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Alphabet Plunges After Missing Across The Board, Drags Nasdaq Lower After Hours

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Alphabet Plunges After Missing Across The Board, Drags Nasdaq Lower After Hours

The tech earnings train has gotten derailed on the very first stop and it’s looking uglier by the minute: moments after Microsoft slumped after reporting otherwise solid earnings, and Texas Instruments guided below expectations again, it was Google’s turn to disappoint and it did just that when it reported earnings that missed on revenue and EPS for the second consecutive quarter, sending GOOGL’s stock sharply lower after hours (hardly a shock after the catastrophic Snapchat earnings last week).

Let’s dig into what was another mediocre at best (if perhaps not as ugly as some had expected) quarter for Alphabet:

  • EPS $1.06, missing estimates of $1.25, down from $1.40 Y/Y
  • Revenue $69.09 billion, up 6% Y/Y and 11% in constant currency,  and missing consensus estimates of $70.76 billion
  • Revenue ex-TAC $57.27 billion, missing estimates of $58.18 billion
    • Google advertising revenue $54.48 billion, missing estimates of $56.98 billion
    • YouTube ads revenue $7.07 billion, missing estimates of $7.46 billion
    • Google Services revenue $61.38 billion, missing estimates of $63.98 billion
    • Google other revenue $6.90 billion, beating estimates of $6.84 billion
    • Google Cloud revenue $6.87 billion, beating estimate $6.61 billion
    • Other Bets revenue $209 million, beating estimates $204 million
  • Operating income $17.14 billion, missing estimates of $19.71 billion
    • Google Services operating income $19.78 billion, missing estimates of $23.03 billion
    • Google Cloud operating loss $699 million, beating the estimated loss of $814.2 million
    • Other Bets operating loss $1.61 billion, missing the estimate loss $1.37 billion
  • Operating margin 25%, missing the estimate 27.9%
  • Capital expenditure $7.28 billion, missing the estimate $7.65 billion
  • Number of employees 186,779, vs estimate 177,845

The result visually:

And a more detailed breakdown:

Commenting on the quarter, CEO Sundar Pichai was laconic: “We’re sharpening our focus on a clear set of product and business priorities. Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts. We are focused on both investing responsibly for the long term and being responsive to the economic environment.”

Mercifully, CFO Ruth Porat kept her comment also rather brief, trying to spin an otherwise ugly quarter: “Financial results for the third quarter reflect healthy fundamental growth in Search and momentum in Cloud, while affected by foreign exchange. We’re working to realign resources to fuel our highest growth priorities.”

To the disappointment of some, there were no incremental stock buyback announcements but recall that just two quarters ago GOOGL announced plans to buy back an additional $70BN in Class A and Class C shares, and also unveiled the 20 for 1 stock split.

That said, Alphabet did repurchase another $15.4bn of stock in the quarter (the same as last quarter) , a sign of GOOGL management continued focus on capital allocation and balancing investments/margins in a post pandemic environment. That may explains why Alphabet’s cash hoard declined for a fourth straight quarter, falling to $116 billion from $125 billion in Q2, $134 billion at Q1, and $139.6 billion at the start of the year.

In kneejerk reaction, the stock was not happy  with the across the board miss, and GOOGLE stock is down some 5% after hours…

… and together with MSFT and TXN dragging the Nasdaq down by 1%, cutting today’s gains in half.

Developing

Tyler Durden
Tue, 10/25/2022 – 16:16

MSFT Beats Top- & Bottom-Line; But Shares Slide On Rising Cloud Costs, Margin Pressure

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MSFT Beats Top- & Bottom-Line; But Shares Slide On Rising Cloud Costs, Margin Pressure

At first glance, earnings for the tech giant looked solid as Microsoft beat on the top- and bottom-lines:

  • Revenue $50.12 billion (+11% YoY), better than the estimate of $49.56 billion

  • EPS $2.35 (less than the $2.71 EPS for Q1 last year), but better that the estimate of $2.29

However, the top-line growth was the weakest since 2017…

The breakdown shows the company beating in all the segments (but cloud was barely a beat):

  • Productivity and Business Processes revenue $16.47 billion, estimate $16.11 billion

  • Intelligent Cloud revenue $20.33 billion, estimate $20.31 billion

  • More Personal Computing revenue $13.33 billion, estimate $13.08 billion

  • Commercial Cloud revenue $25.7 billion, estimate $25.66 billion

But while the CFO projected strength in cloud…

“This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year-over-year. We continue to see healthy demand across our commercial businesses including another quarter of solid bookings as we deliver compelling value for customers,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Some traders pointed to problems, potentially affecting cloud margins as the MSFT slideshow discussed rising energy prices are boosting the costs of delivering cloud…

Gross margin dollars grew 20% (up 26% CC) and gross margin percentage decreased slightly. Excluding the impact of the latest change in accounting estimate for useful lives, gross margin percentage decreased roughly 3 points driven by sales mix shift to Azure and other cloud services and lower margins in Azure and other cloud services, primarily due to higher energy costs.

