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Crescat Capital On The “Bill Gross Widowmaker Trade”

Crescat Capital On The “Bill Gross Widowmaker Trade”

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Crescat Capital

ValueWalk’s Raul Panganiban interviews Crescat Capital’s Kevin Smith And Tavi Costa, discussing their trade of the century idea. In this part, Tavi and Kevin discuss how should people prepare for the upcoming bear market, US versus Germany 10 years spread, Meb Faber podcasts, and their favorite books and hobbies.

Q4 2019 hedge fund letters, conferences and more

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Raul Panganiban: All right. Yeah. So just want to know, how, how should people prepare for the upcoming bear market? And yeah, what should they be doing?

Kevin Smith: Well, we certainly think it's, it's not too late to be looking at you know, not being so heavily long of the US equities in general. We think that there are a lot of opportunities still on the short side of the market. There are a lot of macro opportunities out you know, outside of just trying to buy and hold Value oriented equities. We think there are some niche value areas particularly in the precious metal space, some in the healthcare space and now Now certainly starting to emerge in the energy space. Although we view the energy logs that we have in our hedge funds, we don't have any yet in our, in our long always strategies. You know, we we kind of view those as hedges right now. Because, you know, we think there still could be more pain ahead in the energy sector but but there is definitely some deep value starting to emerge and you know, when there's blood in the streets like there was yesterday, you know, after after a sec. A, you know, the oil and gas EMP and services sector has already been as decimated as it has been, you know, really that those stocks started going down in 2014 in late 2014, when China really first started to first big you know hiccup and and so there's some opportunity even there today if you can find the ones that aren't going to go bankrupt or maybe on the distress credit side of that that sector but there's just a tremendous amount of opportunities precious metals obviously and and on the long side and and and you know eight different sectors that we see opportunities still on the short side there's some insane valuations software stocks trading at 20, 30, 40 times, EV to sales, some of them not even free cash flow positive.

Industrials, you know, technology stocks, you know, I know that the you know, the typical FANG stocks and the Apples of the world are, you know, are great companies and they have great margins of free cash flow, but You know, the Amazons of the world, they're, they're cyclical companies do and they have a lot to lose a lot of a lot of free. You know, a lot of, you know, there's a lot of peak earnings that you can see in those companies as well in this cycle, and there will be downturn ahead for, you know, for those companies too.

Tavi Costa: Also offer an alternative year, which is, you know, one trade that we find interesting is to be long treasuries and short German bones, for instance, the convergence of the interest rates between the two countries not did not just the two actually there are some others like, you know, the Japanese yields, as well as another one, the Italian yields, and so forth. I think that others, you know, usually especially the German bunds, when you look at the chart of 10 year yields differential between the two countries, they tend to converge, especially when you're at the peak of the cycle and starting to turn and I think that's exactly what Racine today, I think there's a lot more to play out in that, in that in that trade. Now in terms of how to how to really protect and how to, I think that will depend on in terms of the risk appetite of each investor. But, you know, cash gold treasuries still look attractive and a and if you're willing to, to, to go to the short side, I think that's the short. The case for for be short stocks is incredibly compelling still and I think it's still has a lot to play out. So and that is just a way of actually growing capital or just protecting I would say when.

Kevin Smith: Yeah, to add a little bit on the Treasury side of things. I mean, certainly yields heartbeat come down quite a bit and in a very short period of time here on on the on the Treasury curve. And you know that that has been a trade of ours in the global macro fund. We've been we've been long, ultra, you know, the ultra long bond and the Treasury long bond versus a short basket of European sovereign debt and Japanese government bonds, that that trade has worked remarkably well this month. And very recently, I think there's there's more to go there. But it's important to have that hedge side of it on the, on the shorting the European and jgb sovereign debt because because yields have already come down so much. So it's really the spread narrowing that we're playing it. It's yet another uncanny macro timing indicator of a business cycle downturn when that when that yield spread starts to converge of us yield versus European yield, for instance, like Toby was saying, and it really has started to, to converge. We kind of call that to Bill Gross Widowmaker trade because because he was very early on that on that bond spread. It didn't work for him, but you look at it now. And it's it's happening either. So I would just caution against, you know, I know a lot of people have been saying buy treasury bonds. That's your hedge for a downturn, and it has been it's worked great. We look at risk parity. It's such as Popular strategy and we at one point, we thought, we're going to be in a risk parity unwind where both both bonds and stocks were going to stop working at the same time, while the bond side of the risk parity actually did did work, even though apparently I've seen the most risk parity funds. Were record long on the equity side here recently, which may make that that trade not look so good here, among most risk parity funds recently, but yeah, they got it right. Again, on the bond side, it's not always going to work out on that bond side, especially now with with how we think the Fed is going to come in and that's why we think having the precious metal long side of it is so important, there is a chance that we could come out of this, you know, with a more inflationary type of cycle and that, you know, and it could be the end of a 40 year, Bond bull market, it may not be the end until bond yields get to zero percent and they very well may get to zero percent in this cycle. But then Um, but then you know, we're gonna have MMT fiscal and monetary you know stimulus at the same time and that ultimately just record global debt to GDP bubble that we're in right now, we think is going to be resolved with with with rising inflationary kind of kind of a scenario but but perhaps not before we can get through this deflationary initial part of of the global downturn.

