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SpaceX and beyond: How Olivia Steedman is leading OTPP to new frontiers of tech investing

Olivia Steedman chuckles when she thinks about the first tech investment she made for the Ontario Teachers’ Pension Plan.

Now the senior managing director of the pension’s ambitious…

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Olivia Steedman chuckles when she thinks about the first tech investment she made for the Ontario Teachers’ Pension Plan.

Now the senior managing director of the pension’s ambitious innovation investment platform, in 2017 Steedman was still part of the team that had built Teachers’ into a major force in infrastructure. The field was getting crowded, though, as others had caught on to the value in the asset class, causing return compression and forcing them to adjust their strategy.

“What we decided to do was to take on earlier stage infrastructure risk, kind of like when you’re in equities and you go to venture, you just move a little bit earlier, which for infrastructure meant taking on construction risk and development risk,” Steedman recalled in a recent interview.

In early 2018, they invested in Stem Inc., an artificial intelligence-powered energy storage company based in Silicon Valley and backed by investors including the venture capital arms of General Electric and French energy giant Total SA.

“To be honest, looking back on it, I was initially so focused on the infrastructure element — the project finance piece — the interesting venture-growth element only sank in later,” Steedman said.

Still, it whet her appetite for a repeat of the early days of pushing the established pension plan into new areas like they had done with infrastructure. So, when a decision was made to create a new specialized department within the pension giant devoted to investing in later-stage companies using technology to disrupt incumbents and create new sectors, she threw her hat in the ring.

“Quite similar to our initial conversations around infrastructure, we realized the opportunity around direct investing in venture tech companies is a whole new world, a whole new way to get return. And we should be doing more of that,” she recalled.

“I was so excited about this idea, I put my hand up and said I can build this for you. I helped build infrastructure, (and) no I don’t have tons of venture tech experience, but I know the organization and I know how to build a team and together we’ll build something great here.”

These days, it’s impossible to miss the venture-growth aspect of Steedman’s investments. The Teachers’ Innovation Platform, known as TIP, made an immediate splash after launching in April 2019 with Steedman at the helm, choosing Elon Musk’s Space Exploration Technologies Inc. as its first investment. That financing round reportedly raised more than US$300 million for SpaceX (Teachers’ stake was not disclosed) and valued Musk’s company at more than US$33 billion, but it also signalled something important about TIP: Its goal was to be big and bold and put Teachers’ on the map when it came to late stage-venture companies looking for a serious partner.

It’s a bold course to bring a massive pension fund into the next frontier of investing. But it’s not entirely uncharted. A few decades ago, it was unusual to see a pension fund investing in real estate, yet pensions including Teachers’ are now among the largest players in the sector. Infrastructure investing, too, was in a nascent stage when Steedman joined the investment group in 2002. With an $880 million portfolio, it represented just one per cent of Teachers’ total portfolio. By 2019, it had ballooned to nearly $17 billion and represented eight per cent of the pension fund’s assets.

Already, TIP has $3.5 billion in investments and posted a 16.3 per cent return in 2020.

“It’s been such as amazing ride,” said Steedman , a civil engineer and chartered accountant by training who got into investing after working in project finance at a large accounting firm, and landed a job at Teachers’ in 2002 as an assistant portfolio manager.

Steedman sums up the common theme among companies in the TIP portfolio this way: they are taking a shot at “solving a profound problem or delivering an unmet need,” she said. It is that investment philosophy that drew her group to SpaceX.

 This image courtesy of NASA, shows a SpaceX Falcon 9 rocket, carrying the Crew-2 mission astronauts, lifting off from the Kennedy Space Center in Florida on April 23, 2021.

Within six weeks of meeting with SpaceX officials, the investment was a go — before the full TIP team was even in place.

“It’s how we need to operate in this new space,” Steedman said, adding that it was immediately clear to the TIP team that the investment “could be the perfect emblem of what we want to do and where we want to play.”

The headline-worthy investment may be a calling card of sorts for Teachers’, but they were attracted to more than just the plans to ferry ordinary citizens on commercial flights into outer space.

