Authored by Jeff Louderback via The Epoch Times (emphasis ours),

Nearly two years after newly elected President Joe Biden ordered a halt to construction on the project, the Department of Homeland Security announced on Dec. 13 that it will work to close gaps along the southwest border of the wall between the United States and Mexico.

Biden’s 2020 campaign promise was that he would not build “one more foot” of the border wall, which was one of former president Donald Trump’s most prominent objectives.

The Biden administration is confronted with finding solutions to address the end of Title 42, which is set to expire on Dec. 21. DHS has said that could lead to an estimated 9,000 to 14,000 illegal immigrants crossing from Mexico into the United States every day.

Created as part of the Public Health Service Act under President Franklin D. Roosevelt in 1944, Title 42 was designed to prevent the introduction of contagious diseases in the United States.

At the start of the COVID-19 pandemic in 2020, the Trump administration invoked the order to restrict migrant entry into the United States.

For the 12 months ending Sept. 30, 2022, Customs and Border Protection stopped migrants more than 2,766,582 times, compared with 1.72 million times in fiscal year 2021, which was the previous high.

Once Title 42 is lifted, the number of migrants that Border Patrol agents must process will “likely be double or greater,” according to a U.S. Department of Homeland Security Office of Inspector General report released in September.

In addition to closing seven “small gaps” in the wall in the Yuma, Arizona, sector and filling in another space in the El Paso, Texas, sector, crews will also work on environmental issues surrounding the wall and finish building roads, according to DHS.

Overall, the new work will occur in the Border Patrol’s San Diego sector, which includes western Arizona and part of eastern California, and the El Paso sector, which covers western Texas and New Mexico.

Early in his tenure, Homeland Security Secretary Alejandro Mayorkas indicated last year that gaps would have to be closed, but DHS has been slow to move forward with the task.

The gaps have allowed illegal immigrants to enter the United States and add to the record number of illegal border activity that has escalated since Biden took office in January 2021.

Building the border wall was one of Trump’s most widely discussed campaign promises in 2016. The Trump administration erected more than 450 miles of fencing and planned on adding around 300 more miles of construction.

After Biden took office, crews were permitted to fill in holes and tie down loose materials, but they were ordered to halt construction.

A Government Accountability Office audit conducted in 2021 discovered that 69 miles of the wall constructed during the Trump administration includes all of the technology and the roads.

Construction at some parts of the wall created environmental issues that need repairs, which will take place as part of the new project, according to DHS.

This work will include installing drainage systems, adding safety features to roadways, and remediating some construction sites between El Paso and San Diego, DHS said.

“Prior to work, the Department of Homeland Security will work closely with stakeholders, including impacted landowners, tribal, state and local elected officials, and federal agencies to seek input and help on prioritizing potential remediation activities within each sector,” the DHS said in a statement.

Border Patrol agents have frequently emphasized the importance of a wall to help control illegal immigration.

In El Paso, Border Patrol said its agents are stopping migrants around 2,400 times a day on average compared with approximately 1,700 each day in previous months.

The migration rate across from Mexico into Texas has recently spiked with the rapidly approaching end to Title 42.

Migrants processed under the policy are not permitted to request asylum in the United States and are removed from the country.

On paper, Title 42 covers the Canada and Mexico borders and migrants of all nationalities. It has mostly been used along the southern border to remove illegal immigrants from Mexico, Guatemala, Honduras, and El Salvador from the United States.

One of Biden’s first actions as president was ending the “Remain in Mexico” policy implemented under Trump.

Under that law, asylum-seekers were required to remain in Mexico while their asylum claims were processed. Figures showed that the policy discouraged false asylum claims and decreased the number of illegal immigrants.

Blackstone Inc.’s stock is down 42% year-to-date. The $68 billion Blackstone Real Estate Income Trust (BREIT) informed investment advisors and portfolio managers last month who plowed money into the fund that redemption requests in November and December would be capped. Recall BREIT’s redemption request policy is 2% of NAV can be redeemed per month or 5% per calendar quarter. This was the first-time BREIT faced redemption limits, spooking money managers. Then the Blackstone Private Credit Fund (BCRED), one of the largest investment vehicles with a portfolio of corporate loans, was subjected to redemption limits as now the Securities and Exchange Commission investigates. 

BREIT and BCRED enforcing redemption limits have been the chatter on Wall Street. Earlier this month, we shared a “BREIT Advisor Guide” that was emailed to money managers with a Q&A section to keep their clients calm and prevent a further run on the fund.

Over the last several years, the non-tradeable funds have been massive outperformance vehicles for wealthy clients. Now there’s a sense of panic given the challenging macro conditions as the Federal Reserve risks sending the economy into a hard landing in the second half of 2023 due to overtightening. Investors fear these non-tradeable funds could become illiquid despite good performance and are pulling out funds and asking questions later. 