Tavi Costa: It's why the spread trade becomes so attractive because you know, it's one way to hide yourself as well fields already had a big move on the downside in the US, but then you would expect that German bonds would also move up a little faster than than treasuries and a lot of ways and I think that's why you see throughout this periods of, especially now and looking back in history, other times when these imbalances begin to sort of unfold, but it's time to reduce risk and reduce interview cyclical bats right now. In search for safe havens instead and, and it's not too too late so to look for those.

Raul Panganiban: Definitely, you know, I encourage everyone to check out the article that you put out the tide is going out and seeing that chart the US versus Germany 10 years spread. It's very interesting and I'm glad you guys are putting out your research for everyone to read.

Kevin Smith: Thank you. You bet is as you know, as a global as a hedge fund. One thing that makes us different is that we do have an open website and we're able to and we were happy to share our research. It's how we bring headsail we let people know about who we are and hopefully we can attract like minded investors, investors who really buy into our process and our research because that's what we're what we're looking for. And you know, most hedge funds out there, you know, are kind of old school and to have a lockdown website, but we are under this JOBS Act. You know, we went on Under the 506 c regulation where we we validate all of the investors that come into our hedge funds to make sure that they are accredited. And that's the key there. We can only take accredited investors into our hedge funds but we have the other two strategies for for non accredited investors and that's our to SME strategies. Think the precious metals strategy that we launched last year was up 61% in its first year, had a big pullback here recently. And we think that that creates an incredible opportunity today to for for, for accredited as well as non accredited investors. And so we encourage you to check out our website and read our letters and follow us on on social media. We're on Twitter and LinkedIn and Tavi's also on Instagram.

Tavi Costa: I've been trying it all.

Raul Panganiban: Nice. Yeah. And I see you guys had a YouTube channel as well. Get videos on there as well.

Kevin Smith: Yeah, we're trying to get more active with that we have our the webinar that we that we did three weeks ago which is on that channel. We encourage you to take a look at that.

Raul Panganiban: Yeah, definitely. And I know a lot of this conversation has probably seen kind of negative. But the one I think was on the Meb Faber podcasts that you guys were on reinvention genomics, that theme so yeah, if we can end with that. What do you see is the future for genomics and how was or what are you observing the industry as a whole?

Kevin Smith: Well, I personally get excited about the a lot of the the science and the technology in terms of the ability to help cure diseases and, and, you know, come up with vaccines and whatnot. So I think there's a lot of exciting things going on there on there. You know, it's one of the health healthcare industry and the drugs. The drug industry and healthcare sector are one of the areas of the market that does off have some value. Currently. You know, there's there's also a lot of, you know, frothy companies there too. And it's really it's hard to determine who are going to be the winners and the losers. You know, we, you know, there. There are a few companies there that we own that are just your big biotech companies with diverse pipelines. We own Amgen and Bristol Myers Squibb, for instance, or two I would point to, as well as Gilead Sciences we don't own Gilad because of the of the vaccine for Ebola that might also be used for Coronavirus. We don't go ahead because they have a deep pipeline of securities. And and I think it's something like a 12% free cash flow yield. You know, they have drug secure aids and cancer and I mean aids aids and Hep C. They're leaders in their, in their, in their industry. Where's Bristol Myers has got a huge cancer franchise and they cure cancer so you know those those are two places that one can look today on that side of things. There's certainly some more exciting things on the on the genomic revolution side of things that that we're going to be more interested in getting back into more in the depths of the recession that we don't own them today.

