The World and Everything in It - May 23, 2022

MARY REICHARD, HOST: Good morning!

Police officers must read your Miranda rights to you if they intend to interrogate you. But what are the limits to asserting that right?

NICK EICHER, HOST: That’s ahead on Legal Docket.

Also today the Monday Moneybeat, we’ll talk about a stock market that is on the brink of a bear market.

Plus the WORLD History Book. 25 years ago this week, a pilot completes Amelia Earhart’s journey.

REICHARD: It’s Monday, May 23rd. 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 today’s news.

KENT COVINGTON, NEWS ANCHOR: U.S. military flies emergency baby formula supplies from Europe » U.S. Military planes usually carry emergency supplies out of the country to other nations in need, but this time, it’s the other way around.

A cargo plane carrying baby formula from Germany arrived in Indianapolis on Sunday.

Secretary of Agriculture Tom Vilsack:

VILSACK: The reason why we are doing this is obviously the critical need that is out there. It would take approximately two weeks for the normal commercial process to work. As a result of the United States military’s involvement, we’re going to get this here in a matter of days.

The C-17 cargo plane carried enough formula to fill more than a half-million bottles. The flight brought 15 percent of the specialty medical grade formula needed in the United States.

It was the first of several flights expected from Europe aimed at easing the nationwide formula shortage.

Brian Deese, director of the White House National Economic Council said people should see “more formula in stores starting as early as this week.”

Contamination forced a shutdown of the nation’s largest baby formula plant. That has fueled much of the nation’s shortage.

Biden wraps up South Korea trip, plans to announce economic plan in Japan » President Biden wrapped up a visit to South Korea on Sunday. In remarks at Osan Air Base, Biden told service members monitoring the North Korean nuclear threat…

BIDEN: You are on the front line of everything we’re concerned about. You represent the commitment [that] our two countries made to each other and the strength of the U.S.-ROK alliance.

He wrapped up his three-day trip to South Korea by showcasing Hyundai's pledge to invest at least $10 billion in the United States.

BIDEN: The new facility should be rolling out the latest electric vehicles and batteries to power them by 2025.

He said that will create thousands of jobs in the state of Georgia.

This morning, the president is in Japan where he’s planning to announce an economic plan to counter Beijing in the Indo-Pacific region.

President Biden approves Ukraine aid » While in South Korea over the weekend, President Biden signed into law a massive new aid package for Ukraine. WORLD’s Josh Schumacher has more.

JOSH SCHUMACHER, REPORTER: The legislation passed Congress with big bipartisan majorities. It will provide $40 billion in military and economic aid.

It is intended to support Ukraine through September, and it dwarfs an earlier emergency measure that granted roughly thirteen-and-a-half billion.

The new legislation provides $20 billion in military assistance. That will ensure that advanced weapons continue to flow to Ukraine to help blunt Russia’s advances.

It also gives a billion dollars to help refugees—$8 billion in economic support and $5 billion to fight global food shortages brought on by Russia’s invasion.

Reporting for WORLD, I’m Josh Schumacher.

W.H.O. chief: The pandemic isn’t over » The head of the World Health Organization, Tedros Ghebreyesus, warned on Sunday that we’re nowhere near being out of the woods with COVID-19.

GHEBREYESUS: No, it’s most certainly not over. I know that’s not the message you want to hear, and it’s definitely not the message I want to deliver.

He said cases are now on the rise “in almost 70 countries in all regions, and this is in a world in which testing rates have plummeted.”

He added that “this virus has surprised us at every turn.”

GHEBREYESUS: A storm that has torn though communities again and again, and we still can’t predict its path or its intensity.

Cases continue to rise in the United States. That’s been the case for nearly two months now. That increase has been somewhat slow and steady—nothing like the huge omicron spike in December and January.

Still, U.S. cases have more than tripled since March—from about 29,000 infections per day to nearly 100,000 per day. But deaths have continued to slowly decline.

White House virus response coordinator Dr. Ashish Jha told ABC’s This Week that Congress must step up with more pandemic funding now.

JHA: If they don’t, we will go into the fall and winter without that next generation of vaccines, without treatments and diagnostics. That’s going to make it much, much harder for us to take care of and protect Americans.

Jha also recommended Americans continue to—or return to—wearing masks indoors in public.

I’m Kent Covington. Straight ahead: a Supreme Court oral argument lightning round.

