The World and Everything in It: January 2, 2023

MARY REICHARD, HOST: Good morning!

Bankruptcy is one of the most complicated parts of our legal system and so, among our cases today we’ll have one that seemed almost to stump the court.

NICK EICHER, HOST: We will be in hot pursuit of clear statements today on Legal Docket.

Also today, Wall Street closed out 2022 as its worst year in nearly a decade and a half, what’s ahead for 2023? We’ll talk about it on the Monday Moneybeat.

Plus the WORLD History Book. One hundred years ago today, Margaret Sanger opened a clinic in New York City.

REICHARD: It’s Monday, January 2nd. This is The World and Everything in It from listener-supported WORLD Radio. I’m Mary Reichard.

EICHER: And I’m Nick Eicher. Good morning!

REICHARD: Up next, Kent Covington with the news.

KENT COVINGTON, NEWS ANCHOR: Ukraine » Ukrainians face a grim start to 2023 after more missile and drone attacks over the weekend. But in Kyiv, residents still celebrated the new year. In between air raid sirens, many sang Ukraine’s national anthem from their apartment windows in unison.

AUDIO: [Kyiv]

Russia launched fresh attacks on Sunday, striking more residential buildings  after a blistering New Year's Eve assault that killed at least three civilians.

ZELENSKYY: [Ukrainian]

President Volodymyr Zeleneskyy in a new year’s address told Ukrainians —quote—“You are incredible. See what we have done and what we are doing, how our soldiers have been smashing this 'second army of the world' since the first days.”

Russia claimed it targeted Ukrainian drone production. Officials in Kyiv say the Kremlin once again intentionally took aim at civilian targets.

Idaho suspect extradition » Police said Sunday they’re confident that the search is over for the person who killed four University of Idaho college students in November.

DAHLINGER: We believe we’ve got our man.

Captain Anthony Dahlinger with the Moscow, Idaho, Police Department says the suspect is Bryan Kohberger, a 28-year-old Ph.D. criminal justice student at Washington State University.

DAHLINGER: It’s bittersweet. We’re very excited [about] the fact that we were able to locate Mr. Kohberger and bring him into custody. But we all still feel the sadness and the sorrow of this event, and we still feel horrible for the families.

Police arrested him at his parents' home in rural Pennsylvania—nearly seven weeks after the slayings.

Kohberger’s attorney says his client plans to waive an extradition hearing so he can quickly be brought to Idaho to face murder charges. He added that Kohberger looks forward to being exonerated as quickly as possible.

NY police attack » Meantime, in New York City, authorities are reportedly investigating whether an attack on three police officers at a New Year’s Eve celebration was related to Islamic terrorism.

Police Commissioner Keechant Sewell:

SEWELL: A 19-year-old male approached an officer and attempted to strike him over the head with a machete. The male then struck two additional officers over the head with a machete.

The attack happened a little after 10 p.m. near Times Square. Two of the three officers were hospitalized but are expected to recover. The third was unharmed.

TikTok concerns » On Capitol Hill, lawmakers say they’ll debate legislation in the new year to address security concerns about the social media app TikTok.

Republican Congressman Mike Gallagher told NBC’s Meet the Press:

GALLAGHER: I’m concerned about TikTok’s ability to track your location, track your keystrokes, track what websites you’re visiting, even when you’re not using the app. I’m concerned about the lack of transparency around the algorithm, which is addicting kids.

US intelligence officials say China’s communist government has ultimate control over the app. And FCC Director Brendon Carr described the app as “digital fentanyl” due to its addictive nature and the dangers he believes the app poses.

Pointer Sister obit » Anita Pointer died over the weekend at the age of 74. She was one of four sibling singers who earned pop success as The Pointer Sisters with hits like 1984’s “Jump.”

MUSIC: [Jump]

Her publicist said she passed away while she was with family members. A cause of death was not immediately revealed.

The Pointer Sisters won three Grammy Awards and had more than dozen top 20 hits

Box office » At the weekend box office, Avatar: The Way of Water continues to draw big numbers.

