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U.S. Supreme Court - 2015 Will Be A Blockbuster Year

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
February 24, 2015

IN THIS ISSUE:

1. Fed is Worried About Raising Rates Too Soon

2. 2015 Will Be a Big Year For the Supreme Court

3. Texas Judge Blocked Obama’s Immigration Plans

4. WEBINAR: Niemann Capital Management, February 26

Overview

The Supreme Court is poised for a blockbuster year in 2015 – and the list of high-profile cases could keep growing. Already, the Court is set to rule in a key case that threatens to wreak havoc on Obamacare. In addition, the justices will consider important cases regarding religious freedom, free speech, and limits on political fundraising.

That mix of cases poses big risks for liberals, who were caught off guard by the Court’s willingness/enthusiasm to take on another high-stakes Obamacare battle much sooner than expected.

Yet Republican governors and social conservatives have a lot on the line as well. Under mounting pressure, the High Court agreed to hear a landmark the case on same-sex marriage once again – one that could clear the way for same-sex couples to legally marry in every state.

We will take a look today at the most high-profile cases that the Supreme Court will hear this year, and what lies at stake in each of them. I wish Americans paid more attention to the Highest Court in the land.

Before we get into that discussion, let’s take a look at the minutes from the most recent Fed Open Market Committee (FOMC) meeting on January 27-28. Those minutes revealed that several members on the Committee have new concerns about the economic recovery, especially in light of falling inflation and the rising US dollar.

While the minutes didn’t say so specifically, it is clear that several members of the Committee now question whether short-term interest rates should be raised at all this year.

Finally, we’ll look at the federal court decision in Texas last week that stopped President Obama’s executive action on immigration dead in its tracks, at least for now. This is an interesting development, and it remains to be seen if Obama can get this decision reversed.

Editor’s Note: A hat tip goes to Morgan Housel of The Motley Fool for his interesting analysis on ALTRIA, the most successful public company in the world since 1968, based on share price increases, which I included in last week’s E-Letter.

Fed is Worried About Raising Rates Too Soon

The minutes from the Fed’s late January policy-setting meeting, released last Wednesday, show officials grappling to square solid US economic growth with the weakness in international markets, as well as worrying about falling inflation expectations in the US. Some Committee members also expressed concern that raising interest rates too soon could pour cold water on the economic recovery.

Many believed that the FOMC was targeting June as the month to begin raising rates. However, the latest minutes shed light on the depth of the Fed’s inflation debate and highlighted the desire of several policymakers to keep interest rates low for longer.

FOMCIn its January policy statement, the Fed voiced concern about turmoil in markets across the globe, saying it would take “financial and international developments” into account when determining monetary policy. It was the first time since January 2013 that the Fed made an overt reference to overseas economic events in its policy statement.

The minutes offered a more detailed view of the overseas concerns, with policymakers noting how China’s economic slowdown and tensions in the Middle East and Ukraine pose downside risks to the US economic growth outlook.

Even though Fed officials agreed that US economic growth was strengthening, the minutes showed the central bank continuing to struggle with whether it can move ahead with raising rates amid falling inflation expectations.

“Several participants saw the continuing weakness of core inflation measures as a concern,” the minutes said, detailing the Fed’s internal debate over the conflicting signals sent by different measures of inflation expectations and a rising US dollar.

Though policymakers expect the recent bout of low US inflation to prove transitory, they also said the different measures of expectations “needed to be monitored closely” for signs the public and/or investors are losing faith in the Fed’s ability to reach its 2% inflation target. With the consumer price index down in December, that faith could be waning.

The FOMC decided to leave the word “patient” in its January policy statement, as it pertains to when the first rate hike might occur. However, some Committee members worried openly that when ‘patient’ is dropped, investors will put too much weight on its meaning, and financial markets could overreact.

The bottom line is that the Fed doesn’t intend to raise rates anytime soon. The next FOMC meeting will be on March 17-18, with a press conference to follow by Chair Janet Yellen.