Raul Panganiban: And then switching over to some personal questions. What are your favourite books?

Tavi Costa: I have a few. A few that I read recently. 'The Art of Speculation' was the book. I think Sam Zell wrote a book, 'It Might Be Too Subtle' is another good story of a successful investor overall, and almost like a, you know, like him as a macro thinker as well, very smart guy. And more recently, I've been reading a book called 'The Chinese Invasion Threat', it says sort of a history of Taiwan and China, you know, issues that they had in the past. And anyway, so that those are the ones that I've done. And obviously 'Market Wizards' are, you know, always always great books to look at for investment ideas in terms of processes and different ways of thinking about the markets.

Kevin Smith: So from for me, I'll just mention one and that's 'The Big Short'. And what I you know, what I like about The Big Short is really, it's not about the ultimate and yes, it's about the ultimate success, but it's not ultimate success. That's the lesson to take away from that, that book, it's the, you know, it's the endurance and the short term pain that that, that those those managers really had to go through. And that any value in you know, really true value investor I think we'll have to go through to see their positions to fruition and, you know, it's about having conviction and doing your analysis doing your homework and being able to have the fortitude and strength of your conviction to ride you know, ride the volatility of the markets food to till the end and, and that's, you know, that's what we're about here here at crest scat. And, you know, it's not just about being short, you know, I'll say it again, we are not perma bears. I've had you know, you know, many great stock ideas and money that I've made on the long side, and I'm determined to do even better than I've done that in past business cycles. In this next you know, business cycle. It's Expansion but right now the opportunity we think is, is, you know, certainly on the down on the short side of a lot of things.

Raul Panganiban: Yeah and now I can only assume one of your hobbies would be tennis. But do you have any hobbies you'd like to talk about?

Tavi Costa : Yeah tennis definitely up the playing call it so it was still played occasionally. But I think that a long distance running has been sort of a recent passion a new hobby for me and I enjoy doing the things like marathons and I enjoy the training process is a great way to practice. You know, patience and discipline, but also a good time for for sort of organise your thoughts and listen to audiobooks and good interviews while you run and I think that has been really great to keep myself healthy at the same time. Get some clarity outside of being in the monitors to all the time.

Kevin Smith: For me, one nice thing about living in Colorado is we have great skiing. And that's one of the reasons I moved here 25 years ago. So I, you know, I like to, I like to ski in the winter, I like to play golf and tennis in the summer in Colorado is great for that as well.

Raul Panganiban: Very nice. And then you guys is closing thoughts?

Kevin Smith: Well, I think, you pretty much know what we're all about it at this point. And I'd really encourage you to take a take a look at our website, follow us on social media. You know, we you know, we've got some exciting things here with a lot more to play out for investors who might be interested in in, in allocating some capital towards towards Crestcat. So we are certainly open for business in that way as well.

Tavi Costa: Yeah, and I would add, I would add, I think it's You know, is the focus to to truly profit from what we believe to be the greatest macro setups we've seen or careers, at least my career can say, and I think Kevin's too, but not just to grow our business, but also, you know, evolve as investors in general. I think there's a lot of opportunity here to in the markets and, you know, we're very focused on capitalising, all of those, hopefully in the next one, two years with all this all this imbalances that we see macro wise.

Read the full interview here

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Vaccine-skeptical mothers say bad health care experiences made them distrust the medical system

Vaccine skepticism, and the broader medical mistrust and far-reaching anxieties it reflects, is not just a fringe position in the 21st century.

Women's own negative medical experiences influence their vaccine decisions for their kids. AP Photo/Ted S. Warren

Why would a mother reject safe, potentially lifesaving vaccines for her child?

Popular writing on vaccine skepticism often denigrates white and middle-class mothers who reject some or all recommended vaccines as hysterical, misinformed, zealous or ignorant. Mainstream media and medical providers increasingly dismiss vaccine refusal as a hallmark of American fringe ideology, far-right radicalization or anti-intellectualism.

But vaccine skepticism, and the broader medical mistrust and far-reaching anxieties it reflects, is not just a fringe position.

