Week in Review

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Week in Review

05/22/2021

For the week 5/17-5/21

[Posted 9:30 PM ET, Friday]

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Edition 1,153

Yes, for many it’s about the mask mandate and the Centers for Disease Control and Prevention’s amended guidance that says fully vaccinated people no longer need to wear face coverings or socially distance in most circumstances both indoors and outdoors.

But New Jersey Gov. Phil Murphy (Dem.) insisted the state will keep requiring all people, vaccinated or not, to keep wearing masks indoors in public because “we’re still not out of the woods” with the pandemic – even though our numbers have improved significantly.

And it’s true that as Murphy also said “the majority of New Jerseyans are still unvaccinated” and “we’re not checking anyone’s vaccine status at the door when you go to the supermarket or the hardware store.”  He said the state can’t expect workers to be “able to tell who is vaccinated from who isn’t” and it’s “unfair to put the burden on business owners and frontline employees to police every patron.”

I have no problem with that.  I’ve told you I’d wear a mask in a supermarket or drugstore for years, if need be.  Like whoopty-damn-do.

And we aren’t even half-vaccinated in the Garden State.  Just use common sense, and common courtesy and decency for a little while longer.

Alas, Murphy is in the midst of a reelection campaign and so Monday, he’ll be announcing that New Jersey will join Pennsylvania and New York in removing the mask mandate and adopting the CDC’s guidance (in time for Memorial Day weekend), even if that is jumping the gun a bit, as discussed in the op-ed below.

Meanwhile, to visit the ailing Dr. Bortrum in a nearby facility, I have to get tested every three days to go into his room, despite being fully vaccinated myself, and I’m 3-for-3!  Yippee.

But I also attended my first large gathering this week of a charity group I’ve long been affiliated with.  It was 36 of us in a member’s back yard, no masks, many insisting on shaking my hand after I hadn’t seen a lot of them literally since March 2020, and I was OK with it (the no masks, not the handshakes…fist bump is fine, sports fans).

And so as I was leaving this little gathering, I went over to a member I hadn’t talked to as yet, a rather radical right-winger, and it’s the kind of small talk you saw in that SNL sketch with Elon Musk the other week, until she said she hadn’t been vaccinated, at which point I said, “I’m outta here.”

Biden Agenda

--In keeping with the above….

Leana S. Wen / Washington Post

“Last Thursday’s abruptly announced guidance from the Centers for Disease Control and Prevention has devolved into a giant mess. Governors and mayors were caught by surprise, leading to a flurry of rapid changes and a patchwork of disparate regulations across the country. Businesses found themselves scrambling without the tools they need to relax restrictions for the vaccinated while protecting the unvaccinated.

“While many people happily shed their masks and celebrated the apparent end of the pandemic, others are concerned that with only 37 percent of the country fully vaccinated, this relaxation is premature and could lead to a resurgence of infections.

“If such a head-scratching turn of events had occurred under former president Donald Trump, the administration surely would have been blamed for the lack of coordination and resulting widespread confusion. The Biden team has excelled on many aspects of the Covid-19 response, but this was a major blunder that threatens to set back much of the progress made.  President Biden needs to fix it, urgently.

“Most important, Biden should own that it was a mistake to cede this level of responsibility to the CDC.  After watching Trump repeatedly sideline the agency, seemingly for political reasons, the Biden administration understandably has wanted to elevate the CDC’s role.  But there’s a big difference between listening to scientists and ceding policymaking to one scientific organization.  Trump supporters might complain about a double standard, but intervening in this case wouldn’t be about politics; it would be for the public good.

“Biden should clarify what it is that the CDC does: It’s a scientific agency that excels at interpreting research and formulating evidence-based guidance.  In this case, it was appropriate for the CDC to state that after reviewing all the data, it is confident that fully vaccinated people are at little risk for contracting the coronavirus and spreading it to others.

“But that’s very different from announcing that vaccinated people can take off their masks because, without verification of vaccination, this would inevitably lead to the end of mask mandates. That’s not scientific guidance – that’s a major policy decision to shift the entire direction of the United States’ pandemic response.  Arguably, this was the single biggest decision that the Biden administration has made on Covid, yet senior administration officials learned about the CDC’s planned change only the night before, and the president himself didn’t find out about it until the morning of the announcement.

“This was an astounding strategic and tactical mistake. It will have lasting repercussions unless the White House steps in to clean up the CDC’s mess.  As a start, the administration should clarify that while vaccinated people are generally not at risk, the unvaccinated are still at high risk.  Therefore, if there is no reliable way to verify vaccination status, indoor mask mandates must still remain in place.  At the same time, the administration should define region-by-region criteria for when such mandates can be lifted – for example, when 70 percent of a community is fully vaccinated….

“(A) decision on something as overarching and consequential as ending mask mandates should have been directed from the very top, by the president himself. Biden needs to course-correct, now.  If he does not, the existing confusion could harm Americans’ health, prolong the pandemic, and paradoxically diminish confidence in the CDC and its ability to safeguard the public’s health.”

--President Biden’s team has offered to reduce his infrastructure and jobs plan by about a quarter, to $1.7 trillion, a counterproposal that’s still far higher than what Senate Republicans said they’d support.

The new White House plan would shift spending on manufacturing, supply chains, small business, and research and development to other pieces of legislation being considered by Congress – including bills aimed at combating China’s technology dominance and the global semiconductor shortage, White House Press Secretary Jen Psaki told reporters.

But the new total still dwarfs an initial offer from Senate Republicans of $568 billion.  Senate Majority Leader McConnell suggested a compromise could go as high as $800 billion, still far below the new Biden topline.

--The U.S. called for a global minimum corporate tax of at least 15%, less than the 21% rate it has proposed for the overseas earnings of U.S. businesses – a level that some nations had argued was excessive.

The contrast between the new proposal, released by the Treasury Department Thursday, and the higher rate the Biden administration is seeking to be applied to American companies underscores the difficulty of international talks being led by the Organization for Economic Cooperation and Development (OECD).  Ireland, for one, has been using low business taxes as a key economic development strategy for years.  Negotiators are aiming for a deal this summer.

Treasury Secretary Janet Yellen has argued for an ambitious effort to end a global “race to the bottom” on company taxes.  Such competition has eroded government revenues at the same time they have run up record debt levels as a result of the pandemic.

“It is imperative to work multilaterally to end the pressures of corporate tax competition and corporate tax base erosion,” the Treasury Department said in a statement on Thursday.  “Treasury underscored that 15% is a floor and that discussions should continue to be ambitious and push that rate higher.”

Trump and the GOP

The House passed a resolution creating a Jan. 6 commission 252-to-175, with 35 Republicans joining Democrats to support the measure.  New York Republican Rep. John Katko, who helped draft the bill, said, “This is a fair and necessary legislation. I encourage all members, Republicans and Democrats alike, to put down their swords for once, just for once, and support this bill.”

But Katko’s plea fell mostly on deaf ears.

The commission envisioned by the House bill would have a broader scope than any existing Jan. 6 inquiries.  It would investigate not just the security failures that paved the way for the riot and the crimes that were committed during it, but the role Trump and members of Congress played in instigating it as well as their actions while the assault was underway.

The commission is modeled after the congressional probe into the Sept. 11, 2001 attacks.

But the bill’s fate in the Senate is in jeopardy after a number of prominent Republicans came out against it this week.

Senate Majority Leader Mitch McConnell made clear Wednesday that he will not support the bill, which he called a “slanted and unbalanced proposal.”

“It’s not at all clear what new facts or additional investigation yet another commission could actually lay on top of existing efforts by law enforcement and Congress,” McConnell said on Wednesday.

“The facts have come out, they’ll continue to come out,” the Kentucky Republican said.

Senate Majority Leader Chuck Schumer (D-N.Y.) vowed to force a vote on the bill.

“They are caving to Donald Trump and proving that the GOP is still drunk off the big lie,” he said.

Former President Trump had called for an immediate end to the debate over the commission to investigate the Capitol riot.

“Republicans in the House and Senate should not approve the Democrat trap of the January 6 Commission.  It is just more partisan unfairness and unless the murders, riots, and fire bombings in Portland, Minneapolis, Seattle, Chicago, and New York are also going to be studied, this discussion should be ended immediately,” Trump said in a statement Tuesday night.

“Republicans must get much tougher and much smarter, and stop being used by the Radical Left.  Hopefully, Mitch McConnell and Kevin McCarthy are listening!” he added.

Republicans have sought to derail the commission, including insisting the panel have a scope broader than the Jan. 6 attacks, and following the lead of Trump, some have bluntly attempted to revise the narrative of what happened during the deadly riots.

