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Futures Tumble As Global Bond Yields Surge

Futures Tumble As Global Bond Yields Surge

Yesterday when US stock markets were closed but both bond and equity futures were trading, we pointed out that 10Y Treasury futures implied a yield of over 1.80%, a number which was the highest in…

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Futures Tumble As Global Bond Yields Surge

Yesterday when US stock markets were closed but both bond and equity futures were trading, we pointed out that 10Y Treasury futures implied a yield of over 1.80%, a number which was the highest in years and which we warned would cause headaches for stock traders when the US reopened fully on Tuesday. And sure enough, with 10Y yields surging as high as 1.8536% overnight and 2Y yields jumping to 1.05% (up a whopping 15bps from 0.90% last Friday)...

.... futures are getting hammered this morning, with emini S&P futures down 48 points or over 1% and just above 4,600, while Nasdaq futures were getting hammered again, sliding 1.62% or 254 points. The dollar rose and Brent oil touched $88/bbl, the highest price since 2014.

Global stocks have had a turbulent start to the year as investors shift out of more expensive and rates-sensitive sectors such as technology into cheaper, so-called value shares. Market participants are now waiting for the earnings season to gauge whether companies can continue delivering robust profits despite higher costs and challenges from omicron.

“With rates biased higher over the coming months, investors should be prepared for parts of the tech sector to again be challenged,” Seema Shah, chief strategist at Principal Global Investors, wrote in a note to investors. “Although rising bond yields are challenging the entire tech sector, investors must distinguish between profitless names that are a long way from demonstrating healthy earning power and mega-cap tech firms that can defend their margins.”

Fed rate hikes are in focus as premium builds in front-end yields - the move was driven by lots of jawboning after last week JPM’s Dimon flagged potential for 7 Fed rate increases, while over the weekend billionaire investor Ackman said U.S. central bank is losing inflation battle and needs to raise 50bps in March to “restore its credibility.”

Intel Corp., Apple Inc. and Tesla Inc. were among the biggest declines in U.S. premarket trading. Bank of America Corp.’s January global fund manager survey showed that net allocation to the tech sector fell 20% month-over-month to 1%, the lowest since 2008, though they expect inflation to fall this year and are placing record bets on a boom in both commodities and stocks overall. Other notable premarket movers:

  • Apple (AAPL US) -1.9%, shrugging off a PT raise at Deutsche Bank; Tesla (TSLA US) -3.2%, Microsoft (MSFT US) -2.2%.
  • Snowflake (SNOW US) raised to outperform at William Blair following the software solutions provider’s better than expected growth in 2021 and a pullback in the stock. Shares down 0.9% in premarket.
  • Amazon.com (AMZN US) has made a last-minute reversal to its plan to ban the use of Visa’s credit cards issued in the U.K. Shares down 2% in premarket.
  • Under Armour (UAA US) “represents a healthy brand thrown out with the industry bath water,” with recent selloff making the company’s risk/reward “particularly compelling,” BMO says, upgrading to outperform. Shares up 0.7% in premarket.

Tech also led the retreat in Europe, where equities traded poorly with most indexes close to, or through last Friday’s lows. Euro Stoxx 50 drops as much as 1.6%, FTSE 100 and IBEX fare marginally better. Weakness is most pronounced in tech and travel stocks with only energy and telecoms holding in the green.

In rates, as noted above, Treasuries slumped across the curve in bear-flattening moves as traders intensified bets the Fed will hike early and often. The largest moves were in the short end where two-year yields soared above 1% for the first time since 2020 on increased speculation of a Federal Reserve rate hike in March.

Treasury yields gapped higher led by front end when trading resumed after Monday’s US holiday as Fed rate-hike expectations went into overdrive. Swaps fully price in an initial hike in March and a total of four this year.  Treasury two-year yield climb 7bps to 1.04%, touches 1.06%, adding to Friday’s 7bp jump. Two-year hits 1.06%, and 10-year reaches 1.85% -- both are highest seen since before pandemic struck. Though off session highs, yields remained cheaper by more than 6bp in 2-year sector, which reached 1.056% during Asia session, flattening 2s10s curve by 3bp on the day; 10-year yields around 1.82%, cheaper by 3.6bp with comparable bunds and gilts outperforming by 2.5bp to 3bp. Bear-flattening Treasuries move briefly pushed 5s30s spread under 50bp, flattest since March 2020; it remains tighter by ~4bp on the day at ~52bp.

Australia’s 3-year bond yield climbed to the highest since April 2019 as investors forecast global tightening moves to force the RBA to abandon its plans to hold record-low rates until at least 2023. German 10Y Bunds rose as high as -0.005%. Gilts yields add 1-1.5bps across the curve with 10y yields trading either side of 1.20%. 10y Italy underperforms peripheral peers, widening ~2bps to Germany.

