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Capital punishment is undoubtedly one of the more controversial and increasingly unique features of the American criminal justice system. While every European country (except Belarus), along with Canada and Australia, have abolished capital punishment, the United States is among a dwindling number of democracies, including Japan and India, that preserve it. Capital punishment isn't available in every U.S. State, although 38 states sanction it, as does the federal government. Since 1976, there have been 1,089 executions in the United States, 398 of which occurred in the state of Texas.
In this week's issue of Newsweek, Eve Conant examines a study appearing in the August issue of the American Sociological Review on whether the race of murder victims affects the probability that a convicted killer gets the death penalty or life in prison. Her story is mainly comprised of an interview with David Jacobs, coauthor of the study and a professor of sociology and political science at Ohio State University. Below we have excerpted portions of her story.
* * *
Is American justice colorblind? A new study finds that blacks on death row convicted of killing whites are more likely to be executed than whites who kill minorities. It also concludes that blacks who kill other minorities are less likely to be executed than blacks who kill whites. The authors of the report say their findings raise serious doubts about claims that the U.S. criminal justice system is colorblind.
Appearing in the August issue of American Sociological Review, the report claims to be the first of its kind to study whether the race of murder victims affects the probability that a convicted killer gets the ultimate punishment. The study examined outcomes of 1,560 people sentenced to death in 16 states between 1972 and 2002. NEWSWEEK's Eve Conant spoke to David Jacobs, coauthor of the study and a professor of sociology and political science at Ohio State University.
NEWSWEEK: Why did you do this study?
David Jacobs: Because the role of race is a fundamental question about the death penalty. There was a lot of research, mostly on one or two Southern states, which found that if an African-American killed a white, that they'd be more likely to get the death penalty. But you have to remember that only about 10 percent of those who get the death sentence actually get executed. Most people wind up leaving death row and going back to prison where they serve long sentences. But we really didn't know much about what happened to offenders after they were sentenced to death and that's what's unique about this study. We didn't know the factors that cause executions. There have been a few studies, but we didn't know if a black or Hispanic who kills a white person would be more likely to be executed. We knew it was more likely that these offenders would get the death sentence. But we didn't know if they were more likely to actually get executed.
NEWSWEEK: So what did you find?
David Jacobs: Holding a whole bunch of stuff constant, including several political variables, we found that if a black person killed a white person they were more likely to get executed. If a Hispanic killed a white person they were also more likely, but this probability wasn't quite as strong. There is more than a twofold greater risk that an African-American who killed a white will be executed than a white person who kills a nonwhite victim. A Hispanic is at least 1.4 times more likely to be executed if such an offender kills a white. Both findings are statistically significant. Also, the findings indicate that blacks who kill nonwhites are less likely to be executed than blacks who kill whites, which shows that the postsentencing capital-punishment process continues to place greater value on white lives.
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For the rest of the piece, click here. In a previous post, "Black History is Now," Jon Hanson & Michael McCann discussed a recent and remarkable study by Jennifer Ebehardt and co-authors that examined the life-and-death significance of "blackness" and found a disturbing correlation between how prototypically "black" a death-eligible criminal defendant was and whether that defendant was sentenced to death.


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"A global growth market is out there for our industry," says Krubasik.
Design News: What makes you believe industrial production has a promising future?
Krubasik: A major stimulus for growth within the industrial customer sector is the trend toward incorporating information technology and microelectronics in industrial equipment, systems, and plants. We are creating ever more intelligent production methods, and steadily improving man-machine interaction by optimizing interfaces between operators and automation systems. In addition, the classical hardware business is increasingly being complemented with software and industrial services, which are demanded by customers as part of a complete one-source package.
Q: And new global markets?
A: We should realize that three-quarters of the world's future industrial countries are only poised at the threshold of industrialization: Asian countries are rapidly building up their industrial infrastructures after making great progress in expanding their basic energy, telecommunications, and transportation infrastructures; Latin America is speeding up efforts to rejuvenate its aged industrial base and replace it in part with modern plants; while Central and Eastern Europe, even though presently handicapped by lack of sufficient financial resources, will completely renew its industrial base over the medium term.
Q: What are the prospects for European suppliers with regard to these emerging markets?
A: European suppliers will be able to grow in all of these markets. The role of Europe should be to help newly industrializing countries build up their industrial base and renew their industrial infrastructures by offering special know-how and high-tech solutions. As industry spreads throughout the world, European suppliers will obviously need to expand local value-added. This, in turn, will have a positive effect on jobs in our home markets. At Siemens, we have seen that every three jobs created in the growth region of Asia secures an additional job here in Germany.
Q: How can European companies assure they are an attractive partner in building up the industrial base of newly developing countries, yet keep a step ahead of new competitors in their own market?
A: Quite naturally, new competition is emerging in these growth regions. We shouldn't fear this development, but keep ahead of global competition through productivity and innovation. Good examples for German industry leading successfully in the face of emerging foreign competition can be seen in autos and telecommunications.
Q: What are your thoughts regarding productivity?
A: The effects of higher productivity can be quite positive for employment in the long term. Industries and countries with the higher productivity and biggest productivity gains also create the most jobs. It is obvious that a high labor cost country like ours can only survive with top productivity. Our own suppliers also face this fact of life: they must keep in step with our own efforts to boost productivity at Siemens.
Q: What about innovation?
A: The various worlds of industrial technology are gradually merging: Mechanical systems are being replaced by microelectronics; decentralized automation concepts are supplanting previously isolated solutions by providing open controls with open industrial communications systems based on high-performance bus systems; and information/communication systems are changing processes in plants and industrial production. Furthermore, technical services are enjoying a booming market and customers increasingly prefer turnkey solutions. Our innovations are being focused to ensure that all industrial products from Siemens--ranging from switchgear and drives, to automation, instrumentation, and monitoring equipment--are part of an integrated automation system world.
Q: What does this mean for Siemens?
A: Customers enjoy productivity gains of around 50 percent with the unification of engineering interfaces in all production processes, from project management to diagnosis. Here at Siemens, we are creating ever more intelligent production methods, and steadily improving man-machine interaction by optimizing interfaces between operators and automation systems. Prospects for Siemens and our industry in general are excellent.