MSFT shares tumbled on the print, erasing all of the day’s gains…

“In a world facing increasing headwinds, digital technology is the ultimate tailwind,” said Satya Nadella, chairman and chief executive officer of Microsoft.

“In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way.”

Tyler Durden
Tue, 10/25/2022 – 16:16

Surging Crypto, Swap-Spreads, Bonds, & Stocks Signal “Something’s Afoot”

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Surging Crypto, Swap-Spreads, Bonds, & Stocks Signal “Something’s Afoot”

Ugly US housing and sentiment data were just the (bad news) spark to set stonks on fire today. Small Caps led the way, up around 3%, followed by a huge surge over 2% in the Nasdaq (ahead of this week’s epic earnings extravaganza). The Dow was the biggest loser of today’s winners, eking out a 1% gain…

…on the back of a massive short-squeeze (biggest daily gain for the ‘most shorted’ basket since May). Off of yesterday’s lows, ‘most shorted’ stocks are up a shocking 11%…

Source: Bloomberg

…with no fear of downside evident in the options market…

Source: Bloomberg

…but there was lots of chatter that something scary this way comes in the arcane details of the rates market as swap spreads notably decoupled from treasury yields today suggesting, as one veteran swaps trader remarked via text “something is afoot”.

The 10Y swap spread (red) is negative (means 10y swap rate is below 10Y treasury yield) and broke away from TSY yields today…

Source: Bloomberg

This decoupling is likely being driven by chatter about Treasury buybacks (as we explained in detail here), which is an effective pivot by The Fed and is implicitly backstopping Treasuries – hence TSY yields fall closer to swap rates. Belly swap spreads widened even more today than the long-end…

Source: Bloomberg

Widening swap spreads (less negative in this case) have traditionally signaled increased systemic risk (including liquidity anxiety). Simply put, a higher spread suggests market participants are willing to swap their risk exposures, suggesting overall risk aversion, although we would note that, as the same veteran trader noted, “a lot of these moves have been technically-driven” referencing the SOFR/LIBOR transition. Still, it’s a sudden and noteworthy shift.

Is that ‘anxiety’ why we saw cryptos explode higher today also? (we note some chatter on Chinese capital outflows after Xi’s 3rd term). Bitcoin ripped up to $20,400…

Source: Bloomberg

…and Ethereum soared back above $1500…

Source: Bloomberg

Gold was also bid on the chatter about a Fed shift…

US Treasuries were aggressively bid today with the mid- to long-end of the curve dramatically outperforming (2Y -3bps, 10Y -15bps). Notably, TSYs were well bid overnight then yields plunged on the shitty US data. The bid ended when Europe closed. This left 2Y yields unchanged on the week while 10Y yields are down around 13bps (a significant flattening)…

Source: Bloomberg

At the short-end, Fed rate expectations shifted dovishly today…

Source: Bloomberg

The market remains sure that The Fed will be cutting rates next year…

Source: Bloomberg

The dollar tumbled to 3 week lows today…

Source: Bloomberg

Cable soared today, squeezing shorts up to recent resistance levels…

Source: Bloomberg

Oil prices rallied back from overnight weakness with WTI hovering around $85 ahead of tonight’s API data…

US NatGas prices soared today as the Freeport LNG terminal appears set to reopen (allowing exports to Europe and thus tightening domestic supply)…

Finally, the era of negative-yielding debt is almost over. As Bloomberg notes, the total market value of negative-yielding debt worldwide has fallen to just under $1 trillion and consists entirely of short-dated Japanese securities…

Source: Bloomberg

…And overnight we saw 2Y JGBs trade above zero for the first time since 2015

Source: Bloomberg

At its peak there was over $18 trillion in global negative-yielding debt. How’d that cunning plan work out?

Tyler Durden
Tue, 10/25/2022 – 16:00

Now That Housing Is Rolling Over, Is That Fixer-Upper A Deal?

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Now That Housing Is Rolling Over, Is That Fixer-Upper A Deal?

Authored by Charles Hugh Smith via OfTwoMinds blog,

So-called “cosmetic work” can cost tens of thousands of dollars.

Now that housing is finally rolling over due to rising mortgage rates and bubble valuations, many of those who have been priced out of the market are hoping to take advantage of lower prices. In many cases, the most affordable segment is fixer-uppers, homes that are distressed for any number of reasons: a lack of maintenance; construction or drainage deficiencies; obsolete or defective foundations, water or termite damage, etc.

Longtime correspondent Daniel C. is familiar with my building experience, and so he asked a question that will benefit many potential homebuyers: “What advice would you give to someone with next to no homebuilding skills, but willing to learn, regarding getting into a fixer-upper?”

My answer is not gender-specific: for example, my wife is a much better plumber than I am. Together we’ve poured concrete, did a tear-off of multiple layers of comp roofing shingles down to the sheathing, repaired the sheathing and installed a new roof, completely rehabbed dozens of double-hung windows (new sash, window putty, repairing dryrot, etc.) in which she did the bulk of the work, and so on, in a very long list of renovation / rehab / new construction projects. Anyone can learn these skills and will benefit from learning as much as possible about how buildings are constructed, upgraded / repaired and maintained.

