Week in Review

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Week in Review

05/10/2025

For the week 5/5-5/9

[Posted 4:30 PM ET, Friday]

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Edition 1,359

Before I start off on the trade situation, the Federal Reserve, Warren Buffett, the new Pope and more, I can’t help but note a major concern over the years/decades was whether Pakistan’s nuclear weapons facility is secure...secure from a terrorist group gaining control.  I’ve heard it is, but now with India and Pakistan essentially at war, thankfully a relatively low grade one thus far, as I discuss further below, you just hope there isn’t a surprise in the coming days, like the terrorist attack on Indian-controlled Kashmir that killed 26 tourists and led to the crisis we have in the region today.  As in some group we never heard of has gained access to Pakistan’s nukes.

Just another reason to sleep with one eye open...but that’s my job, I do it for you...another free feature of StocksandNews.

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Thursday, President Trump announced the outlines of an agreement on trade with the UK.  The deal is the first of its kind since the administration unleashed “Liberation Day” tariffs five weeks ago.  The pact, which appeared to have been put together hastily by U.S. and British officials, is fairly limited in scope.  The Trump administration agreed to roll back tariffs imposed on British steel and automobiles in exchange for purchasing Boeing jets and giving American farmers greater access to UK markets.

“The final details are being written up,” Trump told reporters.  “In the coming weeks, we’ll have it all very conclusive.”

This weekend, Treasury Secretary Scott Bessent and his team are meeting with Chinese Vice Premier He Lifeng in Geneva, Switzerland, for exploratory trade talks, the intensity of which is not known at this point, but there will be an airing of grievances from each side.  Some are saying the U.S. side is ready to set a target of reducing tariffs below 60% as a first step that they feel China may be prepared to match.  If there is progress, implementation could come as soon as next week.

But today, Trump posted on Truth Social: “80% Tariffs on China seems right!  Up to Scott B.”

High on the U.S. wish list is securing the removal of China’s export restrictions on rare earths used to make magnets, among other things, as a range of industries face disruption, according to reports.  Progress has been made on the issue of fentanyl.

Sec. Bessent said earlier in the week that “We’ve got to de-escalate before we move forward.  We don’t want to decouple, what we want is fair trade.”

China’s Ministry of Commerce said in a statement the U.S. should “show sincerity” in the talks, correct wrong practices and resolve the concerns of both sides through “equal consultation.”

“If you say one thing and do another, or even attempt to continue to coerce and blackmail under the guise of talks, China will never agree, let alone sacrifice its principled position and international fairness and justice to seek any agreement,” the ministry said.

Editorial / Wall Street Journal

“President Trump continues to walk back his trade war by degrees, and markets continue to cheer. That’s the big story in Thursday’s announcement that the U.S. and the United Kingdom have struck a new trade deal.

“Many details need to be worked out, but the deal marks another step back from Mr. Trump’s ‘liberation day’ tariffs of April 2. The President and his advisers promised no exceptions at the time, but the markets staged a revolt.  Mr. Trump then offered a 90-day reprieve to everyone but China to negotiate deals that pull the U.S. and the world back from the trade-war abyss.

“The British deal is the first, which makes economic and political sense. The two economies are compatible in many ways, and much of the two-way trade is in services rather than goods.  The negotiations on a bilateral deal began in the first Trump term, so some progress was already made. The U.S. has a trade surplus with the UK, unlike much of the rest of the world.  Keir Starmer, the British Prime Minister, also needs a trade as he copes with sluggish growth....

“But the details here matter less at the current moment than the direction of U.S. trade policy, as the buoyant market response recognizes.  A month ago the world looked to be on the edge of potential 1930s-style trade meltdown.

“That seems less likely now. Mr. Trump is promising many more trade deals to come, as he tries to execute a retreat from his tariff morass. And credit to Mr. Starmer for recognizing the opportunity and offering the President an exit he can boast about.  Other national leaders can take that lesson....

“Not that this is the end of the trade harm. The U.S. still has to negotiate deals with countries that may be more resistant to avoid more tariff mayhem when the 90 days expire. The biggest question concerns China and the looming shutdown in most two-way trade....

“Mr. Trump still has a long way to go to mitigate the harm from his tariff barrage, and some of it will be permanent in the form of higher border taxes and prices.  But the British deal offers a template for a partial face-saving exit, if Mr. Trump will take it.”

Meanwhile, asked by a reporter in the Oval Office about worker layoffs as container ships carrying exported goods become scarce at major U.S. ports, such as Long Beach, Calif., Trump argued, stupidly, it “means we lose less money...when you say it slowed down, that’s a good thing, not a bad thing.” The president said nothing about lost jobs and wages.

Across the pond, Europe is using retaliatory negotiating strategies with warnings the European Union is ready to impose tariffs in excess of $100 billion on U.S. goods – if talks do not lead to a positive outcome.

“Tariffs are already having a negative impact on the global economies,” European Commission President Ursula von der Leyen said in a statement Thursday.  “The EU remains fully committed to finding negotiated outcomes with the U.S.”

As for Trump’s tariffs on imported steel that were supposed to boost demand for American steel, so far, they haven’t stopped one of the country’s biggest steelmakers, Cleveland-Cliffs, from closing plants and retreating from its strategy to dominate the industry. The top supplier of sheet steel to automakers in the U.S., has in recent months idled plants and iron-ore mines.  The company plans this summer to close three specialty steel plants in Pennsylvania and Illinois.

[Cleveland-Cliffs’ shares (CLF) have fallen from a 52-week high of $18 to $7 on all the bad news.  President Trump has put roadblocks on Nippon Steel’s attempt to merge with U.S. Steel because he was convinced by the likes of CLF’s CEO that his company would be a better acquirer.  Friday, Nippon reiterated its hope U.S. Steel could become a 100% subsidiary.]

--Canadian Prime Minister Mark Carney met with President Trump Tuesday at the White House, and it was cordial enough, though Trump still had to talk about making Canada the 51st state.  Carney, who won a stunning election on an anti-Trump platform, told the president, “As you know from real estate, there are some places are never for sale,” to which Trump responded, “Only time will tell...never say never.”  When the issue came up again, Carney said Canadians had no interest in joining the United States.  “That’s not going to change,” he added.

Trump did say he had “a lot respect” for Carney and praised his performance in a debate that helped power him to victory.  Carney applauded Trump for his “relentless focus on the American worker,” calling him a “transformational president.”

Donald Trump on Truth Social, just prior to Prime Minister Mark Carney’s visit:

“I look forward to meeting the new Prime Minister of Canada, Mark Carney. I very much want to work with him, but cannot understand one simple TRUTH – Why is America subsidizing Canada by $200 Billion Dollars a year, in addition to giving them FREE Military Protection, and many other things?  We don’t need their Cars, we don’t need their Energy, we don’t need their Lumber, we don’t need ANYTHING they have, other than their friendship, which hopefully we will always maintain. They, on the other hand, need EVERYTHING from us!  The Prime Minister will be arriving shortly and that will be, most likely, my only question of consequence.”

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Trump World, cont’d....

--President Trump’s budget proposal falls short of his promises to boost U.S. military spending, according to three top Republicans, Sens. Susan Collins (Maine), Mitch McConnell (Ky.), and Roger Wicker (Miss.), who respectively chair the powerful appropriations and defense committees – say the one-time increase won’t have the lasting effect of a permanent addition to the defense budget. 

Under the president’s discretionary request, the Defense Department’s budget would rise by $119 billion to top $1 trillion, but that extra spending is just a one-year only supplement to jumpstart Trump’s priorities, including a next-generation missile defense shield, new U.S. shipbuilding capacity and military-led border security missions.  The senators say the one-time increase won’t have the lasting effect of a permanent addition to the defense budget.

They argue that, in effect, Trump’s spending increase amounts to a bonus, not a raise.

The Department of Defense base budget would remain at $892.6 billion under the president’s proposal, which, without growth to account for inflation, represents a cut in real-terms, Wicker said in a statement.

Collins, the head of the Senate Appropriations Committee, said in a statement she has “serious objections to the proposed freeze in our defense funding given the security challenges we face.”

“Ultimately, it is Congress that holds the power of the purse,” Collins wrote.

“It’s a supplement,” said McConnell, the head of the Appropriations subcommittee for Defense, said in a statement on X.  “America cannot expect our allies to heed calls for greater annual defense spending if we are unwilling to lead by example.”

The request, said Wicker, head of the Armed Services Committee, amounts to “a fifth year straight of Biden administration funding, leaving military spending flat.”

Meanwhile, aside from the defense angle, Congress is deep into drafting President Trump’s big bill of tax breaks, spending cuts and funding to halt migrants, but achieving Speaker Mike Johnson’s goal of passing the package by Memorial Day – the last Monday in May – ain’t gonna happen.

The tax cuts portion is still a work in progress, ditto reductions in Medicaid (a huge, divisive issue within the GOP), food stamps and other government programs.  But Republicans have made progress on parts that would increase spending, including money for the U.S.-Mexico border wall.