subset: commoncrawl


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Only In Sarasota
For 56 years, the Sarasota Ski-A-Rees have been thrilling onlookers with world-class waterskiing. The homegrown troupe regularly wins state and national awards, and it's often a family affair, with generations of parents and kids involved in every aspect of the sport. You can catch a free performance every Sunday at 2 until May 20 at Ken Thompson Park next to Mote Marine.
Photo by>>ChooseSarasota.com
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AYER/SHIRLEY — Students are not the only ones being transitioned into a new assessment system.
As part of the new Educator Evaluation Framework (EEF), all licensed educators will soon receive a summative evaluation rating and an impact on student learning rating based on new criteria.
According to Ayer-Shirley Regional School District Superintendent Carl Mock, the next phase of the EEF requires educators to begin identifying and implementing District-Determined Measures (DDMs) of student growth, which must be developed for all licensed teachers in all grades and subjects, as well as for all administrators.
Starting next year, for those teachers who teach ELA and math in MCAS-tested grades, one of these DDMs must measure trends in their students' Student Growth Percentiles (SGP). EEF regulations state that a trend for both SGP and other DDMs must consist of at least two years of data.
"For those teachers who have either ELA or math Student Growth Percentiles, that will be one of two DDMs that will be used to determine whether or not a teacher has low, moderate or high impact on student learning," Mock explained.
The second measure must be locally developed or identified assessments of growth, such as portfolios, performance assessments, locally created pre- and post-tests or textbook-based assessments.
"What may happen is that the kids that we exempt from taking MCAS this year, when those kids go to another teacher, the following year that teacher would not have an MCAS Student Growth Percentile because she would inherit a class that had not taken the MCAS in third grade," Mock said.
Those students who may be exempt are the Page Hilltop Elementary third-graders randomly selected to field test the new performance-based assessment known as PARCC.
The problem could be alleviated, Mock said, by ensuring that those students are "spread out" the following year.
The goal of PARCC, he said, is to have the data from the testing available to participating schools (representing two-thirds of Massachusetts public school districts) by the end of school year.
That, he said, is much faster than the MCAS, the results of which do not come in until schools are well into the following school year.
"So that is an advantage to have the information over the summer," he concluded.


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With A Tiger's Help, Orange Juice Helps Lighten The Mood At Olympics
When you spend hours on end at a media center, even if it's on an assignment as terrific as the Summer Olympics, the refreshments can get to be, well, familiar.
But no contempt has been bred here. That's partly because of Innocent brand juice — the "official smoothie and juice of the London 2012 Olympic games," as the label says.
And any drink that can make us chuckle on deadline is greatly appreciated. Especially if it's what's on the outside of the bottle that makes us laugh.
Copyright 2021 NPR. To see more, visit https://www.npr.org.


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Mt. Royal
Mt. Royal is a new group, founded November 2012, from Baltimore, Maryland.
The band comprises of Katrina Ford (vocals), Ed Harris (bass), Matt Pierce, (keys), Woody Ranere (guitar) and Mike Lowry (drums). Katrina is best-known as the vocalist of Celebration, leading lights of Baltimore's music scene. To describe Mt. Royal's music it is easiest to explain that their contrasting elements work together for the sake of a common purpose. Their aesthetics and melodies appear to have a friendly pop leaning tailor-made for a broad audience, with a consistent undercurrent of attitude from the rhythm section and Ford's emotive, powerful delivery and sweeping, surging arrangements that provide some unexpected twists while retaining the clear focus of each song. The end result reconciles the most fundamental elements of intoxicating, heart-driven music. Mt. Royal has the charged ambition and scope of vintage psychedelia whilst always utilising the eclectic sonic palette of the modern world.
The Mt. Royal EP will be released 27th January 2014 on Bella Union.
Mt. Royal EP tracklisting:
1. Missing Reward
2. Black Thorn
3. More
4. Yes Your Majesty
5. Mockingbird
6. What's On My Grave?


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Perspective on Books and the Net
By Bruce McKinney
These days the world of collectible books is a warren of categories - on line listings, shops on Main Street, catalogues on line and through the mail, presentations at trade shows, and auctions, both traditional and eBay. These categories function independently. They sell to different customers - dividing the world of rare and collectible books into a mosaic of hundreds if not thousands of pieces.
The scale of the venues for old and collectible books is exponentially increasing, the number of dealers, number of books, the number of auction houses and sales all incr...