Pediatric vaccination rates had already fallen sharply before the COVID-19 pandemic, ushering in the return of measles, mumps and chickenpox to the U.S. in 2019. Four years after the pandemic’s onset, a growing number of Americans doubt the safety, efficacy and necessity of routine vaccines. Childhood vaccination rates have declined substantially across the U.S., which public health officials attribute to a “spillover” effect from pandemic-related vaccine skepticism and blame for the recent measles outbreak. Almost half of American mothers rated the risk of side effects from the MMR vaccine as medium or high in a 2023 survey by Pew Research.

Recommended vaccines go through rigorous testing and evaluation, and the most infamous charges of vaccine-induced injury have been thoroughly debunked. How do so many mothers – primary caregivers and health care decision-makers for their families – become wary of U.S. health care and one of its most proven preventive technologies?

I’m a cultural anthropologist who studies the ways feelings and beliefs circulate in American society. To investigate what’s behind mothers’ vaccine skepticism, I interviewed vaccine-skeptical mothers about their perceptions of existing and novel vaccines. What they told me complicates sweeping and overly simplified portrayals of their misgivings by pointing to the U.S. health care system itself. The medical system’s failures and harms against women gave rise to their pervasive vaccine skepticism and generalized medical mistrust.

The seeds of women’s skepticism

I conducted this ethnographic research in Oregon from 2020 to 2021 with predominantly white mothers between the ages of 25 and 60. My findings reveal new insights about the origins of vaccine skepticism among this demographic. These women traced their distrust of vaccines, and of U.S. health care more generally, to ongoing and repeated instances of medical harm they experienced from childhood through childbirth.

girl sitting on exam table faces a doctor viewer can see from behind
A woman’s own childhood mistreatment by a doctor can shape her health care decisions for the next generation. FatCamera/E+ via Getty Images

As young girls in medical offices, they were touched without consent, yelled at, disbelieved or threatened. One mother, Susan, recalled her pediatrician abruptly lying her down and performing a rectal exam without her consent at the age of 12. Another mother, Luna, shared how a pediatrician once threatened to have her institutionalized when she voiced anxiety at a routine physical.

As women giving birth, they often felt managed, pressured or discounted. One mother, Meryl, told me, “I felt like I was coerced under distress into Pitocin and induction” during labor. Another mother, Hallie, shared, “I really battled with my provider” throughout the childbirth experience.

Together with the convoluted bureaucracy of for-profit health care, experiences of medical harm contributed to “one million little touch points of information,” in one mother’s phrase, that underscored the untrustworthiness and harmful effects of U.S. health care writ large.

A system that doesn’t serve them

Many mothers I interviewed rejected the premise that public health entities such as the Centers for Disease Control and Prevention and the Food and Drug Administration had their children’s best interests at heart. Instead, they tied childhood vaccination and the more recent development of COVID-19 vaccines to a bloated pharmaceutical industry and for-profit health care model. As one mother explained, “The FDA is not looking out for our health. They’re looking out for their wealth.”

After ongoing negative medical encounters, the women I interviewed lost trust not only in providers but the medical system. Frustrating experiences prompted them to “do their own research” in the name of bodily autonomy. Such research often included books, articles and podcasts deeply critical of vaccines, public health care and drug companies.

These materials, which have proliferated since 2020, cast light on past vaccine trials gone awry, broader histories of medical harm and abuse, the rapid growth of the recommended vaccine schedule in the late 20th century and the massive profits reaped from drug development and for-profit health care. They confirmed and hardened women’s suspicions about U.S. health care.

hands point to a handwritten vaccination record
The number of recommended childhood vaccines has increased over time. Mike Adaskaveg/MediaNews Group/Boston Herald via Getty Images

The stories these women told me add nuance to existing academic research into vaccine skepticism. Most studies have considered vaccine skepticism among primarily white and middle-class parents to be an outgrowth of today’s neoliberal parenting and intensive mothering. Researchers have theorized vaccine skepticism among white and well-off mothers to be an outcome of consumer health care and its emphasis on individual choice and risk reduction. Other researchers highlight vaccine skepticism as a collective identity that can provide mothers with a sense of belonging.