Some of the most-watched committees – Ways and Means, Energy and Commerce and Agriculture – have yet to act.  So you can see how the deadline will slip, potentially for months, though many senior Republicans are predicting by Fourth of July.

President Trump the instructed congressional Republicans to raise taxes on the wealthiest earners, rattling his party’s brittle consensus on economic issues and muddling the GOP’s path toward enacting his campaign promises.

Speaker Johnson, Senate Majority Leader John Thune (R-S.D.) and tax writers from both chambers have been preparing the legislation for months to extend the 2017 tax cuts for all income levels and incorporate Trump’s campaign promises to end taxes on tips, overtime wages and Social Security benefits. But that list of priorities has a hefty price tag, which is exacerbating tension within the GOP ranks between Trump loyalists and fiscal hawks.

--President Trump, asked during an interview on NBC News’ “Meet the Press” whether he believes that he needs to uphold the Constitution during his presidency, responded, “I don’t know.”

The comment came as Trump remained adamant that he wanted to ship undocumented immigrants out of the country and said that it was inconceivable to hear millions of cases in court, insisting that he needed the power to quickly remove people he said were murderers and drug dealers.

“I was elected to get them the hell out of here, and the courts are holding me from doing it,” he said.

Pressed by host Kristen Welker on whether he still needs to abide by the Constitution, he said, “I don’t know.”

“I have brilliant lawyers that work for me, and they are going to obviously follow what the Supreme Court said,” he said, appearing to downplay the oath of office that includes a commitment to “preserve, protect and defend the Constitution.”

In the wide-ranging interview that aired Sunday, Trump was dismissive of his higher tariffs’ economic consequences for consumers, saying Americans would simply have to make do with fewer dolls and pencils, and higher costs for strollers.  And he brushed aside the spiraling effects that a recession could bring.

He also did not rule out the use of military force to take Greenland, while saying it’s “highly unlikely” that he would use force against Canada.  And he complimented Vice President Vance and Secretary of State Rubio as potential successors.

But also in the interview, with Trump being elected on a pledge to lower costs and fight inflation, he minimized concerns about the potential for a recession and suggested that having an economic hit in the short term would be worth it if he can achieve his long-term goals.

“Everything’s okay,” he said.  “...I said this is a transition period. I think we’re going to do fantastically.”

Asked if he was worried about the economy contracting under his watch he said he was not, but did not rule it out.

“Anything can happen,” he said.  “But I think we’re going to have the greatest economy in the history of our country.  I think we’re going to have the greatest economic boom in history.”

Trump blamed his predecessor for the negative GDP report for the first quarter, while conceding that it is “partially” the Trump economy going forward.

“I think the good parts are the Trump economy and the bad parts are the Biden economy, because he’s done a terrible job,” he said.  “He did a terrible job on everything.” [Matt Viser / Washington Post]

Pressed further on whether he took responsibility for the impact his tariff plans were having on the economy, he said, “Ultimately, I take responsibility for everything.”

He added: “The tariffs have just started kicking in.  And we’re doing really well.  Psychologically, I mean, the fake news was giving me such press on the tariffs.  The tariffs are going to make us rich.  We’re going to be a very rich country.”

Asked about providing relief for small businesses, he said, “They’re not going to need it.”

As to his prior comment that “children will have two dolls instead of 30 dolls,” Trump told Kristen Welker:

“I don’t think a beautiful baby girl needs – that’s 11 years old – needs to have 30 dolls.  I think they can have three dolls or four dolls, because what we were doing with China was just unbelievable.  We had a trade deficit of hundreds of billions of dollars with China.”

On the issue of Federal Reserve Chair Jerome Powell and the Fed not lowering interest rates, Trump suggested it was due to personal animus – “He just doesn’t like me because I think he’s a total stiff,” he said – but Trump also said he would not attempt to remove him before Powell’s term is up in 2026.

When asked about military force to take over Greenland, he said that “it’s highly unlikely” but added that “I don’t rule it out.”

Trump said it was “highly unlikely” that the U.S. would need to use military force to make Canada the 51st state.

He rebuffed claims that he is taking the country down an authoritarian path, saying that anyone who disagrees with him “had their chance at the election, and they lost big.”

“Many people love Trump.  I won the election,” he said. “They didn’t win the election. I got a lot more votes than they did. I won the popular vote.  I won all seven swing states by a lot.  A lot of people were surprised.”

Then he said: “Actually, I think there was a lot of hanky-panky going on, but it was too big to rig,” he said.  “That’s the good news.  It’s too big to rig.”

Matthew Hennessey / Wall Street Journal

“Americans aren’t used to hearing their president scold them for being too materialistic. There’s a good reason: We aren’t.  Only snooty Europeans envious of our sustained prosperity say so.  Everyone else wants what we have badly enough to walk in bare feet across jungles full of sharp, crushed doll parts.  This is bad politics, plain and simple.  Voters don’t want to hear about how wasteful they are.  Presidents succeed by promising a chicken in every pot, and then delivering two or three.  Up until last week I would have said that was Mr. Trump’s shtick.  Now I’m not so sure.

“Another thing: As the totemic exemplar of American consumer culture, Mr. Trump has no standing to push austerity. His whole life has been a tribute to gilded, gaudy excess.  Every room he enters is bedazzled and bedecked.  He redecorated the Oval Office to reflect his maximalist design preferences.  His wife probably has warehouses full of clothes she doesn’t ‘need.’  My guess is his grandchildren will get spoiled this Christmas.

“Beyond all that, Mr. Trump long had a side hustle as a pitchman for the kind of junk that fills the cargo holds of Chinese ships that soon won’t be docking in Los Angeles and Long Beach.  He put his name on anything he thinks he can sell – sneakers, watches, steaks, golf balls.  Nobody ‘needs’ any of it.  Most of us live and work in the private sector of trade-offs.  We make budgeting decisions for our businesses and families that have real-world consequences.  We can decide what we need and don’t need, thank you very much.

“Contrast Mr. Trump’s austerity with the ‘abundance’ agenda that lefty journalist Ezra Klein is peddling to Democrats.  There may not be much substance to it, but it’s a smart approach. For 25 years liberals have worked hard to convince Americans that we are too rich, too fat, too selfish, and too insular to be virtuous.  Mr. Klein is offering Democrats a way out.  They’d be stupid not to take it. Soon Democrats will be running shouting ‘Abundance!’ and Republicans will be hectoring you to take your economic medicine.  Quite the switcheroo.

“MAGA world will no doubt find a way to spin Mr. Trump’s austerity agenda as the antidote to American carnage.  There isn’t a city, town or burg in this great nation that wouldn’t scrimp and save in the event of a real emergency. But this isn’t a real emergency. It’s a manufactured one.  Mr. Trump flooded the engine.  Let him get out and push.”

--Mexican President Claudia Sheinbaum said on Saturday that President Trump proposed sending American troops into Mexico to help her administration fight drug trafficking in a tense recent phone call but that she rejected it.

“He said, ‘How can we help you fight drug trafficking?  I propose that the United States military come in and help you.’  And you know what I said to him? ‘No, President Trump.’”

She added: “Sovereignty is not for sale.  Sovereignty is loved and defended.”

Trump on Sunday then said Sheinbaum rejected his proposal because she is fearful of the country’s powerful cartels.

Trump said it was “true” that he proposed sending the troops to Mexico and lashed into Sheinbaum for dismissing the idea.

“Well she’s so afraid of the cartels she can’t walk, so you know that’s the reason,” Trump said in comments to reporters aboard Air Force One.  “And I think she’s a lovely woman.  The president of Mexico is a lovely woman, but she is so afraid of the cartels that she can’t even think straight.”

[Sheinbaum’s approval rating in Mexico has soared to 80%.]

--Defense Secretary Hegseth on Monday directed significant cuts to the U.S. military’s senior-most ranks, saying the elimination of positions held by about 100 generals and admirals is necessary to slash “redundant force structure” and streamline the Pentagon’s sprawling bureaucracy.

The plan was announced with scant detail in a one-page memo signed by the defense secretary.  It calls for a “minimum” 20 percent cut to the number of four-star generals and admirals – the military’s top rank – on active duty and a corresponding number of generals in the National Guard.  There also will be another 10 percent reduction, at least, to the total number of generals and admirals across the force.

It was unclear whether Hegseth intends to gradually phase out the targeted positions, which his memo does not identify, or move quickly to force out the men and women who now fill those roles. 

The move follows a purge of top military leaders that occurred in the opening weeks of President Trump’s return to office. In his memo, Hegseth said the measures would safeguard the United States’ status as “the most lethal fighting force in the world” by promoting “greater efficiency, innovation, and preparedness for any challenge that lies ahead.”

As I heard one expert put it, the danger is you lose a lot of institutional knowledge and experience when you just lop off 20%.  Those in such positions typically have roles overseeing large organizations as well as extensive education.  And they have broad military experience, often in combat.