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HILCO has bought the debt of HMV, according to sources close to the situation.
This move by the restructuring specialist gives it a big influence in the fate of the entertainment retailer which went into administration last week.
Hilco, which bought HMV Canada in 2011 and salvaged home goods firm Habitat, has bought the debt from HMV's lenders Royal Bank of Scotland and Lloyds, sources said today.
HMV, which has over 200 stores and more than 4,000 staff, had underlying net debt of £176.1 million (€210m) in October.
The acquisition does not mean Hilco now owns HMV but does give the group a central role in its future, potentially giving the 92-year-old retailer and its administrators Deloitte more time to attract new backers.
Hilco, RBS and Lloyds all declined to comment. Deloitte was not immediately available for comment.
Deloitte has received over 50 expressions of interest in HMV including from trade buyers and private equity firms. Video games seller Game has confirmed it is interest in buying a number of HMV stores.
Hilco has widely been regarded as a frontrunner to take full control of HMV due to its relationship with music labels and film studios through its Canadian business.
On Monday it was appointed to help Deloitte run the business during the administration process, one of the sources said.
HMV's business of selling DVDs and CDs has struggled in declining markets and amid increased competition from supermarkets and online retailers such as Amazon.


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Nope, Obamacare Won't Kill Two Million Full-Time Jobs
Papers and pundits screamed it today, in massive headlines. The conservatives cackled it. "OBAMACARE WILL MEAN 2 MILLION FEWER FULL-TIME WORKERS." It was bullshit, born of the media's oversimplification and the right wing's malicious stupidity. The truth is good news.
The Congressional Budget Office released a report today forecasting the economy's prospects. Much of it dealt with the effects of health care reform. On Page 117, in Appendix C ("Labor Market Effects of the Affordable Care Act"), the CBO offered a single sentence that sent the Beltway into a batshit tizzy:
The reduction in CBO's projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.
JOBS LOST! MILLIONS OF FULL-TIME WORKERS SIDELINED BY OBAMACARE! It blasted across every major paper's front page and hundreds of conserva-pundits' and Republicans' Twitter accounts. Here's the Washington Post's lede:
The Affordable Care Act will reduce the number of full-time workers by more than 2 million in coming years, congressional budget analysts said Tuesday, a finding that sent the White House scrambling to defend a law that has bedeviled President Obama for years.
A new analysis from the Congressional Budget Office says that the Affordable Care Act will result in more than 2 million fewer full-time workers in the next several years, providing Republican opponents of the law a powerful political weapon leading up to this year's midterm elections.
But instead of salivating and pivoting immediately to the right-left political impact of the report, perhaps the reporters should have spent more time, like, reporting on the report itself. What did that 2 million figure represent, exactly? Not real workers, but an "equivalent" expression of how many fewer hours we would all be working. TPM's Dylan Scott was the first reporter to notice something amiss, once the hysterical news cycle had expended itself. Here's what the CBO actually said:
CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.
When workers no longer have to rely on full-time employers to get affordable health care, they suddenly have the freedom to not work full-time. That could mean people stuck in crappy hourly jobs 40 hours a week at, say, the local big-box store. Or creatives jammed in underpaying urban admin assistant jobs. Indeed, the CBO adds:
Because the largest declines in labor supply will probably occur among lower-wage workers… the impact on the overall economy will be proportionally smaller than the reduction in hours worked.
In other words, people who qualify for expanded Medicaid coverage could choose to scale back their hours at work, could pursue better hourly wages for half-time jobs, could save by keeping the kids out of day care a few more times a week. People will have more time, and the economy won't have much less money for it. CBO again:
The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than a net drop in business' demand for labor, so it will appear almost entirely as a reduction in labor force participation… rather than as an increase in unemployment… or underemployment.
As Scott says, the CBO "specifically undermines" the claims made by the papers and pundits. Obamacare will give more of us more time away from work. This is a good thing.
And yet. Here we are, listening to Lindsey Graham and Erick Erickson bitch about the poor, poor workers that will lose jobs in a flagging economy because of one sentence out of context from a several hundred page report and several complicit reporters but mostly OBAMACARE.
The problem here is truly philosophical. It is ideological. It is rooted in the two Americas' distressingly divergent answers to a simple question: What is a job for?
For pundits and pointy-headed analysts, it's to keep The Economy and Growth flowing. That is its good. That is its end. Workers are the means. For most workers (the vast majority of whom aren't leaving their families and schlepping through megastorms to cubicles or factories for the love), the job is the means to a different, individualized end: the ability to buy one's own way, to keep loved ones fed and happy and healthy, to stave off poverty.
So what the CBO said today, in essence, was that if this Obamacare thing works out, people won't need to work full-time jobs just to keep health care benefits. They may actually be able to spend more time with those families. They may be able to freelance, to split hours between two parents rather than having one stay-at-home parent and one full-time earner. They may be able to take a chance on that novel or Etsy shop, instead of staying at the office until death.
That's not what conservatives hear, though, because that's not what conservatives care about. Their concern for people is subverted by their concern for commercial output, or economic abstractions that appear to impact commercial output. It wasn't always so; the original argument for Adam Smithian, invisible-hand laissez-faire capitalism was that it's the best system for everyone concerned. That is no longer the economics of conservatism; to even hark back to "the good of all" is a marker of socialism now. The new capitalism is Ayn Rand's, based on the principle that government is bad and private enterprise is good. All facts, all figures must be processed through this worldview before being regurgitated onto Main Street.
This paradigm and its macroeconomic lingo are so pervasive that it's now promulgated by an "objective" media on front pages of newspapers as immutable fact. So that the Times, before clarifying that 2 million actual jobs held by existent people won't really be lost, finds it necessary to use the figure, and to add that it provides "a powerful political weapon" to foes of Obamacare.
It does, but only if you're an idiot. The New York Times, the Washington Post, and the other media bigs are not idiots. But they're playing an idiot's game.
[Photo credit: AP]