BREIT’s Advisor Guide to money managers blamed the increased redemptions on Asia.

 Bloomberg noted the same thing:

BREIT’s success has started to complicate its future. It’s attracted investors from all over the world, meaning it is exposed to the trends in a wider array of markets. In Asia, the strong dollar caused BREIT to become a bigger position in leveraged portfolios of wealthy Asians. When home markets tanked, a slew of Asian investors faced margin calls and turned to the parts of their portfolios that could be readily turned to cash — including the Blackstone trust.

Now the only issue is that someone yelled fire, and investors are panicking, which has caught the attention of the SEC, according to people familiar with the matter. Here’s what they told Bloomberg:

The regulator is trying to understand the market impact and circumstances of the events, and asked how the firms met redemptions and if affiliates sold before clients, one of the people said. The inquiries aren’t any indication that either firm is under investigation or committed any wrongdoing.

Here’s a timeline of BREIT’s redemptions via a recent note by Barclays.

Problems for Blackstone are worsening. Financial Times, citing sources, said the New York-based investment manager could delay the launch of the Blackstone Private Equity Strategies Fund, or BXPE, due to the unresolved issues surrounding BREIT and BCRED, dismal fundraising conditions, volatile financial markets, and an aggressive Fed tightening monetary conditions to tame inflation. 

These issues are “casting a shadow over the entire industry,” said Sheldon Chang, president of CrowdStreet Advisors. He said, “it will prompt a review of semi-liquid funds and their structure. People will tend to get overly conservative.”

Blackstone has sent its top executives to financial media outlets to counter the redemption panic. President Jon Gray went on CNBC the other day to calm fears. At a conference, Steve Schwarzman, Blackstone’s chief executive officer, said that BREIT’s redemptions were due to investors needing liquidity for other reasons rather than issues with the fund. 

What appears to be happening is that investors are exiting hard-to-trade assets ahead of the possible recession next year. People are building cash as the risk now is that the Fed could cause a hard landing. 

Authored by Bryan Jung via The Epoch Times (emphasis ours),

Congress is negotiating more than 7,500 “pork-barrel spending” earmarks totaling $16 billion for a year-long omnibus spending bill.

The annual fiscal spending bill, which is meant to keep the federal government funded, will expire at the end of the current fiscal year, in September 2023.

A ban on earmarks was instituted in the House of Representatives since 2011, when Republicans controlled the chamber; but House Democrats recently revived them last year, with provisions to increase transparency.

House Republicans Cave on Earmark Spending, Outraging Fiscal Conservatives

However, the House Republicans voted to retain earmarks for annual spending bills after they won a slim majority in the midterm elections, outraging fiscal conservatives.

The $16 billion in proposed pork barrel spending projects for next year currently dwarfs the $9.7 billion in earmarks passed through the fiscal spending bill for 2022, reported Bloomberg.

Members in both houses are now attempting to negotiate a deal and avoid a year-long stopgap measure that would not include earmarks for lawmakers’ favorite pet projects.

The caving of House Republicans on earmarks is a significant victory for caucuses and members in swing districts, but a defeat for conservatives intent on reining in spending to reduce the federal deficit and waste.

Fiscal conservatives lost an earlier 158–52 closed-door vote at the GOP conference on Nov. 30, giving Republican leaders the power to bring spending bills to the floor that contain local funding for members’ favorite projects, reported Bloomberg.

Rep. David Schweikert (R-Ariz.) told Bloomberg that he opposed the decision on earmarks because he remembered “the bad old days” when it was abused by members for personal gain, and he believed that his peers were swayed by an argument that Congress members need to take back control of spending decisions.

“There’s an argument saying, look we do have certain things that have federal nexus, how do you do that open and transparent?” Schweikert said.

“But it can’t be buying a museum for someone to curry favor in the district.”

Certain retiring senators would be among the “biggest winners” if a deal on the omnibus was agreed upon, such as Senate Appropriations Chairman Patrick Leahy (D-Vt.), who got $213 million in earmarks; Vice Chairman Richard Shelby (R-Ala.), with $656 million in earmarks; and Senate Armed Services ranking member Jim Inhofe (R-Okla.), with $511 million in earmarks, Bloomberg Government reported.

Earmark Appropriations Surge for Fiscal Year 2023

As noted, the general omnibus framework agreement includes over 7,500 earmarks totaling $16 billion in 2023 appropriations bills that could make it into the overall annual spending package, reported Bloomberg Government.

The omnibus spending package comprises 12 separate appropriations bills, which span more than 2,500 pages of text, according to the Cato Institute, a libertarian think tank.