Seeing medical care as a threat to health

The perceptions mothers shared are far from isolated or fringe, and they are not unreasonable. Rather, they represent a growing population of Americans who hold the pervasive belief that U.S. health care harms more than it helps.

Data suggests that the number of Americans harmed in the course of treatment remains high, with incidents of medical error in the U.S. outnumbering those in peer countries, despite more money being spent per capita on health care. One 2023 study found that diagnostic error, one kind of medical error, accounted for 371,000 deaths and 424,000 permanent disabilities among Americans every year.

Studies reveal particularly high rates of medical error in the treatment of vulnerable communities, including women, people of color, disabled, poor, LGBTQ+ and gender-nonconforming individuals and the elderly. The number of U.S. women who have died because of pregnancy-related causes has increased substantially in recent years, with maternal death rates doubling between 1999 and 2019.

The prevalence of medical harm points to the relevance of philosopher Ivan Illich’s manifesto against the “disease of medical progress.” In his 1982 book “Medical Nemesis,” he insisted that rather than being incidental, harm flows inevitably from the structure of institutionalized and for-profit health care itself. Illich wrote, “The medical establishment has become a major threat to health,” and has created its own “epidemic” of iatrogenic illness – that is, illness caused by a physician or the health care system itself.

Four decades later, medical mistrust among Americans remains alarmingly high. Only 23% of Americans express high confidence in the medical system. The United States ranks 24th out of 29 peer high-income countries for the level of public trust in medical providers.

For people like the mothers I interviewed, who have experienced real or perceived harm at the hands of medical providers; have felt belittled, dismissed or disbelieved in a doctor’s office; or spent countless hours fighting to pay for, understand or use health benefits, skepticism and distrust are rational responses to lived experience. These attitudes do not emerge solely from ignorance, conspiracy thinking, far-right extremism or hysteria, but rather the historical and ongoing harms endemic to the U.S. health care system itself.

Johanna Richlin does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Is the National Guard a solution to school violence?

School board members in one Massachusetts district have called for the National Guard to address student misbehavior. Does their request have merit? A…

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Every now and then, an elected official will suggest bringing in the National Guard to deal with violence that seems out of control.

A city council member in Washington suggested doing so in 2023 to combat the city’s rising violence. So did a Pennsylvania representative concerned about violence in Philadelphia in 2022.

In February 2024, officials in Massachusetts requested the National Guard be deployed to a more unexpected location – to a high school.

Brockton High School has been struggling with student fights, drug use and disrespect toward staff. One school staffer said she was trampled by a crowd rushing to see a fight. Many teachers call in sick to work each day, leaving the school understaffed.

As a researcher who studies school discipline, I know Brockton’s situation is part of a national trend of principals and teachers who have been struggling to deal with perceived increases in student misbehavior since the pandemic.

A review of how the National Guard has been deployed to schools in the past shows the guard can provide service to schools in cases of exceptional need. Yet, doing so does not always end well.

How have schools used the National Guard before?

In 1957, the National Guard blocked nine Black students’ attempts to desegregate Central High School in Little Rock, Arkansas. While the governor claimed this was for safety, the National Guard effectively delayed desegregation of the school – as did the mobs of white individuals outside. Ironically, weeks later, the National Guard and the U.S. Army would enforce integration and the safety of the “Little Rock Nine” on orders from President Dwight Eisenhower.

Three men from the mob around Little Rock’s Central High School are driven from the area at bayonet-point by soldiers of the 101st Airborne Division on Sept. 25, 1957. The presence of the troops permitted the nine Black students to enter the school with only minor background incidents. Bettmann via Getty Images

One of the most tragic cases of the National Guard in an educational setting came in 1970 at Kent State University. The National Guard was brought to campus to respond to protests over American involvement in the Vietnam War. The guardsmen fatally shot four students.

In 2012, then-Sen. Barbara Boxer, a Democrat from California, proposed funding to use the National Guard to provide school security in the wake of the Sandy Hook school shooting. The bill was not passed.

More recently, the National Guard filled teacher shortages in New Mexico’s K-12 schools during the quarantines and sickness of the pandemic. While the idea did not catch on nationally, teachers and school personnel in New Mexico generally reported positive experiences.

Can the National Guard address school discipline?

The National Guard’s mission includes responding to domestic emergencies. Members of the guard are part-time service members who maintain civilian lives. Some are students themselves in colleges and universities. Does this mission and training position the National Guard to respond to incidents of student misbehavior and school violence?

