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05/16/2020

For the week 5/11-5/15

[Posted 10:30 PM ET, Friday]

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Special thanks to Jerry S. for his ongoing support.

Edition 1,100

President Trump unveiled his new vaccine team from the Rose Garden this afternoon, led by Dr. Moncef Slaoui, who told us he was confident there would be a vaccine for Covid-19 by January.  We all pray he’s right.

But the president told us, “and this is important…vaccine or no vaccine, we’re back.”  America is open for business. Trump then said, again, even if there’s no vaccine “it will go away.”

Not quite, Mr. President.

There are of course so many variables when it comes to a vaccine, let alone the fact that we’re dealing with a virus that can affect the brain, kidneys, heart, vascular and digestive system.  Some patients have sudden strokes, pulmonary embolisms or heart-attack symptoms.  Others have kidney failure.  I mean good luck finding something that’s able to address most of the above.

Vaccines take a long time to develop because of how hard the science is – and how high the safety and effectiveness standards are.  Vaccines are given to healthy people, and there is little tolerance for side effects or risks.

And there’s the issue of ramping up production, not just to hundreds of millions of prepared doses, but billions to cover the world.

And who gets the initial doses?  For example, France on Thursday said equal access to any coronavirus vaccine developed by Sanofi was non-negotiable and that no country such as the United States should get priority because of financial motivations.

Sanofi, a French pharmaceutical giant, initially said any vaccine doses it produced in the United States could go to U.S. patients first, given the country had supported the research financially.

That’s a potential mess.  And President Trump was asked today, if China comes up with one first, do you think they’d share it with the United States?  ‘I hope they would,’ replied the president.

This is a massive issue, one of many.  January?  We have to be realistic.

---

This week the number of jobless claims filed was nearly another 3 million, bringing the 2-month total to 36.5 million, or 23% of the labor force.

Federal Reserve Chair Jerome Powell, in a sober review of where the U.S. economy stands as it slowly reopens, said on Wednesday the country could face an “extended period” of weak growth and stagnant incomes, though he pledged to use more Fed power as needed, while issuing a call for more fiscal spending.

“We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased.  This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.”

In a webcast, Powell said the U.S. response “has been particularly swift and forceful.  But the recovery may take some time to gather momentum,” and be dictated by progress fighting the coronavirus pandemic.

The longer the health risks persist, Powell added, the more likely businesses will fail and households will be strapped for income in a downturn that he noted has fallen most heavily on those least able to cope.

A recent Fed survey, he said, estimated that 40% of households with less than $40,000 in income included someone who has lost a job since February.  The worst case outcome leaves the economy mired in “an extended period of low productivity growth and stagnant incomes… Additional fiscal support could be costly but worth it if it helps avoid long term economic damage and leaves us with a stronger recovery,” Powell noted in what was a direct call to Congress to add to the nearly $3 trillion it has allocated for economic relief thus far.

Minneapolis Federal Reserve Bank President Neel Kashkari said on Thursday that the true U.S. jobless rate is probably 24% or 25%, and with economic difficulties likely to last as long as 18 months, more help from Congress is needed.

“We are in the equivalent of an economic war.  Money in the pockets of people who have lost their jobs is what we need right now.”

More on the economy below.

Meanwhile, President Trump is ratcheting up tensions with China, saying on Thursday he was very disappointed over its failure to contain the coronavirus, and that the worldwide pandemic had cast a pall over his trade deal with Beijing.

“I’m very disappointed in China,” Trump said in an interview with Fox Business Network.  “They should have never let this happen.  So I make a great trade deal and now I say this doesn’t feel the same to me.  The ink was barely dry and the plague came over.”

A Chinese state-run newspaper has reported that some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement.  Trump said he was not interested in renegotiating.

When asked about possible retaliatory measures against China, Trump said, “There are many things we could do. We could cut off the whole relationship.  Now, if you did, what would happen?  You’d save $500 billion,” referring to estimated U.S. annual imports from China, which he often refers to as lost money.

The remark drew ridicule from Hu Xijn, editor in chief of China’s influential Global Times newspaper, who referred to Trump’s much-criticized comments about how Covid-19 might be treated.

“This president once suggested Covid-19 patients inject disinfectants to kill the virus,” Hu said in a Twitter post.  “Remember this and you won’t be surprised when he said he could cut off the whole relationship with China.  All I can say is he is beyond my imagination for a normal president.”

Today, the Trump administration moved to block global chip supplies to blacklisted telecom equipment giant Huawei Technologies, spurring further fears of Chinese retaliation and hammering the shares of those U.S. producers of chipmaking equipment.

A report in the Global Times said Beijing was ready to put U.S. companies on an “unreliable entity list,” as part of countermeasures to the new limits on Huawei.  Companies such as Apple, Cisco Systems and Qualcomm could be impacted should this come to pass, as well as China suspending purchase of Boeing airplanes, the report said.

But the Commerce Department’s rule, effective Friday but with a 120-day grace period, also hits Taiwan Semiconductor Manufacturing Co., the biggest contract chipmaker and key Huawei supplier.  See below under “Street Bytes” for how this could impact their plans in the U.S.

U.S. companies can still sell to Huawei but not without licenses that need approval from the Commerce Department.

Tonight, China appears to be trying to tone down the rhetoric.

Covid-19 Death Toll…as of posting….

World  308,154
United States  88,507
UK  33,998
Italy  31,610
France  27,529
Spain  27,459
Brazil  14,817

*My state of New Jersey is now at 10,150 deaths.  It’s sickening.

Covid Bytes

--Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and a very public presence throughout this crisis, said the initial wave of outbreaks in cities such as New York City, where one in five people have been infected, represent a fraction of the illness and death yet to come.

“This damn virus is going to keep going until it infects everybody it possibly can,” Osterholm said Monday during a meeting with the USA TODAY Editorial Board.  “It surely won’t slow down until it hits 60 to 70 percent” of the population, the number that would create herd immunity and halt the spread of the virus.

--Russia has been undercounting when it comes to its Covid death toll, but it’s been reporting 10,000+ cases a day for a long stretch.  And now President Putin’s spokesman Dmitry Peskov said he had tested positive and was receiving treatment at hospital.  “Yes, I am sick. I am receiving treatment,” Peskov was quoted as saying by the Interfax news agency.

But while Peskov has been by Putin’s side for years, he says the last time he met the president in person was a month ago.  Putin has been working remotely from his residence outside Moscow.

--Brazil’s death toll has been soaring, with multiple daily tallies in excess of 800.  But experts say the real figure may be far higher due to a lack of testing in the country.

“Brazil is only testing people who end up in the hospital,” Domingo Alves from the University of Sao Paulo Medical School told AFP news agency.

--Deaths and new cases have been spiking in Mexico and government data released on Thursday showed more than half of hospitals in the capital, Mexico City, were at capacity with coronavirus patients.

--The Wisconsin Supreme Court on Wednesday dramatically rejected the extension of the state’s stay-at-home orders, siding with Republican legislators in a high-profile challenge of the emergency authority of a statewide official during the pandemic.

Gov. Tony Evers, a Democrat, had extended the prohibition on most travel and operations of nonessential businesses until May 26.  But in a 4-to-3 ruling, the court said that Wisconsin’s top health official had not followed the proper process in setting the strict limits for residents.

The ruling immediately ended stay-at-home provisions statewide.  Within hours, some taverns were reopening.

“This turns the state to chaos,” said Evers in an interview that evening.  “People will get sick.  And the Republicans own the chaos.”

President Trump tweeted: “The people want to get on with their lives. The place is bustling!”

Personally, I’m a big fan of Usinger’s Famous Sausage in Milwaukee.  Order some online for your summer barbecues.

--The pandemic has left the budgets of many state and local governments in a shambles.

For example, California Gov. Gavin Newsom on Thursday slashed his proposed budget for the next fiscal year by $19 billion, cutting spending for public schools and universities, environmental protection and natural resource management, dramatically scaling back programs planned when the state was flush with cash just a few months ago.  State employees will be asked to accept pay cuts of 10%.

In Ohio, back in February, the state was running a $200 million budget surplus. Two months later the state is facing a $777 million hole.

All but one state – Vermont – have balanced-budget laws in place and for most, the new fiscal year starts on July 1, leaving the governors desperate for help with just a few weeks to come up with a plan.

--California State University, the nation’s largest four-year college system, acted early and canceled most in-person classes in the fall and instead will offer instruction primarily online, Chancellor Timothy White announced Tuesday.

There will be some limited exceptions that allow for in-person activity, but otherwise the 23-campus Cal State system, with 500,000 students, will be taught online.

Needless to say this is a work in progress, more details to be revealed in June and July.

But it’s the same challenge faced all over the country, and much of the world for that matter.

Many of us are wondering if there will be fall college sports.

Trump World      

--The National Security Agency received and approved requests on behalf of more than three dozen Obama administration officials, including then-Vice President Joe Biden, to “unmask” a U.S. citizen mentioned in classified foreign intelligence reports during the presidential transition, revealing the identity of Michael Flynn.

The requests were made between President Trump’s November 2016 election and inauguration in January 2017, according to a memo declassified by Trump’s new acting director of national intelligence and made public by two Republican senators on Wednesday.

Flynn pleaded guilty in late 2017 to lying to the FBI about conversations he had with Russian ambassador to the U.S. Sergey Kislyak.  However, his lawyers now say they believe this document supports their case to reverse his plea, citing investigative misconduct.

Included on the list of Obama-era officials who tried to reveal the identity of Flynn were intelligence chiefs John Brennan and James Clapper.

Each person on the list was “an authorized recipient,” that the unmasking was approved through the agency’s normal procedures, and that intel officials could not say for sure that everyone on the list saw the unmasking information.

National Security Agency Director Paul Nakasone, who provided the list, said, “While the principals are identified below, we cannot confirm they saw the unmasked information.”

Republican supporters of Mr. Flynn have said his career was ruined through leaks of classified information about his communication with Kislyak at the end of 2016, when the Obama administration was imposing sanctions on Moscow for interfering in the U.S. election.

The Trump campaign accused Biden of improperly using the unmasking process to target Flynn, although none of the officials, including Biden, would have known of Flynn’s identity until after receiving the unmasked reports from the NSA.

“Americans have the right to know the depth of Biden’s involvement in the setup of Gen. Flynn to further the Russia collusion hoax,” Brad Parscale, the campaign manager of Trump’s re-election team, said in a statement.

Many Democrats and former intelligence officials who served under presidents of both parties said the scrutiny of foreign intercepts during the transition – and Mr. Flynn’s role in those months – were warranted given that intelligence officials had already issued warnings about Russia’s election interference and possible ties between Trump’s 2016 campaign and Moscow.

Editorial / Wall Street Journal…May 11

“RussiaGate is now a complete dead letter – but ObamaGate is taking its place.  Just how far did the then-president go to cripple his successor?

“It’s now clear the Obama-Comey FBI and Justice Department never had anything more substantial than the laughable fiction of the Steele dossier to justify the ‘counterintelligence’ investigation of the Trump campaign.  Yet incessant leaks from that supposedly confidential probe wound up consuming the Trump administration’s first months in office – followed by the Bob Mueller-led special counsel investigation that proved nearly the ‘total witch hunt’ that President Trump dubbed it.

“Information released as the Justice Department dropped its charges against Gen. Mike Flynn shows that President Barack Obama, in his final days in office, played a key role in fanning the flames of phony scandal.  Fully briefed on the ‘Crossfire Hurricane’ investigation, he knew the FBI had come up with nothing despite months of work starting in July 2016.

“Yet on Jan. 5, 2017, Obama told top officials who’d be staying on in the new administration to keep the crucial facts from Team Trump.

“It happened at an Oval Office meeting with Vice President Joe Biden, intel chiefs John Brennan and Jim Clapper and National Security Adviser Susan Rice, as well as FBI Director Jim Comey and Deputy Attorney General Sally Yates.

“ ‘From a national-security perspective,’ Rice’s memo afterward put it, ‘President Obama said he wants to be sure that, as we engage with the incoming team, we are mindful to ascertain if there is any reason that we cannot share information fully as it relates to Russia.’

“This, even as then-President Obama also directed that as many people as possible across his administration be briefed on the (utterly unsubstantiated) allegations against Team Trump – and as Rice and others took unprecedented steps to ‘unmask’ U.S. citizens like Flynn whose conversations had been caught on federal wiretaps of foreigners.

“Indeed, the Obama administration went on a full-scale leak offensive – handing The Washington Post, New York Times and others a nonstop torrent of ‘anonymous’ allegations of Trumpite ties to Moscow.  It suggested that the investigations were finding a ton of treasonous dirt on Team Trump – when in fact the investigators had come up dry.

“Sadly, Comey’s FBI played along – sandbagging Flynn with the ‘friendly’ interview that later became the pretext for the bogus charges dropped last week, as well as triggering the White House chaos that led to his ouster.  This, when the FBI had already gone over the general with a fine-tooth comb, and concluded that, no, he’d done nothing like collude with the Russians.

“Meanwhile, Comey himself gave Trump an intentionally misleading briefing on the Steele dossier.  That was followed by leaks that suggested the dossier was the tip of an iceberg, rather than a pack of innuendo that hadn’t at all checked out under FBI scrutiny.

“Pulitzer Prizes were won for blaring utter fiction; the Trump administration was kneecapped out of the gate. Innocents like Flynn were bankrupted along the way.

“Say this about Obama: He knows how to play dirty.”

Editorial / Wall Street Journal…May 13

“When news stories appeared in early 2017 about Michael Flynn’s conversation with Russia’s ambassador to the U.S., these columns wondered how Mr. Flynn’s call was so widely known. The names of private U.S. citizens caught on tape by U.S. intelligence are supposed to be ‘masked’ so their privacy is protected.

“Well, now we know…. It seems everyone but the night janitor wanted to know who Mr. Flynn was talking to.

“A stunning 39 separate officials snooped on Mr. Flynn’s conversations with foreign actors, lodging nearly 50 unmasking demands between Nov. 30, 2016 and Jan. 12, 2017.  Our sources say the nearly dozen redacted names on the list are likely intelligence types – who might have a legitimate interest in knowing who their foreign targets were speaking to in the U.S.  But most of the rest are partisan officials who had no business spying on their successors….

“The media cordon sanitaire that protects Democrats will say this is no big deal because unmasking is routine and legal.  But if the masking rule means nothing in practice, why pretend it exists?

“The Flynn unmasking is important because it occurred amid a media frenzy over supposed Trump campaign collusion with Russia.  Leaks to the Washington Post about the conversations between the Russian ambassador and both Mr. Flynn and soon-to-be Attorney General Jeff Sessions were played up as central to the collusion scandal.  They caused Mr. Sessions to recuse himself from the Russia probe and Mr. Flynn to be fired.  While unmasking isn’t illegal, leaking intelligence is.

“There are other dots to connect. Documents released last week show that former Deputy Attorney General Sally Yates first learned about the Flynn wiretapping from no less than President Barack Obama in a Jan. 5, 2017, Oval Office meeting.  At least one of the unmaskers must have told Mr. Obama.

“The dates of the unmasking raise further questions.  The FBI’s interest in Mr. Flynn was supposedly triggered by conversations starting Dec. 29, 2016.  Yet Mr. Flynn was first unmasked a month earlier – shortly after Mr. Trump named him security adviser.

“The (Dennis) McDonough unmasking takes place on Jan. 5, 2017 – the day of the Oval Office meeting at which Mr. Flynn was discussed.  Mr. Biden’s unmasking request was made on Jan. 12, 2017 – the day the Washington Post reported on the Flynn-Russia conversation.  Mr. Biden has some explaining to do.

“All of this is fodder for U.S. Attorney John Durham as he tries to unmask the origins of the Russia collusion political ambush. The Flynn unmaskings, and the timely media leaks, take the story into the Obama White House.  The peaceful transition of power is a hallmark of American democracy, or at least it used to be.  It isn’t supposed to be an opportunity for the Administration that lost the election to cripple its successors as they take power.”

So following is some of what I wrote back as the Flynn case was unfolding.

WIR 11/19/16

“President-elect Trump then made three key moves in assembling his national security and law enforcement team on Thursday and Friday, formally tabbing retired Lt. Gen. Michael Flynn to be his national security adviser, Alabama Republican Sen. Jeff Sessions for attorney general, and Kansas Republican Rep. Mike Pompeo to head the CIA.  All have hardline credentials.

“Flynn is a decorated military intelligence officer and former head of the Defense Intelligence Agency, with deep experience to draw upon.  He is obviously smart as hell but he’s about the last guy I’d want to have a beer with.  He has cozied up to the likes of Vladimir Putin and Turkey’s Erdogan.”

WIR 1/14/17

“Late Tuesday came the bombshell, via various media outlets, that U.S. intelligence agencies and the FBI have been investigating explosive (some salacious) claims, compiled by a former Western intelligence official, the Russian government operatives engaged in a conspiracy with advisers to Trump’s presidential campaign and employees of his company.

“Senior intelligence officials then shared the claims in a two-page addendum to a classified briefing President-elect Trump received a week ago Friday.

“On Wednesday, Kremlin spokesman Dmitry Peskov dismissed the report, denying Russia has compromising material on Donald Trump.

“ ‘This is a clear attempt to damage our bilateral relations,’ he said.  ‘Truly, there are those who whip up this hysteria, who will break their necks to support this ‘witch hunt.’’

“Trump tweeted after the allegations surfaced publicly Tuesday, ‘FAKE NEWS – A TOTAL POLITICAL WITCH HUNT!’

“U.S. officials did confirm that a summary of the information had been given to Trump out of an abundance of caution to make him aware of the allegations that could become public.

“But an early investigation of the claims by the FBI revealed that in one key instance, the allegation that Trump’s attorney Michael Cohen traveled to Prague to meet with Kremlin officials to arrange cash payments to hackers working under Moscow’s direction, the FBI found no evidence that Cohen had traveled to Prague, ever, as Cohen himself asserts.  Then we learned it wasn’t even the same Michael Cohen!