SpaceX’s telecommunications satellite launch business was an equal draw, and the combination illustrates a key plank of the TIP investment strategy, Steedman said.

The pension fund is looking to invest in companies that have a platform or anchor business that can support the development of riskier “disruptive” technology and services.

“What was perhaps interesting to SpaceX was that … they know we’re a long-term investor, we follow on (with subsequent investments) in companies,” Steedman said.

“Where we have conviction around something we’re going to be there to support the company.”

Since that initial investment, Steedman has built a team of close to 20 people who work in three TIP offices: Hong Kong, London and Toronto.

Last October, Kelvin Yu, a private equity and venture veteran of Sequoia Capital, Fosun Group and Partners Group, was hired to lead the team in Asia.

Then in January, Rick Prostko, a veteran Silicon Valley venture capitalist who worked at Comcast Ventures and was an early investor in grocery delivery app Instacart Inc., was hired to build a presence in San Francisco and head up TIP’s direct investing business in North America.

Before joining the Canadian pension firm, Prostko had made an investment in Calgary-based Attabotics Inc., a 3D robotics warehouse and supply chain company that caught the attention of Steedman last year. In August, TIP led a US$50 million series C financing round for the company whose logistics, Steedman said, were inspired by an ant colony.

“(It’s) vertical, with robots travelling up, down and around in three dimensions to pick up the goods and deliver them to humans on the edge,” she said. “All of a sudden you can fit really dense large-scale warehouses into a much smaller footprint and therefore you can put them in places closer to the customers.”

 Jakob Moore of Attabotics Inc. organizes robot canisters in Calgary. Logistics for the 3D robotics warehouse and supply chain company were inspired by an ant colony.

Teachers’ hasn’t disclosed a target for the ultimate size of its disruptive tech platform, which accounted for around two per cent of the pension fund’s $221.2 billion in net assets at the end of 2020. In the short term, according to an advertisement for a managing director in London, TIP aims to deploy up to $2 billion each year in markets around the globe, with about three-quarters of that capital destined for direct investments and the rest invested through funds.

Steedman’s goal is to have Teachers’ be the first call when companies that fit the profile are looking for funding and an ongoing relationship. To do this, she is leaning heavily on the pension fund’s reputation as long-term investor with global expertise and connections.

So far, TIP’s investments have come from a mix of referrals and knocking on doors. Steedman said a “funds book” of earlier stage financings that Teachers’ tucked into TIP is part of the pipeline of referrals — providing access both to companies to invest in and potential investment partners among Silicon Valley’s leading venture capital firms. Company founders are also starting to spread the word.

“It’s a whole cocktail of different sources. The vision, and we’ll get there, is to be a known brand in this ecosystem,” she said.

“What we’re trying to do is build our relationships, not just with the founders, but other players in the ecosystem, and in many cases we are partnering with them as well.”

When it comes to targets, TIP’s team is thinking globally, making investments in Asia, Europe and North America.

“What we’re focused on is later stage venture. There may be one or two exceptions but generally you’re not going to see us investing in brand new companies,” Steedman said. “We like to see revenues, we like to see a certain kind of scaling happening before we come in, so typically we’ll invest at the Series B and beyond stages.”

The platform’s  “target cheque size” for initial investments is between $25 million to $250 million.

Among its early investments, TIP led the series B financing for Kry, a Sweden-based healthcare company that matches doctors to patients. Already growing when the COVID-19 pandemic hit, the company doubled its customer count and expanded to more than 30 countries, with TIP participating in another round of funding.

Last November, TIP led the series C financing for Pony.ai, an autonomous vehicle company whose earlier investors included Toyota and Sequoia Capital. It obtained licences and permits in California and Beijing, and its competitors include Waymo, established under Google’s parent Alphabet, and China’s Alibaba.

“The reality is, we’re two years into this journey and I think we’ve had a lovely debut,” she said. “But we need to continue to build our brand and have us be top of mind for founders. I think that will come, we can see it coming already, (but) until we are the first name that pops into their head, we need to focus on how we can help these companies scale and grow.”