That said, being able to make an accurate assessment of the risks and costs embedded in a fixer-upper is an entirely different level of experience and skill–especially if the fixer “looks okay and just needs cosmetic work.”

Here is my response to Daniel and everyone else who is considering bidding on a fixer-upper.

That’s a tough question because there’s a lot to know before you can make an informed assessment and decision.

When I was younger, my partner and I built close to 100 houses in five years, from modest starter homes to pricey custom homes, commercial buildings and a 42-unit subdivision. Before that, I worked my way through college working for a contractor who did renovations, additions and luxury homes. I am still learning.

If I had to summarize a complex process, I would start with these points:

1. Many things can’t be fixed or can only be fixed at horrendous expense. Avoid buying any home / property with problems that can’t be fixed. These include (but are not limited to) poor drainage / flooding, soil settlement, bad neighbors, poor location, noise from freeways, railways, etc., deficiencies in construction, defective foundations, water and termite damage in the framing, poor floor plan and obsolete systems (heating, electrical, plumbing, etc.).

2. So-called “cosmetic work” can cost tens of thousands of dollars. It’s widely assumed “anyone can paint a house.” This is true if we mean paint a house badly, i.e. spray a thin coat of cheap paint without preparing the surface by removing all the loose paint, filling all the defects, sanding the surface, applying a good-quality primer and then applying a good coat of good-quality paint appropriate to the weather, sun exposure, etc.

The rule of thumb is 90/10: 90% of the work is preparing the surface professionally, 10% is applying the paint.

Not many amateurs have the time, equipment and experience to do this job properly on an entire interior and exterior of a house.

The prep work is when you discover all sorts of problems that were hidden behind the flaking paint: dry-rot and termite damage, water leaks, etc. If you can peel the paint off with your fingernail–which is what happens when somebody slapped paint over an unprepared semi-gloss surface–that inept paint job will only make the prep more time-consuming.

If there is lead-based paint that has to be removed due to decay, weathering, etc., that’s another issue entirely, and a costly one to remediate.

Paint and labor are both expensive. A quality paint job for a house that hasn’t been properly maintained might cost $25,000, and more for a larger house or one with major maintenance issues that must be repaired.

Toss in refinishing hardwood floors (another job best left to pros), a new roof (it looked okay from the outside but look in the attic and oops, see all those leaks?), new appliances, new flooring, and so on–all “cosmetic,” not structural–and the total cost might be $50,000 to $100,000, depending on what’s discovered as work progresses.

For buyers who scraped up every dime just to buy the place, the cost of this “cosmetic” work is a deal-breaker.

In other words, “cosmetic” doesn’t necessarily mean “cheap” or “we can do it ourselves.”

3. If you are serious about a house, I would find an experienced house inspector who would agree to do the inspection with you present so they can point out what they’re looking for and the systems that are OK and those that aren’t.

An experienced inspector will be looking at the fundamentals: drainage (water must flow naturally away from the house) , foundation / soil (settling due to poor compaction, etc.) roof (leaks), water-dryrot /termite damage, defective construction and obsolete plumbing/electrical/heating / insulation, etc..

Before you get that far, you can do a useful bit of investigation yourself in the initial walk-through. I bring a 4-foot level, a ladder and a good flashlight whenever I look at a house, which we occasionally do out of curiosity because we like the location or the design of the house.

The level tells me if the floor is basically level or not, the ladder and flashlight is to look in the attic to identify leaks, quality of construction, vents, insulation, etc., look under sinks for signs of leaks, and if there’s a crawlspace, crawl under the house and look for termites, settling, quality of construction, etc.

Realtors are typically surprised when I show up with a 4-ft ladder and the level. They’re not used to seeing anyone who looks beyond the superficial. The look and feel of a home is important, but that won’t yield an assessment of defects, costs and whether the investment needed to restore the house will actually increase the value above and beyond what you’re paying.

4. Research the history of the property in city/county records. Building permits are public records, and it’s useful to find out if whatever major work was done to the house was properly permitted or not. Unpermitted structural, electrical, plumbing, roofing, etc. work opens costly cans of worms, as work that’s not up to code can be dangerous (improper venting, etc.) and opens the door to legal issues when you try to sell the house.

Ideally, previous owners hired professionals who obtained permits. That’s what you want to see–evidence the renovation / repair work was done correctly by a licensed professional, or if done by an amateur, that the work was properly inspected and approved.

There is a lot to know, and I’m not sure how best to learn enough to be consequential. I’m not sure there are any shortcuts. Even with all my experience, I still consult with professionals on issues I don’t have enough experience to assess. The big mistakes are made by not seeing fundamental issues with the items listed above–the “bones” and location of the house having problems that can’t be fixed or only at horrendous expense. The other is to not look at the neighbors and traffic at various times, so you have to visit at rush hour and late at night.

A lot of older homes have better quality wood, stucco, etc., as the materials were often higher quality, but they tend to have obsolete / worn out plumbing, electrical, flooring, heating, etc., plus deferred maintenance which allowed small problems to become big problems.