“Christopher Steele, 52, was identified as the ex-MI6 agent behind the dossier.  He went into hiding after his name was disclosed.  Steele, who is director of a private security firm, prepared the 35-page report – alleging Russia had compromising information on Trump – and now he fears for his life and expects backlash from Russia, the Daily Telegraph reports. You made your bed, buddy (though I feel for his innocent family).

“But on the issue of fake news (in the case of Russia, propaganda), Tuesday night, Hillary Clinton’s former campaign team ran with the above, the BuzzFeed story, with Brian Fallon and Josh Schwerin, both of whom served as Clinton spokesman, saying the information meant the Kremlin could be in a position to blackmail Trump.  All of them reacted via Twitter.

“ ‘This is only credible theory for why Trump refuses to accept intelligence community’s finding that Russia was behind hacks,’ Fallon said.  ‘No matter what he tweets in next 24 hours, Trump must be interrogated about Russia more than anything else at his (Wednesday) press conference.’

“Schwerin also suggested Russia may seek to blackmail Trump with information it may have obtained.  ‘There’s a reason all presidential candidates traditionally release tax returns and have full financial transparency.  Blackmail should be impossible.’

“Jesse Ferguson, also a Clinton campaign spokesman, said ‘could we really go from our first black male president to our first blackmailed president?’

“Former Harry Reid spokesman Adam Jentleson also took to Twitter on Tuesday to say that the former Senate Democratic leader had seen the documents before writing an October letter to FBI Director James Comey about Trump’s ties to Russia.  The letter asserted that Comey was in possession of ‘explosive information’ about close ties and coordination between Trump, his top advisers and the Russian government.

“ ‘Now you know,’ Jentleson said, in a series of tweets.

“But the dossier was fake news!  All the above Clinton team members jumped to conclusions, as is today’s modern politics, I understand.  But you ever wonder why I’m the ‘wait 24 hours’ guy?  It’s because I prefer to be responsible, and as accurate as possible.

“I have never, ever, published one of the fake news stories from this past election cycle, or any cycle over the nearly 18 years of this column.  [The only instance I can think of offhand that comes remotely close was in passing along the Judith Miller/New York Times pieces on WMDs in Iraq that proved to be false, but this wasn’t Russian-inspired disinformation.]

“I received all the fake news stories of the last two years in particular from many of my friends, and they should have known when I refused to reply to them what I thought of the garbage.

“I like Glenn Kessler’s explanation, Kessler being responsible for the Washington Post’s Fact checker: ‘People seem to confuse reporting mistakes by established news organizations with obviously fraudulent news produced by Macedonian teenagers.’  There have been reports that young Macedonians were setting up sites on Facebook devoted to click-baity, pro-Trump deception, and reaping advertising profits, as reported by the Post’s Margaret Sullivan.

“[Speaking of the Washington Post, I told you the other day how I didn’t include their story about Russian hacking of a Vermont utility because it didn’t meet my standards…and it proved to be false.]

“There’s a good reason why I read up to 20 sources a day, from around the world, before I put this column together.  Yes, they are mainstream media outlets, but I get all sides and then use my brain to come up with some conclusions, coupled with giving you both sides on all the major stories of the day to help you in your own decision-making as to what’s right and what’s wrong.  It’s also a ‘week in review,’ not ’12 hours in review,’ which is what we had the past few days, and sadly may get the next four to eight years.”

---

So that’s some of what I wrote, prior to Michael Flynn resigning.  I may or may not go through more of it next time.

But just as the impeachment hearings bored the hell out of me because I said President Trump should have been censured, as it was far from a perfect phone call, but not impeachable, the whole Flynn issue bores me as well.

What gets me is I’m the guy who covered every day of the Bush 43 and Obama presidencies, in this very space, and in the end called them two of the five worst presidents of all time.  I’ve also said I wouldn’t grade Donald Trump until his first term is over.

I just have to remind folks that Barack Obama is not our president today.  Nor was Hillary Clinton ever our president.  Donald Trump is president.

Yes, the FBI acted in unethical, if not illegal, ways the last few years and we await John Durham’s report.  There were some bad apples in the Bureau, led by James Comey.

But in case you haven’t noticed, we’re in the midst of a global pandemic, with over 88,000 lives lost in America, and an economic catastrophe.  Plus we’re playing with fire when it comes to China, as much as I agree with the hardline stance the administration has taken.

So I’m not going to waste a lot of time on Michael Flynn.  I’ll report the facts as we learn them and give you both sides, or one, as appropriate.

In the meantime I’m going to wait and see what Lindsey Graham’s committee might unwrap.  It would be totally appropriate for him to call Joe Biden.

--On Wednesday, President Trump described as not acceptable a warning given by top infectious disease expert Anthony Fauci about the dangers of reopening the economy and schools too quickly.

“To me it’s not an acceptable answer, especially when it comes to schools,” Trump told reporters at the White House when asked about Fauci’s warnings to senators on Tuesday about the risks of reopening the schools and economy too soon. 

Trump, in contrast, said on Wednesday the only thing that would be acceptable would be professors or teachers “over a certain age” not holding classes.  “I think they ought to take it easy for another few weeks,” he added.

--Thursday, President Trump said his administration did have a plan to deal with the pandemic – and Press Secretary Kayleigh McEnany flashed a previously unknown “Pandemic Crisis Action Plan” to prove it.

McEnany held up a binder for reporters before the president went off to Allentown, Pa., to tour a mask manufacturing facility, the president again refusing to wear a mask himself.

The unveiling of the pandemic action plan came as Dr. Rick Bright, a vaccine expert who led a biodefense agency in the Department of Health and Human Services, testified to Congress on Thursday that a “dark winter” was ahead because of the government’s failure to prepare.

McEnany also held up a copy of the plan the Obama administration left for the incoming Trump team, describing it as “insufficient.”

“The Obama-Biden plan that has been referenced was insufficient, wasn’t going to work, so what our administration did under the leadership of President Trump is do an entire 2018 pandemic preparedness report,” McEnany said.

Trump described his playbook as “much better, much more complete and a lot tougher” than the one left by his predecessor and was upbeat about a vaccine being delivered by the end of the year.

“We were given very little when we came into this administration, and they’ve done a fantastic job and I think we’re going to have a vaccine by the end of the year,” he said.

So the president and Ms. McEnany actually want us to believe they had a playbook going back to 2018, yet we are just learning about it now.  If they had it, why wasn’t it used, like in February?

Meanwhile, Senate Majority Leader Mitch McConnell lied in an interview this week when he said the Obama administration failed to leave the Trump administration “any kind of game plan” for something like the coronavirus pandemic. 

--Trump tweets:

“Good numbers coming out of States that are opening.  America is getting its life back! Vaccine work is looking VERY promising, before end of year.  Likewise, other solutions!”

“22-0 in my endorsements of Congressional Candidates this season.  California & Wisconsin won big on Tuesday.  Thank you to all of those very brilliant Voters.  You will not be disappointed!”

“I don’t know the so-called Whistleblower Rick Bright, never met him or even heard of him, but to me he is a disgruntled employee, not liked or respected by people I spoke to and who, with his attitude, should no longer be working for our government!”

“If I were a Senator or Congressman, the first person I would call to testify about the biggest political crime and scandal in the history of the USA, by FAR, is former President Obama.  He knew EVERYTHING.  So do it @LindseyGrahamSC, just do it.  No more Mr. Nice Guy.  No more talk!”

[Graham said he would hold hearings next month, but he wouldn’t call Obama.]

“Thank you to @foxandfriends for covering, supremely, the greatest political scandal in the history of the United States, OBAMAGATE. Fake News @CNN and Concast’s own MSDNC are only trying to make their 3 year Con Job just go away. They are embarrassed and don’t know what to do….

“….Likewise, the @nytimes and @washingtonpost are a disgrace to journalism.  They are all Fake News, and they know it better than anyone else.  History is unfolding, and it is not a pretty picture for ‘journalism.’”

“Our Testing is the BEST in the World, by FAR! Numbers are coming down in most parts of our Country, which wants to open and get going again.  It is happening, safely!”

“The American People are WARRIORS!”

Wall Street

In keeping with Fed Chair Powell’s remarks above, the economic news this week was awful.  Today, we had a report on April retail sales, which plunged 16.4% over March, -17.2% ex-autos; needless to say the worst ever for this metric.  April industrial production fell 11.2%, the worst performance for this indicator in its 101-year history.

April consumer prices fell 0.8%, -0.4% ex-food and energy; 0.3% year-over-year, 1.4% on core.

Producer prices for the month fell a record 1.3%, -0.3% on core; -1.2% vs. a year ago, 0.6% ex-food and energy.

As for the Atlanta Fed’s GDPNow barometer for second quarter GDP, try -42.8% for a seasonally adjusted annual rate.  Yes, -42.8%.

While President Trump talks of a “transition to greatness,” in the third quarter, there is not going to be a V-shaped recovery after what will be such an historically bad second quarter.  Instead, most economists now talk of a Nike “swoosh” recovery; a large drop followed by a painfully slow recovery, not just in the United States but in Europe as well.

Airlines certainly don’t see a return to 2019 levels until 2022 at the earliest.  Travel & leisure are getting decimated. Ditto retail, with J.C. Penney the latest to file for Chapter 11 today.  Despite a decent rally in oil prices the last few weeks, crude is still well below a level that would prevent massive job losses and drastically reduced capital spending. 

But at the same time, yes, we have to reopen America as much as we can.

Editorial / Wall Street Journal

“Much of the media continue to treat the economic destruction as a sideshow and present a false choice between saving lives and jobs.  But this is the fastest jobs collapse in modern history. The Great Depression drove millions of Americans into poverty and caused many suicides, and there’s a substantial risk this could happen again.

“Mental-health crisis hotlines are reporting spikes in calls. According to Express Scripts, anti-anxiety prescriptions increased by a third between mid-February and mid-March.  Many in despair will probably turn to alcohol or narcotics.  CVS executives warned this week that delayed care could lead to a surge of non-coronavirus related health problems.  They include cancers undiagnosed and illnesses left untreated.

“Hospitals have also had to cancel elective procedures, which is how they make most of their money. Stanford Health Care is cutting pay by 20% for its 14,000 workers.  The California Medical Association reported that revenues at private practices have declined by two-thirds since March 1, and half have furloughed or laid off staff.

“Congress has appropriated $175 billion to shore up hospitals, but this won’t help small physician practices much.  Many health-care providers warn they may not survive if their privately insured patients lose jobs and sign up for Medicaid, which doesn’t cover their costs.

“Businesses are also going under.  This week J.Crew and Neiman Marcus filed for bankruptcy, and many more will follow.  Some over-leveraged companies may have failed anyway, but many small businesses that were healthy before the government-induced coma are closing permanently.  Consider Griswold’s Tavern in Newport, Rhode Island, or an iconic Italian bistro Biba in Sacramento, both of which have been around since the 1980s.

“ADP this week reported that small businesses shed 11 million jobs in April.  According to the Labor report, 8.2 million leisure and hospitality jobs – about half of the industry – have been eliminated in two months.  Many Democrats seem to think this is no big deal since many laid-off workers will be able to collect enhanced unemployment benefits that pay more than their wages.  But what happens in a few months if their employers no longer exist?

“The crowd that demands the economy remain locked-down until there’s a vaccine, miracle therapy or daily testing of everyone in the country seem to think the government can replace the private economy.  That’s a fantasy, and they are betraying the very low- and middle-income workers they claim to represent.  Average wages in April rose sharply because so many low-income workers were laid off….

“It is important to stress that the strict lockdowns were a government policy choice.  But the damage is done, and our focus isn’t on recriminations. The issue is what to do now, and the public is wise enough to know that public health can’t be sustained without a healthy economy.  Americans can see the destruction all around them. They know the virus will be with us for a long time unless there’s a vaccine, so we have to learn to live with it and have a functioning economy.

“No politician wants to admit it, but we are moving to a de facto policy that gives people and businesses the leeway to open and make their own risk calculations.  Most Americans are smart enough to know they need to take precautions and social distance, and businesses have no incentive to endanger their employees.  Meat packers are learning that lesson the hard way.

“The tradeoff isn’t between lives and livelihoods.  The policy goal has to be to protect both as much as possible.  Deploy more personal protective equipment, greatly increase testing, build surge capability to handle flare-ups, and isolate society’s most vulnerable to keep hospitals from getting overwhelmed.  But for heaven’s sake reopen the economy so we don’t consign millions to years of poverty.”

The above was written last weekend.  The past few days have seen more states take their first steps to reopen.  Here’s hoping for the best.

Europe and Asia

Eurostat released its flash estimate for GDP in the first quarter, down 3.8% in the euro area compared with the fourth quarter.  It was the sharpest decline since the series started in 1995.  In the fourth quarter, GDP had grown by 0.1% in the EA19.  Year-over-year, seasonally adjusted GDP decreased by 3.2% in the eurozone.

Germany’s GDP fell 2.2% in the first quarter, per the Federal Statistics Office, the second steepest slump since unification in 1990.  But Germany has performed relatively well in the coronavirus health crisis.

Spain’s economy slumped 5.2% in Q1 over the previous quarter, France -5.8%, Italy -4.7% and the UK -2.0%.  [Reminder, the U.S. was down 1.2% in the first quarter over the prior quarter, -4.8% annualized.]

The containment measures didn’t hit Europe until March.  Not surprisingly, March industrial production in the EA19 fell 11.3% over February.

Meanwhile, officials at the European Commission warn that eurozone lenders could take a sizeable hit from the coronavirus outbreak as an economic slowdown puts strain on borrowers, the EC concluding there is “a risk to the financial stability of the euro area.”

“Averting severe and lasting damage…may require additional and substantial support,” the EC wrote in a report.

The bleak assessment lays bare the vulnerability of the sector to unpaid loans or investment losses due to the virus.

Brexit: The UK’s negotiator, David Frost, said “very little progress” has been made in the latest round of UK-EU trade talks, but he said a far-reaching free trade deal could still be agreed to before the end of the year “without major difficulties.”

But Frost said it was being held up by the EU’s desire to “bind” the UK to its laws and seek unfair access to fishing waters.

The EU’s Michel Barnier suggested the UK’s own demands were “not realistic” and warned of a looming stalemate.

Speaking in Brussels, the bloc’s chief negotiator said “no progress has been made on the most difficult issues.”

Barnier added he was “still determined but not optimistic.”  The EU, he said, would not accept a deal “at any price” and it was stepping up preparations for a no-deal outcome, in which the two sides would trade with each other under World Trade Organization rules.

Separately, Britain’s finance ministry fears the budget deficit could hit a record $414 billion due to the pandemic, potentially as high as $630 billion under a worst-case scenario, where the economy doesn’t recover.  As recently as March, the forecast was for just $67 billion.

Turning to AsiaChina reported industrial production in April rose 3.9%, year-over-year, the first expansion in 2020, while retail sales fell 7.5% yoy. 

China’s National Bureau of Statistics warned that while the country’s economic recovery would continue, increased risks of a global recession pose significant challenges for exports.  A spokeswoman for the NBS added that pressure on employment is relatively big and the current recovery is weak.

Fixed asset investment fell 10.3% in January-April. Private sector fixed-asset investment, which accounts for 60% of total investment, fell 13.3% over the four months, per the NBS.

Meanwhile, producer prices in April suffered their sharpest fall in four years, -3.1% vs. a year ago, showing weakening industrial demand.  Consumer prices rose 3.3% for the month.

Chinese factories are grappling with slashed or cancelled overseas orders after reopening as global demand stays tepid.

Finally, real estate investment in China fell 3.3% in the first four months of 2020 from a year earlier.

Street Bytes

--Stocks fell for a third week in four amid the increased tensions with China and reality hitting some investors in the face after the absurd rally off the lows, with the Dow Jones losing 2.7% to 23685.  The S&P 500 lost 2.3% and Nasdaq 1.2%.

--The New York Stock Exchange is reopening its iconic trading floor, two months after the pandemic forced its closure.

Only a limited number of traders will return to the floor when it reopens May 26, and they will be required to wear masks and abide by social-distancing rules to limit the spread.

Among the protective measures, those coming to work on the floor won’t be allowed to take New York City mass transit to get there and they’ll submit to temperature checks to enter the building.

--U.S. Treasury Yields

6-mo. 0.14%  2-yr. 0.15%  10-yr. 0.64%  30-yr. 1.32%

In his webcast this week, Fed Chair Powell said the Fed’s view on negative interest rates has not changed and it is not something the policy-setting committee is looking at.

--The budget deficit soared to a record $1.935 trillion in the 12 months through April as the U.S. ramped up spending to counter the economic slowdown and revenue dropped, a Treasury Department report showed on Tuesday.  The deficit for April alone was $737.85 billion.

--Yes, as the world reopens oil consumption is rising and the price has recovered, now $29.71 on West Texas Intermediate.  “We see early signs of a gradual rebalancing of oil markets.  It is still gradual and it is still fragile,” said Fatih Birol, the International Energy Agency’s executive director.  This year will still be the worst on record, he added.

The world is expected to consume 21.5 million fewer barrels a day this month compared with a year ago, the IEA said in its monthly oil report Thursday.

Saudi Arabia and Russia issued a joint statement that they are “pleased with the recent signs of improvements in economic and market indicators, especially the growth in oil demand and the ease in concerns about storage limits.”

Last week, U.S. crude inventories declined for the first time in nearly three months, falling by 75,000 barrels, the U.S. Energy Information Administration said.  The tally compared with expectations of a 4.1-million-barrel rise.

Gasoline consumption is expected to mount a strong comeback as “people are likely to choose their own cars, a relative ‘safe space’ over public transportation as states and countries reopen,” said Kathleen Kelley, an advisor to hedge funds.

But the U.S. oil rig count plunged by 34 to 258 during the week ended today, its lowest level since July 2009, according to data compiled by Baker Hughes.