At least 10 Republican votes are needed in the Senate and it’s clear they aren’t there.

More than 440 people have been charged so far with participating in the attack, which left five dead.  Many have ties to right-wing extremist groups, the FBI has said.

Later Wednesday, Sen. John Thune (R-S.D.), the No. 2 Republican in the Senate after McConnell, suggested that creating the commission was bad, politically, for the GOP.

Thune told reporters that Republican senators essentially fell into two camps: those who supported the panel, and those “who, I think, believe it will be counterproductive because of the work that’s already been done, and that it could be weaponized politically, and drug into next year.”

Opinion…both sides…

Editorial / Washington Post

“Democratic and Republican negotiators agreed last week to create a high-level, expert commission with subpoena power to conduct an examination of the Jan. 6 Capitol invasion, one of the lowest moments in U.S. history. But House Minority Leader Kevin McCarthy (R-Calif.) on Tuesday threw his negotiators under the bus, condemning the compromise and vowing to oppose the bill creating a commission when it comes to a House vote.  This is cowardice, distilled.

“Many Republicans do not want an impartial panel to remind the public of their party’s role in the event…. Republican lawmakers who signed a spurious lawsuit seeking to overturn the results bear some guilt; those who went on to object to the counting of electoral votes from several swing states bear even more.

“An honest proceeding would also require Mr. McCarthy to testify under oath about his eyewitness experience of the violence – and to then-President Donald Trump’s apparent indifference.  Mr. McCarthy has resisted offering the public a frank accounting of his interactions with Mr. Trump, including on a phone call during which Mr. McCarthy reportedly begged Mr. Trump to stop the mob.  Mr. McCarthy has concluded that whatever political benefits he receives from embracing Mr. Trump are worth the price of his integrity.

“If there are to be hearings, Mr. McCarthy argued, they should examine not only the Capitol invasion but other politically motivated violence, such as the riots surrounding the Black Lives Matter protests last summer. The point is to draw a false equivalence between a historically unique attack on the nation’s seat of government, in which Mr. Trump and other Republicans are directly implicated, and crimes that left-leaning activists committed – crimes that did not occur in the halls of Congress, that did not aim to interrupt the peaceful transition of power, that did not reflect a plot to overturn a presidential election.

“The more Mr. McCarthy and other Republicans try to minimize the insurrection’s significance, the more they encourage the lies on which it was based.”

Editorial / Wall Street Journal

“Democrats are forcing a House vote on Wednesday to establish a commission to investigate the events of Jan. 6, despite opposition from Republican leaders. Do not expect this largely partisan vote to yield a bipartisan accounting of the Capitol riot.

“An independent commission could be useful if it answered outstanding questions and agreed on a common set of facts about events. The Capitol police and law enforcement haven’t been forthcoming with key details – such as the role the police played in letting rioters enter the building, or the circumstances of the killing of protester Ashli Babbitt, or what they know about who planned what….

“The press says Republicans got what they wanted, namely a commission with five members (including the chair) named by Democrats, and five (including a vice chair) by Republicans. The proposal requires agreement between the chair and vice chair – or a vote of a majority of the commission – to issue subpoenas.  The commission would be required to issue its report by Dec. 31.

“But hidden in the fine print are tools empowering Democrats. The bill gives the chairman unilateral authority to demand information from federal agencies and appoint senior staff.  ‘Thanks to powers invested in the Chairperson alone, the Democratically-appointed members would have significant control over the direction of the investigation’ and the ability to stop GOP members from ‘engaging in mischief,’ New York University law professor Ryan Goodman reassured a Washington Post writer.

“Mr. McCarthy also wants the commission to address the political violence beyond Jan. 6 – including the 2017 attack at a Republican baseball practice that almost killed Rep. Steve Scalise; this year’s Good Friday murder of Capitol officer William Evans; and attacks on a federal courthouse in Portland, Ore.  But Democrats are opposed, and the broader the mandate the greater likelihood of discord.

“Multiple investigations of the Jan. 6 events are already underway…. Congressional committees, led by Democrats, have been holding hearings and will no doubt issue reports.  Unless a commission could work together, its effort would be redundant.

“It’s a shame to say it, but there isn’t enough shared trust in Washington these days to pull off a bipartisan inquiry on so polarized a subject.  Mrs. Pelosi views the commission as a path to retain her majority, and Donald Trump will be cat-calling from the sidelines.

“Senate Democratic Leader Chuck Schumer gave the game away on Tuesday when he said: ‘Republicans can let their constituents know: Are they on the side of truth, or do they want to cover up for the insurrectionists and for Donald Trump?’  Fair-minded inquiry?

“A commission will add more partisan heat than light, so better to let Congress and law enforcement do their jobs in regular order, and be held accountable for it.”

Proud Boys leader Ethan Nordean lashed out at Trump, accusing him of misleading his supporters and then deserting them despite their unwavering loyalty.

“We are now and always have been on our own. So glad he was able to pardon a bunch of degenerates as his last move and s--- on us on the way out,” Nordean said in an expletive-laden message.  “F--- you trump (sic) you left us on [t]he battle field bloody and alone.”

Nordean is among the 400+ charged for their alleged roles on Jan. 6.

Prosecutors have detailed communications sent through the instant messaging app Telegram that they say show additional evidence that Nordean and other Proud Boys members conspired to breach the Capitol.

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New York Attorney General Letitia James’ ongoing investigation into the Trump Organization expanded into criminal territory this week as the AG has joined the Manhattan district attorney’s office in its criminal investigation of the former president’s business.

This means that the attorney general’s office will continue to pursue its civil investigation into the Trump Organization, but will also join the Manhattan DA’s office in its own probe into whether the company misled lenders and insurance companies about the value of its properties and if it paid the appropriate amount in taxes.

The Manhattan District Attorney Cyrus Vance Jr. scored a major legal victory in February, when the Supreme Court ruled that his office could review the former president’s tax returns and present them to a grand jury.

A central figure in that investigation is Trump’s long-serving chief financial officer, Allen Weisselberg.  The New York Times reported that prosecutors are seeking his cooperation, and recently subpoenaed records from his bank and the private school in Manhattan his grandchildren attended.

Trump on Wednesday:

“I have just learned through leaks in the mainstream media, that after being under investigation from the time I came down the escalator 5 ½ years ago, including the fake Russia Russia Russia Hoax, the 2 year, $48M, No Collusion Mueller Witch Hunt, Impeachment Hoax #1, Impeachment Hoax #2, and others, that the Democrat New York Attorney General has ‘informed’ my organization that their ‘investigation’ is no longer just a civil matter but also potentially a ‘criminal’ investigation working with the Manhattan District Attorney’s Office.

“There is nothing more corrupt than an investigation that is in desperate search of a crime. But, make no mistake, that is exactly what is happening here….

“Likewise, the District Attorney’s office has been going after me for years based on a lying, discredited low life, who was not listened to or given credibility by other prosecutorial offices, and sentenced to 3 years in prison for lying and other events unrelated to me. [Ed. referring to Michael Cohen.]

“These investigations have been going on for years with members and associates of the Trump Organization being viciously attacked, harassed, and threatened, in order to say anything bad about the 45th President of the United States….

“I have built a great company, employed thousands of people, and all I do is get unfairly attacked and abused by a corrupt political system. It would be so wonderful if the effort used against President Donald J. Trump, who lowered taxes and regulations, rebuilt our military, took care of our Veterans, created Space Force, fixed our border, produced our vaccine in record-setting time (years ahead of what was anticipated), and made our Country great and respected again, and so much more, would be focused on the ever more dangerous sidewalks and streets of New York.

“If these prosecutors focused on real issues, crime would be obliterated, and New York would be great and free again!”

Trump revealed Thursday that he will hold campaign-style rallies in four battleground states in the coming weeks – North Carolina, Florida, Ohio and Georgia – as speculation swirls that he’ll mount another bid for the White House.  He is scheduled to headline the North Carolina Republican Party’s convention on June 5.

The Pandemic

With increasingly successful vaccination efforts in the U.S. and much of Europe, focus is on Asia.  Japan’s numbers are far too high, especially given the weak vaccine rollout, while Taiwan’s government was forced to impose its toughest restrictions thus far as the island tries to combat a spike in cases.

Last week I told you of 34 on May 14, which was a new high.  This week there were a few day at or above 300!  Authorities believe half of the new cases came from tea houses.

Schools in Singapore have shifted to home-based learning due to its spike, including the highest daily tally since last September.