Sen. Jack Reed (R.I.), the top Democrat on the Senate Armed Services Committee, questioned in a statement Monday night the rationale that Hegseth is using to make the cuts, noting the defense secretary’s propensity for dismissing senior military leaders.

“I have always advocated for efficiency at the Department of Defense, but tough personnel decisions should be based on facts and analysis, not arbitrary percentages,” Reed said.  “Eliminating the positions of many of our most skilled and experienced officers without sound justification would not create ‘efficiency’ in the military – it could cripple it.”

--Meanwhile, Secretary Hegseth used Signal more extensively for official Pentagon business than previously disclosed.

As reported in the Wall Street Journal, Hegseth engaged in at least a dozen separate chats, people familiar with his management practices said.  In one case, he told aides on the encrypted app to inform foreign governments about an unfolding military operation, the people said.  He also used the nongovernmental message service to discuss media appearances, foreign travel, his schedule, and other unclassified but sensitive information, two people said.  The Pentagon didn’t respond to requests for comment.

--The administration says it is going to pay immigrants in the United States illegally who’ve returned to their home country voluntarily $1,000 as it pushes forward with its mass deportation agenda.

The Department of Homeland Security said in a news release Monday that it’s also paying for travel assistance and that those people who use an app called CBP Home to tell the government that they plan to return home will be “deprioritized” for detention and removal by immigration enforcement.

--According to the Wall Street Journal, the U.S. is stepping up its intelligence-gathering efforts regarding Greenland, drawing America’s spying apparatus into President Trump’s campaign to take over the island, according to two people familiar with the effort.

Several high-ranking officials under Director of National Intelligence Tulsi Gabbard issued a “collection emphasis message” to intelligence-agency heads last week.  They were directed to learn more about Greenland’s independence movement and attitudes on American resource extraction on the island.

--The Associated Press, citing multiple U.S. officials, reported that President Trump’s “earth-shattering” announcement that he teased in the Oval Office on Tuesday during his meeting with Mark Carney, concerns that the U.S. will begin referring to the Persian Gulf as the Arabian Gulf, or the Gulf of Arabia.

“We’re going to have a very, very big announcement to make, like as big as it gets,” Trump said.  “And I won’t tell you on what...and it’s very positive.”

Trump said it didn’t concern trade. 

--Two Truth Social posts from Trump on Sunday....

“The Movie Industry in America is DYING a very fast death.  Other Countries are offering all sorts of incentives to draw our filmmakers and studios away from the United States.  Hollywood, and many other areas within the U.S.A., are being devastated.  This is a concerted effort by other Nations and, therefore, a National Security threat.  It is, in addition to everything else, messaging and propaganda!  Therefore, I am authorizing the Department of Commerce, and the United States Trade Representative, to immediately begin the process of instituting a 100% Tariff on any and all Movies coming into our Country that are produced in Foreign Lands.  WE WANT MOVIES MADE IN AMERICA, AGAIN!”

And....

“REBUILD AND REOPEN ALCATRAZ!  For too long, America has been plagued by vicious, violent, and repeat Criminal Offenders, the dregs of society, who will never contribute anything other than Misery and Suffering. When we were a more serious Nation, in times past, we did not hesitate to lock up the most dangerous criminals, and keep them far away from anyone they could harm.  That’s the way it’s supposed to be.  No longer will we tolerate these Serial Offenders who spread filth, bloodshed, and mayhem on our streets.  That is why, today, I am directing the Bureau of Prisons, together with the Department of Justice, FBI, and Homeland Security, to reopen a substantially enlarged and rebuilt ALCATRAZ, to house America’s most ruthless and violent Offenders.  We will no longer be held hostage to criminals, thugs, and Judges that are afraid to do their job and allow us to remove criminals, who came into our Country illegally.  They reopening of ALCATRAZ will serve as a symbol of Law, Order, and JUSTICE.  We will MAKE AMERICA GREAT AGAIN!”

--President Trump posted an AI-generated image of himself dressed as pope, days before the conclave to elect his successor was set to begin.

Trump had joked last week about his interest in the vacancy.  “I’d like to be pope. That would be my number one choice.”

Trump then said he had nothing to do with the image.

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Wall Street and the Economy

Aside from all the trade talk, it was about the Federal Reserve’s Open Market Committee meeting and Chair Jerome Powell’s comments afterwards at his presser that captured Wall Street’s attention this week.

The Fed warned that the economy faced growing risks of higher unemployment and higher inflation when officials unanimously agreed to hold interest rates steady on Wednesday.

“Uncertainty about the economic outlook has increased further,” officials said in their post-meeting statement, the first since President Trump imposed sudden tariff increases last month.  “The committee...judges that the risks of higher unemployment and higher inflation have risen.”

The Fed’s dilemma is it has to decide whether to focus more on the potential for inflation to go up or more on the risk of rising unemployment.

“They’re in a bad situation,” said William English, a former senior Fed adviser.  “If I were there, I would be suggesting that they stay put for now.”

Powell then said at his press conference: “The current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments.”

“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” noted Powell.

“We don’t feel like we need to be in a hurry.  We feel like it’s appropriate to be patient,” he added.  “And when things develop – of course we have a record of – we can move quickly when that’s appropriate.”

And... “It’s not a situation where we can be pre-emptive because we actually don’t know what the right response to the data will be until we see more data,” he said.

The Fed next meets June 17-18 and it’s doubtful there is going to be enough relevant data in terms of the tariffs by then to get the FOMC to lower rates.  You’ll have two more rounds of inflation data, plus one PCE (personal consumption expenditures index) reading, and another jobs report, but I don’t see it being definitive.

After last week’s deluge of economic data, we only had one item worth mentioning, the April ISM service sector reading, 51.6, better than expected, 50 the dividing line between growth and contraction.

The Atlanta Fed’s GDPNow very early look at second-quarter growth is 2.3%.

Freddie Mac’s 30-year fixed-rate mortgage was unchanged this week at 6.76%.

Next week, key inflation data, CPI, PPI, as well as a report on April retail sales which could easily move the markets, though it’s what happens in Geneva and the trade talks over the weekend that will certainly have an impact on Monday.

Europe and Asia

We had service sector PMIs for the eurozone for the month of April, courtesy of S&P Global and Hamburg Commercial Bank.  For the bloc, the index was 50.1, a 5-month low.

Germany: 49.0
France: 47.3
Italy: 52.9
Spain: 53.4
Ireland: 52.8

UK: 49.0, lowest since Jan. 2023.

Dr. Cyrus de la Rubia, Chief Economist, Hamburg Commercial Bank:

“Eurozone economic growth slowed at the start of the second quarter, following a pick-up in the first three months of the year. The services sector, which is a major player, practically stagnated in April. Even though manufacturing output saw a surprising uptick, it wasn’t enough to prevent the overall slowdown in growth.”

In other economic news, eurozone producer prices decreased by 1.6% in March compared with February, but were up 1.9% year-over-year. [Eurostat]

And retail trade in the EA20 decreased 0.1% in March vs. February, but was up 1.5% from a year ago. [Eurostat]

Britain: The Bank of England cut its key interest rate, a day after the Federal Reserve opted to keep rates on hold, highlighting the growing divergence between the U.S. central bank and its global peers in their response to President Trump’s tariffs.

The BOE’s Monetary Policy Committee lowered the rate to 4.25% on Thursday from 4.5%, the bank’s fourth cut in seven meetings, and it appeared to clear the way for more aggressive moves should the hit to growth from tariffs prove more severe than anticipated.

Germany: Friedrich Merz became Germany’s 10th chancellor Tuesday, but it took a second ballot to get him across.  The conservative leader, embarrassingly, failed to get a majority of 316 out of 630 votes in parliament on the first ballot, falling six short.

He then gained the majority on a second vote later in the day, but this raised questions about the new government’s ability to push its ambitious policy agenda, including a massive increase in defense spending, through parliament.

Turning to Asia...in China, the private Caixin service sector reading for April was 50.7 vs. 51.9 prior.

But all eyes were on the April exports number, up 8.1% year-over-year, far better than consensus of 1.9% and vs. 12.4% the month prior. 

Exports to the U.S. plunged 21.0%, as you’d expect after the tariffs, but the government can take solace from exports to Japan rising 7.8%, Taiwan (15.5%), Australia (5.8%), the EU (8.3%) and ASEAN (20.8%).

Imports, -0.2% Y/Y, were also better than forecast.

Japan’s April service sector reading was 52.4 vs. 50.0 prior.

March household spending, a key metric here, rose 0.4 from February, up 2.1% vs. a year ago.

Street Bytes

--The major indices all fell marginally this week after a big 2-week rally...the Dow Jones off 0.2% to 41249, the S&P 500 down 0.5% and Nasdaq falling 0.3%.

We get Walmart’s earnings next week, which could be quite informative.