Plus, a rock-n-roll hit makes its debut.

This is The World and Everything in It.

MARY REICHARD, HOST: It’s Monday, May 23rd and you’re listening to The World and Everything in It from WORLD Radio. Good morning! I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. It’s time for Legal Docket.

The current Supreme Court term ends next month and that means a slew of opinions will be handed down between now and then. Big issues like abortion, gun rights, and prayer still to be decided.

Last week, two opinions came down.

The first one is a win for a sitting United States senator. Ted Cruz of Texas challenged an aspect of the campaign finance law known as McCain-Feingold. That law capped the amount of personal loan money candidates can reimburse themselves using funds collected after election day.

A 6-3 decision said that rule violates the right to free speech. But the liberal justices criticized the majority opinion—for in their view ignoring the intent of the law which is to curb corruption.

Over the years, a few other provisions of McCain-Feingold already have been struck down as unconstitutional.

REICHARD: The second decision concerns immigration. A 5-4 ruling says regular courts cannot review factual findings made by judges in immigration courts.

This is bad news for a man from India in the United States for 30 years under a work visa. He didn’t go through the formal inspection process when he arrived in 1992. And he checked a box on an application for a driver’s license in 2008 that said “US citizen” when he was not.

Those things triggered deportation proceedings. The majority justices found such facts are not reviewable by a court.

EICHER: Okay, on to oral arguments.

Hang on to your seats, though, because we will hit highlights in five cases today, but within our usual time constraints. We’re going to go fast, so here we go:

Dispute Number One relates to the 1966 Supreme Court decision that gave us what’s been known ever since as Miranda rights. That ruling required police to advise suspects of their right to remain silent while in police custody and to obtain a lawyer before they’re interrogated.

Let’s flash back to February 1966. Here’s lawyer John Flynn. He represented Ernesto Miranda:

FLYNN: I believe the record indicates that at no time during the interrogation and prior to his oral confession was he advised either of his rights to remain silent, his right to counsel, or of his right to consult with counsel; nor, indeed, was such the practice in Arizona at that time, as admitted by the officers in their testimony. The defendant was then asked to sign a confession, to which he agreed.

A split court agreed that procedural safeguards are necessary to protect Fifth Amendment rights; people should be advised of their rights in order to assert those rights.

Fast forward 56 years to the question before the high court now: Just how far does Miranda go?

The facts are straightforward. Terence Tekoh worked at a medical facility in Los Angeles. Police officer Carlos Vega arrested him on suspicion of sexual assault of a patient—but Officer Vega didn’t issue Tekoh his Miranda rights.

Later on, a jury acquitted Tekoh of sexual assault.

Case closed? Not quite.

Tekoh then sued Vega for that failure to issue Miranda rights to him.

But is that failure by itself a sufficient basis for a federal lawsuit?

EICHER: It is not—to hear the lawyer for the federal government argue. Have a listen to this exchange between Assistant to the Solicitor General Vivek Suri and a more skeptical Justice Clarence Thomas.

SURI: Miranda recognized a constitutional right, but it's a trial right concerning the exclusion of evidence at a criminal trial. It isn't a substantive right to receive the Miranda warnings themselves. A police officer who fails to provide the Miranda warnings accordingly doesn't himself violate the constitutional right, and he also isn't legally responsible for any violation that might occur later at the trial. The Ninth Circuit's contrary decision should be reversed.

THOMAS: What if the police officer purposely lies in order to convince the prosecutor to use the statement?

SURI: We would still say that there is no Miranda claim, but I have to be clear that that issue is not properly presented in this case.

REICHARD: What stood out to me in this and several other arguments this term are comments from the justices about the role of the Supreme Court.

Listen to Justice Elena Kagan address the attorney for the police officer. She refers to what Miranda and subsequent case law has come to mean to Americans.

KAGAN: …that it, you know, was sort of central to people's understanding of the law and that if you overturned it or undermined it or denigrated it, it would be -- you know, it had -- would have a kind of unsettling effect not only on people's understanding of the criminal justice system but on people's understanding of the Court itself and the legitimacy of the Court and the way the Court operates and the way the Court sticks to what it says, you know, not just in a kind of technical stare decisis sense but in a more profound sense about the Court as an institution and the role it plays in society.

Alright, cases two and three both involve questions of procedure.

In one case, a man convicted of drug and firearm offenses appealed and lost. Then he tried to have the sentence vacated on the basis that he had a lousy lawyer.

