Because in his time as Mets owner, he has proven himself to be such an incredible capital allocator, Steve Cohen has now revealed an $8 billion plan to build a massive complex in Queens, near Citi Field. 

The plan is part of Cohen’s bid to try and win a state casino license and the complex would covert nearby parking lots to a “Hard Rock Hotel and Casino, a live music venue, a food hall and 20 acres of park space,” CBS News New York reported. 

Empire City Casino in Yonkers and the Racino at Aqueduct are expected to get two of the state’s three casino licenses and there is “intense competition” for the third license, CBS reported. 

Tom Grech, president and CEO of the Queens Chamber of Commerce, commented: “It’s going to be an $8 billion investment in Queens, 15,000 construction jobs — both temporary and permanent — and a way to transform an entire area to continue to cement Queens as kind of our sports and entertainment mecca for the entire city.”

The details of Cohen’s proposal were released publicly for the first time on Tuesday, Bloomberg added in a writeup. Bloomberg detailed the plans:

If Cohen is granted the license, he plans to partner with Hard Rock and SHoP Architects to build the gaming complex, which is being called Metropolitan Park. It would feature 20 acres of newly built public park space designed by landscape architect firm Field Operations, which helped develop the High Line in Manhattan and Freshkills Park in Staten Island.

It would also include new athletic fields, a renovated mass-transit station and a “Queens food hall,” a Cohen spokesperson said in a statement. The new gaming complex would create 15,000 permanent and construction jobs, Cohen said.  

Cohen has hired more than 6 lobbying firms and spent millions to get feedback and support from the surrounding neighborhoods. Cohen also faces additional obstacles, with Bloomberg noting that “The proposed casino site sits on what is technically state-owned parkland, and the legislature would need to pass a bill allowing annexation of the land.”

It is estimated that a casino in Queens could generate $1.9 billion annually in revenue. The state has still not set a deadline for when prospective bids are due or when it will decide on the third license, the report concludes. 

We’re sure it won’t be long until AOC voices her displeasure for the idea, just as she did with the proposed construction of new Amazon facilities that would have brought thousands of jobs to Long Island City years ago. 

Authored by Yuhong Dong via The Epoch Times (emphasis ours),

Since the unprecedented COVID-19 global pandemic that started in January 2020, humans have been in a constant battle with the SARS-CoV-2 virus.

A series of vaccine versions have been developed and administered globally, beginning in January 2021 when an mRNA vaccine based on the original Wuhan strain was implemented. Subsequently, a bivalent mRNA vaccine was developed based on the Omicron offspring. Currently, the most updated version is based on XBB.1.5 and is ready to be injected into people’s arms.

Bivalent vaccines contain two different components. One component is to protect us against the original viral strain, while the other targets the most recent variants.

The vaccine is based on the gene code of a known virus, whereas the lead time for vaccine development normally takes an average of 10 years. Even with the current “green-light” policies for COVID-19 vaccines, it takes almost one year for the first generation to launch and a couple of months for the second and third generations.

However, due to the basic survival skills of SARS-CoV-2, the virus is always mutating in order to escape from a vaccine. Even before a vaccine is ready to launch, there are always a few mutants that have already found a way to escape from the antibodies induced by the sluggish vaccine, creating the next wave.

Regardless, the unprecedented speed of vaccine development won’t be able to compete with the speed of viral mutation, as the virus is always taking the lead and will be one step ahead of the vaccine.

In June 2021, when more than 50 percent of the U.S. population had received two doses of these vaccines, the stage was set for various mutants to take over, including the well-known alpha and delta variants.

A key mutation in spike protein called N501Y, which can escape from vaccine protection, was discovered in alpha. It was also found in two other major variants prevalent during that time and significantly increased in the rate at which it spread.

Shortly thereafter, Delta (B.1.617.2) emerged and presented even more enhanced transmissibility and vaccine escape ability with its intriguing spike protein double mutations of L452R and E484Q, refreshing the viral spreading and escaping records. It was designated as a “variant of concern” by the World Health Organization (WHO) on May 11, 2021.

These double mutations in the spike protein cause the vaccine-induced antibodies to significantly lose their ability to bind to delta, resulting in immunological evasion and causing major global havoc.

The increased binding affinity caused by delta makes it much easier to replicate in human cells. It was reported that patients infected with delta had a viral load 1000 times greater than patients with the original strain. It’s also been able to spread twice as fast as the original SARS-CoV-2 virus.

In July 2021, preliminary data from Israel showed that Pfizer’s vaccine efficacy was significantly reduced at five and six months after vaccination to 44 percent and 16 percent, respectively.

In a July 2021 outbreak in Massachusetts, 74 percent of breakthrough infections occurred in fully vaccinated persons, and the delta variant was detected in 90 percent of them.

Result: The vaccine failed.

Time lapsed: Seven months from the first monovalent vaccine launched in January 2021 until the dominant delta wave in July 2021 in the United States.

Almost all of Omicron and its subvariants have developed specific mutations that have made them spread more quickly while evading our immune response. It has been clearly defined as an immune escape strain according to this Nature review.

A surprising virus, Omicron (B.1.1.529) surged more quickly than any previous strain and completely took over by April 2022. This emergence of hypermutated, increasingly transmissible Omicron variant significantly threatened the vaccine strategy.