As happened with infrastructure a few years ago, the tech sector has heated up, leading to some lofty valuations, which can make the investment game tougher.

“On the one hand, the valuation and what’s happened with businesses … have been great but you need to be very careful and very disciplined, Steedman said. “If we see something that’s beyond our risk appetite, we’ll walk away.”

She acknowledged that such choices aren’t always easy — or obvious.

The current environment, she said, is a time to be “super selective” and to come to the table with “well-researched views” on different sectors and situations, something that is a common philosophy across the Teachers’ pension plan. While every investment at TIP is made with a view to making money, there is also a recognition that there will be losers.

“That sort of goes with the territory with earlier stage investing. You are taking more risk so you should expect more bumps in the road and some losses,” Steedman said.

“We do every single deal with an expectation that it’s going to be a very successful outcome but we’re prepared for that.”

She is also focused on finding ways for TIP to participate in upside without overspending by playing up commitments other than cash.

“We see this quite bit with some of our founders … it’s not just money and valuation that they’re looking for. They’re watching the markets as well and they’re seeing things pop and maybe get a bit peaky, and you know, generally speaking they want someone in their cap table who’s going to help them scale and navigate highs as well as possible lows,” she said.

“They want people who are going to be there for the long term and help them deliver on their own ambitions. And that’s what we offer when we’re speaking with founders. We’re here for the long term and we’ll follow on as your business grows and things go well, we’ll be here for you.”

• Email: bshecter@postmedia.com | Twitter:

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How Fanatics Took Over The World

How Fanatics Took Over The World

Authored by Jeffrey Tucker via DailyReckoning.com,

Early in the pandemic, I had been furiously writing articles about lockdowns. My phone rang with a call from a man named Dr. Rajeev Venkayya. He is the head.

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How Fanatics Took Over The World

Authored by Jeffrey Tucker via DailyReckoning.com,

Early in the pandemic, I had been furiously writing articles about lockdowns. My phone rang with a call from a man named Dr. Rajeev Venkayya. He is the head of a vaccine company but introduced himself as former head of pandemic policy for the Gates Foundation.

Now I was listening.

I did not know it then, but I’ve since learned from Michael Lewis’s (mostly terrible) book The Premonition that Venkayya was, in fact, the founding father of lockdowns. While working for George W. Bush’s White House in 2005, he headed a bioterrorism study group. From his perch of influence – serving an apocalyptic president — he was the driving force for a dramatic change in U.S. policy during pandemics.

He literally unleashed hell.

That was 15 years ago. At the time, I wrote about the changes I was witnessing, worrying that new White House guidelines (never voted on by Congress) allowed the government to put Americans in quarantine while closing their schools, businesses, and churches shuttered, all in the name of disease containment.

I never believed it would happen in real life; surely there would be public revolt. Little did I know, we were in for a wild ride…

The Man Who Lit the Match

Last year, Venkayya and I had a 30-minute conversation; actually, it was mostly an argument. He was convinced that lockdown was the only way to deal with a virus. I countered that it was wrecking rights, destroying businesses, and disturbing public health. He said it was our only choice because we had to wait for a vaccine. I spoke about natural immunity, which he called brutal. So on it went.

The more interesting question I had at the time was why this certified Big Shot was wasting his time trying to convince a poor scribbler like me. What possible reason could there be?

The answer, I now realized, is that from February to April 2020, I was one of the few people (along with a team of researchers) who openly and aggressively opposed what was happening.

There was a hint of insecurity and even fear in Venkayya’s voice. He saw the awesome thing he had unleashed all over the world and was anxious to tamp down any hint of opposition. He was trying to silence me. He and others were determined to crush all dissent.

This is how it has been for the better part of the last 15 months, with social media and YouTube deleting videos that dissent from lockdowns. It’s been censorship from the beginning.

For all the problems with Lewis’s book, and there are plenty, he gets this whole backstory right. Bush came to his bioterrorism people and demanded some huge plan to deal with some imagined calamity. When Bush saw the conventional plan — make a threat assessment, distribute therapeutics, work toward a vaccine — he was furious.

“This is bulls**t,” the president yelled.