TRAILER: Dad, I know you think I’m crazy, but I feel her. So what does her heartbeat feel like? Mighty. 

The sequel to the 2009 blockbuster earned another $63 million domestically. Globally, Avatar 2 has now earned nearly $1.4 billion.

In second place, the animated feature Puss in Boots: The Last Wish took in another $16 million for a total of more than $60 million after 2 weeks in theaters.

I’m Kent Covington. Straight ahead: a complicated bankruptcy case at the Supreme Court.

Plus, the WORLD History Book.

This is The World and Everything in It.

MARY REICHARD, HOST: It’s Monday, January 2nd! Glad to have you along for the first edition of The World and Everything in It of 2023. Good morning and happy new year. I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. Happy new year to you! It’s time for Legal Docket. And for that, we turn to legal reporter Jenny Rough, reporting from Washington.

JENNY ROUGH, REPORTER: Our first case, appropriately enough coming out of the holidays, involves shopping malls.

And specifically the biggest mall in the country, The Mall of America in Minnesota.

To understand the case, we have to go back three decades and mention another retailer: Sears, Roebuck, and Company.

Sears leased space in the Mall of America for just the token amount of $10 per year. But in 2018, Sears filed for Chapter 11 bankruptcy, that’s known as a reorganization bankruptcy.

And as part of the restructuring, Sears assigned its lease to another company called Transform Holdco.

The Mall’s parent company—MOAC Mall Holdings—objected to the lease assignment. And now it’s up to the Supreme Court to decide whether a provision in the bankruptcy code bars the court of appeals from hearing the case.

At oral argument, Eric Brunstad argued on behalf of Transform. He went all the way back to that time in 1991, when Sears and Mall of America first partnered up.

BRUNSTAD: Sears built the building, not MOAC. Decades later, in 2018, when Sears filed for bankruptcy, the building that Sears built with this ground lease became property of the bankruptcy estate of Sears' bankruptcy estate. Sears moved for authority to sell by private contract this property to Transform. After the necessary approvals from the bankruptcy court were obtained, that sale transaction closed on October 4, 2019, three years ago.

After the sales transaction closed, the lease was no longer within the bankruptcy estate. So Transform argues the appellate court no longer has jurisdiction to review a case about that property.

This is a technical case. Even the justices admitted to their confusion. And oral arguments wandered all over the place. But the court granted certiorari only on one narrow question: Do appellate courts have jurisdiction here, that means the power to hear and determine a case. Justice Elena Kagan focused on that narrow question.

KAGAN: Mr. Brunstad, do you have anything to say about the question presented? [Laughter.]

BRUNSTAD: I do, your Honor. I do, your Honor.

Transform’s lawyer said the section of the bankruptcy code at issue does have a jurisdictional bar. Congress intended that. Just look at the overall framework.

BRUNSTAD: The context is really critical.

KAGAN: Well, context, boy, jumping to context in a place where we've always said you need a clear statement in the text, where is your clear statement. 

Justice Kagan wanted Transform’s lawyer to point to explicit words in the statute. Something like—

KAGAN: Something that says something like, “The court has no jurisdiction.” [Laughter.]

BRUNSTAD: That would be wonderful if it were here, but it’s not. But the intent was exactly that.

There’s a circuit split here. So at a minimum, the court should resolve whether the bankruptcy code bars appellate courts from deciding in these situations.

The second case today also involves a bankruptcy, but not the kind we’ve been discussing, a reorganization bankruptcy. This one is Chapter 7 bankruptcy. Chapter 7 allows individuals to clear certain debts.

The facts revolve around a husband and wife, David and Kate Bartenwerfer. Kate is a real estate agent. David is a contractor. Together they bought a house in San Francisco and planned to fix it and flip it.

In the spring of 2007, they began renovations and moved out.

David took care of the renovations and that’s where the conflict lies.

In March 2008, they sold the home and represented legally that it was free of defects.