--Despite the above, Saudi Aramco said its first-quarter profit fell and it would cut spending this year, as the state-controlled company is the latest global energy giant to slash spending as the collapse in prices weighs heavily on the industry.

The company expects capital spending of between $25 billion and $30 billion this year, down from $32.8 billion a year earlier.

--Tesla Inc. on Monday told employees at its California vehicle factory to return to work, a few days after local officials said the plant should remain closed as lockdown measures remain in effect to curb the spread of the coronavirus.

Separately on Monday, Treasury Secretary Steven Mnuchin said California should do whatever is necessary to help the electric carmaker reopen its only U.S. vehicle factory if it wants to keep the company in its state.

Health officials in Alameda County, where the Fremont factory is based, said on Friday and Saturday it must remain closed as long as local measures to curb the spread remain in effect, but after Tesla sued the county on Saturday, Alameda said Tesla could reopen the week of May 18 if it did so safely, though Tesla reopened Monday anyway, CEO Elon Musk saying the county can arrest him if they want.  The week went without incident.

Then late today there was a story that Tesla was looking to build a new plant in Austin, Texas.

Maureen Callahan / New York Post

“And this guy wants to colonize Mars.

“Covid-19 has unmoored self-proclaimed genius Elon Musk like nothing since the dramatic 2018 cave rescue of 12 Thai children and their coach – a rescue Musk badly tried and failed to hijack, leaving him to slander one hero diver as a ‘pedo.’

“Tesla’s market value immediately plunged by $2 billion.

“In the aftermath, a chastened Musk did a fairly good job of keeping his head down, his mouth shut and meeting Tesla production numbers – his longtime bete noire.

“And then came a global pandemic, treating us all to yet another look inside this once-in-a-generation mind.  It’s always a trip.

“ ‘The coronavirus panic is dumb,’ he tweeted on March 6.

“ ‘Maybe worth considering chloroquine for C19,’ he tweeted March 16.

“Days later, Dr. Anthony Fauci made it clear that chloroquine, an anti-malaria drug, had not been proven effective against coronavirus.

“Undeterred, Musk tweeted not to worry, proclaiming that children are ‘essentially immune’ to the coronavirus.

“Also not true.  In fact, we’ve watched children fall ill with a potentially fatal ‘pediatric multi-system inflammatory syndrome’ that our top medical minds can’t specifically diagnose.

“Yet Musk loves nothing more than promoting himself as some kind of global superhero, one with a brain so expansive, he can solve any crisis or manifest any vision in a flash – be it interplanetary travel or the ultra-fast fabrication of a submarine built to impossible specs or the magicking up of desperately needed, hard-to-build medical equipment.

“ ‘We have extra FDA-approved ventilators,’ he tweeted on March 31.  ‘Will ship to hospitals worldwide within Tesla delivery regions.  Device & shipping costs are free.  Only requirement is that the vents are needed immediately for patients, not stored in a warehouse.’

“Yet as widely reported, most of what he shipped were non-invasive machines used to help patients with sleep apnea.  In typical fashion – huge promises to the marketplace, little to no fulfillment – Musk kept upping the ante, posting a photo of what he called a Tesla-engineered ventilator that we have yet to actually see.

“No worries.  Like the greatest con artists, Musk is adept at moving eyeballs where he wants them.  So next he began agitating for the lockdown to end, tweeting that it’s a violation of civil liberties.

“ ‘FREE AMERICA NOW!’ was an April 29 tweet.

“If we know one thing about Covid-19, it’s this: Until there’s a vaccine, this virus is the constant.  Human behavior is the variable.

“Anyway, Musk must be going stir-crazy, because he also tweeted that he was giving up all his material possessions, including his residence…with one stipulation.

“ ‘I own Gene Wilder’s house,’ he tweeted.  ‘It cannot be torn down or lose any [of] its soul.’

“This was after tweeting parts of ‘The Star-Spangled Banner’ in bits and pieces.

“Tesla shareholders, are you alarmed yet?  Does this seem like the behavior of a stable, sober-as-a-judge CEO?

“Musk and girlfriend Grimes just named their new baby boy X AE A-12….

“His real fight is reopening and operating his Tesla plant in California, which he did yesterday in defiance of lockdown orders.  What’s that – debt, you say?  A history of over-promising and under-producing? Tesla on the verge, again as ever?

“No – look over here, fellow Americans.  Elon Musk wants us to believe he’s a warrior for our liberty and our rights, not an overleveraged Silicon Valley billionaire who, like the smallest of us, may be totally undone by a virus that cares not about who you are.

“Or, in this case, want so badly to be.”

--Toyota Motor Corp. said on Tuesday it expects profit to drop by 80% to its lowest in nine years, as Japan’s biggest automaker grapples with the impact of the pandemic.

Toyota expects a $13.95 billion hit from a fall in global vehicle sales this year, yet it still expects to eke out a profit.

“The coronavirus has dealt us a bigger shock than the 2008 global financial crisis,” Toyota President Akio Toyoda said at a media briefing.  “We anticipate a big drop in sales volumes, but despite that we are expecting to remain in the black.”

Toyota forecast global sales of 8.9 million vehicles – a nine-year low – versus 10.46 million in the year just ended. It expects sales to recover to 2019 levels next year.

Boy, I don’t see that happening.

Others, such as Honda Motor Co. and General Motors have refrained from issuing forecasts.

And then today, Toyota said it would reduce vehicle production in Japan by 122,000 units in June due to a lack of demand.  The company also said it would halt production at all of its 15 plants for four days next month, while stopping output for up to 7 days on 10 of its production lines

--China’s auto market grew in April, overcoming an early-year collapse triggered by the coronavirus shutdown and ending a 21-month streak of declines that has shaken the world’s largest auto market.

April sales grew 4.4% from a year earlier to 2.07 million vehicles, according to the government-backed China Association of Automobile Manufacturers.

But the good news could be short-lived, the association warned.

“We don’t see this month’s growth as a normal phenomenon, as the domestic epidemic eased and consumers delayed purchases until recently,” said Chen Shihua, the association’s deputy secretary-general. “It is difficult to guarantee positive growth in the coming months.”

After sales crashed 42% in the first quarter of 2020, analysts are forecasting total sales of about 23 million vehicles this year, which would be the market’s weakest performance since 2013.

The association said it expects sales for the year to be down 15% to 25%, depending on how quickly the pandemic can be brought under control.

--Boeing’s jetliner order book slipped below 5,000 for the first time in seven years, as another 108 MAX jets from its backlog were pulled and Boeing downgraded the status of deals for another 101 planes because of airlines’ weakening financial health in the wake of the coronavirus pandemic.

Boeing’s report comes as CEO David Calhoun told NBC’s “Today” show that passenger traffic might be up to 25% of pre-pandemic levels by September, possibly approaching 50% by the end of the year.

Calhoun also made waves when he predicted the collapse of air-travel demand would “most likely” force a major U.S. carrier to go out of business.  He didn’t name any specific airlines.

Airport temperature checks, onboard mask requirements and other safety measures will help reassure passengers as they look to resume flying, Calhoun said.

But both Boeing and European rival Airbus SE are going to be suffering more cancellations as airlines shrink or collapse.

Boeing has shed more than 500 orders so far this year, trimming its backlog to 4,834 jets.  Airbus has outstanding orders for around 7,500 aircraft, but I would expect that to come down considerably.

For its part, Airbus has told top staff that the company must be “resized” in plans to be set out by the end of June and is ready to cut jet production again to tackle any second wave of the coronavirus crisis, according to Reuters.

--Last week I wrote of United Airlines warning that when its payroll protection provisions for a federal loan come off Sept. 30, there would be large layoffs, and this week, Delta Air Lines said it expects to have 7,000 more pilots come the fall than it will need.  Delta has 14,000 pilots on its roster currently.  This doesn’t necessarily mean it plans on laying off anywhere near 7,000, but we’ll see how the summer goes.

The move comes as Delta also announced it would no longer fly Boeing’s wide-body 777 aircraft and some of the other older, high-maintenance jets, as part of further cost-cutting measures.

--Avianca Holdings, Latin America’s No. 2 airline, filed for bankruptcy on Sunday, as a bond payment deadline loomed and after pleas for aid from Colombia’s government to weather the coronavirus crisis have so far been unsuccessful.

Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis.

“Avianca is facing the most challenging crisis in our 100-year history,” Avianca CEO Anko van der Werff said in a press release.

Avianca was weak before the outbreak, but its bankruptcy filing highlights the challenges for airlines that cannot count on state rescues.

--El Al Airlines called on Israeli Prime Minister Netanyahu to rescue it on Wednesday, rejecting what it said were impossible conditions for state-backed loans.  The Israeli government is demanding an overhaul of El Al, including layoffs, before agreeing to a lifeline.

To receive government backing on a loan the airline has agreed to cut 2,000 jobs and reduce annual expenses by $350 million out of a total of $2 billion. The airline suspended passenger flights until at least the end of May, while about 6,000 of its 6,500 workforce are on unpaid leave until June 30.

The government argues the airline’s problems, including a bloated workforce, high salaries and a weak balance sheet, began well before the Covid-19 outbreak.

--Ryanair said it planned to restore 40 percent of its flight schedule from July 1st, affecting 90 percent of its route network.

--Hyatt Hotels Corp. said late Monday it would lay off 1,300 people globally as it tries to cope with the coronavirus crisis.  It also cut pay for senior management, board members and all employees in corporate offices.

“Due to the historic drop in travel demand and the expected slow pace of recovery, Hyatt has made the extremely difficult decision to implement layoffs and restructure roles across its global corporate functions, beginning June 1, 2020,” Hyatt said in a statement.

Understand Hyatt had 55,000 employees as of Dec. 31, 2019, so there will be far more layoffs than 1,300.

The hotel industry is estimating a loss of $1.4 billion in revenue every week on account of the outbreak and a 30% drop in hotel occupancy over a year, according to statements from the American Hotel and Lodging Association and the U.S. Travel Association in March.  It has only gotten worse since.

Generally speaking, the hotel industry needs 70 percent occupancy rates to breakeven.

--Marriott International, Inc. reported first quarter results that were miserable.  January and February were good, ex-Greater China, but then everything came crashing down in March.

CEO Arne Sorenson on the outlook:

“The resilience of travel demand is evident in the improving trends we see in Greater China.  Occupancy at our hotels in the region reached 25 percent in April, up from less than 10 percent in mid-February 2020.

“Looking at our occupancy and booking trends, it appears that lodging demand in most of the rest of the world has stabilized, albeit at very low levels.  Occupancy was around 20 percent over the past two weeks in North American limited-service hotels, benefiting from leisure and drive-to demand.” 

Like I said, the issue is how quickly the industry can get back to 70 percent.

--Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of silicon chips, said Friday it would spend $12 billion to build a chip factory in Arizona, as U.S. concerns grow about dependence on Asia for the critical technology.

TSMC said the project has the support of the federal government and Arizona and comes as the Trump administration has sought to jump-start development of new chip factories in the U.S. dsue to rising fears about the U.S.’s heavy reliance on Taiwan, China and South Korea to produce microelectronics and other key technologies.

The plant in terms of capacity will actually be relatively small and the factory will employ more than 1,600 people.  The company has a small facility in Washington state, with most of TSMC’s factories being in Taiwan.

But it’s a win for President Trump, especially with Arizona Republican Sen. Martha McSally facing a tough reelection challenge in November.

Secretary of State Mike Pompeo said: “TSMC’s announcement comes at a critical juncture, when China is competing to dominate cutting-edge technology and control critical industries.  The TSMC facility in Arizona will increase U.S. economic independence.”

However, now we have the Huawei situation.  What will TSMC do?

--Share in Cisco Systems rallied after the company’s fiscal third quarter results came in slightly ahead of Wall Street’s expectations.

For the three months ending April 25, the networking equipment and software giant reported revenue of $12.0 billion, down 8% from a year earlier, but slightly ahead of the Street consensus. Earnings were also better than forecast.

Revenue was down 8% in the Americas, 9% in the Asia-Pacific region, and 7% in Europe, Middle East and Africa.  Revenue from infrastructure platforms – the company’s core networking business – was down 15%.  Security revenue was up 6%.

Cisco said that while results in March were ahead of expectations, it began to see a broad-based slowdown across the business in April as countries across the world were locked down.

For the fiscal fourth quarter ending in July, Cisco is projecting a revenue decline of 8.5% to 11.5% from a year ago.

“During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future,” CEO Chuck Robbins said in a statement.  “The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before.  We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations.”

Cisco said 95% of its staff is now working from home.

--By now you should have begun to see a changing pattern in the kinds of advertisements you are seeing on television.  In the initial days of the lockdown, it was more than a bit surreal to have the normal fare, but big ad campaigns are purchased over extended periods of time.

But now, as the Wall Street Journal reported, the “upfront” deals for the fall season for  many advertisers came off May 1 and they can begin to cut back future spending commitments, with companies able to cancel up to 50% of their third-quarter ad spending.

Many such as General Motors, PepsiCo and Domino’s Pizza will take advantage of this, according to the Journal.

Some companies are shifting TV ad dollars to other marketing channels including streaming-video services.

But going back to March and April, networks were under no obligation to offer any breaks.  “Advertisers can generally cut up to 50% of their commitment for a particular quarter only if they notify networks roughly 60 days ahead of time. That window had already passed for the second quarter.” [WSJ]

--Shares in General Electric, the iconic industrial manufacturer, closed at $5.79 on Wednesday, its lowest close since Dec. 20, 1991, when the stock ended at $5.59.  It closed the week at $5.51.

Clearly, investors are worried about the issues confronting the company, first and foremost, aviation, which is GE’s largest and most profitable segment, but now the sector has been decimated.

With industry insiders believing it will take years for demand to return to 2019 levels, that means fewer planes and fewer GE engines – as well as fewer shop visits to overhaul and repair the global jet fleet.  Planes are serviced in proportion to the amount they are used.

--Public pension plans lost a median 13.2% in the three months ended March 31, according to Wilshire Trust Universe Comparison Service data, slightly more than in the fourth quarter of 2008.

Stocks then bounced back in April, but pension losses are poised to drive up already-burdensome retirement costs for governments.

--Under Armour on Monday posted a first-quarter loss as the athletic-apparel company saw its revenue drop beginning in the last weeks of the period as it closed its stores due to the pandemic.

“During the first quarter, our results in January and February were tracking well to our plan,” said CEO Patrik Frisk.  “Since mid-March, as the pandemic accelerated dramatically in North America and EMEA (Europe, Middle East and Africa) and retail store closures ensued, we’ve experienced a significant decline in revenue across all markets.”

Revenue fell to $930.2 million from $1.2 billion last year, with a per-share loss of $1.30, vs. an expected loss of $0.22 per share.

North America revenue in the March quarter fell 28%, while EMEA revenue rose 2.9%, and Asia-Pacific lost 34% to $95.7 million.

Under Armour, which withdrew its full-year guidance in early April, said it is planning to cut operating expenses this year by $325 million through temporary layoffs at retail stores and U.S. distribution centers, cutting incentive compensation, postponing planned capital spending, and “tightening” hiring, contract services, travel and other discretionary spending.

I list it all because this is what you are going to be hearing from virtually every company that isn’t Amazon, Walmart or some specific tech companies.

--Corn futures on the Chicago Board of Trade are trading around $3.20 per bushel – well below what most farmers say is their break-even price.  Soybean futures are roughly at their break-even price of $8.40 per bushel.

Tuesday, the USDA forecast corn production in the U.S. will reach 16 billion bushels this year, pushing U.S. inventories up 1.2 billion bushels to a total 3.3 billion – their highest level since 1987.

The USDA said it expects higher export demand for soybeans this year and for U.S. exports of the crop to rise by 375 million bushels to over two billion bushels, so farmers have been switching from corn to soybeans.

--Soft-shell crabs are cheaper this year, due to dining spots being closed or relying on takeout or delivery, so at least for the New York area, wholesalers have a surplus of the crabs, which are typically sourced from North Carolina at this time of year.

--We note the passing of a New York original, Ben Benson.  Benson, a fun-loving restaurateur who got his start helping his former college buddy more or less invent the singles bar when they ran the original TGI Fridays in the 1960s, branched off to open Ben Benson’s steakhouse, which he liked to say was the most famous steakhouse nobody’s ever heard of.

While it didn’t have the swagger of Brooklyn’s Peter Luger, and was viewed kind of low on the list of New York’s great steakhouses, it did attract its share of celebrities, while Benson was the familiar voice from a radio jingle. 

He also had some clever newspaper ads.  The most famous of them came in the wake of the 1985 murder of Paul Castellano, then the boss of the Gambino crime family.  Castellano and an aide were shot on the sidewalk heading into Sparks Steak House on Manhattan’s East Side.    So Benson ran an ad featuring a photograph of the crime scene and the tagline “Eat at Ben Benson’s.  It won’t kill you.”

Foreign Affairs

China: The United States on Thursday condemned attempts by China-linked “cyber actors and non-traditional collectors affiliated” to steal U.S. intellectual property and data related to coronavirus research, Secretary of State Mike Pompeo said.

“The PRC’s behavior in cyberspace is an extension of its counterproductive actions throughout the Covid-19 pandemic,” he said in a statement.  “While the United States and our allies and partners are coordinating a collective, transparent response to save lives, the PRC continues to silence scientists, journalists, and citizens, and to spread disinformation, which has exacerbated the dangers of this health crisis.”

Pompeo’s comments came a day after the FBI and the Department of Homeland Security issued a joint statement to raise awareness against what they called threats to coronavirus-related research from actors related to China.

It said the FBI was investigating digital break-ins at U.S. organizations by China-linked “cyber actors” that it had monitored “attempting to identify and illicitly obtain valuable intellectual property and public health data related to vaccines, treatments, and testing from networks and personnel affiliated with Covid-19-related research.”