--U.S. Treasury Yields

6-mo. 4.24%  2-yr. 3.88%  10-yr. 4.38%  30-yr. 4.84%

The yield on the 10-year rose 7 basis points on the week.  Inflation data and retail sales numbers next week could move Treasuries some.

--Crude oil fell below $57 per barrel on Monday as OPEC+ agreed to ramp up production, fueling fears about a global supply glut.  OPEC+ will accelerate oil output hikes for a second consecutive month, raising output in June by 411,000 bpd at its Saturday meeting (videoconference).  This could bring back as much as 2.2 million bpd to the market by November as the group’s leader Saudi Arabia seeks to punish some fellow members that have exceeded their quotas (talking about you, Kazakhstan, and Iraq, and the UAE).

Despite talk of demand destruction, oil consumption did increase by 1.2 million barrels a day in the first quarter of 2025, the most since 2023, according to the International Energy Agency.  But analysts there and elsewhere are cutting their forecasts for demand in anticipation of disruption from global trade tensions.

On the geopolitical front, tensions in the Middle East increased after Israel vowed to retaliate against the Houthis and to act against “their patron” Iran after a missile fired by the group landed near Israel’s main airport.  In response, Iran’s Defense Minister Nasirzadeh warned on Sunday that Tehran would strike back if attacked by the U.S. or Israel.

Oil then surged to $60 on Wednesday, supported by weaker U.S. production and growing demand in Europe and China.  And major producers, such as in the next story, announced plans to reduce their rig counts.  Reports on U.S.-China trade talks also helped boost sentiment.

--The head of the largest independent oil producer in the Permian Basis predicts U.S. shale production has peaked and will likely decline from here as oil prices hover near four-year lows.

“We have a very good view of what the U.S. looks like. And right now that’s a business that’s slowing dramatically and likely declining in terms of production,” Diamondback Energy CEO Travis Stice said during the company’s earnings call on Tuesday morning.

Stice, who is slated to step down and become executive chairman later this month, issued a shareholder letter on Monday in which he pointed to declining crew count activity in the Permian Basin as an indicator that “production has peaked” and will begin to decline this quarter.

“We know a lot of people in the business,” Stice told analysts.  “Every single conversation I’ve had with...operators is that this oil price doesn’t work.”

Weekly rig counts have been trending lower compared to a year ago, according to Baker Hughes data.

--Berkshire Hathaway stock fell 5% Monday on news over the weekend that CEO Warren Buffett will be stepping down at year-end after 60 years of leading the company.  Now, investors have to decide if it’s worth owning for the long term, though Buffett did say he will still be around and no doubt will have a veto over any major decisions that future CEO Greg Abel makes with regards to the huge cash pile in particular....nearly $348 billion per the first-quarter earnings report. 

This is my assumption, which could be wrong.  But Buffett said he “would still hang around and conceivably be useful in a few cases.” He will remain chairman of Berkshire – turning that role over to his son Howard Buffett upon his death – and remains the single biggest shareholder in Berkshire, with a roughly 14 percent stake that is worth about $164 billion.

Abel, 62, joined Berkshire in 1999 when the company bought his energy business.  Since then he has turned what is now called Berkshire Hathaway Energy into one of America’s biggest power producers.

Buffett shocked an arena full of his shareholders Saturday by making the announcement, saying he will recommend to Berkshire’s board that Abel should become CEO at the end of the year.

“I think the time has arrived where Greg should become the Chief Executive officer of the company at year end,” Buffett said.

Previously, the 94-year-old investor has always said he had no plans to retire.

Earlier, before dropping his bombshell, Buffett warned about the dire global consequences of President Trump’s tariffs while telling the thousands of investors gathered at his annual meeting in Omaha that “trade should not be a weapon” but “there’s no question that trade can be an act of war.”

Buffett said Trump’s trade policies have raised the risk of global instability by angering the rest of the world.

While Buffett said it is best for trade to be balanced between countries, he doesn’t think Trump is going about it the right way with his widespread tariffs.  He said the world will be safer if more countries are prosperous.

“We should be looking to trade with the rest of the world.  We should do what we do best and they should do what they do best,” he said.

America has been going through revolutionary changes ever since its birth and the promise of equality for all, which wasn’t fulfilled until years later, Buffett said.  But nothing that is going on today has changed his long-term optimism about the country.

“If I were being born today, I would just keep negotiating in the womb until they said, ‘You could be in the United States,’” Buffett said.

Jason Zweig / Wall Street Journal

“There’s only one Warren Buffett, and there will never be another....

“There are three reasons why he has no equal and never will: the person, the period and the package.

“Let’s start with the person.  Buffett is not only brilliant, but he has also spent nearly his entire long lifetime obsessed with the stock market.  Especially in his early years as an investor, his unparalleled success depended on an unbearable sacrifice: forgoing a normal social and family life.

“A later writer called the great 17th-century philosopher Baruch Spinoza ‘the god-intoxicated man.’ Buffett is the stock-intoxicated man.

“Ever since 1942, when he bought his first stock at age 11, he has devoured information about companies, reading corporate reports the way most people listen to music....

“Now imagine enjoying it almost every waking moment ever since Harry Truman was in the White House. That’s how unusual Buffett is.

“Expertise is rooted in pattern recognition, and Buffett has seen every conceivable pattern.  Given what I know about his work habits, I estimate – conservatively, I believe – that Buffett has read more than 100,000 financial statements in his more-than-seven-decade career....

“His unparalleled exposure to financial information, combined with his prodigious memory, made Buffett into a human form of artificial intelligence.  He could answer almost any query out of his own internal database.

“That has given him an unparalleled ability to identify the kernel of significance in any new bit of information – and a durable advantage over other investors.  Now that AI is universally available, a person with Buffett’s massive command of data won’t even have an advantage in the future.

“Then there’s the period – the time over which Buffett has exercised his investing prowess. As he has said many times, he won ‘the ovarian lottery’ by being born when and where he was.

“Had Buffett been born in Omaha in (say) 1880 instead of 1930, he would have had to invest in livestock instead of stocks. Had he been born in 1930 in Omsk instead of Omaha, he wouldn’t have owned railways; he probably would have worked on the Trans-Siberian Railway.

“And Buffett happened to come of age just in time to study under Benjamin Graham, the pioneer of security analysis and one of the greatest investors of the past century.

“Buffett also began his career before trillions of dollars had poured into the stock market from index funds and other giant institutional investors.

“He built his phenomenal early track record by fishing where no one else was even looking to catch anything.  He fed on the tiniest plankton of the stock market.

“He bet big on these small fry....

“From 1957 through 1968, such obscure bets helped produce an average return of 25.3% annually, compared with 10.5% for the S&P 500....

“And Buffett didn’t merely succeed.  He succeeded over one of the longest career spans any investor has ever had.  He took over Berkshire, a tattered manufacturer of textiles, in 1965.  By the end of last year, Buffett had racked up an annualized average return of 19.9%, compared with 10.4% for the S&P 500.

“Almost anyone with a reasonable amount of luck can beat the market over a year. So far as I know, no one in history has beaten the market by so wide a margin over a period of six decades – because only Buffett has combined extraordinary investment skill with such extraordinary longevity.

“Finally, Buffett placed his investments in a package like none other.

“Berkshire Hathaway operates as a publicly traded holding company, a receptacle for whatever he has thought worth owning: other publicly traded stocks, Treasury bonds, private companies.  At one point it was even one of the world’s largest holders of silver; now it holds more than $330 billion in cash....

“This package has given Buffett a structural advantage that has enabled him to pursue opportunities wherever and whenever he has perceived them. That’s a luxury almost no other professional investor has – or even wants.

“So long as most fund managers earn a lavish living for underperforming the market, the real risk for them will be trying anything different.  Pigs will sprout feathers before anybody has the daring to try truly emulating Warren Buffett.”

--Google shares cratered nearly 8% on Wednesday after Apple’s senior vice president of services, Eddy Cue, revealed that Apple is exploring adding AI search engines such as Perplexity to its default Safari web browser.

Cue’s comments came during Google parent Alphabet’s antitrust trial, as reported by Bloomberg.  Last year, a federal judge ruled that Google maintained an illegal monopoly, through its search business.  During the trial, it was revealed that Google pays Apple $20 billion a year to use its search engine as the default search option in Safari.

During his testimony, Cue said Apple saw a drop in searches in Safari for the first time last month, attributing the move to customers increasingly opting for AI-based search options.  Apple already offers ChatGPT as a search option as part of its Apple Intelligence platform.

Google has been working feverishly to ensure it catches up with AI startups like OpenAI and Perplexity to ensure it grabs hold of the AI search market.

Google’s exclusivity deal with Apple is one of many the search giant has set up to ensure its search engine remains top of mind for users around the world. 

Apple relies on Google’s deal for revenue as part of its Services business.  Services saw sales of $96.1 billion in 2024, making that $20 billion per year an important part of the segment.

But Google shares fell on Eddy Cue’s pronouncement that Apple saw a drop in searches for the first time last month, a momentous development.