In terms of future valuation, the location is paramount. My biggest mistake when I was in my 20s was not scraping up more money to afford a lot on the “good side” of town where valuations will increase much more reliably because of the enduring value of proximity to schools, shopping, etc., views, leafy tree-lined streets, etc.

The other essentials are the floor plan, orientation to wind and sun, proximity of neighbors and size of the lot. You can’t change any of that. A poor floor plan can only be changed with a gut-and-rebuild, which is as expensive as building a new house (or even more expensive due to the predictable emergence of “surprises.”)

What can you live with and what can’t you live with? Some things you might think you can live with but actually you can’t, and you will regret buying the place.

I would caution against over-estimating how much work you can do yourselves. Even apparently simple jobs like repainting wood kitchen cabinets can take a stupidly huge amount of time if the work is done right. Even with 49 years’ experience, I am still prone to under-estimating the time it will take to do difficult projects–and many projects are incredibly difficult, tedious and challenging.

Here’s an example. The entry to a lower-floor in-law unit flooded when it rained heavily. There was a drain in the concrete so I figured the drain pipe had corroded and needed to be replaced. After digging down in tight quarters due to retaining walls and live rock, I found the pipe extended out about a foot and ended. It had never been a proper drain. So we had to laboriously chisel out live rock to lay a drain line that actually functioned.

“New” doesn’t mean it doesn’t have deal-breaking issues. A friend of mine bought a relatively new house (less than 10 years old) house that had such severe termite damage to the structure that he tore it down and built a new house on the lot. (He knew about the damage and basically paid for the lot, not the house.)

Patience is a virtue here. Wait for the right property but be ready to jump when it appears. The more properties you visit and investigate, the better your knowledge base. Once you have a substantial knowledge of the market and what’s available, first impressions and instincts are useful.

I liked the house we bought as soon as I walked the property and walked around inside. Functional floor plan, good orientation to sun and wind, good-sized lot, neighbors not too close, good drainage, pleasant views, good location in town, solid foundation and roof, quality construction, previous owners did a good job with upgrades by hiring professionals for both cosmetic and electrical/plumbing work, mature fruit trees–sold!

Not everything had been fixed, of course. The house is 65 years old. The wood windows were painted shut, sash cords broken, etc. The yard had massive deferred maintenance and ill-suited landscaping. This didn’t mean there wasn’t backbreaking work to be done, but these improvements / repairs could be done over time and were within our skillsets and budget.

It took about four years of looking at dozens of inferior / defective properties before this came on the market. It was worth the wait. We weren’t looking for an “investment” to flip, we were looking for a place where we’d be happy.

Here’s another reason to be patient: bubble symmetry. 

Asset bubbles tend to take roughly the same time to deflate and they took to inflate. The recent run-up in housing valuations was extremely steep, and so we can anticipate the possibility that the decline will be similarly steep.

*  *  *

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century.  Read the first chapter for free (PDF)  

Become a $1/month patron of my work via patreon.com.

Tyler Durden
Tue, 10/25/2022 – 15:50

Peter Schiff: When The Sucker’s Rally Ends, The Dollar Will Crash

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Peter Schiff: When The Sucker’s Rally Ends, The Dollar Will Crash

Via SchiffGold.com,

The world loves dollars. Whenever there is a problem, people flock to the dollar as a safe haven. But the US has problems of its own. In a podcast, Peter Schiff said America’s problems will eventually catch up to the dollar and at that point, the greenback will crash.

Former British Prime Minister Liz Truss blew into office promising tax cuts in the face of historically high inflation. On the one hand, the Bank of England has been raising interest rates – a contractionary monetary policy. But tax cuts with no corresponding spending cuts increase budget deficits – an inflationary fiscal policy. The British markets recognized this contradiction. The British pound tanked and plunged to a record low.

The government quickly backtracked on the tax cuts and Truss ended up stepping down.

This raises a question that US policymakers need to wrestle with. Why exactly were the British markets concerned about tax cuts?

As Peter pointed out, they were concerned about increasing debts. The debt to GDP ratio in Great Britain is already around 85%.

Now, that is a big number. It is a number that should cause concern. I think, really, anything above 50% of GDP is too big a number. So, because these tax cuts threatened to send British debt to GDP even higher, investors rightly dumped the pound.”

But what did they do?

They bought dollars.

They sold pounds for dollars. But they were selling pounds because Britain has a debt problem. The irony is they were buying dollars despite the fact that the United States has an even bigger debt problem.”

The US national debt pushed above $31 trillion in early October. And the US government continues to pile onto that number. Uncle Sam ran a $1.3 trillion deficit in fiscal 2022. The debt to GDP ratio in the US is already 125%.

And as Peter pointed out, it is actually higher than 125% when you factor in state and local debt. When you include state and municipal debt, the ratio balloons to 140%.

We’re in a much bigger fiscal mess than Great Britain. So, selling pounds and buying dollars because you’re worried that Britain has too much debt is jumping from the frying pan into the fire.”