Bloomberg Government reported a total of 3,123 earmarks from the Senate, which will cost taxpayers $7,780,973,000, and 4,386 earmarks totaling $8,231,999,565 from the House, in next year’s appropriations bills.

Both chambers have proposed a combined 7,509 earmarks totaling $16,012,972,565.

However, the total of earmarks are slightly less than 1 percent of the roughly $1.7 trillion government spending bill that lawmakers expect to pass before the end of the year, Bloomberg reported.

Lawmakers in both parties reached a compromise in 2022, by agreeing to apply a 1 percent cap on new earmarking after it was revived for the fiscal package that year.

The Congressional Research Service defines earmarks as a benefit to “a specific entity or state, locality, or congressional district other than through a statutory or administrative formula or competitive award process.”

They consist of spending provisions or “pork” that members of the House and Senate attach to bills that are likely to pass and signed into law.

Many lawmakers enjoy adding earmarks into bills for projects in their districts, but they also have the reputation of being abused as a reward for members’ key donors and special interests.

Congressional leaders also like the use of earmarks to convince members of their caucus to vote with the party line by providing favors for their districts or states back home.

“If Congress extended all spending in the current Continuing Resolution for the remainder of FY2023, the U.S. would spend $1.707 trillion in discretionary spending,” wrote Romina Boccia of the Cato Institute in October.

“Add to that the $4.2 trillion (without subtracting off‐​setting receipts) in mandatory spending the Congressional Budget Office projects for FY2023, and the federal government is projected to spend nearly $6 trillion this year.”

“And even these staggering figures likely understate next year’s federal spending footprint since they do not account for spending by the CHIPS Act, the Inflation Reduction Act, nor the most recent student loan forgiveness by executive order.”

House Passes Short-Term Funding Measure to Avoid Last-Minute Shutdown

The House approved a stop-gap spending measure on the evening of Dec. 14 to extend funding for federal agencies through Dec. 23 and avoid a partial government shutdown.

The final vote was 224–201, with nine House Republicans joining Democrats, giving Congress further time to craft a larger annual spending package.

Republican leaders in the House opposed the stop-gap legislation, calling it an “attempt to buy additional time for a massive lame-duck spending bill in which House Republicans have had no seat at the negotiating table,” reported CBS News.

“This Continuing Resolution is a simple date change that keeps the government up and running as we negotiate the details of final 2023 spending bills,” announced the Chairwoman of the House Appropriations Committee, Rep. Rosa DeLauro of Connecticut, a Democrat.

“I am encouraged by the agreement we have reached on a framework that provides a path forward to enact an omnibus next week. The House and Senate Appropriations Committees are working around the clock to negotiate the details of spending bills that will be supported by the House and Senate.”

The problems for Elon Musk continue to pile up in all directions around him. 

Of the many outstanding issues Musk and Tesla (not to mention Twitter) are dealing with is a 2017 lawsuit that called the company a “hotbed for racist behavior.” The plaintiff in that case, Marcus Vaughn, is now trying to add more than 100 workers to the lawsuit. 

Tesla meanwhile has asked a California appeals court to force the complaint into private arbitration, which would prevent a class action status, Bloomberg reported Thursday. 

Five years ago, Vaughn had claimed that “racial discrimination and harassment were widespread at Tesla’s factory in Fremont, California”. The company punched back in a blog post and fired three employees after looking into some of the incidents in question. 

Vaughn said he heard the “N-word” used at least 100 times while working at Fremont. He also said that employees called the factory “the plantation” or “slaveship.” 

Vaughn’s lawyers certainly smell blood in the water at Tesla – they also represented a former elevator operator at the company who won a $137 million jury verdict over the company last year for discrimination. 

That case is now in appeals and is expected to be settled within 90 days, Bloomberg noted. 

Authored by Eva Fu via The Epoch Times,

The recently revealed censorship that has plagued Twitter in recent years is “criminal,” according to former White House COVID adviser Dr. Scott Atlas, as it allowed “lies to be imposed on the public” during a pandemic that wrought untold damage worldwide.

“When correct science policy is blocked, people die, and people died from the censorship,” Atlas, a special coronavirus adviser during the Trump administration and contributor to The Epoch Times, said in an interview.

Atlas was speaking days after Elon Musk, the new owner of Twitter, released troves of internal files showing how the previous Twitter team built a blacklist to limit disfavored tweets’ visibility without the knowledge of those using the platform. Among those flagged was Dr. Jay Bhattacharya of Stanford, whose tweet criticizing pandemic lockdowns shortly after joining the platform last August got him on the “trends blacklist” preventing the amplification of his tweets.