“We need a whole-of-society plan. What are you going to do about foreign borders? And travel? And commerce?”

Hey, if the president wants a plan, he’ll get a plan.

“We want to use all instruments of national power to confront this threat,” Venkayya reports having told colleagues.

“We were going to invent pandemic planning.”

This was October 2005, the birth of the lockdown idea.

Dr. Venkayya began to fish around for people who could come up with the domestic equivalent of Operation Desert Storm to deal with a new virus. He found no serious epidemiologists to help. They were too smart to buy into it. He eventually bumped into the real lockdown innovator working at Sandia National Laboratories in New Mexico.

Cranks, Computers, and Cooties

His name was Robert Glass, a computer scientist with no medical training, much less knowledge, about viruses. Glass, in turn, was inspired by a science fair project that his 14-year-old daughter was working on.

She theorized (like the cooties game from grade school) that if school kids could space themselves out more or even not be at school at all, they would stop making each other sick. Glass ran with the idea and banged out a model of disease control based on stay-at-home orders, travel restrictions, business closures, and forced human separation.

Crazy right? No one in public health agreed with him but like any classic crank, this convinced Glass even more. I asked myself, “Why didn’t these epidemiologists figure it out?” They didn’t figure it out because they didn’t have tools that were focused on the problem. They had tools to understand the movement of infectious diseases without the purpose of trying to stop them.

Genius, right? Glass imagined himself to be smarter than 100 years of experience in public health. One guy with a fancy computer would solve everything! Well, he managed to convince some people, including another person hanging around the White House named Carter Mecher, who became Glass’s apostle.

Please consider the following quotation from Dr. Mecher in Lewis’s book: “If you got everyone and locked each of them in their own room and didn’t let them talk to anyone, you would not have any disease.”

At last, an intellectual has a plan to abolish disease — and human life as we know it too! As preposterous and terrifying as this is — a whole society not only in jail but solitary confinement — it sums up the whole of Mecher’s view of disease. It’s also completely wrong.

Pathogens are part of our world; they are generated by human contact. We pass them onto each other as the price for civilization, but we also evolved immune systems to deal with them. That’s 9th-grade biology, but Mecher didn’t have a clue.

Fanatics Win the Day

Jump forward to March 12, 2020. Who exercised the major influence over the decision to close schools, even though it was known at that time that SARS-CoV-2 posed almost risk to people under the age of 20? There was even evidence that they did not spread COVID-19 to adults in any serious way.

Didn’t matter. Mecher’s models — developed with Glass and others — kept spitting out a conclusion that shutting down schools would drop virus transmission by 80%. I’ve read his memos from this period — some of them still not public — and what you observe is not science but ideological fanaticism in play.

Based on the timestamp and length of the emails, he was clearly not sleeping much. Essentially he was Lenin on the eve of the Bolshevik Revolution. How did he get his way?

There were three key elements: public fear, media and expert acquiescence, and the baked-in reality that school closures had been part of “pandemic planning” for the better part of 15 years. Essentially, the lockdowners, over the course of 15 years, had worn out the opposition. Lavish funding, attrition of wisdom within public health, and ideological fanaticism prevailed.

Figuring out how our expectations for normal life were so violently foiled, how our happy lives were brutally crushed, will consume serious intellectuals for many years. But at least we now have a first draft of history.

As with almost every revolution in history, a small minority of crazy people with a cause prevailed over the humane rationality of multitudes. When people catch on, the fires of vengeance will burn very hot.

The task now is to rebuild a civilized life that is no longer so fragile as to allow insane people to lay waste to all that humanity has worked so hard to build.

Tyler Durden Fri, 06/11/2021 - 21:40

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Government

Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Authored by Brandon Smith via Alt-Market.us,

This past week a US District judge in California struck down the state’s 30 year ban on high capacity semi-automa

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Brandon Smith: The Real Reasons Why California Leftists Are Terrified Of The AR-15

Authored by Brandon Smith via Alt-Market.us,

This past week a US District judge in California struck down the state’s 30 year ban on high capacity semi-automatic rifles which leftists label “assault weapons”. The judge called the ban unconstitutional (which it is). In response, the progressive media has lost their collective minds, screeching in horror at the idea of AR-15 rifles being legal within the borders of their carefully manicured socialist Utopia state. Their most commonly expressed reaction seems to be fear.

