Unreliable Conservatism: Judge Bernard A. Friedman, Reagan Appointee, Overturns Michigan's Marriage Amendment

As a Democrat in recovery, Ronald Reagan proved more than once that his journey to conservatism was incomplete.

On the social issues he was full of soothing words to keep the religious rubes in the Republican line at the voting booth, but appointed to the courts people confused by liberalism (the Reagan Democrats), such as Judge Bernard A. Friedman in Michigan, who openly encouraged in 2012 lesbian plaintiffs to challenge Michigan's constitutional amendment of 2004 defining marriage as between a man and a woman. Appointed as Friedman was in 1988, conservatives may wish to console themselves with the thought that Ronald Reagan was already senile in his last year in office and was co-opted by the George H. W. Bush faction. You remember him . . . the same guy who happily signed his name recently as a witness to a lesbian "wedding" in his own dotage.  

And here we are in 2014 and the same judge Friedman has struck down what was passed by the voters with 59% approval just 10 years ago:

In his 31-page written opinion, Friedman said the constitutional amendment known as the Michigan Marriage Act, passed by 2.7 million state voters in 2004, was unconstitutional because it denied gays and lesbians equal protection under the law.

When conservatism admits liberal ideas into its universe, a queer thing known as libertarianism, the rule of law goes out the window because the rules go out the window. Societies form around consensus (culture springs from the cult), and when the consensus breaks down so does the concept of society. Order gives way to chaos, whether imposed from without by judicial usurpation or by voter apathy, acquiescence or decadence.

If capturing the heights through elections has shown us anything it is that sometimes leaders can persuade the people from the ramparts, but unless the laws spring forth organically from the beliefs of the people the future of the idea of one nation remains in doubt.

As many have pointed out, marrying your dog, multiple men or women, a herd of sheep, or minor boys and girls cannot be far behind unless Nature and Nature's God once again capture our imaginations.

"Our outlook continues to be more favorable for Treasuries going forward."

So says Market Anthropology's Erik Swarts, here.

"[O]ur current estimates of prospective S&P 500 total returns are negative on every horizon shorter than about 7 years," says John Hussman, here.

Foreclosure's Ground Zero Finally Shifts To New Jersey And New York After Region Being In "Suspended Animation" For Years

So reports Bloomberg here in late February:

The epicenter of the U.S. foreclosure crisis is shifting to New Jersey and New York, threatening a housing rebound in one of the country’s most densely populated areas. ...

The number of New York and New Jersey homeowners losing their houses reached a three-year high in 2013. Banks in these states have been slowly working through a backlog of delinquent loans that enabled borrowers to skip mortgage payments for years. ...

“It is really a delayed reaction in New Jersey and New York,” said Michael Fratantoni, chief economist for the Mortgage Bankers Association in Washington. “Loans that were made pre-crisis have been in this state of suspended animation for a number of years. And now, we are beginning to see the pace of resolution pick up.”

Keith Jurow has been warning about this since at least early 2013.

All But One Big Bank Would Fail Real Stress Tests, Which Means In An Actual Crisis It's 2008 All Over Again

So says Bloomberg View here, naming Wells Fargo as the only one which would pass:

The results aren’t pretty. Using a start date of Sept. 30, 2013, the same as that of the Fed's latest round of stress tests, the NYU model gives only one of the six largest U.S. banks -- Wells Fargo & Co., Inc. -- a passing grade. The other five -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley -- would have a combined capital shortfall of more than $300 billion. That's not much less than they needed to get themselves out of the last crisis.

China Ups The Ante In The Race For Thorium Reactors

The earth is loaded with thorium, but so is the moon.

The South China Morning Post reports here:

A team of scientists in Shanghai had originally been given 25 years to try to develop the world's first nuclear plant using the radioactive element thorium as fuel rather than uranium, but they have now been told they have 10, the researchers said. ... 

Professor Li, director of the project's molten salt chemistry and engineering technology division, said the smog crisis had provided huge impetus for their research. ...

Western countries such as the United States have experimented with thorium reactors but gave up on the technology because of the engineering difficulties.

Analysts have also suggested the US lost interest in thorium as a fuel for reactors because uranium was a more suitable material to produce nuclear weapons.

Interest, however, has been revived in recent years and research projects have been established in several countries, including the United States, France and Japan.

"This is definitely a race," said Li. China "faces fierce competition from overseas and to get there first will not be an easy task", he said.

h/t Ambrose Evans-Pritchard

The Federal Reserve Couldn't Hit A Bull In The Ass With A Sack Of Peaches, Let Alone Target The Inflation Rate

The all items CPI had climbed to 219.016 on July 1, 2008 and didn't surpass that level again until October 1, 2010 at 219.024. The deflationary gale of the Great Recession blew for 27 months.

The collapse in prices in the five months from July 2008 through November 2008 was 3.48%, after rising in 2007 by 4.29%, a spread of 7.77 points.

So much for inflation targeting by the Federal Reserve, which couldn't hit a bull in the ass with a sack of peaches.