The Chinese Embassy in Washington condemned the allegations as “lies.”

Wendy Wu / South China Morning Post

“China should prepare for more inflammatory comments from U.S. President Donald Trump and his team as relations between the two countries come under increasing pressure due to the Covid-19 pandemic and the economic recession it created, according to observers.

“The assessment came after Trump expressed doubts over the phase one trade agreement signed between Washington and Beijing in January, saying the U.S. would save $500 billion if it ‘cut off the whole relationship’ with China.

“In an interview with Fox Business News on Thursday, Trump even poured cold water on his personal ties to Chinese President Xi Jinping.

“ ‘I have a very good relationship [with Xi], but I just, right now I don’t want to speak to him.’

“The two leaders last spoke on February 7.”

Monday, however, Chinese Vice-premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin had an apparently positive discussion, the two sides agreeing to create “favorable conditions” for the phase one trade deal, which has been facing growing uncertainty.

On a different topic….

David Ignatius / Washington Post

“Here’s a fact that ought to startle every American who assumes that because we spend nearly $1 trillion each year on defense, we have primacy over our emerging rival, China.

“ ‘Over the past decade, in U.S. war games against China, the United States has a nearly perfect record: We have lost almost every single time.’

“That’s a quote from a new book called ‘The Kill Chain: Defending America in the Future of High-Tech Warfare,’ the most provocative critique of U.S. defense policy I’ve read in years.  It’s written by Christian Brose, former staff director of the Senate Armed Services Committee and a close adviser to late senator John McCain.  The book isn’t just a wake-up call, it’s a fire alarm in the night.

“Brose explains a terrible truth about war with China: Our spy and communications satellites would immediately be disabled; our forward bases in Guam and Japan would be ‘inundated’ by precise missiles; our aircraft carriers would have to sail away from China to escape attack; our F-35 fighter jets couldn’t reach their targets because the refueling tankers they need would be shot down.

“ ‘Many U.S. forces would be rendered deaf, dumb and blind,’ writes  Brose.  We have become so vulnerable, he argues because we’ve lost sight of the essential requirement of military power – the ‘kill chain’ of his title – which means seeing threats and taking quick, decisive action to stop them.

“How did this happen?  It wasn’t an intelligence failure, or a malign Pentagon and Congress, or lack of money, or insufficient technological prowess.  No, it was simply bureaucratic inertia compounded by entrenched interests. The Pentagon is good at doing what it did yesterday, and Congress insists on precisely that.  We have been so busy buffing our legacy systems that, as Brose writes, ‘The United States got ambushed by the future.’

“We should reflect on America’s vulnerability now, when the world is on lockdown and we have a chance to reassess.  A new world will emerge after the global coronavirus pandemic, one in which China is clearly determined to challenge the United States as a global power.  The propaganda wars over the origin of the novel virus that causes Covid-19 are just a warm-up for the tests that are ahead….

“Rather than match our fleets of carriers and squadrons of jets around the world, Beijing developed precision weapons to prevent the United States from mobilizing these forces.  An example is the DF-21, the world’s first ballistic anti-ship missile, which Brose says is known as ‘the carrier killer.’

“The Pentagon wants to confront the Chinese challenge, but it insists on keeping the same vulnerable, wildly expensive platforms at the center of the United States’ military power.  And Congress demands adherence to this status quo… Expensive fighter jets have a lobby, too.  As Brose notes; ‘There is a reason why parts of the F-35 are built in every state in America…It is political expediency.’….

“Brose envisions a military version of the ‘Internet of things’ – smart systems at the outer edges of our defenses which can blunt China’s dominance without breaking the budget or risking all-or-nothing confrontations.  ‘We have the money, the technological base, and the human talent,’ he writes.  What we lack is the will to change.”

North Korea: The regime axed its spy chief as well as the long-running head of Kim Jong-un’s security – signs of a major shakeup as the mystery over Kim’s own status deepens.

The head of the Reconnaissance General Bureau (RGB), Jang Kil Song, was ousted, the RGB being the North’s military intelligence agency, according to a report by South Korea’s Unification Ministry.

The RGB is behind the most high-profile attacks as well as spy mission, including those against the U.S., South Korea says.

The army general who has led the team protecting Kim since 2010 was also replaced.

Meanwhile, Kim has stayed out of sight amid rumors over his health.

After not being seen for three weeks, missing key national events, he appeared May 1 at a ribbon-cutting event to prove he was alive, but as I noted the other week, that merely sparked rumors it was a body double.

Separately, U.S. authorities have detected the assembly and completion of ICBMs at an automobile plant where North Korea launched ballistic missiles in 2017, according to a South Korean newspaper Dong-A Ilbo.

The official told the newspaper that the U.S. is keeping an eye on future developments and exploring multiple possibilities such as the test-firing of an ICBM.

Pyongyang may attempt provocations before July, according to the newspaper. Back on Jan. 1, Kim Jong-un declared he would soon debut a “new strategic weapon.”

Iran: One Iranian warship accidentally struck another with a missile during an exercise, killing 19 sailors and wounding 15 others, Iran’s navy said on Monday.

The incident took place during training in the Gulf of Oman, a sensitive waterway that connects to the Strait of Hormuz through which about a fifth of the world’s oil passes.  Iran regularly conducts exercises in the area.

A frigate fired at a training target released by a support ship, however, the support ship stayed too close to the target and was hit, Iran’s state broadcaster said.

Afghanistan: President Trump’s stalled plans to bring peace to Afghanistan suffered a new setback with a decision by Kabul to resume operations against the Taliban following two attacks on Tuesday that killed scores of Afghans.

One heinous attack at a Kabul hospital killed 24 people, including two newborns, and a suicide bombing at a funeral in Nangarhar province killed at least 32.

The Taliban denied involvement in both attacks, and the U.S. believes ISIS was responsible for the attack on the hospital, which also claimed the lives of 16 mothers of newborns.  The hospital was run by the international humanitarian organization Doctors Without Borders.  ISIS claimed responsibility for the attack on the funeral.

The government had largely suspended offensives against the Taliban since a U.S. troop reduction plan was unveiled on Feb. 29, but Afghan President Ashraf Ghani’s stated intention to resume operations could start a cycle of violence, according to a U.S. official.

Washington still plans to cut the number of U.S. troops in Afghanistan to 8,600 from about 13,000 when the deal was struck, and then assess whether to go lower.

Random Musings

--Presidential tracking polls….

Gallup: Still old data…49% approve of President Trump’s job performance, 47% disapprove; 93% of Republicans approve, 47% of independents (Apr. 14-28).
Rasmussen: 49% approve, 50% disapprove (May 15).

--In a new CNN poll conducted by SSRS, presumptive Democratic nominee Joe Biden’s lead over President Trump now stands at 5 points, with 51% of registered voters nationwide backing Biden, while 46% prefer Trump.

BUT…in 15 battleground states decided by 8 points or less in 2016, Trump leads Biden 52% to 45%.

95% of Democrats back Biden, and 95% of Republicans back Trump.  Among independents, 50% back Trump, 46% Biden.

54% of voters say they trust the president to better handle the nation’s economy, while 42% say they prefer Biden.

But 55% say Biden would be best for uniting the country and not divide it, while 38% say Trump would be, which is laughable. 

--A Rasmussen national telephone and online survey found that 23% of likely Republican voters think their party should find someone other than Trump to be their presidential nominee.

By comparison, 28% of likely Democratic voters say their party should find someone other than Joe Biden to be their presidential nominee.

--In a separate CNN poll, 54% continue to say the U.S. government is doing a poor job preventing the spread of Covid-19.  And, while a growing share of the public feels the worst of the outbreak is behind us (44%, up from 17% in April), a majority (52%) still sees the worst on the horizon.

82% of Democrats say the federal government is generally doing a poor job, 80% of Republicans say it’s doing a good one.  There is nearly a 70-point chasm between Democrats and Republicans over whether the government is doing enough to address the potential for the death toll to rise to 100,000 or higher (81% of Republicans say the government is doing enough, just 13% of Democrats agree).

And 76% of Republicans think the government is doing enough to address a potential second wave of cases vs. 10% of Democrats.

Republicans are more apt to say that they trust the information they get about coronavirus from Trump (84%) than they are to say they trust the information they get from Dr. Anthony Fauci (61%).  Among Democrats, just 4% say they trust the information they get from the president, well behind the 81% who say they trust Fauci or the 80% who trust the CDC.

--According to a Washington Post/University of Maryland poll, half of all Americans say that they think it will not be safe for gatherings of 10 or more people until midsummer, including nearly one-quarter who say it will not be safe until 2021 or later.

In a similar poll in mid-April, 51% of all Americans said they thought gatherings of 10 or more people would be safe by the end of June.

Eight in 10 say it is necessary for people in their communities to wear a mask when outside the home, and more than 8 in 10 say it is important for people to stay at least six feet apart from one another in public.  Three in 4 say people in their communities should avoid gatherings with friends with whom they do not live, and more than 7 in 10 say people should stay home as much as possible.

Clear majorities of Democrats, Republicans and independents support such measures, although about a third or more of Republicans say wearing masks, avoiding gatherings with friends and staying home as much as possible are unnecessary.

--In a Washington Post/Ipsos poll of opinions on various governors and their performance during the pandemic, in Ohio, 86 percent of adults say they approve of the way Gov. Mike DeWine (R), who moved aggressively to close down his state and has been cautious about lifting the restrictions, has dealt with the crisis.  In Georgia, 39 percent of adults approve of the performance of Gov. Brian Kemp (R), who moved less swiftly than some other governors to mitigate the spread and has been in the forefront of reopening the economy there.

Overall, 71 percent of Americans approve of their governors’ performances, with majority approval from people in both major parties.  A much smaller 43 percent approve of Trump’s efforts.  But like the above CNN survey, 8 in 10 Republicans and Republican-leaning independents approve of his handling of the crisis and almost 9 in 10 Democrats and Democratic-leaning independents disapprove.

In the two largest states with Democratic governors, Gov. Gavin Newsom (Calif.) and Gov. Andrew Cuomo (N.Y.) receive positive marks from about 8 in 10 adults.  Those lofty positive ratings dip significantly in the two largest states with Republican governors.  In Florida, 60 percent of adults give Gov. Ron DeSantis positive ratings, while in Texas, 57 percent say they approve of the way Gov. Greg Abbott has handled the pandemic.

58 percent of Republicans in California and New York give their governors positive marks.

DeWine wins approval from 90 percent of Democrats in his state, while only 12 percent of Ohio Democrats approve of the president’s handling of the crisis.

People were simply asked whether they approved of “your state’s governor.”   The respondents were not prompted with either the name of the governor or the governor’s political party.

But there is a significant partisan divide on the issue of slowing the virus’ spread rather than beginning to reopen businesses.

92 percent of Democrats and Democratic-leaning independents say they favor closures to deal with the virus, while Republicans and Republican-leaning independents are split almost evenly, with 49 percent saying closures should be the top priority and 50 percent saying businesses should be opened up again.

--Meanwhile, in my state of New Jersey, Democratic Gov. Phil Murphy has a 77% overall approval rating among all New Jerseyans: 92% of Democrats, 76% of independents, and 47% of Republicans approve.

72% give him an ‘A’ or ‘B’ for his handling of the outbreak, according to the Rutgers-Eagleton poll.

--Joe Biden, op-ed / Washington Post…from his basement….

“(On the coronavirus response from President Trump), instead of unifying the country to accelerate our public health response and get economic relief to those who need it, President Trump is reverting to a familiar strategy of deflecting blame and dividing Americans.  His goal is as obvious as it is craven: He hopes to split the country into dueling camps, casting Democrats as doomsayers hoping to keep America grounded and Republicans as freedom fighters trying to liberate the economy.

“It’s a childish tactic – and a false choice that none of us should fall for.

“The truth is that everyone wants America to reopen as soon as possible – claiming otherwise is completely absurd.  Governors from both parties are doing their best to make that happen, but their efforts have been slowed and hampered because they haven’t gotten the tools, resources and guidance they need from the federal government to reopen safely and sustainably.  That responsibility falls on Trump’s shoulders – but he isn’t up to the task.

“It’s been more than two months since Trump claimed that ‘anybody that wants a test can get a test.’  It was a baldfaced lie when he said it, and it still isn’t remotely true.  If we’re going to have thriving workplaces, restaurants, stores and parks, we need widespread testing.  Trump can’t seem to provide it – to say nothing of worker safety protocols, consistent health guidelines or clear federal leadership to coordinate a responsible reopening.

“In addition to forgetting the tests, he seems to have forgotten that ours is a demand-driven economy – you can shout from the rooftops that we’re open for business, but the economy will not get back to full strength if the number of new cases is still rising or plateauing and people don’t believe that it’s safe to return to normal activities.  Without measures in place to prevent the spread of the virus, many Americans won’t want to shop in stores, eat in restaurants or travel; small-business owners know that a nervous public won’t provide enough customers to ensure they thrive….

“Again, the solution isn’t a mystery.  The Trump administration could focus on producing and distributing adequate testing and protocols that conform with the guidance of public health experts; doing so would speed up the reopening process considerably and make it a whole lot more effective.  The administration is fully aware that this is the right path, too – after all, the president and his staff are now reportedly receiving daily tests.  They knew exactly how to make the Oval Office safe and operational, and they put in the work to do it.

“They just haven’t put in that same work for the rest of us.

“If Trump and his team understand how critical testing is to their safety – and they seem to, given their own behavior – why are they insisting that it’s unnecessary for the American people?

“And why does the president insist on trying to turn this into yet another line of division, pitting strained, grieving Americans against one another across manufactured battle lines of ‘health’ and ‘the economy’?  Everybody knows that we can’t revive the latter unless we safeguard the former – and pretending otherwise is the most transparent of political ploys.  Instead of once again seeking to divide us, Trump should be working to get Americans the same necessary protections he has gotten for himself.”

--Mike Garcia, a former military pilot and newcomer to Republican electoral politics, won a special election to fill a House seat in Southern California, that of former Rep. Katie Hill, the first time the GOP has flipped a Democratic held seat in California since 1998.  A good sign for the Republicans come November.  The two will square off again then to run for a full term.  Garcia won by 12 points.

In rural Wisconsin, Tom Tiffany, a Republican state senator, handily beat Tricia Zucker, a Democratic school board member, in another special election.

--FBI agents seized the mobile phone of North Carolina Republican Sen. Richard Burr, chairman of the Senate Intelligence Committee, as part of an investigation into stock sales.

Burr and three other senators sold holdings after receiving closed-door briefings on Capitol Hill early this year about the emerging threat of the coronavirus.

The Los Angeles Times reported that agents, acting on a search warrant, took Burr’s phone at his Washington home.

Burr and Kelly Loeffler, a Georgia Republican, both completed their transactions at a time when the Trump administration and Republican leaders were downplaying the potential damage the illness could cause in the U.S.

Burr’s office has said that the sales were unrelated to any information he received by virtue of his position as leader of the Intelligence Committee.  In March, he called for an inquiry into the allegations.

Thursday, Burr said he will step down as Intelligence Committee chairman, effective today.

--Howard Stern says he and President Trump are both showmen who love a good time – and they both hate Trump supporters.

“One thing Donald loves is celebrities, he loves the famous,” Stern said on his SiriusXM show Tuesday.  “He loves it. He loves to be in the mix.”

Stern hosted Trump on his radio show several times over the years and invited him to his 2008 wedding, seating the then-future president next to Joan Rivers. 

“The oddity in all of this is the people Trump despises most, love him the most,” Stern said.  “The people who are voting for Trump for the most part…he wouldn’t even let them in a f---ing hotel.  He’d be disgusted by them.  Go to Mar-a-Lago, see if there’s any people who look like you.  I’m talking to you in the audience.”

Stern said Trump should resign, though conceded that was highly unlikely to happen.

--What a tragic story out of the Netherlands this week.  At least five surfers drowned off the coast of the resort of Scheveningen after they were caught in strong winds and foamy waters.  At least three of the five were seasoned surfers who were professional trainers in open water swimming, according to a Dutch broadcaster.

--The other week I wrote of how the pandemic was killing nonprofits/charity groups.  In my group’s case, our annual golf outing is 2/3s of our fundraising total and as it was June 1st, sayonara.  And, like so many groups, the money is from sponsorships from local businesses so at least in the case of New Providence, which is where my Lions Club is based, no one knows who is surviving and you sure as hell can’t go into a business even if they do reopen and ask, “Do you want to sponsor a hole like you have in the past?”  Ah, I don’t think you do that.

But my club is in great financial shape so I read with interest that in a survey of 3,400 nonprofits two years ago, half said they had only three months’ cash on hand or less; 19% said they had a month or less, according to the Nonprofit Finance Fund, a New York-based lender that conducted the survey.

--A RealClearPolitics Opinion Research poll released Thursday found 40 percent of families are more likely to choose to homeschool their children or engage in virtual learning once the coronavirus pandemic subsides.

The survey asked parents, “Are you more or less likely to enroll your son or daughter in a homeschool, neighborhood homeschool co-op, or virtual school once the lockdowns are over?”

Of the 626 parents who responded, 40.8 percent said they were “more likely” to do so, while 31.1 percent replied they were “less likely.”

---

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

We thank our healthcare workers and first responders.

God bless America.

---

Gold $1754
Oil $29.71…up $10 in two weeks…

Returns for the week 5/11-5/15

Dow Jones  -2.7%  [23685]
S&P 500  -2.3%  [2863]
S&P MidCap  -5.85
Russell 2000  -5.5%
Nasdaq  -1.2%  [9014]

Returns for the period 1/1/20-5/15/20

Dow Jones  -17.0%
S&P 500  -11.45
S&P MidCap  -23.5%
Russell 2000  -24.7%
Nasdaq  +0.5%

Bulls 47.1
Bears 26.0

Hang in there. Wash your hands.

