Week in Review

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Week in Review

07/31/2021

For the week 7/26-7/30

[Posted 9:30 PM ET, Friday]

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Edition 1,163

So much for the “summer of joy,” as President Joe Biden promised on July 4, in declaring America’s independence from Covid-19.  Less than four weeks later, the sense of victory is evaporating.

Covid cases are surging, fueled by vaccine holdouts and the highly transmissible Delta variant.

Thursday night, the Washington Post obtained a leaked internal federal health document that argues officials must “acknowledge the war has changed” when it comes to the coronavirus and the Delta variant’s ability to cause more severe illness than earlier variants and spread as easily as chickenpox.

The internal Centers for Disease Control and Prevention slide presentation, shared within the CDC, captures the struggle of the nation’s top public health agency to persuade the public to embrace vaccination and prevention measures, including mask-wearing, as cases have surged across the United States, and with new research suggesting vaccinated people can spread the virus.

The document strikes an urgent note, revealing the agency knows it must revamp its public messaging to emphasize vaccination as the best defense against a variant so contagious that it acts almost like a different novel virus, leaping from target to target more swiftly than Ebola or the common cold.

The document cites a combination of recently obtained, still-unpublished data from outbreak investigations and outside studies showing that vaccinated individuals infected with Delta may be able to transmit the virus as easily as those who are unvaccinated.  Vaccinated people infected with Delta have measurable viral loads similar to those who are unvaccinated and infected with the variant.

Robert Wachter, chairman of the Department of Medicine at the University of California at San Francisco, wrote in an email to the Post, “I finished reading it significantly more concerned than when I began.”

The data and studies cited in the document were the prime reason why the CDC issued new recommendations that call for everyone – vaccinated or not – to wear masks indoors in public settings in certain circumstances.  CDC Director Rochelle Walensky privately briefed members of Congress on Thursday, drawing on much of the material in the document.

The presentation came two days after Walensky announced the reversal in guidance on masking among people who are vaccinated.  On May 13, people were told they no longer needed to wear masks indoors or outdoors if they had received the shots.  The new guidance reflects a strategic retreat in the face of the Delta variant.

Walensky then warned Thursday that the Delta variant “is one of the most infectious respiratory viruses we know of and that I have seen in my 20-year career.”

So even people who are vaccinated should wear masks indoors in communities with substantial viral spread, which is part of the messaging confusion, because it’s not easy to determine where the boundaries are between the good and bad ones.

But on Friday, the CDC released a study concerning Provincetown, Massachusetts, which is on the tip of Cape Cod.  Over the Fourth of July holiday there were a number of public events and in the end, 469 were identified with having contracted Covid; 74%, 347, of whom were fully vaccinated.

While 79% of the vaccinated individuals who were infected reported cold-like symptoms, only four had to be hospitalized and there were no deaths.  That’s all you need to know.  Director Walensky said this study was a “pivotal discovery” leading to their recommendation that masks be worn in areas where cases were surging, though it also confirms the efficacy of vaccines in keeping one from getting seriously ill.

Here in New Jersey, I wore a mask in Home Depot on Monday and will start wearing a mask again this weekend at the grocery, drug and liquor stores; my county, it was announced today, an area of concern.  The last two days my state has had 1,000 new cases for the first time in months.  That’s all I need to know.  It’s just common sense.

“I think the central issue is that vaccinated people are probably involved to a substantial extent in the transmission of Delta,” Jeffrey Shaman, a Columbia University epidemiologist, wrote in an email after reviewing the CDC slides.

In a July study, Chinese researchers found that people infected with the Delta variant on average had roughly 1,000 times more copies of the virus in their respiratory tracts than people infected with the original strain.

Higher levels of virus mean that infected people shed more virus, scientists say.

Linsey Marr, professor of civil and environmental engineering at Virginia Tech who studies airborne transmission of viruses: Having 1,000 times more copies of the virus in the respiratory tract “doesn’t necessarily mean that there’s 1,000 times more virus [released into the air] – although it could be.”

This afternoon, Walmart, the largest private employer in the U.S., is requiring its headquarters and regional staff to be vaccinated by Oct. 4, joining Google in instituting a policy that may set a standard for corporate America as the Delta variant spreads.

Walmart separately told its frontline store and warehouse associates Friday to don masks again and doubled the cash incentive it’s providing for employees to get vaccinated to $150.

Biden’s Agenda

--The White House’s shift on masking is perilous politically.  President Biden’s central promise of the 2020 campaign was to lead the United States out of the pandemic, which he was on his way to accomplishing, until it became clear a large segment of the population was not going to get the vaccine.

