The insanity coming out of "financial media" on the GDP report is amusing -- but not surprising.

Real gross domestic product (GDP) increased at an annual rate of 1.6 percent in the first quarter of 2024 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2023, real GDP increased 3.4 percent.

Here's the basic problem in this report -- the last three reports are a declining trend and the Q3 2023 number looks like a pull-forward rather than an acceleration in growth, as the overall trend from Q3 2022 looks like those two interim reports were people having "one last party."

The increase in consumer spending reflected an increase in services that was partly offset by a decrease in goods. Within services, the increase primarily reflected increases in health care as well as financial services and insurance. 

Health care and insurance are not discretionary purchases and this is extremely bad news economically as it wasn't absorbed; it  came out of everything else.

Oh, and as for inflation?

The price index for gross domestic purchases increased 3.1 percent in the first quarter, compared with an increase of 1.9 percent in the fourth quarter (table 4). The personal consumption expenditures (PCE) price index increased 3.4 percent, compared with an increase of 1.8 percent. Excluding food and energy prices, the PCE price index increased 3.7 percent, compared with an increase of 2.0 percent.

ALL of these figures, including core, are well above target -- in fact, approaching double said target.

These are extremely hot inflation numbers and they're in non-discretionary purchases which nobody can get around and extremely sticky too as car insurance is typically a six-month term with property insurance renewing annually.  There are lots of reports of 20% increases in insurance costs for autos and homes -- and in many cases they're actually higher, and this is among people without any claims.  I'm seeing it here, and I'm not in a high-risk area.  If you are, or in a place where various government policies have driven up loss rates (e.g. uninsured motorists) then you may be looking at doubles and again, no insurance means either no driving or running the risk of driving on a suspended license which, when you get caught, will mean SR-22 policies to get reinstated (and don't ask the price -- its eye-watering.)

If you're still in the camp that rates are coming down this year you're wrong.  No they're not with price indices going up like this, and yet that has been the mantra for the last six months+ in the asset markets.

I'll take the under on that and that nice, safe 5%+ in the short end of the Treasury curve looks real good compared with a likely 30%+ loss in equities or (much worse, due to it being illiquid) Real Estate.

Last night's Tesla earnings would have, you'd think, cut the stock in half.

Tesla is of course a car company.  Elon would love to claim its a bunch of other things, but none of them have been deliverable over the firm's life in meaningful ways.  This includes all of the "revolutionary" lines of business he has tried to argue he'd have sewn up -- the most-intriguing, of course, being driverless cars that entirely change the paradigm of personal transportation.

Being able to buy such a vehicle means you can immediately (subject to various legal constraints, of course) now own a taxi that can take people from here to there when you're not using it, wildly increasing utilization and generating income that offsets its expense.  Said vehicle could be programmed that "I have go to the store at 3:00 PM" and thus it would return and charge with time to do that, but from 2:00 AM when the bars close until then it might run around as "summoned" to various people and take them wherever.

In addition it is a huge mobility boost in that anyone currently unable to drive for medical or age-related reasons, or those who wish to go somewhere but are intoxicated, now can do so without constraint -- if you buy such a vehicle.  Of course the problem with it in the EV space is range (which means in an ICE context its even more valuable as now I can, for example, crawl in the back with a sleeping bag, sixpack of beer and punch in a destination over a thousand miles away and do whatever., having to intervene only to put more fuel in the tank.)

This both opens up the commuter space and intermediate-range (under 500 mile) business travel in ways that today are simply unreasonable, particularly until you get into the realm of private aviation making economic sense -- which for nearly everyone it doesn't.

It also immediately shifts all liability -- and thus insurance -- off you as the owner and to the company that makes it.  The earthquake-level implications of this are obvious but Musk has claimed that it would be available "imminently" -- within a year -- now since 2019 and yet no such advancement from the original capability, in legal and operational terms, has occurred.

You'd think that at some point running this "blue sky" nonsense would fold back on him -- but so far it hasn't.