But the crux of this case is based upon whether the judge was lousy, too: specifically, a mistake by the judge who found that the man missed a filing deadline, but in fact he really didn’t miss it.

So now the question is whether the Federal Rules of Civil Procedure allow courts to fix that problem.

Sounds straightforward. But it isn’t.

Listen to Justice Amy Coney Barrett opine that maybe both sides have this wrong.

BARRETT: You have the difficulty of distinguishing between fact and law, and then you also have the difficulty in identifying whose error was it? I mean, I think the government makes a good point, that it can be difficult to figure out if a legal error was by the litigant or by the court. It could be categorized as the counsel’s error. It could be categorized as the court’s error.

Justice Stephen Breyer acknowledged human error.

BREYER: Look, the judges do make mistakes. Give them a quick chance to do it, even if it’s one of law. Call it to their attention. Six of one, half dozen of the other because we have problems both ways.

The other procedural dispute involves two companies fighting over alleged fraud in a business transaction. They’d each signed an arbitration agreement to settle problems before an arbitration board in Germany.

But before arbitration can proceed, one company seeks discovery, that is, relevant documents and testimony, and wants a federal district court to compel the other party to provide it.

The question is whether federal district courts even have authority to make such an order.

Justice Kagan doubted one side’s interpretation of the law:

KAGAN: I mean, it all depends, right? And I guess my broader question is, like, really, what can you take from this language? I'm all for, you know, being serious about language when there's something to be serious about, but I don't know…

On to our fourth argument, a case captioned United States v Washington.

This one asks how state laws around workers’ compensation apply when federal contractors are involved.

Here’s the situation. The Department of Energy oversees cleanup of a nuclear waste site in the state of Washington. It’s expected to take 60 years! Some of those doing the work are federal contractors.

An old state law presumes health problems like cancer and lung disease will occur as a result of doing this kind of work. The law says that’ll trigger workers’ compensation benefits. The federal government contests that aspect.

After the Supreme Court took the case, Washington state changed that law, so now there’s an additional question of whether the case is now moot.

This dispute involves a doctrine called intergovernmental immunity. That prevents the federal government and state governments from intruding on each other’s sovereignty.

Lawyer for the state of Washington argued all this doesn’t matter anymore because the new law resolves the old problems.

But Justice Breyer wasn’t so sure about that.

BREYER: …if it’s a real problem, then I can’t say it’s moot.

OK, fifth and final argument today, this one about Chapter 11 bankruptcy and quirky laws governing bankruptcy in Alabama and North Carolina.

Those two states oversee corporate bankruptcies by the Judicial Conference and leave the appointment of trustees to handle the cases to the bankruptcy judges.

That’s different from the rest of the country. The US Trustee’s Office oversees Chapter 11 proceedings for the 48 other states.

There’re reasons for that. Too in the weeds for our purposes here, so I’ll spare you.

This is the point, though: The law requires payment to Trustees to come from the debtors’ estate.

A few years ago, Congress raised those fees up to $250,000. But that fee increase didn’t apply to Alabama and North Carolina.

Chief Justice John Roberts:

ROBERTS: What’s the reason? Why are there two different systems?

Very good questions, and whatever answers, we have a split in the circuits over this—meaning different circuit courts of appeals have answered differently and the Supreme Court needs to resolve that split.

As for the two different systems, the issue involves the way the fee increase is paid for. Companies in Chapter 11 bankruptcy have to pay it, but because Alabama and North Carolina aren’t in the same system of oversight, the US Trustee’s Office has to pony up millions of dollars in refunds to debtors. And it doesn’t want to, as you might expect.

Trustees say that disparate effect violates the Uniformity Clause of the U.S. Constitution. The problem is the Constitution requires bankruptcy laws to be uniform across the country, while federal law permits these different oversight systems.

Next week, we’ll complete analysis of all oral arguments this term.

And that’s this week’s Legal Docket!

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

NICK EICHER, HOST: Time now for our regular conversation on business, markets, and the economy. Financial analyst and adviser David Bahnsen is on the line. Good morning.

DAVID BAHNSEN, GUEST: Good morning, Nick, good to be with you.