--AMD reported better-than-expected earnings results Tuesday afternoon on strong data-center chip sales.  Its shares rose a bit.

The semiconductor company reported first-quarter adjusted earnings per share of 96 cents, compared to Street consensus estimate of 94 cents. Revenue came in at $7.4 billion, also above expectations.

AMD offered a robust outlook.  The company offered a sales range for the current quarter with $7.4 billion at the midpoint versus the $7.2 billion analysts’ estimate.

“Despite the dynamic macro and regulatory environment, our first-quarter results and second-quarter outlook highlight the strength of our differentiated product portfolio and consistent execution positioning us well for strong growth in 2025,” AMD CEO Lisa Su said in a statement.

--The Walt Disney Co. posted solid profits and revenue in the fiscal second quarter as its domestic theme parks thrived and the company added well over a million subscribers to its streaming service.

For the three months ended March 30, Disney earned $3.28 billion, or $1.81 per share. The Burbank, California, company lost $20 million or a penny per share, a year earlier.

Removing one-time charges or benefits, earnings were $1.45 per share, easily topping the $1.18 the Street was expecting.  Revenue rose 7% to $23.62 billion, also topping projections.

Revenue in Disney’s Entertainment segment climbed 9%, while revenue for the Experiences division increased 6%.

Disney’s direct-to-consumer business, which includes Disney+ and Hulu, posted quarterly operating income of $336 million compared with $47 million in the prior-year period.  Revenue increased 8%.

The Disney+ streaming service had a 2% increase in paid subscribers domestically, which includes the U.S. and Canada.  There was a 1% rise internationally, which excludes Disney+ Hotstar.  Total paid subscribers for Disney+ edged up 1% in the quarter to 126 million subscribers from 124.6 million in the first quarter.

The Experiences division, which includes six global theme parks, its cruise line, merchandise and videogaming licensing, reported operating income rose 9% to $2.5 billion.  Operating income climbed 13% at domestic parks.  Operating income dropped 23% for international parks and Experiences.  Disney is projecting full-year adjusted earnings of $5.75 per share.

Disney also announced Wednesday that it is planning a new theme park in Abu Dhabi, which would be the company’s seventh global park.

--I wrote of the growing issues at Newark Liberty International Airport last week and they exploded into a national story over the weekend...thousands of flights delayed, diverted or canceled owing to a long list of air traffic control failures.

Flight delays of four hours could be the new normal this summer, with severe air traffic controller shortages and equipment malfunctions, especially at the Philadelphia air traffic control facility that oversees flights at Newark.

The FAA says it needs 3,000 controllers to be fully staffed, and shortages are acute in the New York City region.

United Airlines, Newark’s largest carrier, advised customers to consider alternative airports in the area as air traffic controller shortages continue to disrupt operations.

United took the step to cancel 35 roundtrip flights per day from its Newark schedule going forward.  That amounted to about 10% of United’s daily schedule at the airport, where it averages 328 flights a day.

“It’s disappointing to make further cuts to an already reduced schedule at Newark, but since there is no way to resolve the near-term structural FAA staffing issues, we feel like there is no other choice in order to protect our customers,” United CEO Scott Kirby said in a statement.

Next year, Newark will be a major hub for international visitors coming for the World Cup, nearby MetLife Stadium hosting a number of contests, including the final.

Between Saturday and Tuesday, over 560 flights into and out of Newark Airport were cancelled, while over 1,600 were delayed, and not minor ones, but many flights with 4-hour+ delays.

Transportation Secretary Sean Duffy on Thursday announced a new “state of the art” air-traffic control system, which it is expected will take three to four years to build, featuring new telecommunications systems, new radios, and new ground radar.  “We want to make sure air-traffic controllers have the tools to keep aircraft separated,” Duffy said.  “All front facing systems and back-end systems will be brand new.”

But it’s going to cost tens of billions and that has to be approved by Congress.

In the meantime, it’s probably going to be a long summer for air travelers.

[Friday was another awful day at Newark.]

--TSA checkpoint numbers vs. 2024

5/8...111
5/7...102
5/6...80
5/5...95
5/4...127
5/3...79
5/2...100
5/1...116

--Ford Motor reported first-quarter earnings on Monday, suspending full-year financial guidance, estimating a 2025 “gross” tariff impact of $2.5 billion and a “net” tariff impact of $1.5 billion. 

Ford’s prior financial guidance called for a 2025 operating profit of about $7.8 billion, so the $1.5 billion net impact is about 20% of prior guidance.

The company reported far better than expected first-quarter, but it’s the future that is worrisome, even though Ford is the best-positioned of traditional auto makers to weather Trump’s tariffs.  More than 80% of its cars sold in the U.S. are assembled here. It ships vehicles made abroad via bonded carriers that aren’t subject to tariffs, and has stopped exporting vehicles to China.

About half of the new cars sold in the U.S. are imports, mainly from Mexico, Japan, South Korea and Canada, so with Ford only importing about 20% of the vehicles it sells domestically, it has an advantage, but auto makers face tariffs on imported parts, too.

Ford cited a number of factors in terms of its guidance including “industrywide supply chain disruption” tied to the tariffs and the risk that levies may increase in the future.  Automakers have warned that broad, lasting tariffs will increase costs, jeopardize employment and potentially increase new-car prices that are already nearing $50,000 on average.

Ford CEO Jim Farley last week said the company won’t increase the price of its vehicles until it sees how rivals respond to added tariff costs.

But the United States did impose 25 percent tariffs on imported auto parts on Saturday that could sharply raise prices for new and used vehicles as well as for repairs and insurance. [Think replacement parts will become more expensive, when talking the last two.]

Even cars made in the United States often have engines, transmissions, batteries or other components produced in other countries.

Ford then announced Wednesday it would hike prices on three of its Mexico-produced models, including the Mustang Mach-E electric SUV and the Maverick pickup by as much as $2,000.

Analysts say General Motors will suffer because imported parts often account for more than half the value of Chevrolets or Cadillacs made in the U.S.  GM also imports cars from Canada, Mexico and South Korea.

Volvo Cars, which has a factory in South Carolina, uses many parts from China, so it too will be hard hit.

Car prices aren’t likely to skyrocket in the short term because most carmakers and their dealers have large inventories of cars manufactured before the tariffs took effect.

--Tesla sold 58,459 China-made electric vehicles in April, down 6% from last year, data from the China Passenger Car Association showed on Wednesday.

Deliveries of locally made Model 3 and Model Y vehicles slid 25.8% from the previous month.

Tesla’s Chinese rival BYD, with its Ocean and Dynasty lineup of EVs and plug-in hybrids, last month saw a 19.4% year-on-year jump in passenger vehicle sales to 372,615 vehicles.

Meanwhile, Tesla had more bad sales new out of Europe.  Tesla’s April sales in Germany amounted to 885 vehicles, down 46% year over year, according to the Federal Motor Transit Authority.  Across Europe Tesla sales dropped 37% Y/Y in the first quarter.

--Hotel operator Marriot International trimmed its 2025 room revenue forecast on Tuesday, as it braces for slowing travel demand in the U.S. amid tariffs-induced fears of an economic recession and federal spending cuts.

The company highlighted a hit from a 10% drop in nights booked by the U.S. government, as funding cuts trigger staff layoffs and tighter travel budgets.

Marriott expects room revenue growth of 1.5% to 3.5% for the year, compared with 2% to 4% if forecast earlier.

The company said it had net income of $2.39 per share. Adjusted earnings came to $2.32 per share, which passed Street estimates of $2.27.

The company posted revenue of $6.26 billion in the period, up 5% but short of Street forecasts.

For the current quarter ending in June, Marriott expects EPS to range from $2.57 to $2.62, with full-year earnings in the range of $9.82 to $10.19 per share.

But Marriott does see its lower-priced tiers in the U.S. showing signs of weaker demand.

--Ferrari backed its full-year guidance as more car deliveries and customize requests helped the sports-car maker deliver forecasting-beating earnings in the first quarter of the year.

The Italian automaker reported net profit of 412 million euros ($466.2 million), up from 352 million euros in the same quarter last year as revenue rose 13% to1.79 billion euros.

It shipped 3,593 vehicles to customers, 33 more than a year earlier.

CEO Benedetto Vigna said its strategy of focusing on the quality of revenue rather than volumes was paying off.

Shipments were up 8% in Europe, the Middle East and Africa and rose 3% in the Americas.  Mainland China, Hong Kong and Taiwan logged a 25% contraction in shipments, while the rest of the Asia-Pacific recorded a 6% drop.

Ferrari backed full-year guidance of revenue of more than 7 billion euros.

--Tyson Foods shares fell hard after the company cautioned that tariffs and economic uncertainty are cutting into Americans’ appetite for steaks and high-price beef cuts.

Tyson said its beef prices rose 8% in its most recent quarter, while its sales volumes slipped 1%.  Rising costs are turning more Americans toward cheaper options, including ground beef, chicken and precooked meals, executives for the Arkansas meat company said Monday.