Thailand has been seeing new highs in cases, while Nepal is a total s---show.  If you’re squeamish, don’t look up their chart on worldometers.

And down in South America, now it’s Argentina’s turn…record highs in cases and deaths this week.  And it’s not as if Brazil has crushed its curve…au contraire mon frere.  [Or rather, pelo contrario meu irmao.]

Covid-19 death tolls, as of tonight….

World…3,457,001…The Economist says the global total is more like 7 million to 12 million
USA…603,407
Brazil…446,527
India…295,508
Mexico…221,080
UK…127,710
Italy…125,028
Russia…117,739
France…108,437
Germany…87,852
Colombia…83,719
Spain…79,620
Iran…78,194
Argentina…73,391
Poland…72,691
Peru…67,253
South Africa…55,719
Ukraine…49,101
Indonesia…49,073
Turkey…45,840
Czechia…29,990
Romania…29,826
Hungary…29,427
Chile…28,290
Canada…25,162
Belgium…24,794
Pakistan…20,089
Philippines…19,763

Source: worldometers.info

U.S. daily death tolls…Sun. 289; Mon. 384; Tues. 733; Wed. 633; Thurs. 659; Fri. 656.

Covid Bytes

--Europe has recorded a 60% drop in new coronavirus cases over the past month, said WHO regional director Dr. Hans Kluge. The news comes as the European Union eased travel restrictions for vaccinated visitors and any traveler from countries where Covid-19 is under control.

“Where vaccination rates in high-risk groups are highest, admissions to hospitals are decreasing and death rates are falling. Vaccines are saving lives, and they will change the course of this pandemic and eventually help end it,” Kluge said.

The EU’s executive arm on Thursday finalized a third vaccine contract with Pfizer and BioNTech through 2023 for an additional 1.8 billion doses of their Covid-19 shot to share between the bloc’s countries except for Hungary, which opted out of the deal.

But vaccines alone will not end the pandemic, Kluge added.

“Without informing and engaging communities, they remain exposed to the virus,” he said.  “Without surveillance, we can’t identify new variants. And without contact tracing, governments may need to reimpose restrictive measures.”

--Meanwhile, in the U.S. the seven-day moving average for deaths has been falling steadily.

--New York City lifted all its restrictions after more than 13 months of misery.

“New York is coming back, and it’s a testament to the strength and grit of New Yorkers who banded together, stayed tough, and fought as one to defeat this Covid beast,” Gov. Andrew Cuomo said in a statement.

There are no more mask or social distance requirements for those who are fully vaccinated, in compliance with the recent CDC guidance.

Meanwhile, Gov. Cuomo is set to make more than $5 million for his controversial pandemic-themed book on leadership during the Covid crisis, according to federal tax filings made public Monday.  $500,000 of his first $3.1 million was donated to the United Way and vaccination efforts.  He paid $1.5 million in taxes and incurred $117,000 in expenses.

The governor is set to receive an additional $2 million over the next two years, even as sales of the tome, titled “American Crisis: Leadership Lessons from the Covid-19 Pandemic,” have slowed.

--Californians fully vaccinated can go mask-free in most indoor settings starting June 15 – which also is the target date for reopening the state’s economy, officials said Monday.

--With the pandemic waning in the U.S., according to a Harris Poll of 2,063 adults conducted May 14-16 for USA TODAY, 40% of Americans prefer to work from home full-time, compared with 35% who seek a home-office hybrid and 25% who want to go back to the office full-time.

Workers cite a variety of concerns about going back to the office, including losing the flexibility they’ve enjoyed while teleworking, getting back to their pre-Covid routines, health worries and having to make small talk again with coworkers.

--India recorded a record 4,529 Covid-19 deaths on Tuesday, the highest daily toll of any country since the pandemic began, according to figures from the country’s health ministry and Johns Hopkins.

The previous high for daily deaths was recorded on Jan. 20 in the United States, when 4,400 people died.

India’s hospitals continue to be overwhelmed, lack of oxygen an ongoing issue, and, as we know, the official data understates the severity of the situation and the true death count, which is significantly higher.

But, after an exponential rise, the surge in India appears to be moderating as individual states have imposed their own lockdowns.

Wall Street and the Economy

The market was spooked again on Wednesday as investors’ risk appetite diminished amid a crash in cryptocurrencies (see below) and inflation concerns related to the robust recovery, but what had been a 587-point decline in the Dow Jones early in the morning ended up being just a 164-point drop at day’s end.

Part of the issue was the release of minutes from the Federal Reserve’s policy meeting in late April, which showed that some Fed officials want to begin discussing a plan for reducing the Fed’s massive bond-buying program at a future meeting. The Fed’s purchase of Treasury and mortgage bonds currently totals at least $120 billion a month.

“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the minutes said.

They noted that many officials echoed Chairman Jerome Powell’s view that the Fed should give markets plenty of advance warning before it begins reducing the purchases.

So the markets recovered Thursday, and were mixed Friday, as traders realized there is no cause for concern, at least for today, as the bond market remained in Bart Simpson mode… “no problemo.”

As for the supply constraints, as Tom Linebarger, chairman and CEO of engine and generator manufacturer Cummins Inc. said on a call this week, “You name it, and we have a shortage of it.”  Clients are “trying to get everything they can because they see high demand,” Cummins president Jennifer Rumsey said.  “They think it’s going to extend into next year.”

Virtually all companies are talking about the supply issue lasting all year.  And as I talk about below, the deepening drought in California presents another problem.

So this obviously goes to prices paid and the Fed’s attitude the big pickup in inflation we’ve witnessed is ‘transitory.’  I’m still siding with the Fed…but I’m focused on the yield on the 10-year.

This week saw releases on the housing front.  April housing starts came in less than expected, a 1.569 million pace, -9.5% over March.  The decline was attributed to builders delaying projects because of a surge in lumber prices and other supply constraints.

Today we had figures on existing-home sales in April, down 2.7% from March, but up 20% for January to April, and up 33.9% year-over-year.

The median existing-home sales price rose 19.1% Y/Y to $341,600, both record highs, per the National Association of Realtors.

“Home sales were down again in April from the prior month, as housing supply continues to fall short of demand,” said Lawrence Yun, NAR’s chief economist.  “We’ll see more inventory come to the market later this year as further Covid-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes.  The falling number of homeowners in mortgage forbearance will also bring about more inventory.”

Lastly, the weekly jobless claims figure hit another pandemic low, 444,000, and that is good.

The Atlanta Fed’s GDPNow barometer for the second quarter is 10.1%.

Gerard Baker / Wall Street Journal

“Supply bottlenecks have been driving up prices, and with the economy reopening employers are desperate for workers.  Being paid to stay home is proving to have predictable consequences for the availability of labor. All this may or may not be ‘transitory’ as the Fed insists it is.

“But perhaps most worrying and suggestive of stagflation is a growing mismatch between the pool of available labor and the demand for it.  Companies have shed millions of jobs in the last year – and many improved their profitability. They will be slow to return to their old payrolls if they ever do.  Demographic trends are also stagflationary – with fewer working-age Americans available to support the growing proportion of the population less likely to work.

“That raises the risk that the economy may be shifting to a higher unemployment rate consistent with a sustainable growth rate. The nightmare for Mr. Biden, as we saw in the 1960s and 1970s, is that the harder he presses the fiscal accelerator, the more the effect is felt in prices and not in real demand.

“Last time it took more than a decade of wrenching monetary punishment to squeeze inflation out of the system.  It’s not only Joe Biden who doesn’t have that long.”

Europe and Asia

We had flash PMI readings in the eurozone for May, courtesy of IHS Markit, and the Composite index came in at 56.9, a 39-month high (50 the dividing line between growth and contraction).

Manufacturing was 62.9 vs. 62.9 in April, while the reading on services is 55.1 vs. 50.5 last month, a 35-month high.

Germany had a flash manufacturing figure of 64.0, with services at 52.8.

France’s manufacturing number was 59.2, services 56.6.

Outside the eurozone, in the UK, the flash reading on manufacturing was 66.1, a record high, with services at 61.8, a 91-month high.

Chris Williamson / IHS Markit

“Demand for goods and services is surging at the sharpest rate for 15 years across the eurozone as the region continues to reopen from Covid-related restrictions.  Virus containment measures have been eased in May to the lowest point since last October, facilitating an especially marked improvement in service sector business activity, which has been accompanied by yet another near-record expansion of manufacturing.

“Growth would have been even stronger had it not been for record supply chain delays and difficulties restarting businesses quickly enough to meet demand, especially in terms of re-hiring. The shortfall of business output relative to demand is running at the highest in the survey’s 23-year history.