Brian Trumbore

 

 



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Week in Review

05/16/2020

For the week 5/11-5/15

[Posted 10:30 PM ET, Friday]

Note: StocksandNews has significant ongoing costs and your support is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974.

Special thanks to Jerry S. for his ongoing support.

Edition 1,100

President Trump unveiled his new vaccine team from the Rose Garden this afternoon, led by Dr. Moncef Slaoui, who told us he was confident there would be a vaccine for Covid-19 by January.  We all pray he’s right.

But the president told us, “and this is important…vaccine or no vaccine, we’re back.”  America is open for business. Trump then said, again, even if there’s no vaccine “it will go away.”

Not quite, Mr. President.

There are of course so many variables when it comes to a vaccine, let alone the fact that we’re dealing with a virus that can affect the brain, kidneys, heart, vascular and digestive system.  Some patients have sudden strokes, pulmonary embolisms or heart-attack symptoms.  Others have kidney failure.  I mean good luck finding something that’s able to address most of the above.

Vaccines take a long time to develop because of how hard the science is – and how high the safety and effectiveness standards are.  Vaccines are given to healthy people, and there is little tolerance for side effects or risks.

And there’s the issue of ramping up production, not just to hundreds of millions of prepared doses, but billions to cover the world.

And who gets the initial doses?  For example, France on Thursday said equal access to any coronavirus vaccine developed by Sanofi was non-negotiable and that no country such as the United States should get priority because of financial motivations.

Sanofi, a French pharmaceutical giant, initially said any vaccine doses it produced in the United States could go to U.S. patients first, given the country had supported the research financially.

That’s a potential mess.  And President Trump was asked today, if China comes up with one first, do you think they’d share it with the United States?  ‘I hope they would,’ replied the president.

This is a massive issue, one of many.  January?  We have to be realistic.

---

This week the number of jobless claims filed was nearly another 3 million, bringing the 2-month total to 36.5 million, or 23% of the labor force.

Federal Reserve Chair Jerome Powell, in a sober review of where the U.S. economy stands as it slowly reopens, said on Wednesday the country could face an “extended period” of weak growth and stagnant incomes, though he pledged to use more Fed power as needed, while issuing a call for more fiscal spending.

“We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased.  This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.”

In a webcast, Powell said the U.S. response “has been particularly swift and forceful.  But the recovery may take some time to gather momentum,” and be dictated by progress fighting the coronavirus pandemic.

The longer the health risks persist, Powell added, the more likely businesses will fail and households will be strapped for income in a downturn that he noted has fallen most heavily on those least able to cope.

A recent Fed survey, he said, estimated that 40% of households with less than $40,000 in income included someone who has lost a job since February.  The worst case outcome leaves the economy mired in “an extended period of low productivity growth and stagnant incomes… Additional fiscal support could be costly but worth it if it helps avoid long term economic damage and leaves us with a stronger recovery,” Powell noted in what was a direct call to Congress to add to the nearly $3 trillion it has allocated for economic relief thus far.

Minneapolis Federal Reserve Bank President Neel Kashkari said on Thursday that the true U.S. jobless rate is probably 24% or 25%, and with economic difficulties likely to last as long as 18 months, more help from Congress is needed.

“We are in the equivalent of an economic war.  Money in the pockets of people who have lost their jobs is what we need right now.”

More on the economy below.

Meanwhile, President Trump is ratcheting up tensions with China, saying on Thursday he was very disappointed over its failure to contain the coronavirus, and that the worldwide pandemic had cast a pall over his trade deal with Beijing.

“I’m very disappointed in China,” Trump said in an interview with Fox Business Network.  “They should have never let this happen.  So I make a great trade deal and now I say this doesn’t feel the same to me.  The ink was barely dry and the plague came over.”

A Chinese state-run newspaper has reported that some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement.  Trump said he was not interested in renegotiating.

When asked about possible retaliatory measures against China, Trump said, “There are many things we could do. We could cut off the whole relationship.  Now, if you did, what would happen?  You’d save $500 billion,” referring to estimated U.S. annual imports from China, which he often refers to as lost money.

The remark drew ridicule from Hu Xijn, editor in chief of China’s influential Global Times newspaper, who referred to Trump’s much-criticized comments about how Covid-19 might be treated.

“This president once suggested Covid-19 patients inject disinfectants to kill the virus,” Hu said in a Twitter post.  “Remember this and you won’t be surprised when he said he could cut off the whole relationship with China.  All I can say is he is beyond my imagination for a normal president.”

Today, the Trump administration moved to block global chip supplies to blacklisted telecom equipment giant Huawei Technologies, spurring further fears of Chinese retaliation and hammering the shares of those U.S. producers of chipmaking equipment.

A report in the Global Times said Beijing was ready to put U.S. companies on an “unreliable entity list,” as part of countermeasures to the new limits on Huawei.  Companies such as Apple, Cisco Systems and Qualcomm could be impacted should this come to pass, as well as China suspending purchase of Boeing airplanes, the report said.

But the Commerce Department’s rule, effective Friday but with a 120-day grace period, also hits Taiwan Semiconductor Manufacturing Co., the biggest contract chipmaker and key Huawei supplier.  See below under “Street Bytes” for how this could impact their plans in the U.S.

U.S. companies can still sell to Huawei but not without licenses that need approval from the Commerce Department.

Tonight, China appears to be trying to tone down the rhetoric.

Covid-19 Death Toll…as of posting….

World  308,154
United States  88,507
UK  33,998
Italy  31,610
France  27,529
Spain  27,459
Brazil  14,817

*My state of New Jersey is now at 10,150 deaths.  It’s sickening.

Covid Bytes

--Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and a very public presence throughout this crisis, said the initial wave of outbreaks in cities such as New York City, where one in five people have been infected, represent a fraction of the illness and death yet to come.

“This damn virus is going to keep going until it infects everybody it possibly can,” Osterholm said Monday during a meeting with the USA TODAY Editorial Board.  “It surely won’t slow down until it hits 60 to 70 percent” of the population, the number that would create herd immunity and halt the spread of the virus.

--Russia has been undercounting when it comes to its Covid death toll, but it’s been reporting 10,000+ cases a day for a long stretch.  And now President Putin’s spokesman Dmitry Peskov said he had tested positive and was receiving treatment at hospital.  “Yes, I am sick. I am receiving treatment,” Peskov was quoted as saying by the Interfax news agency.

But while Peskov has been by Putin’s side for years, he says the last time he met the president in person was a month ago.  Putin has been working remotely from his residence outside Moscow.

--Brazil’s death toll has been soaring, with multiple daily tallies in excess of 800.  But experts say the real figure may be far higher due to a lack of testing in the country.

“Brazil is only testing people who end up in the hospital,” Domingo Alves from the University of Sao Paulo Medical School told AFP news agency.

--Deaths and new cases have been spiking in Mexico and government data released on Thursday showed more than half of hospitals in the capital, Mexico City, were at capacity with coronavirus patients.

--The Wisconsin Supreme Court on Wednesday dramatically rejected the extension of the state’s stay-at-home orders, siding with Republican legislators in a high-profile challenge of the emergency authority of a statewide official during the pandemic.

Gov. Tony Evers, a Democrat, had extended the prohibition on most travel and operations of nonessential businesses until May 26.  But in a 4-to-3 ruling, the court said that Wisconsin’s top health official had not followed the proper process in setting the strict limits for residents.

The ruling immediately ended stay-at-home provisions statewide.  Within hours, some taverns were reopening.

“This turns the state to chaos,” said Evers in an interview that evening.  “People will get sick.  And the Republicans own the chaos.”

President Trump tweeted: “The people want to get on with their lives. The place is bustling!”

Personally, I’m a big fan of Usinger’s Famous Sausage in Milwaukee.  Order some online for your summer barbecues.

--The pandemic has left the budgets of many state and local governments in a shambles.

For example, California Gov. Gavin Newsom on Thursday slashed his proposed budget for the next fiscal year by $19 billion, cutting spending for public schools and universities, environmental protection and natural resource management, dramatically scaling back programs planned when the state was flush with cash just a few months ago.  State employees will be asked to accept pay cuts of 10%.

In Ohio, back in February, the state was running a $200 million budget surplus. Two months later the state is facing a $777 million hole.

All but one state – Vermont – have balanced-budget laws in place and for most, the new fiscal year starts on July 1, leaving the governors desperate for help with just a few weeks to come up with a plan.

--California State University, the nation’s largest four-year college system, acted early and canceled most in-person classes in the fall and instead will offer instruction primarily online, Chancellor Timothy White announced Tuesday.

There will be some limited exceptions that allow for in-person activity, but otherwise the 23-campus Cal State system, with 500,000 students, will be taught online.

Needless to say this is a work in progress, more details to be revealed in June and July.

But it’s the same challenge faced all over the country, and much of the world for that matter.

Many of us are wondering if there will be fall college sports.

Trump World      

--The National Security Agency received and approved requests on behalf of more than three dozen Obama administration officials, including then-Vice President Joe Biden, to “unmask” a U.S. citizen mentioned in classified foreign intelligence reports during the presidential transition, revealing the identity of Michael Flynn.

The requests were made between President Trump’s November 2016 election and inauguration in January 2017, according to a memo declassified by Trump’s new acting director of national intelligence and made public by two Republican senators on Wednesday.

Flynn pleaded guilty in late 2017 to lying to the FBI about conversations he had with Russian ambassador to the U.S. Sergey Kislyak.  However, his lawyers now say they believe this document supports their case to reverse his plea, citing investigative misconduct.

Included on the list of Obama-era officials who tried to reveal the identity of Flynn were intelligence chiefs John Brennan and James Clapper.

Each person on the list was “an authorized recipient,” that the unmasking was approved through the agency’s normal procedures, and that intel officials could not say for sure that everyone on the list saw the unmasking information.

National Security Agency Director Paul Nakasone, who provided the list, said, “While the principals are identified below, we cannot confirm they saw the unmasked information.”

Republican supporters of Mr. Flynn have said his career was ruined through leaks of classified information about his communication with Kislyak at the end of 2016, when the Obama administration was imposing sanctions on Moscow for interfering in the U.S. election.

The Trump campaign accused Biden of improperly using the unmasking process to target Flynn, although none of the officials, including Biden, would have known of Flynn’s identity until after receiving the unmasked reports from the NSA.

“Americans have the right to know the depth of Biden’s involvement in the setup of Gen. Flynn to further the Russia collusion hoax,” Brad Parscale, the campaign manager of Trump’s re-election team, said in a statement.

Many Democrats and former intelligence officials who served under presidents of both parties said the scrutiny of foreign intercepts during the transition – and Mr. Flynn’s role in those months – were warranted given that intelligence officials had already issued warnings about Russia’s election interference and possible ties between Trump’s 2016 campaign and Moscow.

Editorial / Wall Street Journal…May 11

“RussiaGate is now a complete dead letter – but ObamaGate is taking its place.  Just how far did the then-president go to cripple his successor?

“It’s now clear the Obama-Comey FBI and Justice Department never had anything more substantial than the laughable fiction of the Steele dossier to justify the ‘counterintelligence’ investigation of the Trump campaign.  Yet incessant leaks from that supposedly confidential probe wound up consuming the Trump administration’s first months in office – followed by the Bob Mueller-led special counsel investigation that proved nearly the ‘total witch hunt’ that President Trump dubbed it.

“Information released as the Justice Department dropped its charges against Gen. Mike Flynn shows that President Barack Obama, in his final days in office, played a key role in fanning the flames of phony scandal.  Fully briefed on the ‘Crossfire Hurricane’ investigation, he knew the FBI had come up with nothing despite months of work starting in July 2016.

“Yet on Jan. 5, 2017, Obama told top officials who’d be staying on in the new administration to keep the crucial facts from Team Trump.

“It happened at an Oval Office meeting with Vice President Joe Biden, intel chiefs John Brennan and Jim Clapper and National Security Adviser Susan Rice, as well as FBI Director Jim Comey and Deputy Attorney General Sally Yates.

“ ‘From a national-security perspective,’ Rice’s memo afterward put it, ‘President Obama said he wants to be sure that, as we engage with the incoming team, we are mindful to ascertain if there is any reason that we cannot share information fully as it relates to Russia.’

“This, even as then-President Obama also directed that as many people as possible across his administration be briefed on the (utterly unsubstantiated) allegations against Team Trump – and as Rice and others took unprecedented steps to ‘unmask’ U.S. citizens like Flynn whose conversations had been caught on federal wiretaps of foreigners.

“Indeed, the Obama administration went on a full-scale leak offensive – handing The Washington Post, New York Times and others a nonstop torrent of ‘anonymous’ allegations of Trumpite ties to Moscow.  It suggested that the investigations were finding a ton of treasonous dirt on Team Trump – when in fact the investigators had come up dry.

“Sadly, Comey’s FBI played along – sandbagging Flynn with the ‘friendly’ interview that later became the pretext for the bogus charges dropped last week, as well as triggering the White House chaos that led to his ouster.  This, when the FBI had already gone over the general with a fine-tooth comb, and concluded that, no, he’d done nothing like collude with the Russians.

“Meanwhile, Comey himself gave Trump an intentionally misleading briefing on the Steele dossier.  That was followed by leaks that suggested the dossier was the tip of an iceberg, rather than a pack of innuendo that hadn’t at all checked out under FBI scrutiny.

“Pulitzer Prizes were won for blaring utter fiction; the Trump administration was kneecapped out of the gate. Innocents like Flynn were bankrupted along the way.

“Say this about Obama: He knows how to play dirty.”

Editorial / Wall Street Journal…May 13

“When news stories appeared in early 2017 about Michael Flynn’s conversation with Russia’s ambassador to the U.S., these columns wondered how Mr. Flynn’s call was so widely known. The names of private U.S. citizens caught on tape by U.S. intelligence are supposed to be ‘masked’ so their privacy is protected.

“Well, now we know…. It seems everyone but the night janitor wanted to know who Mr. Flynn was talking to.

“A stunning 39 separate officials snooped on Mr. Flynn’s conversations with foreign actors, lodging nearly 50 unmasking demands between Nov. 30, 2016 and Jan. 12, 2017.  Our sources say the nearly dozen redacted names on the list are likely intelligence types – who might have a legitimate interest in knowing who their foreign targets were speaking to in the U.S.  But most of the rest are partisan officials who had no business spying on their successors….

“The media cordon sanitaire that protects Democrats will say this is no big deal because unmasking is routine and legal.  But if the masking rule means nothing in practice, why pretend it exists?

“The Flynn unmasking is important because it occurred amid a media frenzy over supposed Trump campaign collusion with Russia.  Leaks to the Washington Post about the conversations between the Russian ambassador and both Mr. Flynn and soon-to-be Attorney General Jeff Sessions were played up as central to the collusion scandal.  They caused Mr. Sessions to recuse himself from the Russia probe and Mr. Flynn to be fired.  While unmasking isn’t illegal, leaking intelligence is.

“There are other dots to connect. Documents released last week show that former Deputy Attorney General Sally Yates first learned about the Flynn wiretapping from no less than President Barack Obama in a Jan. 5, 2017, Oval Office meeting.  At least one of the unmaskers must have told Mr. Obama.

“The dates of the unmasking raise further questions.  The FBI’s interest in Mr. Flynn was supposedly triggered by conversations starting Dec. 29, 2016.  Yet Mr. Flynn was first unmasked a month earlier – shortly after Mr. Trump named him security adviser.

“The (Dennis) McDonough unmasking takes place on Jan. 5, 2017 – the day of the Oval Office meeting at which Mr. Flynn was discussed.  Mr. Biden’s unmasking request was made on Jan. 12, 2017 – the day the Washington Post reported on the Flynn-Russia conversation.  Mr. Biden has some explaining to do.

“All of this is fodder for U.S. Attorney John Durham as he tries to unmask the origins of the Russia collusion political ambush. The Flynn unmaskings, and the timely media leaks, take the story into the Obama White House.  The peaceful transition of power is a hallmark of American democracy, or at least it used to be.  It isn’t supposed to be an opportunity for the Administration that lost the election to cripple its successors as they take power.”

So following is some of what I wrote back as the Flynn case was unfolding.

WIR 11/19/16

“President-elect Trump then made three key moves in assembling his national security and law enforcement team on Thursday and Friday, formally tabbing retired Lt. Gen. Michael Flynn to be his national security adviser, Alabama Republican Sen. Jeff Sessions for attorney general, and Kansas Republican Rep. Mike Pompeo to head the CIA.  All have hardline credentials.

“Flynn is a decorated military intelligence officer and former head of the Defense Intelligence Agency, with deep experience to draw upon.  He is obviously smart as hell but he’s about the last guy I’d want to have a beer with.  He has cozied up to the likes of Vladimir Putin and Turkey’s Erdogan.”

WIR 1/14/17

“Late Tuesday came the bombshell, via various media outlets, that U.S. intelligence agencies and the FBI have been investigating explosive (some salacious) claims, compiled by a former Western intelligence official, the Russian government operatives engaged in a conspiracy with advisers to Trump’s presidential campaign and employees of his company.

“Senior intelligence officials then shared the claims in a two-page addendum to a classified briefing President-elect Trump received a week ago Friday.

“On Wednesday, Kremlin spokesman Dmitry Peskov dismissed the report, denying Russia has compromising material on Donald Trump.

“ ‘This is a clear attempt to damage our bilateral relations,’ he said.  ‘Truly, there are those who whip up this hysteria, who will break their necks to support this ‘witch hunt.’’

“Trump tweeted after the allegations surfaced publicly Tuesday, ‘FAKE NEWS – A TOTAL POLITICAL WITCH HUNT!’

“U.S. officials did confirm that a summary of the information had been given to Trump out of an abundance of caution to make him aware of the allegations that could become public.

“But an early investigation of the claims by the FBI revealed that in one key instance, the allegation that Trump’s attorney Michael Cohen traveled to Prague to meet with Kremlin officials to arrange cash payments to hackers working under Moscow’s direction, the FBI found no evidence that Cohen had traveled to Prague, ever, as Cohen himself asserts.  Then we learned it wasn’t even the same Michael Cohen!