EICHER: I want to pick up on a topic we started last week, David, because the markets really dropped again with the Standard & Poor’s 500 careening toward bear-market territory and I want to read a headline from The Wall Street Journal. “The Market Is Melting Down and People Are Feeling It.” Then the headline adds a spicy quote from a market advisor: “My Stomach Is Churning All Day.” David, can you relate? How’s your stomach?

BAHNSEN: My stomach is fine, that person who said that may want to find a different line of work if they find this market to be turning their stomach, it's a very volatile market. And this last week it had downside. For about six months the NASDAQ has had a lot of downside. But I'm not sure what this adviser’s experience is with financial markets that would make him think it is abnormal. The reason markets have delivered, you know, the 10% return per year going back 100 years is because markets are subject to various bouts of volatility and uncertainty. And what that does is generate what we call a risk premium. To be willing to go through moments like this, we require a higher expected rate of return. And that's sort of the point of being a stock market investor.

So what you've seen is the market have to kind of deal with two things at once. The first has been playing out for as I said, six months, it's not a new story. And that is companies that made stationary bicycles with an iPad on top that were worth more than some of the largest companies in the world have had to drop 95% in value because they were in a bubble, and the whole world lost its mind. And companies that made video camera technology—with no revenue—to talk to each other on a computer that were worth 14 times as much as the largest oil and gas company in the world - and America - had to reprice, because they were 70-80% overvalued. That kind of a thing started six months ago and has continued to play out and there's been a lot of carnage there.

And so I shouldn't be overly glib. If somebody is in that space, I can see where their stomach’s turning, but their stomach should be churning in repentance, of of the absurdity of the way they were managing capital.

I guess it doesn't mean people have to like it all the time. The Dow is right now down between 13 and 14% on the year. The average drawdown going back 50 years, meaning at some point from a high level to a low level in the middle of the year, every year for 50 years on average has been somewhere around 11%. So it isn't particularly abnormal. It's definitely worse for those that are heavy in growth. But that's different than saying ‘the market.’ I get very excited during periods of market volatility because I believe that it rationalizes the risk premium we hope to capture over long periods of time.

EICHER: Well, given that this is the big story everyone’s talking about, I would like for you to spend our remaining few minutes explaining, fundamentally, why is the market so volatile right now?

BAHNSEN: Yeah, the market is going down because risk assets are getting repriced in a different monetary environment. And so all risk assets are priced against a ‘risk free rate’ - the amount of return that you want and expect relative to giving up your money for a period of time. And when you get rid of your money for a period of time, you are getting rid of a risk free rate that you could have gotten on that money by holding on to it. So when that risk free rate is zero, it makes risky assets worth more. And when that risk free rate is 2%, it makes risky assets worth somewhat less. The more money one can get without risk, the less risk they're willing to take. But when you talk about the more diversified market that reflects the diversified nature of the American economy, that would include technology but would include the consumer, it would include industrials, it would include materials, it would include health care, which by the way, is doing very well in this period; it would include energy, which is done extremely well in this period up about 40% on the year.

Now, why do most investors not feel that? Because energy 10 years ago was 17% of the S&P 500 and six months ago, it was 2%. And so a lot of the anti-fossil fuel people that were successful in getting people out of their energy investments, they took an entire part of the population out of what has been the top performing area all of last year, and the first almost six months of this year.

So fundamentally, it is right now all markets that are down, but not all down equally, and not all sectors are down.

And so I believe that this transition in the market, Nick from growth into value—from overpriced speculative things to more rational and fair-valued type of investments, that's the theme that we're seeing. But then, right now, with the Fed tightening, it does exacerbate uncertainty, even in the quote unquote, “safer” and more rational parts of the market. And so you have to kind of take on a little more volatility there, as well. And I'm very confident that this will play out over time in a way that reprices assets as they ought to be repriced; that things that were excessively valued need to come down and that's good for markets. You want capital allocated towards its most rational use, and there was nothing rational about calling a bicycle company with an iPad on top a $50 billion company.

EICHER: All right, David Bahnsen, financial analyst and advisor, head of the financial planning firm The Bahnsen Group. He writes daily at DividendCafe.com. David, thanks.

BAHNSEN: Thanks so much, Nick.

MARY REICHARD, HOST: Today is Monday, May 23rd. Good morning! This is The World and Everything in It from listener-supported WORLD Radio. I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. Next up: the WORLD History Book. This week marks the anniversary of a successful flight around the world—retracing Amelia Earhart’s flight plan. Plus, the Supreme Court upholds the constitutionality of detaining a dangerous suspect. But first, the 60th birthday of a pop-culture earworm.