“This imbalance of supply and demand has put further upward pressure on prices.  How long these inflationary pressures persist will depend on how quickly supply comes back into line with demand, but for now the imbalance is deteriorating, resulting in the highest-ever price pressures for goods recorded by the survey and rising prices for services.”

We also had a look at first-quarter GDP for the eurozone, down 0.6% vs. the fourth quarter, and -1.8% vs. Q1 2020. 

Q1 2021 vs. Q1 2020…

Germany -3.0%, France +1.5%, Italy -1.4%, Spain -4.3%, Netherlands -2.6%.  [Eurostat]

April inflation in the euro area was 1.6% annualized, up from 1.3% in March.  A year earlier, the rate was 0.3%.  [Eurostat]

Germany 2.1% ann., France 1.6%, Italy 1.0%, Spain 2.0%, Netherlands 1.7%.

Brexit: Just one note.  Brexit’s impact on trade is laid bare in new data that shows a surge in imports to Ireland of goods from Europe and a sharp fall in goods bought from Britain.

The change comes as Irish companies open up new supply chains to avoid tariffs and delivery delays on goods from the UK.

The biggest impact was seen in imports of the food sector, with British imports over the first three months of the year down 60 percent compared to the first quarter of 2020.

Granted, the impact may be somewhat exaggerated by higher than normal food imports from the UK in March 2020 as supermarkets struggled to keep up with panic buying at the outset of the pandemic.

About 30 percent of Ireland’s exports in March went to the United States, by the way.

Turning to Asia…China reported April industrial production rose 9.8% year-on-year, vs. 14.1% in March.  Retail sales were up 17.7% Y/Y vs. 34.2% prior. Fixed-asset investment for Jan. thru April was up 19.9%, down from the 25.6% pace for Jan. thru March.  [National Bureau of Statistics]

However, to strip out last year’s pandemic distortions, government statisticians and economists have benchmarked this year’s numbers against 2019’s.  By that measure, official data showed industrial production up 14.1% Y/Y in April, while the pace of retail sales slowed to 8.8%.

A survey on new home prices showed China’s 70-city index was up 4.8% year-on-year in April.

In Japan, the Tokyo Games start in about two months but a major Japanese doctors’ group is calling for the already-delayed event to be canceled over fears that the country’s health-care system cannot accommodate the potential medical needs of thousands of international athletes, coaches and media amid a surge of coronavirus cases in the country.

Tokyo hospitals “have their hands full and have almost no spare capacity,” the association of roughly 6,000 primary care physicians added.  It is at least the second group of Japanese doctors to ask that the Olympics and Paralympics be canceled.

However, Japanese Prime Minister Yoshihide Suga, local organizers and the International Olympic Committee (IOC) have all doubled and tripled down on the official line that the Games will go ahead on July 23.

The cost for the Games is now at around $26 billion vs. an initial projected cost of $7.5 billion, and with only $6.7 billion secured from private funding, most of the money is coming from public funds.

The latest Yomiuri Daily poll showed that 59 percent of Japanese wanted the Games cancelled.

Meanwhile, a flash reading on manufacturing for May in Japan came in at 53.1 vs. 54.3 in April.  The services figure was a poor 45.7.

First-quarter GDP registered a 5.1% annualized decline after growth in the latter half of 2020.  It’s all about renewed coronavirus restrictions and a slow vaccine rollout.  Private consumption was down 1.4%.

Separately, industrial production for March rose 3.4% year-over-year.

Exports in April, though, jumped 38.0% Y/Y, beating market consensus and after a 16.1% rise in March. This was the steepest growth in outbound shipments since April 2010, amid strong signs that a recovery in global trade gained strength.  Sales of transport equipment soared 69.4%, boosted by motor vehicles (88.9%).  Exports of machinery surged 40.3%.

Exports rose 33.9% to China, 45.1% to the U.S., and 32.9% to Germany.

Imports were up 12.8%.

Lastly, core inflation for April was -0.1%, year-on-year, continuing a recent trend.

Street Bytes

--Stocks ended mixed on the week, with the Dow Jones falling 0.5% to 34207 and the S&P 500 slipping 0.4%, while Nasdaq broke a four-week losing steak with a 0.3% gain.  The improving jobs picture, as in declining weekly jobless claims, gives the market angst in terms of the Fed and the potential end to its easy money policies sooner than later.

--U.S. Treasury Yields

6-mo. 0.02%  2-yr. 0.15%  10-yr. 1.62%  30-yr. 2.32%

Essentially unchanged on the week and a seventh consecutive week with the 10-year between 1.56% and 1.66%.

--Bitcoin plunged Wednesday morning, down to near $30,000, after hitting a high earlier in the year of nearly $65,000, before some prominent proponents helped propel a big rebound in the afternoon to about $40,000.  It stayed at that level Thursday, but today fell back to $37,000 after China doubled down on its efforts to prevent speculative and financial risks by cracking down on the mining and trading of the cryptocurrency.

[Earlier, the People’s Bank of China reiterated that the digital tokens cannot be used as a form of payment.]

The extreme volatility elicited a tweet from Elon Musk that implied Tesla Inc. wasn’t among the sellers.

ARK CEO Cathie Wood said she was still sticking to her $500,000 forecast for bitcoin.

Last week Musk said Tesla was no longer accepting bitcoin as payment, while criticizing the environmental impact of crypto-mining.

While a five-year holder of bitcoin is sitting on gains of over 6,000%, as Aaron Back of the Wall Street Journal opines:

“For many speculators, that record will be enough to justify holding on or buying the dip. But its historic gains rest at least partly on the prospect that it will someday rival major currencies as a store of value and medium of exchange – in other words, a true currency. Events this week serve as a reminder of why that is far from assured.

“To begin with, the volatility of cryptocurrencies is itself a major drawback. For a speculative risk asset, volatility is actually somewhat desirable. For a currency it most decidedly isn’t.  A high degree of uncertainty as to what bitcoin will be worth in the near future makes it hard to rely on as a medium of exchange: The payment you are taking for a good or service today might not be exchangeable for other goods and services next week at anything near what you thought.  It is a basic but important point.”

--Walmart Inc. on Tuesday raised its full-year earnings forecast after shoppers armed with government stimulus checks ventured back into stores, driving demand that is expected to continue through the year as Covid-19 restrictions ease.

Visits to Walmart stores around the country grew by 21.7% in April, according to data firm Placer.ai.  Last Friday, Walmart began allowing fully-vaccinated people to shop without wearing masks, making it the first major retailer to walk back its mandatory mask policy.

“My optimism is higher than it was at the beginning of the year,” CEO Doug McMillon said on a post-earnings call.  “In the U.S., economic stimulus is clearly having an impact, but we also see encouraging signs that our customers want to get out and shop.”

U.S. same-store sales rose a better-than-expected 6% in the quarter ended April 30 compared with the same period last year, as people gravitated towards apparel, recreation and home improvement products like outdoor living and sporting goods, the company said.  E-commerce sales rose 37%, though this was the slowest online growth for WMT since the coronavirus outbreak in early 2020 upended the retail landscape.  Sales of nonfood items jumped more than 20% in the quarter.

Operating income rose 32.3% to $6.91 billion in the quarter, while adjusted earnings of $1.69 per share beat estimates of $1.21.  Total revenue rose 2.7% to $138.31 billion.

Earlier this year, Walmart said it would convert two-thirds of its U.S. hourly store roles to full-time positions, while also increasing pay for some of its hourly U.S. workers to an average above $15 an hour.

--Target’s sales and profits surged in the first quarter as Americans emerged from the pandemic eager to spend.  Sales at stores opened at least a year rose 18% in the three-month period ended May 1, which follows a 6.9% increase in the previous quarter.  Online sales soared 50% after rocketing 118% in the prior quarter.

The Minneapolis chain also offered an upbeat sales outlook and the shares rallied over 3% in response.

Clothing was the star performer as Americans ditched their sweatpants, with sales spiking more than 60%.  Sales of home goods rose in the mid-30% range.  Sales of food and beverages grew, even on top of historic growth a year ago.

First-quarter net income increased more than sixfold to $2.1 billion, or $3.69 per share on an adjusted basis, easily surpassing Wall Street expectations of $2.21.

Sales jumped 23.3% to $23.88 billion, also breezing past analyst projections of $21.75 billion.

Target said in March that it will plow $4 billion into its business each year for the next several years to redo its stores, add new ones and speed up delivery.  The capital investment is up 50% from the previous year.  The company plans to add 30 to 40 new stores this year, up from 29 last year.  It also will remodel 150 stores in 2021…200 in 2022.