But such revelations, Atlas said, are “only the tip of the iceberg.”

“There’s a far larger story here that we need to hear,” he said, which he considers “far more nefarious and more systemic than isolated tweets being pulled down.”

“This seems to be criminal behavior, and I think it needs to be investigated in the courts,” he said.

The Censorship of 2020

Atlas wants to direct attention back to 2020, when health officials followed in the Chinese Communist Party’s footsteps to implement blanket COVID-19 lockdowns.

In November of that year, while Atlas was still on the White House’s coronavirus task force, Twitter took down his post that argued mask-wearing was not effective in curbing the spread of the virus—a decision celebrated by some proponents of the measures, including fellow task force member Dr. Deborah Birx.

“One would think that the American public should hear what the adviser to the president is saying during the pandemic of 2020. Yet Twitter decided to simply block that discussion from the public,” he said.

Both Twitter and Facebook that August also removed a video from President Donald Trump in which he said children are “almost immune” to COVID-19. That same month, Facebook said it had deleted 7 million pieces of content it deemed to be COVID-19 misinformation over the second quarter of 2020.

Despite most states having a mask mandate until early this year, a number of studies found children and teenagers to be at a far lower risk of getting or dying from COVID-19, even with the emergence of new variants. But the “censorship of 2020,” be it deleting individual tweets, suspending accounts, or blocking the amplification of posts, had done its damage.

“When decisions were being made in 2020 and imposed upon the public, that’s when censorship counted the most,” Atlas said.

The absence of alternative viewpoints manipulated not only the public, but government officials as well, Atlas said.

“It created this illusion that there was a consensus among science and public health policy experts that lockdowns should be imposed; it created and perpetrated lies that if you were opposed to lockdowns, you were choosing the economy over lives, and that if you were opposed to lockdowns, you were somehow calling for letting the infection spread without any mitigation whatsoever,” he said.

“They absolutely contributed to policies that killed massive numbers of people and destroyed children and low-income people, who are the most vulnerable. That’s why it’s criminal.”

Atlas has been a vocal critic of COVID-19 lockdowns since early on in the pandemic, saying that “targeted protection was the logical, safer, and ethical way to manage the pandemic.” In May 2020, he wrote an article for the Hill warning about the “millions of years of life” such policies would cost Americans.

Learning loss aside, the pandemic restrictions led to an explosion of child abuse, drug overdoses, mental health issues, and obesity among youth, who were deprived of normal social interaction and forced to continue schooling through remote learning.

Collectively, America’s social media and legacy media, “coupled with incompetent bureaucrats running the policy and ignorant university professors have left a sinful legacy of damage,” said Atlas—the reason for the massive loss of trust in public health agencies that people depend for guidance in future crises.

Former Twitter CEO Jack Dorsey recently said his “biggest mistake” while at the company was to “invest in building tools for us to manage the public conversation, versus building tools for the people using Twitter to easily manage it for themselves,” a decision he said has “burdened the company with too much power.”

Late last month, Musk announced an end to the COVID-19 “misleading information” policy, which has resulted in 100,000 pieces of content cut from the platform and more than 11,000 account suspensions.

Atlas welcomed the gesture but thought that more individuals need to “rise up” for real change.

“There should be a public outrage that is massive,” he said.

He believes those the American public elected to represent them haven’t done their part.

“Where are our elected officials in this, where are they?” he asked. “If they can’t act, simply for ensuring free speech, they should all step down.”

‘Distortion’ Around Vaccine Mandates

A recent study published in Nature of over 15,000 citizens across 21 countries shows that people who have received COVID-19 vaccines are far more likely to be prejudiced against the unvaccinated than the other way around, which Atlas saw as yet another illustration of how social media censorship has shaped public opinion through suppressing critical information.

More than 5.47 billion people worldwide have received at least one dose of one of the COVID-19 vaccines, accounting for roughly 70 percent of the world population, despite a “thorough, detailed understanding of efficacy and side effects from the vaccines,” Atlas noted.

But because of the lockdown mandates, which he called “pseudo-scientific,” throngs of workers in healthcare, education, and the military lost their jobs and hospitals suffered staffing shortages, causing backlogs of patients needing vital treatment for other non-COVID-19 diseases.

In perpetrating a “false narrative,” social media platforms have deviated from their promised role as a digital town hall and a visible source of information, and instead allowed themselves to be a tool for harm, said Atlas.

“We are living in an Orwellian society if this sort of censorship is allowed to keep going.”

Atlas faced considerable pressure in 2020 for airing his views on COVID-19 and resigned after four months of repeated clashes with other members of the task force. But he said this “character assassination” won’t stop him from doing what he believes is right.