In FX, the Bloomberg Dollar Spot Index rose as the dollar was higher or steady against all of its Group-of-10 peers; Scandinavian and Antipodean currencies were the worst performers while the Canadian dollar held up against the greenback amid a continued rise in oil prices.  The euro gravitated toward $1.1380, a key technical area. The pound weakened on the back of a broadly stronger dollar, with focus on inflation figures due Wednesday. Britain’s labor market grew strongly despite a surge in coronavirus infections late last year. Further pound gains aren’t that straightforward for options traders. Ten-year gilt yields are flirting with their highest level since before the pandemic ahead of a seven-year sale. The yen recovered from an Asia session loss after Bank of Japan Governor Haruhiko Kuroda looked to quash speculation that the phasing out of stimulus is anywhere near the horizon.

In commodities, Brent oil surged to the highest level in seven years, underscoring the inflation challenge facing the Federal Reserve. Easing concerns about the impact of the omicron virus strain on demand, together with shrinking inventories and geopolitical risks are contributing to Goldman forcasting a $105 per barrel crude price in 2023. With US traders walking to their desks, crude futures are in the green but off session highs. WTI gains over 1.5%, holding above $85, Brent gains stall near $88. Spot gold drifts ~$8 lower near $1,810/oz. Most base metals trade well: LME tin adds over 2.5% to a record high. LME lead and copper are in the red

Looking at the day ahead now, and data releases include UK unemployment for November, the ZEW Survey from Germany for January, whilst in the US there’s the Empire State manufacturing survey for January and the NAHB’s housing market index. Central bank speakers include the ECB’s Villeroy and earnings releases include Goldman Sachs and BNY Mellon.

Market Snapshot

  • S&P 500 futures down 1.2% to 4,597.00
  • STOXX Europe 600 down 1.3% to 478.04
  • MXAP down 0.6% to 193.63
  • MXAPJ down 0.7% to 632.44
  • Nikkei down 0.3% to 28,257.25
  • Topix down 0.4% to 1,978.38
  • Hang Seng Index down 0.4% to 24,112.78
  • Shanghai Composite up 0.8% to 3,569.91
  • Sensex down 0.8% to 60,816.76
  • Australia S&P/ASX 200 down 0.1% to 7,408.78
  • Kospi down 0.9% to 2,864.24
  • Brent Futures up 1.3% to $87.61/bbl
  • Gold spot down 0.4% to $1,811.82
  • U.S. Dollar Index little changed at 95.35
  • German 10Y yield little changed at -0.01%
  • Euro down 0.1% to $1.1395

Top Overnight News from Bloomberg

  • Brent oil surged to the highest level in seven years as physical markets run hot in the world’s largest consuming region and Goldman Sachs Group Inc. said prices are headed for $100 a barrel
  • If the Bank of England pulls the trigger and raises interest rates to 0.5% next month, that would be the first back- to-back hikes since 2004. It also opens the door for the BOE to start reducing its record balance sheet
  • Some investors call for more frequent remit revisions from the U.K.’s Debt Management Office amid widespread support for more short and inflation- linked issuance
  • Chinese President Xi Jinping called on nations to secure global supply chains and prevent inflation shocks, as the leader of the world’s No.2 economy seeks a smooth path to clinching a precedent-defying third term in power
  • The Chinese property market expectation has been improving steadily as property sales, land purchases and financing gradually return to normal recently after efforts from various sides, Zou Lan, head of PBOC’s financial market department, says at a briefing
  • China will aim to keep the yuan exchange rate stable, and market and policy factors will help correct any short-term deviation from its equilibrium level, a senior central bank official said

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded mixed with early optimism in the region soured by a resumption of the surge in US yields as trade got underway from the US holiday. US equity futures resumed trade flat but thereafter experienced pressure with the NQ (-1.8%) the laggard as US yields surged, with the 10yr cash yield briefly topping 1.85%. European equity futures were also softer overnight but to a lesser extent. In APAC, the ASX 200 (-0.1%) was initially kept afloat by strength in tech and the mining sectors with the latter unfazed by Rio Tinto’s weaker quarterly iron production and shipment numbers as the mining heavyweight’s FY22 guidance was relatively in line with forecasts, although the gains were later faded amid losses in the top-weighted financials sector and a rise in US yields to their highest in two years. The Nikkei 225 (-0.3%) benefitted early on from the recent JPY weakness and after the BoJ policy announcement in which it maintained policy settings as expected and reaffirmed its dovish stance. The central bank reiterated that it will take more action without hesitation if needed and that it expects rates to remain at current or lower levels, which was at a contrast to a prior source report that suggested debate among policymakers on how soon a rate increase can be signalled, although the Japanese benchmark later slipped into the red as the spotlight turned to the higher US yields. The Hang Seng (-0.4%) and Shanghai Comp. (+0.8%) were mixed with outperformance in the mainland following the PBoC’s liquidity efforts and with many anticipating further policy action from China. This helped the mainland shrug off the early indecision brought on by ongoing developer headwinds and virus concerns that have prompted China’s decision to refrain from selling Beijing Winter Olympics tickets to the general public amid the COVID-19 outbreak. Finally, 10yr JGBs were initially kept afloat with mild support heading into the BoJ policy announcement where the central bank maintained it policy settings and reiterated its intentions to sustain powerful monetary easing, although JGBs then retreated in tandem with the pressure in T-note futures as US yields resumed their advances to the highest levels since January 2020 which saw yields in the belly up by around 10bps and the 10yr yield briefly rose above 1.85%.