But the new masking guidelines highlight questions some public health officials have had for weeks – whether the administration was too quick to relax guidelines in May and too fast to celebrate getting back to normal, especially with Biden inviting 1,000 guests to the White House for Independence Day.

David Axelrod, the longtime political strategist, told the Washington Post: “(Biden) certainly has a good story to tell about their efforts, and there’s probably a recognition that the resistance to vaccinations is very much behind this change (in masking guidelines). But how far that goes as a shield against public dissatisfaction with where we are?  I don’t know.”

Axelrod added, “Psychologically, it’s much harder to get people to charge up the hill once than to have them roll down the hill and have to charge up the hill a second time.”  Americans, he said, will be “grumpy” about having to wear masks again.

Public frustration is likely to grow – some of it directed at Biden, some of it at the millions still refusing to get vaccinated.

Sen. Thom Tillis (R-NC) said he is “deeply concerned” that “the Biden administration’s contradictory decision will cause even more vaccine hesitancy, giving many Americans the false impression that the vaccines are not as effective as they were originally told.”

--President Biden and a bipartisan group of senators reached agreement Wednesday on a $1 trillion national infrastructure package, and the Senate appeared ready to begin consideration of the key part of the administration’s agenda.  It then cleared its first test vote by a wide margin, 67-32, above the 60 required.

Biden welcomed the accord as one that would show America can “do big things” – with the most significant long-term investments in nearly a century, he said, on par with building the transcontinental railroad or the interstate highway system.

“This deal signals to the world that our democracy can function,” Biden said in a statement.  “We will once again transform America and propel us into the future.”

But…this is a long ways from being wrapped up.  The full Senate must consider the package, and pick apart the details of a bill that includes $550 billion in new spending on public works projects.  According to initial reports, the five-year spending package would be paid in part by tapping $205 billion in unspent Covid-19 relief aid and $53 billion in unemployment insurance aid some states have halted.

The outcome will set the stage for the next debate over Biden’s much more ambitious $3.5 trillion spending package, a strictly partisan package of far-reaching programs and services including child care, tax breaks and health care that touch almost every corner of American life.  Republicans strongly oppose that bill, and could easily try to stop both.

And there is zero certainty the House would approve the Senate infrastructure plan, with progressives like Rep. Alexandria Ocasio-Cortez voicing stiff opposition.

--The top Democrat and Republican on the Senate Appropriations Committee have reached a deal on a roughly $2 billion Capitol Hill security spending bill in response to the deadly January 6 insurrection.

Vermont Democratic Sen. Patrick Leahy, the committee chair, and Sen. Richard Shelby of Alabama, the ranking Republican member, announced the agreement on Tuesday, the same day that four officers who were on the front lines of the insurrection testified about the horrific violence they had faced that day during a hearing convened by the House select committee investigating the attack.

The Senate security supplemental funding bill will provide funding for the Capitol Police, the National Guard and other law enforcement partners to cover costs incurred during the insurrection.  The legislation would also help ensure the Capitol is protected in the future by paying for security upgrades at the complex.

The timing of a Senate vote on the bill is to be determined.  The House earlier passed a $1.9 billion security spending package in May.  The House would need to take up the Senate’s legislation after it is approved by the Senate before it could be sent to President Biden to be signed into law.

--At the aforementioned House hearing investigating Jan. 6, Rep. Liz Cheney, one of two Republicans on the committee, said in her opening remarks:

“We cannot leave the violence of Jan. 6 and its causes uninvestigated,” cautioning that to not do so would invite a Jan. 6-style riot “every four years.”

While Cheney and fellow Republican Adam Kinzinger listened to the chilling testimony of the four officers who were under attack, Republican lawmakers Louie Gohmert, Marjorie Taylor Greene and Matt Gaetz appeared at a news conference outside the Justice Department on Tuesday where they attempted to call out what they claimed is unjust treatment of defendants detained after the attack at the U.S. Capitol.

Pathetic.

Equally pathetic was the attempt by House Minority Leader Kevin McCarthy, House Republican Conference Chairwoman Elise Stefanik and Rep. Jim Jordan to blame Speaker Pelosi for the violence that former President Trump instigated.

“I feel like I went to hell and back to protect them and the people in this room. Too many are now telling me that hell doesn’t exist or that hell actually wasn’t that bad.  The indifference shown to my colleagues is disgraceful,” Officer Michael Fanone said during the hearing.  “Nothing, truly nothing, has prepared me to address those elected members of our government who continue to deny the events of that day. And in doing so, betray their oath of office.”

The Pandemic

Indonesia is in deep trouble, cases soaring, ditto deaths, including 2,000 of the latter on Tuesday for the first time.

And look at Vietnam.  35 total deaths in all of 2020.  You’re reading that right.  Well, it’s had back-to-back days with 200 deaths suddenly.