In 2012 and 2013, despite explicitly targeting the rate at 2%, the Fed could only come up with 1.6% and 1.56% respectively, suggesting that deflationary winds remain a problem.

Bonds Beat Both Stocks And Cash For The Last 15 Years 1999-2014

The return from cash in the Vanguard Prime Money Market Fund has been 2.3% per year for the last 15 years, according to Morningstar. Note that the return over the last one, three and five years of that period has been effectively zero, which is what you get also from gold at all times and in all places . . . plus the shine.

The return from stocks in the Vanguard S&P500 Index Fund has been 4.2% per year for the last 15 years, according to Morningstar. Note that the one, three and five year returns have been three to five times the 15 year return. The S&P500 is currently very richly valued, and in real terms its level is about 7.1% off its all time high in August 2000.

The return from bonds in the Vanguard Total Bond Market Index Fund has been 5.15% per year for the last 15 years, according to Morningstar. At the current NAV of 10.71, the price of the fund is richly valued, about 2% above what looks like the historical high end of normal at around 10.50 per share.

Your 15 Year Real Return From The S&P500: Just 2% Per Year 1999-2014

The inflation-adjusted return from an investment in the S&P500 from January 1999 to January 2014 is just 2% per year.

At that rate it takes 35 years to double your fortune in real terms.

Calculate your return here.

Americans Still Earn Way Too Little To Afford The Median Priced Home

The national median price for an existing home in December 2013 was $196,300.

Median household income at the end of 2013 had reached $52,297.

That's a ratio of 3.75:1, which is even higher than the 3:1 ratio which prevailed a year ago, and 44% higher than the recommended ratio of 2.6:1.

Either housing is still much too high or wages are much too low to support ownership of the median priced home in the United States. It is more likely that both things are true.

And forget about buying a new house on such an income.

The median new house price reached a new record in December at $270,200, vaulting the ratio to 5.17:1.

Housing prices have continued to rise because of deliberate government policy to reinflate the housing bubble.

Sellers should sell and buyers should beware. 

Like The Size Of The Civilian Labor Force, Average Weekly Hours Have Stopped Their Recovery

Edward Lazear for The Wall Street Journal here has called attention to two months of back to back declines in average weekly hours, using the seasonally adjusted figures.

average weekly hours, not seasonally adjusted, quarterly average

It got me to looking at the not seasonally adjusted figures, which do not show the same thing. In fact, they show that we've been flirting with the 34.3 level quite a bit in 2013, but also even since before the Great Recession, and before ObamaCare and the recent spate of nasty winter weather. But what is interesting is that the quarterly average of the figures shows that we failed to make a new high in average weekly hours last summer, breaking a pattern of ever higher highs in 2010, 2011 and 2012 which had developed after the lows in late 2009, early 2010. You'll also notice a pattern had developed of higher lows in the measure at the beginning of 2011 and 2012,  but broken at the beginning of 2013.

civilian labor force level, not seasonally adjusted

This is interesting because you can see this same pattern in the level of the civilian labor force. The post-recession level bottomed at the beginning of 2011 and made higher lows at the turn both to 2012 and 2013, but not to 2014, which appears to signify more than seasonal shrinkage. Similarly there's been a pattern of ever higher highs in the summers in 2011, 2012 and 2013, but if the pattern doesn't hold in the summer as it hasn't in the winter, we'll not beat the 2013 summer level in the summer of 2014.

It stands to reason that as the civilian labor force recovers and grows, which it has, average weekly hours should rise, which they have, until recently. But the recent weakness in hours probably goes hand in hand with recent weakness in the size of the labor force, not with something else, like ObamaCare or the weather. And that probably has more to do with flagging demand in the economy than anything else.

What This Country Needs Is A Good 5-cent Dollar

Which would be an improvement of 25%.

Between March 5-12 Someone (Russia?) Yanked $104.5 Billion In US Treasuries From US Custodial Supervision

Peter Coy has the story here:

There’s circumstantial evidence that Russia may have yanked tens of billions of dollars in assets out of a custodial account at the U.S. Federal Reserve, possibly to keep it from being frozen by U.S. authorities in case of heightened conflict in Ukraine.

LA Employment Agencies Place Illegal Chinese In Jobs All Over America

The LA Times reports here:

Here in this bare room, where a map of the U.S. is one of the only decorations on the walls, a young man newly arrived from northeast China can find work washing dishes in Minnesota or Utah for 12 hours a day, six days a week. ...

"You can call from any part of the country to get a nanny or a restaurant worker sent to you," said Xiaojian Zhao, a professor of Asian American studies at UC Santa Barbara who has studied the employment agencies. "They are like labor distribution centers for the ethnic economy." ...

"We have been the portal, the Ellis Island, of Asian immigrants for 30 years," said Talbot, the [Monterey Park, California] city manager. "We see people walking down the sidewalk with suitcases. They've just landed. I don't know how they get here from the airport, but they get here."

