think that can be fairly argued.

          In reading the statute, then, it seems the relevant question is what is the “proper place of custody” with regard to digital information sent via e-mail. I don’t think that the fact that the Sec State has legitimate custody wherever she may physically be provides any insight into the “proper place of custody” for digital information sent via e-mail, copied, and stored on a server. I assume that the State Department has a policy that defines the “proper” way in which sensitive information is supposed to be sent and stored digitally. So presumably the question is whether Hillary’s storage of information on a privately maintained server with less security than a gmail account qualifies under that policy as a “proper place of custody”.

          Like

        • Scott, agreed. It gets easy for administrative purposes to deal with, but my point is that criminal law is much more technical.

          Like

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