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I have been experiencing 'electrical burning smells' for a couple of years on any HVAC fan speed except full speed, so I finally decided it was the blower resistor - part no. 64 11 1 468 524 for my car. The Bentley manual wiring diagram says the blower resistor is located on the 'left side of the right foot well'. Wrong - it is located on the 'right side of the left foot well'. Getting the old one out and the new one in was a pain. You can barely see it from deep inside the left foot well - the resistor has a blue plastic case - the blue color will help you see it amid all the other stuff in the area. There are two plastic tabs - one on each side of the resistor that you need to squeeze to remove the it and a 4-wire plug that you need to remove from the resistor. You will need to remove the 'Trim Panel Foot Control' panel - part no. 51 45 1 978 935 to get close to the resistor. This panel is some sort of plastic and cracks very easily. This panel has a HVAC duct mounted on top of it and supplies air to the driver's side foot well and is a $131 piece that I will do without - I will try to repair my broken panel. After replacing the resistor, the smell is no longer present. This resistor mounts within the HVAC system air stream - the air flow evidently keeps the resistors cool, but it collects dust and crud over the years so I guess this accumulation of stuff contributes to the burning smell. Every time I repair something, a piece of plastic crap crumbles - hate plastic crap.
95 540i


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Kepler Finds Its First Planet in the Habitable Zone
NASA's orbiting Kepler telescope has discovered its first planet in the habitable zone of another star. By "habitable," astronomers mean that a planet could harbor temperatures conducive to liquid water—and maybe life.
The new planet, Kepler 22b, orbits somewhat closer to its host star than Earth does to the sun. "The star is some 600 light-years away." NASA's Bill Borucki, who leads the Kepler mission, in a December 5th teleconference.
That star is a bit cooler than the sun. "So if the greenhouse warming were similar on this planet, and it had a surface, its surface temperature would be something like 72 Fahrenheit—a very pleasant temperature here on Earth."
Kepler 22b is more than twice as large as Earth. One big caveat is that it may not be rocky, like Earth is. It could instead be a gas planet like Neptune. If that were the case, prospects for life there would be rather dim.
Kepler ought to find even better candidates for life in the near future. The satellite has now tentatively identified more than 2,300 possible planets—about 50 of them in the habitable zone—that await confirmation in the years to come.
—John Matson
[The above text is a transcript of this podcast.]


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Toxic waste problem dates back 150 years
Trout caught in Torch Lake, Mich., are not safe to eat. Groundwater in Baldwin, Fla., is not safe to drink. Six acres of land in Bridgewater, Mass., are not safe to live on.
All three locations were once among the most dangerous toxic waste sites in the country and became part of the Environmental Protection Agency's Superfund cleanup program. All three are now considered clean by the EPA, though toxins remain.
The EPA is responsible for protecting human health at 1,700 hazardous waste sites across the country through the Superfund program. These sites contain chemicals that can cause a range of serious illnesses, from cancer to birth defects to neurological disorders.
As is the case at Torch Lake, Baldwin and Bridgewater, an EPA "cleanup" does not mean all toxins are gone. Toxic materials, in many cases, are physically or financially impossible to eliminate. Instead, many Superfund cleanups end with restrictions on how a site can be used because the toxins left behind still pose a danger to human health.
Federal funding for Superfund cleanups has stagnated over the past 15 years, even as the number of Superfund sites grows.
America's toxic waste problem dates back 150 years to the start of the industrial revolution.
In 1962, Rachel Carson's landmark book, "Silent Spring," documented the danger of pesticides in the environment to birds, other wildlife and people.
In 1970, the Environmental Protection Agency was created by the Nixon administration, and Congress strengthened the Clean Air Act. Two years later, Congress passed the Clean Water Act.
Then in 1978, Love Canal became international news. Love Canal was a neighborhood in Niagara Falls, N.Y., where homes and an elementary school had been built atop a landfill that was leaking 21,000 tons of toxic waste. Pregnant women there suffered high rates of miscarriages. Babies were born with multiple birth defects.
In 1980, Congress passed the Comprehensive Environmental Response Compensation and Liability Act, also known as the Superfund Law. The goal was to identify and clean major toxic sites such as Love Canal, and when possible to collect damages from the polluters responsible for the contamination.
Today, the EPA estimates that polluters pay for all of or part of the cleanup at 60 percent to 70 percent of Superfund sites. The rest are paid for with federal funds.
There are 1,322 Superfund sites on the EPA's National Priorities List.
A site is removed from the Superfund list when the potential for causing cancer or other serious illnesses falls to a certain level or is eliminated entirely. In the program's 34-year history, 379 sites have been removed from the list.