It harbors multiple amino acid mutations in the spike (including Q498R and N501Y), which significantly enhance binding to the ACE2 receptor. It has also altered the cell entry pathway which further contributes to its ability to escape from vaccine protection.

In mid-2022, BA.4 and BA.5 lineages of Omicron were the dominant COVID-19 variants in the United States and were predicted to circulate in the second half of 2022.

Thus, Pfizer and Moderna quickly took the initiative to develop bivalent boosters based on the original strain from Wuhan and Omicron BA.4 and BA.5. They made it within another miraculously short time frame of just a few months.

On August 31, 2022, the FDA approved the bivalent booster shots of COVID-19 mRNA vaccines designed to target the Omicron subvariants BA.4 and BA.5, with Pfizer only providing the data on eight mice.

However, Omicron keeps quickly changing, splitting into even more diversified subgroups. Soon after the new bivalent vaccine was distributed, BA.4 and BA.5 became history.

A new variant XBB.1.5 began appearing in October 2022 and reached its peak in April 2023. It combines two descendent lineages (BA.2.10.1 and BA.2.75) of Omicron. The featured new spike protein mutation (F486P) leads to increased transmissibility and significant escape from the vaccine.

Not surprisingly, the antibody levels to XBB.1.5 in bivalent mRNA-boosted individuals declined significantly to pre-booster levels after only three months. The bivalent booster vaccine effectiveness against COVID-19-associated hospitalization declined to as low as 24 percent at six months post-vaccination, according to CDC data collected from September 2022 to April 2023.

Result: The vaccine failed.

Time lapsed: Five months after the bivalent booster vaccine launched in September 2022 and was utilized until the U.S. dominant wave of XBB.1.5 in January 2023 emerged.

Result: Vaccine doomed to fail.

Time lapsed: Less than one month from the XBB.1.5 booster vaccine launch in October 2023 to the U.S. dominant wave of vaccine escape by EG.5 or other cousin variants in October 2023.

Omicron continues to change from XBB to JN, HK.3, EG.5, and  HV.1—all belonging to the huge and diversified Omicron family.

EG.5, carrying an additional F456L mutation, is significantly more resistant to neutralization by the sera from vaccinated people. That means even the most recent version of the COVID-19 vaccine based on XBB.1.5 is going to lose its protection with EG.5. Since the risk of breakthrough infection remains high, the WHO listed EG.5 as a “variant of concern” in early August.

While HV.1 shares almost all spike mutations that EG.5 carries, it took on a surprising additional mutation (L452R) from a remote ancestor delta variant in 2011, which had normally disappeared in the omicron variant. HV.1 can further escape the XBB.1.5-based vaccine-induced immunity and is even more evasive than EG.5.

The same detour trick of HV.1 is also used by JN.1 coming on the scene in August 2023. It gains an additional L455S mutation, switching from the XBB sublineage to BA.2.86 (Pirola).

The HK.3 virus has played a novel trick. It has two mutations in the adjacent spike 455 and 456 positions (L455F and F456L), thus called a “FLip.” Together, this virus binds even more tightly to ACE2 and is taking off slowly in Brazil and Spain.

Both HK.3 (FLip) and JN.1 present even lower binding affinities, meaning the vaccine is even less effective than the current version, raising further concerns over vaccine strategy.

Despite the extraordinary speed of vaccine development against COVID-19 and the continued mass vaccination program, the never-ending emergence of new SARS-CoV-2 variants threatens to significantly overturn the vaccine’s intended effects.

This is a tiring battle between vaccines and the virus. The winners and losers are clear. The microscopic tricks utilized by the SARS-CoV-2 virus variants are far superior to the vaccines’ unproven technology.

Alerts have been raised and major concerns have been discussed by scientists as early as 2021 in top-ranked journals including The Lancet and Nature in addition to Nature Reviews, eBioMedicine (part of The Lancet Discovery Science), and other publications through 2023.

The common view is that the pressure exerted on viruses from repeated vaccination programs serves as a primary driver of the diversified variants of SARS-CoV-2.

If humans continue to develop vaccines based on these emerging new variants, there will continue to be repeated failures. How many more failures will it take to realize that all of these vaccine efforts have been in vain?

It is a time for rational deliberation to pause to reflect on finding the root cause of the viral infection.

We already have a dynamic shield of protection against serious viral attacks—our natural immunity. Only by facing our own innate immunity will the virus find its tricks useless.

This is not what Bidenomics promised…

Yesterday, we highlighted the fact that retail job cuts were the highest since 2020.

Amid the early holiday shopping season, retailers have cut 72,182 jobs through October, a 258% increase from the 20,191 jobs eliminated in 2022, according to a new report from Challenger, Gray & Christmas.

This marks the most significant number of job cuts since retailers cut 179,520 jobs in October 2020.

Additionally, corporate America is delivering the bleakest sales reports in four years this earnings season, a sign that weakening consumer demand is limiting companies’ ability to raise prices further.

“We heard a lot of caution in managements’ guidance during the season and that’s exactly what we are watching for — weaker sales and margins compression as pricing power wanes,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets.

“For now, consumer and corporates still have access to credit, but it’s getting harder and more expensive. Once that dries out, we would see more pain.”