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Politically the area has in the past routinely elected Democrat notables such as Judy Chu and Hilda Solis.



h/t Mickey Kaus

Bet You Didn't Know Japan Has 44 Tons Of Plutonium

I didn't either.

Story here:

Japan now has 9 tons of plutonium stockpiled at several locations in Japan and another 35 tons stored in France and the U.K. The material is enough to create 5,000 nuclear bombs. The country also has 1.2 tons of enriched uranium. ...

It also has plans to open a new fast-breeder plutonium reactor in Rokkasho in October. The reactor would be able to produce 8 tons of plutonium a year, or enough for 1,000 Nagasaki-sized weapons.

FDIC Sues 16 Big Banks Saying LIBOR Rigging Hurt 38 US Banks Which Eventually Failed

CNBC reports here:

The FDIC said the defendants' conduct caused substantial losses to 38 banks that the U.S. regulator had taken into receivership since 2008, including Washington Mutual Bank and IndyMac Bank.

Among the banks named as defendants include Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank AG, HSBC Holdings, JPMorgan Chase, the Royal Bank of Scotland Group and UBS.

Sink Sunk In FL 13 By Libertarian Spoiler In Low Turnout Special Election Where Fixing ObamaCare Got No Traction

Flashback to November 2010 when Eric Cantor already said he wanted to keep the good parts of ObamaCare and not repeal the thing outright. Eric Cantor never saw the Republican blowout in 2010 as a resounding verdict against ObamaCare, even though the Republican sweep of the House was history making. Newsmax reported Cantor's remarks here.

Today, repeal of ObamaCare is much more appealing than keeping it as is, by almost 2:1 in December polling by Gallup, here. Those who want to scale it back or expand it somehow to fix it are evenly divided in the polling data and together represent 40% of those polled. The polling overall, however, is negative on ObamaCare by 52% to 37%.

The narrowly won Florida 13 District seat this week by a Republican was a test of the Democrat strategy of running on a platform of fixing ObamaCare. It didn't work.

Politico reports here:

Democrats had hoped that defeating Jolly would show that they could beat the GOP’s anti-Obamacare offensive. Sink had embraced the national Democratic Party’s “fix it, don’t repeal it” mantra, which candidates across the country are expected to adopt this year.

Election results at 10 News WTSP here show that a libertarian spoiled the race for the Democrat Alex Sink. Usually libertarians ruin elections for Republicans, not Democrats. The libertarian strongly supported marriage equality and liberalization of marijuana laws.

Turnout was low in the narrowly Republican majority district where older voters weren't particularly engaged by ObamaCare, as reported separately, here.

San Fran Gay Rights Activist Sentenced For Child Porn

Just remember people, homosexuality is completely unrelated to child sexual abuse. Completely.

Vivian Ho of The San Francisco Chronicle reports here:

Veteran gay rights advocate and former San Francisco Human Rights Commission staff member Larry Brinkin was sentenced to one year in county jail Wednesday for possessing child pornography. ... Brinkin, who worked as a senior contract compliance officer with the rights commission until his 2010 retirement, was arrested in June 2012 after e-mail attachments were found on his AOL subscriber's account that contained images of toddlers engaged in sex acts with men.

h/t Savage

Here come the Chinese industrial bankruptcies: Officials to respond with a mixture of capitalism and Keynes

The Chinese premier's comments are discussed here in The UK Guardian:

Premier Li Keqiang told lenders to China's private sector factories they should expect debt defaults as the world's second largest economy encounters "serious challenges" in the year ahead. ... Li's warning followed the failure of Shanghai Chaori Solar Energy to make a payment on a 1bn yuan (£118m) bond last week. The default was the first of its kind for China and widely seen as pointing to the end of 11th-hour government bailouts for troubled enterprises. Some analysts said the decision to let some indebted firms collapse was a sign the authorities had learned from the Japanese boom and bust experience of the late 1980s and early 1990s. Tokyo was plunged into two "lost" decades of stagnation after it prevented zombie companies from declaring bankruptcy – even blocking petitions from bondholders in the courts - when a property collapse exposed debts many times the value of their businesses.

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If only we could get Americans to practice some similar capitalism by letting companies and banks fail instead of bailing them out.

China can afford the Keynesian stimulus, however, unlike the US. They've got the savings Keynes prescribed, in the form of massive foreign reserves.

Too bad America has no such savings.

Malaysia Still Can't Find Boeing 777 Missing For 5 Days

Amazing. Maybe they should start looking on the ground, like in Pakistan.

FERC Study Warns Sabotage Vs. 0.01% Of Electrical Grid Could Blackout The Nation For Months

Reported here:

A study by the Federal Energy Regulatory Commission raises concerns about the seriousness of electricity grid vulnerability, The Wall Street Journal reports.

The study found that if saboteurs attacked just nine of the country's 55,000 electric-transmission substations, the country's power network would collapse. An ensuing nationwide blackout could last weeks or even months, the newspaper said.