REICHARD: What a great age!

EICHER: Here’s Paul Butler.

PAUL BUTLER, EXECUTIVE EDITOR: We begin today on May 25th, 1962. The Isley Brothers release: “Twist & Shout.”

MUSIC: [Twist & Shout, Isley Brothers] 

The Isley Brothers’ recording eventually hit number 17 on the Top 100 Billboard chart. The song is actually a cover of a less successful version produced a year earlier by The Top Notes:

MUSIC: [First recording of Twist and Shout (Top Notes (1961)]

The “twist” in “Twist and Shout” comes from the 1950’s and early 60’s dance craze:

DANCE INSTRUCTOR: And the last element is bringing your heels forward on each turn so you get the full twist movement, and there you have it.

In 1963 the Beatles recorded their version of “Twist and Shout.” John Lennon disliked the song, but audiences loved it and it became one of their most popular hits.

MUSIC: [Beatles Ed Sullivan Show 1964]

“Twist and Shout” has been recorded by dozens of artists over the years. Twenty-four years after its first release, the Beatles version of the song hit the Billboard Top 100 once again in 1986. That, after it was featured in Ferris Bueller's Day Off. It peaked at No. 23.

Next, 35 years ago this week the U.S. Supreme Court rules that dangerous defendants can be held without bail. The case: United States v. Salerno.

The conflict before the nine justices re-considered the 1984 Bail Reform Act. That legislation allowed federal courts to detain someone before a trial if the government could prove potential danger to the community. Lawyer Anthony Cardindale argued on behalf of the respondent: mobster Anthony Salerno. Audio here from the oral argument.

ANTHONY M. CARDINALE: …up until this point, I think I certainly have lived under the assumption, and have practiced law under the assumption, that you got punished, you went to jail, only after the government was able, after trial, after proof of guilt beyond a reasonable doubt, to inflict punishment.

Cardindale appealed to the Excessive Bail Clause of the Eighth Amendment and the Due Process Clause of the Fifth Amendment to make his case for the unconstitutionality of the Act.

ANTHONY M. CARDINALE: …while I certainly agree that Congress has the power, and certainly the duty, to be concerned about the public welfare and safety, when it comes to this type of behavior…the Constitution must protect the individual and society at the same time. And when you deal with predictive behavior, the balance, I submit, is necessarily on the side of the individual. And it has to be.

In the end, the Court upheld the Bail Reform Act as constitutional by a 6-3 margin. Chief Justice William Rhenquest wrote this caution in his decision: “In our society, liberty is the norm, and detention prior to trial or without trial is the carefully limited exception.” The decision goes on to say that detention for societal safety reasons must be limited to a list of serious offenses—placing the burden on the government to prove significant threat. The accused are also guaranteed a speedy trial.

And finally, 25 years ago:  May 28th, 1997.

ANNOUNCER: And here’s our traffic director directing her in. Listen to the sound of those beautiful engines. Give her a wave out there.

Texas pilot Linda Finch completes her circumnavigation of the globe—touching down at an Oakland, California airport.

FINCH: Well, I learned as I say constantly that we never set our limits high enough. I can do more than I thought I can do. It's hard to push them up there and set them that high.

Finch flew a replica of Amelia Earhart’s 1937 twin-engine Lockheed Electra. Finch left the same airfield two and a half months earlier as she retraced Earhart’s intended itinerary.

Finch visited 18 countries during her journey. Her favorite part of the trip was the day she spent with Mother Theresa in India.

FINCH: I talk about that a lot. It was magnificent. I got to spend a morning in Mother Theresa's home and it was one of the greatest gifts I have ever received was my time there.

One spectator was particularly relieved when Finch successfully returned home—unlike her forerunner, Amelia Earhart.

SPECTATOR: I was here 60 years ago when Amelia took off. I was 10 years old … I live for this day. I tell you the truth. I was here in March when Linda took off and I had a sick spot—didn't think I was going to get through it. I got through it and I am here today. So it really is great. I got to shake her hand.

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

NICK EICHER, HOST: Tomorrow: showing up for school. We’ll tell you what educators are doing to get kids back to class after the disruptions of the pandemic.

And, record apprehensions at the southern border. We’ll get an update on the government’s plan to address illegal immigration.

That and more tomorrow.

I’m Nick Eicher.

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

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