Not a pretty picture, but it gets worse…

As Apollo’s Torsten Sløk highlighted this week, hiring for the holiday season is generally done in October, and adding up new jobs created in the BLS-defined holiday season retail sectors in the latest employment report shows that retailers expect a weaker holiday season.

The BLS defines holiday sectors as furniture, electronics, personal care, clothing, sporting goods, general merchandise stores, miscellaneous store retailers (e.g., florists, office supply stores, gift shops, and pet shops), and non-store retailers (e.g., online shopping and mail-order houses, vending machine operators, and direct store establishments).

This soft outlook is consistent with growing inventories at many retailers.

Authored by Jonathan Turley,

Below is my column in The Hill on a second Biden Administration and what it might entail in policy priorities. With one year before the next presidential election, the Hill asked me to project what such a second term might look like for President Joe Biden.

Here is the column:

Popular culture has curses that range from the charming (the Billy Goat Curse) to the chilling (King Tut). No curse, however, has more objective validity than the “second-term curse” of American presidents.

Only 21 presidents have stuck around for a second round. For those, the additional four years have proven the downfall of many a good president.

While some have actually died in successive terms (Franklin Delano Roosevelt, Lincoln, McKinley), others have politically died from debilitating scandals, from Grant to Nixon to Clinton.

Some second-term presidents become far too comfortable in their second terms, allowing others to dictate decisions.

For others, it is not laziness but legacy that gets them into trouble. Some feel a certain liberty and license that comes with being a lame duck president — pursuing a legacy with reckless abandon.

A second term for Joe Biden could easily repeat these common failings, particularly if the U.S. House remains in Republican hands. During the election, Biden pledged to follow a strategy that served him well over decades of politics: to pursue a moderate government that unites a divided country. He then immediately abandoned that strategy and moved sharply to the left. The general view was that Biden handed over much of governing to far-left aides, who proceeded to populate his administration with similar far-left appointees.

The decision to lead from the left will likely make this election more challenging for Biden, who could well join the other 10 presidents who lost bids for a second term. To succeed, he will have to defend those policies in this election.

It is less likely that Biden will break from his Cabinet and staff in a second term. To the contrary, second terms tend to be more ideologically aggressive, since they free presidents from the need to face voters again. Second terms are when presidents are most likely to yield to temptation.

Second-term presidents tend to have little patience for negotiations as they watch their final years in politics ticking away. If one or both houses of Congress remain under Republican control, Biden is likely to dramatically increase his controversial use of unilateral action in areas like the environment and immigration. He has already lost a number of major legal cases finding that he exceeded his constitutional authority. That is not likely to deter a second-term Biden.

On specific issues, Biden is likely to become more extreme.

For example, Biden has already been criticized by industry for fulfilling his pledge to hamper domestic fossil fuel production and prioritize green technologies in the name of climate change. Even as hostile countries like Iran, Russia and Venezuela have raked in billions from oil sales, Biden has pushed for greater production by such countries rather than production in the U.S. Despite activists’ superficial complaints, he showed a remarkable level of commitment to this issue in his first term, and is likely to become more aggressive in a second term.

Specifically, climate czar John Kerry is likely to be given the ultimate “green light” in pursuing new international agreements, as the administration tries to bolster flagging sales of electric vehicles by putting pressure on increasingly jittery auto companies.

Biden has often called for gun bans and other measures to combat gun violence in the U.S. His claims have often been historically or technically challenged. The range of movement for Congress and the president is limited by the Second Amendment and the individual right to bear arms.

However, Biden has made gun control a major part of his legacy. He is expected to pursue new legislation in Congress or, if the Democrats do not control the legislative branch, unilateral action through federal agencies. We saw the later type of measures recently when the administration imposed a moratorium on gun exports to much of the world, pending further review about where such guns would be used.

Biden has faced withering criticism over his immediate moves after taking office to dismantle Trump measures along the border and to stop any additional building of segments of the wall, despite the rusting border material left at the border. Rather than build the wall, the administration sold the wall material for scrap, at a fraction of its value. As with the fossil fuel policies, the commitment has been impressive, given the public backlash with an election looming.

It is not clear whether a second term will make Biden more or less likely to crack down on the southern border.

The good money says that he will be more likely to yield to his party’s far-left in pursuing paths to employment, citizenship and other measures for undocumented persons.

Across the country, Democrats are running on abortion rights. Biden has rallied his supporters to the pro-choice cause. With a sizable number of Democratic members making this a priority, it is likely that Biden will double down on unilateral actions to target states that have passed limits on abortion, while continuing an equally aggressive effort in the courts to reverse or curtail current precedent.

The other issue that concerns me most, as someone associated with the free speech community, is the impact that a second Biden term would have on the First Amendment. Biden in his first term has proven the most hostile president toward free speech since John Adams. His administration has maintained a massive system committed to the monitoring and censorship of social media.

This elaborate system recently led to a court finding an unprecedented, “Orwellian” attack on free speech. Free of the pressure of a new election, Biden is likely to double down on such efforts to limit what his administration views as “disinformation, malinformation, and misinformation” in areas ranging from climate change to election fraud to transgender policy.

For a second-term president, what is past is prelude. Biden is likely to move even more boldly to the left, where he has laid the foundation for his presidency. In his first term, Biden had every reason to fulfill his pledge to lead from the center, yet chose not to do so despite dismal popularity levels.