“Christopher Steele, 52, was identified as the ex-MI6 agent behind the dossier.  He went into hiding after his name was disclosed.  Steele, who is director of a private security firm, prepared the 35-page report – alleging Russia had compromising information on Trump – and now he fears for his life and expects backlash from Russia, the Daily Telegraph reports. You made your bed, buddy (though I feel for his innocent family).

“But on the issue of fake news (in the case of Russia, propaganda), Tuesday night, Hillary Clinton’s former campaign team ran with the above, the BuzzFeed story, with Brian Fallon and Josh Schwerin, both of whom served as Clinton spokesman, saying the information meant the Kremlin could be in a position to blackmail Trump.  All of them reacted via Twitter.

“ ‘This is only credible theory for why Trump refuses to accept intelligence community’s finding that Russia was behind hacks,’ Fallon said.  ‘No matter what he tweets in next 24 hours, Trump must be interrogated about Russia more than anything else at his (Wednesday) press conference.’

“Schwerin also suggested Russia may seek to blackmail Trump with information it may have obtained.  ‘There’s a reason all presidential candidates traditionally release tax returns and have full financial transparency.  Blackmail should be impossible.’

“Jesse Ferguson, also a Clinton campaign spokesman, said ‘could we really go from our first black male president to our first blackmailed president?’

“Former Harry Reid spokesman Adam Jentleson also took to Twitter on Tuesday to say that the former Senate Democratic leader had seen the documents before writing an October letter to FBI Director James Comey about Trump’s ties to Russia.  The letter asserted that Comey was in possession of ‘explosive information’ about close ties and coordination between Trump, his top advisers and the Russian government.

“ ‘Now you know,’ Jentleson said, in a series of tweets.

“But the dossier was fake news!  All the above Clinton team members jumped to conclusions, as is today’s modern politics, I understand.  But you ever wonder why I’m the ‘wait 24 hours’ guy?  It’s because I prefer to be responsible, and as accurate as possible.

“I have never, ever, published one of the fake news stories from this past election cycle, or any cycle over the nearly 18 years of this column.  [The only instance I can think of offhand that comes remotely close was in passing along the Judith Miller/New York Times pieces on WMDs in Iraq that proved to be false, but this wasn’t Russian-inspired disinformation.]

“I received all the fake news stories of the last two years in particular from many of my friends, and they should have known when I refused to reply to them what I thought of the garbage.

“I like Glenn Kessler’s explanation, Kessler being responsible for the Washington Post’s Fact checker: ‘People seem to confuse reporting mistakes by established news organizations with obviously fraudulent news produced by Macedonian teenagers.’  There have been reports that young Macedonians were setting up sites on Facebook devoted to click-baity, pro-Trump deception, and reaping advertising profits, as reported by the Post’s Margaret Sullivan.

“[Speaking of the Washington Post, I told you the other day how I didn’t include their story about Russian hacking of a Vermont utility because it didn’t meet my standards…and it proved to be false.]

“There’s a good reason why I read up to 20 sources a day, from around the world, before I put this column together.  Yes, they are mainstream media outlets, but I get all sides and then use my brain to come up with some conclusions, coupled with giving you both sides on all the major stories of the day to help you in your own decision-making as to what’s right and what’s wrong.  It’s also a ‘week in review,’ not ’12 hours in review,’ which is what we had the past few days, and sadly may get the next four to eight years.”

---

So that’s some of what I wrote, prior to Michael Flynn resigning.  I may or may not go through more of it next time.

But just as the impeachment hearings bored the hell out of me because I said President Trump should have been censured, as it was far from a perfect phone call, but not impeachable, the whole Flynn issue bores me as well.

What gets me is I’m the guy who covered every day of the Bush 43 and Obama presidencies, in this very space, and in the end called them two of the five worst presidents of all time.  I’ve also said I wouldn’t grade Donald Trump until his first term is over.

I just have to remind folks that Barack Obama is not our president today.  Nor was Hillary Clinton ever our president.  Donald Trump is president.

Yes, the FBI acted in unethical, if not illegal, ways the last few years and we await John Durham’s report.  There were some bad apples in the Bureau, led by James Comey.

But in case you haven’t noticed, we’re in the midst of a global pandemic, with over 88,000 lives lost in America, and an economic catastrophe.  Plus we’re playing with fire when it comes to China, as much as I agree with the hardline stance the administration has taken.

So I’m not going to waste a lot of time on Michael Flynn.  I’ll report the facts as we learn them and give you both sides, or one, as appropriate.

In the meantime I’m going to wait and see what Lindsey Graham’s committee might unwrap.  It would be totally appropriate for him to call Joe Biden.

--On Wednesday, President Trump described as not acceptable a warning given by top infectious disease expert Anthony Fauci about the dangers of reopening the economy and schools too quickly.

“To me it’s not an acceptable answer, especially when it comes to schools,” Trump told reporters at the White House when asked about Fauci’s warnings to senators on Tuesday about the risks of reopening the schools and economy too soon. 

Trump, in contrast, said on Wednesday the only thing that would be acceptable would be professors or teachers “over a certain age” not holding classes.  “I think they ought to take it easy for another few weeks,” he added.

--Thursday, President Trump said his administration did have a plan to deal with the pandemic – and Press Secretary Kayleigh McEnany flashed a previously unknown “Pandemic Crisis Action Plan” to prove it.

McEnany held up a binder for reporters before the president went off to Allentown, Pa., to tour a mask manufacturing facility, the president again refusing to wear a mask himself.

The unveiling of the pandemic action plan came as Dr. Rick Bright, a vaccine expert who led a biodefense agency in the Department of Health and Human Services, testified to Congress on Thursday that a “dark winter” was ahead because of the government’s failure to prepare.

McEnany also held up a copy of the plan the Obama administration left for the incoming Trump team, describing it as “insufficient.”

“The Obama-Biden plan that has been referenced was insufficient, wasn’t going to work, so what our administration did under the leadership of President Trump is do an entire 2018 pandemic preparedness report,” McEnany said.

Trump described his playbook as “much better, much more complete and a lot tougher” than the one left by his predecessor and was upbeat about a vaccine being delivered by the end of the year.

“We were given very little when we came into this administration, and they’ve done a fantastic job and I think we’re going to have a vaccine by the end of the year,” he said.

So the president and Ms. McEnany actually want us to believe they had a playbook going back to 2018, yet we are just learning about it now.  If they had it, why wasn’t it used, like in February?

Meanwhile, Senate Majority Leader Mitch McConnell lied in an interview this week when he said the Obama administration failed to leave the Trump administration “any kind of game plan” for something like the coronavirus pandemic. 

--Trump tweets:

“Good numbers coming out of States that are opening.  America is getting its life back! Vaccine work is looking VERY promising, before end of year.  Likewise, other solutions!”

“22-0 in my endorsements of Congressional Candidates this season.  California & Wisconsin won big on Tuesday.  Thank you to all of those very brilliant Voters.  You will not be disappointed!”

“I don’t know the so-called Whistleblower Rick Bright, never met him or even heard of him, but to me he is a disgruntled employee, not liked or respected by people I spoke to and who, with his attitude, should no longer be working for our government!”

“If I were a Senator or Congressman, the first person I would call to testify about the biggest political crime and scandal in the history of the USA, by FAR, is former President Obama.  He knew EVERYTHING.  So do it @LindseyGrahamSC, just do it.  No more Mr. Nice Guy.  No more talk!”

[Graham said he would hold hearings next month, but he wouldn’t call Obama.]

“Thank you to @foxandfriends for covering, supremely, the greatest political scandal in the history of the United States, OBAMAGATE. Fake News @CNN and Concast’s own MSDNC are only trying to make their 3 year Con Job just go away. They are embarrassed and don’t know what to do….

“….Likewise, the @nytimes and @washingtonpost are a disgrace to journalism.  They are all Fake News, and they know it better than anyone else.  History is unfolding, and it is not a pretty picture for ‘journalism.’”

“Our Testing is the BEST in the World, by FAR! Numbers are coming down in most parts of our Country, which wants to open and get going again.  It is happening, safely!”

“The American People are WARRIORS!”

Wall Street

In keeping with Fed Chair Powell’s remarks above, the economic news this week was awful.  Today, we had a report on April retail sales, which plunged 16.4% over March, -17.2% ex-autos; needless to say the worst ever for this metric.  April industrial production fell 11.2%, the worst performance for this indicator in its 101-year history.

April consumer prices fell 0.8%, -0.4% ex-food and energy; 0.3% year-over-year, 1.4% on core.

Producer prices for the month fell a record 1.3%, -0.3% on core; -1.2% vs. a year ago, 0.6% ex-food and energy.

As for the Atlanta Fed’s GDPNow barometer for second quarter GDP, try -42.8% for a seasonally adjusted annual rate.  Yes, -42.8%.

While President Trump talks of a “transition to greatness,” in the third quarter, there is not going to be a V-shaped recovery after what will be such an historically bad second quarter.  Instead, most economists now talk of a Nike “swoosh” recovery; a large drop followed by a painfully slow recovery, not just in the United States but in Europe as well.

Airlines certainly don’t see a return to 2019 levels until 2022 at the earliest.  Travel & leisure are getting decimated. Ditto retail, with J.C. Penney the latest to file for Chapter 11 today.  Despite a decent rally in oil prices the last few weeks, crude is still well below a level that would prevent massive job losses and drastically reduced capital spending. 

But at the same time, yes, we have to reopen America as much as we can.

Editorial / Wall Street Journal

“Much of the media continue to treat the economic destruction as a sideshow and present a false choice between saving lives and jobs.  But this is the fastest jobs collapse in modern history. The Great Depression drove millions of Americans into poverty and caused many suicides, and there’s a substantial risk this could happen again.

“Mental-health crisis hotlines are reporting spikes in calls. According to Express Scripts, anti-anxiety prescriptions increased by a third between mid-February and mid-March.  Many in despair will probably turn to alcohol or narcotics.  CVS executives warned this week that delayed care could lead to a surge of non-coronavirus related health problems.  They include cancers undiagnosed and illnesses left untreated.

“Hospitals have also had to cancel elective procedures, which is how they make most of their money. Stanford Health Care is cutting pay by 20% for its 14,000 workers.  The California Medical Association reported that revenues at private practices have declined by two-thirds since March 1, and half have furloughed or laid off staff.

“Congress has appropriated $175 billion to shore up hospitals, but this won’t help small physician practices much.  Many health-care providers warn they may not survive if their privately insured patients lose jobs and sign up for Medicaid, which doesn’t cover their costs.

“Businesses are also going under.  This week J.Crew and Neiman Marcus filed for bankruptcy, and many more will follow.  Some over-leveraged companies may have failed anyway, but many small businesses that were healthy before the government-induced coma are closing permanently.  Consider Griswold’s Tavern in Newport, Rhode Island, or an iconic Italian bistro Biba in Sacramento, both of which have been around since the 1980s.

“ADP this week reported that small businesses shed 11 million jobs in April.  According to the Labor report, 8.2 million leisure and hospitality jobs – about half of the industry – have been eliminated in two months.  Many Democrats seem to think this is no big deal since many laid-off workers will be able to collect enhanced unemployment benefits that pay more than their wages.  But what happens in a few months if their employers no longer exist?

“The crowd that demands the economy remain locked-down until there’s a vaccine, miracle therapy or daily testing of everyone in the country seem to think the government can replace the private economy.  That’s a fantasy, and they are betraying the very low- and middle-income workers they claim to represent.  Average wages in April rose sharply because so many low-income workers were laid off….

“It is important to stress that the strict lockdowns were a government policy choice.  But the damage is done, and our focus isn’t on recriminations. The issue is what to do now, and the public is wise enough to know that public health can’t be sustained without a healthy economy.  Americans can see the destruction all around them. They know the virus will be with us for a long time unless there’s a vaccine, so we have to learn to live with it and have a functioning economy.

“No politician wants to admit it, but we are moving to a de facto policy that gives people and businesses the leeway to open and make their own risk calculations.  Most Americans are smart enough to know they need to take precautions and social distance, and businesses have no incentive to endanger their employees.  Meat packers are learning that lesson the hard way.

“The tradeoff isn’t between lives and livelihoods.  The policy goal has to be to protect both as much as possible.  Deploy more personal protective equipment, greatly increase testing, build surge capability to handle flare-ups, and isolate society’s most vulnerable to keep hospitals from getting overwhelmed.  But for heaven’s sake reopen the economy so we don’t consign millions to years of poverty.”

The above was written last weekend.  The past few days have seen more states take their first steps to reopen.  Here’s hoping for the best.

Europe and Asia

Eurostat released its flash estimate for GDP in the first quarter, down 3.8% in the euro area compared with the fourth quarter.  It was the sharpest decline since the series started in 1995.  In the fourth quarter, GDP had grown by 0.1% in the EA19.  Year-over-year, seasonally adjusted GDP decreased by 3.2% in the eurozone.

Germany’s GDP fell 2.2% in the first quarter, per the Federal Statistics Office, the second steepest slump since unification in 1990.  But Germany has performed relatively well in the coronavirus health crisis.

Spain’s economy slumped 5.2% in Q1 over the previous quarter, France -5.8%, Italy -4.7% and the UK -2.0%.  [Reminder, the U.S. was down 1.2% in the first quarter over the prior quarter, -4.8% annualized.]

The containment measures didn’t hit Europe until March.  Not surprisingly, March industrial production in the EA19 fell 11.3% over February.

Meanwhile, officials at the European Commission warn that eurozone lenders could take a sizeable hit from the coronavirus outbreak as an economic slowdown puts strain on borrowers, the EC concluding there is “a risk to the financial stability of the euro area.”

“Averting severe and lasting damage…may require additional and substantial support,” the EC wrote in a report.

The bleak assessment lays bare the vulnerability of the sector to unpaid loans or investment losses due to the virus.

Brexit: The UK’s negotiator, David Frost, said “very little progress” has been made in the latest round of UK-EU trade talks, but he said a far-reaching free trade deal could still be agreed to before the end of the year “without major difficulties.”

But Frost said it was being held up by the EU’s desire to “bind” the UK to its laws and seek unfair access to fishing waters.

The EU’s Michel Barnier suggested the UK’s own demands were “not realistic” and warned of a looming stalemate.

Speaking in Brussels, the bloc’s chief negotiator said “no progress has been made on the most difficult issues.”

Barnier added he was “still determined but not optimistic.”  The EU, he said, would not accept a deal “at any price” and it was stepping up preparations for a no-deal outcome, in which the two sides would trade with each other under World Trade Organization rules.

Separately, Britain’s finance ministry fears the budget deficit could hit a record $414 billion due to the pandemic, potentially as high as $630 billion under a worst-case scenario, where the economy doesn’t recover.  As recently as March, the forecast was for just $67 billion.

Turning to AsiaChina reported industrial production in April rose 3.9%, year-over-year, the first expansion in 2020, while retail sales fell 7.5% yoy. 

China’s National Bureau of Statistics warned that while the country’s economic recovery would continue, increased risks of a global recession pose significant challenges for exports.  A spokeswoman for the NBS added that pressure on employment is relatively big and the current recovery is weak.

Fixed asset investment fell 10.3% in January-April. Private sector fixed-asset investment, which accounts for 60% of total investment, fell 13.3% over the four months, per the NBS.

Meanwhile, producer prices in April suffered their sharpest fall in four years, -3.1% vs. a year ago, showing weakening industrial demand.  Consumer prices rose 3.3% for the month.

Chinese factories are grappling with slashed or cancelled overseas orders after reopening as global demand stays tepid.

Finally, real estate investment in China fell 3.3% in the first four months of 2020 from a year earlier.

Street Bytes

--Stocks fell for a third week in four amid the increased tensions with China and reality hitting some investors in the face after the absurd rally off the lows, with the Dow Jones losing 2.7% to 23685.  The S&P 500 lost 2.3% and Nasdaq 1.2%.

--The New York Stock Exchange is reopening its iconic trading floor, two months after the pandemic forced its closure.

Only a limited number of traders will return to the floor when it reopens May 26, and they will be required to wear masks and abide by social-distancing rules to limit the spread.

Among the protective measures, those coming to work on the floor won’t be allowed to take New York City mass transit to get there and they’ll submit to temperature checks to enter the building.

--U.S. Treasury Yields

6-mo. 0.14%  2-yr. 0.15%  10-yr. 0.64%  30-yr. 1.32%

In his webcast this week, Fed Chair Powell said the Fed’s view on negative interest rates has not changed and it is not something the policy-setting committee is looking at.

--The budget deficit soared to a record $1.935 trillion in the 12 months through April as the U.S. ramped up spending to counter the economic slowdown and revenue dropped, a Treasury Department report showed on Tuesday.  The deficit for April alone was $737.85 billion.

--Yes, as the world reopens oil consumption is rising and the price has recovered, now $29.71 on West Texas Intermediate.  “We see early signs of a gradual rebalancing of oil markets.  It is still gradual and it is still fragile,” said Fatih Birol, the International Energy Agency’s executive director.  This year will still be the worst on record, he added.

The world is expected to consume 21.5 million fewer barrels a day this month compared with a year ago, the IEA said in its monthly oil report Thursday.

Saudi Arabia and Russia issued a joint statement that they are “pleased with the recent signs of improvements in economic and market indicators, especially the growth in oil demand and the ease in concerns about storage limits.”

Last week, U.S. crude inventories declined for the first time in nearly three months, falling by 75,000 barrels, the U.S. Energy Information Administration said.  The tally compared with expectations of a 4.1-million-barrel rise.

Gasoline consumption is expected to mount a strong comeback as “people are likely to choose their own cars, a relative ‘safe space’ over public transportation as states and countries reopen,” said Kathleen Kelley, an advisor to hedge funds.