But the buyer said it did have defects and sued: problems with the windows, water leaks in the house, legal issues with the renovation permits.

So the case went to trial and the jury found in favor of the buyer.

But instead of paying the money they owed, Kate and David filed for bankruptcy to try to erase debts. But the problem is, under the bankruptcy code if the debt is the result of fraud, you can’t erase it.

Kate says David is the one who committed fraud, not her. He’s the one with actual knowledge of the defects. But a lower court held her vicariously liable because they both owned and sold the property.

That’s the background that brings us to the Supreme Court.

Sarah Harris is Kate’s lawyer. She warns against unduly harsh results:

HARRIS: Bankruptcy is the last place to read in vicarious liability. That financial death sentence would fall mostly on unsophisticated spouses who do not realize routine transactions in marriage, like selling homes, create business partnerships in the eyes of the law.

But Justice Clarence Thomas said the words of the statute talk about the debt. You can’t erase debt obtained by fraud. The text of the statute doesn’t focus on the debtor, the individual.

THOMAS: It focuses on the debt. It's talking about money or debt that's obtained by fraud. How do you convert that into a statute that is focusing on the debtor?

Zachary Tripp argued on behalf of the buyer. And he picked right up on that. The language of the statute is clear.

TRIPP: Once it is established that specific money is obtained by fraud, then "any debt arising therefrom is not discharged." Full stop. The text stops there. There are no more words.

But Justice Sonia Sotomayor asked about those harsh results his opposition brought up. Any debt obtained by fraud, no matter the circumstances?

SOTOMAYOR: I obtain a loan fraudulently. Later, I sell that debt to my friend, Justice Thomas, who has no idea about the fraud. Justice Thomas then struggles to pay the debt and he files for bankruptcy. He wants to discharge the debt. Can he?

That’s a harder case. Justices aren’t partners like spouses or joint homeowners are. Still, Tripp argued Justice Thomas might very well be liable. That’s the consequence of the plain language Congress enacted.

Fraud is on the rise in this country, so it’s important to clarify the law.

The final dispute today involves a federal statute called the False Claims Act. Jesse Polansky worked for a medical billing company that he thought was committing fraud. Specifically, Polansky believed his employer was miscoding Medicare patients in order to bill Medicare at a higher rate. Polansky brought what’s known in the law as a qui tam action. That allows a whistleblower to sue on behalf of the government and receive a portion of the reward.

The government here investigated the fraud claims and decided not to intervene, meaning, not to take over the litigation. But whistleblower Polansky went forward with it.

But then five years later, the government wanted to dismiss the case.

At the Supreme Court, Justice Ketanji Brown Jackson wanted an explanation of how the government has authority to dismiss a case it chose to stay out of. She questioned Frederick Liu, who argued on behalf of the United States.

JACKSON: That seems odd. I mean, the statute is very clear that the government has a period of time at the beginning to make a determination about whether or not it's going to take over the action. So I'm curious as to the government's repeated representations that they can do all sorts of things related to this suit without even intervening. 

LIU: Well, I think it goes to the purpose of intervention under the structure of the statute. The purpose of intervention under the statute is for the government to become a plaintiff in the case. The only reason intervention matters is if we want to proceed with the case, and it matters what our rights are, what our burdens are going forward. But, if the whole point of our motion is to end the case, then there simply is no reason to put us through the hurdle of intervening beforehand.

Litigating qui tam cases is expensive. Whistleblowers might be discouraged from bringing fraud claims if the government can just step in and dismiss it at the last moment. On the other hand, giving the government that authority can help prevent aggressive whistleblowers with frivolous claims.

And that’s this week’s Legal Docket. I’m Jenny Rough.

MARY REICHARD, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen. 

He’s head of the wealth management firm The Bahnsen Group and he’s here now to ring in a new year.

David, good morning !

DAVID BAHNSEN, GUEST: Good morning, Nick, and Happy New Year.