Why are people doing this? Because there is a perception that US debt doesn’t matter because the dollar serves as the global reserve currency. Therefore, the US dollar is the go-to when there is a problem, even if the problem is bigger in the US. Peter recalled that when S&P downgraded US Treasuries, people bought US Treasuries because they were worried about the downgrade.

People bought US Treasuries as a safe haven from US Treasuries. That shows you how ridiculous it is.”

In the same way, it’s absurd to sell a country’s currency because you’re worried about debt and buy dollars when the US has even more debt.

It’s important to factor state and municipal debt into the equation in the US because all of these governments are funding themselves from the same tax base.

These governments are trying to get blood from the same turnips. Because Americans are broke. We have no savings. So, can we possibly repay this debt? Of course not. Repaying the debt is impossible. So, what’s going to happen? We’re going to default.”

Peter said there are two possible ways the US can default — the honest way or the dishonest way.

But either is a disaster if you own US Treasuries. The honest way is just to admit that we can’t pay and we default. We restructure the debt and we tell our creditors, ‘You are not going to get your money.’ But I don’t think politicians have the integrity to do that. They’re going to take the coward’s way out. They’re going to print. They’re going to inflate the debt away. That’s the only way out of this problem — monetize that debt and repudiate it through inflation, which is why it’s crazy for anyone to believe that the Fed is going succeed in reducing inflation back down to 2%. It can’t succeed.”

The government can’t inflate the debt away at 2% per year. They actually need higher inflation to handle the debt.

There’s another problem. The only reason the US government has been able to push the debt down the road for this long is that interest rates have been low. As rates go up, the problem gets bigger.

This is why Peter calls this a sucker’s rally. And when it ends, the dollar will crash.

Tyler Durden
Tue, 10/25/2022 – 15:34

MSNBC Legal Analyst Declares Trump Could Be Charged With Manslaughter

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MSNBC Legal Analyst Declares Trump Could Be Charged With Manslaughter

Authored by Jonathan Turley,

We previously discussed the declaration of Harvard Professor Lawrence Tribe that former president Donald Trump could be charged with the attempted murder of former Vice President Michael Pence.

Now, MSNBC legal analyst and Michigan Law Professor Barbara McQuade has gone one better. She told MSNBC viewers that Trump could be charged with manslaughter for his role in the January 6 Capitol riot.

Just as Tribe declared his theory was “without any doubt, beyond a reasonable doubt, beyond any doubt,” McQuade appeared equally certain that this was a serious and possible charge.

Anchor Nicolle Wallace was bouncing off comments of Rep. Liz Cheney on what the House might do to Trump when she turned to McQuade for legal analysis:

Wallace: “Let me ask you, I think what they’re saying is that even if you were that deluded, quote, ‘You may not send an armed mob to the Capitol or sit for 87 minutes and refuse to stop the attack. You may not send out a tweet that incites further violence.’ It sounds like around the violence. She’s looking at what the committee talks about as dereliction of duty. Is that a specific crime you can charge someone with, Barbara?”

McQuade: “It’s not a federal offense, but there actually is an interesting legal theory here for manslaughter, which Federal law defines as a death that occurs on federal property when a person acts with a recklessness mindset or even gross negligence. And so Donald Trump, unlike most ordinary citizens, has not only a duty not to do something bad, but an affirmative duty to take action to protect people. I think you could possibly put together a theory based on the facts that Liz Cheney just described to make Donald Trump responsible for the deaths that occurred that day.”

So let’s recap. Trump could be prosecuted for manslaughter because he had an “affirmative duty to take action to protect people”?

The problem is that many officials had an affirmative duty to protect individuals on that day, including congressional leaders and officials. There is no question that Trump waited too long to call back his supporters. Many of us criticized Trump for his insistence that Pence could effectively block certification of the election. I publicly condemned Trump’s speech while it was being given. However, I know of no case that would impose this affirmative duty on Trump as a criminal legal matter.

That does not change due to Trump’s speech before the riot. Indeed, such a use of the speech would contradict controlling Supreme Court precedent.

In Brandenburg v. Ohio, the Supreme Court ruled in 1969 that even calling for violence is protected under the First Amendment unless there is a threat of “imminent lawless action and is likely to incite or produce such action.”

It is common for political leaders to call for protests at the federal or state capitols when controversial legislation or actions are being taken. Indeed, in past elections, Democratic members also protested elections and challenged electoral votes in Congress.

The problem for prosecutors is that Trump never actually called for violence or a riot. Rather, he urged his supporters to march on the Capitol to express opposition to the certification of electoral votes and to support the challenges being made by some members of Congress. He expressly told his followers “to peacefully and patriotically make your voices heard.”

Trump also stated: “Now it is up to Congress to confront this egregious assault on our democracy…And after this, we’re going to walk down – and I’ll be there with you – we’re going to walk down … to the Capitol and we’re going to cheer on our brave senators and congressmen and women.”