2015 Will Be a Big Year For the Supreme Court

Here are the highest-profile cases the Supreme Court will likely tackle in just the first six months of 2015, before the current term is over around the end of June, as summarized by Sam Baker at National Journal.

Obamacare

The justices will hear oral arguments March 4 in a lawsuit that threatens to cripple the health care law, just three years after Chief Justice John Roberts helped save it. This time, the challengers want the Court to invalidate the law's premium subsidies in states that didn't set up their own insurance exchanges.

Most states didn't establish their own exchanges, and more than 80 percent of enrollees are getting subsidies – so a win for the challengers here would likely make insurance more expensive for about 5 million people and could make insurance markets unstable in most of the country.

Obamacare's supporters are nervous about this case, King v. Burwell, not only because of its implications, but because of the way the Supreme Court decided to hear it. The justices took up the Obamacare case much earlier than many observers had expected, opting not to wait for a lower-court ruling that likely would have strengthened the Obama administration's hand.

The fact that the Supreme Court decided to jump in without waiting for that lower-court ruling was seen as a sign that the Court's conservative bloc is itching for another shot at the Affordable Care Act. The big question now is whether Roberts will save the law again.

Same-sex marriage equality

The Court hasn't yet said whether it will act on the latest round of appeals in same-sex marriage cases, but just about everyone wants it to... Challenges to several states' marriage laws will be on the schedule - and even more states have asked the judges to just settle the marriage-equality question once and for all.

The Court had tried to stay away from the issue since its landmark rulings last year that struck down a key part of the Defense of Marriage Act and opened the door to same-sex marriage in the states without mandating it.

When a federal Appeals Court upheld same-sex marriage in several states, the justices declined to hear an appeal. But then the Court of Appeals for the 6th Circuit upheld bans on same-sex marriage in Michigan and Kentucky, as well as state laws in Ohio and Tennessee.

So now the Appeals Courts are divided over the constitutionality of state laws banning same-sex marriage, and almost all of the states in question have asked the Supreme Court to settle the issue for good. Given the patchwork of laws from state to state, many legal observers say it'll be hard for the Court to stay on the sidelines this time.

Religious freedom

Religious liberty was the defining issue of 2014's biggest ruling - the Hobby Lobby decision involving Obamacare's contraception mandate - and it's back in a big way this term. The Court has already heard oral arguments in a suit filed by an Arkansas prison inmate who wants to grow a beard, in accordance with his Muslim faith but in violation of prison rules.

During oral arguments, the justices reportedly seemed to be siding with the inmate, questioning whether the prison system could ensure inmates' safety without such strict rules against beards. [On January 20, the Court ruled in favor of the inmate.]

The Court has agreed to hear a second similar case, but hasn't yet scheduled oral arguments. This one concerns a woman who was denied a job at an Abercrombie & Fitch store because the head scarf she wore, as a practicing Muslim, wasn't consistent with the company's "Look Policy." The question in the case is whether a business can discriminate against someone's religion if it didn't know that a religious accommodation was needed.

Supreme Court

Freedom of speech

The Court has teed-up three potentially significant cases on freedom of speech under the First Amendment - including one that wades into the Roberts Court's favorite free-speech subject: campaign finance law.

The first, in which the justices have already heard oral arguments, concerns social-networking sites and asks what type of messages constitute a "threat." The case concerns a man, Anthony Elonis, who posted violent Facebook messages about an ex-wife, including some that discussed killing her. But the question is whether those messages meet the legal standard for a "threat," which says that a "reasonable person" must conclude that the person making the statement is actually expressing an intent to commit violence.

The second free-speech case the Court has agreed to hear deals with a Florida law that prohibits judicial candidates from personally soliciting campaign contributions - they have to set up a fundraising committee, to avoid situations in which a person wins and becomes a judge, then has to try to remain impartial while deciding a case that involves a major donor. The Roberts Court hasn't found many campaign finance laws it likes, and critics fear that a ruling against Florida's fundraising ban would have broader national implications that threaten judges' independence.