He quoted English writer G. K. Chesterton: “Right is right even if nobody does it. Wrong is wrong even if everybody is wrong about it.”

Thousands from around the world, he said, have written to him encouraging him to keep speaking up, including some “whose family members had committed suicide from the lockdowns and many in the health profession who said they were “afraid to step forward.”

“We need people with integrity to rise up when the pressure is on, and when you do that, you empower other people to speak up.”

Authored by Jonathan Turley via jonathanturley.org,

Despite my support for Elon Musk’s continuing efforts to reduce censorship and restore free speech protections on Twitter, I have been critical of some of his moves from his use of polls on restoring certain posters to the suspensions of media figures this week. However, this morning, I was struck by the European Union (EU) rushing into the controversy to threaten, again, sanctions against Musk. The EU is apparently aghast that Twitter could suspend media even temporarily after ignoring the bans on conservative media for years under the old management.

I understand Musk’s view of such tracking as a form of doxxing (particularly after a man reportedly used the information to attack the car with one of his children inside). Doxxing has long been subject to suspension. Indeed, figures connected mainstream media from CNN to the Washington Post have been previously accused of doxxing. Liberal groups were accused of doxxing conservative justices and others, including dangerously posting information on the children of Justice Amy Coney Barrett. It does not seem to matter when the targets are conservative, Republican, or libertarian.

However, it was the appearance of the EU that was most jarring. We have been discussing efforts by figures like Hillary Clinton to enlist European countries to force Twitter to restore censorship rules. Unable to rely on corporate censorship or convince users to embrace censorship, Clinton and others are resorting to good old-fashioned state censorship, even asking other countries to censor the speech of American citizens. It is an easy case to make given the long criminalization of speech in countries like France, Germany, and England.

The EU responded immediately by threatening Musk that restoring free speech could result immediate sanctions or an entire ban.  Now, EU commissioner Vera Jourova warned that the EU’s Digital Services Act was preparing to act to defend press freedom: “Elon Musk should be aware of that. There are red lines. And sanctions, soon.”

Jourova’s self-righteous tirade was almost comical given the EU long-standing attacks on free speech and silence of prior media suspensions. Jourova insisted “[The] EU’s Digital Services Act requires respect of media freedom and fundamental rights. This is reinforced under our Media Freedom Act.”

Really? Where was Jourova and the EU when Twitter was aggressively suspending media like the New York Post for publishing the true story of Hunter Biden’s laptop? How about the slew of conservative writers and experts barred for questioning official accounts on issues ranging from Covid to climate change?

…How about the slew of conservative writers and experts barred for questioning official accounts on issues ranging from Covid to climate change? The past suspension of writers like Greg Piper, Alex Berenson, and others was not nearly as concerning for the EU.

— Jonathan Turley (@JonathanTurley) December 16, 2022

Not surprisingly, the EU is threatening to use the unprecedented anti-free speech law recently passed by the body.

For years, some of us have denounced the EU’s efforts to pass the Digital Services Act, a roadmap for state censorship on the Internet. It is the Western embrace of Chinese style speech controls on the Internet. The chief censor in the West has been Breton, who has shown open contempt for free speech values.

Breton has made no secret that he views free speech as a danger coming from the United States that needs to be walled off from the Internet. He previously declared that, with the DSA, the EU is now able to prevent the Internet from again becoming a place for largely unregulated free speech, which he referred to as the “Wild West” period of the Internet.

Jourova has also been a leading anti-free speech voice globally. She has pressed the United States for greater and greater censorship, declaring “democracies may die in noise and cacophony.” She wanted the tiddy silence and order that comes from state imposed censorship.

Now, however, Jourova is deeply upset that some are being suspended as part of an anti-doxxing rule. Of course, the past suspension of writers like Greg Piper, Alex Berenson, and others was not nearly as concerning for the EU. The “red line” was only crossed when favored media were subject to such suspensions. The fact that this comes soon after threatening Musk not to restore free speech rights only makes the EU’s position more maddeningly conflicted and obtuse.

While I disagree with the scope of this action, I still support his efforts at Twitter in the fact of an all-out-war declared by an alliance of political, media, and business interests. Musk has dismantled one of the most massive censorship systems in the world. Many of us in the free speech community will not hesitate to call him out when he is wrong, but the EU and many of these anti-free speech figures can spare us the transparent outrage after years of supporting censorship.

Just last month, EU officials were threatening @ElonMusk with sanctions and other legal reprisals if he doesn’t censor more.

Now they’re threatening him with sanctions due to last night’s bans.

Do you see the issue? Zero principles. Just whether the right people are censored: pic.twitter.com/Uv46J6jJJ0

— Glenn Greenwald (@ggreenwald) December 16, 2022

The Russian government has said one of its diplomats stationed in Africa was hospitalized Friday after opening a letter bomb, which detonated upon opening. 