If McQuade is referring to 18 U.S.C. § 1112, the courts have imposed an element that she does not mention even for involuntary manslaughter: proximate cause. United States v. Main, 113 F.3d 1046, 1049-50 (9th Cir. 1997) (“When the jury is not told that it must find that the victim’s death was within the risk created by the defendant’s conduct an element of the crime has been erroneously withdrawn from the jury . . . It is not relevant that § 1112 does not expressly mention proximate cause.”).

Thus, the standard jury instruction requires the following:

            First, the defendant committed an act that might produce death;

            Second, the defendant acted with gross negligence, defined as wanton or reckless disregard for human life;

            Third, the defendant’s act was the proximate cause of the death of the victim.  A proximate cause is one that played a substantial part in bringing about the death, so that the death was the direct result or a reasonably probable consequence of the defendant’s act;

            Fourth, the killing was unlawful;

            Fifth, the defendant either knew that such an act was a threat to the lives of others or knew of circumstances that would reasonably cause the defendant to foresee that such an act might be a threat to the lives of others; and

            Sixth, the killing occurred at [specify place of federal jurisdiction].

Putting aside the accuracy of the portrayal of this crime, McQuade’s definition is so broad it could be used against the congressional leaders and staff for their own gross negligence and “affirmative duties.” The one area that has been studiously avoided by the House leadership and J6 Committee is the failure of Congress to take steps to prepare adequately for this protest despite warnings of potential violence. Indeed, the media has assisted in this effort with its own focus in coverage.

The Democrats in the final hearing hammered away at documents showing that the agency knew about violent threats in the days leading up to Jan. 6th. However, the Democrats have refused to pursue the lack of preparations on Capitol Hill as a focus of the hearing. On the day of the riot, many of us noted (before the breach of security) that there was a relatively light police presence around the Capitol despite the obvious risk of a riot. Once the crowd surged, they quickly were able to gain access to the building. Conservative media have featured a video showing an officer standing by as crowds poured into the building.

That obviously does not mean that there was not violence or that Capitol police did not bravely fight to protect the building. Most of us have denounced the riot as a desecration of our constitutional process.

Moreover, at some point, officers may have shifted to deescalating as crowds surged into the building. The question is why there were not more substantial barriers, like those used at the White House. Instead, some barriers were composed of a few officers using their bikes.

The available evidence indicates that the House was warned and that the need for National Guard deployments were discussed. There is a concern that, after criticizing such deployment and fencing around the White House in the earlier riots, the Democrats did not want to be seen following the same course.

An Inspector General report indicated that police were restricted by Congress in what they could use on that day. Previously, it was disclosed that offers of National Guard support were not accepted prior to the protests. The D.C. government under Mayor Muriel Bowser used only a small number of guardsmen in traffic positions.

There is a danger to adopting this type of broad definition of manslaughter and I would also oppose such a charge against Capitol officials. What Professor McQuade is suggesting would allow for the wholesale criminalization of negligence. While it is true that involuntary manslaughter can include a gross negligence basis, it is not as fluid as suggested on MSNBC.

This was not an impulsive suggestion by Professor McQuade. She has been hammering away at this charge for months. In July, she tweeted that Trump could face five manslaughter charges. She explained:

“Of course, he himself was the one who set this risk in motion by summoning the mob and then lighting the fuse with his Ellipse speech urging them to march to the Capitol, but that conduct raises some sticky 1st Amendment concerns. His inaction in stopping the violence does not.”

She then added: “DOJ, you up yet?”

Notably, in those tweets, McQuade emphasized a charge under “DC law, manslaughter” which can then be charged under the federal Assimilative Crimes Act. Again, the use of such a law would fail for the reasons above.

The Criminal Jury Instructions for the District of Columbia, No. 4.25.B emphasize that, while you do not need actual knowledge of the extreme risk of death or serious bodily injury, there must still be a showing of a gross deviation from the standard of care:

“The essential elements of involuntary manslaughter, each of which the government must prove beyond a reasonable doubt, are: 1. That the defendant caused the death of the decedent; 2. That the conduct which caused the death was a gross deviation from a reasonable standard of care; and 3. That the conduct which caused the death created an extreme risk of death or serious bodily injury. The gist of the difference between second degree murder and involuntary manslaughter is in whether the defendant is aware of the risk. To show guilt of second degree murder, the government must prove the defendant was aware of the extreme risk of death or serious bodily injury. For involuntary manslaughter, the government must prove, not that the defendant was aware of the risk, but that s/he should have been aware of it.”

The failure to do more in the face of a violent mob is not a compelling basis for such a showing and would likely fold back into those “sticky” constitutional concerns.

It is also noteworthy that D.C. officials have not moved to charge Trump on this or other crimes despite their earlier public statements.  After the riot, DC Attorney General Karl Racine announced that he was considering arresting Trump, Donald Trump Jr., Rudy Giuliani and U.S. Rep. Mo Brooks and charging them with incitement. So what happened to that much discussed prosecution? Was that because Trump is just too popular with D.C. officials or there is a lack of interest in such prosecutions? It is because the desire to prosecute over January 6th outstripped the law and the evidence.