Fear is rarely a rational thing. When someone operates based on fear they tend to make terrible decisions and support oppressive causes and laws. Fear leads to an obsession with control. Fearful people also tend to look for large mobs of other terrified people so they can feel safe and secure and anonymous. They want to be able to act impulsively on their fears without having to face consequences for it later.

Leftists are driven primarily by two factors: Narcissism, and yes, fear. I’ve discussed their narcissism at great length in past articles; now I think we should delve into their fear.

The most common leftist retort to the question “Why are you so afraid of the AR-15?” will usually be a snort of indignant disbelief followed by the words:

“Because it’s a military weapon designed to kill a lot of people quickly…idiot!”

But this is not an argument, it is an expression of irrational fear. Why are they, as individuals, afraid of the AR-15? What are the chances that they will EVER be faced with a person intent on killing them with an AR-15? And, why do they believe that disarming innocent law abiding Americans will somehow save them from their paranoia?

Let’s examine the first issue of statistical probability; how many people are actually killed by AR-15s each year? Not many according to the FBI, which does not track the stats on specific rifles, but does track the stats on all rifles together. And, as it turns out, only around 6% of all gun deaths involve rifles in the US each year.

How much of that 6% involves the use of military grade rifles like the AR-15? It’s impossible to say, but even if it was half, or 3% of all gun related crimes, that would still mean you have FAR more of a chance of being murdered by a knife or blunt object than an AR. By extension, Rifles overall are dwarfed by handgun murders, so, again, why are leftists so afraid of the AR-15?

What about mass shootings? It seems like the AR-15 is a favorite among mass shooters because of it’s “efficiency”, so is this reason enough to be fearful? According to the New York Times own analysis, the AR-15 was used to kill 173 people in mass shootings in the US from 2007 to 2017. Meaning around 17 homicides per year over a decade can be attributed to the rifle. Again, the AR is dwarfed by almost all other weapons in homicide including knives, even when accounting for mass shootings.

With the sheer number of military grade weapons in the hands of civilians in the US there should be mass homicides everywhere you look if you take the common position of the typical progressive gun grabber. But, this is not the case. In fact, if you want to increase your chances of being killed by a gun, move to a major Democrat run city like Chicago, New York or Philadelphia. In Chicago, there were 4033 shootings and 784 homicides, predominantly in black neighborhoods and primarily with handguns.

So, statistically, access to AR-15s does not increase gun homicides. But what about living in a black neighborhood in leftist run Chicago under some of the strictest gun laws in the country? Yes, your chances of being shot are MUCH higher (just not by an AR-15).

Since the math does not add up in favor of the leftists, perhaps we should examine other factors that might be driving them to focus on the AR in particular. Let’s talk about “precedence”…

Look at it this way – States like California are a petri dish, a testing ground for the future that leftists want for the entire country. There is an old saying that “As goes California, so goes the US”, and this is because California is often where most experimental legislation is pushed; legislation that violates the boundaries of what the constitution allows. Sometimes it’s New York or New Jersey or some other blue state, but most of the time CA is where unconstitutional precedents are set. Its massive population and large number of electoral votes make it a perfect target for conditioning the wider public to further restrictions on their freedoms.

This explains some of the fear the media is showing regarding the latest federal court decision on military grade weapons like the AR. Political elites see California as their own little kingdom with their own special laws, and they plan to eventually spread those laws across America using California as the model. But, if such laws are overturned as unconstitutional, then the precedent actually works in reverse. Now, the leftists are concerned that an overturned gun ban in CA means more blue states will follow and their entire gun grabbing scheme will go out the window.

The leftist mind thinks in terms of unchecked and unhinged “democracy”. Meaning, they believe that the majority is paramount; the majority is law. If a majority in a society wants to take away your freedoms, then they have the right to because they have the mob on their side. 51% rules over the lives of the other 49%. But this is not how things work in a Constitutional Republic.

