Week in Review

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Week in Review

02/26/2022

For the week 2/21-2/25

[Posted 9:15 PM ET, Friday]

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Edition 1,193

NATO Secretary General Jens Stoltenberg, Thursday, Feb. 24

“Good afternoon.

“Russia has attacked Ukraine. This is a brutal act of war. Our thoughts are with the brave people of Ukraine.

“Sadly, what we have warned against for months has come to pass. Despite all calls on Russia to change course and tireless efforts to seek a diplomatic solution.

“Peace in our continent has been shattered. We now have war in Europe, on a scale and of a type we thought belonged to history….

“This is a grave moment for the security of Europe.  Russia’s unjustified and unprovoked attack on Ukraine is putting countless innocent lives at risk….

“This is a deliberate, cold-blooded and long-planned invasion.  Despite its litany of lies, denials, and disinformation, the Kremlin’s intentions are clear for the world to see.

“Russia’s leaders bear full responsibility for their reckless actions and the lives lost.

“NATO Allies condemn Russia’s invasion of Ukraine in the strongest possible terms.

“This is a blatant violation of international law. An act of aggression against a sovereign, independent and peaceful country.  And a serious threat to Euro-Atlantic security….

“We fully support Ukraine’s sovereignty and territorial integrity.  And Ukraine’s right of self-defense.

“Russia is using force to try to rewrite history.  And deny Ukraine its free and independent path.

“NATO’s core task is to protect and defend all Allies.  There must be no room for miscalculation or misunderstanding.  An attack on one will be regarded as an attack on all.  This is our collective security guarantee….

“The Kremlin’s aim is to re-establish its sphere of influence.  Rip up the global rules that have kept us all safe for decades. And subvert the values that we hold dear.

“This is the new normal for our security.  Peace cannot be taken for granted.

“Freedom and democracy are contested by authoritarian regimes.  And strategic competition is on the rise.

“We must respond.  With renewed resolve.  And even stronger unity.

“North America and Europe, together in NATO.  We are an Alliance of 30 democracies.  Standing as one.  We will protect our people and our values. 

“Democracy will always prevail over autocracy.  Freedom will always prevail over oppression.”

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We know already who Time Magazine’s “Person of the Year” will be come next December.  Vladimir Putin.  One can only hope, though, that it is a picture of the man, lying on the floor of the Kremlin, with a bullet in his head.

I have been covering Vladimir Putin’s career at the Kremlin since day one.  StocksandNews was founded in February 1999 (though my first “Week in Review” was at PIMCO, Nov. 1997…and there was no break when I left them to start S&N), and Putin was appointed prime minister by Boris Yeltsin in Aug. 1999.  I’ve called him Vlad the Impaler for over 15 years. 

I have to repeat that in 1973, at age 15, I traveled with my parents to Moscow, Leningrad, Kiev, Warsaw, Prague, Budapest and Sofia.  Back then Kiev, Kyiv, was formally part of the Soviet Union.

I went back to Kyiv in March 2006, after the Orange Revolution, to do my thing, learn more about the people and the times. 

Since 1999, I have been to Russia multiple times, back to Warsaw, Prague, Sofia, a first time to Bucharest, Slovenia….and I can’t help but add, China four times, Taiwan, and South Korea…among the scores of nations I’ve traveled to.

I’m Slovak, a ‘Novak,’ so I have a particular affection for the people of Ukraine, like the relatives I met in Prague and Budapest in ’73.

This week my heart broke for them, particularly all those women you saw being interviewed.  How the hell did they deserve this?  As you heard them say, why did Vladimir Putin declare war on them…Ukrainians viewing Russians as their ‘brothers.’  So many Ukrainians have relatives in Russia.  I shed a tear when a Russian girl, who looked to be in her 20s, was interviewed in Moscow and she choked up as she explained the man she loved was in Ukraine.

But in covering this crisis, I’m going to follow the principles that I always have.  This is a running history like no other in the world.  On the big events of the day, I try to present the facts, all sides, and give an opinion. 

For now, though, one of my guiding principles, as you all know, is ‘wait 24 hours.’  So much of what we first see and hear when it comes to Ukraine is just not true; or spewed out without any proper context.  This is a Week in Review.  Not instant punditry. 

So with all that transpired this week, I try my best to lay out the pertinent facts below and there is lots of outside opinion from those who I’ve long respected. Some of what they say will prove to be right, some of it will prove to be wrong…just like with my opinions.

Tonight, I can only echo the now famous words that will live in history, just like those of Gen. Anthony McAuliffe, who when given an ultimatum to surrender by the Germans at the Battle of the Bulge, replied with one word…NUTS!  It had to be explained to the Germans delivering the message from their commanding officer that McAuliffe meant, “Go to hell!”

And so we have the story of the 13 brave Ukrainian soldiers, defending Snake Island, a strategic Ukrainian possession in the Black Sea, who when confronted by a Russian warship with the warning they needed to lay down their arms or be killed, replied, “Go Fuck yourself!” before they were indeed all blown away.

As I go to post, like many of you I’ll pray tonight for President Volodymyr Zelensky and his compatriots, for the women and children of this noble nation.

I look forward to returning to Ukraine, and Kyiv, someday…and hiring out a driver to take me down to the Snake Island area, where no doubt forever after will stand a memorial to the 13.

It’s a message, an example, the West desperately needs to remember in how they confront Vladimir Putin in these coming days and months, but we should all pray it’s delivered internally, back in Moscow.  I’ve long told you who might carry out the duty…a close crony of Vlad.  I’ve stated his name before, but I’ll just give his initials today… I.S.  He’s not a good man either.  But he’s also not Vlad the Impaler.

One more…pray for Alexei Navalny, who I fear will be executed, and for all the brave protesters in Moscow and all over Russia…at least 1,700 of whom were arrested yesterday.

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The following are some of the important events of the week, somewhat in chronological order.

President Putin gave a nearly hour-long grievance-laden speech before he openly sent troops to the Russian-backed statelets in the Donbas that he recognized on Monday, referring to Volodymyr Zelensky’s democratically elected government as “those who seized and retain power in Kyiv.”

Putin then signed treaties that pave the way for Moscow to build military bases in the Donbas.

And he gained approval from the upper house of parliament for permission to use Russia’s armed forces abroad, which clearly goes beyond the separatist region and could apply to neighboring countries, including the Baltics.

Russian Foreign Minister Sergei Lavrov on Tuesday questioned whether Ukraine had a right to sovereignty because he said the government in Kyiv did not represent the country’s constituent parts, the Interfax news agency reported.

“I don’t think anyone can claim that the Ukrainian regime, since the 2014 coup d’etat, represents all the people living on the territory of the Ukrainian state,” Lavrov was quoted as saying.

Lavrov also brushed off the threat of sanctions on Tuesday, saying the West would impose them regardless of events and describing the response to Russia’s recognition of two breakaway Ukrainian regions as predictable.

“Our European, American, British colleagues will not stop and will not calm down until they have exhausted all their possibilities for the so-called ‘punishment of Russia.’  They are already threatening us with all manner of sanctions or, as they say now, ‘the mother of all sanctions,’” Lavrov said.  “Well, we’re used to it. We know that sanctions will be imposed anyway, in any case.  With or without reason.”

So back to Putin’s speech, which recognized the two separatist areas in the Donbas as sovereign independent states but was also so much more.

He began by saying “the topic of my speech is the events in Ukraine and why it is so important for us, for Russia.  Of course, my appeal is also addressed to our compatriots in Ukraine.”

For Russia, the area of Ukraine is what was once called the “near abroad,” a kind of buffer between Russia and the West.  “Let me emphasize once again that Ukraine for us is not just a neighboring country. It is an integral part of our own history, culture, spiritual space. These are our comrades, relatives, among whom are not only colleagues, friends, former colleagues, but also relatives, people connected with us by blood, family ties,” Putin said.

Vlad the Impaler looked to history to justify this, saying the “inhabitants of the southwestern historical Old Russian lands called themselves Russian and Orthodox. So it was until the 17th century, when part of these territories were reunited with the Russian state, and after.”

He notes that “in the 18th century, the lands of the Black Sea region, annexed to Russia as a result of wars with the Ottoman Empire, were called Novorossiya.  Now they are trying to obliviate these milestones of history, as well as the names of state military figures of the Russian Empire, without whose work modern Ukraine would not have many large cities and even the very exit to the Black Sea.”

Putin claims that “modern Ukraine was entirely and completely created by Russia: more precisely, Bolshevik, communist Russia.”   He accused the Soviets of actually reducing Russia’s control of Ukraine by separating parts of this area and creating the Ukraine Soviet Socialist Republic.  Indeed, Crimea was eventually given to Ukraine under this process.  At the same time, Ukraine was brutally treated by Stalin, and millions starved.  Later, after the Second World War and the Holocaust, Ukrainian resistance against the Soviets continued for years.

Putin says “Stalin already annexed to the USSR and transferred to Ukraine some lands that previously belonged to Poland, Romania and Hungary. At the same time, as a kind of compensation, Stalin endowed Poland with part of the original German territories, and in 1954 Khrushchev for some reason took away Crimea from Russia and also presented it to Ukraine.”

Putin’s argument about Ukraine is that Russia is reaching back to what was done in 1917 and 1922 for its “rights” to do things there today.  He’s arguing that what was done arbitrarily in the 1920s, can now be undone.

Putin continues that the Soviets made a mistake in the 1920s.  “At first glance, this is generally incomprehensible; some kind of madness.  But this is only at first glance.  There is an explanation,” he offers.  He points out that the Soviets sought to remain in power by giving in to demands of various nationalities within the Soviet empire: Give them something for the great Soviet Union.  Putin argues that the early Soviet decision was a mistake and this became obvious after 1991 with the wars and breakup of the USSR.

Putin suggests we speak about the events of the past with honesty.  “This is a historical fact.  Actually, as I have already said, as a result of the Bolshevik policy, Soviet Ukraine arose.”   He accuses Ukraine of being an entity created by Lenin.  “This is fully confirmed by archival documents, including Lenin’s harsh directives on the Donbas, which was literally squeezed into Ukraine.”

Vlad says it is ironic that modern-day Ukraine has taken down Lenin’s statue, since in his view Lenin created modern Ukraine.  “We are ready to show you what real decommunization means for Ukraine.”

Jumping ahead, Putin then argues that Ukraine did not deal fairly with Russia in the 1990s and began to move towards the West. “I will add that Kyiv tried to use the dialogue with Russia as a pretext for bargaining with the West, blackmailed it with rapprochement with Moscow, knocking out preferences for itself; saying that otherwise, Russian influence on Ukraine will grow.”

He claims that “Ukrainian society faced the rise of extreme nationalism, which quickly took the form of aggressive Russophobia and neo-Nazism.  Hence the participation of Ukrainian nationalists and neo-Nazis in terrorist gangs in the North Caucasus, and the increasingly louder territorial claims against Russia.”  Recall, Putin came to power after Russia suffered failure in the Balkans when NATO bombed Serbia and after Russian setbacks in Chechnya.

Putin then obliterated Chechnya and in the early 2000s, imprisoned or drove into exile the oligarchs who arose in 1990s Russia.  “A stable statehood in Ukraine has not developed, and political, electoral procedures serve only as a cover, a screen for the redistribution of power and property between various oligarchic clans,” he says.

Vlad the Impaler accuses Ukraine’s current government, which he sees as a government that was the result of a “coup” in 2014, as perpetuating corruption and being anti-Russian. He accuses it of persecuting the Russian language and Orthodox Church. He argues that Russia’s decision to annex Crimea from Ukraine was done to support the inhabitants of the peninsula. Then he accuses Ukraine of enacting a new military strategy against Russia.  “The strategy proposes the organization in the Russian Crimea and on the territory of Donbas, in fact, of a terrorist underground.”