“Beef is experiencing the most challenging market conditions we have ever seen,” Tyson CEO Donnie King said on a conference call.

Large meatpackers such as Tyson are contending with the lowest cattle supply since 1951.   The livestock shortage has driven up the cost to secure cattle from ranchers and pressured meat companies’ bottom lines over the past year.  Tyson said its cattle costs jumped by about $470 million during the three months ended March 29.

Tyson, the largest American meat supplier, said the rising costs and slower sales led to a $258 million loss in its beef business for the quarter, compared with a $35 million loss a year ago.

The company said it is relying on its poultry business to help offset the beef-market turbulence.  Its operating profit from chicken rose about 66% to $262 million during the quarter.

“I think chicken will be a clear winner in this,” King said.

Overall Tyson posted a quarterly profit of $7 million, or 2 cents a share, compared with $145 million, or 41 cents a share, in the year-earlier quarter.  Adjusted earnings of 92 cents a share beat estimates.

Tyson said total sales in its fiscal second quarter were flat year over year at about $13 billion, below Street expectations.

--The “failing New York Times” said on Wednesday that it added 250,000 digital-only subscribers in the last quarter, and that digital subscription revenue during the period jumped more than 14 percent.

That helped drive adjusted operating profit 12.9 percent higher from a year earlier to $92.7 million. Total revenue rose 7.1 percent, to $636 million.

The Times had 11.66 million total subscribers at the end of Q1, including 600,000 print subscribers.  The company has a stated goal of 15 million subscribers by the end of 2027.

The Athletic, which the Times purchased for $550 million in 2022, continued to eke out a profit, with total revenue increasing 27.9 percent in the first quarter to $47.6 million.

--Marvel scored a strong box office showing for “Thunderbolts,” its latest superhero flick, which opened in last weekend’s top spot with the third-highest domestic sales of the year, an estimated $76 million in domestic box office sales, according to Comscore.

The weekend’s overall total three-day domestic box office reached $145.6 million.  So far this year, box office sales of nearly $2.5 billion are up 15.7% from the same time last year, according to Comscore.

Analysts are saying this coming Memorial Day weekend “will blow the doors off previous” holiday numbers and the summer should be strong.

Comscore’s Paul Dergarabedian is pointing to coming pictures such as Paramount’s “Mission: Impossible – The Final Reckoning,” Warner Bros.’ “Superman,” and Comcast-owned Universal’s “Jurassic World Rebirth.”

--Bill Gates announced he plans to spend more than $200 billion over the next 20 years to fight poverty, malnutrition, polio and other global scourges, accelerating by decades a commitment to give away nearly all of his wealth.

The 69-year-old Microsoft co-founder and philanthropist said he would give 99% of his fortune to his charitable foundation, which he chairs, sooner than originally planned because the world faces many urgent problems that he wants to fund – and encourage others to fund – new tools to solve them.

Gates criticized Elon Musk for advising the Department of Government Efficiency (DOGE) to slash the budget of the U.S. Agency for International Development (USAID), accusing the world’s richest man of “killing the world’s poorest children.”

In an interview with the Financial Times, Gates suggested DOGE’s cuts were too abrupt and left lifesaving food and medicines to expire in warehouses.  He said the Trump administration’s moves to eliminate USAID came at the cost of a resurgence of diseases like measles, HIV and polio.

“The picture of the world’s richest man killing the world’s poorest children is not a pretty one,” he told the FT.

Gates had worked closely with USAID for years through joint efforts with the Gates Foundation.

--Congratulations to CNBC’s Bob Pisani, who signed off today after 35 years at the network, most of which were spent on the floor of the New York Stock Exchange.  He will transition over to the new subscription service, CNBC Pro, in the fall.

Foreign Affairs

Russia/Ukraine:  Russian President Vladimir Putin said in comments broadcast Sunday that the need to use nuclear weapons in Ukraine had not arisen and that he hopes it will not.

In a preview of an upcoming interview with Russian state television, published on Telegram, Putin said Russia has the strength and the means to bring the conflict in Ukraine to a “logical conclusion.”

Responding to a question about Ukrainian strikes on Russian territory, Putin said: “There has been no need to use those (nuclear) weapons...and I hope they will not be required.”

“We have enough strength and means to bring what was started in 2022 to a logical conclusion with the outcome Russia requires,” he said.

Putin signed a revamped version of Russia’s nuclear doctrine in November 2024, spelling out the circumstances that allow him to use Moscow’s atomic arsenal, the world’s largest.

That version lowered the bar, giving him that option in response to even a conventional attack backed by a nuclear power.

--Meanwhile, the Ukrainian Air Force said Russia fired 183 exploding drones and decoys in the early hours of Saturday, with a strike on Ukraine’s second-largest city, Kharkiv, wounding 47 people.

Eleven people were wounded in a separate Russian drone attack the next night on the Ukrainian capital, Kyiv, Ukraine’s State Emergency Service said Sunday.  Two children were among the wounded.

--Four people were killed in Ukraine overnight Monday and early Tuesday in Russian strikes, Ukrainian officials said.  Three were killed and seven injured in the north Sumy region, after Russia hit villages with guided aerial bombs, mortars and rockets.

Sumy is close to the Russian region of Kursk, where Russian officials say three people were killed overnight in Ukrainian strikes.  Ukraine maintains some of its forces are still active inside Kursk.

Separately, one person was killed in a drone attack on the southern city of Odesa.  Others were injured in an attack on Kharkiv.

Russian then launched an intense drone and missile attack on Kyiv and other cities overnight Tuesday, killing a mother and her son in the capital, amid faltering U.S.-backed attempts to broker a pause in the fighting.

Ukraine launched drones towards Moscow for a third day, forcing most of the Russian capital’s airports to close hours before Chinese President Xi Jinping was due to arrive.

The Kremlin has touted his presence, along with that of 27 other world leaders, as a sign that Russia has not been isolated since it launched its full-scale invasion.

--Ukraine said it downed two Russian jet fighters using sea drones equipped with modified U.S.-made missiles, in what military officials in Kyiv said is the first such attack in the history of warfare.

Magura-7 sea drones deployed by Ukraine’s military-intelligence agency, known as HUR, fired the missiles at two Su-30 jets that were flying near the Russian Black Sea port of Novorossiysk, HUR said.

Russia’s military hasn’t commented on the attack, but if accurate, the shootdowns demonstrate the threat Ukraine poses to Russia, with a military-industrial complex that is innovating in order to hold its own against Moscow’s much-larger military.

In a video address on Saturday, President Zelensky described the attack as “brilliant” and “a testament to Ukraine’s capabilities.”  Kyiv said it is the first instance of a combat aircraft downed by a marine drone.

--At week’s end, Ukraine said Russia was violating its own ceasefire, hundreds of times.

“Russia’s unilateral, three-day ceasefire has proved to be a farce because of continued attacks across the front line,” Ukraine’s foreign minister, Andrii Sybiha, said.  Sybiha accused Russia of violating its self-declared ceasefire 734 times and said that Ukraine was responding “appropriately” to every attack.

--At the military parade in Red Square on Friday, the commander of Russia’s ground troops, Oleg Salyukov, led 11,000 troops, including some 1,500 who had fought in Ukraine.

Putin in his remarks insisted that Russia “was and will be an indestructible barrier against Nazism, Russophobia, antisemitism.”  The Russia leader has repeatedly and falsely referred to Ukraine’s leadership as Nazis.

“Truth and justice are on our side,” he said, insisting that “the entire country, society and people support the participants” of the Ukraine war.

--The BBC Russian Service, in collaboration with independent media outlet Mediazona and a team of volunteers, concluded last year was the deadliest for Russian forces since the start of the full-scale war in Ukraine: at least 45,287 people were killed, almost three times more than in the first year of the invasion, and significantly exceeding the losses of 2023, when the longest and deadliest battle of the war was taking place in Bakhmut.

At the start of the war, losses happened in waves during battles for key locations, but 2024 saw a month-on-month increase in the death toll as the front line slowly edged forward.

The BBC and its partners processed open source data from Russian cemeteries, military memorials and obituaries.  So far, they have identified the names of 106,745 Russian soldiers killed during the full-scale invasion.  The true number is clearly much higher.  Military experts estimate the BBC’s number may cover between 45% and 65% of deaths, which would mean 164,223 to 237,211 people.

In the first year of the full-scale war, according to the BBC’s calculations, Russia lost at least 17,890 soldiers.  This number does not include losses from Russia’s two proxy forces in occupied eastern Ukraine.

In 2023, the number rose to 37,633.

In 2024, you had bloody battles for Avdiivka and Robotyne, followed by intensified assaults towards Pokrovsk and Toretsk.

In August 2024, Russian conscripts were killed when Ukrainian forces stormed over the border into the Kursk region.  From August 6 to 13 alone, an estimated 1,226 Russian soldier died.

The heaviest overall losses occurred during a slow Russian advance in the east between September and November 2024, according to leading U.S. military analyst Michael Kofman.