Finally, there's the free-speech issue that never dies: the Confederate flag. Officials in Texas rejected a proposed license-plate design from a group called Sons of Confederate Veterans, which, unsurprisingly, included the Confederate flag. The state said the license plate would conjure up associations with "expressions of hate," but a lower court said the design should have been allowed. Now the Supreme Court will have to decide who's right.

As you can see from the summary of the important cases above, 2015 is sure to be a big year for the Supremes. Both liberals and conservatives have a lot riding on their decisions! Some, maybe all, of these cases could hinge on Chief Justice John Roberts - who conservatives will remember for his surprise deciding vote on Obamacare in 2012.

Texas Judge Blocked Obama’s Immigration Plans

Speaking of important court decisions, on February 16, a federal judge in Texas blocked President Obama’s executive actions on immigration. The judge, responding to a suit filed by 26 US states, did not rule on the legality of Obama’s immigration orders but said there was sufficient merit to the challenge to warrant a suspension while the case goes forward.

In a setback to the president, US District Judge Andrew Hanen in Brownsville, a city along the Texas border with Mexico, issued the temporary court order to stop Obama’s executive actions that would prevent the deportation of some 4.5 million illegal aliens in this country.

As a result of the order, the Obama administration had to halt the president’s unilateral actions to shield millions of illegal immigrants from deportation, grant them work permits, etc. President Obama said he disagreed with the ruling and expected his administration to prevail once the issue makes its way through the courts.

Obama said the Justice Department will appeal Hanen’s preliminary injunction to the majority conservative 5th U.S. Circuit Court of Appeals in New Orleans. Hanen has previously issued other opinions critical of the Obama administration’s enforcement of immigration laws.

Speaking to reporters in the Oval Office, the president told reporters: “The law is on our side and history is on our side. We will be prepared to implement this fully as soon as the legal issues get resolved.”

While there is no doubt that the Justice Department will seek to have Judge Hanen’s decision overturned, the question is whether it will be successful in doing so. Some legal experts think it may not be so easy.

Judge Hanen’s 123-page ruling was laced with citations from US Supreme Court decisions that upheld cherished liberal positions, including the rights of states to be free from the effects of global warming and the rejection of Arizona’s attempt to enforce immigration laws.

The Judge’s ruling  is based on the states’ argument that the Obama administration exceeded its authority under federal law, which he said does not give the Department of Homeland Security the power to unilaterally bestow legal residency on millions of people Congress has designated as eligible for deportation. He wrote:

“The DHS is tasked with the duty of removing illegal aliens. Nowhere has Congress given it the option to either deport these individuals or give them legal presence and work permits.”

The Justice Department will no doubt present strong arguments for overturning Judge Hanen’s ruling; however, by building his opinion on a foundation of liberal decisions that he probably disagrees with, Hanen at least has made the government’s job more politically difficult.

This will be a very interesting case to watch and will likely reach the Supreme Court at some point. There is a good article from Forbes in the links below that explains this unusual ruling.

WEBINAR: Niemann Capital Management, February 26, 3:00pm CST

Our next live webinar will feature Niemann Capital Management which has been on our recommended list since 2001. Niemann has several different strategies that invest in a dozen or more equity exchange-traded funds (ETFs) in an effort to capitalize on intermediate and longer trends in the market.

If you are concerned that the market may move lower just ahead, then you owe it to yourself to join us for the webinar with Niemann Capital Management on Thursday, February 26 at 3:00pm CST. The live presentation will last about 30 minutes, and you may ask any questions you have afterward.

To register for the free webinar, CLICK HERE.

Very best regards,

Gary D. Halbert

 

SPECIAL ARTICLES

Fed: Raising rates too soon could hurt the recovery

Five key cases heading to the Supreme Court, besides Obamacare

How a Texas Judge blocked Obama’s immigration plans

 


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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