Russia also objects to Kyiv joining NATO.  Putin claims that while Moscow was open to working with the treaty organization, it has rapidly expanded.  “The authorities of some Eastern European countries, trading Russophobia, brought their complexes and stereotypes about the Russian threat to the Alliance, [and] insisted on building up collective defense potentials, which should be deployed primarily against Russia.  Moreover, this happened in the 1990s and early 2000s, when, thanks to openness and our goodwill, relations between Russia and the West were at a high level.”

Putin then claims he spoke to former President Bill Clinton about Russia joining NATO.  “I won’t reveal all the details of that conversation, but the reaction to my question looked, let’s say, very restrained, and how the Americans really reacted to this opportunity can actually be seen in their practical steps towards our country.”

Russia doesn’t want the NATO expansion trend to continue.  Putin says there were already five waves of NATO expansion, most recently with Albania and Croatia; in 2017 Montenegro; in 2020 North Macedonia… As a result, the Alliance [and] its military infrastructure came directly to the borders of Russia. This became one of the key causes of the European security crisis.”

Putin then draws the line to this being an existential crisis for Russia. “Many Ukrainian airfields are located close to our borders.  NATO tactical aircraft stationed here, including carriers of high-precision weapons, will be able to hit our territory to the depths of the Volgograd-Kazan-Samara-Astrakhan line. The deployment of radar reconnaissance assets on the territory of Ukraine will allow NATO to tightly control the airspace of Russia right up to the Urals.”

Putin’s bottom line is that the West has ignored his proposals and demands.  “There is only one goal [of the West] – to restrain the development of Russia.  And they will do it, as they did before, even without any formal pretext at all… Russia has every right to take retaliatory measures to ensure its own security: That is exactly what we will do.”

Putin adds that “international documents expressly state the principle of equal and indivisible security, which, as is well known, includes obligations not to strengthen one’s security at the expense of the security of other states.”  So he’s recognizing parts of Ukraine as independent states in order to move forces into these new buffer states.

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Tuesday, Germany took steps to halt the process of certifying the Nord Steam 2 gas pipeline from Russia, Chancellor Olaf Scholz said, a highly significant act.

The pipeline bringing natural gas from Russia to Germany has long been criticized by the United States and some European countries who argue that it increases Europe’s reliance on Russian energy supplies.

Wednesday night, New York time, while the UN Security Council was convening in emergency session, Putin then launched the full-scale invasion.

Ursula von der Leyen, president of the European Commission:

“It is President Putin who was bringing war back to Europe.  And in these dark hours, the European Union and its people stand by Ukraine and its people. We are facing an unprecedented act of aggression by the Russian leadership against a sovereign, independent country.  Russia’s target is not only Donbas, the target is not only Ukraine, the target is the stability in Europe and the whole of the International Peace order.  And we will hold President Putin accountable for that.”

UK Prime Minister Boris Johnson:

“I am appalled by the horrific events in Ukraine and I have spoken to President Zelensky to discuss next steps.  President Putin has chosen a path of bloodshed and destruction by launching this unprovoked attack on Ukraine.  The UK and our allies will respond decisively.”

Ukrainian Foreign Minister Dmytro Kuleba:

“Putin has just launched a full-scale invasion of Ukraine.  Peaceful Ukrainian cities are under strikes.  This is a war of aggression.  Ukraine will defend itself and will win.  The world can and must stop Putin.  The time to act is now.”

UN Secretary-General Antonio Gueterres:

“President Putin, in the name of humanity, bring your troops back to Russia.  In the name of humanity, do not allow to start in Europe what could be the worst war since the beginning of the century.”

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In another rambling speech on Thursday filled with more historical grievances and accusations of a relentless Western plot against his country, noting America’s “empire of lies,” Putin chillingly threatened “consequences you have never faced in your history” for “anyone who tries to interfere with us.”  Putin reminded the world that Russia “remains one of the most powerful nuclear states” with “a certain advantage in several cutting-edge weapons.”

As the New York Times’ Roger Cohen noted, Putin came closer to threatening nuclear war than any statement from a major world leader in recent decades.

Given Russia’s nuclear arsenal, he said, “there should be no doubt that any potential aggressor will face defeat and ominous consequences should it directly attack our country.”  He added: “All necessary decisions have been taken in this regard.”

Again, this is chilling. 

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Latest Developments

--Thursday, the big question was what kind of resistance could Ukraine’s 200,000 service members, with more troops in the National Guard, border service, volunteer battalions and other units mount and would they be able to slow a Russian onslaught, giving time for international pressure on the Kremlin and a domestic resistance to grow?  The early evidence is good, but they need resources, quickly.

One thing not in Kyiv’s favor is that, despite purges of people with Russian government connections in Ukraine’s military and security apparatus, pro-Russian operatives are a significant threat to Zelensky et al, particularly if they give up key hidden assets that could be used against Russian forces.

[As an aside, that’s a huge issue in South Korea, with North Korea long having infiltrated Seoul in particular.]

--As Russian missiles pound Kyiv, families cowered in shelters and authorities told people to prepare petrol bombs to defend their capital, as President Putin urged the Ukrainian military to seize power and make peace.

Putin says he does not plan a military occupation, only to disarm Ukraine and remove its leaders, alluding to Ukrainian far-right nationalists who collaborated with Nazi invaders in World War II to fight Soviet Russia.

But it is not clear how a pro-Russian leader could be installed unless Russian troops control much of the country.

The mayor of Kyiv is former world heavyweight boxing champion Vitali Klitschko, who is taking up arms himself.  “The enemy wants to put the capital on its knees and destroy us.”

The goal is to decapitate the government and Zelensky said he knew he was the “number one target” but would stay in Kyiv.

Ukraine said more than 1,000 Russian soldiers had been killed so far.  The United Nations said 25 civilians had been killed.  Of course such figures are impossible right now to verify and will be changing dramatically.

--The Kremlin said it had offered talks in the Belarusian capital Minsk, but that Ukraine had proposed Warsaw instead and there was now a “pause” in contact.

--UN agencies said as many as 5 million people could try to flee abroad.  Ukraine has banned men of fighting age from leaving.

--President Zelensky held a “very productive” phone call with President Biden today, according to the Ukrainian Ambassador to Washington.

Tonight, he vowed to stay in the capital and defend his country as Kyiv prepared for a massive assault.

--Friday, NATO leaders agreed to immediately deploy elements of the alliance’s emergency military forces, adding troops and firepower to bolster defenses along its Eastern front.

The unprecedented deployment is meant to deter Russia from attacking NATO members and to prepare alliance forces to respond quickly should an attack occur.

NATO Sec. Gen. Stoltenberg said the alliance has never before collectively deployed such a force.

“We have over 100 jets at high alert operating in over 30 different locations.  And over 120 ships from the High North to the Mediterranean, including three carrier strike groups,” he said.  “There must be no space for miscalculation or misunderstanding.  We will do whatever it takes to defend every ally, and every inch of NATO territory….

“The world will hold Russia and Belarus accountable for their actions: Russia as the aggressor, Belarus as the enabler,” Stoltenberg said.  “President Putin’s decision to pursue his aggression against Ukraine is a terrible strategic mistake for which Russia will pay a severe price for years to come.”

--Secretary of State Antony Blinken spoke today with his Ukrainian counterpart and condemned reports of mounting civilian deaths, including those of Ukrainian children, due to attacks around Kyiv.

--The Biden administration announced Friday that it will move to freeze the assets of President Putin and Foreign Minister Lavrov, following similar moves by the European Union and Britain.

The Treasury Department and the other parties are freezing Putin and Lavrov’s assets as part of a broader package of sanctions against Russia for the invasion of Ukraine.

But it wasn’t immediately clear how impactful an asset freeze would be on the two, though it’s an important symbolic move; part of the strategy of turning Putin into an international pariah.

The Kremlin responded to the imposition of sanctions on them by saying it reflected the West’s “absolute impotence” when it comes to foreign policy.  Foreign Ministry spokeswoman Maria Zakharova was quoted as saying, “The issue is that we have reached the line where the point of no return begins.”

Zakharova brushed off the British measures, saying: “Neither Putin nor Lavrov have accounts in Britain or anywhere abroad.”

--Chinese Foreign Minister Wang Yi told senior European officials today that China respects countries’ sovereignty, including Ukraine’s, but that Russia’s concerns about NATO’s eastward expansion should be properly addressed.

Wang said the current situation in Ukraine was not something Beijing wished to see and that it would welcome direct dialogue between Russia and Ukraine as soon as possible.

“Given five consecutive rounds of NATO’s eastward expansion, Russia’s legitimate security demands should be taken seriously and properly addressed,” Wang said, according to a statement.

--Russia vetoed a draft UN Security Council resolution on Friday that would have “deplored” Moscow’s invasion of Ukraine, while China abstained from the vote – a move western countries view as a win for showing Russia’s international isolation.  The United Arab Emirates and India also abstained from the vote on the U.S.-drafted text.  The remaining 11 council members voted in favor.

--Ukraine said Russian warships shelled a Moldovan-flagged chemical tanker and a Panamanian-flagged cargo ship due to load grain near Odessa port in the Black Sea on Friday.  On Thursday, a Turkish-owned cargo ship was struck off Odessa.

--The Russian government took steps Friday to further limit what its citizens can see in media and on the internet; “slowing” access to Facebook and ordering state and independent outlets to use only governmental sources in their reporting on Ukraine.

Nick Clegg, vice president of global affairs at Facebook’s parent company Meta, tweeted on Friday, “Yesterday, Russian authorities ordered us to stop the independent fact-checking and labeling of content posted on Facebook by Russian state-owned media organizations.  We refused.  As a result, they have announced they will be restricting the use of our services.”

Other tidbits….

--Russia supplies 40% of Europe’s natural gas and 25% of its oil.  It’s also the largest exporter of wheat in the world, with Ukraine itself known as the breadbasket of Europe. Oil and grain prices had been soaring until today when they fell back.

--Do not discount the impact of the sports world in this crisis, as UEFA has moved the Champions League (soccer) final from Russia to Paris, while Formula One racing has stated it will not hold this year’s Russian Grand Prix.

I’m going to be curious to see how Russia’s NHL stars are treated in the States.  Washington Capitals superstar Alex Ovechkin said yesterday, “Please, no more war.”

--When Russia attacked Ukraine, the nearest naval vessel of a major NATO ally was in the Mediterranean.  Nothing in the Black Sea.

A key reason: divisions among members over whether to challenge Russia’s navy in the area, resulting in a lack of coherent and meaningful Black Sea NATO strategy, according to various reports.

--Belarusian President Alexander Lukashenko said on Thursday that troops from the ex-Soviet country could take part in Russia’s military operation against Ukraine if needed.  Another bad sign.

--Ukraine lost control of the Chernobyl nuclear site, where Ukrainian forces had waged a fierce battle with Russian troops.

The current state of the facilities, the site of the world’s worst nuclear disaster, is not known, though there were reports of a heightened level of radioactivity.

The nuclear reactor at the plant (80 miles north of Kyiv) exploded in April 1986, sending a radioactive cloud across Europe.

The exploded reactor was then covered by a protective shelter (sarcophagus) several years ago to prevent radiation leaks.

Russian shelling apparently hit a radioactive waste repository.

If you never watched it, HBO did an outstanding drama series titled “Chernobyl” a few years ago.  It’s totally true to the history of the event and the Russian government’s coverup. 