“Dmitry Sitiy, who runs the Bangui branch of Russian House, a state-funded cultural center that promotes Russian culture around the world, collected a parcel addressed to him from a DHL office earlier on Friday, according to a source in the Russian Embassy cited by news agency RIA Novosti,” The Moscow Times writes, citing state sources.

“The parcel — which had no return address on it — later detonated when Sitiy opened it at his home. Sitiy was hospitalized, although the severity of his injuries remains unclear,” authorities detailed.

Police in the Central African Republic, or CAR, called it a terrorist act, describing further that the diplomat had previously received death threats.

“Earlier, he received the first package, and when he opened it, there were threats in it,” CAR police chief Bienvenue Zokoue said. “He contacted me so that I could help him identify the person who sent it.”

Russia’s foreign ministry subsequently described that the mail bomb was a deliberate attempt by nefarious entities to “harm” ties between Moscow and the CAR government. 

“We strongly condemn this criminal action, which is clearly intended to hinder the activities of the Russian House in Bangui and, more broadly, to harm the successful development of friendly relations between our two countries,” the ministry said.

It’s unclear if the mail bomb attack is related to the ongoing Ukraine war, but the last month has witnessed a string of mysterious parcel bomb incidents at European as well as Ukrainian consulates and embassies across Europe. The US Embassy in Madrid at one point even had a mail bomb sent to it, which was intercepted by security services before it arrived on the grounds in a December 1st incident.

Dmitri Sytiy, the nominal founder of Wagner-linked Prigozhin firm Lobaye Invest in the Central African Republic, reportedly hospitalized after being injured by a mail bomb. Prigozhin blames France via Concord Press Service on VK. https://t.co/Gsy6pWm4eq

— Jack Margolin (@Jack_Mrgln) December 16, 2022

One aspect to tensions over Russia’s presence in central Africa is the activities of Wagner Mercenaries. French officials in the same region have complained of the threat and shady activities of the Putin-linked Russian security firm, so it’s possible the mail bomb attack on the diplomat may be related to these ongoing tensions, and also could be related to the Ukraine conflict.

Some reports are saying Sitiy is in serious condition, and CAR authorities along with the Russian Embassy are conducting a full investigation.

By Michael Every of Rabobank

2022 was a year dominated by inflation, capped off with a week of 50bp rate hikes from the Fed, the BOE, and the ECB, and even the suggestion of less ridiculously-easy BOJ monetary policy.

Stefan Koopman (see ‘Division!’) underlines the BOE’s 2-6-1 split decision to hike 50bp to 3.50%, with two votes for no change and one for 75bp. He thinks the downshift to 50bp combined with the net dovish dissent signals the MPC is looking for a landing zone in H1 2023, but that it will take some time to get there, particularly due to the tight labour market. He forecasts a terminal BOE rate of 4.75%. The math issue is if the BOE is doing long division.

The ECB also went 50bp, taking the deposit rate to 2%, and reportedly this was only not 75bp due to Lagarde emphasizing several more 50bp hikes to come: one in February, and another one or two after that, which is a clear upside risks to our forecast of another 50bp in February followed by two 25bp hikes (see ‘More to Follow’). Note that even that would not put the deposit rate above the projected level of core CPI by end-2023 (4.2%). Indeed, the updated ECB projections show it missing its inflation target through to end-2025. It therefore intends to maintain restrictive rates, and QT is starting soon too, thought with no active sales of securities.

There were few takers in December 2021 for the view that 2022 would end with rates here, with the promise of them moving higher. However, the risks were visible: the logistics industry was tearing its hair out over how Deep the Ship was that we were in, and military experts were doing the same over Russia’s troop build-up. Have lessons been learned as we head into 2023?

On rates, the market is only very reluctantly being disavowed that imminent pivots loom. The room for further volatility in terms of the level of yields, if not the flattening of curves, as well as in key FX crosses, as the reality of what is actually happening sinks in remains.

On geopolitics, there is still little market focus on potential flashpoints outside Ukraine –although CEOs are aware– and the market is pricing that the Ukraine War is dialling down despite Ukrainians and Russians both saying they are in this for the long haul, and the former just saying that the latter will try for Kyiv again at some point eventually.

In logistics, markets are confusing a collapse in demand with an improvement in supply. First, the absence of ships off the port of LA/Long Beach is due to the slump in retail sales reported this week, but also due to firms moving to other, now more strained, US ports: don’t believe charts showing LA/LB backlogs as a metric of supply chains ‘healing’. Second, if the scale of Covid disruption about to hit China had coincided with demand remaining where it was, we would again be seeing stories of goods shortages and even more rampant supply-side inflation. Third, while ocean carrying rates on most (not all) routes are back to more normal levels, that is in the face of a looming recession: and blank sailings and scrapping older tonnage aims to bring supply down to lower demand to keep freight rates up.  