A shift now to the center would muddle his legacy and make him appear opportunistic in his prior appeal to the far-left.

The odds favor more of the same, as Biden seeks to seal a legacy as the greenest, most anti-gun and most pro-abortion-rights president in history.

Update(1930ET): The US has just confirmed it conducted a second round of major airstrikes in Syria since the Gaza war began, which the Pentagon has described as retaliation for a recent series of attacks by “Iran-linked” militias against US troops in the country’s east:

U.S. fighter jets conducted “a self-defense strike” at a weapons storage facility in Syria that was being used by Iran’s Islamic Revolutionary Guard Corps, Defense Secretary Lloyd Austin said Wednesday.

The strike in eastern Syria was carried out at President Joe Biden’s direction, Austin said in a statement.

“This precision self-defense strike is a response to a series of attacks against U.S. personnel in Iraq and Syria by IRGC-Quds Force affiliates,” Austin said.

At this point the Pentagon has cited that 46 US service members have been injured over the past month of attacks inside Iraq and Syria, most with ‘traumatic brain injuries’.  

* * *

Update(11:45ET): Yemen’s Houthis have claimed they’ve successfully shot down a US MQ-9 reaper drone over “territorial waters” off the Yemeni coast. According to a machine translation of a Houthi army statement: 

Our air defenses were able to shoot down an American MQ9 aircraft while it was carrying out hostile, monitoring and spying activities in the airspace of Yemeni territorial waters and within the framework of American military support for the Israeli entity.

If confirmed as accurate, this could draw the United States deeper into what could develop into a broader regional conflict. The Pentagon has had aerial assets flying over Gaza, and the Mediterranean and Red Seas. Further US warships have been seeking to intercept ratcheting drone and missile attacks from the Houthis, with one such intercept having already occurred in the opening weeks of the Gaza war, now having reached one month.

There’s as yet been no Pentagon or US official confirmation of the alleged MQ-9 drone shootdown. 

Yemen’s Ansar Allah aka Houthis claim to have downed a US MQ-9 Reaper operating above Yemeni territory in support of Israel amid the current war in Gaza. The Houthis have fired missiles and drones against Israel in recent weeks. https://t.co/GcgbB18331

— 𝕋om 𝕆’ℂonnor (@ShaolinTom) November 8, 2023

However, footage purporting to show the drone shootdown has been released…

⚡️Yemeni armed forces: “Yemeni air defenses shoot down an American MQ9 plane while it was carrying out hostile missions as part of military support for the Israeli enemy entity” pic.twitter.com/WpGJczbCRj

— War Monitor (@WarMonitors) November 8, 2023

* * *

President Biden in a phone call this week urged Israeli Prime Minister Benjamin Netanyahu to implement a three-day pause in fighting. This was revealed by multiple sources to Axios Tuesday, and Biden’s request appears to have been rejected, given the call took place Monday and Israel has since reaffirmed there will be no truce until the hostages held by Hamas are released.

“According to a proposal that is being discussed between the U.S., Israel and Qatar, Hamas would release 10-15 hostages and use the three-day pause to verify the identities of all the hostages and deliver a list of names of the people it is holding, the U.S. official said,” according to the report. 

But Netanyahu on Tuesday gave a speech declaring that his forces were “reaching deeper than Hamas ever imagined” a hailed the killing of thousands of Hamas terrorists and commanders. “There will not be a ceasefire without the return of our kidnapped,” he emphasized in a message “to our enemies and our friends alike.”

Israel’s Defense Minister Yoav Gallant had at the same time declared that the IDF is fighting “in the heart” of Gaza City and is “tightening the noose” around Hamas.

Concerning the Monday phone call, Axios revealed further, “The two U.S. and Israeli officials said Netanyahu told Biden he doesn’t trust Hamas’ intentions and doesn’t believe they are ready to agree to a deal regarding the hostages.”

The Israeli leader “also said that Israel could lose the current international support it has for the operation if the fighting stops for three days, the officials said.” Netanyahu further voiced to Biden that in 2014 Hamas took advantage of a humanitarian pause to kidnap an Israeli soldier and kidnap others.

The official White House call readout from the Biden-Netanyahu meeting only said the two leaders “discussed ongoing efforts to secure the release of hostages held by Hamas” – but without offering further details.

Of the estimated total 240 captives, Hamas has so far released four hostages, reportedly in large part through Qatar’s mediation, but lately US officials have said progress has stalled since then.

Footage released today by the IDF showing Israeli Ground Troops alongside Armored Vehicles and Tanks having Captured a Block of Al-Rasheed Street along the Coast of Gaza City, meaning that IDF Ground Units have Penetrated much Deeper into the West of the City and the Northern… pic.twitter.com/nztCbFYDWi

— OSINTdefender (@sentdefender) November 7, 2023

Israel says it was able to free a female soldier during the initial phase of ground operations, while reports have said that in some cases deceased hostages have been found, possibly due to airstrikes.

Hamas has meanwhile continued to publish short videos of what the group says are successful ambush attacks on tanks and armored convoy units, also showing close urban combat, but typically with IDF ground troops nowhere to be seen. The IDF appears to be advancing into Gaza City purely with armor, and presumably with ground infantry troops staying in the rear until a city area is initially prepared through tank, artillery, and airstrikes.