EICHER: Alright, well good thing 2023 wasn’t booked on Southwest Airlines or it might still be 2022, but let’s look ahead today. Your practice is to deliver a forward-looking white paper for your clients and the investing public, so in that spirit, we talked last week about the markets being down for the whole of 2022, and that’s precisely how it ended on Friday with the Dow, the S&P, and the Nasdaq all down about 10, 20, and 30%-plus respectively.

What’s your market outlook as we get to work on a new year, David?

BAHNSEN: Well, there's a lot, I think that when one looks at the market, they have to look at the stock market and the different aspects of it. But also look at the bond market, the dollar commodities, the Dow was actually down 8.8% Last year, so a little less than 10. And then the NASDAQ was down a little bit over 33%. With the s&p being in between, they're down almost 20, not quite 20%. So what you see in those three different indexes is that the riskiest stuff that was more tech oriented and more speculative, but also that had been up the most that had had the biggest kind of euphoric rise in the 2020 and 2021. Period, that was what was hit the worst, the most kind of Americana type stocks broadly diversified across our industrial, agricultural, financial materials, all of the different sectors. And it does include technology, but it doesn't center around technology. That's more what the Dow is like. And it did far better. A lot of people listening know that dividend growth stocks were actually up on the year, which happens to be the area that we focus on at my firm. And so it was a mixed bag last year, and yet the things that were most excessive, which by the way, includes housing, not just different elements of the stock market, but housing prices, if they were to drop 10% from here on a national average basis, they would only be back to where they were in October of 2021. If they were to drop 20%, they wouldn't even be back to their pre COVID levels. That's how much things had gone up. And that's what the asset price inflation is that the Fed is really trying to deal with. At this point, the regular inflation that people have seen with their day to day expenditures is far outside of the Fed's control.

EICHER: What trends are you looking for in the overall economy in 2023, are we looking at a relatively normal year? Normal being defined as we’re not thinking really about global pandemics and the residual effects of lockdown policies. So is it kind of a return to normal or what do you say for 2023?

BAHNSEN: Well, remember one of our kind of principles about assets and markets and economics is that there is no really such thing as normal, but in the context of your question is a good one, that the pandemic created a particular abnormality. And I think economically, a lot of that has been gone, but not in China. And so even 2023, there will still be a sort of pandemic-related abnormality, because of their reopening. And it's one of our major points, I have my 10 themes of 2023. And the fifth one is do not underestimate the China reopening, because I believe that they have a significant amount of pent up demand. They’re 1.2 billion consumers, and there could be a weakening in global trade around certain recessionary impact, but then a resurgence of global trade around China reopening. There could be a lot of upward pressure on oil prices around China reopening that’s certainly going to bring a lot more demand for global oil with China normalizing their economic activity in this long overdue process of reopening. So I think there will still be some abnormalities because there's two sides to the abnormal mountain. There was the abnormalities of shut down and then there's the abnormalities of reopening and we've experienced that in the United States.

EICHER: You know, David, I'm thinking about the abnormality of war. And I think of that in the context of the story that moved last week about President Putin of Russia trying to get around the price cap on Russian oil and I wonder how that factors in and whether that war winds down maybe in 2023, what effect that might have on the global economy?

BAHNSEN: Well, no, I don't see it winding down. And I don't think those are two of the same things. I think oil prices and war have different elements involved with them. And I think that the largest aspect on the oil price side that we do know about, you know, the way the war plays out, and the way on going foreign entanglements and complexities surface is by definition unknowable. Look, Nick, nobody knew at the beginning of 2022 that Putin was going to invade Ukraine, and no one knew that oil was going to go to $120 in the middle of the year. But did anyone know that the war was still going to be going on, and that oil would end lower than it was when Putin invaded Ukraine? So these things cannot be predicted - the events themselves, or the response in commodity markets to the events. There's two levels of variants that are unknowable. But the thing I would say about oil prices that we do know is that the strategic petroleum reserves are right now sitting at a level that they were at when the Cosby Show was the number one show in America. Okay, so, this is unacceptable, and it's unsustainable. And if you're going to have 400 million barrels have to be restocked in Strategic Petroleum Reserve, if China is going to be reopening, with another million and a half barrels per day of consumption, and if you don't get a deep global recession, then chances are there's going to be more upward pressure on oil prices, which still even with that massive draw from the strategic petroleum reserves have stayed right around $80. So I think that we have to assume two things - and again, these are two separate subjects. Geopolitically, I assume heightened instability, not normalization. I think Russia and China are formulating an alliance that is deeply unsettling for the West. And I think that there's very little concern about it in the West. And I include here the right in America; people are acting as if this is just no big deal, it doesn't affect us. Well, it does. But then the second piece on the commodity side is that there's a lot of supply and demand issues that we have gotten nowhere near to addressing to produce healthy equilibrium.