Indeed, the industry is not learning much from 2022. Shipping Australia warns of ‘Five problems that could slow supplies of food, computers, cars and other goods this winter*’ (inflation, labour unrest, energy shortages, geopolitics, and extreme weather), and notes “global external shocks require a total rethink, repurpose and reform of the process of globalisation.” Yet it “cautions against government support for protectionist maritime policies”, is against Aussie trucking too; urges the Productivity Commission’s inquiry into maritime logistics to drop all key proposals; and opposes “the Federal government handing control of supply chain to unions”.

So, there are huge problems – but doing more of the same is the proposed solution. Shipping Australia specifically argues Oz is failed by its version of the US’ Jones Act, which only allows domestically owned and registered vessels with domestic crews to engage in cabotage, or trade between domestic ports, and should scrap it. They also argue the Jones Act is an economic failure for the US, citing pro-union Democrat AOC on how unfair it is on Puerto Rico(!) while arguing for lower maritime wages and increased foreign penetration of an industry with massive national security implications. They even conclude with the Karl Marx quote that history repeats itself, first as tragedy, then as farce – and again as 2022, I might add.   

Their core argument inverts the actual problems 2022 raised, including for central banks. They rightly point out the Jones Act hasn’t seen either the US or Australia build more merchant ships; but they fail to point out that this is the failure of neoliberal capitalism in the face of competition from state capitalism and mercantilism, not the Jones Act. Without beating any nationalist drum, Shipping Australia has NO AUSTRALIAN SHIPS, with membership comprised of Hong Kong, Dutch, Japanese, Taiwanese, Danish, Italian, Djibouti, and Norwegian/Swedish firms. Their argument against “government support for protectionist maritime policies” is against proposals to build a national Aussie carrier to ensure services in an emergency, and to reduce prices in what the White House alleges is a cartelised global industry. The Chair of the Aussie parliament’s Joint Standing Committee on Treaties meanwhile stresses, “Without a sovereign shipping capacity, our economy and security is at risk…. Maintaining an effective maritime capability requires naval capacity, an Australian merchant marine, a shipbuilding and sustainment industry and, of course, a skilled workforce and training framework.” He adds there is no Australian-flagged ship capable of transporting petroleum.

Where this links to central banks is that capital flows where it can make most money – and that isn’t into a rival to a global ocean carrier cartel, however needed. Or into infrastructure; or into productive investment that increases supply. Economies practising mercantilism do all that – and so they dominate said supply. As such, it doesn’t matter how low you set Western rates, because there are financial bubbles to chase instead of vital investments. Yet then you end up with highly vulnerable logistical systems and economies, and rate hikes, as 2022 demonstrated.

Logically, the way to get cheaper long-term ocean carrying without a recession, and the spare capacity to build up one’s navy at short notice, is to have the Jones Act; and a larger ship-building industry and a larger merchant marine. That history is clear for the US: W.L. Marvin (1903) underlines if you don’t control the oceans, you don’t control much – and if you control the oceans militarily, but not economically, you won’t control them for long, because you are literally paying to open the doors to your own rivals. That is why legislation is before Congress to strengthen the Jones Act.

Likewise, it seems the only way to get more supply of reliable key goods is for a protectionist shield for the private sector to operate behind; and state spending to jump start it; and central-bank rate hikes to choke off bubble alternatives. Relatedly, the US Inflation Reduction Act, alongside Europe’s energy crisis, is threatening to suck European industry and jobs to the US. Again, a policy of tax incentives and local content provision alongside state spending –and the failure of Europe’s neoliberal reliance on Russia– is a gamechanger. So much so that Germany’ Scholz says Europe must be included under the same US policy umbrella, like Canada; and France’s Macron warns if Europe doesn’t, then there won’t be much of Europe left, so the EU will then have to respond in kind.

Meanwhile, Indonesia is going a route I spent 2022 arguing would end up being embraced after others have been tried and failed: to get the central bank to cover the fiscal deficits required to jump-start state supply-side spending, even as rates are raised. Its parliament just passed legislation mandating Bank Indonesia to directly finance the budget in times of defined crisis, as it has been doing, while also recognising a digital rupiah as legal tender. I suspect 2023 will be a year in which these kind of thoughts will resurface in ‘developed’ markets too.