But the U.S. oil rig count plunged by 34 to 258 during the week ended today, its lowest level since July 2009, according to data compiled by Baker Hughes.

--Despite the above, Saudi Aramco said its first-quarter profit fell and it would cut spending this year, as the state-controlled company is the latest global energy giant to slash spending as the collapse in prices weighs heavily on the industry.

The company expects capital spending of between $25 billion and $30 billion this year, down from $32.8 billion a year earlier.

--Tesla Inc. on Monday told employees at its California vehicle factory to return to work, a few days after local officials said the plant should remain closed as lockdown measures remain in effect to curb the spread of the coronavirus.

Separately on Monday, Treasury Secretary Steven Mnuchin said California should do whatever is necessary to help the electric carmaker reopen its only U.S. vehicle factory if it wants to keep the company in its state.

Health officials in Alameda County, where the Fremont factory is based, said on Friday and Saturday it must remain closed as long as local measures to curb the spread remain in effect, but after Tesla sued the county on Saturday, Alameda said Tesla could reopen the week of May 18 if it did so safely, though Tesla reopened Monday anyway, CEO Elon Musk saying the county can arrest him if they want.  The week went without incident.

Then late today there was a story that Tesla was looking to build a new plant in Austin, Texas.

Maureen Callahan / New York Post

“And this guy wants to colonize Mars.

“Covid-19 has unmoored self-proclaimed genius Elon Musk like nothing since the dramatic 2018 cave rescue of 12 Thai children and their coach – a rescue Musk badly tried and failed to hijack, leaving him to slander one hero diver as a ‘pedo.’

“Tesla’s market value immediately plunged by $2 billion.

“In the aftermath, a chastened Musk did a fairly good job of keeping his head down, his mouth shut and meeting Tesla production numbers – his longtime bete noire.

“And then came a global pandemic, treating us all to yet another look inside this once-in-a-generation mind.  It’s always a trip.

“ ‘The coronavirus panic is dumb,’ he tweeted on March 6.

“ ‘Maybe worth considering chloroquine for C19,’ he tweeted March 16.

“Days later, Dr. Anthony Fauci made it clear that chloroquine, an anti-malaria drug, had not been proven effective against coronavirus.

“Undeterred, Musk tweeted not to worry, proclaiming that children are ‘essentially immune’ to the coronavirus.

“Also not true.  In fact, we’ve watched children fall ill with a potentially fatal ‘pediatric multi-system inflammatory syndrome’ that our top medical minds can’t specifically diagnose.

“Yet Musk loves nothing more than promoting himself as some kind of global superhero, one with a brain so expansive, he can solve any crisis or manifest any vision in a flash – be it interplanetary travel or the ultra-fast fabrication of a submarine built to impossible specs or the magicking up of desperately needed, hard-to-build medical equipment.

“ ‘We have extra FDA-approved ventilators,’ he tweeted on March 31.  ‘Will ship to hospitals worldwide within Tesla delivery regions.  Device & shipping costs are free.  Only requirement is that the vents are needed immediately for patients, not stored in a warehouse.’

“Yet as widely reported, most of what he shipped were non-invasive machines used to help patients with sleep apnea.  In typical fashion – huge promises to the marketplace, little to no fulfillment – Musk kept upping the ante, posting a photo of what he called a Tesla-engineered ventilator that we have yet to actually see.

“No worries.  Like the greatest con artists, Musk is adept at moving eyeballs where he wants them.  So next he began agitating for the lockdown to end, tweeting that it’s a violation of civil liberties.

“ ‘FREE AMERICA NOW!’ was an April 29 tweet.

“If we know one thing about Covid-19, it’s this: Until there’s a vaccine, this virus is the constant.  Human behavior is the variable.

“Anyway, Musk must be going stir-crazy, because he also tweeted that he was giving up all his material possessions, including his residence…with one stipulation.

“ ‘I own Gene Wilder’s house,’ he tweeted.  ‘It cannot be torn down or lose any [of] its soul.’

“This was after tweeting parts of ‘The Star-Spangled Banner’ in bits and pieces.

“Tesla shareholders, are you alarmed yet?  Does this seem like the behavior of a stable, sober-as-a-judge CEO?

“Musk and girlfriend Grimes just named their new baby boy X AE A-12….

“His real fight is reopening and operating his Tesla plant in California, which he did yesterday in defiance of lockdown orders.  What’s that – debt, you say?  A history of over-promising and under-producing? Tesla on the verge, again as ever?

“No – look over here, fellow Americans.  Elon Musk wants us to believe he’s a warrior for our liberty and our rights, not an overleveraged Silicon Valley billionaire who, like the smallest of us, may be totally undone by a virus that cares not about who you are.

“Or, in this case, want so badly to be.”

--Toyota Motor Corp. said on Tuesday it expects profit to drop by 80% to its lowest in nine years, as Japan’s biggest automaker grapples with the impact of the pandemic.

Toyota expects a $13.95 billion hit from a fall in global vehicle sales this year, yet it still expects to eke out a profit.

“The coronavirus has dealt us a bigger shock than the 2008 global financial crisis,” Toyota President Akio Toyoda said at a media briefing.  “We anticipate a big drop in sales volumes, but despite that we are expecting to remain in the black.”

Toyota forecast global sales of 8.9 million vehicles – a nine-year low – versus 10.46 million in the year just ended. It expects sales to recover to 2019 levels next year.

Boy, I don’t see that happening.

Others, such as Honda Motor Co. and General Motors have refrained from issuing forecasts.

And then today, Toyota said it would reduce vehicle production in Japan by 122,000 units in June due to a lack of demand.  The company also said it would halt production at all of its 15 plants for four days next month, while stopping output for up to 7 days on 10 of its production lines

--China’s auto market grew in April, overcoming an early-year collapse triggered by the coronavirus shutdown and ending a 21-month streak of declines that has shaken the world’s largest auto market.

April sales grew 4.4% from a year earlier to 2.07 million vehicles, according to the government-backed China Association of Automobile Manufacturers.

But the good news could be short-lived, the association warned.

“We don’t see this month’s growth as a normal phenomenon, as the domestic epidemic eased and consumers delayed purchases until recently,” said Chen Shihua, the association’s deputy secretary-general. “It is difficult to guarantee positive growth in the coming months.”

After sales crashed 42% in the first quarter of 2020, analysts are forecasting total sales of about 23 million vehicles this year, which would be the market’s weakest performance since 2013.

The association said it expects sales for the year to be down 15% to 25%, depending on how quickly the pandemic can be brought under control.

--Boeing’s jetliner order book slipped below 5,000 for the first time in seven years, as another 108 MAX jets from its backlog were pulled and Boeing downgraded the status of deals for another 101 planes because of airlines’ weakening financial health in the wake of the coronavirus pandemic.

Boeing’s report comes as CEO David Calhoun told NBC’s “Today” show that passenger traffic might be up to 25% of pre-pandemic levels by September, possibly approaching 50% by the end of the year.

Calhoun also made waves when he predicted the collapse of air-travel demand would “most likely” force a major U.S. carrier to go out of business.  He didn’t name any specific airlines.

Airport temperature checks, onboard mask requirements and other safety measures will help reassure passengers as they look to resume flying, Calhoun said.

But both Boeing and European rival Airbus SE are going to be suffering more cancellations as airlines shrink or collapse.

Boeing has shed more than 500 orders so far this year, trimming its backlog to 4,834 jets.  Airbus has outstanding orders for around 7,500 aircraft, but I would expect that to come down considerably.

For its part, Airbus has told top staff that the company must be “resized” in plans to be set out by the end of June and is ready to cut jet production again to tackle any second wave of the coronavirus crisis, according to Reuters.

--Last week I wrote of United Airlines warning that when its payroll protection provisions for a federal loan come off Sept. 30, there would be large layoffs, and this week, Delta Air Lines said it expects to have 7,000 more pilots come the fall than it will need.  Delta has 14,000 pilots on its roster currently.  This doesn’t necessarily mean it plans on laying off anywhere near 7,000, but we’ll see how the summer goes.

The move comes as Delta also announced it would no longer fly Boeing’s wide-body 777 aircraft and some of the other older, high-maintenance jets, as part of further cost-cutting measures.

--Avianca Holdings, Latin America’s No. 2 airline, filed for bankruptcy on Sunday, as a bond payment deadline loomed and after pleas for aid from Colombia’s government to weather the coronavirus crisis have so far been unsuccessful.

Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis.

“Avianca is facing the most challenging crisis in our 100-year history,” Avianca CEO Anko van der Werff said in a press release.

Avianca was weak before the outbreak, but its bankruptcy filing highlights the challenges for airlines that cannot count on state rescues.

--El Al Airlines called on Israeli Prime Minister Netanyahu to rescue it on Wednesday, rejecting what it said were impossible conditions for state-backed loans.  The Israeli government is demanding an overhaul of El Al, including layoffs, before agreeing to a lifeline.

To receive government backing on a loan the airline has agreed to cut 2,000 jobs and reduce annual expenses by $350 million out of a total of $2 billion. The airline suspended passenger flights until at least the end of May, while about 6,000 of its 6,500 workforce are on unpaid leave until June 30.

The government argues the airline’s problems, including a bloated workforce, high salaries and a weak balance sheet, began well before the Covid-19 outbreak.

--Ryanair said it planned to restore 40 percent of its flight schedule from July 1st, affecting 90 percent of its route network.

--Hyatt Hotels Corp. said late Monday it would lay off 1,300 people globally as it tries to cope with the coronavirus crisis.  It also cut pay for senior management, board members and all employees in corporate offices.

“Due to the historic drop in travel demand and the expected slow pace of recovery, Hyatt has made the extremely difficult decision to implement layoffs and restructure roles across its global corporate functions, beginning June 1, 2020,” Hyatt said in a statement.

Understand Hyatt had 55,000 employees as of Dec. 31, 2019, so there will be far more layoffs than 1,300.

The hotel industry is estimating a loss of $1.4 billion in revenue every week on account of the outbreak and a 30% drop in hotel occupancy over a year, according to statements from the American Hotel and Lodging Association and the U.S. Travel Association in March.  It has only gotten worse since.

Generally speaking, the hotel industry needs 70 percent occupancy rates to breakeven.

--Marriott International, Inc. reported first quarter results that were miserable.  January and February were good, ex-Greater China, but then everything came crashing down in March.

CEO Arne Sorenson on the outlook:

“The resilience of travel demand is evident in the improving trends we see in Greater China.  Occupancy at our hotels in the region reached 25 percent in April, up from less than 10 percent in mid-February 2020.

“Looking at our occupancy and booking trends, it appears that lodging demand in most of the rest of the world has stabilized, albeit at very low levels.  Occupancy was around 20 percent over the past two weeks in North American limited-service hotels, benefiting from leisure and drive-to demand.” 

Like I said, the issue is how quickly the industry can get back to 70 percent.

--Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of silicon chips, said Friday it would spend $12 billion to build a chip factory in Arizona, as U.S. concerns grow about dependence on Asia for the critical technology.

TSMC said the project has the support of the federal government and Arizona and comes as the Trump administration has sought to jump-start development of new chip factories in the U.S. dsue to rising fears about the U.S.’s heavy reliance on Taiwan, China and South Korea to produce microelectronics and other key technologies.

The plant in terms of capacity will actually be relatively small and the factory will employ more than 1,600 people.  The company has a small facility in Washington state, with most of TSMC’s factories being in Taiwan.

But it’s a win for President Trump, especially with Arizona Republican Sen. Martha McSally facing a tough reelection challenge in November.

Secretary of State Mike Pompeo said: “TSMC’s announcement comes at a critical juncture, when China is competing to dominate cutting-edge technology and control critical industries.  The TSMC facility in Arizona will increase U.S. economic independence.”

However, now we have the Huawei situation.  What will TSMC do?

--Share in Cisco Systems rallied after the company’s fiscal third quarter results came in slightly ahead of Wall Street’s expectations.

For the three months ending April 25, the networking equipment and software giant reported revenue of $12.0 billion, down 8% from a year earlier, but slightly ahead of the Street consensus. Earnings were also better than forecast.

Revenue was down 8% in the Americas, 9% in the Asia-Pacific region, and 7% in Europe, Middle East and Africa.  Revenue from infrastructure platforms – the company’s core networking business – was down 15%.  Security revenue was up 6%.

Cisco said that while results in March were ahead of expectations, it began to see a broad-based slowdown across the business in April as countries across the world were locked down.

For the fiscal fourth quarter ending in July, Cisco is projecting a revenue decline of 8.5% to 11.5% from a year ago.

“During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future,” CEO Chuck Robbins said in a statement.  “The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before.  We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations.”

Cisco said 95% of its staff is now working from home.

--By now you should have begun to see a changing pattern in the kinds of advertisements you are seeing on television.  In the initial days of the lockdown, it was more than a bit surreal to have the normal fare, but big ad campaigns are purchased over extended periods of time.

But now, as the Wall Street Journal reported, the “upfront” deals for the fall season for  many advertisers came off May 1 and they can begin to cut back future spending commitments, with companies able to cancel up to 50% of their third-quarter ad spending.

Many such as General Motors, PepsiCo and Domino’s Pizza will take advantage of this, according to the Journal.

Some companies are shifting TV ad dollars to other marketing channels including streaming-video services.

But going back to March and April, networks were under no obligation to offer any breaks.  “Advertisers can generally cut up to 50% of their commitment for a particular quarter only if they notify networks roughly 60 days ahead of time. That window had already passed for the second quarter.” [WSJ]

--Shares in General Electric, the iconic industrial manufacturer, closed at $5.79 on Wednesday, its lowest close since Dec. 20, 1991, when the stock ended at $5.59.  It closed the week at $5.51.

Clearly, investors are worried about the issues confronting the company, first and foremost, aviation, which is GE’s largest and most profitable segment, but now the sector has been decimated.

With industry insiders believing it will take years for demand to return to 2019 levels, that means fewer planes and fewer GE engines – as well as fewer shop visits to overhaul and repair the global jet fleet.  Planes are serviced in proportion to the amount they are used.

--Public pension plans lost a median 13.2% in the three months ended March 31, according to Wilshire Trust Universe Comparison Service data, slightly more than in the fourth quarter of 2008.

Stocks then bounced back in April, but pension losses are poised to drive up already-burdensome retirement costs for governments.

--Under Armour on Monday posted a first-quarter loss as the athletic-apparel company saw its revenue drop beginning in the last weeks of the period as it closed its stores due to the pandemic.

“During the first quarter, our results in January and February were tracking well to our plan,” said CEO Patrik Frisk.  “Since mid-March, as the pandemic accelerated dramatically in North America and EMEA (Europe, Middle East and Africa) and retail store closures ensued, we’ve experienced a significant decline in revenue across all markets.”

Revenue fell to $930.2 million from $1.2 billion last year, with a per-share loss of $1.30, vs. an expected loss of $0.22 per share.

North America revenue in the March quarter fell 28%, while EMEA revenue rose 2.9%, and Asia-Pacific lost 34% to $95.7 million.

Under Armour, which withdrew its full-year guidance in early April, said it is planning to cut operating expenses this year by $325 million through temporary layoffs at retail stores and U.S. distribution centers, cutting incentive compensation, postponing planned capital spending, and “tightening” hiring, contract services, travel and other discretionary spending.

I list it all because this is what you are going to be hearing from virtually every company that isn’t Amazon, Walmart or some specific tech companies.

--Corn futures on the Chicago Board of Trade are trading around $3.20 per bushel – well below what most farmers say is their break-even price.  Soybean futures are roughly at their break-even price of $8.40 per bushel.

Tuesday, the USDA forecast corn production in the U.S. will reach 16 billion bushels this year, pushing U.S. inventories up 1.2 billion bushels to a total 3.3 billion – their highest level since 1987.

The USDA said it expects higher export demand for soybeans this year and for U.S. exports of the crop to rise by 375 million bushels to over two billion bushels, so farmers have been switching from corn to soybeans.

--Soft-shell crabs are cheaper this year, due to dining spots being closed or relying on takeout or delivery, so at least for the New York area, wholesalers have a surplus of the crabs, which are typically sourced from North Carolina at this time of year.

--We note the passing of a New York original, Ben Benson.  Benson, a fun-loving restaurateur who got his start helping his former college buddy more or less invent the singles bar when they ran the original TGI Fridays in the 1960s, branched off to open Ben Benson’s steakhouse, which he liked to say was the most famous steakhouse nobody’s ever heard of.

While it didn’t have the swagger of Brooklyn’s Peter Luger, and was viewed kind of low on the list of New York’s great steakhouses, it did attract its share of celebrities, while Benson was the familiar voice from a radio jingle. 

He also had some clever newspaper ads.  The most famous of them came in the wake of the 1985 murder of Paul Castellano, then the boss of the Gambino crime family.  Castellano and an aide were shot on the sidewalk heading into Sparks Steak House on Manhattan’s East Side.    So Benson ran an ad featuring a photograph of the crime scene and the tagline “Eat at Ben Benson’s.  It won’t kill you.”

Foreign Affairs

China: The United States on Thursday condemned attempts by China-linked “cyber actors and non-traditional collectors affiliated” to steal U.S. intellectual property and data related to coronavirus research, Secretary of State Mike Pompeo said.

“The PRC’s behavior in cyberspace is an extension of its counterproductive actions throughout the Covid-19 pandemic,” he said in a statement.  “While the United States and our allies and partners are coordinating a collective, transparent response to save lives, the PRC continues to silence scientists, journalists, and citizens, and to spread disinformation, which has exacerbated the dangers of this health crisis.”

Pompeo’s comments came a day after the FBI and the Department of Homeland Security issued a joint statement to raise awareness against what they called threats to coronavirus-related research from actors related to China.

It said the FBI was investigating digital break-ins at U.S. organizations by China-linked “cyber actors” that it had monitored “attempting to identify and illicitly obtain valuable intellectual property and public health data related to vaccines, treatments, and testing from networks and personnel affiliated with Covid-19-related research.”