On the one hand, New Mexico’s pandemic experience shows the National Guard could be a stopgap to staffing shortages in unusual circumstances. Similarly, the guards’ eventual role in ensuring student safety during school desegregation in Arkansas demonstrates their potential to address exceptional cases in schools, such as racially motivated mob violence. And, of course, many schools have had military personnel teaching and mentoring through Junior ROTC programs for years.

Those seeking to bring the National Guard to Brockton High School have made similar arguments. They note that staffing shortages have contributed to behavior problems.

One school board member stated: “I know that the first thought that comes to mind when you hear ‘National Guard’ is uniform and arms, and that’s not the case. They’re people like us. They’re educated. They’re trained, and we just need their assistance right now. … We need more staff to support our staff and help the students learn (and) have a safe environment.”

Yet, there are reasons to question whether calls for the National Guard are the best way to address school misconduct and behavior. First, the National Guard is a temporary measure that does little to address the underlying causes of student misbehavior and school violence.

Research has shown that students benefit from effective teaching, meaningful and sustained relationships with school personnel and positive school environments. Such educative and supportive environments have been linked to safer schools. National Guard members are not trained as educators or counselors and, as a temporary measure, would not remain in the school to establish durable relationships with students.

What is more, a military presence – particularly if uniformed or armed – may make students feel less welcome at school or escalate situations.

Schools have already seen an increase in militarization. For example, school police departments have gone so far as to acquire grenade launchers and mine-resistant armored vehicles.

Research has found that school police make students more likely to be suspended and to be arrested. Similarly, while a National Guard presence may address misbehavior temporarily, their presence could similarly result in students experiencing punitive or exclusionary responses to behavior.

Students deserve a solution other than the guard

School violence and disruptions are serious problems that can harm students. Unfortunately, schools and educators have increasingly viewed student misbehavior as a problem to be dealt with through suspensions and police involvement.

A number of people – from the NAACP to the local mayor and other members of the school board – have criticized Brockton’s request for the National Guard. Governor Maura Healey has said she will not deploy the guard to the school.

However, the case of Brockton High School points to real needs. Educators there, like in other schools nationally, are facing a tough situation and perceive a lack of support and resources.

Many schools need more teachers and staff. Students need access to mentors and counselors. With these resources, schools can better ensure educators are able to do their jobs without military intervention.

F. Chris Curran has received funding from the US Department of Justice, the Bureau of Justice Assistance, and the American Civil Liberties Union for work on school safety and discipline.

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Chinese migration to US is nothing new – but the reasons for recent surge at Southern border are

A gloomier economic outlook in China and tightening state control have combined with the influence of social media in encouraging migration.

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Chinese migrants wait for a boat after having walked across the Darien Gap from Colombia to Panama. AP Photo/Natacha Pisarenko

The brief closure of the Darien Gap – a perilous 66-mile jungle journey linking South American and Central America – in February 2024 temporarily halted one of the Western Hemisphere’s busiest migration routes. It also highlighted its importance to a small but growing group of people that depend on that pass to make it to the U.S.: Chinese migrants.

While a record 2.5 million migrants were detained at the United States’ southwestern land border in 2023, only about 37,000 were from China.

I’m a scholar of migration and China. What I find most remarkable in these figures is the speed with which the number of Chinese migrants is growing. Nearly 10 times as many Chinese migrants crossed the southern border in 2023 as in 2022. In December 2023 alone, U.S. Border Patrol officials reported encounters with about 6,000 Chinese migrants, in contrast to the 900 they reported a year earlier in December 2022.

The dramatic uptick is the result of a confluence of factors that range from a slowing Chinese economy and tightening political control by President Xi Jinping to the easy access to online information on Chinese social media about how to make the trip.

Middle-class migrants

Journalists reporting from the border have generalized that Chinese migrants come largely from the self-employed middle class. They are not rich enough to use education or work opportunities as a means of entry, but they can afford to fly across the world.

According to a report from Reuters, in many cases those attempting to make the crossing are small-business owners who saw irreparable damage to their primary or sole source of income due to China’s “zero COVID” policies. The migrants are women, men and, in some cases, children accompanying parents from all over China.