Top Asian News

  • Bank Indonesia Names New Monetary Policy Head
  • Tokyo Area Faces Three-Week Covid Quasi-Emergency, NHK Says
  • DaFa Properties Failed to Pay 9.95% Senior Notes Due Jan. 2022
  • China Diplomat Calls U.S. Omicron Surge ‘Greatly Out of Control’

Major European bourses are firmly in negative territory (Euro Stoxx 50 -1.5%; Stoxx 600 -1.2%) as sentiment was hit amid surging bond yields as US cash bonds resumed trade overnight. APAC saw somewhat of a mixed closed with Shanghai benefitting from the prospect of further policy loosening after commentary from the PBoC, who also intimated that the divergence with some Western central banks is manageable. US equity futures have extended their APAC losses as volumes pick up and yields remain at high – with the NQ (-2.0%) the hardest hit. On that note, Deutsche Bank's January survey showed 49% of respondents believe US tech stocks are in a bubble, 39% disagree, 12% do not know, whilst the BofA January survey suggested investors cut net overweight positions in the Tech sector to their lowest since December 2008. Back in Europe, EUR-bourses see relatively broad-based losses and overlooked a sizeable rise in the German ZEW Economic Sentiment (51.7 vs exp. 32.0) – which indicated the economic outlook has improved considerably since the start of 2022. Meanwhile, the UK’s FTSE 100 (-0.9%) initially saw some losses cushioned by oil majors – which remains the outperforming sector despite trimming earlier gains. Broader European sectors are in the red across the board with some defensives towards the top of the bunch, while the other side of the spectrum sees Tech and Travel & Leisure as the marked laggards, with the former under heavy pressure from rising yields, with the German 10yr cash yields eyeing positive territory. The latter meanwhile is weighed on more by its Leisure subsector as sector-heavyweight Evolution Gaming (-4.8%) sits towards the foot of the Stoxx 600. The auto sector is also under pressure following lacklustre EU27 car registrations, whilst Toyota also cut its output forecast amid the chip shortage and as its auto plant in Tianjin remains suspended following the regional COVID outbreak. In terms of individual movers, Hugo Boss (-0.3%) conforms to the regional losses despite seeing an initial spike higher at the open following encouraging earnings.

Top European News

  • German Investor Confidence Surges Amid Hopes for 2022 Recovery
  • Spotify Backer GP Bullhound Said to Join Amsterdam SPAC Rush
  • Brexit Gives $228 Billion Boost to Irish Bank Balance Sheets
  • Ex-Citi Banker Says He Was Fired for Flagging ‘Toxic’ Dubai Unit

In FX, some respite for the Greenback after its marked reversal from early 2022 peaks (index at 96.422 on January 4th), and the latest ratchet higher in US Treasury yields is providing impetus even though other global bonds are tracking the moves amidst more upside in oil prices that is stoking inflation pressures and prompting further reflation trades. The DXY is trying to form a firmer base above 95.000 within a 95.126-95.454 range in the face of heightened risk aversion that is boosting demand for safer havens and crimping commodity related gains for currencies within and beyond the basket. Ahead, only NY Fed manufacturing and the NAHB housing market index on a relatively quiet agenda after the long MLK holiday weekend.

  • JPY - The Yen has recovered pretty well from overnight lows posted against the Dollar following a still dovishly positioned BoJ and subsequent comments from Governor Kuroda underlining that policy stance with little inclination to change tack anytime soon, irrespective of source reports claiming the contrary. Indeed, Usd/Jpy is back down around 114.60 having popped above 115.00 and a Fib retracement level at 114.92 that could be pivotal on a closing basis from a technical perspective rather than pure risk-off/on dynamics.
  • CAD/EUR/GBP/CHF - All softer vs their US rival to varying degrees, as the Loonie continues to derive a degree of traction/underlying support from WTI extending to Usd 85.74/brl at one stage and now awaiting Canadian CPI for further direction hot on the heels of yesterday’s broadly upbeat BoC business outlook survey. Usd/Cad is flattish between 1.2486-1.2534 parameters, while the Euro has lost grip of the 1.1400 handle, Sterling is back below 1.3650 and the Franc is straddling 0.9150 in wake of a rather mixed German ZEW survey, solid UK jobs data on balance and a slowdown in Swiss producer/import prices.
  • AUD/NZD - The Aussie and Kiwi have both faded above round numbers that have acted as support and resistance of late, at 0.7200 and 0.6800 respectively, but the former is holding up a tad better given a modest bounce in the Aud/Nzd cross in the low 1.0600 zone after a deterioration in NZIER confidence and decline in cap u. Moreover, Aud/Usd may glean impetus from decent option expiry interest between 0.7190-0.7200 (1.065 bn).