The latest round of this nonsense included even more ludicrous claims, but follows a pattern seen in all the other big market blow-ups.  Now the word is "AI" and of course Tesla is supposed to be an "AI Company."  Except it isn't, of course, although somehow Elon spun this idea that it shall buy many more Nvidia AI "chip stacks" and by doing so become one, never mind solving the driving problem.  Musk even alluded to literally using the "excess" CPU power (and the energy to run it!) in customer vehicles without any indication the owner would be paid for it!

Many of you don't remember 1999, but I do.  I was in the middle of the 1990s.  The number of times I heard phantasm-invoking nonsense out of CEOs on earnings calls couldn't be counted.  It all ended in tears, and this time it will as well.

Tesla, on an annualized earnings basis of the reported "45 cents", which incidentally is bogus because that's non-GAAP earnings, sells at ninety times an annualized run-rate of $1.80.  At the same time the firm now is showing negative free cash flow, which is a change -- it was at least cash-flow positive before, even though much of it was tax farming of various sorts.  Nonetheless money is money and now the company is bleeding it at an arterial level, and it appears he's stretching payment times to vendors too, which makes the books look better for a while because the cash isn't flowing out as quickly.

This fever, like the one in 1999, will break.

Probably not today, but break it will, and when it does all of those who have repeatedly managed to sucker people into buying a hope and a dream will be faced with the reality that said dreams are and will be unrealized -- and what will be left is whatever can actually generated in operating income from actual products and services sold to actual customers.

Don't be the guy who's long stocks when that day comes.

One has to wonder from the USSC arguments the other day.

Legal experts said the Biden administration was "on the ropes" in Tuesday’s oral arguments at the Supreme Court in a case questioning whether a Jan. 6 rioter can be charged with a federal "obstruction" crime, which carries implications for former President Trump.

On Tuesday, Jeffrey Green, lawyer for Joseph Fischer – who is one of more than 300 people charged by the Justice Department with "obstruction of an official proceeding" in the Jan. 6, 2021, riot at the Capitol – argued that the federal statute shouldn’t apply and that it had only ever been applied to evidence-tampering cases. 

Biden's DOJ has "repurposed" the SarBox law, in short, to bring the most-serious of felony charges in the Jan 6 cases, and has won many convictions on those charges.  They also form the basis of the most-serious charges against Trump himself.

What's also interesting is that in 2019 the OLC issued an opinion -- which was never "formally" put into practice -- that the law didn't apply in this sort of situation at all.  I was unaware of that but the case process that led to the Supremes hearing the case has brought that into the forefront.

SarBox was passed in the wake of the 2000 tech crash and Enron specifically to provide serious criminal penalties for evidence destruction in a corporate context. As I've repeatedly noted lawsuits are not a deterring factor when aimed at corporations because the company pays them and thus there is little you can do to the actual directors and officers.  While theoretically piercing the corporate shield is possible there are myriad ways for very wealthy people to evade accountability even if you succeed.

Sarbox's particular target was corporate officer and/or board-level interference with auditors who are supposed to prevent such chicanery from going unchallenged.  Imposing hard, felony criminal penalties on directors and officers, particularly CEOs and CFOs, would have provided a meaningful check and balance in that going to prison sucks no matter how rich you are, and its arguably worse the more money you have for obvious reasons (its hard to enjoy that mansion, Lambo or Bizjet when you're behind bars.)

The irony is that prior to Jan 6th only a handful of cases have ever been brought against corporate officers, despite many instances of accounting chicanery.  Indeed the entire 08 market blow-up was arguably over precisely that -- various executives asserting that their "books were clean" and "all was well" while they knew they were making loans that were unsound and in fact the borrowers were committing fraud in their income statements, yet the securitizers were lending the money and selling the paper on to customers anyway.  I will remind you that unlike the S&L crash where a huge number of banking executives went to prison in the wake of 2008 nobody did, despite several instances of publicly-disclosed hard proof of financial frauds -- such as backdating deposits to avoid violating reserve requirements.

One line of questioning I did not hear was why the Government should be able to ignore thousands of such cases including when they're documented in the open press over the space of two decades and then, come a convenient political target, "repurpose" said law and throw a few hundred ordinary citizens in prison for it.