CEO Brian Cornell, citing the vaccine rollout, said, “Consumer confidence is on the rise.”

--Macy’s reported better-than-expected results for its fiscal first quarter as the department store chain benefits from the reopening in the U.S.  The company also lifted its full year guidance.

Adjusted earnings slowed to $0.39 a share from $0.44 in the same period a year before, but this was ahead of consensus. Sales in the three months through May 1 jumped to $4.71 billion from $3.02 billion last year, also topping the Street’s expectations.

Comparable sales were up almost 63%, well ahead of analysts’ view for 46% growth.  Macy’s shut stores across the U.S. in March 2020.  Over 2019, comparable sales were down more than 10%.

Digital sales rose 34% year-on-year in the first quarter.

The retailer sees net sales ranging from $21.73 billion to $22.23 billion this year, up from the prior range of $19.75 billion to $20.75 billion.  The company also guided higher on earnings.

--Home Depot reported higher fiscal first-quarter earnings on Tuesday, handily topping analyst estimates as Americans busy themselves with home improvement and do-it-yourself projects.

The building supplies retailer posted profit of $3.86 a share, compared with $2.08 a share for the same quarter in 2020.  Net sales for the quarter ended May 2 were $37.5 billion, up from $28.26 billion the year previous. Analysts were looking for $34.6 billion.

“Fiscal 2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects,” said Craig Menear, Home Depot’s chairman and CEO, in a statement.

Comparable store sales jumped 31% over last year, with U.S. comp sales rising 30%.  Analysts were looking for same store sales of 20%.

--Fellow home improvement chain, Lowe’s, also delivered strong Q1 results that easily beat expectations.  Same-store sales rose 25.9% in the first quarter ended April 30, beating analysts’ estimates for a 19.2% rise.

Lowe’s said it was tracking ahead of what it calls a “robust market scenario” for the full year, which estimates fiscal 2021 sales of $86 billion or down about 4% from last year. Total net sales at Lowe’s rose 24.1% to $24.42 billion in the first quarter, beating expectations, while net earnings of $3.21 per share also exceeded forecasts.

Over the past four quarters, LOW’s U.S. comparable sales growth averaged 26.6% compared to 20.5% for HD.  However, this quarter was a different story, as Lowe’s U.S. comp sales growth of 24.4% lagged HD’s 29.9% surge.

HD is better suited to benefit from remodeling, additions, and decks, as the company skews more towards professionals and contractors.  Lumber, which accounts for about 10% of HD’s total sales, is up nearly 130% this year while copper prices have jumped by 32%.

--Three years ago, AT&T Inc. was fighting the Justice Department to defend their takeover of Time Warner Inc., a more than $85 billion foray into the entertainment business.  AT&T then won the court battle, but it proved to be costly.

This week the telecom giant gave up its dreams of marrying media content and distribution in one of the biggest about-faces in corporate deal history.

AT&T said Monday it will spin off its sprawling media empire, including HBO, CNN, TNT, TBS and the Warner Bros. studio, int a new venture with Discovery Inc., whose properties include HGTV, Oprah Winfrey’s OWN, The Food Network and Animal Planet.  That follows a February agreement to split off a 30% stake in satellite broadcaster DirectTV and give up operational control of its pay-TV unit.

All told, the two reversals erased tens of billions of dollars in equity value, as AT&T exits its business in return for shedding debt.

In the Discovery deal, AT&T will receive $43 billion in cash, debt securities and WarnerMedia’s retention of certain debt in the deal. Quite a comedown from the $85 billion valuation of 2018.

So now AT&T is sticking to business it knows – the wireless and broadband business.

“The personal reaction is I’m a bit sad,” CEO John Stankey said in an interview, noting that investors haven’t been won over by the company’s media strategy.  “I’m disappointed that the shift in the market that occurred caused us to have to step back and re-evaluate.”

Investors totally panned the about-face.

Cable mogul John Malone, a major Discovery shareholder, said that although he believes Time Warner is doing fine, merging content and distribution usually doesn’t make sense.  “I think that the technology of connectivity and digital technologies are one focus, and creating content that people get addicted to is another focus,” he said.  “And you seldom would find both of those in the same management team.”

It was in 2001 that Time Warner acquired AOL for $106 billion, one of the biggest flops in business history. AOL was eventually spun off.

And now this.  AT&T shareholders will own 71% of the as-yet unnamed media company, with Discovery shareholders holding the remainder.  Discovery CEO David Zaslav will run the combined business.

As telecommunications analyst Craig Moffett said: “What a dismal failure, and what an embarrassing chapter for what was once one of America’s most storied companies.”

--It will take several years for the global aviation industry to recover to 2019 capacity levels as airlines have retired aircraft and made critical staff redundant, the head of the global airline industry body IATA said on Wednesday. 

“The ability for the industry to recover to the 2019 levels of capacity quickly is now impossible,” IATA Director General Willie Walsh told an Irish parliament committee. “The reason I say this is…we have seen a lot of aircraft have been returned. So therefore the aircraft are not available.  A lot of critical staff, unfortunately, have been made redundant.”

--Ryanair reported a record annual after-tax loss of $980 million on Monday after Covid-19 restrictions forced it to scrap over 80 percent of its flights, but the budget airline said there were signs the recovery had begun.

Europe’s largest discount airline flew 27.5 million passengers in the financial year ended March, down from 149 million the previous year in what it called the most challenging in its history.

The airline reiterated its forecast that passenger numbers for the current fiscal year would be towards the lower end in the range of 80 million to 120 million passengers.  It expects to fly just five million to six million passengers in the April-June quarter.

CEO Michael O’Leary said: “If, as is presently predicted, most European populations are vaccinated by September, then we believe that we can look forward to a strong recovery” in the second half of the year.

--Shares in Boeing rose today as the company said it planned to increase 737 MAX output to as many as 42 jets a month in fall 2022.  This would be more than the 31 a month current target set for early 2022.

But implementation will depend on demand, the health of suppliers and BA’s success in reducing a surplus of jets already built, as IATA is alluding to above.

--TSA checkpoint travel numbers vs. 2019

5/20…65 percent vs. 2019
5/19…61
5/18…61
5/17…66
5/16…71…post-pandemic high of 1,850,531
5/15…69
5/14…64
5/13…67

--Deere & Co. raised its full-year earnings forecast after a 169% surge in quarterly profit, as a recovering global economy boosts demand for farm machine and construction equipment.  The world’s largest farm equipment manufacturer, however, expects supply-chain pressures to intensify the remainder of the year.

CEO John May said Deere is working closely with key suppliers to secure the parts and components.

The company said net income for 2021 would be between $5.3 billion and $5.7 billion, up from a previous forecast of $4.6bn to $5.0bn.

Farm machinery companies are benefiting from a turnaround in the U.S. farm economy following a run-up in grain prices. A record surge in U.S. corn and soybean prices has boosted farmers’ incomes, lifting demand for tractors and combines.

Deere expects industry sales of large agricultural equipment in the United States and Canada – the company’s biggest combined market – to grow by 25% this year.

Equipment sales in the quarter ended May 2 rose 34% year-on-year to about $11 billion.  [Total revenue was $12.06 billion, up from $9.25bn a year ago, and well ahead of expectations.]

--Networking equipment giant Cisco Systems issued poor guidance for its current quarter as it sliced its forecast on gross margins because of supply chain issues, which are expected to remain in play for at least this year and have pushed the earnings forecast for the next three months to below consensus.

Cisco guided its fiscal fourth quarter earnings per share to between $0.81 and $0.83, lagging the market’s expectations of $0.85.

In the quarter just ended, pro-forma earnings increased to $0.83 from $0.79 a year ago, one cent ahead of analysts’ guidance.  Revenue grew to $12.8 billion from $12 billion a year earlier amid “strong” demand.

“We saw broad-based demand across the business, led by our biggest growth opportunities: hybrid work, digital transformation, cloud and continued strong uptake of our subscription-based offerings,” CEO Charles Robbins said on the call. 

In the fiscal third quarter, Cisco reported $3.8 billion in software revenue, with 81% of those sales coming via a subscription compared with 76% in the previous quarter.

The market didn’t like the overall tone of the report and the shares fell 5% in response.

--Ireland’s healthcare system struggled to restore computers and treat patients, days after it shut down its entire information technology system in response to a ransomware attack.

Thousands of diagnostic appointments, cancer treatment clinics and surgeries have been canceled or delayed since last Friday’s cyberattack.  Authorities said it could be weeks before the public health service will return to normal.