--French President Emmanuel Macron said on Friday that Vladimir Putin had been duplicitous in his conversations with him, discussing the details of the Minsk agreements over the phone while preparing to invade Ukraine.

“Yes, there was duplicity, yes there was a deliberate, conscious choice to launch war when we could still negotiate peace,” Macron told reporters after an EU summit.

--Russia’s Aeroflot was banned from flying to the United Kingdom on Thursday, Prime Minister Johnson announcing the ban in parliament.

--Brazil’s President Jair Bolsonaro scolded his Vice President Hamilton Mourao for condemning the Russian invasion of Ukraine and said it was not for Mourao’s job to speak about the crisis in eastern Europe.

Just days before the invasion, Bolsonaro, a truly loathsome figure, was alongside Putin at the Kremlin and said he was “in solidarity with Russia,” without elaborating.

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Commentary…prior to full-scale invasion, late Wednesday…

Editorial / Wall Street Journal

“ ‘Who in the Lord’s name does Putin think gives him the right to declare new so-called countries?’ President Biden asked Tuesday in announcing new sanctions against Russia. The answer is a complacent West, which has failed to impose serious costs despite more than a decade of Russian aggression.

“At least the Administration overcame its initial reluctance to call Vladimir Putin’s deployment of troops in Eastern Ukraine an ‘invasion.’  Mr. Biden on Tuesday called it ‘the beginning of a Russian invasion,’ and he responded with what he said was the beginning of greater sanctions.

“The White House bet seems to be that sanctions restraint will cause Mr. Putin to settle for holding the regions his forces now occupy and forgoing an assault on Kyiv.  But the Russian has never been deterred before by Western restraint, and he may see this as more weakness.  Mr. Putin responds only to strength, and the West still isn’t showing enough….

“The Europeans also settled for tougher talk but weak sanctions….

“The most encourage surprise came from Germany, which said it is halting the certification for Russia’s Nord Stream 2 gas pipeline for now.  Better late than never.  But that suggests there’s an opening to let the pipeline proceed if Mr. Putin doesn’t swallow all of Ukraine….

“At this late date nothing may stop Mr. Putin’s desire for conquest.  But the mistake the West has made for more than a decade is to think the Russian autocrat can be a reasonable geopolitical partner.  He doesn’t want to be part of the current international order.  He wants to blow it up.  It’s depressing to have to say this, but Cold War II is here.”

George F. Will / Washington Post

“The ‘surly drums of war’ – a phrase from Winston Churchill, who knew the soundtrack of European history – again reverberate on a continent that thought it had heard the last of them.  It has not even heard the last of Otto von Bismarck.

“Vladimir Putin is emulating Bismarck, who used three quickly decisive wars – against Denmark in 1864, Austria in 1866 and France in 1870 – to create a unified modern Germany from what had been a loose confederation of states. Denmark lost a third of its territory and 40 percent of its population.  Prussia’s seven-week war against Austria established the Hohenzollern dynasty, which Bismarck served, as dominant within the confederation.  The Franco-Prussian War sealed Germany’s unity.  By acquiring land, some German-speaking populations and an aura of national vitality, Bismarck’s wars of national creation stoked cohesion.

“Putin believes, or wants the world to believe that he believes, that his war against Ukraine, now entering its ninth year, is an act of re-creation, bringing Ukrainians home to the community from which they were sundered when the Soviet Union expired.  If Putin succeeds in reducing Ukraine to satellite status, and in inducing NATO to restrict its membership and operations to parameters he negotiates, he might, like Bismarck, consider other wars – actual, hybrid, cyber.  The Baltic nations – Latvia, Lithuania, Estonia, all NATO nations – should worry.

“Today’s crisis echoes 1938, when Hitler stirred the restiveness of separatists: ethnic Germans in Czechoslovakia’s Sudetenland. Therefore, today’s crisis also echoes 1918, when President Woodrow Wilson embraced ‘self-determination’ as a universal right and ‘an imperative principle of action.’  His secretary of state Robert Lansing wondered, ‘What unit has he in mind?  Does he mean a race, territorial area, or a community?’

“Wilson mistakenly assumed that ‘nations’ and ‘peoples’ are synonymous, or that they designate coterminous entities.  In Putin’s plan to dismember Ukraine by embracing self-determination for ethnic Russian separatists, he, like Hitler in 1938, is exploiting careless rhetoric that ignores the fact that ethnicities do not tidily coincide with national boundaries….

“In 2015, the year after Putin sliced Crimea off Ukraine, his foreign minister, Sergey Lavrov, said Russia’s annexation was merely a response to the people of Crimea ‘invoking the right of self-determination.’ This phrase can be used to sanitize the dismemberment of Ukraine – and some other nations (see above: the Baltics).  And perhaps can reduce nations supposedly supporting Ukraine to paralytic dithering about whether sanctions, or which sanctions, are an appropriate response to an aggression wielding a Wilsonian concept.

“It must delight Putin to employ an American saint’s piety in an act of anti-American realpolitik. Much of Putin’s geopolitics consists of doing whatever opposes U.S. policy.  Call this the Nelson Rule.  Before the Battle of Trafalgar, Lord Nelson, meeting with some of his officers, reportedly picked up a fire poker and said, ‘It matters not at all in what way I lay this poker on the floor.  But if Bonaparte should say it must be placed in this direction, we must instantly insist upon its being laid in some other one.’  Regarding the United States, Putin is Nelsonian.

“In 2013, President Barack Obama grandly declared that Syrian President Bashar al-Assad ‘must go.’  Putin decided that Assad must stay.  Nine years later, Assad is still there, partly because of Putin.

“Practice supposedly makes perfect, but not yet for Putin’s regime. It has had abundant experience with lying, but this has not made it an even competent liar. When leaders of the pro-Russian separatist movement in eastern Ukraine released videos claiming attacks on ethnic Russians, it was quickly established that the videos were recorded two days before the separatists said the attacks occurred.

“But raw power lubricated by audacious lying is Bismarckian.  In July 1870, the French ambassador to Prussia asked King William of Prussia for certain assurances, which the king declined to give.  Bismarck edited a telegram describing this conversation to make the episode resemble an exchange of insults.  Passions boiled in both countries, and France declared war, which Bismarck wanted because he correctly thought war would complete the welding of the German states into a muscular nation.

“Bismarck was clever.  Putin, with his feral cunning, might be a clever imitator.”

Richard A. Clarke / New York Daily News

“Chess is widely played in Russia.  In a game, players must think several moves ahead, contemplating what the other player will do in response to a move, and what then follows. The chess game between Russia and the West has begun.  We need to think several moves ahead.

“In move one, Russian troops roll overtly onto Ukrainian territory.  Move two sees the U.S., NATO, the EU and the G-7 impose crippling economic sanctions. NATO also moves some forces east, closer to Russia.  What then is Moscow’s drastic response?  What is move three? The Putin government already knows.

“We can also envision move three.  Russia will bring the war to our homeland. They will not land Naval Infantry on the New Jersey shore, but they will make us hurt as a nation, using two types of weapons in what they call hybrid warfare.

“The first kind of weapon, about which the Biden administration has already warned, is cyberattack.  They could engage in both targeted and indiscriminate cyber war. Targeted attacks could do things such as blowing up refineries that make gasoline, at a time when gas prices are already high.

“In response to U.S. moves that restrict Russian access to the American and global financial system, Russia could attempt to prevent anyone’s online access to key parts of that financial system.  Airlines are fragile, depending upon complex computer networks and systems.  The three electric power networks serving the U.S. and Canada are also only as strong as their many weak links, and the Russian military has already demonstrated its ability to collapse foreign power grids.

“Russia has also already engaged in indiscriminate attacks….

“The second kind of weapon of hybrid war we are likely to see here is using highly designed disinformation to provoke some Americans into violence against others and against the government.  As with cyberwar, we have seen the rehearsals.  In 2016, Russian disinformation operatives pretending to be Americans convinced some gullible political extremists to stage rallies where and when directed, even to have women dress up as ‘Hillary in a prison jumpsuit’ inside cages brought to the rallies.

“The poisonous venom of fake news and conspiracy theories that have riven the U.S. for the last several years are stoked by Russian trolls, bots and disinformation experts. Some of their activity has probably not been revealed, and others not even documented by U.S. intelligence and law enforcement, but many private sector experts believe the Russian disinformation machine has been whipping up opposition to public health measures.

“It is worth asking whether the ‘foreign’ instigation the Canadian government has said was a significant part of the so-called trucker protests was Russian.  What we do know is that dark money was involved, overseas bot-farms-for-rent were employed (one in Bangladesh), and social media accounts (one belonging to a woman in Missouri) were hacked and then employed to coordinate the civil unrest north of the border.

“The Russian move on Ukraine has been highly orchestrated, with actions rolling out on schedule for the last many weeks.  Their script goes well beyond this week’s events and well beyond Ukraine.  It is not paranoia to suspect that Russian-funded and controlled bots, fake accounts and disinformation will whip up gullible Americans in support of trucker-style Covid-related protests on Washington’s Beltway and once again on the U.S. Capitol building, perhaps during the State of the Union on March 1.

“American leaders and lawmakers have been too hesitant to ask publicly what the role of Russian intelligence has been….

“The U.S. homeland is now at high risk of cyberwar and domestic extremist violence caused by, or exacerbated by, Russia as its response to our non-violent retaliation to their overt military aggression in Ukraine.  It’s time to think about move three. And move four.”

Robert Kagan / Washington Post…pre-invasion…

“Let’s assume for a moment that Vladimir Putin succeeds in gaining full control of Ukraine, as he shows every intention of doing.  What are the strategic and geopolitical consequences?

“The first will be a new front line of conflict in Central Europe.  Until now, Russian forces could deploy only as far as Ukraine’s eastern border, several hundred miles from Poland and other NATO countries to Ukraine’s west.  When the Russians complete their operation, they will be able to station forces – land, air and missile – in bases in western Ukraine as well as Belarus, which has effectively become a Russian satrapy.

“Russian forces will thus be arrayed along Poland’s entire 650-mile eastern border, as well as along the eastern borders of Slovakia and Hungary and the northern border of Romania.  (Moldova will likely be brought under Russian control, too, when Russian troops are able to form a land bridge from Crimea to Moldova’s breakaway province of Transnistria.)  Russia without Ukraine is, as former secretary of state Dean Acheson once said of the Soviet Union, ‘Upper Volta with rockets.’  Russia with Ukraine is a different strategic animal entirely.

“The most immediate threat will be to the Baltic states. Russia already borders Estonia and Latvia directly and touches Lithuania through Belarus and through its outpost in Kaliningrad.  Even before the invasion, some questioned whether NATO could actually defend its Baltic members from a Russia attack.  Once Russia has completed its conquest of Ukraine, that question will acquire new urgency.

“One likely flash point will be Kaliningrad.  The headquarters of the Russian Baltic Fleet, this city and its surrounding territory were cut off from the rest of Russia when the Soviet Union broke up.  Since then, Russians have been able to access Kaliningrad only through Poland and Lithuania.  Expect a Russian demand for a direct corridor that would put strips of the countries under Russian control.  But even that would be just one piece of what is sure to be a new Russian strategy to delink the Baltics from NATO by demonstrating that the alliance cannot any longer hope to protect those countries.

“Indeed, with Poland, Hungary and five other NATO members sharing a border with a new, expanded Russia, the ability of the United States and NATO to defend the alliance’s eastern flank will be seriously diminished.