In commodities, WTI and Brent front month futures have pulled back from overnight highs but remain at elevated levels with WTI Feb around USD 85/bbl (83.50-85.74 range) and Brent March north of USD 87/bbl (86.44-88.13 range). Several factors are in play for the complex from both sides of the equations. Geopolitical risk premium continues to be woven into prices as tensions remain at highs between NATO/Ukraine and Russia, adding to that the middle eastern developments between the UAE/Saudi and Houthis. Further on the supply side, the under-production from several OPEC members continues to underpin prices. On the demand side, the reopening of economies in the West provides the complex with bullish omens, albeit the East remains cautious – with China adhering to its zero-COVID policy and Tokyo reportedly planning to raise its COVID warning level by one notch, according to TV Asahi. Meanwhile, Goldman Sachs upped its forecast and expected oil hitting USD 100/bbl in H2 2021 amid a lower-than-expected hit to demand from Omicron. The bank sees USD 90/bbl in Q1 2022 and USD 95/bbl averaging in Q2 this year. Elsewhere, spot gold is under pressure from the rising Buck and yield, with the yellow metal in close proximity to its 21 DMA (1,809), 50 DMA (1,806) and 200 DMA (1,803). LME copper has succumbed to the risk aversion and currently trades around session lows but north of USD 9,500/t.

US Event Calendar

  • 8:30am: Jan. Empire Manufacturing, est. 25.0, prior 31.9
  • 10am: Jan. NAHB Housing Market Index, est. 84, prior 84
  • 4pm: Nov. Total Net TIC Flows, prior $143b

DB's Jim Reid concludes the overnight wrap

In around an hour or so we will be publishing our latest monthly survey results. It's fair to say that there's a more bearish tilt to the responses than there was before Xmas. We asked a few of the same 2022 questions and there has been a further bias towards higher rates, more Fed hikes, less strong risk/equities and a slightly earlier likely next US recession date. There's lots more so watch out for the results at 8am London time.

By next month's survey it might be worth asking who hasn't played "Wordle". I discovered this new global craze over the last week and have become quickly addicted to the daily search for the 5-letter word of the day. For the uninitiated you have 6 attempts to guess the word from scratch. After each guess you get told if you have any of the right letters in order and whether any of the letters are correct but in the wrong order. Each guess has to be an actual word to count. From there is a process of skill/elimination and luck! When I've succeeded it's the former, when I've failed it's the latter. It's highly addictive and it's certainly improved my vocabulary of 4-letter words when I can't work it out.

It's a shame there is only one new word every day as yesterday's quiet US session would have given plenty of opportunity to play. Although it was a predictably slow session, familiar themes dominated and investor conviction hardened that the Fed were set to embark on a regular series of rate hikes starting in March. Indeed, yesterday marked a number of fresh milestones, as it was the first time that Fed funds futures were fully pricing in a March rate hike, up from 97% on the close on Friday. And for the year as a whole, futures are now pricing in 3.99 hikes, up from 3.79 on Friday and again the highest number to date. Bear in mind that at the start of October, futures were pricing in just a single hike in 2022, so we’ve added nearly 3 additional hikes in the space of just 3 and a half months, which begs the question of what we might be saying in another 3 and a half months from now. A reminder of the "What's in the tails?" note from our economists over the weekend detailing the risk scenario of a Fed that may choose to get to neutral earlier than expected than expected. They outline a scenario where the Fed needs to raise rates at every meeting from March. This is inline with my thinking that unless financial conditions tighten notably, every meeting from March is live. See their report here.

US Treasury markets themselves were closed as a result of the holiday but yields have jumped across the curve in the Asian session this morning. 2yr yields have risen +6.8bps and above 1% (1.034%) for the first time since February 2020 while 5yr (+7.2bps) and 10yr yields (+5.2bps) have both jumped to the highest level since January 2020. Overnight oil has hit the highest level since 2014 and is up around +1.5% as I type. The complex's is up more than +10% on a YTD basis and is the best performer YTD in our global list of key macro variables.

This all follows a selloff in sovereign bonds across the board in Europe yesterday. In Germany, yields on 10yr bunds were up +2.0bps to -0.03%, which puts them back around their highest level since the pandemic, and not far off reaching positive territory for the first time since May 2019. They got close yesterday but stepped back from the parapet. Given the Asian session, today could be the day that German bonds give you a positive yield again! Over in France, yields on 10yr OATs (+2.3bps) hit a post-pandemic high of their own, and their Spanish counterparts (+2.0bps) saw yields at their highest since June 2020.