Prime Minister Micheal Martin said the attack was a “heinous” one that targeted patients and “the Irish public.”

The criminal gang, Conti, a Russian-speaking ransomware group responsible for the attack, said that unless the $20 million ransom is paid by Monday, it will release patient data.  But it seems the social media giants are on the lookout to take down any information that emerges, while the Irish government has vowed not to pay the ransom.

--California is back in a serious drought condition in much of the state and this is going to impact the cost of various food products. California grows a third of the United States’ vegetables and two-thirds of the nation’s fruits and nuts.

Many farmers simply will not be able to grow this summer, as much of the state missed the rainy season and likely won’t see significant moisture until October.

--The New York City construction industry lost 74,000 jobs and $9.8 billion in activity last year during shutdowns triggered by the pandemic, according to a new study by an industry group – which is urging lawmakers to take action to get hard hats back to work.

The Covid-19 safety restrictions that closed job sites resulted in a loss of $5.5 billion in wages and 8.3 percent in commercial real estate, mortgage recording and transfer taxes to the city, an analysis conducted for the Building Trades Employers Association said.

The building and construction trade industry represents 20 percent of the city’s economy, 10 percent of jobs and 5 percent of wages, the report said.

The city is not expected to regain all the jobs lost during the pandemic until 2025.

--Bank of America Corp. on Tuesday said it plans to raise its hourly minimum wage to $25 by 2025, putting it on track to surpass its big-bank peers during a time of worker shortages across the country.

BofA is also requiring all of its U.S. vendors to pay employees who are dedicated to the bank at least $15 an hour.

The second-largest U.S. lender joins companies including Amazon.com and McDonald’s Corp. in saying it will raise pay to attract workers as the economy reopens more fully.

JPMorgan Chase & Co., the largest U.S. lender, in January raised its minimum hourly base pay to between $16 and $20, depending on the local cost of living.  Wells Fargo & Co. last year raised its pay to between $15 and $20 an hour, also depending on geography.  And Citigroup Inc. raised its base pay to $15 an hour in 2019, though the bank is saying its average for hourly U.S. workers is $23.89.

--According to the California Association of Realtors, the median home price in the state shot past $800,000 for the first time in April…$813,980, up 7.2% from March and 34% from a year earlier, when pandemic lockdowns mostly froze the housing market.

--All manner of stories involving Bill Gates this week, weeks after the announcement that he and wife Melinda were ending their 27-year marriage.

What seems pretty apparent is that Melinda Gates initiated divorce proceedings going back to 2019, following disclosure of Bill Gates’ relationship with Jeffrey Epstein, whom Gates got to know beginning in 2011, three years after Epstein, who faced accusations of sex trafficking of girls, pleaded guilty to soliciting prostitution from a minor.  Melinda Gates had expressed discomfort with her husband spending time with the sex offender, but Gates continued doing so, according to reporting by the New York Times.

A representative for Bill Gates said: “It is extremely disappointing that there have been so many untruths published about the cause, the circumstances and the timeline of Bill Gates’ divorce.”

Long after Bill and Melinda Gates married in 1994, Bill was allegedly on occasion pursuing women in Microsoft’s office.

Members of Microsoft’s board in 2019 looked into a company engineer’s allegations that she had a sexual relationship with Gates.  Gates would step down from Microsoft’s board in March 2020, but Gates’ spokesperson disputes that the two are related.  Gates said at the time he was stepping down to focus on philanthropy.

Another reputation, built over time, shattered.

--U.S. exports to China of wine, cotton, log timber and woods have increased over the past year amid a block by Beijing on the same products from Australia, trade data shows.

Exports of American coal have also risen since February after Australian shipments of the raw material were banned in October last year.

--Finally, we note the passing of Spencer Silver, a chemist who accidentally invented the delicate adhesive used in Post-It Notes, an innovation that blanketed the office landscape like a blizzard with messages and reminders.  Silver was 80.

The Post-It Note was credited to two principal investors: Silver, tasked by 3M in 1968 with creating a new superstrong adhesive, and Art Fry, a colleague who discovered an application for the intriguing substance that Silver produced.

The adhesive at first seemed to be a failure as it was weaker than a schoolchild’s art glue.  But it had an unusual characteristic: It could be attached to a surface, peeled off and reattached without damaging the surface or losing stickiness.

Yet it wasn’t until 1980 that Silver, working with Fry, finally came up with an application that was distributed nationally, after a strong test run in Boise, Idaho, years earlier.

The rest is history.

Foreign Affairs

Israel and the Palestinians: President Biden on Thursday pledged humanitarian and reconstruction aid for Gaza as he hailed the deal to end 11 days of fighting between Israel and Hamas that tested his negotiating skills and exposed him to criticism from fellow Democrats. 

Biden also promised to replenish Israel’s Iron Dome missile defense system, despite complaints from the Democratic left about a pending U.S. arms sales to Israel, Biden said the United States would work through the United Nations and other international stakeholders “to provide rapid humanitarian assistance and to marshal international support for the people in Gaza and in the Gaza reconstruction efforts.”

Biden insisted that reconstruction aid would be provided in partnership with the Palestinian Authority and not with Hamas, which the United States labels a terrorist organization.  The PA, run by President Mahmoud Abbas, 85, only governs parts of the occupied West Bank, however, while Hamas holds sway in the Gaza Strip.

“We will do this in full partnership with the Palestinian Authority – not Hamas – in a manner that does not permit Hamas to simply restock its military arsenal,” Biden said.

Secretary of State Antony Blinken is traveling to the region to meet with Israeli, Palestinian and regional counterparts to discuss recovery efforts and “working together to build better futures for Israelis and Palestinians.”

The ceasefire agreement followed days of intense diplomatic activity and Biden and his top national security aides deserve credit, for today, for helping prevent the conflict from spiraling out of control into a prolonged, and perhaps regional, war.

Biden spoke six times with Israeli Prime Minister Benjamin Netanyahu and once with Egyptian President Abel Fattah al-Sisi. Both Netanyahu and Sisi were close to former President Trump, and Biden waited weeks before calling Netanyahu after taking office in what was viewed as a snub.  His phone call with Sisi on Thursday was the first time they had spoken since Biden took office in January.  Egypt, which has a peace treaty and diplomatic relations with Israel and also maintains contacts with Hamas, has traditionally played a role in ending Gaza fighting.

Biden’s public backing of Israel’s right to self-defense against Hamas’ rocket attacks prompted criticism from fellow Democrats that he needed a more balanced approach instead of marching in lockstep with Israel.  Biden defended his way of handling the crisis, but said Palestinians deserve to live in peace and security just like Israelis.

“My administration will continue our quiet, relentless diplomacy toward that end,” he said.

Critics have pointed to Biden’s lack of high-level representation on the ground but a search for a new U.S. ambassador to Israel is supposedly nearing an end.

Palestinians rallied by the thousands early Friday after the cease-fire took hold, with many viewing it as a costly but clear victory for Hamas over a far more powerful Israel.

Some 230 Palestinians were killed in Gaza in the 11-day war, 65 of them children, with at least another  21 Palestinians killed in the West Bank, while Israeli losses were put at 12.  Once again, conflict brought widespread devastation to impoverished Gaza.  But the over 4,000 rockets that Hamas fired (90% or so of which were shot down by the Iron Dome missile defense system) were seen by many Palestinians as a bold response to perceived Israeli abuses in Jerusalem, the emotional heart of the conflict.

Hamas also claimed victory, despite the horrifying toll the war took on countless Palestinian families.  And now it faces the daunting task of rebuilding in a territory already suffering from high unemployment and a coronavirus outbreak.

The Israeli Defense Forces largely achieved their goal of seriously degrading Hamas’ capability, including the destruction of tunnels throughout the Gaza Strip, including those penetrating Israel.

But the IDF failed to destroy Hamas’ rocket and missile launch system and they maintain a large arsenal of strategic weapons.

Meanwhile, the conflict potentially boosted Netanyahu’s chances of staying in power after another indecisive election, though far-right politicians on whom he relies to form a coalition and many residents in Israel’s south who make up his base lambasted the cease-fire.

Gideon Saar, a former ally who now leads a small party opposed to Netanyahu, called the cease-fire “embarrassing.”

Opposition leader Yair Lapid wrote on Facebook: “If we had a government, security considerations would not be mixed with political considerations.  No one would ask themselves why the fire always breaks out just when it’s most convenient for the prime minister.”

Lapid appeared to be poised to make history early last week, saying he was wrapping up the final details of forming a government that would end Netanyahu’s 12-year rule.