“The new situation could force a significant adjustment in the meaning and purpose of the alliance.  Putin has been clear about his goals. He wants to reestablish Russia’s traditional sphere of influence in Eastern and Central Europe.  Some are willing to concede as much, but it is worth recalling that when the Russian empire was at its height, Poland did not exist as a country; the Baltics were imperial holdings; and southeastern Europe was contested with Austria and Germany.  During the Soviet period, the nations of the Warsaw Pact, despite the occasional rebellion, were effectively run from Moscow.

“Today, Putin seeks at the very least a two-tier NATO, in which no allied forces are deployed on former Warsaw Pact territory.  The inevitable negotiations over this and other elements of a new European security ‘architecture’ would be conducted with Russian forces poised all along NATO’s eastern borders and therefore amid real uncertainty about NATO’s ability to resist Putin’s demands.”

Commentary since the full invasion was launched…

David Ignatius / Washington Post

“Now that Russian troops have surged into Ukraine, how does Putin plan to extricate himself? It’s likely that he hopes to keep Russian ground troops out of Kyiv and other big cities, instead using Spetsnaz special forces and FSB operatives to neutralize these targets.  He will probably seek to install a puppet government. But here’s where U.S. officials believe Putin’s planning breaks down.

“What Putin doesn’t appear to realize, with his vision of Russian-Ukrainian oneness, is that his bullying has deeply alienated Ukrainians.  I saw that anti-Putin sentiment when I visited Kyiv in late January, and it’s undoubtedly even stronger now that Russian tanks are on the streets and jets are in the sky.  Putin obviously believed his own rhetoric that Ukraine wasn’t a real country. That level of self-absorption so often leads to mistakes.

“With his unprovoked invasion, Putin has shattered the international legal rules established after World War II, along with the European order that followed the Cold War.  That old architecture was getting shaky, and it was destined to be replaced eventually.

“The Ukraine assault, pitting a messianic Russian autocrat against the wishes of every other major nation, perhaps including China, will determine the shape of the new order to come. If Putin loses his battle to subjugate Ukraine, the new order will have a solid and promising foundation.  If Putin wins, the new era will be very dangerous indeed.”

Roger Cohen / New York Times

“European states, particularly France, generally viewed the American conviction that a Russian invasion was almost inevitable as too alarmist, but differences were papered over in the pursuit of diplomacy.

“In the end, the diplomatic efforts Europeans believed in were doomed because an increasingly isolated Mr. Putin has worked himself into a revanchist fury.  He appears to see himself standing alone against the United States and what he portrays as the ‘far-right nationalists and neo-Nazis’ that ‘the leading NATO countries are supporting” in Ukraine.

“Mr. Putin’s steadily mounting anger over the past two decades has been focused on the perceived Western humiliation of Russia after the dissolution of the Soviet Union 31 years ago and on NATO’s subsequent expansion eastward to safeguard countries like Poland that suffered during the Cold War under Moscow’s totalitarian domination.

“But the Russian leader has evidently developed his outrage into a consuming worldview of American iniquity. What this will mean in military terms in the coming years remains to be seen.

“ ‘Nearly everywhere, in many regions of the world where the United States brought its law and order, this created bloody, unhealing wounds and the curse of international terrorism and extremism,’ Mr. Putin said.  America’s conduct across the globe was ‘con-artist behavior.’

“He continued; ‘Therefore, one can say with good reason and confidence that the whole so-called Western bloc formed by the United States in its own image and likeness is, in its entirety, the very same ‘empire of lies.’’

“Mr. Putin seem oblivious to the fact that the choreography of the Russian invasion has been one of extraordinary, if predictable, doublespeak.

“It has included unsubstantiated accusations of ‘humiliation and genocide’ perpetrated by the ‘Kyiv regime’; Russian recognition of the independence of the separatist regions of Donetsk and Luhansk so that these ‘people’s republics’ could ask ‘Russia for help’; and the claim that therefore Russia was within its rights, under the United Nations Charter, in responding to a request for assistance by sending troops ‘to demilitarize and de-Nazify Ukraine.’

“In the end, Mr. Putin appears to have had no hesitation in ordering Russia into Ukraine. He accused the authorities in Kyiv – all neo-Nazi usurpers, in his view – of aspiring to ‘acquire nuclear weapons’ for an inevitable ‘showdown’ with Russia.

“He appeared to have forgotten that Ukraine once had a vast nuclear arsenal before it gave up in 1994 under an agreement known as the Budapest Memorandum. Russia was one of the countries that signed the accord, promising in exchange that it would never use force or threats against Ukraine and would respect its sovereignty and existing borders.

“So much for that.”

Gerald F. Seib / Wall Street Journal

“Russia’s military incursion deeper into Ukraine is one of those rare events that won’t merely affect the world.  It will change the world.

“By moving further into a sovereign state to bring it under his thumb, Russian President Vladimir Putin has shattered the security architecture that has prevailed in Europe since the end of the Cold War, and no one knows what will take its place.

“The ability of the U.S. to do what three consecutive presidents have pledged to do – clear away other international entanglements to focus on competition with China – has been undercut again.  Military expenditures will likely increase in the West.  Economic globalization will be set back.

“Meanwhile, fissures that have been lying just beneath the surface in American politics, separating internationalists and neo-isolationists, are becoming more visible, particularly in the Republican Party.

“Those are just some of the ripple effects.  Like the 9/11 terrorist attacks, the onset of what could become the largest ground warfare in Europe since World War II marks such a departure from the norm that some of its consequences are impossible to know for sure, and some figure to play out in unexpected ways for years to come.

“Two effects already seem certain.  First, Russia has dramatically accelerated Mr. Putin’s long-promised effort to regain some of the influence and territory that the former Soviet Union either owned outright or effectively controlled.  That goal alone will affect the psychology of more than a dozen countries scattered across the new, post-Soviet map of Europe.  Governments in Poland, Lithuania, Latvia and Estonia will worry they are next on Mr. Putin’s list of nearby states to destabilize.

“The second effect is that the Western alliance generally, and the North Atlantic Treaty Organization specifically, have been newly united and galvanized.

“That unity now will be tested by the stresses and strains of the weeks and months ahead.  If it endures, senior U.S. officials believe, this renewed Western resolve could turn the Ukraine adventure into a giant strategic blunder by Mr. Putin.  The depth and durability of the West’s cohesion is set to be tested above all in Germany, which has sometimes appeared ambivalent about confronting Mr. Putin.

“Still, one force pulling Germany away from Russia also has emerged in recent weeks: American liquefied-natural-gas exports have begun to fill the gap left by declining Russian exports, suggesting the possibility of a new energy relationship with European allies.

“A key question is whether efforts now under way to isolate Moscow with economic sanctions will drive Russia closer to China in a meaningful way. Those two nations share an interest in building defenses against economic pressures the U.S. can exert as the most powerful force in the current version of the international economy.

“The most immediate help China can give Russia is simple relief from the sanctions imposed on Moscow, which are now set to expand and deepen.  More broadly, China and Russia share a motivation to work together to build a kind of parallel international financial system apart from the dollar-denominated, American-dominated one that currently exists.  Dreaming of such an outcome and achieving it are two quite different things, but the dream now might have new resonance.”

Editorial / Wall Street Journal

“The larger meaning of Russia’s Ukraine invasion is that the world has entered a dangerous new era.  Or perhaps it’s more accurate to say the world has returned to its pre-World War II state in which the strong take advantage of the weak, and authoritarians are on the march.

“The post-Cold War order was dependent on U.S. economic and military power, not on the illusion that the ‘international community’ can enforce world order.  Could there be a better display of United Nations impotence than Russia presiding on Wednesday over a Security Council session on Russia’s invasion?

“Mr. Biden and his advisers continue to believe in this community of nations fantasy, but this is a time for sturdier alliances of conviction and interests.  If Mr. Putin consolidates control in Kyiv, he will surely increase the threats against NATO’s border countries.  The alliance will have to fortify its eastern front, and Europe in particular will have to rearm.  The political war on fossil fuels needs to end.

“Some Americans will want to concede Russia this sphere of influence and say it’s Europe’s problem.  But a world in which Russia dominates Eastern and Central Europe, Iran dominates the Middle East, and China dominates East Asia will not be safe for U.S. interests.  Regional powers have a habit of becoming global threats, especially when they work in concert – as Russia, China and Iran are already doing.

“We can debate if Mr. Biden’s weakness on Afghanistan caused Mr. Putin to believe he could invade Ukraine, but you fight a Cold War with the President you have. Mr. Biden now has to rally the world and get the American public to understand the stakes in Ukraine and counter the rapidly increasing threats to America.”

Biden Agenda

--Congress was not in session this week due to the holiday, but on Tuesday he gives his first State of the Union Address.  There couldn’t be a more tumultuous time to give it.  Number one, as the Journal notes above, Biden has to explain the situation in Ukraine and what it means in terms of the big picture.  And as David Axelrod recently commented, the president needs to be humble.  I’m not so sure he’s capable of that these days.

[And we have the potential trucker protest in the capital.]

--We also now have the Supreme Court nomination of Judge Ketanji Brown Jackson, who would become the first Black woman to serve on the high court, the president delivering on a campaign promise.

Jackson, 51, once worked as one of the retiring Justice Stephen Breyer’s law clerks early in her legal career.  She attended Harvard as an undergraduate and for law school, and served on the U.S. Sentencing Commission, the agency that develops federal sentencing policy, before becoming a federal judge in 2013.

She currently serves on the U.S. Court of Appeals for the District of Columbia Circuit, one of the nation’s most influential courts.  In June, three Republicans, Lindsey Graham, Susan Collins and Lisa Murkowski, voted to confirm her for the D.C. Circuit.  Sen. Graham is already blasting the nomination, ditto many other Republicans.

More next time.

Wall Street and the Economy

It was highly predictable, as I did last week, to forecast a down Tuesday in the stock market with all the war talk over a three-day holiday weekend, and after the invasion of Ukraine late Wed. evening, New York Time, at the bottom on Thursday, the Dow Jones was down 5.3% from Friday’s close.  The Nasdaq, at the lows, was into bear market territory, down more than 20% from its highs.  The S&P 500 had entered correction mode Tuesday, -10%+ from its high level and only worsened.

So we were set up for a little bounceback rally and that’s what we got, though the chief reason given for Thursday’s reversal, the imposition of further sanctions on Vladimir Putin’s regime, was rather absurd given they will have little impact.  Just say the market was oversold.

We’ll see what happens over the weekend, but if the crisis in Ukraine should quiet down, whatever that means, the focus will return to inflation and the Federal Reserve and you can’t tell me that’s already been discounted….the impact of four or more rate hikes in 2022 on the economy and earnings.

Before talking about the Fed more, just a few notes on the economic data of the week.  We had a second look at fourth-quarter GDP, which ticked up to 7.0% annualized vs. the first estimate of 6.9%.

The S&P CoreLogic Case-Shiller 20-city home price index for December rose 1.1% over November, and 18.6% for the year, a record.  [Phoenix home prices have risen an average of 32.5% over the past year, Tampa 29.4%, and Miami 27.3%.]

January new home sales were a little light of forecasts at 801,000 annualized.

Due to rising mortgage rates, however, new applications are plummeting in recent weeks.

January personal income was unchanged, a little better than expected, while consumption, +2.1%, was stronger than forecast.

Importantly, the Fed’s preferred inflation barometer, the core personal consumption expenditures index (ex-food and energy), rose 0.5% on the month and 5.2% year-over-year, the highest since April 1983.

With all the recent data, the Atlanta Fed’s GDPNow barometer for first-quarter growth sits at 0.6%...not exactly Q4’s 7.0%.