According to estimates by the American Institute for the Study of War (ISW), from September to November 2024, Russian forces captured 2,356 square kilometers of Ukraine.  The cost of this advance was at least 11,678 Russian military deaths.  And the figures are likely higher.  The BBC is only accounting for soldiers and officers whose names appeared in publicly available obituaries and whose deaths or funeral fell within this period.

Israel/Gaza: Israel’s security cabinet voted to approve a new ground operation that includes occupying the Gaza Strip while also agreeing to a plan to take control over aid distribution that has been rejected by international humanitarian groups.

The war plan approved Monday includes “conquering the strip and holding the territory,” according to an Israeli official.  It represents a shift in strategy for Israel since the collapse of a temporary ceasefire in March.  In Israel’s initial ground operation, it raided Hamas strongholds and then retreated, allowing the U.S.-designated terrorist group to infiltrate areas once forces departed.  Now, it has approved a strategy that includes holding on to territory to ensure that Hamas can’t rebuild.

Israel has steadily ratcheted up pressure on Hamas since the truce lapsed. It started with the blockade on all aid and commercial goods, resuming aerial bombardment and limited ground operations later in the month.

But Israel is under immense pressure to lift the ban on humanitarian goods, with food, fuel, clean water and medicine dangerously low...if existent at all.  Lawlessness is spreading.

In the same session, the cabinet approved a plan to resume aid to Gaza by setting up about six to 10 aid-distribution sites that would be protected by private U.S. security contractors.  It is an attempt by Israel to prevent Hamas from co-opting aid and using it to maintain control over the population.

Aid groups say the claim Hamas is stealing and diverting aid to fund its war effort is blown out of proportion and that humanitarian needs outweigh the risks. 

The cabinet didn’t say when the plan would go into effect, Israeli officials said.

It has been more than 60 days since Israel halted all humanitarian aid and preventable diseases and illnesses are surging – and so is the likelihood of dying from them, doctors say.

The military had announced on Saturday night that it was mobilizing thousands of reserve soldiers to bolster its campaign against Hamas.

Israeli strikes across Gaza on Wednesday killed at least 59 people, including women and children, hospital officials said Wednesday.

Iran/Houthis/Yemen: Israel’s military said Tuesday it launched airstrikes against Iranian-backed Houthi rebels in Yemen, fully disabling the country’s international airport in the capital, Sanaa.  It also said several power plants were struck in the area.

Footage aired on Israeli television showed thick black plumes of smoke rising above the skyline of Sanaa.

The Houthis confirmed Israel’s strikes, Israel having issued a warning for people to evacuate the area of the airport.  There was no immediate report on casualties.

The strikes were the second time in two days that Israel attacked the rebels in Yemen, in retaliation for a missile strike on Israel’s airport on Sunday.

Speaking of which, Israeli air defenses seemingly failed to fully intercept a Houthi missile fired from Yemen, striking near the country’s main Ben Gurion Airport.  It came close to the runways.

“We will hit back sevenfold at anyone who hurts us,” Defense Minister Israel Katz said on Sunday.

But then Tuesday, while sitting with Canadian Prime Minister Carney in the Oval Office, President Trump blurted out that the United States would stop bombing the Houthi militant group in Yemen because the group said it did not want to fight anymore.  “We will honor that, and we will stop the bombings,” Trump said.

Editorial / Wall Street Journal

“President Trump declared victory over the Houthis, Iran’s terrorist proxy in Yemen, on Tuesday.  ‘They have capitulated,’ he said amid an Oval Office meeting with Canada’s Prime Minister.  ‘they say they will not be blowing up ships anymore,’ he added, ‘and I will accept their word, and we are going to stop the bombing of the Houthis.’

“Mission accomplished? If the Houthis – whose slogan is ‘God is the Greatest, Death to America, Death to Israel, Curse be upon the Jews, Victory to Islam’ – stop shooting at U.S. vessels, then yes. That was the objective presented when the U.S. began bombing.

“ ‘It has been over a year since a U.S.-flagged commercial ship safely sailed through the Suez Canal, the Red Sea, or the Gulf of Aden,’ the White House said in its March 15 statement.  ‘No terrorist force will stop American commercial and naval vessels from freely sailing the Waterways of the World.’

“This would satisfy that criteria, though some senior Houthi officials deny the group will end its Red Sea blockade.  We may learn more when their leader, Abdul Malik al-Houthi, gives his weekly speech Thursday, but the real test is when U.S. vessels transit the waters again.  And how about ships from other states?  The U.S. has an interest in preventing any group of modern-day pirates from denying commercial traffic access to vital sea lanes.

“The deal comes via Oman, the Gulf sultanate that is also mediating nuclear talks between the U.S. and Iran.  This suggests it could have been arranged over most Houthi leaders’ heads.  After threats by Mr. Trump and Defense Secretary Pete Hegseth to hold Tehran accountable for its proxy’s fire, Iran has reason to de-escalate.

“Credit Mr. Trump for using sustained force against the Houthis and threatening their weapons-suppliers in Tehran....

“(But) no one should pretend the Houthi threat is finished, as Iran could reactivate its proxy whenever it’s advantageous. There’s also no sign the Houthis will cease firing ballistic missiles at Israel; one struck near Ben Gurion airport Sunday.

“The deal with the U.S. blindsided Jerusalem, though Israel’s retaliation against the Houthis earlier on Tuesday, which destroyed their main airport and link to Iranian weapons, may have helped clinch it.  Iran doesn’t need another proxy overwhelmed.  The key for the U.S. will be keeping Iran in retreat.”

The Wall Street Journal reported Thursday, “The top five container-shipping companies said they...had no immediate plans to return to the area where the Houthis began targeting merchant ships in late 2023...”

China: In Moscow, Chinese President Xi Jinping told his Russian counterpart Vladimir Putin that their two countries have a responsibility to oppose unilateralism and power politics.

“Eighty years ago, the peoples of China and Russia made tremendous sacrifices to secure a great victory, contributing an indelible chapter to the cause of world peace and human progress,” Xi said, at the beginning of a meeting between the two.

“Today, in the face of unilateralist backflows and acts of power politics and bullying on the international stage, China will join Russia in shouldering our special responsibilities as major countries and permanent members of the UN Security Council.”

Xi arrived Thursday, Putin’s special military parade in Red Square the next day, Xi with the honored position of standing next to Putin, marking the 80th anniversary of the Victory of the Soviet Union’s Great Patriotic War, Xi said that history and reality have fully proved that continuing to develop and deepen China-Russian relations is integral to carrying forward the friendship between the two peoples from generation to generation.

Xi’s appearance with Putin runs counter to his attempted charm offensive with the European Union, and EU leaders will remember this in any negotiations going forward.

India/Pakistan: It’s been a tension convention in the region for weeks following the terror attack on tourists in Indian-administered and early Wednesday morning it all boiled over as at least 26 people were killed after India fired missiles into Pakistani-controlled territory in several locations, in what Pakistan’s leader called an “act of war.”

Pakistan claimed it shot down five Indian fighter jets, and that the strikes had hit at least two sites previously tied to banned militant groups.

India said it struck infrastructure used by militants linked to last month’s massacre of 26 tourists, allegedly targeted by Islamist assailants.

Pakistan’s prime minister, Shehbaz Sharif, condemned Wednesday’s air strikes and said the “deceitful enemy has carried out cowardly attacks” and that his country would retaliate.

Along the Line of Control, which divides the disputed region of Kashmir between India and Pakistan, there were heavy exchanges of fire.

Thursday, Pakistan said it shot down 25 drones from India in its airspace while Indian said it “neutralized” Pakistan’s attempts to strike military targets with drones and missiles, as fighting spread between the nuclear-armed neighbors.

But there is so much disinformation flowing back and forth that it is virtually impossible to know what the situation is on the ground today, Friday.

Ankit Panda of the Carnegie Endowment for International Peace wrote Thursday: “Escalation dominance by the conventionally superior state against its insecure, weaker adversary that relies on a low threshold for nuclear use is a dangerous game. Incentives for Pakistan to introduce nuclear signals to the mix will grow,” he predicted.

Random Musings

--Presidential approval ratings....

Gallup: 44% approve of President Trump’s job performance, while 53% disapprove.  37% of independents approve (Apr. 1-14).

Rasmussen: 51% approve, 48% disapprove (May 9).

--George Simion, a right-wing nationalist who has promised to “Make Romania Great Again,” won the first round of his country’s presidential election on Sunday, bucking the recent trend of voters punishing candidates seen as friendly to President Trump.

Simion was far ahead of 10 rival candidates, garnering more than 40 percent (41).  The results, while incomplete, ensured Simion a shot in a runoff on May 18 against the second-place finisher, Nicusor Dan, the centrist mayor of Bucharest, Romania’s capital, who polled 21%.

Unlike voters in Canada and Australia who in recent elections favored parties openly opposed to Donald Trump, Romanians rewarded one of Europe’s most vocal admirers of the MAGA movement.