EICHER: OK, we’ve got a new Congress coming in—a bigger majority for Democrats in the Senate, actual control, even though it’s a narrow 51-49. Then a change in control of the House, also very narrow but in favor of Republicans.

You mentioned last week, 2022 showed us the benefits of divided government. Do you look for more such benefits in 2023, in terms of economic policy?

BAHNSEN: Well, the better way to say it is economic policy not coming out of Washington, because that's the point of divided government or gridlock. And I think that's exactly right. It was one of our themes in 2022 that I had stated that the political reality will underwhelm. And I gave myself an A plus on this particular account, because that's exactly what happened. The predictions of a huge red wave that then turned to, “No it doesn't look like that will happen,” then resurge to, “It will happen.” And then it, in fact, didn't happen. And through all of those ups and downs of 202, around political expectation, markets didn't care, the markets only knew one thing: there was going to be one way or another a form of gridlock. Now, I don't by the way, technically agree that there are Democrats that are 51-49 in the Senate, because with Kyrsten Sinema in Arizona re-registering as Independent, she sort of codified what was already the case, which is Manchin and Sinema are still kind of purple senators, and then you have a significant amount of red and blue around it. And it isn't anywhere near filibuster proof. And then to your point, the Republicans having a slight majority in the House, the reality is that certain things can get done - and some of them are going to be things I don't like. But some things that they could end up getting done theoretically, I might like. I doubt it. But the big things cannot get done. Something that could be market impacting around a categorical reforming of tax code, trade policy, etc. I don't care if they had 70 Republican senators, they're gonna spend way too much money. I don't care if there was a Republican in the White House. They're gonna spend way too much money; they spent more with the last Republican. So the issues that really matter to me about the financial health of our country are non-partisan. We, as a country, spend too much money and we as a country are okay with it.

EICHER: No question about that. Hey, David, thank you for last week's review. Thank you for this week's preview. Next week, we will get back to our listener questions and we'll look forward to that. David Bahnsen is founder managing partner and chief investment officer of the Bahnsen group, his personal website bahnsen.com. David, thank you so much and happy new year.

BAHNSEN: Well, Happy New Year, Nick, and I'll quickly plug that this Friday at dividend cafe.com this Friday the sixth is that annual white paper coming out about our projections for the year ahead.

EICHER: Perfect. Thank you.

BAHNSEN: Thanks, Nick.

NICK EICHER, HOST: Today is Monday, January 2nd. Good morning! This is The World and Everything in It from listener-supported WORLD Radio. I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. Next up: the WORLD History Book. Today we commemorate the birthday of Louis Braille and his alphabet. Plus, a record breaking hail storm in Australia, but first, 100 years ago today, birth-control crusader Margaret Sanger opens a clinic in New York City. Here’s Paul Butler.

PAUL BUTLER: We begin today on January 2nd, 1923, the Clinical Research Bureau begins operation. It is the first legal birth control clinic in America—the forerunner of Planned Parenthood.