So we’re about 17 days away from the Federal Reserve’s critical March 15-16 meeting where, regardless of how things play out in Ukraine, the Fed will be hiking interest rates for the first time in a while.  Various Fed governors spoke out this week.

Atlanta Federal Reserve Bank President Raphael Bostic said on Thursday that the Fed may need to raise rates four or more times this year if high inflation persists.

“The data may come in perhaps more pessimistic in terms of how well we are doing on inflation and if it does I’m going to move my view, maybe 4 (hikes), and depending on how things go it may be more than that,” Bostic said during a virtual event hosted by the Atlanta Fed.

On the issue of the Fed’s mammoth balance sheet, Bostic said he wants to see the central bank raising rates a couple of times before it begins to reduce it “as aggressively as possible.”

On Wednesday, San Francisco Fed Bank President Mary Daly said she expects the central bank will need to raise rates at least four times this year, and likely more, to stop high inflation from getting worse.  She previously forecast three rate increases.

But Russia’s invasion of Ukraine could complicate matters and Fed officials will be sifting through the data ahead of the meeting, but it shouldn’t impact “liftoff.”

Cleveland Fed President Loretta Mester said on Thursday that geopolitical events can worsen inflation and be damaging to economic growth in the near-term, Mester a voting member this year on monetary policy.

“The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the U.S. will also be a consideration in determining the appropriate pace at which to remove accommodation,” Mester said at a virtual event.

Finally, on the Canada/trucker protest front, Prime Minister Justin Trudeau suddenly said his government no longer required emergency powers to deal with protests against Covid-19 restrictions, amid mounting criticism from all sides.

Trudeau said police had been successful in shutting down a protracted protest in the capital of Ottawa and that law-enforcement officials had assured him officers had the tools to maintain public safety without extraordinary measures.

“We are no longer in an emergency situation,” Trudeau said.  “Order has been restored and the blockades and occupation are over.”

Trudeau had invoked the rarely used extraordinary powers last week in order to give police in Ottawa the tools it needed to dismantle a weeks-long demonstration set up in the city’s downtown.

But after the police accomplished their mission, the Liberal government then got approval to extend emergency powers for a total of 30 days on the event the protesters/truckers return.

The protesters initially wanted an end to cross-border Covid-19 vaccine mandates for truck drivers, but the blockade turned into a demonstration against Trudeau and the government and the prime minister could not have handled it worse.

Editorial / The Economist

“The truckers are wrong about the vaccine mandate at the border. Such rules are a reasonable precaution to slow the spread of a deadly and highly infectious disease.  Canada’s government is right to enforce them.  But the truckers have every right to express their disagreement.  A wise government would listen to them and respond politely, taking their complaints seriously and patiently explaining why Covid restrictions, though onerous, are necessary for the time being.

“Justin Trudeau has done the opposite. First, he refused to meet them. Then, seizing on the fact that a few of the protesters appear to be bigots, he attempted to put all of them outside the boundaries of reasonable debate by condemning ‘the anti-Semitism, Islamophobia, anti-black racism, homophobia and trans phobia that we’ve seen on display in Ottawa over the past number of days.’  The police already have ample powers to quell disorder.  Yet on February 14th Mr. Trudeau invoked emergency powers under a 34-year-old law that had never been used before. It would allow the government to declare protests illegal and freeze the bank accounts of protesters without a court order.

“Meanwhile, his Liberal government is mulling two worrying changes to Canada’s already illiberal hate-speech laws.  One would allow Canada’s Human Rights Tribunal to impose large fines on those it deems to have used hateful language. It has in the past taken an expansive view of what counts as hateful, and defendants would enjoy fewer safeguards than they do under criminal law.  The other proposed change would let individuals file legal complaints against people pre-emptively, if they fear that they may be about to say something hateful.

“These are both terrible ideas.  The Economist has long argued that free speech should be restricted only under exceptional circumstances, such as when the speaker intends to incite physical violence.  Canada’s laws are already more restrictive than this, and the country’s illiberal left would like them to be still more so.  Academics have been suspended or disciplined for writing that Canada is ‘not racist’ or for holding gender-critical views.  The proposed amendments would give illiberal activists legal tools to harass conservative religious folk, traditional feminists and many more besides, simply for holding views that the left finds offensive.  Worse, it would allow some to be gagged before they speak.

“Canada is not yet a rancorous or bitterly divided society.  If Mr. Trudeau wants to keep it that way, he should stop trying to police Canadians’ thoughts.”

Europe and Asia

We had the flash PMI readings from IHS Markit for February in the eurozone, with the composite at 55.8 vs. 52.3 in January (50 the dividing line between growth and contraction). Manufacturing output was 55.6 for the EA19, with services at 55.8; the improving picture the result of Covid containment measures being relaxed.

Germany had flash Feb. readings of 55.4 for manufacturing, 56.6 services.

France came in at 55.0 mfg., 57.9 services.

Elsewhere, the UK’s flash manufacturing figure was 56.7, services 60.8.

Chris Williamson / IHS Markit

“The eurozone economy regained momentum in February as an easing of virus-fighting restrictions led to renewed demand for many consumer services, such as travel, tourism and recreation, and helped alleviate supply bottlenecks.  Business optimism in the outlook has likewise improved as companies look to the further reopening of the economy, encouraging increased hiring.

“However, although easing, supply constraints remain widespread and continue to cause rising backlogs of work.  As such, demand has again outstripped supply, handing pricing power to producers and service providers.  At the same time, soaring energy costs and rising wages have added to inflationary pressures, resulting in the largest rise in selling prices yet recorded in a quarter of a century of survey data history.

“The strength of the rebound in business activity signaled by the PMI provides welcome evidence that the economy has so far shown encouraging resilience in the face of the Omicron wave, but the intensification of inflationary pressures will add to speculation of an increasing hawkish stance at the ECB.”

The euro area inflation rate for January was 5.1%, up from 5.0% in December.

Germany 5.1%, France 3.3%, Italy 5.1%, Spain 6.2%, Netherlands 7.6%, Ireland 5.0%

Brexit: Bank of England policy makers are facing their toughest challenge since Britain crashed out of the European exchange rate mechanism 30 years ago. Soaring prices, with inflation forecast to peak over 7%, more than triple the Bank of England’s 2% target, are causing a cost of living crisis for households already dealing with soaring energy prices.  But the BOE has to tighten monetary policy further.

Turning to Asia…absolutely nothing of note on China’s economy this week.

Japan released its flash PMI readings for February and they were not good, owing to renewed Covid restrictions as a result of record daily infections and deaths.  The manufacturing figure was 48.7, 42.7 for services.

Street Bytes

--After the market swoon and then stupendous rally off the lows, including Friday’s 834-point gain in the Dow Jones (the biggest percentage gain since Nov. 2020), the major averages finished mixed on the holiday-shortened week.  The Dow lost 0.1% to 34058, while the S&P 500 gained 0.8% and Nasdaq 1.1%.

--U.S. Treasury Yields

6-mo. 0.68%  2-yr. 1.57%  10-yr. 1.96%  30-yr. 2.27%

After a flight to quality early on due to Russia’s invasion, yields rose by week’s end as traders refocused on the inflation issue and the Fed’s looming moves to begin hiking rates.

The 10-year initially traded down to a yield of about 1.88% amid the tumult.

--Oil, as represented by West Texas Intermediate, hit $100 a barrel briefly on Thursday before a sharp selloff sent it to $92 by week’s end.

--Exxon Mobil Corp. said on Wednesday its global staffing fell by 9,000 people last year amid cost-reduction efforts after the pandemic battered energy demand and prices.  Exxon has been slashing costs and debt to boost cash returns to shareholders.  Exxon ended 2021 with 63,000 regular employees, down from 72,000 in 2020 and from 74,900 before the pandemic.

--Hackers who unleashed malicious software on computers in Ukraine, Latvia and Lithuania had been inside the targeted systems for months, cybersecurity experts said, suggesting careful preparation for potentially damaging attacks across borders.

The deployment of the so-called wiper malware, which can delete data on a targeted machine, came Wednesday, hours before the Kremlin launched airstrikes and a land offensive across swaths of Ukraine. 

While the people behind the cyberattacks are unknow, Western officials have for months warned that a hybrid war on Ukraine might have digital fallout that could aid a Russian land invasion and ripple outward to disrupt businesses and governments around the world.

I post this here just to remind all of you, especially if you work for a large corporation, be careful opening attachments.  The malware spreads quickly.  This wiper malware is also different from another threat I detail below in comments on Iran.

--Home Depot extended its winning streak against analysts’ estimates, beating earnings and revenue expectations for the seventh consecutive quarter. 

In 4Q21, HD faced difficult year-over-year comparisons; total sales and comparable sales had increased by 25% and 24.5%, respectively, in the year ago quarter.  Nevertheless, total sales and comparable sales for 4Q21 still increased by 11% and 8.1%, respectively, demonstrating that demand remains healthy, even as pandemic-related restrictions and mandates ease.

One category that does appear to be slowing is DIY (do-it-yourself), which soared during the early stages of the pandemic in 2020.    The moderation in DIY spending is evidence by a 3.4% dip in consumer transactions.  For a reference point, transactions jumped by 12.3% in 2Q20 as stuck-at-home consumers tackled smaller home improvement tasks.

The decline in DIY activity isn’t necessarily problematic for Home Depot because many people have now set their sights on larger projects requiring professional help (pro sales), which account for roughly half of HD’s business, with the average ticket size increasing by 12.4% on a year-over-year basis.

HD is confident enough to increase its quarterly dividend by 15%.  But the shares fell hard because although HD’s fiscal 2022 guidance is generally in line with forecasts, it hammers home the point that growth is bound to decelerate.  Specifically, sales and comparable sales growth is expected to be slightly positive, compared to growth of 14.4% and 11.4%, respectively, in FY21.

Rising interest rates pose a significant threat, especially in the professional business. Consumers who have leaned on historically low rates may begin scrapping more costly home improvement projects.

Shipping costs have done a number on gross margins, which were at 9.5% in the last quarter, vs. 24% in the year ago quarter.

--Home Depot rival Lowe’s Cos., the nation’s second-largest home improvement chain behind HD, offered an upbeat annual outlook after reporting strong fiscal fourth-quarter results that showed a still sizzling housing market.

Lowe’s obviously faces the same issues as Home Depot, so I won’t repeat them, but the Mooresville, North Carolina-based company earned $1.21 billion, or $1.78 per share, for the quarter ended Jan. 28, beating Wall Street’s expectations.

Revenue came in at $21.34 billion in the period, also surpassing Street forecasts.

Same-store sales rose 5.1%.  Sales from “Pro” customers, again, the contractors, increased 23%.

The company also guided higher for the full year and, unlike HD, Lowe’s shares rose sharply in response.

--Macy’s offered an upbeat outlook on Tuesday after reporting strong quarterly results that exceeded Wall Street estimates despite a slew of challenges from inflation to supply chain clogs.

The New York company also said that it would not spin off its ecommerce division from its Macy’s and Bloomingdale’s stores, rejecting a push from activist investor Jana to separate the businesses to create better value, similar to what Saks Firth Avenue did early last year.

Like other retailers, Macy’s faces rising costs for everything from labor to shipping as supply chain backups hit companies worldwide during the holidays.  This past holiday quarter also offered an extra challenge: a contagious new variant, Omicron, that made some customers nervous about going into stores.  It also forced many workers to take sick leave, resulting in surging costs for companies having to hire more workers beyond what was planned to fill that gap.

In November, Macy’s said that it would pay a minimum of $15 per hour for new and current workers by May.