In spite of the prospect of tighter monetary policy before much longer, European equities posted a decent performance yesterday, with the STOXX 600 advancing +0.70% as part of a broad-based advance. Technology stocks led the way, with the STOXX Technology index (+1.59%) recovering after 2 consecutive weekly declines, whilst the STOXX Health Care Index (+1.06%) also pared back its losses after a weak start to the year so far. In the UK, the FTSE 100 (+0.91%) closed at its highest level in almost 2 years and cemented its status as one of the top-performing of the main European and US equity indices on a YTD basis, having risen +3.1% in 2022 thus far. And on top of that, the gains for both France’s CAC 40 (+0.82%) and the German DAX (+0.32%) meant that both indices were back into positive territory on a YTD basis as well.

Asian stock markets are without a clear trend this morning with the Nikkei (+0.12%) fluctuating after the BOJ maintained its negative interest rate while keeping the bond yield target and asset purchases intact, in-line with market expectations. In its outlook report, the central bank raised its inflation forecast for the fiscal year from April due to rising energy costs alongside a weak yen. The BOJ revised up its inflation forecast to +1.1% in fiscal 2022 from a +0.9% rise estimated earlier and sees inflation for fiscal 2023 reaching +1.1% from +1.0%. Additionally, it refreshed Japan’s growth outlook to +3.8% for fiscal 2022 compared to +2.9% three months ago, despite increasing concerns over the rapid spread of the Omicron variant. Elsewhere, the Shanghai Composite (+0.94%) and CSI (+1.07%) are extending their previous session gains this morning. Meanwhile, the Kospi (-1.02%) is edging down after opening higher while the Hang Seng (-0.14%) is trading in the red at the time of writing. Moving ahead, futures market in the DM world indicate a negative start with the S&P (-0.50%) and DAX (-0.28%) contracts moving lower.

Back to the energy complex, Galina in my team put out a comprehensive report on carbon pricing and trading yesterday. It's packed full of interesting stuff and the ramifications of the sharp rise higher over the past year. See here for more.

Turning to the pandemic, there was continued positive news from the UK on cases, which are now down by -42% over the last 7 days relative to the preceding week, which is a very promising sign for elsewhere given that the UK was one of the first of the advanced economies to be hit by the Omicron wave.

To  the day ahead now, and data releases include UK unemployment for November, the ZEW Survey from Germany for January, whilst in the US there’s the Empire State manufacturing survey for January and the NAHB’s housing market index. Central bank speakers include the ECB’s Villeroy and earnings releases include Goldman Sachs and BNY Mellon.

Tyler Durden Tue, 01/18/2022 - 07:34

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Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and…

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4 hours ago

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March 13, 2024

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Riley Gaines Explains How Women's Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and bewildering tunnel of social justice cultism?  Global events have been so frenetic that many people might not remember, but only a couple years ago Big Tech companies and numerous governments were openly aligned in favor of mass censorship.  Not just to prevent the public from investigating the facts surrounding the pandemic farce, but to silence anyone questioning the validity of woke concepts like trans ideology. 

From 2020-2022 was the closest the west has come in a long time to a complete erasure of freedom of speech.  Even today there are still countries and Europe and places like Canada or Australia that are charging forward with draconian speech laws.  The phrase "radical speech" is starting to circulate within pro-censorship circles in reference to any platform where people are allowed to talk critically.  What is radical speech?  Basically, it's any discussion that runs contrary to the beliefs of the political left.

Open hatred of moderate or conservative ideals is perfectly acceptable, but don't ever shine a negative light on woke activism, or you might be a terrorist.

Riley Gaines has experienced this double standard first hand.  She was even assaulted and taken hostage at an event in 2023 at San Francisco State University when leftists protester tried to trap her in a room and demanded she "pay them to let her go."  Campus police allegedly witnessed the incident but charges were never filed and surveillance footage from the college was never released.  

It's probably the last thing a champion female swimmer ever expects, but her head-on collision with the trans movement and the institutional conspiracy to push it on the public forced her to become a counter-culture voice of reason rather than just an athlete.

For years the independent media argued that no matter how much we expose the insanity of men posing as women to compete and dominate women's sports, nothing will really change until the real female athletes speak up and fight back.  Riley Gaines and those like her represent that necessary rebellion and a desperately needed return to common sense and reason.

In a recent interview on the Joe Rogan Podcast, Gaines related some interesting information on the inner workings of the NCAA and the subversive schemes surrounding trans athletes.  Not only were women participants essentially strong-armed by colleges and officials into quietly going along with the program, there was also a concerted propaganda effort.  Competition ceremonies were rigged as vehicles for promoting trans athletes over everyone else. 

The bottom line?  The competitions didn't matter.  The real women and their achievements didn't matter.  The only thing that mattered to officials were the photo ops; dudes pretending to be chicks posing with awards for the gushing corporate media.  The agenda took precedence.

Lia Thomas, formerly known as William Thomas, was more than an activist invading female sports, he was also apparently a science project fostered and protected by the athletic establishment.  It's important to understand that the political left does not care about female athletes.  They do not care about women's sports.  They don't care about the integrity of the environments they co-opt.  Their only goal is to identify viable platforms with social impact and take control of them.  Women's sports are seen as a vehicle for public indoctrination, nothing more.