Yet that, I would argue, is precisely the root of the issue here, just as it is in many other contexts.  Indeed you can successfully argue that the Kavanaugh hearing disruptions, which were an official proceeding and undertaken specifically to disrupt or prevent his confirmation with what were later (in at least one case) proved to be a false predicate, has at least the same nexus to this law as do the January 6th events.

A nation that is allegedly governed by laws cannot tolerate those laws being used in this fashion -- where they are molded, scripted and enforced only against those of specific political persuasion while those of other political persuasions are left alone.  SarBox was, as I argued at the time, perhaps not a bad law but it was an unnecessary law in that fraud is a criminal offense already and thus the question turns on being willing to bring the charges, not whether the conduct is a crime in the first place -- and the last 20 years have proved that the Government didn't really "mean it" in that it has almost-never been used when accounting tricks and other similar games are discovered.

I'm very interested in reading the opinion that comes from this case -- should the Supremes toss this "creative interpretation" depending on its scope it could in fact void a huge number of existing convictions.  The Court is generally rather uninterested in doing that sort of thing, and as such I don't really expect that outcome, but even a more-nuanced decision might well stuff, to some extent, that Genie back in the bottle.

We'll see.

The Senate appears to have a rather odd view of the Executive -- then again so does the House, and both are not only toxic they're demonstrably false.

Mayorkas is the first Cabinet secretary to be impeached in almost 150 years. House Republicans voted to impeach Mayorkas in February over his handling of the southern border by a narrow margin after failing to do so on their first try.

Democrats have slammed the impeachment as a political stunt, saying that Republicans had no valid basis for the move and that policy disagreements are not a justification for the rarely used constitutional impeachment of a Cabinet official.

The impeachment of Mayorkas has nothing to do with "policy disagreements"; it is first, last and only about a Cabinet official's deliberate refusal to enforce laws as written, including 8 USC §1324.

That statute mandates felony criminal penalties carrying prison sentences for anyone who assists, harbors or transports illegal immigrants.  Other sections of US law forbid the Federal Government and its agencies from "paroling" into the United States an illegal immigrant unless that have a facially-reasonable claim to asylum.  There is no capacity in the law to permit DHS to do so simply because there are a lot of people illegally crossing.

Policy is defined by legislation and thus has to pass both House and Senate and either be signed by the President or a veto must be overridden.  It is absolutely true that different Administrations will have different policies but the Constitution is clear and each person in all three branches of Government takes an oath to uphold and enforce all of the laws and thus the means to express policy isn't to ignore laws you don't like but rather to work to change them through the legislative process.

If you can't find agreement via that process then until you can the existing policy stands whether you agree with it or not and if you take an oath to enforce the law as written and you refuse to do so on a deliberate basis impeachment is the peaceful and appropriate action to remove you from said office.

Neither the House or Senate acting alone can change policy, no matter which party controls said chamber.  Only both, acting in concert, can do so.  This is intentional in the design of our Republic; policy changes of significant importance to society are described in our laws, and it is both wildly unreasonable and destructive to civil order to change them on a whim when one person wins or loses an office, no matter the office.

The Senate's Schumer led his caucus to toss the entire thing as "unconstitutional" on a part-line vote.  Big shock, right?

When you boil it down essentially everything wrong with this nation comes down to this same issue: Various politicians and paid employees of the government simply ignore any law they disagree with either in its entirety or as applies to some favored group while using it as a cudgel against anyone they dislike.  Our national foundation rests on that never being tolerated by anyone, anywhere and for any reason.

I fully understand that these policy matters have serious and vehemently-expressed opinions on all sides.  That's a good thing: Freedom of expression is in fact also a foundation of America.

But no public official is empowered to take that disagreement and turn it into a malicious abuse of existing law whether by intentional omission or weaponization against disfavored persons or those who hold a different point of view.  Down that road lies a line that cannot be foreseen in advance in that the people may, at some point, determine that the strictures of polite society no longer apply to them by that very example set by our officials.

You do not want this; it is precisely through that road that essentially every civil conflict and social destruction has occurred and if you believe you'll be immune to it if it happens, no matter how wealthy or poor you might be, you're wrong.