But Macy’s said it navigated supply chain shortages by working with suppliers and placing bets on such products as fragrances, fine jewelry, home décor, toys, and sleepwear, all areas that performed well in the fourth quarter.  Macy’s CEO Jeff Gennette told analysts on an earnings call Tuesday that sales of dressy clothing are improving but it’s still not back to pre-pandemic levels.

Macy’s executives also noted that it’s looking at where it can raise prices.  They gave an example of a mattress or sofa that might have been $500 and now would have to be priced at $549 or $599 to make the same profit margin.  But, in those cases, the customer pushed back.

Gennette believes there are lots of tailwinds.

However, “We believe that consumer demand will remain healthy as the job market improves and wages continue to rise,” he said.  “We expect demand to increase, particularly as people return to the office and to social events.”

Gennette added that international tourism is big, particularly when it looks at its flagship New York City store, and it’s down 50% at Macy’s from 2019 levels, though he expressed optimism, especially beyond 2022. 

Macy’s earned $742 million for the three-month period ended Jan. 29.  That compares with $160 million in the year ago period. Revenue rose nearly 30% to $8.66 billion from $6.78 billion.

Same-store sales rose 28.3%.  Online sales were up 12% for the quarter.  Macy’s online business accounted for 39% of net sales for the quarter, down a bit from the pandemic-induced online shopping surge during the fourth quarter of 2020, but still up nearly 9 percentage points compared to the fourth quarter of 2019.

Roughly 7.2 million new customers shopped the Macy’s brand during the quarter, an 11% increase versus the fourth quarter of 2019.  During the fourth quarter of 2021, 58% of new customers came through the digital channel, the company said.

Macy’s issued guidance for both earnings and sales that exceeded the Street’s consensus, but the shares fell, largely because investors weren’t happy the company wasn’t splitting off its ecommerce division.

--Needless to say, the major airlines were suspending their flights into the Ukrainian capital of Kyiv days before Vladimir Putin launched his attack.  LOT Polish Airlines was perhaps the last to fly passengers to Kyiv or the Black Sea city of Odessa.

The Federal Aviation Administration on Thursday said it was expanding the area in eastern Europe and Russia where U.S. airlines and U.S. pilots cannot operate.  Some U.S. long-haul flights from the United States to India and other destinations overfly Russian airspace, but it was not clear whether any of those routes may be affected.

--TSA checkpoint travel numbers vs. 2019….

2/24…92 percent of 2019 levels
2/23…80
2/22…78
2/21…95
2/20…86
2/19…78
2/18…111
2/17…91

*A distinct improving trend.

--Elon Musk and his lawyers are escalating their fight with U.S. securities regulators, with a lawyer accusing them of leaking investigative information, and the Tesla CEO alleging on Twitter that government corruption is being exposed.

Neither Musk nor his lawyer, Alex Spiro, offered specifics about the leak, but the actions ramped up a war of words with the Securities and Exchange Commission.

The agency isn’t the only federal regulator that Musk is sparring with.  The National Highway Traffic Safety Administration recently has stepped up enforcement against Tesla.

The safety agency has launched multiple investigations of Tesla and is overseeing 15 Tesla recalls since January of 2021.  Recalls include “full self-driving” software being programmed to run stop signs at slow speeds.  Investigations include unexpected braking by Tesla vehicles.

The spat with the SEC goes back to 2018, when Musk and Tesla each agreed to pay $20 million in civil fines over Musk’s tweets about having the money to take the company private at $420 per share.  The funding was far from secured and the company remains public.  The settlement specified governance changes, including Musk’s ouster as board chairman, as well as approval of Musk’s tweets.

But wait…there’s more!  Musk and his younger brother are being investigated by the SEC over whether the siblings violated insider trading laws, the Wall Street Journal reported on Thursday.

The probe reportedly centers on Kimbal Musk’s sale in November of 88,500 Tesla shares – worth $108 million at the time – which allegedly occurred one day before Elon Musk posted a Twitter poll asking if he should sell 10% of his stake in Tesla.

Tesla shares then plummeted after Elon posted the poll – and the Tesla CEO subsequently sold several billion dollars’ worth of stock. 

Fri. Nov. 5, Tesla stock closed at $1222.  Nov. 8: $1162. Nov. 9: $1023.

After touching $700, exactly, on Thursday morning, Tesla shares closed the week at $811, down from a high of $1208 less than two months ago, Jan. 4, but a massive reversal.

--President Biden announced several public and private investments on Tuesday aimed at expanding the domestic supply of rare earth minerals that are needed to make electric vehicles, computers, solar panels and other products but are currently sourced from overseas.

“We can’t build a future that’s made in America if we ourselves are dependent on China for the materials that power the products of today and tomorrow,” Biden said at a White House event.

The investments announced were aimed at boosting domestic supplies of minerals – including lithium, Cobalt and rare earths, many of which come from China – that are used in a wide array of technologies.

The Pentagon awarded MP Materials, an American mining company, $35 million to expand a rare earths project in Mountain Pass, Calif. 

Other projects being financed would extract lithium, Cobalt, nickel and graphite from retired lithium-ion batteries used in electric vehicles.

The infrastructure law passed last year contained funding for projects to recover rare earths and other critical minerals from coal ash and mine waste, refine battery materials, and recycle electric vehicle batteries.

--Norwegian Cruise Lines reported a loss of $1.95 per share, worse than expected.  Revenues rose to $487.4 million from just $9.6 million a year ago, but well below forecasts.

By year end 2021, the company had approximately 70% of its capacity operating, or 75% when including a vessel that had returned to service and subsequently paused due to the inoperability of its scheduled voyages in South Africa during the Omicron surge.

The company said of its booking environment and outlook: “Net booking volumes at the beginning of the fourth quarter of 2021 continued to demonstrate substantial week-over-week sequential growth after the slowdown in booking activity caused by the Delta variant of Covid-19.  Net booking volumes in the latter part of the fourth quarter of 2021 began to be negatively impacted by the Omicron variant of Covid-19, primarily for close-in voyages in the first and second quarters of 2022.  In recent weeks, as the Omicron wave subsided, net booking trends have improved sequentially.  As a result, the company’s current cumulative booked positions for the first half of 2022 is below the extraordinarily strong levels of 2019 at substantially higher prices even when including the dilutive impact of future cruise credits …”

--Google is relaxing some of its Covid-19 workplace policies as it prepares to bring workers back to its offices, including a rule requiring U.S. employees to be vaccinated.  But workers will still have to be vaccinated to use the company’s offices.  Masks will not be required in the office, with the exception of Google’s main Mountain View headquarters in Santa Clara County.

Google also said it planned to restore many of its famed amenities, such as fitness centers, cafeterias, and commuter shuttles.

--Moderna Inc. on Thursday projected higher vaccine sales for the second half of the year as it sees Covid-19 becoming a flu-like endemic illness, prompting people to take regular shots.  The company expects $19 billion in sales of its vaccine this year from $18.5 billion previously, and said talks were ongoing for vaccine orders in 2023. 

Moderna has said its vaccine will be priced below value during the pandemic period, and that it will change its pricing strategy as Covid-19 shows signs of subsiding.  The company also said it was working on a new “bivalent” booster vaccine, which combines an Omicron-specific booster and its original Covid-19 vaccine. With just a single product on the market, Moderna has been banking on the sales of its shot to help sustain its research and development efforts as it looks to build a large portfolio of vaccines and treatments using mRNA technology.

--New York City’s hotels hosted the highest number of visitors last week since the start of the year, a good sign for the rest of 2022 and a hoped-for recovery in tourism.

January and February are typically the city’s slowest months for hotel stays, according to STR, which tracks the industry.

During the week that ended Feb. 19 – before the long holiday weekend – occupancy averaged 56.5%, and it hit 69.7% for the weekend of Feb. 12, STR said.  That full-week occupancy rate was up 40% from early January, when staff shortages and event cancellations amid a surge of Covid-19 cases pushed occupancy down to 40.3%.

Before Omicron hit, city hotels had reached their post-March 2020 peak of 81.5% occupancy for the week that ended Dec. 11.

Employment at accommodation and food serves companies was still 33% lower in December than it was in February 2020, according to an analysis by economist James Parrott.  That is triple the size of the 11% loss nationally, he wrote.

--Carl Icahn launched a proxy fight for two board seats at McDonald’s Corp., as the activist investor pushes the fast-food chain to require its suppliers to change their treatment of pigs.

Icahn’s actual stake in McDonald’s is small and he had been in talks with the company alongside the Humane Society of the United States for several weeks, the Wall Street Journal first reported earlier in the month.

At issue is McDonald’s suppliers’ use of so-called gestation crates, which are small cages used to constrain pregnant pigs.

In 2012, McDonald’s pledged to stop buying pork by 2022 from producers who use the crates. Few knew at the time that Mr. Icahn quietly had pushed for the changes behind the scenes.

Now, 10 years later, Icahn and the Humane Society are arguing that McDonald’s failed to follow through and changed its interpretation of the pledge.  McDonald’s now often has its producers move pigs out of the containers only after confirming they are pregnant, which many wait to do so until the sows are four to six weeks into their 16-week pregnancies.

Icahn had expected the use of the crates to be banned altogether.  If you’re wondering how he picked this issue way back, it was because his daughter worked at the Humane Society.

For decades, hog farmers have been using gestation crates to confine individual pregnant sows and gilts because some of the animals become aggressive toward others.

During the four-month duration of her pregnancy, a sow is kept caged inside a 2 ½-by-7-foot stall. The sow then gives birth to a litter of piglets before she is returned to the crate a month later, when she is impregnated again.

Hog farmers claim the confinement is necessary since it allows them to monitor the animals’ health and feed.

Several states have banned pig breeders from using gestation crates, and large pork producers and food service providers have pledged to phase out their use as public pressure has grown on factory farms to allow for greater animal movement.

McDonald’s buys about 1% of all U.S. pork that is produced, the product ending up in items including Bacon McDouble Cheeseburgers, Sausage McMuffins and McRib sandwiches.

--I went to my local Dollar Tree store this week, as I’m wont to do, and it happened.  The prices were finally hiked from $1.00 to $1.25.

But the bigger issue this week concerned Family Dollar, owned by Dollar Tree, which was forced to close more than 400 stores in six states due to a rodent infestation at a Family Dollar warehouse in West Memphis, which raised health concerns.  Many products such as medicine, pet food and cosmetics were recalled.

The Food and Drug Administration was alerted to the unsanitary conditions at the distribution center, which supplied the stores, after a customer complaint.

More than 1,100 dead rodents were found at the center when it was fumigated, the agency said.

--Well, from that disgusting story to the sweet…Krispy Kreme reported sales for the quarter ended Jan. 2 of $370.6 million compared with $325.6 million a year ago, better than expected, but the company said it expects full-year 2022 earnings of $0.38 to $0.41, below the Street’s forecasts.

--Molson Coors Beverage reported annual revenue growth for the first time in more than a decade.  Fourth-quarter earnings fell short of the Street’s expectations, but the revenue topped forecasts.

The company’s Coors Light and Miller Lite saw sales growth in 2021 as the turnaround plan began bearing fruit.

Shrinking beer consumption in the U.S. has put pressure on brewers, like Molson Coors, but CEO Gavin Hattersley credited the beers’ marketing campaigns for working to buck that trend.

For the first time in more than a decade, the Miller Lite owner reported annual revenue growth.  Net sales rose 6.5% to $10.28 billion in 2021, a dramatic turnaround from 2020 when net sales declined 8.7% as pandemic restrictions weighed on demand.

For the fourth quarter, Molson Coors’ net sales grew 14.2% to $2.62 billion.  I’m waiting for a thank you note from Mr. Hattersley.