Or Myanmar, where the junta is finally calling for international help amidst a huge surge in another country that can ill afford it.

Here in the states, on Wednesday, Florida had its highest case total since January!

Today, the U.S. had 99,000 cases, following 96,000 on Thursday.  Back on June 22, the 7-day average was 11,300.  That’s how bad it has become in just five weeks.

Covid-19 death tolls, as of tonight….

World…4,223,257
USA…628,934
Brazil…555,512
India…423,842
Mexico…239,997
Peru…196,214
Russia…157,771
UK…129,583
Italy…128,047
Colombia…120,432
France…111,824
Argentina…105,586
Indonesia…92,311
Germany…92,161
Iran…90,344
Spain…81,486
Poland…75,259
South Africa…71,679
Ukraine…52,930
Turkey…51,253
Chile…35,366
Romania…34,278
Ecuador…31,549
Czechia…30,363
Hungary…30,026
Philippines…27,722
Canada…26,589
Belgium…25,235
Pakistan…23,295
Bangladesh…20,467

U.S. daily death tolls…Sun. 49; Mon. 143; Tues. 371; Wed. 483; Thurs. 411; Fri. 417.

Covid Bytes

--In line with the opening, former Health and Human Services (HHS) Assistant Secretary Brett Giroir told Fox News Thursday that Americans who have not been vaccinated against the coronavirus will contract the Delta variant of Covid-19 sooner or later.

“This is so infectious that you will get it,” Giroir said, adding: “If you have had Covid before, we don’t know exactly, but it’s looking like prior immunity is not so good against Delta, and I’m really concerned that the evidence is mounting that even natural immunity will not protect you against Delta.

“So get the vaccine, it’s the way to save your life and keep you out of the hospital, and that’s the number one reason we need to get it,” said Giroir.

Giroir reiterated that it was “just a matter of time” before unvaccinated Americans or those who had not previously had the virus became infected.

“America is divided between the majority of eligible people who are vaccinated and those who are not.  I understand many of you in the majority are frustrated with the consequences of the failure of the minority to get vaccinated,” he said.  “This is not about red states and blue states.  It’s literally about life and death.”

--Responding to state and local health officials’ recommendations, Disneyland, Universal Studios Hollywood and other theme parks will require guests to wear masks in all indoor settings, regardless of vaccination status.

State public health officials issued the recommendations Wednesday that all vaccinated Californians wear masks in public indoor settings in response to the continued surge of coronavirus cases. The state had previously recommended that unvaccinated people continue to wear masks indoors.

Disneyland had previously reminded parkgoers that the state recommends that all visitors be vaccinated or take a coronavirus test before visiting the park, but Disneyland employees have not been asking visitors for proof of status.

--New York City will require all of its municipal workers – including teachers and police officers – to get coronavirus vaccines by mid-September or face weekly Covid-19 testing, Mayor Bill de Blasio announced Monday.

The rule is expected to affect about 340,000 city employees, making the city one of the largest employers in the U.S. to take such action.  While it isn’t a vaccine mandate – no workers will be forced to take a shot – officials hope the inconvenience and discomfort of weekly tests will persuade many to overcome a reluctance to get inoculated.

The Sept. 13 deadline coincides with the start of public school, when the Democratic mayor has said he expects all pupils to be in classrooms full time.

--Former President Donald Trump blasted the Biden administration Tuesday after the Centers for Disease Control and Prevention (CDC) recommended indoor mask mandates in most areas of the U.S. as well as in all K-12 schools, regardless of vaccination status.

“We won’t go back,” the 45th president said.  “We won’t mask our children.  Joe Biden and his Administration learned nothing from the last year.  Brave Americans learned how to safely and responsibly live and fight back.

“Don’t surrender to Covid,” Trump added.  “Don’t go back! Why do Democrats distrust the science?  Don’t let this happen to our children or our Country.”

--Last year the annual Sturgis Motorcycle Rally in Sturgis, South Dakota, helped fuel a surge in Covid-19 cases throughout the region, and this year (Aug. 6-15) promises to be no different, especially with the Delta variant.

But it’s also a reflection of the economy today, as Sturgis is having a hard time finding enough employees to staff venues, bars, restaurants, hotels and campgrounds as the city and businesses ramp up for hundreds of thousands of visitors.

--Kathleen Parker / Washington Post

“I’m not blind to the troubles I may be causing with this assessment, but I’m weary of playing nice with people who are plain wrong and causing 300 million Americans, give or take, to suffer. Now, the Centers for Disease Control and Prevention is saying that even the fully vaccinated should wear masks indoors under certain circumstances, including K-12 schools.  Why?  Because Covid cases are taking off again, hospitals are filling up and people are dying.  Former CDC director Tom Frieden said Monday that we soon could be seeing as many as 200,000 Covid cases a day.  And nearly all of those getting sick are unvaccinated….