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RSS Feed
Today in the Word is a Ministry of Calvary Chapel Caldwell where Bob Larson is the teaching pastor. You can hear Today in the Word each weekday at 5:30 PM MST.
Today Pastor Bob Larson will be teaching in the New Testament in the book of Philippians and continuing in chapter four. He has titled today's message as "The Joy of Commitment." So let's join Pastor Bob on Today in the Word as he continues in Philippians 4, part 2 of a 4 part series.
Previous Post: The Joy of Commitment Pt. 1
Next Post: The Joy of Commitment Pt. 3


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Since Chefen has brought this figure into play, there's much to consider about it. [Also see followup here.] For interested parties, the data is at WDCP here . I haven't got to checking Chefen's results yet, but wanted to table interesting results in passing. As Jean S noticed, the Corrigendum stated that an "old" version of the reconstruction was used in these calculations, but it didn't "matter". I've plotted the two versions together and, for the purposes of his correlations, the difference between the two versions probably doesn't "matter" but it's worth wondering why the two versions differ. Secondly, Figure 7 contains a splice of instrumental and proxy records, which presumably carry forward into the correlations. I'll review what Mann has said in the past about such splices.
First here is the original Figure 7 shown in full with original caption. Notice the change in the line at the right of the top panel and the caption. Mann has here spliced the proxy reconstruction with instrumental data from 1980-1995.
Original Caption. Figure 7. Relationships of Northern Hemisphere mean (NH) temperature with three candidate forcings between 1610 and 1995. Panels, (top to bottom) as follows. "ÅNH', reconstructed NH temperature series from 1610–1980, updated with instrumental data from 1981–95. "ÅSolar', reconstructed solar irradiance. "Ålog CO2′, greenhouse gases represented by atmospheric CO2 measurements. "ÅDVI', weighted volcanic dust veil index. Bottom panel, evolving multivariate correlation of NH series with the three forcings NH, Solar, log CO2. The time axis denotes the centre of a 200-year moving window. One-sided (positive) 90%, 95%, 99% significance levels (see text) for correlations with CO2 and solar irradiance are shown by horizontal dashed lines, while the one-sided (negative) 90% significance threshold for correlations with the DVI series is shown by the horizontal dotted line. The grey bars indicate two difference 200-year windows of data, with the long-dashed vertical lines indicating the centre of the corresponding window.
The next figure compares the "old" and "new" versions of the MBH reconstruction. The range of differences is from -.2 to 0.27. I wonder how this is dealt with in confidence interval calculations. The blue on the right shows the spliced instrumental record.
Top: black – "Old" reconstruction; red- "new" reconstruction; – blue – instrumental splice.
Some time ago, we discussed Mann's statement at realclimate that:
No researchers in this field have ever, to our knowledge, "grafted the thermometer record onto" any reconstruction. It is somewhat disappointing to find this specious claim (which we usually find originating from industry-funded climate disinformation websites) appearing in this forum.
I had discussed in a previous post a splicing of proxy and instrumental records executed by Crowley and was able to show convincingly that Crowley had effected the type of splice that Mann said no one, to his knowledge, had ever done. I then pointed out that Mann had switched Crowley versions between Mann et al (Eos 2003) and Jones and Mann 2004, using an unspliced Crowley version in the latter. I surmised that the Eos 2003 spaghetti graph (and these spaghetti graphs are hard to read) contained a spliced Crowley version and that Mann knew this, calling the above claim into question.
Lambert examined the Eos graph and suggested that the graph shown as being from Crowley was actually a displaced version of the MBH99 reconstruction and it was simply another Mann screw-up, but did not provide evidence that Mann "knew" of the Crowley splice. Since Mann has not issued a corrigendum explaining exactly what the screwup in Eos 2003 was, it's impossible to know for certain – this is the Hockey Team. However, I agreed with Lambert that it might have been simply yet another Mann screwup and did not show that Mann mis-spoke at realclimate.
However, here we have a splice in Mann's own work, in MBH98 itself no less. How can someone reconcile the splice in Figure 7 and related Supplementary Information with the claim that "No researchers in this field have ever, to our knowledge, "grafted the thermometer record onto" any reconstruction "? I'm sure we'll find out soon enough. Lambert's pretty resourceful at explaining away his client's DNA.