The reasons why they covet women's sports are varied, but a primary motive is the desire to assert the fallacy that men and women are "the same" psychologically as well as physically.  They want the deconstruction of biological sex and identity as nothing more than "social constructs" subject to personal preference.  If they can destroy what it means to be a man or a woman, they can destroy the very foundations of relationships, families and even procreation.  

For now it seems as though the trans agenda is hitting a wall with much of the public aware of it and less afraid to criticize it.  Social media companies might be able to silence some people, but they can't silence everyone.  However, there is still a significant threat as the movement continues to target children through the public education system and women's sports are not out of the woods yet.   

The ultimate solution is for women athletes around the world to organize and widely refuse to participate in any competitions in which biological men are allowed.  The only way to save women's sports is for women to be willing to end them, at least until institutions that put doctrine ahead of logic are made irrelevant.          

Tyler Durden Wed, 03/13/2024 - 17:20

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Congress’ failure so far to deliver on promise of tens of billions in new research spending threatens America’s long-term economic competitiveness

A deal that avoided a shutdown also slashed spending for the National Science Foundation, putting it billions below a congressional target intended to…

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March 13, 2024

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Science is again on the chopping block on Capitol Hill. AP Photo/Sait Serkan Gurbuz

Federal spending on fundamental scientific research is pivotal to America’s long-term economic competitiveness and growth. But less than two years after agreeing the U.S. needed to invest tens of billions of dollars more in basic research than it had been, Congress is already seriously scaling back its plans.

A package of funding bills recently passed by Congress and signed by President Joe Biden on March 9, 2024, cuts the current fiscal year budget for the National Science Foundation, America’s premier basic science research agency, by over 8% relative to last year. That puts the NSF’s current allocation US$6.6 billion below targets Congress set in 2022.

And the president’s budget blueprint for the next fiscal year, released on March 11, doesn’t look much better. Even assuming his request for the NSF is fully funded, it would still, based on my calculations, leave the agency a total of $15 billion behind the plan Congress laid out to help the U.S. keep up with countries such as China that are rapidly increasing their science budgets.

I am a sociologist who studies how research universities contribute to the public good. I’m also the executive director of the Institute for Research on Innovation and Science, a national university consortium whose members share data that helps us understand, explain and work to amplify those benefits.

Our data shows how underfunding basic research, especially in high-priority areas, poses a real threat to the United States’ role as a leader in critical technology areas, forestalls innovation and makes it harder to recruit the skilled workers that high-tech companies need to succeed.

A promised investment

Less than two years ago, in August 2022, university researchers like me had reason to celebrate.

Congress had just passed the bipartisan CHIPS and Science Act. The science part of the law promised one of the biggest federal investments in the National Science Foundation in its 74-year history.

The CHIPS act authorized US$81 billion for the agency, promised to double its budget by 2027 and directed it to “address societal, national, and geostrategic challenges for the benefit of all Americans” by investing in research.

But there was one very big snag. The money still has to be appropriated by Congress every year. Lawmakers haven’t been good at doing that recently. As lawmakers struggle to keep the lights on, fundamental research is quickly becoming a casualty of political dysfunction.

Research’s critical impact

That’s bad because fundamental research matters in more ways than you might expect.

For instance, the basic discoveries that made the COVID-19 vaccine possible stretch back to the early 1960s. Such research investments contribute to the health, wealth and well-being of society, support jobs and regional economies and are vital to the U.S. economy and national security.

Lagging research investment will hurt U.S. leadership in critical technologies such as artificial intelligence, advanced communications, clean energy and biotechnology. Less support means less new research work gets done, fewer new researchers are trained and important new discoveries are made elsewhere.

But disrupting federal research funding also directly affects people’s jobs, lives and the economy.

Businesses nationwide thrive by selling the goods and services – everything from pipettes and biological specimens to notebooks and plane tickets – that are necessary for research. Those vendors include high-tech startups, manufacturers, contractors and even Main Street businesses like your local hardware store. They employ your neighbors and friends and contribute to the economic health of your hometown and the nation.

Nearly a third of the $10 billion in federal research funds that 26 of the universities in our consortium used in 2022 directly supported U.S. employers, including:

  • A Detroit welding shop that sells gases many labs use in experiments funded by the National Institutes of Health, National Science Foundation, Department of Defense and Department of Energy.

  • A Dallas-based construction company that is building an advanced vaccine and drug development facility paid for by the Department of Health and Human Services.

  • More than a dozen Utah businesses, including surveyors, engineers and construction and trucking companies, working on a Department of Energy project to develop breakthroughs in geothermal energy.

When Congress shortchanges basic research, it also damages businesses like these and people you might not usually associate with academic science and engineering. Construction and manufacturing companies earn more than $2 billion each year from federally funded research done by our consortium’s members.

A lag or cut in federal research funding would harm U.S. competitiveness in critical advanced technologies such as artificial intelligence and robotics. Hispanolistic/E+ via Getty Images

Jobs and innovation

Disrupting or decreasing research funding also slows the flow of STEM – science, technology, engineering and math – talent from universities to American businesses. Highly trained people are essential to corporate innovation and to U.S. leadership in key fields, such as AI, where companies depend on hiring to secure research expertise.