Under the Bill of Rights your freedoms are codified and sacrosanct. They are inherent and gifted by God (or whatever you happen to believe in); government has no domain over these rights. The right to firearms and self defense is one of these inherent qualities. It does not matter what the State of California thinks, or even what the “majority” of people in California think. If an American in California wants to own an AR-15, then he/she has the right to own an AR-15.

We also cannot ignore the fact that leftists have an insatiable appetite for collectivism, usually in the name of the “greater good”. Collectivism is basically totalitarianism disguised as humanitarianism. They know what’s best for you, and they are going to make sure you follow THEIR plan for your life.

The AR-15 is indeed a weapon in military use, and maybe this is what frightens leftists the most. Not because they are personally more likely to be shot by one (we’ve already proven that notion false), but because leftists desire control over all else, and with military grade weapons in the hands of the public control becomes much more difficult. ALL totalitarian governments seek to first disarm the people they intend to enslave or destroy. This is a fact.

When a group of people in power are working hard to remove defensive or even offensive weapons from your hands, it’s best to assume that their intentions are malevolent. They are not trying to help you, they are trying to help themselves.

They will deny this motive to the grave, but look at how the political left has been acting lately: They are the only people that have supported mass censorship of opposing viewpoints. They are the only people that are supported by international conglomerates and Big Tech companies. They are the only people that supported the pandemic lockdowns, which were completely useless in stopping the spread of covid, but they were very useful in killing hundreds of thousands of small businesses across the US. They are also the only people in favor of vaccine passports which would destroy the very fabric of our society and erase what is left of our freedoms.

It’s not really surprising that they want to disarm us as well.

Of course, they will claim that this argument is “silly”. After all, what can an AR-15 do against an Apache helicopter or a Abrams battle tank? Well, these rifles in the right hands can do a hell of a lot to stop a technologically advanced military, as we have seen for the past two decades in Afghanistan. Let us not play games; there is a reason why leftists and elites are obsessed with our disarmament. If military grade rifles were not a threat to them, then they would not be going after them so aggressively.

Finally, the mainstream media has rolled out all the typical propaganda tools when it comes to spinning the federal decision in CA, including attacking the judge and his character. Almost every single article on this issue focuses on the fact that the judge compared the AR-15 to a “Swiss Army knife”.

The left will continue to use this narrative as a means to distract from the real problem at hand because false conflations and straw man arguments have worked for them in the past. Clearly, the judge was not trying to say that an AR-15 and a Swiss Army knife are exactly the same, or that they are equally capable of killing people. The logical interpretation is that the AR-15 is a tool like any other tool, and it has multiple uses. It is a utilitarian object, not an inherently demonic death machine as leftists would have us believe.

Gun grabbers love to make the argument that firearms are only designed for one purpose: “Killing”. This is a lie. They are also tools for self defense. They are a means to defuse a violent situation before it even happens. There are thousands of videos on the web showing people with criminal intent running away from a Good Samaritan with a gun. There is no way of telling how many potential victims have been saved by the mere presence of a firearm, but the accounts are documented and numerous.

This is on top of all the other uses for guns, including hunting and sporting uses. So, yes, the judge is absolutely correct; an AR-15 is a multipurpose tool, just like a Swiss Army knife.

In my view, the gun control lobby in America is in the midst of a considerable decline, and maybe it is even about to die. The political left has long operated on the mantra that “the squeaky wheel gets the oil”. In other words, they think if they whine long enough and loud enough about an issue someone will come along and give them what they want just to shut them up, even if what they want is illogical or morally bankrupt.

This strategy has worked out for them for many decades so it’s not surprising that they keep using it, but times are changing. Now, the squeaky wheel gets no oil, at least not from gun owners. The squeaky wheel gets nothing.

Gun control is the big line in the sand for most law abiding conservatives and moderates, and we have grown tired of the debate because it’s no longer a debate, it’s a imposition of ideology and cultism. All the facts are on the side of gun owners. All the legal protections are on the side of gun owners. All the moral dynamics are on the side of gun owners. As long as we stand our ground, there is nothing that leftists can do about it.