On Wednesday Secretary of State Antony Blinken said the US stands by Israel in rejecting calls for a full ceasefire. “Israel has repeatedly told us that there is no going back to October (7) before the barbaric attacks by Hamas — we fully agree,” he said. He then said of G7 counterparts, “We all agreed humanitarian pauses would advance key objectives.”

Authored by Bill King via RealClear Wire,

Last week, Republicans in the U.S. House of Representatives passed a $14.3 billion aid package to Israel, paired with a corresponding cut in the increased funding for the IRS included in the Inflation Control Act passed last year. The bill was almost unanimously opposed by Democrats, who lashed out at the new speaker and Republicans for holding aid to Israel hostage to providing tax cuts to the wealthy.

The bill, which will be dead on arrival at the U.S. Senate, was mostly partisan theatrics, with Republicans attempting to placate their base that is pro-Israel but hates more funding for the IRS. Democrats, however, played along with the theatrics when they could have begun a serious conversation about our national debt.

After all, it did just exceed $33 trillion and now equates to 123% of our gross domestic product. While that is down slightly from stratospheric levels at the height of the pandemic, these are levels we have not seen since WWII. So, I am completely okay with members of Congress insisting that any new spending be offset by cutting spending somewhere else.

However, I do not agree with the Republicans’ proposal to reduce IRS enforcement. I pay my taxes and I suspect that the vast majority of you do as well. When someone is not paying their taxes that means that you and I must pay more.

Many economists estimate that as much as 10% of our economy is conducted underground and is never taxed. Much of this is in the illicit drug and human trafficking trades. But there is also a large independent contractor community that largely does not pay the same income and payroll taxes that you and I do. At a GDP of about $28 trillion, if the 10% estimates are accurate, that is $2.8 trillion escaping taxation. The federal government collects about 20% for every dollar of GDP, so taxing the $2.8 trillion in the underground economy could yield as much as $500-600 billion annually. By the way, that would be enough to cut our current annual deficit in half.

But beyond those completely avoiding taxation in the shadows, there is plenty of other fudging that goes on in the preparation of tax returns. For many years, I practiced commercial litigation. In a number of cases, I had the opportunity to review tax returns of prominent and successful individuals as part of the discovery process. I saw all kinds of schemes to reduce their tax bills that would not stand up in an audit. I saw one case where a couple owned a vacation home in a family limited partnership and wrote off the expenses as if it was a business. I saw another where the owners of a private company wrote off all of the expenses of their corporate jet, yet the logs showed that it was routinely used for purely personal trips.

Those in the underground economy and those fudging their tax returns do so, and almost always get away with it, because the IRS is overwhelmed and only audits a tiny fraction, about .04% of returns filed. I am perfectly fine with Congress setting limits on the kinds of returns that can be audited – say only those over $500,000 and those failing to report their income altogether. But to just say we are going to starve the IRS of resources so they cannot enforce our tax laws is self-defeating and grossly unfair to those of us who do pay our taxes.

And it’s not as though there aren’t plenty of other places to cut or loopholes to plug – loopholes which ultimately have the same effect as spending. For example, the carried interest loophole, which allows private equity investors to treat an interest they receive for putting to together a deal as a capital gain instead of regular income, costs the federal government as much as $18 billion annually – enough to fund the aid to Israel by itself.

Of course, the cost of the aid to Israel, even if you throw in the aid to Ukraine and some money for the southern border (all of which enjoy widespread, bi-partisan support), are a rounding error on our national debt and deficits going forward. The Congressional Budget Office’s current baseline projections are that the federal government will run up another $15 trillion in debt this decade, mostly driven by the rising costs of Social Security, Medicare, and Medicaid. The entire package proposed by Biden for Israel, Ukraine, and the border is only about 7% of the deficit this year and .05% of the deficit projected for this decade.

Until we start talking about the fact that Social Security, Medicare, and Medicaid are not sustainable in their current forms, any discussion about the national debt and deficits is mostly partisan noise. But you must start somewhere. So, let’s hear it, Democrats. What is your alternative proposed offset to provide this aid to Israel and Ukraine and to strengthen our southern border?

We got an early look that something is very broken in China’s capital flows back mid-September, when we first reported that contrary to the official PBOC forex data, a more in depth analysis of China’s fund flows reveals the biggest FX outflow since 2016 amid what we called was a “sudden surge in capital flight”, one which also kicked in just before bitcoin’s powerful thrust higher from $26K to $35K.

In retrospect, the reading wasn’t a fluke, and three months after we reported that “China’s Inward Foreign Direct Investment Falls To The Lowest Level On Record” the latest balance of payments data revealed that China recorded its first-ever quarterly decline in foreign direct investment (FDI), underscoring the capital outflow pressure we first flagged two months ago (and which was much more acute than the modest FX outflow signaled by the PBOC), and Beijing’s challenge in wooing overseas companies and capital in the wake of a “de-risking” move by Western governments.