The Chinese Embassy in Washington condemned the allegations as “lies.”

Wendy Wu / South China Morning Post

“China should prepare for more inflammatory comments from U.S. President Donald Trump and his team as relations between the two countries come under increasing pressure due to the Covid-19 pandemic and the economic recession it created, according to observers.

“The assessment came after Trump expressed doubts over the phase one trade agreement signed between Washington and Beijing in January, saying the U.S. would save $500 billion if it ‘cut off the whole relationship’ with China.

“In an interview with Fox Business News on Thursday, Trump even poured cold water on his personal ties to Chinese President Xi Jinping.

“ ‘I have a very good relationship [with Xi], but I just, right now I don’t want to speak to him.’

“The two leaders last spoke on February 7.”

Monday, however, Chinese Vice-premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin had an apparently positive discussion, the two sides agreeing to create “favorable conditions” for the phase one trade deal, which has been facing growing uncertainty.

On a different topic….

David Ignatius / Washington Post

“Here’s a fact that ought to startle every American who assumes that because we spend nearly $1 trillion each year on defense, we have primacy over our emerging rival, China.

“ ‘Over the past decade, in U.S. war games against China, the United States has a nearly perfect record: We have lost almost every single time.’

“That’s a quote from a new book called ‘The Kill Chain: Defending America in the Future of High-Tech Warfare,’ the most provocative critique of U.S. defense policy I’ve read in years.  It’s written by Christian Brose, former staff director of the Senate Armed Services Committee and a close adviser to late senator John McCain.  The book isn’t just a wake-up call, it’s a fire alarm in the night.

“Brose explains a terrible truth about war with China: Our spy and communications satellites would immediately be disabled; our forward bases in Guam and Japan would be ‘inundated’ by precise missiles; our aircraft carriers would have to sail away from China to escape attack; our F-35 fighter jets couldn’t reach their targets because the refueling tankers they need would be shot down.

“ ‘Many U.S. forces would be rendered deaf, dumb and blind,’ writes  Brose.  We have become so vulnerable, he argues because we’ve lost sight of the essential requirement of military power – the ‘kill chain’ of his title – which means seeing threats and taking quick, decisive action to stop them.

“How did this happen?  It wasn’t an intelligence failure, or a malign Pentagon and Congress, or lack of money, or insufficient technological prowess.  No, it was simply bureaucratic inertia compounded by entrenched interests. The Pentagon is good at doing what it did yesterday, and Congress insists on precisely that.  We have been so busy buffing our legacy systems that, as Brose writes, ‘The United States got ambushed by the future.’

“We should reflect on America’s vulnerability now, when the world is on lockdown and we have a chance to reassess.  A new world will emerge after the global coronavirus pandemic, one in which China is clearly determined to challenge the United States as a global power.  The propaganda wars over the origin of the novel virus that causes Covid-19 are just a warm-up for the tests that are ahead….

“Rather than match our fleets of carriers and squadrons of jets around the world, Beijing developed precision weapons to prevent the United States from mobilizing these forces.  An example is the DF-21, the world’s first ballistic anti-ship missile, which Brose says is known as ‘the carrier killer.’

“The Pentagon wants to confront the Chinese challenge, but it insists on keeping the same vulnerable, wildly expensive platforms at the center of the United States’ military power.  And Congress demands adherence to this status quo… Expensive fighter jets have a lobby, too.  As Brose notes; ‘There is a reason why parts of the F-35 are built in every state in America…It is political expediency.’….

“Brose envisions a military version of the ‘Internet of things’ – smart systems at the outer edges of our defenses which can blunt China’s dominance without breaking the budget or risking all-or-nothing confrontations.  ‘We have the money, the technological base, and the human talent,’ he writes.  What we lack is the will to change.”

North Korea: The regime axed its spy chief as well as the long-running head of Kim Jong-un’s security – signs of a major shakeup as the mystery over Kim’s own status deepens.

The head of the Reconnaissance General Bureau (RGB), Jang Kil Song, was ousted, the RGB being the North’s military intelligence agency, according to a report by South Korea’s Unification Ministry.

The RGB is behind the most high-profile attacks as well as spy mission, including those against the U.S., South Korea says.

The army general who has led the team protecting Kim since 2010 was also replaced.

Meanwhile, Kim has stayed out of sight amid rumors over his health.

After not being seen for three weeks, missing key national events, he appeared May 1 at a ribbon-cutting event to prove he was alive, but as I noted the other week, that merely sparked rumors it was a body double.

Separately, U.S. authorities have detected the assembly and completion of ICBMs at an automobile plant where North Korea launched ballistic missiles in 2017, according to a South Korean newspaper Dong-A Ilbo.

The official told the newspaper that the U.S. is keeping an eye on future developments and exploring multiple possibilities such as the test-firing of an ICBM.

Pyongyang may attempt provocations before July, according to the newspaper. Back on Jan. 1, Kim Jong-un declared he would soon debut a “new strategic weapon.”

Iran: One Iranian warship accidentally struck another with a missile during an exercise, killing 19 sailors and wounding 15 others, Iran’s navy said on Monday.

The incident took place during training in the Gulf of Oman, a sensitive waterway that connects to the Strait of Hormuz through which about a fifth of the world’s oil passes.  Iran regularly conducts exercises in the area.

A frigate fired at a training target released by a support ship, however, the support ship stayed too close to the target and was hit, Iran’s state broadcaster said.

Afghanistan: President Trump’s stalled plans to bring peace to Afghanistan suffered a new setback with a decision by Kabul to resume operations against the Taliban following two attacks on Tuesday that killed scores of Afghans.

One heinous attack at a Kabul hospital killed 24 people, including two newborns, and a suicide bombing at a funeral in Nangarhar province killed at least 32.

The Taliban denied involvement in both attacks, and the U.S. believes ISIS was responsible for the attack on the hospital, which also claimed the lives of 16 mothers of newborns.  The hospital was run by the international humanitarian organization Doctors Without Borders.  ISIS claimed responsibility for the attack on the funeral.

The government had largely suspended offensives against the Taliban since a U.S. troop reduction plan was unveiled on Feb. 29, but Afghan President Ashraf Ghani’s stated intention to resume operations could start a cycle of violence, according to a U.S. official.

Washington still plans to cut the number of U.S. troops in Afghanistan to 8,600 from about 13,000 when the deal was struck, and then assess whether to go lower.

Random Musings

--Presidential tracking polls….

Gallup: Still old data…49% approve of President Trump’s job performance, 47% disapprove; 93% of Republicans approve, 47% of independents (Apr. 14-28).
Rasmussen: 49% approve, 50% disapprove (May 15).

--In a new CNN poll conducted by SSRS, presumptive Democratic nominee Joe Biden’s lead over President Trump now stands at 5 points, with 51% of registered voters nationwide backing Biden, while 46% prefer Trump.

BUT…in 15 battleground states decided by 8 points or less in 2016, Trump leads Biden 52% to 45%.

95% of Democrats back Biden, and 95% of Republicans back Trump.  Among independents, 50% back Trump, 46% Biden.

54% of voters say they trust the president to better handle the nation’s economy, while 42% say they prefer Biden.

But 55% say Biden would be best for uniting the country and not divide it, while 38% say Trump would be, which is laughable. 

--A Rasmussen national telephone and online survey found that 23% of likely Republican voters think their party should find someone other than Trump to be their presidential nominee.

By comparison, 28% of likely Democratic voters say their party should find someone other than Joe Biden to be their presidential nominee.

--In a separate CNN poll, 54% continue to say the U.S. government is doing a poor job preventing the spread of Covid-19.  And, while a growing share of the public feels the worst of the outbreak is behind us (44%, up from 17% in April), a majority (52%) still sees the worst on the horizon.

82% of Democrats say the federal government is generally doing a poor job, 80% of Republicans say it’s doing a good one.  There is nearly a 70-point chasm between Democrats and Republicans over whether the government is doing enough to address the potential for the death toll to rise to 100,000 or higher (81% of Republicans say the government is doing enough, just 13% of Democrats agree).

And 76% of Republicans think the government is doing enough to address a potential second wave of cases vs. 10% of Democrats.

Republicans are more apt to say that they trust the information they get about coronavirus from Trump (84%) than they are to say they trust the information they get from Dr. Anthony Fauci (61%).  Among Democrats, just 4% say they trust the information they get from the president, well behind the 81% who say they trust Fauci or the 80% who trust the CDC.

--According to a Washington Post/University of Maryland poll, half of all Americans say that they think it will not be safe for gatherings of 10 or more people until midsummer, including nearly one-quarter who say it will not be safe until 2021 or later.

In a similar poll in mid-April, 51% of all Americans said they thought gatherings of 10 or more people would be safe by the end of June.

Eight in 10 say it is necessary for people in their communities to wear a mask when outside the home, and more than 8 in 10 say it is important for people to stay at least six feet apart from one another in public.  Three in 4 say people in their communities should avoid gatherings with friends with whom they do not live, and more than 7 in 10 say people should stay home as much as possible.

Clear majorities of Democrats, Republicans and independents support such measures, although about a third or more of Republicans say wearing masks, avoiding gatherings with friends and staying home as much as possible are unnecessary.

--In a Washington Post/Ipsos poll of opinions on various governors and their performance during the pandemic, in Ohio, 86 percent of adults say they approve of the way Gov. Mike DeWine (R), who moved aggressively to close down his state and has been cautious about lifting the restrictions, has dealt with the crisis.  In Georgia, 39 percent of adults approve of the performance of Gov. Brian Kemp (R), who moved less swiftly than some other governors to mitigate the spread and has been in the forefront of reopening the economy there.

Overall, 71 percent of Americans approve of their governors’ performances, with majority approval from people in both major parties.  A much smaller 43 percent approve of Trump’s efforts.  But like the above CNN survey, 8 in 10 Republicans and Republican-leaning independents approve of his handling of the crisis and almost 9 in 10 Democrats and Democratic-leaning independents disapprove.

In the two largest states with Democratic governors, Gov. Gavin Newsom (Calif.) and Gov. Andrew Cuomo (N.Y.) receive positive marks from about 8 in 10 adults.  Those lofty positive ratings dip significantly in the two largest states with Republican governors.  In Florida, 60 percent of adults give Gov. Ron DeSantis positive ratings, while in Texas, 57 percent say they approve of the way Gov. Greg Abbott has handled the pandemic.

58 percent of Republicans in California and New York give their governors positive marks.

DeWine wins approval from 90 percent of Democrats in his state, while only 12 percent of Ohio Democrats approve of the president’s handling of the crisis.

People were simply asked whether they approved of “your state’s governor.”   The respondents were not prompted with either the name of the governor or the governor’s political party.

But there is a significant partisan divide on the issue of slowing the virus’ spread rather than beginning to reopen businesses.

92 percent of Democrats and Democratic-leaning independents say they favor closures to deal with the virus, while Republicans and Republican-leaning independents are split almost evenly, with 49 percent saying closures should be the top priority and 50 percent saying businesses should be opened up again.

--Meanwhile, in my state of New Jersey, Democratic Gov. Phil Murphy has a 77% overall approval rating among all New Jerseyans: 92% of Democrats, 76% of independents, and 47% of Republicans approve.

72% give him an ‘A’ or ‘B’ for his handling of the outbreak, according to the Rutgers-Eagleton poll.

--Joe Biden, op-ed / Washington Post…from his basement….

“(On the coronavirus response from President Trump), instead of unifying the country to accelerate our public health response and get economic relief to those who need it, President Trump is reverting to a familiar strategy of deflecting blame and dividing Americans.  His goal is as obvious as it is craven: He hopes to split the country into dueling camps, casting Democrats as doomsayers hoping to keep America grounded and Republicans as freedom fighters trying to liberate the economy.

“It’s a childish tactic – and a false choice that none of us should fall for.

“The truth is that everyone wants America to reopen as soon as possible – claiming otherwise is completely absurd.  Governors from both parties are doing their best to make that happen, but their efforts have been slowed and hampered because they haven’t gotten the tools, resources and guidance they need from the federal government to reopen safely and sustainably.  That responsibility falls on Trump’s shoulders – but he isn’t up to the task.

“It’s been more than two months since Trump claimed that ‘anybody that wants a test can get a test.’  It was a baldfaced lie when he said it, and it still isn’t remotely true.  If we’re going to have thriving workplaces, restaurants, stores and parks, we need widespread testing.  Trump can’t seem to provide it – to say nothing of worker safety protocols, consistent health guidelines or clear federal leadership to coordinate a responsible reopening.

“In addition to forgetting the tests, he seems to have forgotten that ours is a demand-driven economy – you can shout from the rooftops that we’re open for business, but the economy will not get back to full strength if the number of new cases is still rising or plateauing and people don’t believe that it’s safe to return to normal activities.  Without measures in place to prevent the spread of the virus, many Americans won’t want to shop in stores, eat in restaurants or travel; small-business owners know that a nervous public won’t provide enough customers to ensure they thrive….

“Again, the solution isn’t a mystery.  The Trump administration could focus on producing and distributing adequate testing and protocols that conform with the guidance of public health experts; doing so would speed up the reopening process considerably and make it a whole lot more effective.  The administration is fully aware that this is the right path, too – after all, the president and his staff are now reportedly receiving daily tests.  They knew exactly how to make the Oval Office safe and operational, and they put in the work to do it.

“They just haven’t put in that same work for the rest of us.

“If Trump and his team understand how critical testing is to their safety – and they seem to, given their own behavior – why are they insisting that it’s unnecessary for the American people?

“And why does the president insist on trying to turn this into yet another line of division, pitting strained, grieving Americans against one another across manufactured battle lines of ‘health’ and ‘the economy’?  Everybody knows that we can’t revive the latter unless we safeguard the former – and pretending otherwise is the most transparent of political ploys.  Instead of once again seeking to divide us, Trump should be working to get Americans the same necessary protections he has gotten for himself.”

--Mike Garcia, a former military pilot and newcomer to Republican electoral politics, won a special election to fill a House seat in Southern California, that of former Rep. Katie Hill, the first time the GOP has flipped a Democratic held seat in California since 1998.  A good sign for the Republicans come November.  The two will square off again then to run for a full term.  Garcia won by 12 points.

In rural Wisconsin, Tom Tiffany, a Republican state senator, handily beat Tricia Zucker, a Democratic school board member, in another special election.

--FBI agents seized the mobile phone of North Carolina Republican Sen. Richard Burr, chairman of the Senate Intelligence Committee, as part of an investigation into stock sales.

Burr and three other senators sold holdings after receiving closed-door briefings on Capitol Hill early this year about the emerging threat of the coronavirus.

The Los Angeles Times reported that agents, acting on a search warrant, took Burr’s phone at his Washington home.

Burr and Kelly Loeffler, a Georgia Republican, both completed their transactions at a time when the Trump administration and Republican leaders were downplaying the potential damage the illness could cause in the U.S.

Burr’s office has said that the sales were unrelated to any information he received by virtue of his position as leader of the Intelligence Committee.  In March, he called for an inquiry into the allegations.

Thursday, Burr said he will step down as Intelligence Committee chairman, effective today.

--Howard Stern says he and President Trump are both showmen who love a good time – and they both hate Trump supporters.

“One thing Donald loves is celebrities, he loves the famous,” Stern said on his SiriusXM show Tuesday.  “He loves it. He loves to be in the mix.”

Stern hosted Trump on his radio show several times over the years and invited him to his 2008 wedding, seating the then-future president next to Joan Rivers. 

“The oddity in all of this is the people Trump despises most, love him the most,” Stern said.  “The people who are voting for Trump for the most part…he wouldn’t even let them in a f---ing hotel.  He’d be disgusted by them.  Go to Mar-a-Lago, see if there’s any people who look like you.  I’m talking to you in the audience.”

Stern said Trump should resign, though conceded that was highly unlikely to happen.

--What a tragic story out of the Netherlands this week.  At least five surfers drowned off the coast of the resort of Scheveningen after they were caught in strong winds and foamy waters.  At least three of the five were seasoned surfers who were professional trainers in open water swimming, according to a Dutch broadcaster.

--The other week I wrote of how the pandemic was killing nonprofits/charity groups.  In my group’s case, our annual golf outing is 2/3s of our fundraising total and as it was June 1st, sayonara.  And, like so many groups, the money is from sponsorships from local businesses so at least in the case of New Providence, which is where my Lions Club is based, no one knows who is surviving and you sure as hell can’t go into a business even if they do reopen and ask, “Do you want to sponsor a hole like you have in the past?”  Ah, I don’t think you do that.

But my club is in great financial shape so I read with interest that in a survey of 3,400 nonprofits two years ago, half said they had only three months’ cash on hand or less; 19% said they had a month or less, according to the Nonprofit Finance Fund, a New York-based lender that conducted the survey.

--A RealClearPolitics Opinion Research poll released Thursday found 40 percent of families are more likely to choose to homeschool their children or engage in virtual learning once the coronavirus pandemic subsides.

The survey asked parents, “Are you more or less likely to enroll your son or daughter in a homeschool, neighborhood homeschool co-op, or virtual school once the lockdowns are over?”

Of the 626 parents who responded, 40.8 percent said they were “more likely” to do so, while 31.1 percent replied they were “less likely.”

---

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

We thank our healthcare workers and first responders.

God bless America.

---

Gold $1754
Oil $29.71…up $10 in two weeks…

Returns for the week 5/11-5/15

Dow Jones  -2.7%  [23685]
S&P 500  -2.3%  [2863]
S&P MidCap  -5.85
Russell 2000  -5.5%
Nasdaq  -1.2%  [9014]

Returns for the period 1/1/20-5/15/20

Dow Jones  -17.0%
S&P 500  -11.45
S&P MidCap  -23.5%
Russell 2000  -24.7%
Nasdaq  +0.5%

Bulls 47.1
Bears 26.0

Hang in there. Wash your hands.

Brian Trumbore