It is operated by radical Margaret Sanger and the American Birth Control League. This isn’t Sanger’s first clinic—that opened 7 years earlier—in 1916. But due to a series of Comstock laws on the books at the time the earlier clinic was shut down and Sanger was jailed. Comstock laws originated after the Civil War and prohibited the distribution of explicit information—including details about contraceptives and birth control. But public opinion began to shift in the 1920s and some states softened their Comstock law enforcement.

So Sanger’s second birth control clinic remained open. Despite heavy resistance from the Catholic Church, there were more than 500 similar birth control clinics across the country by the close of the 1950’s.

On September 21st, 1957, Mike Wallace interviewed Margaret Sanger for his ABC television program.

MIKE WALLACE: What events…in your life made Margaret Sanger, a crusader for birth control?

MARGARET SANGER: …I think from the very beginning, I came with a large family. My mother died young. 11 children made an impression on me as a child. I was a trained nurse, were among the people. I saw women who asked to have some means whereby they wouldn't have to have another pregnancy too early, after the last child last abortion, which many of them had. So there's a number of things that are one after the other, they really made you feel that you had to do something.

Wallace’s confrontational interview covered a wide range of topics…including whether or not her interest in birth control was motivated by a personal disdain for the Catholic Church. She insisted that wasn’t it at all. He also pressed her about population control, the natural order, promiscuity, and at one point, Wallace even asked her a theological question…

WALLACE: Do you believe in sin?

SANGER: Well, I think the greatest sin in the world is bringing children into the world that have disease from their parents that have no chance in the world to be a human being practically. delinquents, prisoners, all sorts of things just mark when they're born. That to me is the greatest sin that people can commit.

Sanger identified herself as a life-long Episcopalian. Her influence casts a long shadow…through the organizations she founded—like Planned Parenthood—and the laws she influenced. The cultural acceptance of abortion as birth control can easily be traced back to her work.

Next, January 1st, 1947—75 years ago this week. Audio here from British Pathe newsreel.

NEWSREEL: From Sydney come these samples of the worst hailstorm in the city's history when a 33 mile an hour blitz of jagged lumps of ice left a million pounds worth of damage and its wake.

The hail storm is the most severe recorded storm since observations began in 1792.

NEWSREEL: Thousands of tiled roofs were shattered by hailstones weighing anything up to four pounds. And as for windows, well take a look at this. All the glass and the roof of Sydney Central Station has just disappeared. A major victim of nature's own bodyline bowling...

Nearly 1,000 people were injured by the storm. The total damages equaled three-quarters of a million pounds—about 10 million pounds today.

And finally, Louis Braille was born in France on January 4th, 1809. He lost his sight due to an accident in father’s harness shop when he was three years old. He later attended the National Institute for Blind Children in Paris.

The school had books with raised letters students could trace with their fingers. But each letter was so large, it was difficult to quickly apprehend which letter it was—making reading slow and laborious.

During his time at the school, Louis Braille met a captain from Napoleon's army who taught the students about a communication code called night writing—or writing that could be read at night. It used a series of 12 raised dots—allowing battlefield communication without sound or light. Braille latched onto the communication technique but simplified it to six dots.

At age 15, Braille created his fingertip reading system that made it possible to read letters and numbers quickly using just a fingertip.

The Paris school for the blind began using Braille’s system immediately. But it took awhile to catch on. Louis Braille died in 1852. Eighty years later, the English-speaking world adopted a standardized braille alphabet—further improving it in 1957.

On the 200th anniversary of Louis Braille’s birth, the World Blind Union declared January 4th as World Braille Day. In 2018 the UN General Assembly followed suit, setting apart the day to commemorate Louis Braille and his lettering system.

More than 35 million people around the world are currently blind. According to a 2017 Anglia Ruskin University study, that number is expected to triple over the next 30 years—meaning braille will remain an important communication tool for those who can not see.

That’s this week’s WORLD History Book. I’m Paul Butler.

NICK EICHER, HOST: Tomorrow: an update on the security situation in Haiti.

Plus, our Classic Book of the month—our first one for the new year

That and more tomorrow.

I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard.

The World and Everything in It comes to you from WORLD Radio.

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