--Anheuser-Busch InBev forecast on Thursday its profit would increase this year as consumers have more opportunities to drink outside of their homes after ending 2021 with stronger results than expected due to higher prices.

The world’s largest brewer that makes Budweiser, Corona and Stella Artois said earnings would rise by between 4% and 8% this year.

In the United States, the company’s biggest market, easing of restrictions meant 35% more beer was sold in bars and restaurants in the week of the Super Bowl than in 2021, exceeding by 6% pre-pandemic levels.

--Shares of Digital World Acquisition Corp., the blank-check company behind former U.S. President Donald Trump’s new social media venture, Truth Social, surged nearly 30% in premarket trading on Tuesday as the app climbed the charts after its debut on Apple’s App Store.

Truth Social was launched on Monday, potentially marking Trump’s return to social media after he was banned from Twitter Inc., Facebook and Google following an attack on the U.S. Capitol by his supporters last year.

The site encountered technical glitches shortly after launch, with reports that subscribers were shut out for hours.  Others had trouble signing in.

“Due to massive demand, we have placed you on our waitlist,” read a message to some of those trying to access the platform, adding, “We love you.”

--Alibaba Group reported mixed fiscal third-quarter results on Thursday with revenue falling short of analysts’ consensus but earnings exceeded estimates.

“In the fourth quarter of 2021, China’s GDP grew 4%, while total retail sales rose 3% year-over-year,” CEO Daniel Zhang said in an earnings call.  “Both decelerated from the previous quarter due to the confluence of Covid, price increase of raw materials and other factors.”

--An average of 11.4 million viewers watched the Beijing Olympics on NBC Universal platforms each night – the smallest prime-time audience on record for any Winter Games and well off the 19.8 million nightly viewers for the Pyeongchang Games in 2018.

The Beijing Games were bereft of joy and filled with nothing but gloom, including a godawful performance from American superstar Mikaela Shiffrin, and the doping scandal and drama surrounding Russian figure skater Kamila Valieva.

The Pandemic

The Centers for Disease Control and Prevention on Friday announced a change to the metrics it uses to determine whether to recommend face coverings, shifting from looking at case counts to a more holistic view or risk to a community.  The guidelines had been that masks were recommended for people residing in communities of substantial or high transmission – roughly 95% of U.S. counties, according to the latest data.

The new metrics will still consider caseloads, but also take into account hospitalizations and local hospital capacity, which have markedly improved during the emergence of the Omicron variant.

Under the new guidelines, the vast majority of Americans will no longer live in areas where indoor masking in public is recommended, based on current data.

The move comes after governors in several Democratic-led states announced they were rolling back mask requirements amid declining Omicron cases.

And now, from Los Angeles County to New York City, the CDC’s new guidance will affect the decision on when a local indoor public mask mandate would be eliminated.

Mayor Adams of New York hinted he will soon roll back the city’s vaccine and mask mandates for indoor settings as infection rates continue to drop across New York.

But Covid isn’t history yet in New York.  15 city residents (38 in New York overall) died from it on Tuesday, and Dr. Jay Varma, an infectious disease expert at Weill Cornell Medicine, said he would “absolutely” advise Adams against ending the vaccine screening mandate for dining and other indoor activities.

Varma’s big issue is that Covid immunity levels in populations fluctuate constantly – in part because the efficacy of vaccine protection wanes over time – and that it’s thereby critical to keep guardrails in place that incentivize inoculations as the threat of new, more infectious variants looms.

“That is why we are in a constant battle with this pandemic.  I’m very concerned when people say we have reached a very high level of vaccination and that we can then take away vaccine mandates because what happens in the very likely scenario that we face a new variant in the future?” Varma told the New York Daily News.

“I really do worry about a place like New York, which has already experienced so much devastation.  Now is not the time to celebrate.  Now is the time to prepare.”

Well, Dr. Varma is right, but I’m boosted and will get boosted again at the right time.  I’ll still wear a mask for the time being in a few spots but will certainly do indoor dining.  And that’s the attitude the vast majority of Americans, and public officials will have.

Across the pond, British Prime Minister Boris Johnson announced the government would remove all remaining coronavirus restrictions in England and cut access to free tests as part of its “living with Covid” plan.

At the same time, England’s chief medical officer, Chris Whitty, warned there will be new Covid-19 variants and said some of them could be more resistant to vaccines.

“We all expect…there to be new variants. And some of those new variants will just disappear,” Whitty told a press conference.  “But some of them will cause significant problems.”

Separately, the CDC issued new data that shows that while vaccines still provided protection during the Omicron wave, the shield of coverage they offered was weaker than during other surges.  The change resulted in much higher rates of infection, hospitalization and death for fully vaccinated adults and even for people who had received boosters.

The decline in protection continued a pattern driven by coronavirus vaccines’ reduced effectiveness over time, combined with the increasing contagiousness of the Delta and Omicron waves.

Before Delta struck the United States in July, there were five to 10 cases of Covid-19 for every 100,000 fully vaccinated adults each week, while the rate for unvaccinated people was 50 to 90 cases.

In the Delta wave, unvaccinated people were five times as likely to get infected as vaccinated people.  With Omicron, that difference dropped to less than three times as likely.

Omicron caused unprecedented hospitalizations along with infections.

But vaccines did provide greater protection against hospitalization than for infection during Omicron, even as that protection waned. 

Among the most vulnerable people – those 65 or older – the unvaccinated were about four times as likely to be hospitalized as fully vaccinated people who also had boosters.  Before Omicron, the difference was more than nine times.

Younger unvaccinated people were about five times as likely to be hospitalized as their peers with boosters.

Vaccines provided their greatest protection against death.  At the end of December, before the peak of more than 2,600 deaths per day in January, unvaccinated people were 10 times as likely to die as the vaccinated who had received the initial series of two Pfizer-BioNTech or Moderna shots, or a single dose of the Johnson & Johnson vaccine.

Before Omicron, unvaccinated people were 50 to 60 times as likely to die as people who had received the initial series of vaccines and a booster. That difference dropped in late December to 27 times as high.  [Dan Keating and Naema Ahmed / Washington Post]

One more…from an analysis of U.S. Department of Health and Human Services data.

As reported by Melanie Evans of the Wall Street Journal, as the Omicron variant surged, “it also spread inside hospitals and infected non-Covid-19 patients, reaching a record number….

“The daily total of patients with Covid-19 that caught it in hospitals reached a record of about 4,700 during the Omicron wave in January…

“The figure had peaked at around 1,100 patients with hospital-acquired infections during the Delta wave and 2,050 at the height of the pandemic’s first winter surge, the analysis found.”

Get your shots and stay out of the hospital.

Meanwhile, the likes of South Korea and Japan have been seeing record levels of infections and deaths this week.

As Yogi Berra said, it ain’t over ‘til it’s over.

Covid-19 death tolls, as of early tonight….

World…5,956,325
USA…972,200
Brazil…648,267
India…513,512
Russia…349,365
Mexico…317,303
Peru…210,116
UK…161,224
Italy…154,206
Indonesia…147,586
Colombia…138,501
France…137,958
Iran…136,166
Argentina…125,958
Germany…123,130
Poland…111,056
Ukraine…105,505
Spain…99,410
South Africa…99,145
Turkey…93,805
Romania…63,193
Philippines…56,224
Hungary…43,752
Chile…41,919
Vietnam…39,962
Czechia…38,491
Canada…36,463
Bulgaria…35,357
Ecuador…35,223
Malaysia…32,591
Pakistan…30,139
Belgium…30,101
Bangladesh…29,016
Tunisia…27,668
Greece…25,668
Iraq…24,948
Egypt…23,957
Thailand…22,812
Japan…22,755
Netherlands…21,539
Bolivia…21,414
Portugal…20,973

[Source: worldometers.info]

U.S. daily death tolls…Mon. 294*; Tues. 598; Wed. 2,445; Thurs. 1,883; Fri. 1,853.

*The holiday limited reporting.

Foreign Affairs

Iran: With all that has been going on with the invasion of Ukraine, there is little to no discussion  on the Iranian nuclear talks, where any deal requires the agreement of Russia and China.  Tehran, by the admission of all parties, is close to the “break-out” stage in being able to test a nuclear weapon, and for all we know, it may already have enough weapons-grade enriched uranium.

We continue to see reports that a U.S.-Iranian deal is taking shape in Vienna after months of indirect talks to revive the one abandoned in 2018 by then-President Trump, who also reimposed extensive sanctions on Iran.

Then tonight, a State Department official told reporters, “There’s been significant progress over the last week or two… But at the same time, it’s important to note that very serious issues remain.”

The 2015 accord between Iran and world powers limited Tehran’s enrichment of uranium to make it harder for it to develop material for nuclear weapons, in return for a lifting of international sanctions against Tehran.

But since 2019, Tehran has gone well beyond the deal’s limits, rebuilding stockpiles of enriched uranium, while installing advanced centrifuges to speed up output. 

An Iranian cabinet spokesman said, “Any sanctions that…deal a blow to Iran’s economic benefits from the (nuclear) deal must be lifted.”

Iran has also demanded legal assurances that the United States will not exit the deal again, but Washington says it is impossible for President Biden to provide them.

Iran’s top security body, the Supreme National Security Council, is handling the Vienna talks. It reports directly to Supreme Leader Ayatollah Ali Khamenei.

A draft text of the agreement also alluded to other issues, including unfreezing billions of dollars in Iranian funds in South Korean banks.  Seoul and Tehran have been negotiating this week.  Last weekend Iran said it was ready to swap prisoners with the United States.

Iranian President Ebrahim Raisi told gas exporters on Tuesday to avoid any “cruel” sanctions such as those imposed by the United States on Tehran, and his government said any revival of Iran’s 2015 nuclear accord with world powers must lift such curbs.  Raisi was addressing a gas exporters conference in Doha.

Separately Iran-linked cyber operations are targeting a range of government and private-sector organizations in multiple sectors across Asia, Africa, Europe and North America, U.S. security and law enforcement agencies said in a notice on Thursday.  The FBI and the Cybersecurity and Infrastructure Security Agency, along with British authorities, said they had observed Iranian actors known as “MuddyWater” conducting malicious cyber operations targeting telecommunications, defense, local government and the oil and natural gas sectors.

China/Taiwan: China’s People’s Liberation Army’s Eastern Command announced it had recently conducted landing drills in an undisclosed location in the East China Sea.  And then Thursday, Taiwan’s air force scrambled again to warn away nine Chinese aircraft that entered its air defense zone, the same day that Russia invaded Ukraine.

But the number of aircraft on Thursday was well off the last large-scale incursion, 39 Chinese aircraft on Jan. 23.

So the critical question for Taiwan remains.  Would the United States send troops to defend Taiwan if China invaded?  The U.S. is bound by its own law to ensure Taiwan can defend itself, and Washington sells Taipei billions of dollars’ worth of weapons.

Taiwan is critical economically, being a dominant player in the production of semiconductors that are used in everything from smartphones to cars.

Taiwan announced Friday it would join global sanctions against Russia, although we’ll see what those measures end up being.

Beijing has been ramping up the rhetoric in issuing angry threats to crush moves by Taiwanese politicians to continue pushing for an independent country.

Robert Kagan / Washington Post

As noted above, Mr. Kagan had an extensive forward view of the situation in Ukraine and elsewhere.  In the same op-ed, he had these thoughts on China/Taiwan.

“(What is taking place in Ukraine occurs) as China threatens to upend the strategic balance in East Asia, perhaps with an attack of some kind against Taiwan. From a strategic point of view, Taiwan can either be a major obstacle to Chinese regional hegemony, as it is now; or it can be the first big step toward Chinese military dominance in East Asia and the Western Pacific, as it would be after a takeover, peaceful or otherwise.  Were Beijing somehow able to force the Taiwanese to accept Chinese sovereignty, the rest of Asia would panic and look to the United States for help.