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Enough Already
Here's the AP quote from this morning:
"Frustrated by Israeli and Palestinian actions that complicated his furious effort to salvage foundering peace talks, U.S. Secretary of State John Kerry on Thursday exhorted leaders on both sides to 'lead' and to do so now to prevent the negotiations from collapsing…"
What is truly amazing about this statement is that Kerry misses the point that the "negotiations" are "collapsing" because no one but Kerry and Obama want these negotiations to proceed at all. This "process" is not high on the list of priorities of the folks involved, and the message they are trying to give Kerry and Obama is that they are not seeking this process.
This comes the same morning as a draft report of the OSCE on Ukraine, in which on the ground officials in Ukraine, state-wide, have concluded that nearly 70% of Ukrainians fundamentally reject the American-led reproach of Russia, which is an important trading partner with Ukraine and which has lots of close familial and business ties which would be at risk, not to mention that Ukrainians are nearly unanimous that they don't want to be the battlespace between Russia and the United States. These same Ukrainians, even those in Kiev, seem to believe that the United States is pursuing its own agenda, not that of the Ukrainian people. In other words, this is Kerry and Obama's agenda, not Ukraine's agenda.
We've had lots of conversation about identifying the Obama foreign policy. Obama says that he doesn't want the US to be the world's policeman, and that countries should have a right to self-determination, even as Obama sticks his nose, and American pressure, into the business of other sovereign nations where that pressure and intervention appears to be unwanted. Enough is enough already. We have problems here at home. The mere fact that Obama, frustrated by Congress, has decided he'd rather war with Putin and Israel, is not the effective basis of a foreign policy.