Chinese nationals have long made the journey to the United States seeking economic opportunity or political freedom. Based on recent media interviews with migrants coming by way of South America and the U.S.’s southern border, the increase in numbers seems driven by two factors.

First, the most common path for immigration for Chinese nationals is through a student visa or H1-B visa for skilled workers. But travel restrictions during the early months of the pandemic temporarily stalled migration from China. Immigrant visas are out of reach for many Chinese nationals without family or vocation-based preferences, and tourist visas require a personal interview with a U.S. consulate to gauge the likelihood of the traveler returning to China.

Social media tutorials

Second, with the legal routes for immigration difficult to follow, social media accounts have outlined alternatives for Chinese who feel an urgent need to emigrate. Accounts on Douyin, the TikTok clone available in mainland China, document locations open for visa-free travel by Chinese passport holders. On TikTok itself, migrants could find information on where to cross the border, as well as information about transportation and smugglers, commonly known as “snakeheads,” who are experienced with bringing migrants on the journey north.

With virtual private networks, immigrants can also gather information from U.S. apps such as X, YouTube, Facebook and other sites that are otherwise blocked by Chinese censors.

Inspired by social media posts that both offer practical guides and celebrate the journey, thousands of Chinese migrants have been flying to Ecuador, which allows visa-free travel for Chinese citizens, and then making their way over land to the U.S.-Mexican border.

This journey involves trekking through the Darien Gap, which despite its notoriety as a dangerous crossing has become an increasingly common route for migrants from Venezuela, Colombia and all over the world.

In addition to information about crossing the Darien Gap, these social media posts highlight the best places to cross the border. This has led to a large share of Chinese asylum seekers following the same path to Mexico’s Baja California to cross the border near San Diego.

Chinese migration to US is nothing new

The rapid increase in numbers and the ease of accessing information via social media on their smartphones are new innovations. But there is a longer history of Chinese migration to the U.S. over the southern border – and at the hands of smugglers.

From 1882 to 1943, the United States banned all immigration by male Chinese laborers and most Chinese women. A combination of economic competition and racist concerns about Chinese culture and assimilability ensured that the Chinese would be the first ethnic group to enter the United States illegally.

With legal options for arrival eliminated, some Chinese migrants took advantage of the relative ease of movement between the U.S. and Mexico during those years. While some migrants adopted Mexican names and spoke enough Spanish to pass as migrant workers, others used borrowed identities or paperwork from Chinese people with a right of entry, like U.S.-born citizens. Similarly to what we are seeing today, it was middle- and working-class Chinese who more frequently turned to illegal means. Those with money and education were able to circumvent the law by arriving as students or members of the merchant class, both exceptions to the exclusion law.

Though these Chinese exclusion laws officially ended in 1943, restrictions on migration from Asia continued until Congress revised U.S. immigration law in the Hart-Celler Act in 1965. New priorities for immigrant visas that stressed vocational skills as well as family reunification, alongside then Chinese leader Deng Xiaoping’s policies of “reform and opening,” helped many Chinese migrants make their way legally to the U.S. in the 1980s and 1990s.

Even after the restrictive immigration laws ended, Chinese migrants without the education or family connections often needed for U.S. visas continued to take dangerous routes with the help of “snakeheads.”

One notorious incident occurred in 1993, when a ship called the Golden Venture ran aground near New York, resulting in the drowning deaths of 10 Chinese migrants and the arrest and conviction of the snakeheads attempting to smuggle hundreds of Chinese migrants into the United States.

Existing tensions

Though there is plenty of precedent for Chinese migrants arriving without documentation, Chinese asylum seekers have better odds of success than many of the other migrants making the dangerous journey north.

An estimated 55% of Chinese asylum seekers are successful in making their claims, often citing political oppression and lack of religious freedom in China as motivations. By contrast, only 29% of Venezuelans seeking asylum in the U.S. have their claim granted, and the number is even lower for Colombians, at 19%.

The new halt on the migratory highway from the south has affected thousands of new migrants seeking refuge in the U.S. But the mix of push factors from their home country and encouragement on social media means that Chinese migrants will continue to seek routes to America.

And with both migration and the perceived threat from China likely to be features of the upcoming U.S. election, there is a risk that increased Chinese migration could become politicized, leaning further into existing tensions between Washington and Beijing.

Meredith Oyen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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