In 2022, federal research grants paid wages for about 122,500 people at universities that shared data with my institute. More than half of them were students or trainees. Our data shows that they go on to many types of jobs but are particularly important for leading tech companies such as Google, Amazon, Apple, Facebook and Intel.

That same data lets me estimate that over 300,000 people who worked at U.S. universities in 2022 were paid by federal research funds. Threats to federal research investments put academic jobs at risk. They also hurt private sector innovation because even the most successful companies need to hire people with expert research skills. Most people learn those skills by working on university research projects, and most of those projects are federally funded.

High stakes

If Congress doesn’t move to fund fundamental science research to meet CHIPS and Science Act targets – and make up for the $11.6 billion it’s already behind schedule – the long-term consequences for American competitiveness could be serious.

Over time, companies would see fewer skilled job candidates, and academic and corporate researchers would produce fewer discoveries. Fewer high-tech startups would mean slower economic growth. America would become less competitive in the age of AI. This would turn one of the fears that led lawmakers to pass the CHIPS and Science Act into a reality.

Ultimately, it’s up to lawmakers to decide whether to fulfill their promise to invest more in the research that supports jobs across the economy and in American innovation, competitiveness and economic growth. So far, that promise is looking pretty fragile.

This is an updated version of an article originally published on Jan. 16, 2024.

Jason Owen-Smith receives research support from the National Science Foundation, the National Institutes of Health, the Alfred P. Sloan Foundation and Wellcome Leap.

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What’s Driving Industrial Development in the Southwest U.S.

The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse…

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March 13, 2024

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The post-COVID-19 pandemic pipeline, supply imbalances, investment and construction challenges: these are just a few of the topics address by a powerhouse panel of executives in industrial real estate this week at NAIOP’s I.CON West in Long Beach, California. Led by Dawn McCombs, principal and Denver lead industrial specialist for Avison Young, the panel tackled some of the biggest issues facing the sector in the Western U.S. 

Starting with the pandemic in 2020 and continuing through 2022, McCombs said, the industrial sector experienced a huge surge in demand, resulting in historic vacancies, rent growth and record deliveries. Operating fundamentals began to normalize in 2023 and construction starts declined, certainly impacting vacancy and absorption moving forward.  

“Development starts dropped by 65% year-over-year across the U.S. last year. In Q4, we were down 25% from pre-COVID norms,” began Megan Creecy-Herman, president, U.S. West Region, Prologis, noting that all of that is setting us up to see an improvement of fundamentals in the market. “U.S. vacancy ended 2023 at about 5%, which is very healthy.” 

Vacancies are expected to grow in Q1 and Q2, peaking mid-year at around 7%. Creecy-Herman expects to see an increase in absorption as customers begin to have confidence in the economy, and everyone gets some certainty on what the Fed does with interest rates. 

“It’s an interesting dynamic to see such a great increase in rents, which have almost doubled in some markets,” said Reon Roski, CEO, Majestic Realty Co. “It’s healthy to see a slowing down… before [rents] go back up.” 

Pre-pandemic, a lot of markets were used to 4-5% vacancy, said Brooke Birtcher Gustafson, fifth-generation president of Birtcher Development. “Everyone was a little tepid about where things are headed with a mediocre outlook for 2024, but much of this is normalizing in the Southwest markets.”  

McCombs asked the panel where their companies found themselves in the construction pipeline when the Fed raised rates in 2022.   

In Salt Lake City, said Angela Eldredge, chief operations officer at Price Real Estate, there is a typical 12-18-month lead time on construction materials. “As rates started to rise in 2022, lots of permits had already been pulled and construction starts were beginning, so those project deliveries were in fall 2023. [The slowdown] was good for our market because it kept rates high, vacancies lower and helped normalize the market to a healthy pace.” 

A supply imbalance can stress any market, and Gustafson joked that the current imbalance reminded her of a favorite quote from the movie Super Troopers: “Desperation is a stinky cologne.” “We’re all still a little crazed where this imbalance has put us, but for the patient investor and owner, there will be a rebalancing and opportunity for the good quality real estate to pass the sniff test,” she said.  

At Bircher, Gustafson said that mid-pandemic, there were predictions that one billion square feet of new product would be required to meet tenant demand, e-commerce growth and safety stock. That transition opened a great opportunity for investors to run at the goal. “In California, the entitlement process is lengthy, around 24-36 months to get from the start of an acquisition to the completion of a building,” she said. Fast forward to 2023-2024, a lot of what is being delivered in 2024 is the result of that chase.  

“Being an optimistic developer, there is good news. The supply imbalance helped normalize what was an unsustainable surge in rents and land values,” she said. “It allowed corporate heads of real estate to proactively evaluate growth opportunities, opened the door for contrarian investors to land bank as values drop, and provided tenants with options as there is more product. Investment goals and strategies have shifted, and that’s created opportunity for buyers.” 