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October 22, 2012
The Data-Generating Process
For anyone who works to infer information from a broad range of evidence, one of the important aspects of the job is to think carefully about the structure of the data – what is sometimes called the "data-generating process." Data doesn't just drop from the sky or out of a computer. It is generated by some process, and for any sort of data, it is critical to understand how that process works.
For example, one of the moments of market excitement last week was the reported jump in new housing starts for September. But later in the week, investors learned that there was a slump in existing home sales as well. If we just take those two data points at face value, it's not clear exactly what we should conclude about housing. But the story is clearer once we consider the process that generates that data.
One part of the process is purely statistical. The housing data that is reported each month actually uses monthly data at an annual rate, so the jump from 758,000 to 852,000 housing starts at an annual rate actually works out to a statement that "During September, in an economy of about 130 million homes, about 100 million which are single detached units, a total of 9,500 more homes were started than in August – a fluctuation that is actually in the range of month-to-month statistical noise, but does bring recent activity to a recovery high." Now, in prior recessions, the absolute low was about 900,000 starts on an annual basis, rising toward 2 million annual starts over the course of the recovery. The historical peak occurred in 1972 near 2.5 million starts, but the period leading up to 2006 was the longest sustained increase without a major drop. In the recent instance, housing starts bottomed at 478,000 in early 2009, so we've clearly seen a recovery in starts. But the present level is still so low that it has previously been observed only briefly at the troughs of prior recessions.
The second part of the process is important to the question of what is sustainable. Here the question to ask is how and why does a decision to "start" a house occur? According to CoreLogic, about 22% of mortgages are underwater, with mortgage debt that exceeds the market value of the home. Likewise, banks have taken millions of homes into their own "real-estate owned" or REO portfolios, and have dribbled that inventory into the market at a very gradual rate. All of that means that the availability of existing homes for sale is far smaller than the actual inventory of homes that would be available if underwater homeowners were able, or banks were willing, to sell. Accordingly, much of the volume in "existing home sales" represents foreclosure sales, REO and short-sales (sales allowed by banks for less than the value of the outstanding mortgage). That constrained supply of homes available for sale is one reason why home prices have held up. At the same time, constrained supply means that new home buyers face higher prices and fewer choices for existing homes than they would if the market was actually clearing properly. Given those facts, buyers who are able to secure financing (or pay cash) often find it more desirable to build to their preference instead of buying an existing home. It's not clear how many of these starts represent "spec" building by developers, but it's interesting to note that the average time to sell a newly completed home has been rising, not falling, over the past year.
In the end, the data-generating process features millions of underwater homes, huge REO inventories, and yet constrained supply. The result is more stable home prices, but a misallocation of capital into new homes despite a glut of existing homes that cannot or will not be brought to market. So starts are up even though existing home sales are down. Inefficient or not, there's no indication that inventory will be abruptly spilled into the market, so if the slow dribble continues, we'll probably continue to see gradual growth in housing starts that competes with a gradual release of inventory. This isn't an indication of economic resilience or housing "liftoff," but is instead an indication of market distortion and misallocation of scarce capital. Housing starts increased off of a low base during the 1969-70 and 1981-82 recessions as well. A similar increase is unlikely to materially affect the course of what we continue to believe is a new recession today.
In the financial markets, the data-generating process is often very misunderstood. Investors often seem to believe that prices go higher because money comes "into" the market like air filling a balloon. But the actual process is that every dollar that comes into the market in the hands of a buyer is a dollar that leaves a moment later in the hands of a seller. So the data-generating process is dominated not by money-flow but by subjective eagerness to own stocks. Regardless of whether stocks are highly desired or utterly loathed, every share of stock, once issued, has to be held by some investor until that share is somehow retired. Stocks can never be over-owned or under-owned.
On that subject, a number of Wall Street analysts have argued that the increasing amount of investor assets in bond funds, relative to stock funds, is an indication that stocks are under-owned and that investors are overly bearish about equities. If one believes that the data is generated by money just "flowing" into stocks versus bonds, that's a tempting conclusion. But again, the actual data-generating process is that every share of stock has to be held by someone, as does every bond certificate. The large amount of money being held in the form of bonds says simply that a huge amount of debt has been issued by both corporations and governments, and somebody has to hold it. With yields at record lows, those bonds are being held at very high valuations with little prospective return for the risk involved. The enormous volume of debt being held at high valuations should be a red flag for bond market investors, but is it a green flag for stocks?
According to Ned Davis Research, stock market capitalization as a share of GDP is presently about 105%, versus a historical average of about 60% (and only about 50% if you exclude the bubble period since the mid-1990's). Market cap as a fraction of GDP was about 80% before the 73-74 market plunge, and about 86% before the 1929 crash. 105% is not depressed. Presently, market cap is elevated because stocks seem reasonable as a multiple of recent earnings, but earnings themselves are at the highest share of GDP in history. Valuations are wicked once you normalize for profit margins. Given that stocks are very, very long-lived assets, it is the long-term stream of cash flows that matters most – not just next year's earnings. Stock valuations are not depressed as a share of the economy. Rather, they are elevated because they assume that the highest profit margins in history will be sustained indefinitely (despite those profit margins being dependent on massive budget deficits – see Too Little to Lock In for the accounting relationships on this). In my view, there are red flags all around.
Ultimately, what benefits stocks is a movement from being utterly loathed to being highly desired. Once that has occurred – once stocks are overvalued, overbought, and investors are overbullish, one has to rely on the idea that even more eager investors will enter the fray, and take those shares off the hands of already speculative holders. In general, the data-generating process produces the extreme of an advance exactly at the same time that it produces the highest confidence about the continuation of the advance. It produces the extreme of a decline exactly at the same time that it produces the greatest fear about the continuation of the decline. As a result, the point that investors are most inclined to think about the market in terms of the "trend" is exactly when they should be thinking about the market in terms of the "cycle."
Keep in mind that the bear-market portion of the market cycle typically wipes out more than half of the gains achieved during the bull-market portion. During "secular" bear market periods, the cyclical bear markets wipe out closer to 80% of the prior bull market advances. Risk-management is very forgiving of missed gains in late-stage bull markets. The lack of risk-management is equally punishing to investors who overstay.
The most recent cycle has been unique, from my perspective, because the point where one normally might accept the opportunity for an aggressive stance in post-war data (reasonable valuations coupled with a firming in various trends and technical data) was also the point where the relevance of post-war data came into question. Depression-era data became very relevant, and posed the risk of deep drawdown losses and costly whipsaws under the very same conditions. My own response was to ensure that our methods could navigate extreme market fluctuations regardless of which environment we were facing. That "two data sets" uncertainty is behind us – but the most constructive portion of the past market cycle is also behind us.
As a side note, I should emphasize that trend-following measures are an important and valuable component of the analysis of market action, but it's important to consider a broad range of additional factors as well (breadth, leadership, overbought/oversold conditions, yield spreads, divergences, etc). It's incorrect to believe that simple moving-average crossover methods have been wildly effective over the long-term; particularly since April 2010, which is the last time that our present methods would have indicated a favorable return/risk profile for the S&P 500. Notably, even the popular trend-following strategy of buying the S&P 500 when it is above its 200-day moving-average has had a net loss since April 2010, including dividends, and even ignoring transaction costs. Trading the 50-day moving-average broke even. The luckiest cross-over strategy turned out to be the 17-week moving-average, which would have gained about 14% since April 2010, ignoring transaction costs, but that same strategy would have historically lagged a buy-and-hold approach even before slippage, so there would have been no basis to prefer it in 2010.