Romanian voters also gave a strong rebuke to a decision in December by the country’s Constitutional Court to annul an earlier first round of the presidential ballot and to cancel the victory of Calin Georgescu, an ultranationalist.  He was charged in February with various crimes, including illegal campaigning and involvement in the establishment of an organization “with a fascist, racist or xenophobic character.”

Georgescu was barred from competing in the rescheduled vote, voted on Sunday alongside Simion.  Both men have cast themselves as champions of ordinary Romanians against a corrupt establishment.

--Speaking of Australia, Prime Minister Anthony Albanese became the first Australian prime minister to win a second consecutive three-year term in 21 years.

Opposition leader Peter Dutton conceded defeat after Saturday’s election, the results coming in amazingly fast, I can’t help but add.

Albanese’s ruling center-left Labor Party took 88 seats and the conservative opposition coalition 40 seats in the 150-seat House of Representatives, the lower chamber where parties need a majority to form a government.  You have a slew of unaligned minor parties and independent candidates, as well as the Green Party that comprises the rest of the 150.

Energy policy and inflation have been major issues in the campaign, with both sides agreeing the country faces a cost of living crisis.

The 62-year-old Albanese struck a tone of unity while alluding to his opponent’s failed embrace of Trump-like policies.

“We do not need to beg or borrow or copy from anywhere else,” Albanese told a raucous crowd in Sydney.  “We do not seek out our inspiration overseas. We find it right here in our values and in our people.”

I watched the entire speech live on the BBC...quite good, actually.

In some ways, Albanese’s political resurrection resembled that of Canadian Prime Minister Carney, though Canada had received rougher treatment than Australia, and Albanese’s response was more muted, mainly because Australia is economically less intertwined with the United States than Canada, and it didn’t feel the sting of tariffs that Ottawa did.

And both Albanese and Dutton, a former defense minister, have doubled down on the security alliance with the United States, including a deal for Australia to buy nuclear submarines to push back on growing Chinese military assertiveness in the region.

--President Trump was forced to pull his nomination of Ed Martin as U.S. attorney for Washington, D.C., when North Carolina Republican Sen. Thom Tillis, a key member of the Judiciary Committee, said he would not support the nomination because of Mr. Martin’s work on behalf of the Jan. 6 rioters.  That dealt a fatal blow to his path to confirmation, leaving the committee deadlocked at 11-11, with all 10 Democrats on the panel opposing Martin.

As you can imagine, the declaration from Tillis prompted a fierce backlash among the influencer elites Trump is acutely attentive to appeasing.  The president then selected Fox News host Jeanine Pirro, a former county prosecutor and judge, to be the next interim U.S. Attorney for D.C.

--With VE Day in Europe, a YouGov poll in March indicated that, 80 years on, a large majority of Western Europeans (78% in the UK, 74% in Germany, 75% in Spain) now view the White House as a big threat to peace and security in Europe.

--I was reading an article in USA TODAY by Daniel de Vise on the use of coins.

To wit...American consumers made only 16% of their payments in cash in 2023, according to the Federal Reserve. A 2022 Pew survey found that two-fifths of consumers never use cash at all.

Americans throw away millions of dollars in coins every year, literally treating them like trash.  I disgustedly found out a good friend has been throwing out coins forever and I told him, ‘Give  them to me!!!’

Geezuz...I gladly save coins and put them through Coinstar...beer money, boys and girls.

Speaking of Coinstar, it converts $3 billion in coins into spendable cash every year.  The average jar (I use a small peanut can) yields $58 in buying power.

--The Los Angeles Times reports that soil testing commissioned and led by the paper found lead levels up to three times higher than the state health standard on several properties cleaned by the Army Corps of Engineers after January’s firestorms.

“It’s the first evidence that the federal government’s decision to skip comprehensive soil sampling – a step carried out after every major wildfire in California since 2007 – is leaving potentially dangerous levels of contamination behind,” the Times report.

The firestorms incinerated more than 16,000 structures across nearly 37,500 acres and unleashed tons of toxic material into the air, water and soil.  Homeowners who lost everything in the Eaton and Palisades fires assumed the federal debris-removal process would at least offer a fresh start for the land where the houses once stood.

FEMA insists that it has no responsibility to ensure destroyed properties meet California’s health standards.  The state isn’t stepping in to provide that testing either.

--The House passed a bill Thursday renaming the Gulf of Mexico the Gulf of America, the vote 211-206.

Trump’s order only carries authority within the United States.  Mexico, as well as other countries and international bodies, do not have to recognize the name change.

I thought Rep. Hakeem Jeffries (NY) put it well, when the House’s top Democrat asked his colleagues to vote against this “silly, small-minded and sycophantic piece of legislation.”

--The new budget proposal from President Trump would reduce the budget for the nation’s national parks, monuments, historic sites, seashores and trails by nearly 25% and hand over many of those to the states, who are ill-equipped to take over.

The proposal suggests cutting more than $1.2 billion from the $4.8 billion park service budget.  It quickly sparked outrage from leaders of organizations devoted to national parks and recreation lands, who had already voiced concern about the staff cuts ordered by the Department of Governmental Efficiency and other plans raised by Interior Secretary Doug Burgum.

“It’s nothing less than an all-out assault on America’s national parks,” said Theresa Pierno, president and CEO of the National Parks Conservation Association, a nonprofit advocacy group.  “This is the most extreme, unrealistic and destructive National Park Service budget a President has ever proposed in the agency’s 109-year history.”

Now this is all just a proposal and Congress still has the final say.  But the maintenance of the parks this summer as America’s families, pulling back on their travel budgets and not going overseas, or flying from New Jersey to California, are instead apt to flood our national park system to ‘levels never seen before,’ as Trump himself would put it.  And if they see a mess, long lines, campground reservations canceled, they will be pissed!  [With mid-term election ramifications.]

Remember, the park service has already lost 2,400 to 2,500 employees, more than 10% of its staff, including probationary employees who were fired and others who accepted voluntary buyouts and early retirements, according to the Parks Conservation Association.  The cuts have already forced parks to cut hours, close visitor centers and limit camping reservations.

--Finally, Thursday was quite a day for Catholics in the United States in particular, and Catholics worldwide, as we have our first American-born pope, Leo XIV.

It was a shock in that the election of Robert Francis Prevost, a Chicago native, Villanova graduate, came so soon, just the second day of the papal conclave.

As the Wall Street Journal editorialized:

“Pope Leo is thought to share his predecessor’s focus on the needy, and in his speech from the balcony of St. Peter’s he called for a church that seeks to be close ‘especially to those who are suffering.’  But it’ll help if he isn’t hostile to free markets, as the best way to alleviate poverty and much suffering.  Francis seems to have believed that the corruption he saw in Argentina was called capitalism....

“Perhaps the conclave saw (in Cardinal Prevost)...a compromise candidate between progressive and conservative factions. Whatever the case, we join Americans of all faiths, or none, in welcoming Pope Leo and wishing him Godspeed for the work ahead.”

Peggy Noonan / Wall Street Journal

“What stays with me after this momentous Thursday of the white smoke is the kindness with which the huge crowd cheered Leo, the encouragement and ready affection they showed. Other great faiths don’t do it this way, don’t present their leaders with everyone cheering and half of them weeping and all of them together in the great square. There’s a deep sweetness to how the Catholics do it, inviting the world.  It reminds me of James Joyce, and his definition of the church’s universality: ‘Here comes everybody.’”

I have to admit I shed a tear as a Catholic watching the event unfold.  I also rushed to the Wiki page on Pope Leo XIII, like I’m sure tens of millions did. 

I just think Leo XIV will be outstanding, and what a shot in the arm for the U.S. Catholic Church at a time of failing finances and closed schools, as well as a severe shortage of priests.

And I can’t help but add, what a massive boost for Villanova University, which is still reaping the rewards of having two NCAA men’s basketball championships in the last ten years.

The election of Leo will obviously lead to another surge in applications for this very fine institution of higher learning.  Good for them.

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

Slava Ukraini.

God bless America.

And God Bless Pope Leo XIV. “Blessed are the peace makers....”

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Gold $3341...the highest weekly close ever....
Oil $61.03

Bitcoin: $103,204 [4:00 PM ET, Friday] ...another big up week....

Regular Gas: $3.14 (down 4 cents); Diesel: $3.53 [$3.64 - $3.96 yr. ago]

Returns for the week 5/5-5/9

Dow Jones -0.2%  [41249]
S&P 500  -0.5%  [5659]
S&P MidCap  +0.5%
Russell 2000  +0.1% 
Nasdaq  -0.3%  [17928]

Returns for the period 1/1/25-5/9/25

Dow Jones  -3.0%
S&P 500  -3.8%
S&P MidCap  -5.6%
Russell 2000  -9.3%
Nasdaq  -7.2%

Bulls 32.1
Bears 33.9

Hang in there.

Brian Trumbore

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