In short, whether it be rate hikes, the shift towards mercantilism, or defence spending, we are all keeping up with the Joneses… and getting rid of ‘the Jones Acts’ only makes sense if you think that more neoliberalism is still the cure for all our problems. Which is like saying we need more housing bubbles and exotic derivatives after 2008; more Brexit after Brexit; more QE after QE; more crypto after FTX; more globalisation and integration after Ukraine; and more rate cuts after decades of them ending up with double-digit inflation – but of course these are still popular views in some circles. Yet if you think the Joneses trend won’t have enormous economic, market, and geopolitical consequences then you are making the same error to end-2022 as you would have made at end-2021 when ignoring panicked logistics industry or military experts.

This is my last Daily for 2022, though the Global Daily goes on under other authorship until just before Xmas – so please keep reading! Best wishes from me to all readers.

Happy Friday – and an early Happy New Year.

A 50-foot tall, 264,000-gallon aquarium containing around 1,500 tropical fish burst in the German hotel in the capital of Berlin on Friday, sending fish and water through the lobby and onto the street, along with all sorts of hotel debris – from bellhop trolleys to twisted lamps.

Guests described the scene as a street strewn with dying fish, some of which appeared to have frozen to death in 19-degree F frigid morning temps, the NY Times reports.

According to police, the aquarium – known as the AquaDom, exploded early in the morning. Two people injured by glass shards were taken to a local hospital. Around 100 firefighters arrived on scene, which is currently under investigation.

The incident caused “incredible maritime damage,” according to the police, who noted that the aquarium held around 100 species of tropical fish.

Und so sieht es drin aus #aquarium #berlin pic.twitter.com/QyiImxbxvW

— rbb|24 (@rbb24) December 16, 2022

A video made by Sandra Weeser, a member of the federal Parliament who was staying at the hotel, showed the wreckage of the giant tank amid mangled debris.

In an interview on local television, Ms. Weeser described waking up to a shock wave that she thought was a small earthquake before falling back asleep. When she got up an hour later, she saw dozens of people and firefighters outside the hotel, and was soon guided out of the building herself. -NYT

“It’s a picture of devastation with lots of dead fish and broken shards,” said Weesler. “The ones that might have been saved were frozen to death.”

Update- being evacuated from #radissonblu and #aquadome now. Here’s my view as we left pic.twitter.com/vCjXjZde40

— Larissa (@lararimmer) December 16, 2022

The AquaDom stood 46-feet high, 38-feet in diameter, and cost around $13.6 million to build. It opened in 2003, and underwent a modernization procedure around two years ago. It was described by its makers as the largest cylindrical free-standing aquarium in the world.

The incident resulted in a shutdown of the building’s power, which put other fish at risk housed in smaller aquariums inside the building.

“The fish that have survived are being moved as safely as possible,” said Markus Kamrad, an official at the Berlin Senate. “Our Plan A is to reactivate the electricity. Plan B would be to bring them to a safe location, and we have some offers from places that say they are ready to take them.”

Authored by Simon White, Bloomberg macro strategist,

Equities will remain mired in a bear market until we see a turnaround in global growth, a revival in investor sentiment and positioning, and a resurgence in excess liquidity.

Seasonally, the last quarter of the year is the best for US equities and this year, despite the misery of the bear market (if you’re a long-only investor), the fourth quarter is on course to be by far the best – and only positive – one of the year.

But this is not a new dawn, and even if the year manages to finish on a festive high, the throbbing headache of the bear market will return in 2023, due to (at least) three major headwinds for US stocks.

First, there is the ongoing global slowdown. Higher rates around the world along with protracted Covid restrictions in China have blunted global growth. Rates around the world looked to have turned a corner, and peak global hawkishness is behind us, but it will take time for this to feed through.

Further, in China, even though there is incremental easing in Covid measures, a strong and immediate bounce back can’t be assumed when the populace has been living in fear to a virus most of the rest of the world has adapted to with the help of effective vaccines.

One of the best barometers of global growth is South Korean exports. As a small, open, trading economy, its exports are sensitive to the cross-currents in global growth. As the chart below shows, US earnings will face mounting headwinds while South Korean exports continue to fall. Moreover, we are unlikely to see a bounce in P/Es while inflation remains elevated.

Second, investor sentiment and positioning in equities continues to weaken. Retail-investor cash positions continue to rise to the detriment of their stock allocations, according to the AAII, while institutional cash holdings are below their long-term average, according to BAML.

On top of this, investors continue to pull money out of their stock-margin accounts, to levels only seen in recessions, and consistent with further declines in equity prices.

Finally, and most importantly, equities are highly unlikely to stage a sustainable rally until we see a decisive pivot in excess liquidity, the difference between real money growth and economic growth.

While monetary conditions remain tight, growth is still positive and inflation is elevated, excess liquidity will remain low and act as a major brake on stock prices.