At present, we have little reason to believe that the data-generating process we are observing here is anything "out-of-sample" from the standpoint of a century of historical evidence. We presently have an overvalued, overbought (intermediate-term), overbullish market featuring a variety of syndromes that have typically appeared in the "exhaustion" part of the market cycle: elevated valuation multiples on normalized earnings, emerging divergences in market internals, an increasingly tepid economic backdrop, market prices near the upper Bollinger bands at monthly and weekly resolutions, and other factors that – taken in aggregate – have historically been associated with very weak average market outcomes.
Yes, the Federal Reserve has continued its program of quantitative easing, but here, I am convinced that we understand the data-generating process by which QE has impacted stock prices – namely, by creating an ocean of zero-interest money that acts as a "hot potato," encouraging investors to seek riskier securities until all assets are so overvalued that their prospective returns compete with zero-interest money. At that point, the zero-interest money (which has to be held by someone) is just passively held, and acts as no further stimulant to prices. QE has had its effects at points when prices have declined deeply over the prior 6-month period, and I suspect that any major future effort will work only until investors realize that this manipulation of their risk preferences is all that quantitative easing is capable of achieving. On this point, I fully agree with PIMCO's Bill Gross, who tweeted last week "The crash on Oct 19 1987 showed that portfolio insurance puts were dangerous. R central bank 'puts' in the same category? Very likely."
On the economic front, careful consideration of the data-generating process provides insight into how "surprises" can emerge in a very predictable way. For example, although short-term economic data isn't particularly cyclical, the expectations of investors and economists typically swing too far in the direction of recent news, which in turn creates cycles in economic "surprises" because not many periods contain an utter preponderance of only-good or only-bad data. In modeling this process, the same behavior can be produced in random data. The length of the cycle appears to be proportional to the length of the "lookback" period used to determine whether the recent trend of the data is favorable or unfavorable.
Case in point, there's a perception that the recent economic data has somehow changed the prospects for a U.S. recession. The idea is that while the data has remained generally weak, the latest reports have been better than expectations. However, it turns out that there is a fairly well-defined ebb-and-flow in "economic surprises" that typically runs over a cycle of roughly 44 weeks (which is by no means a magic number). The Citigroup Economic Surprises Index tracks the number of individual economic data points that come in above or below the consensus expectations of economists. I've updated a chart that I last presented in 2011, which brings that 44-week cycle up-to-date. Conspiracy theorists take note – the recent round of "surprises" follows the fairly regular pattern that we've observed in recent years. There's no manipulation of the recent data that we can find – it just happens that the sine wave will reach its peak right about the week of the general election.
In short, it is not enough to examine data, even large volumes of it. In order to extract information and draw conclusions, it is crucial to think about the process that is involved in generating that data. In other words, it helps to think about the interactions between buyers and sellers, the effect of expectations and how they are formed, and – for physical and biological data – the actual systems that are operating to produce the facts and figures that are being analyzed.
If investors believe that the markets are simply balloons that increase as funds flow in and out, that stocks should be valued as a simple multiple of profits without concern for profit margins or the factors that drive those margins, that stocks are "under-owned" simply because an enormous volume of low-interest debt has been issued, that moderate growth in a distorted housing market representing a diminished fraction of economic activity will suddenly drive a robust recovery, and that central bank "puts" are a reliable defense against market losses – with no need to consider the mechanism by which those puts supposedly work – then the willingness to accept significant market risk is understandable. For my part, I am convinced that these beliefs are at odds with how the data are actually generated. The red flags are significant not only for the stock market, but for the bond market (particularly credit-sensitive debt) and the economy as well.
A final note regarding Europe. Last week's 2-day EU summit had two results. First, Angela Merkel insisted that the European Stability Mechanism (ESM) should be used only for future banking crises, not to bail out past banking debts. Second, Merkel said that Germany would not support transfer payments to indebted countries without strict conditionality, refusing to consent to the more generous and less conditional proposals from France. In Merkel's words, "As long as there are individual national budgets, I regard the assumption of joint liability as inappropriate, and from our point of view, this isn't up for debate. The Spanish government will be liable for paying back the loans to recapitalize its banks."
That effectively short-circuits June's vague plan-for-a-plan to use the ESM to "break the link between the banks and the sovereigns." Efforts to create a single bank supervisor for Europe were pushed off until the end of next year, and Merkel added the further stipulation that "When we have a bank supervisor and want a direct recapitalization, then one must naturally have a resolution fund for the banks that has contributions from banks."
The upshot is that despite endless hopes to the contrary, Germany continues along the principle that "liability and control belong together," and that there will be no open-ended bailouts funded by the German public, or through open-ended money creation, which even Draghi has said must be conditional despite his "believe me, it will be enough" rhetoric. To use Merkel's phrase, which was recently misinterpreted as an endorsement of ECB money-printing, the insistence on strict conditionality is "completely in line with what Germany has said all along."
We should not be at all surprised if the bids drop away from Spanish and Italian bonds in the weeks ahead. In my view, those bids were based on a misinterpretation of ECB policy and an overestimation of the prospect for large and unconditional bailouts. The reality is likely to be far more challenging.
The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Only comments in the Fund Notes section relate specifically to the Hussman Funds and the investment positions of the Funds.
Fund Notes
As of last week, our estimates of prospective return/risk for stocks remained strongly unfavorable, holding us to a defensive stance. Strategic Growth Fund remains fully hedged, with a "staggered strike" position that places the strike prices of many of its index put options at a level that is now just a few percent below present market levels. We're observing more internal turbulence in market action here, with many individual stocks experiencing steep losses on even modest earnings disappointments. Skittishness about earnings prospects can lead to indiscriminate selling, particularly in richly valued markets, but we would expect that staggered strike position to provide a reasonable defense against that risk in the event the market declines by more than a few percent. Strategic International is also fully hedged here. Strategic Dividend Value is hedged at about 50% of the value of its stock holdings – its most defensive investment stance. Strategic Total Return continues to carry a duration of less than 2 years, meaning that a 100 basis point change in interest rates would be expected to impact the Fund by less than 2% on the basis of bond price fluctuations. The Fund also holds less than 5% of assets in precious metals shares.
Needless to say, these are very defensive positions for us, and reflect what we see as very weak prospective returns per unit of risk in stocks and bonds, and only a modest return/risk profile even in precious metals. This undesirable investment menu has emerged as the intentional result of repeated bouts of quantitative easing that have distorted asset prices and prospective returns. I strongly believe that more favorable return/risk prospects will emerge over the course of the coming market cycle, and that locking in elevated, distorted prices and depressed yields in the belief that "the Fed has our back" is a speculative mistake, a misguided superstition, and an analytical error. To embrace present market and economic data at face value - without recognizing that generating this data relies on enormous monetary distortions and government deficits - is like believing that you're Louis XIV just because you've built a massive cardboard Palace of Versailles in your front yard.
The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse.
Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, the Hussman Strategic International Fund, and the Hussman Strategic Dividend Value Fund, as well as Fund reports and other information, are available by clicking "The Funds" menu button from any page of this website.
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