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Why Cutting Aid to Central America Could Increase Migrant Influx

President Donald Trump ordered the State Department to cut funding for Guatemala, Honduras, and El Salvador this weekend in retaliation for the recent influx of migrants from these nations, reversing a longstanding policy that says aid helps abate immigration.

“We’re giving them $500 million,” Trump told reporters on Friday, claiming without evidence that the governments of these nations “set up” immigrant caravans destined for the U.S.-Mexico border with their “worst people.”

“We were paying them tremendous amounts of money, and we’re not paying them anymore because they haven’t done a thing for us,” he continued.

The State Department said a day later that it would be ending foreign assistance programs for the Northern Triangle (Guatemala, Hondura and El Salvador) for fiscal years 2017 and 2018 at the president’s direction. A congressional aide told Reuters this could be about $700 million.

“We will be engaging Congress as part of this process,” said a State Department spokesperson.

According to Liz Schrayer, president and CEO of the U.S. Global Leadership Coalition—a nonprofit coalition of businesses and NGOs dedicated to American development and diplomacy—pulling back aid “exasperates the exact root causes that are creating the migration numbers’ increase.”

“We’ve seen statistics that for every 10 additional murders, six additional children seek safety at our border,” said Schrayer. Foreign aid targets these uninhabitable conditions by supporting security and programs of economic development, she said. One such U.S.-funded program in El Salvador gives children job training, and according to Schrayer, homicides rates have come down 78% in these areas.

“That means kids are staying in these communities,” she said. “They’re not coming to our borders.”

Trump argues the governments in the Northern Triangle aren’t doing enough to stop migration to the U.S. Schrayer said she agrees with the president in that “yes, those country’s leadership need to be accountable to their citizens, and should do more.”

But, she added, the situation should also be answered with the “active diplomacy” and “effective development” funded by foreign assistance programs.

Speaking at the Northern Triangle conference in June 2017, Vice President Mike Pence promoted this policy, saying that “to further stem the flow of illegal immigration and illegal drugs into the United States, President Trump knows, as do all of you, that we must confront these problems at their source.”

Trump’s decision to cut aid is a full reversal of this policy, and Congressional Democrats were swift to condemn the decision. Sen. Bob Menendez (D-N.J.), the ranking member of the Senate Foreign Relations Committee, said the end of these aid programs would “undermine American interests and put our national security at risk.”

“U.S. foreign assistance is not charity; it advances our strategic interests and funds initiatives that protect American citizens,” Menendez said in a statement. “From combating drug trafficking and transnational criminal groups to helping establish safe communities with economic opportunities, U.S. foreign assistance addresses the factors driving migration from Central America.”

A Congressional delegation to El Salvador investigating the increase in family and child migrations to the U.S. called the president’s decision “entirely counterproductive.”

“It will only result in more children and families being forced to make the dangerous journey north to the U.S.-Mexico border,” said the five Democratic lawmakers in a statement. “We will work with our colleagues in Congress to do everything in our power to push back on the President’s misguided approach to Central America.”

Trump has long threatened to cut off aid to the Northern Triangle in retaliation for these countries not stopping the caravans passing through their borders. Families and children continue to seek asylum at the U.S.-Mexico border, however, and Trump says the detention centers are full.

“We’ve run out of space,” said Trump on Friday. “We can’t hold people anymore.”

Trump has threatened to entirely shutdown the southern border as the result of these record-breaking numbers. According to U.S. Customs and Border Protection, February of this year saw 78,000 apprehensions at the southern border—more than any other month in the past five years.

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Funds are ditching high-growth stocks for Lyft, IPO season

Investors should expect high-growth technology stocks to be sold off as investment funds free up cash to buy into the wave of new initial public offerings, CNBC’s Jim Cramer said Wednesday.

A few companies slated for IPOs this year include ride-hailing apps Lyft and Uber, hospitality platform Airbnb, data intelligence company Palantir, and workspace operator WeWork.

The Dow Jones Industrial Average dropped more than 32 points on the session, the S&P 500 fell 0.46 percent, and the tech heavy Nasdaq slid 0.63 percent.

Cramer noted that there was weakness particularly in the Nasdaq as big institutions reconsider their stock allocations with the looming Lyft IPO.

“You need to be prepared for many more not so hot days like today. In the end, the stock market is like any other market— it’s controlled by supply and demand,” the “Mad Money” host said. “With all of these big IPOs coming … these deals will push the rest of the market down until the tide goes out with a whimper, not a bang.”

Behind the scenes, Cramer said, Lyft management is gauging interest of potential shareholders across the country. As Lyft’s Friday IPO approaches, fund managers are finding out how much of the equity will be allocated to them. The transportation platform is set to offer more than 30 million shares in the boosted range of $70 and $72 a share, up from $62 to $68, he said.

“And you know what, it might not be done being lifted. I’ve seen [IPOs] go up another level and even expand the size of a deal. With that revised range tonight, they’re planning to raise approximately $2.2 billion and that’s before you count the underwriter’s percentage of the greenshoe, which could add another $300 million or so to these companies’ IPO haul.”

Most funds that will get first dibs at Lyft don’t have much cash on hand coming in, he said. In order to raise more capital for Lyft, they are taking money off the table from other stocks that they own, such as Workday, Facebook, or Alphabet, he added.

“Because the Lyft deal will make these money managers so much more money, they’re desperate to raise cash for it and they don’t care how low they sell those stocks,” Cramer said. “So the selling will be indiscriminate and vicious as it was this very morning. Price becomes irrelevant when you’re trying to raise money for a red hot deal.”

After the IPO, Cramer said the largest funds may decide to load up on even more shares at the open. With IPO season underway, Cramer said he has been short-term bearish on the market and is raising money for his charitable trust, ActionAlertPlus.com

“It’s not Lyft that’s the problem, it’s not the fundamentals, it’s not the inverted yield curve,” he said. “It’s the fact that Lyft is merely the first of many deals. I’m betting you’ll see an identical series of sales when fund managers need to raise money for Pinterest or Palantir or Slack, not to mention the big daddy of them all: Uber.”

By the time Uber goes public, the funds may be exhausted and willing to sell anything that’s growing, Cramer said, pointing to health care, semiconductor, retail, and restaurant stocks.

“When we get to Uber, if that’s the last one, you can expect the buyers will be exhausted and the existing stocks will be so darn cheap that they’ll represent real value. They may even make you more money than the lower-quality IPOs … At that point and only at that point can this really be considered terra firma for many of the stocks in the market.”

Disclosure: Cramer’s charitable trust owns shares of Facebook and Alphabet.

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