As with Tribe’s sensational claim, the suggestion of a manslaughter charge obviously thrills many viewers. However, it creates a misleading portrayal of the existing law and its limitations in my view.

Tyler Durden
Tue, 10/25/2022 – 13:35

Ugly, Tailing 2Y “Halloween” Auction Sees Lowest Foreign Demand Of 2022

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Ugly, Tailing 2Y “Halloween” Auction Sees Lowest Foreign Demand Of 2022

With yields tumbling all day tracking the collapse in the dollar, investors hoping to get some concession out of today’s $42BN 2Y auction could kiss said hope goodbye. It may be why when all was said and done, today’s sale of Cusip FQ9 maturing on Halloween 2024 with a cash coupon of 4.375%, was a bust.

Pricing at 4.460%, the auction stopped at the highest yield since before the global financial crisis, and was also well above last month’s 4.290% amid continued inflation fears and tightening expectations by the Fed. The auction also tailed the When Issued 4.448% by 1.2bps, the third consecutive tail.

The Bid to Cover of 2.587 was not too bad, coming above last month’s 2.51 and just above the six-auction average of 2.572.

The ugly internals however more than offset for this, with Indirects sliding to 50.5% from 52.95%; this was the lowest foreign demand since 45.6% last November (and obviously below the recent average of 59.1%). And with Directs taking 25.3%, Dealers were left holding on to 24.2% of the auction, the highest since January when the Fed started ending QE.

Overall, a poor auction, if understandably so considering the plunging yields leaving no chance for a bond concession today.

Tyler Durden
Tue, 10/25/2022 – 13:22

“Progressive” Democrats Formally Retract Call For Diplomacy As Ukraine War Hawks Steamroll Dissent

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“Progressive” Democrats Formally Retract Call For Diplomacy As Ukraine War Hawks Steamroll Dissent

Update(1318ET): That didn’t take long… the 30 Houses Progressive Democrats led by Rep. Pramila Jayapal (WA-07), chair of the Congressional Progressive Caucus, has early Tuesday afternoon issued a complete retraction of their letter sent to the Biden White House urging diplomacy on Ukraine, per an official statement [emphasis ours]: 

“The Congressional Progressive Caucus hereby withdraws its recent letter to the White House regarding Ukraine.”

The letter was drafted several months ago, but unfortunately was released by staff without vetting. As Chair of the Caucus, I accept responsibility for this. Because of the timing, our message is being conflated by some as being equivalent to the recent statement by Republican Leader McCarthy threatening an end to aid to Ukraine if Republicans take over. The proximity of these statements created the unfortunate appearance that Democrats, who have strongly and unanimously supported and voted for every package of military, strategic, and economic assistance to the Ukrainian people, are somehow aligned with Republicans who seek to pull the plug on American support for President Zelensky and the Ukrainian forces.”

What’s more is that Jayapal’s retraction – after giving the ole “blame the interns” excuse (“unfortunately was released by staff without vetting”) – actually goes so far as to suggest diplomacy won’t be possible until after Ukrainian victory. The retraction concludes: 

“Nothing could be further from the truth. Every war ends with diplomacy, and this one will too after Ukrainian victory. The letter sent yesterday, although restating that basic principle, has been conflated with GOP opposition to support for the Ukrainians’ just defense of their national sovereignty. As such, it is a distraction at this time and we withdraw the letter.”

Glenn Greenwald observes they couldn’t even hold out for 24 hours…

There’s also a “blame the GOP” defense going on in this deeply awkward and embarrassing episode, which might also be the clearest demonstration yet of war hawks and the Washington deep state’s swift ability to so easily coopt and control the talking points of these “progressives”. A contingency of thirty of them got steamrolled into conformity literally within a matter of hours. 

Via AP

CNN reports that fellow Dems are “furious” – also given the timing just ahead of the midterms

The public reversal comes amid a backlash from Democrats who criticized the timing of the letter, which was sent on Monday.

“People are furious – especially front-liners,” said one senior House Democrat ahead of the letter being withdrawn, referring to the most vulnerable members at risk of losing their seats in the November 8 midterms.

* * *

The White House has responded to a new letter sent to President Joe Biden by a group of 30 Progressive Democrats urging what they dubbed a dramatic shift in policy on Ukraine toward prioritizing diplomacy with an aim to urgently get the warring parties at the negotiating table.

“We’ve been very clear: Nothing about Ukraine without Ukraine,” White House Press Secretary Karine Jean-Pierre told reporters on Monday in response to the letter, adding that “this is a decision that President Zelensky is going to have to make when it comes to any type of conversation with Russia, any type of negotiation.”

Image via VOA News

Rep. Pramila Jayapal had warned in leading the group’s letter, which was also singed by Alexandria Ocasio-Cortez, “The longer the war in Ukraine goes on, the greater the risk of escalation — to widespread, devastating effect.” She said “my colleagues and I are urging the Administration to engage in a proactive diplomatic push in an effort to seek a realistic framework for a ceasefire.” 