As shown in the chart below, direct investment liabilities in the country’s balance of payments – a broad measure of FDI that includes foreign companies’ retained earnings in China – have been slowing over the last two years after hitting a near-peak value of more than $101 billion in the first quarter of 2022; since then the gauge weakened nearly every quarter and was a deficit of $11.8 billion during the July-September period, marking the first contraction since records started in 1998, which could be linked to the impact of “de-risking” by Western countries from China, as well as China’s interest rate disadvantage (the chart below shows a striking correlation between inbound FDI and China’s tumbling bond yields).

“It’s concerning to see net outflows where China’s doing its best at the moment to try and open — certainly the manufacturing sector — to new inflows,” said Robert Carnell, regional head of research for Asia-Pacific at ING Groep NV. “Maybe this is the beginning of a sign that people are just increasingly looking at alternatives to China for investment.”

“Some of the weakness in China’s inward FDI may be due to multinational companies repatriating earnings,” Goldman analyst Hui Shan wrote (full note available to pro subscribers) adding that “with interest rates in China ‘lower for longer’ while interest rates outside of China ‘higher for longer’, capital outflow pressures are likely to persist.”

According to Julian Evans-Pritchard, head of China economics at Capital Economics, the unusually-large interest rate gap “has led firms to remit their retained earnings out of the country”.

Although he sees little evidence that foreign companies are, on aggregate, reducing their presence in China, “we do think that, over the medium-term at least, increasing geopolitical tensions will hamper China’s ability to attract FDI and instead favor emerging markets that are more friendly to the West.”

Driven by the FDI outflows, China’s basic balance – which encompasses current account and direct investment balances and are more stable than volatile portfolio investments – recorded a deficit of $3.2 billion, the second quarterly shortfall on record.

“Given these unfolding dynamics, which are poised to exert pressure on the RMB, we anticipate a sustained strategic response from China’s authorities,” Tommy Xie, head of Greater China Research at OCBC wrote, and while he is hardly alone in expecting a powerful response from Beijing to stop the bleeding before China is fully “Japanified” so far the ruling Communist Party has failed to materially stimulate its economy, the result of a staggering 300% in consolidated debt to GDP, which has largely tied Beijing’s hand for the past 4 years.

Xie expects China’s central bank to continue counter-cyclical interventions – including a strong bias in daily yuan fixings and managing yuan liquidity in the offshore market- to support the currency in the face of these headwinds.

Separately, onshore yuan trading against the dollar also hit record-low volume in October, highlighting authorities’ stepped-up efforts to curb yuan selling. The latest data showed that onshore volume of yuan trading against the dollar slumped to a record low of 1.85 trillion yuan ($254.05 billion) in October, a 73% drop from the August level.

The PBOC has been urging major banks to limit trading and dissuade clients to exchange the yuan for the dollar, sources have told Reuters. This happened after our September report that FX outflows from China had hit $75 billion, the highest since the country’s 2015 devaluation.

In an attempt to reverse the bleeding, the Chinese government has embarked on a big push in recent months to lure foreign investment back to the country. Bloomberg reported that on Wednesday, the Ministry of Commerce asked local governments to clear discriminatory policies facing foreign companies in a bid to stabilize investment confidence. It’s doubtful the move will have any impact on capital flows which are not driven by “discriminatory” policies and have everything to do with China’s dismal economy.

It cited the need to ensure subsidies for new energy vehicles are not limited to domestic brands as one example. In some industries, foreign firms wait longer and are subject to more rigorous reviewing process when applying for licenses.

In August, the internet regulator met with executives from dozens of international firms to ease concerns about new data rules. The government has also pledged to offer overseas companies better tax treatment and make it easier for them to obtain visas.

But Beijing’s pledges have rung hollow for some firms, with foreign business groups decrying “promise fatigue” amid skepticism about whether meaningful policy support is forthcoming. They also have incentive to repatriate earnings overseas because of the wide gap in interest rates between China and the US, which may be pushing them to seek higher returns elsewhere.

The FDI outflows are adding pressure on the onshore yuan, which has hit the weakest level since 2007 earlier this year. China’s benchmark 10-year government bond yield is trading at 191 basis points below that of comparable US Treasuries, versus an average premium of about 100 basis points over the past decade.

The lack of investment among global firms in China will have far reaching effects on the world’s second-largest economy, especially as it tries counter US curbs on access to advanced technology.

Aside from geopolitical risks, companies had also been pulling back on investment in China last year as the country rolled out pandemic restrictions. While those curbs have been removed, firms are still contending with other challenges from rising manufacturing costs in China and regulatory hurdles as Beijing scrutinizes activity at foreign corporations due to national security concerns.

“Some of the most damaging things have been the abrupt regulatory changes that have taken place,” said Carnell, pointing to this year’s anti-espionage campaign, which resulted in some firms having their offices raided by local authorities. “Once you damage the sort of perception of the business environment, it’s quite difficult to restore trust. I think it will take some time.”

While foreign companies make up less than 3% of the total number of corporations in China, they contribute to 40% of its trade, more than 16% of tax revenue and almost 10% of urban employment, state media has reported. They’ve also been key to China’s technological development, with foreign investment in the country’s high-tech industry growing at double-digit rates on average since 2012, according to the official Xinhua News Agency.