“Developers only know how to run and develop as much as we can,” said Roski. “There are certain times in cycles that we are forced to slow down, which is a good thing. In the last few years, Majestic has delivered 12-14 million square feet, and this year we are developing 6-8 million square feet. It’s all part of the cycle.”  

Creecy-Herman noted that compared to the other asset classes and opportunities out there, including office and multifamily, industrial remains much more attractive for investment. “That was absolutely one of the things that underpinned the amount of investment we saw in a relatively short time period,” she said.  

Market rent growth across Los Angeles, Inland Empire and Orange County moved up more than 100% in a 24-month period. That created opportunities for landlords to flexible as they’re filling up their buildings. “Normalizing can be uncomfortable especially after that kind of historic high, but at the same time it’s setting us up for strong years ahead,” she said. 

Issues that owners and landlords are facing with not as much movement in the market is driving a change in strategy, noted Gustafson. “Comps are all over the place,” she said. “You have to dive deep into every single deal that is done to understand it and how investment strategies are changing.” 

Tenants experienced a variety of challenges in the pandemic years, from supply chain to labor shortages on the negative side, to increased demand for products on the positive, McCombs noted.  

“Prologis has about 6,700 customers around the world, from small to large, and the universal lesson [from the pandemic] is taking a more conservative posture on inventories,” Creecy-Herman said. “Customers are beefing up inventories, and that conservatism in the supply chain is a lesson learned that’s going to stick with us for a long time.” She noted that the company has plenty of clients who want to take more space but are waiting on more certainty from the broader economy.  

“E-commerce grew by 8% last year, and we think that’s going to accelerate to 10% this year. This is still less than 25% of all retail sales, so the acceleration we’re going to see in e-commerce… is going to drive the business forward for a long time,” she said. 

Roski noted that customers continually re-evaluate their warehouse locations, expanding during the pandemic and now consolidating but staying within one delivery day of vast consumer bases.  

“This is a generational change,” said Creecy-Herman. “Millions of young consumers have one-day delivery as a baseline for their shopping experience. Think of what this means for our business long term to help our customers meet these expectations.” 

McCombs asked the panelists what kind of leasing activity they are experiencing as a return to normalcy is expected in 2024. 

“During the pandemic, shifts in the ports and supply chain created a build up along the Mexican border,” said Roski, noting border towns’ importance to increased manufacturing in Mexico. A shift of populations out of California and into Arizona, Nevada, Texas and Florida have resulted in an expansion of warehouses in those markets. 

Eldridge said that Salt Lake City’s “sweet spot” is 100-200 million square feet, noting that the market is best described as a mid-box distribution hub that is close to California and Midwest markets. “Our location opens up the entire U.S. to our market, and it’s continuing to grow,” she said.   

The recent supply chain and West Coast port clogs prompted significant investment in nearshoring and port improvements. “Ports are always changing,” said Roski, listing a looming strike at East Coast ports, challenges with pirates in the Suez Canal, and water issues in the Panama Canal. “Companies used to fix on one port and that’s where they’d bring in their imports, but now see they need to be [bring product] in a couple of places.” 

“Laredo, [Texas,] is one of the largest ports in the U.S., and there’s no water. It’s trucks coming across the border. Companies have learned to be nimble and not focused on one area,” she said. 

“All of the markets in the southwest are becoming more interconnected and interdependent than they were previously,” Creecy-Herman said. “In Southern California, there are 10 markets within 500 miles with over 25 million consumers who spend, on average, 10% more than typical U.S. consumers.” Combined with the port complex, those fundamentals aren’t changing. Creecy-Herman noted that it’s less of a California exodus than it is a complementary strategy where customers are taking space in other markets as they grow. In the last 10 years, she noted there has been significant maturation of markets such as Las Vegas and Phoenix. As they’ve become more diversified, customers want to have a presence there. 

In the last decade, Gustafson said, the consumer base has shifted. Tenants continue to change strategies to adapt, such as hub-and-spoke approaches.  From an investment perspective, she said that strategies change weekly in response to market dynamics that are unprecedented.  

McCombs said that construction challenges and utility constraints have been compounded by increased demand for water and power. 

“Those are big issues from the beginning when we’re deciding on whether to buy the dirt, and another decision during construction,” Roski said. “In some markets, we order transformers more than a year before they are needed. Otherwise, the time comes [to use them] and we can’t get them. It’s a new dynamic of how leases are structured because it’s something that’s out of our control.” She noted that it’s becoming a bigger issue with electrification of cars, trucks and real estate, and the U.S. power grid is not prepared to handle it.  

Salt Lake City’s land constraints play a role in site selection, said Eldridge. “Land values of areas near water are skyrocketing.” 

The panelists agreed that a favorable outlook is ahead for 2024, and today’s rebalancing will drive a healthy industry in the future as demand and rates return to normalized levels, creating opportunities for investors, developers and tenants.  

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at www.us.jll.com or www.jll.ca.

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