“These simultaneous strategic challenges in two distant theaters are reminiscent of the 1930s, when Germany and Japan sought to overturn the existing order in their respective regions. They were never true allies, did not trust each other and did not directly coordinate their strategies.  Nevertheless, each benefited from the other’s actions. Germany’s advances in Europe emboldened the Japanese to take greater risks in East Asia, Japan’s advances gave Adolf Hitler confidence that a distracted United States would not risk a two-front conflict.

“Today, it should be obvious to Xi Jinping that the United States has its hands full in Europe.  Whatever his calculus before Russia’s invasion of Ukraine, he can conclude only that his chances of successfully pulling something off, either in Taiwan or the South China Sea, have gone up.  While some argue that U.S. policies drove Moscow and Beijing together, it is really their shared desire to disrupt the international order that creates a common interest.”

China rejected calling Russia’s moves on Ukraine an “invasion” and urged all sides to exercise restraint.

China’s foreign minister Wang Yi has spoken with his Russian counterpart, Sergei Lavrov, and Wang said that the Ukraine issue had a “complex” history and reiterated that China understands what it called Russia’s “legitimate concerns” on security, according to a statement from the Chinese foreign ministry.

Russia’s attack comes weeks after Putin met with Xi just before the Winter Olympics in Beijing, at which time the two sides announced a strategic partnership aimed at countering U.S. influence and said they would have “no ‘forbidden’ areas of cooperation.”

Random Musings

--Presidential approval ratings….

Gallup: New #s…41% approve of Biden’s job performance, 55% disapprove; 35% of independents approve (Feb. 1-17).  Prior splits were 40-56, 33.

The last six months, Biden’s approval rating has been between 40 and 43 percent.  Not good.  And the percentage of independents approving, which was 61% when the president was inaugurated, is deadly come midterm elections.

Rasmussen: 40% approve, 58% disapprove (Feb. 25).

--On Tuesday, former President Trump praised Vladimir Putin’s decision to send Russian troops into Ukraine to support Russian-backed separatists in the Luhansk and Donetsk provinces.  In an appearance on the right-wing talk radio program “The Buck Sexton Show,” Trump broke his conspicuous silence on the crisis to applaud the Russian dictator.

“This is genius,” he said of Putin’s decision to officially recognize the breakaway provinces and authorize the use of Russian military personnel to assist them.  “So Putin is now saying it’s independent – a large section of Ukraine.  I said, how smart is that? And he’s gonna go in and be a peacekeeper. We could use that on our southern border.  That’s the strongest peace force I’ve ever seen. There were more army tanks than I’ve ever seen.  They’re gonna keep peace, all right.”

Republican Rep. Liz Cheney on Trump’s comments:

“Former President Trump’s adulation of Putin today – including calling him a ‘genius’ – aids our enemies.

“Trump’s interests don’t seem to align with the interests of the United States of America.”

--George F. Will

“The House of Savoy on the Italian Peninsula was a dynasty so fickle across the centuries that critics said it never finished a war on the side on which it started, unless the war lasted long enough for Savoy to change sides twice.  Rep. Nancy Mace (R-S.C.) fascinates not because she is the House of Savoy in human form, although she is, but because she exemplifies a phenomenon that has rarely been less rare – consistently inconstant politicians.

“Mace became a congresswoman on Jan. 3, 2021, three days before President Donald Trump incited the assault on the Capitol.  On Jan. 7, she said, Trump’s ‘entire legacy was wiped out yesterday’ when he, as she later said, ‘put all of our lives at risk.’  Asked in the days after the attack if she though he had a future in the Republican Party, she said: ‘I do not.’  He noticed.

“She trod a sinuous path back toward obeisance, but Trump, unmollified, this month endorsed Mace’s Republican primary opponent.  The next day, Mace stood in front of Manhattan’s Trump Tower and made a 104-second video. It was a grovel akin to Holy Roman Emperor Henry IV standing barefoot in the snow for three days outside the castle of Pope Gregory VII, hoping to have his excommunication reversed.  (It was, but Gregory, who had a Savoyesque knack for changing his mind, later excommunicated Henry again.)  In her video, Mace says she was one of Trump’s earliest supporters, worked for him in seven states in 2016 and thinks he made America, freedom and democracy ‘stronger all around the world.’

“Her Savoy-like somersault is less acrobatic than J.D. Vance’s in his attempt to win Ohio Republicans’ U.S. Senate nomination.  He has deleted his October 2016 tweet endorsing independent presidential candidate Evan McMullin. Vance has called Trump ‘noxious,’ ‘obsessive,’ ‘reprehensible,’ ‘cultural heroin’ and ‘an idiot.’  He has said ‘I can’t stomach Trump’ and “I’m a Never Trump guy.’

“Never, however, came and went, and Vance went to Mar-a-Lago seeking absolution.  Vance is trailing Josh Mandel, who knows how to be emollient to Trump.  Mandel says he decided to run for the Senate a third time because impeaching Trump was unfair.  In his Mar-a-Lago audition, Mandel told Trump that he, Mandel is a ‘killer’ and a ‘balls to the wall’ fighter.  As a senator, he will fight, among other things, ‘atheism’ and Washington ‘cocktail parties.’

“Although polarization is rampant, the doctrine of Savoyism – flexibility in defense of incumbency is no vice – has bipartisan adherents.  For example, many Democrats persistently say that climate change is not just a serious problem; it is an ‘existential’ threat that, unless promptly and uncompromisingly fought, will extinguish life on Earth. But first things first.  The national average price of a gallon of gasoline is $3.48, which in inflation-adjusted terms is about 57 cents more than it was 60 years ago.

“Many Democrats, although green as all get-out, think the federal gasoline tax (about 18 cents a gallon) should be suspended, for eternity or until after the November elections, whichever comes first.  This is today’s existentialism.  It bears a resemblance to the mid-20th-century intellectual fad with that name. It was (according to people who were not enthralled by it) the belief that because life is absurd, philosophy should be, too.

“Meanwhile, the climate warrior in chief, President Biden, has inscribed his name on the ever-lengthening list of presidents who, to produce microscopic and evanescent downward pressure on gasoline prices, have tapped the Strategic Petroleum Reserve.  Biden released 50 million barrels, which is about what Americans consume every 66 hours.  The SPR exists to cushion the nation in an emergency.  Today’s emergency is the threat – existential, of course; is there another kind? – that disgruntled motorists pose to elected incumbents.  The planet’s supposed emergency is secondary.

“In 2019, the year after Robert Francis (a.k.a. Beto) O’Rourke failed to win a Senate seat from Texas, he said this while failing to become president: ‘Hell yes, we’re going to take your AR-15, your AK-47.’  Today, O’Rourke, who might become a has-been without ever having been, is running for governor and saying: ‘I’m not interested in taking anything from anyone.  What I want to make sure we do is defend the Second Amendment.’  The Book of Genesis on O’Rourke, and others: ‘Unstable as water, thou shall not excel.’

“Contemporary politics, which is simultaneously sinister and silly, can leave you in tears or in stitches.  Considering the amount of nonsense spoken, it is consoling that so many people mean so little of what they say.”

--Fox News host Tucker Carlson has been disgustingly pro-Vladimir Putin, ditto other Fox hosts such as Laura Ingraham.

Wednesday evening, as Putin was about to launch his war, Carlson questioned why we should hate the autocratic and isolated Russian ruler, discounting Ukraine as “a pure client state of the United States State Department.”  Laura Ingraham blamed the conflict on the “weakness and the incompetence” of the Biden administration and called Ukrainian leader Volodymyr Zelensky’s desperate appeal for Putin to stop the attack a “pathetic display.”  Seriously, Ingraham was mocking a last-ditch effort to save lives and country.

But I watched Tucker Thursday night and he goes, “I don’t think anybody approves of what Putin did yesterday. I certainly don’t.”

And: “Vladimir Putin started this war,” Schmucker said.  ‘He is to blame for what we’re seeing tonight in the Ukraine.”  Then he goes: “The question is…how should the United States respond to what he has done?  Within minutes of the outbreak of the war last night the usual liars on television began leveraging this tragedy for partisan political gain…it’s contemptible.  But we’re going to ignore that tonight and talk about what matters.”

Yes, forget the past week…and years of kissing up to Putin, which Russian state television as you know has been prominently displaying on its evening newscasts.

--Queen Elizabeth, 95, tested positive for Covid and was experiencing mild symptoms but was expected to continue light duties, Buckingham Palace revealed last Sunday.

Charles, 73, the heir to the throne, earlier this month pulled out of an event after contracting coronavirus for a second time.  He had met the queen just the day before.

The Queen canceled all her virtual events this week and it was not known if she was still experiencing symptoms.

--Finally, I didn’t have a chance last week to note the passing of the great P.J. O’Rourke.

Christopher Buckley / New York Times

“(O’Rourke) was a fellow of infinite jest.  I can scarcely recall, over the 40 years we were friends, P.J. saying anything that wasn’t funny.

“Of all human failings, he found humorlessness the funniest.  Back then, the political left was so earnest about saving the world that there was no room for laughter, which denoted a lack of earnestness.  Self-deprecating humor, P.J.’s trademark, wasn’t allowed because it could undermine the mission.  Saving the world was no laughing matter. One titter and the whole edifice could come crashing down.

“Humorlessness has crept in its petty pace to the right, where it is conducted with North Korean-level solemnity by the bellowing myrmidons of MAGAcom.  A sense of humor, much less self-awareness, are not traits found in cults of personality.  If Tucker Carlson has said anything advertently funny, witty or self-knowing from his bully pulpit, I missed it.  Maybe you had to be there….

“P.J. wasn’t the only conservative pundit to vote for Hillary Clinton in 2016, but he didn’t try to spray Febreze on his ballot. He voted clothespin firmly affixed to his nose.  Mrs. Clinton, he said, was wrong ‘about absolutely everything,’ except in one regard: She wasn’t Donald Trump.  ‘Politics,’ as he’d written, ‘is a necessary evil, or a necessary annoyance, or a necessary conundrum.’

“The Trump era could have been one great big enormous sandbox for P.J. to play in.  Instead, he found it dispiriting, a pageant of stupidity, boorishness and coarseness.

“His last book, ‘A Cry From the Far Middle: Dispatches From a Divided Land,’ published in 2021, shows him in top form, but in it there’s a note of witfulness. The last time I visited with him, he told me, ‘You know, I’ve been doing this for a [expletive] half century.  I’m tired.’

“The weariness didn’t show.  Now that he’s gone, the proverbial baton is passed to a new generation of conservative satirists, specifically Lindsey Graham, Ted Cruz, Josh Hawley and Marjorie Taylor Greene.  And that isn’t funny.”

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Pray for the men and women of our armed forces…and all the fallen.

God bless America.

We pray for Ukraine.  This weekend I’ll light a candle.

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Gold $1891
Oil $91.95

Returns for the week 2/21-2/25

Dow Jones  -0.1%  [34058]
S&P 500  +0.8%  [4384]
S&P MidCap  +1.1%
Russell 2000  +1.6%
Nasdaq  +1.1%  [13694]

Returns for the period 1/1/22-2/25/22

Dow Jones  -6.3%
S&P 500  -8.0%
S&P MidCap  -6.4%
Russell 2000  -9.1%
Nasdaq  -12.5%

Bulls 32.2
Bears 31.0

Hang in there.

Brian Trumbore

  

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