The letter had also warned of the possibility of nuclear war, especially if the US doesn’t make efforts toward a diplomatic track with Russia, but many have also noted the glaring contradictions – such as talk of still supporting ongoing massive military aid to the Ukrainians

US National Security Council spokesman John Kirby also responded Monday, stressing that “We’re not going to have conversations with the Russian leadership without the Ukrainians being represented.” He added, according to The Washington Post, “Mr. Zelensky gets to determine – because it’s his country – what success looks like and when to negotiate.” Kirby explained that while the White House “appreciates [the lawmakers’] very thoughtful concerns,” it remains that Russia’s Putin could choose to end the conflict “at any time.”

The Democrats’ letter was further mocked by a handful of pundits highlighting its contradictions, and that it was more about optics in order to satisfy far left constituents

The two-page statement points to the death and destruction Russia’s war in Ukraine is causing in Ukraine and the harmful effects it is having outside the war zone, acknowledges that engaging with Russia is difficult, and reiterates that any resolution needs to be “acceptable to the people of Ukraine.” A lot of people were confused.

The letter “is remarkable in that it mostly calls for what the U.S. is already doing — arming Ukraine, wanting a diplomatic solution, recognizing Russia isn’t currently open to one — but presents this as if it would be a big change,” writes University of Illinois political scientist Nicholas Grossman. The CPC’s concerns “seem to be more about vibes than the actual policy, which makes the pre-election timing particularly curious,” agrees political journalist Ben Jacobs. Talking Point Memo’s Josh Marshall calls the letter’s arguments “completely incoherent” and “contradictory on the key points.”

All of this prompted Jayapal to issue a statement in follow-up, perhaps walking back or seeking to clarify elements of the letter

“In a letter to President Biden today, my colleagues and I advocated for the administration to continue ongoing military and economic support for Ukrainians while pursuing diplomatic support to Ukraine to ensure we are helpful partners on efforts to reach ‘a solution that is acceptable to the people of Ukraine.’ Let me be clear: we are united as Democrats in our unequivocal commitment to supporting Ukraine in their fight for their democracy and freedom in the face of the illegal and outrageous Russian invasion, and nothing in the letter advocates for a change in that support.”

She continued, “Diplomacy is an important tool that can save lives — but it is just one tool. As we also made explicitly clear in our letter and will continue to make clear, we support President Biden and his administration’s commitment to nothing about Ukraine without Ukraine.”

Indeed the follow-up statement does appear to be a walk-back, blunting the fundamental message urging negotiations or else escalation toward nuclear confrontation looms – as the message of the initial letter emphasized. As journalist Glenn Greenwald observes, while there are some good and rare points on diplomacy that were raised, it remains that “the Progressives’ letter postures as opposition but isn’t really.”

Tyler Durden
Tue, 10/25/2022 – 13:18

Nearly 1 In 10 Rent-Regulated Apartments In NYC Were Vacant In 2021

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Nearly 1 In 10 Rent-Regulated Apartments In NYC Were Vacant In 2021

It only takes so long before rising prices and surging crime start to show up in a city’s population and housing data. The latest such data point for New York City is a report from the Department of Housing Preservation and Development that 88,830 stabilized apartments were vacant in 2021.

This number is significantly higher than the previously reported 61,000 by the state, according to the City, who obtained the previously unreleased updated figures. 

The Department of Housing Preservation and Development based its estimates on data collected by the U.S. Census Bureau last year. The city has about 1 million stabilized units which are mostly located in buildings erected before 1974, the blog says. 

The increased estimates includes 42,860 units that were “unavailable” and “tens of thousands” more still available for rent, according to HPD Chief Research Officer Lyz Gaumer. Collectively this encompasses both apartments that are up for rent and others than landlords are keeping off the market, but are still livable. 

Gaumer told The City that the numbers are “a very conservative estimate of the entire warehoused apartment universe.”

“We are accounting for numbers that aren’t necessarily reported to the state,” said HPD department spokesperson Jeremy House. The state uses data that is reported to them by landlords and owners, he noted. 

Census data revealed that 4.54% of all New York apartments were vacant as of 2021, up from 3.63% in 2017, The City wrote. A rent emergency for the city is enacted only after vacancies exceed 5%. 

The Community Housing Improvement Program, a landlord group, says that “the extremely high number should send off alarm bells to lawmakers that something is wrong and needs to be fixed immediately to get these units back on line.”

Tyler Durden
Tue, 10/25/2022 – 12:55

Down Detector Reports Major Cell Providers All Hit With Disruptions

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Down Detector Reports Major Cell Providers All Hit With Disruptions

Earlier this morning, WhatsApp, the instant messaging service owned by Meta Platforms, experienced widespread outages. Now there’s data from Down Detector that shows major US cellular providers and Apple’s messaging service are experiencing disruptions. 

Down Detector shows Verizon, T-Mobile, and AT&T customers started reporting disruptions around 1200 ET. 

People also reported trouble sending messages on Apple’s iMessage.  

Google searches for “iMessage not working” spiked around noon. 

Here’s what people are saying:

*Developing 

Tyler Durden
Tue, 10/25/2022 – 12:39