“A decline in trade and investment links with advanced economies will be a particularly significant headwind for a catching up economy such as China, weighing on productivity growth and technological progress,” Kuijs said. And since youth unemployment – the single, most direct precursor to the one thing Beijing fears most of all, social unrest – is already at an all time high and will continue to rise (even if China will no longer report on what it is), the likelihood that Beijing will pursue some bazooka stimulus, both fiscal and monetary, only grows with every month that Beijing does not pursue such a critical, if temporary, measure to prevent catastrophe.

Authored by Caden Pearson via The Epoch Times,

The Biden administration filed a petition with the Supreme Court earlier this week to overturn Tennessee’s ban on gender transition procedures for minors…

This move by the Department of Justice follows lower court decisions that allowed similar bans to progress in Tennessee and two other states earlier this summer.

Lawyers for the DOJ argued that the bans, which include one in Kentucky, violate the Equal Protection Clause of the 14th Amendment to the U.S. Constitution.

DOJ lawyers argued in the petition that the question of whether the “recent wave of bans on gender-affirming care are consistent with the Equal Protection Clause” is of national importance and “requires a definitive resolution.”

“Absent this Court’s review, families in Tennessee and other States where laws like SB1 have taken effect will face the loss of essential medical care,” DOJ lawyers wrote in the petition.

Parallel petitions were filed in the last week on behalf of transgender plaintiffs and their families, asking the nation’s highest court to hear cases over similar bans in Kentucky and Tennessee.

However, the DOJ’s Monday filing asked the Supreme Court to resolve only the question of whether the ban in Tennessee violates equal protection. The basis for this argument is the categorization of the law as a sex-based classification, with a focus on how it “discriminates against transgender individuals.”

The two private petitions related to the Tennessee and the Kentucky prohibitions ask an additional question of whether the bans violate the constitutional due process rights of parents to direct the upbringing of their children.

In March, Tennessee Gov. Bill Lee enacted SB1 into law, prohibiting transgender treatment for minors, which took effect in July. The legislation requires children who began such treatments prior to July 1 to cease them by March 31, 2024.

In April, several groups, including the American Civil Liberties Union (ACLU), filed a lawsuit challenging this law on behalf of families with “trans-identifying” children.

On Sept. 28, the Sixth Circuit Court of the U.S. Court of Appeals rejected a petitioner’s challenge in a 2–1 ruling, upholding Tennessee’s ban on transgender treatment for children.

In July, a panel of judges on the Sixth Circuit Court of the U.S. Court of Appeals lifted an order that blocked part of the ban and allowed it to take effect.

The DOJ’s brief argues that the U.S. Court of Appeals for the Sixth Circuit made an error in September by deeming the Tennessee and Kentucky bans likely constitutional.

They argue that these bans should be subject to heightened scrutiny and that they fail this stricter standard.

“The Sixth Circuit did not suggest that laws like SB1 could survive heightened scrutiny. Instead, it applied only the deferential rational-basis standard because it held that some laws that draw sex-based lines do not trigger heightened scrutiny—and that laws discriminating based on transgender status never warrant heightened review,” the DOJ lawyers wrote.

“Those holdings are wrong, and they create or deepen circuit conflicts on the proper application of the Equal Protection Clause to laws targeting transgender individuals, both in the specific context of bans on gender-affirming care and more broadly.”

The DOJ also requested that the Supreme Court consider all three cases together and address the equal protection issue.

However, the DOJ’s stance differs from that of the other petitioners, who have asked the Supreme Court to evaluate whether the bans infringe on the constitutional due process rights of parents to guide their children’s upbringing.

In a footnote, the DOJ lawyers asserted that, in the government’s view, the due process question “does not warrant this Court’s review.”

“[B]ecause that aspect of the Sixth Circuit’s decision does not conflict with any decision of another court of appeals and does not otherwise satisfy this Court’s traditional certiorari standards,” they wrote.

“Accordingly, the Court should grant the petitions limited to the equal-protection issue and consolidate the cases.”

If the justices agree to hear the case, any decision will have significant implications for the 19 states that have implemented laws limiting transgender youths’ access to transition-related care.

The DOJ emphasized in its petition that allowing these bans to take effect could result in “predictable and significant harms” for transgender adolescents in many parts of the country, including “escalating distress, anxiety, and suicidality.”

Tennessee’s legislation is part of a broader trend where multiple states are taking measures against transgender treatments for minors.

Gender transition procedures pose serious health risks, from mental health issues to glandular misfunction, heart complications, and even death.

In May, lawmakers demanded answers after two youths participating in a transgender hormone study, funded by the National Institutes of Health, took their own lives. In addition, 11 participants reported having suicidal thoughts.

Back in July, when we last looked at the unprecedented horror show that is the US budget deficit – and concluded correctly, long before the Q2 Quarterly Refunding Announcement,  that debt issuance was about to explode and yields would soar – we warned that the debt Rubicon was about to be crossed and “US Debt Interest Payments Are About To Hit $1 Trillion.”

Fast forward to today when the endgame has apparently arrived: according to the Treasury’s own calculations, total interest is now over $1 trillion (or $1.027 trillion to be precise).

We calculated this by multiplying the average interest rate on marketable US Treasury debt (which according to the Treasury is 3.096% as of Oct 31) by the $26.003 trillion in marketable US debt (as of Oct 31) which nets off to $805 billion, and adding to this non-marketable debt interest (which as of Oct 31 was 2.884% multiplied by the amount of non-marketable debt which is $7.696 trillion) and which in turn is an additional $222 billion in interest. Add across and you get $1.027 trillion.