“In a few days, we should be able to swear in a new Israeli government that is functional and that is based on broad agreements and the common good,” he declared, hours before the war erupted.

But now the conflict has made it increasingly difficult, and perhaps impossible, for Lapid to assemble his coalition.  Among the groups he was cobbling together was an Islamist party, which has never officially been part of an Israeli governing coalition.

But as things began to heat up between Jews and Arabs in the contested city of Jerusalem, it is highly unlikely the Arabs will join any coalition.  At the same time, Jewish settlers pressed ahead with attempts to evict dozens of Palestinians from their homes in an East Jerusalem neighborhood.

As for the Arab states, some of whom like the United Arab Emirates and Bahrain broke a longstanding taboo in the region by establishing formal ties with Israel, with tacit approval from Gulf power Saudi Arabia, the 11-day war put the governments in a real bind, stressing the importance of preserving the identity of Jerusalem, which contains sites sacred to Judaism, Islam and Christianity.  Turkey’s foreign minister said Israel should be held accountable for war crimes.

It didn’t help that last Saturday, Israel struck a 12-story tower in Gaza, housing the offices of foreign media affiliates such as the Associated Press and Al Jazeera.  Israel said the building contained “military assets of the military intelligence” of Hamas hiding under the guise of the foreign media outlets, an IDF spokesperson said.

AP President and CEO Gary Pruitt called the strike “an incredibly disturbing development.”

The acting director of Qatar-based Al Jazeera Media Network said the strike was “barbaric” and demanded Israel be held accountable.

Iran: Two of the main contenders to become Iran’s president, hardline judiciary chief Ebrahim Raisi and former parliament speaker Ali Larijani, registered last Saturday to run in next month’s election. The June 18 vote to succeed President Hassan Rouhani is seen as a test of the legitimacy of the country’s clerical rulers who are hoping for a high turnout.

Rouhani is barred by term limits from running again.  But voter interest may be hit by rising discontent over an economy that has been crippled by U.S. sanctions reimposed after Washington exited the nuclear deal between Iran and the major powers three years ago.

Raisi is a 60-year-old mid-ranking cleric in Iran’s Shiite Muslim establishment. Appointed by Supreme Leader Ayatollah Ali Khamenei as head of the judiciary in March 2019, he has now emerged as one of the country’s most powerful figures and a contender to succeed Khamenei.

Larijani, a former nuclear negotiator and an adviser to Khamenei, is hoping to secure backing from both moderates and hardliners and bridge the gap between them.

Raisi lost to Rouhani in the 2017 presidential election.  Reformists and rights activists say they are alarmed by Raisi’s background as a hardline judge, especially during the 1980s when he was one of four judges who imposed death penalties on thousands of political prisoners.

China: Tensions across the Taiwan Strait have risen to the point where the risk of armed conflict is at “an all-time high,” according to a Beijing-backed think tank.

The China Cross-Strait Academy released a report on Wednesday on relations across the narrow stretch of water that separates mainland China from Taiwan.  It said researchers had looked at factors including the two sides’ military strengths, trade relations, public opinion, political events, and support from allies, concluding that they were “on the brink of war.”

The think tank, based in Hong Kong, is led by a committee member of the Communist Party-backed All-China Youth Federation.  [South China Morning Post]

Recently, The Economist editorialized:

“The United States is coming to fear that it may no longer be able to deter China from seizing Taiwan by force.  Admiral Phil Davidson, who heads the Indo-Pacific Command, told Congress in March that he worried about China attacking Taiwan as soon as 2027.

“War would be a catastrophe, and not only because of the bloodshed in Taiwan and the risk of escalation between two nuclear powers.  One reason is economic. The island lies at the heart of the semiconductor industry. TSMC, the world’s most valuable chipmaker, etches 84% of the most advanced chips. Were production at TSMC to stop, so would the global electronics industry, at incalculable cost.  The firm’s technology and know-how are perhaps a decade ahead of its rivals’, and it will take many years of work before either America or China can hope to catch up.

“The bigger reason is that Taiwan is an arena for the rivalry between China and America.  Although the United States is not treaty-bound to defend Taiwan, a Chinese assault would be a test of America’s military might and its diplomatic and political resolve.  If the Seventh Fleet failed to turn up, China would overnight become the dominant power in Asia. America’s allies around the world would know that they could not count on it.  Pax Americana would collapse.”

Personally, China will attack Taiwan long before 2027, and the chip issue, as I’ve written for weeks, is what really scares me in the short-term.

On a different matter, literally about an hour after I posted last Friday night, China became the third country in the world to safely land a rover on Mars.

The China National Space Administration said in a statement that its rover Zhu Rong – named after the Chinese mythical god of fire and war – had successfully landed on Mars on Saturday after “nine minutes of terror”: NASA’s name for the time interval when engineers on Earth have no control or oversight of the rover because of a radio signal delay.

If Zhu Rong succeeds in its mission to collect and send back information about the Martian surface over the next 90 days, China would become only the second country to accomplish the task after the U.S.  While the Soviet Union landed its Mars 3 rover successfully in 1971, it stopped sending signals soon after.

Russia: President Vladimir Putin alleged Thursday that some of the country’s foreign foes dream about biting off pieces of the country’s vast territory, warning that Moscow would “knock their teeth out” if they ever try.

In remarks during a conference call with officials, Putin noted that foreign efforts to contain Russia date from centuries ago.

“In all times, the same thing happened: once Russia grew stronger, they found pretexts to hamper its development,” Putin said, alleging that some critics of Russia who he didn’t name have argued that it’s unfair for it to keep its vast natural riches all to itself.

“Everyone wants to bite us or bite something off us, but those who would like to do so should know that we would knock their teeth out so that they couldn’t bite,” the Russian leader said.  “The development of our military is the guarantee of that.”

Putin bragged that Russia has the most modern strategic nuclear forces, including such state-of-the-art weapons as the Avangard hypersonic glide vehicle.

The military has said that the Avangard is capable of flying 27 times faster than the speed of sound and making sharp maneuvers on its way to target to dodge the enemy’s missile shield.

Putin also touted the Poseidon atomic-powered underwater drone armed with a nuclear weapon that is capable of generating devastating tsunami waves near an enemy coast.  Its tests are continuing.

Meanwhile, the Biden administration has waived sanctions on a company building a controversial gas pipeline between Russia and Germany.

The U.S. also lifted sanctions on the executive – an ally of Putin – who leads the firm behind the Nord Stream 2 project.

The move came in a report on Russian sanctions delivered to Congress by the Department of State.

Critics say the pipeline is a major geopolitical prize for the Kremlin.

The project, which would take gas from the Russian Arctic under the Baltic Sea to Germany, is already more than 95% complete.

The Department of State report notes that Nord Stream 2 AG and its chief executive, Matthias Warnig, a former East German intelligence officer, engaged in sanctionable activity.

But it concludes that it is in the U.S. national interest to waive the sanctions.

Editorial / Wall Street Journal

“President Biden has talked tough about Vladimir Putin, but his policy response has been mixed.  This week’s sanctions decision on the Nord Stream 2 natural gas pipeline provides more reason for concern….

“While the Biden Administration wants to target Russian ships working on the nearly complete pipeline, the company running the project and its CEO won’t face sanctions. State will recognize that Nord Stream 2 AG and its leader – a former East German intelligence officer – deserve to be sanctioned.  Yet restrictions on a Putin crony will be waived in the name of ‘U.S. national interests.’ This is the kind of move that prompted the media to assert that Donald Trump must be a Russian agent.

“The decision suggests Mr. Biden doesn’t want to blow up his relationship with the German government, which strongly supports the pipeline. But this gets it backward. The project generates bipartisan opposition in the U.S., and in April the European Parliament called for it to be stopped.  Germans have the responsibility to avoid damaging relations with Washington and the rest of the Continent.

“The pipeline will provide cheap energy but deepen European dependence on Russian gas.  This is geopolitical malpractice given the threat posed by Moscow’s revisionist foreign policy.  It’s also an economic reward to Mr. Putin, who continues to crack down on dissidents, imprison Alexei Navalny, and threaten his neighbors’ sovereignty. That’s why countries like Poland are willing to pay a premium to avoid Russian gas, even if they’re significantly less wealthy than Germany.

“As one of his first official acts, Mr. Biden shut down the Keystone XL pipeline that would improve U.S. energy security.  He is treating a pipeline that increases Russian influence and income better than one that enhances America’s.”

Random Musings

--Presidential approval ratings….