They can continue to lie, they can continue to threaten and they can continue exploiting emotional arguments, but they’ll NEVER get the guns. And, as we have seen recently, we might even start returning some of those gun rights and rifles to states like California, where fear was used to cloud the public mind and people were conned into compliance.

What are California leftists and their comrades in other blue states really afraid of? They are afraid that their strategies are failing, that the public is getting wise to their games, that their incrementalism only works for so long, that their true intentions have become transparent, that their narcissism has blinded them to their own frailties, that the law is not their plaything and that every piece of constitutional ground they have stolen over the decades could be taken back from them in the blink of an eye; as fast as a speeding bullet.

Leftists and totalitarians fear the AR-15, but what they fear more is what it represents. And with each carefully placed practice shot at every gun range across America, they hear the crushing sound of inevitability.

*  *  *

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Tyler Durden Fri, 06/11/2021 - 22:20

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Spread & Containment

Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Peak shipping season is ahead — and the parking lot of container ships moored off the US West Coast continues to worsen, with the epicenter of congestion based around…

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Perfect Storm: Congestion Plagues South China And US West Coast Ports 

Peak shipping season is ahead — and the parking lot of container ships moored off the US West Coast continues to worsen, with the epicenter of congestion based around Los Angeles/Long Beach ports. On the other side of the Pacific, in southern China, a surge in COVID-19 has caused some of the biggest port congestion in more than one year. 

So now port congestion is seen on both sides of the Pacific as it's hardly a secret that the recent collapse of trans-pacific supply chains will remain strained through the summer and one reason why prices for goods are soaring (as recently discussed in "It's About To Get Much Worse": Supply Chains Implode As "Price Doesn't Even Matter Anymore" and "Port Of LA Volumes Are "Off The Charts."") 

But now, focusing at South China ports, exploding cases of coronavirus infections in Guangdong province, a top manufacturing and exporting hub, recently triggered local governments to increase prevention and control efforts that "curbed port processing capacity," said Reuters

Major shipping companies have warned clients of vessel delays, changes to port call schedules, and the possibility of avoiding some ports altogether.

Ocean Network Express (ONE), a container shipping company, warned customers in an advisory Wednesday: "The container logistics situation continues to deteriorate around all the ports in the area [South China port]." 

Most of the congestion has been building at the Yantian International Container Terminal (YICT), a deepwater port in Shenzhen, Guangdong, China handing some of the largest container ships in the world, has reduced capacity at the port due to a recent outbreak of the virus, according to Seatrade Maritime News, citing ONE. 

The world's leading container line Maersk told customers to expect delays up to two weeks because of the reduced capacity of staffing at the port. 

Refinitiv data shows 50 container vessels are moored in the Outer Pearl River Delta, waiting to dock at YICT. For comparison, this compares with 20 vessels for the same time last year. 

Reuters quoted one exporter who said loading delays and slow deliveries continue to tangle global supply chains. 

"Basically we had a similar experience last year so we have experience in responding, only the increase in transport costs are getting really astonishing. The freight fees are reflected in the increase in material costs which are up by around 15%-30% already," said a sales manager at an electronics cable manufacturer in Shenzhen, a large manufacturing city in Guangdong. 

The congestion and delays in South China came when container shipping supply chains were already at full stretch due to US West Coast port congestion. As a result, container freight rates have hit a record high and are expected to continue to rise further. 

"The recent rise in Covid-19 cases in China has resulted in a shutdown that may add to the already record cost of shipping goods out of China. The delays have already resulted in pressurizing soaring shipping prices within China due to a lack of containers and increased export demand," said Josh Brazil, the Vice President of Marketing at project44. 

Port congestion on either side of the Pacific continues to deteriorate. It suggests that the normalization of trans-pacific supply chains will not happen anytime soon and will continue to add cost pressures for exporters in China and importers in the US - adding to the cost of products and ultimately pushed along to US consumers. Delays will also continue to create additional shortages...  

Tyler Durden Fri, 06/11/2021 - 21:20

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