Naturally, this calculation of estimated real-time interest costs – which is entirely based on Treasury data – is different than what the Treasury actually paid. Interest costs in the fiscal year that ended Sept. 30 ultimately totaled $879.3 billion, up from $717.6 billion the previous year and about 14% of total outlays, however that number is merely lagging what the pro forma print currently is, and will inevitably catch up to it, and then lag on the other side even as pro forma interest payment start dropping (once interest rates plunge after the next QE/YCC is launched).

Fans of exponential functions, we got you covered: the unprecedented surge in both interest rates and interest expense in the past two years means that total US interest has doubled since April 2022 and that’s with the inherent lag in interest catch up – as a reminder, the vast majority of 5, 7, 10 and 30 year debt is still locked in at much lower interest rates, and as such, rates will continue to rise as all of the existing debt rolls into much higher rates over the coming years.

Looking ahead, the staggering surge in both yields and total long-term Treasuries in recent months confirms the government will continue to face an escalating interest bill. As a reminder, we were the first to point out that it took just one month after US federal debt first rose above $33 trillion for the first time, to spike by another $600 billion…

One month later:

Total US Debt is now $33.649 trillion, up $58 billion in one day and up $604 billion in one month… up $20 billion every day, up $833 million every hour.

At this rate US debt will be $41 trillion in one year. https://t.co/tOrhqmkFXL pic.twitter.com/UfYOluX1Bq

— zerohedge (@zerohedge) October 18, 2023

… bringing the total to $33.6 trillion, more than the combined GDPs of China, Japan, Germany, and India.

And just to show you how terrifying it is about to get, BofA’s Michael Hartnett notes that “the CBO projects that US government debt will rise by $20 trillion next 10 years, or $5.2 billion every day or $218 million every hour!”

Some more context: total world debt (government, corporate & household) hit a record $227tn in Q1’23, double from $110tn in 2007 & $0.5tn in 1952.

And then there was this warning from the TBAC which very tongue-in-cheek said that “Interest rate expense, as % of GDP, is likely to rise over the medium term”, and also over every other term.

As Bloomberg’s Mark Cudmore concludes, the worsening metrics may “reignite debate about the US fiscal path amid heavy borrowing from Washington. That dynamic has already helped drive up bond yields, threatened the return of the so-called bond vigilantes and led Fitch Ratings to downgrade US government debt in August.“

An even more damning conclusion comes from Hartnett, Fiscal excess in the 2020s is adding to already high levels of government debt; until policy makers address the trajectory of government debt, investors are likely to worry that asset-bearish solutions to indebtedness such as inflation, default, currency debasement, are set to be pursued; but as likely central banks may simply bail out governments in coming years via QE & the introduction of YCC (policies that would be v US dollar negative).

Finally, as we explained yesterday (see “How Treasury Averted A Bond Market “Earthquake” In The Last Second: What Everyone Missed In The TBAC’s Remarkable Refunding Presentation“), the US treasury market was this close to collapse as recently as last week, and if it hadn’t been for some clever language and sleight-of-forward-guidance by the Treasury, in the latest TBAC statement, the endgame for US debt would now be in play. For now, however, it has been merely delayed.

Authored by Simon White, Bloomberg macro strategist,

China has slipped under the radar somewhat, but that’s a good thing for its stocks: when sentiment is negative and attention is focused elsewhere, markets often quietly bottom.

I noted late last month that the Chinese stock market was closing in on capitulation levels, since then the FTSE China A50 Index is up ~3.5%. Breadth still remains poor but is improving, and volume has been solid. There has been no single moment of maximum exhaustion, but after months of deteriorating sentiment and disappointment, it’s possible China’s stocks have bottomed.

That’s underscored by the improvement in some leading indicators. Negative producer prices have been a signature data-series of China’s malaise, but it has finally started to rise.

What’s more, the input prices component from the PMI has been turning up strongly, suggesting increased economic activity is creating price pressures, catalyzed by an improvement in economic activity.

Also more positive, in the US this time, was the improvement in some of the key parts of the Federal Reserve’s Senior Loan Officer survey, released Monday.

Banks tightening lending standards for commercial and industrial loans is one of the most leading parts of the report. The survey leads demand for C&I loans by six months, and growth of loans itself by a year.

C&I loans tend to have the most stringent standards thus they are a good barometer of overall loan demand.

Loan standards and demand for C&I loans both turned up notably in the last quarter, which suggests loan-growth’s negative track should soon change direction.

The market would likely have agitated for more rate cuts sooner if there had been a significant further deterioration.

As it stands, the Fed can keep the flame alive (just) that another rate hike may be in the offing. The primary aim of this is to keep the market from getting too trigger-happy pricing in rate cuts, blunting the efficacy of the Fed’s policy rate.

The UK is seeing such a dynamic. The BOE’s Chief Economist, Huw Pill, suggested today that the market was not “unreasonable” to predict a rate cut next summer.

The latter parts of the Sonia futures curve (e.g. SFIH4 vs SFIH5) are likely to keep flattening, with two additional quarter-point cuts priced in by the end of next year having been priced in over the last three weeks.