Gallup: We have new readings for May 3-18.  54% approve of President Biden’s job performance, 40% disapprove.  54% of independents approve.

The numbers are down slightly since the last survey, April 1-21, which showed a 57-40 split, 58% of independents approving.

Rasmussen: 52% approve of the president’s job performance, 46% disapprove (May 21).   This one has literally been back and forth every week.

--A CBS News/YouGov poll looking into the ouster of Republican Congresswoman Liz Cheney from her leadership post found that 80% of Republicans who’d heard about the vote agree with Cheney’s removal – they feel she was off-message, unsupportive of Donald Trump, and that she’s wrong about the 2020 presidential election.  To a third of them, and most particularly for those who place the highest importance on loyalty, Cheney’s removal also shows “disloyalty will be punished.”

Those Republicans opposed to her removal – just a fifth of the party right now – say it’s mainly because there’s room for different views in the party, not all need support Mr. Trump and this was a distraction.

57% say Cheney is wrong about the 2020 election.

69% say she’s not on message with the party.

52% say she didn’t support Trump.

Among Republicans…being loyal to Trump is 66% important, 33% not important.

When asked if Joe Biden is the legitimate winner of the 2020 presidential election, 33% said ‘yes,’ 67% ‘no.’

In television interviews on Sunday, Cheney said there was “no question” an attack like the one on Jan. 6 could happen again if Trump’s claims go unchecked.

“I think it’s dangerous,” Cheney said.  “I think that we have to recognize how quickly things can unravel. We have to recognize what it means for the nation to have a former president who has not conceded and who continues to suggest that our electoral system cannot function, cannot do the will of the people.”

“We’ve seen not only his provocation of the attack but his refusal to send help when it was needed, his refusal to immediately say, ‘Stop,’” she added.

Trump weighed in once again on his blog last Saturday.

“The 2020 Presidential Election was, by far, the greatest Election Fraud in the history of our Country.”

--Former New Jersey Gov. Chris Christie said in a new interview that he will not wait to see if Donald Trump launches a bid for the White House in 2024 before making his own plans for the next election.

Christie said he is “not going to defer to anyone” if he decides to run for president in 2024.

“And I’m also not going to be one of these people who’s going to say, ‘Well, I’ll wait to see what President Trump’s going to do.’  You know, I’m not going to defer to anyone if I decide that it’s what I want to do and that I think I’m the best option for the party and for the country,” Christie said during an appearance on the “Ruthless” podcast.

Christie said he wants to try to lead the Republican Party in a “productive and smart way” and steer away from recklessness.

“What I want to do is to try to lead the party in a productive and smart way for us to continue to argue for populist-type policies, but not to be reckless, not be reckless with our policies, not to be reckless with our language, to be smart about it,” Christie said.

Christie said this element of “recklessness” influenced the last four years. The former governor said it cost the GOP suburban voters, which led to the party’s defeat in the 2020 election.

--New York City mayoral hopeful Andrew Yang’s support has plummeted among Democratic voters, while Brooklyn Borough President Eric Adams holds a narrow lead in the race, a new poll released Monday found.

Adams garnered 18 percent of primary voters in the WPIX 11/Emerson College survey, while Yang was in second with scandal-rocked city Comptroller Scott Stringer, each receiving 15 percent of likely Democratic voters.

The same survey in March had Yang at 32 percent.

Stringer’s support has shockingly been rising despite a former campaign volunteer from a prior race accusing him of sexual misconduct. Stringer denied the charges.

--Andrew Giuliani, the 35-year-old son of Rudy, announced his campaign for governor of New York, the election in 2022.

“Lots of exciting times around here,” Giuliani said in a Twitter video.  “We’re looking forward to saving our state.  We’re going to work our butts off, and I tell you what: We’re going to have a lot of fun doing it.”

Giuliani worked as a White House aide for former President Trump, but has zero political experience.  He failed in his attempt to become a professional golfer and he currently works as a contributor for right-wing media channel Newsmax.

But his candidacy could prove to be a serious headache for two legitimate GOP candidates…Long Island Rep. Lee Zeldin and former Westchester County Executive Rob Astorino.  Donald Trump encouraged Andrew Giuliani to run last month and the ex-president’s endorsement will carry significant weight. 

I am not a fan of Lee Zeldin, but he should be fuming, because he supported Trump as much as anyone.

Instead, New York GOPers are supposed to vote for this kid?

--The Supreme Court agreed Monday to consider a major rollback of abortion rights, saying it will decide whether states can ban abortions before a fetus can survive outside the womb.

The court’s order sets up a showdown over abortion, probably in the fall, with a more conservative court seemingly ready to dramatically alter nearly 50 years of rulings on abortion rights.

The case involves a Mississippi law that would prohibit abortions after the 15th week of pregnancy.  The state’s ban had been blocked by lower courts as inconsistent with Supreme Court precedent that protects a woman’s right to obtain an abortion before the fetus can survive outside her womb.

The justices had put off action on the case for several months.  Justice Ruth Bader Ginsburg, an abortion-rights proponent, died just before the court’s new term began in October.  Her replacement, Justice Amy Coney Barrett, is the most open opponent of abortion rights to join the court in decades.

Barrett is one of three appointees of former President Trump on the Supreme Court. The other two, Justices Gorsuch and Kavanaugh, voted in dissent last year to allow Louisiana to enforce restrictions on doctors that could have closed two of the state’s three abortion clinics.

Chief Justice John Roberts, joined by Ginsburg and the other three liberal justices, said the restrictions were virtually identical to a Texas law the court struck down in 2016.

But that majority no longer exists, even if Roberts, hardly an abortion-rights supporter, sides with the more liberal justices.

The Mississippi law would allow exceptions to the 15-week ban in cases of medical emergency or severe fetal abnormality. Doctors found in violation of the ban would face mandatory suspension or revocation of their medical license.

--The Duke of Cambridge blamed the BBC over its 1995 explosive interview with his mother for fueling her paranoia and worsening his parents’ relationship. 

After an inquiry found the BBC fell below its standards, Prince William said he was “most saddened” Diana never learned she had been deceived.

He said his mother was failed “not just by a rogue reporter” but also by BBC bosses.

The Duke of Sussex, in a separate statement, blamed a toxic media culture for his mother’s death.

Prince Harry said that the “ripple effect of a culture of exploitation and unethical practices” ultimately took his mother’s life.

“Our mother lost her life because of this, and nothing has changed,” Harry said.  “By protecting her legacy, we protect everyone, and uphold the dignity with which she lived her life.”

The BBC apologized to Princes William and Harry, as well as the Prince of Wales and Diana’s brother Earl Spencer.

The BBC reporter, Martin Bashir, produced fake documents to secure the interview with Diana, and his bosses at the BBC failed to investigate the matter and later covered up elements that were not to its liking, an investigation found.

William effectively accuses the BBC of driving his parents towards divorce and playing some part in the events that led towards his mother’s death.

--The National Oceanic and Atmospheric Administration forecasted that the hurricane season, which runs from June through November, will see 13 to 20 named storms. Six to 10 of those storms will become hurricanes and three to five will be major hurricanes with winds of more than 110 mph, the agency predicted.

Since 1990, a typical season sees 14 named storms, seven hurricanes and three major hurricanes.

Last year, there were 30 named storms – 14 hurricanes, seven of them major.

--Finally, many of you no doubt saw the “60 Minutes” piece last Sunday on UFOs.

As former Navy Lt. Ryan Graves said of the unidentified vessels:

“I am worried, frankly.  You know, if these were tactical jets from another country that were hanging out up there, it would be a massive issue,” Graves said.  “But because it looks slightly different, we’re not willing to actually look at the problem in the face.  We’re happy to just ignore the fact that these are out there, watching us every day.”

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

Thank you to our healthcare workers and first responders.

God bless America.

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Gold $1881…highest weekly close since Dec. 31.
Oil $63.89

Returns for the week 5/17-5/21

Dow Jones  -0.5%  [34207]
S&P 500  -0.4%  [4155]
S&P MidCap  -1.2%
Russell 2000  -0.4%
Nasdaq  +0.3%  [13470]

Returns for the period 1/1/21-5/21/21

Dow Jones  +11.8%
S&P 500  +10.6%
S&P MidCap  +16.6%
Russell 2000  +12.2%
Nasdaq  +4.5%

Bulls  54.5
Bears  17.2

Hang in there.  Guys, as we reopen, remember to tip the barmaids, too.  Not just Ginger and Tiffany.

Dr. Bortrum is hanging in there. It’s not easy.  Just praying I can get him home eventually.

Brian Trumbore

 

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