“To put it bluntly, the 25 to 30 percent of Americans refusing to get the vaccine are putting their own lives at risk, threatening our doctors’ and nurses’ ability to take care of other sick folks, and by mixing among vaccinated people, possibly causing even more infections. This news has me entertaining uncivil thoughts that probably violate the Constitution: I’m no longer against making people prove that they’ve been vaccinated before entering public places. But even in my darkest fantasies, I would never grab a Confederate battle flag and breach the Capitol to ensure that I get my way.

“The good news is that the bad guys of Jan. 6 ultimately will be brought to justice.

“But the ‘bad guys’ of the vaccine resistance, assuming they survive, likely will get away no matter how many others they infect.

“This seems to me most unfair and a very bad business, which is a polite way of saying, and the horse they rode in on.”

--Week One of the Olympics is in the books, as Tokyo registers record daily Covid case infections. Tokyo’s hospitals are increasingly under pressure.

--France’s parliament approved a law Monday requiring special virus passes for all restaurants and domestic travel and mandating vaccinations for all health workers.

Both measures prompted protests and political tensions, but a vast majority of the people are in favor of them.

--Meanwhile, there is chaos and confusion over travel rules and measures to contain the new virus outbreaks when it comes to Europe’s battered tourism industry.

Popular destination countries are grappling with the surge, but visitors to cultural and tourist sites, like the Eiffel Tower, were confronted with new requirements.

Both France and Italy are requiring a special Covid-19 pass to access many museums, dine inside restaurants and cafes, get into pools, casinos, etc.

--Antibodies triggered by Sinovac Biotech’s Covid-19 vaccine decline below a key threshold from around six months after a second dose for most recipients, although a third shot could have a strong boosting effect, according to a lab study.

Chinese researchers reported the findings from a study of blood samples from healthy adults aged between 18-59 in a paper published last Sunday, which has not been peer reviewed.

For participants receiving two doses, two or four weeks apart, only 16.9% and 35.2%, respectively, still had a level of neutralizing antibodies above the threshold six months after the second dose, the paper said.

When participants in some cohorts were given a third dose, about six months after the second, neutralizing antibody levels after a further 28 days had increased around 3-5 fold from the levels seen four weeks after the second dose, the study showed.

Wall Street and the Economy

The Federal Reserve said Wednesday that the U.S. economy is strengthening and making progress toward the Fed’s employment and inflation goals, a small step toward tapering its bond-buying program.

At the same time, Fed Chair Jerome Powell said the labor market still has “a ways to go” and he would like to see stronger job growth before dialing back the bond purchases.

“I’d say we have groundwork to cover in the labor market situation,” Powell said at a news conference after a two-day meeting.  “I would want to see stronger job numbers and that kind of idea.”

Chair Powell made it clear the Fed is nowhere near beginning to hike interest rates.  But the policymaking committee is divided over the status of the bond buying program amid the recent surge in inflation.  But others see the inflation spike as temporary and, with unemployment still at 5.9%, want to wait until the Fed is closer to meeting its employment goal, recent Fed meeting minutes show.

In its post-meeting statement, the Fed repeated that it will keep buying $120 billion a month in Treasury bonds and mortgage-backed securities to hold down long-term rates until “substantial further progress has been made” toward its goals of full employment and around 2% inflation.

Powell appeared to downplay the recent surge in Covid-19 cases in many states because of the Delta variant, possibly indicating it’s unlikely the rising case numbers would prompt the Fed to further put off a scaling back of the bond purchases.  Powell said higher rates of vaccination and greater improvisation by consumers and businesses suggest “we’ve kind of learned to live with” the virus.

As for inflation and the consumer price index that rose 5.4% annually in June, the most in 13 years, Powell again said he believes the price leaps are concentrated in categories linked to the reopening of the economy – such as airlines, hotels and rental cars – and will likely prove temporary.

Bottom line: Raising interest rates is “not something that’s on our radar screens right now,” Powell said.

Separately, the International Monetary Fund released its new forecasts and economic prospects are improving for advanced economies, where nearly 40% of the population has been vaccinated. At the same time, far lower vaccination rates have left emerging and developing economies more vulnerable to additional waves of the pandemic and the associated economic fallout.

Overall, the world economy is expected to expand 6% this year, the IMF said, unchanged from its April forecast and a strong rebound from last year’s 3.2% contraction.  Improved forecasts for advanced economies were offset by downgrades for emerging markets and low-income countries.

Leading the way among the advanced economies are the U.S. and UK, which are both projected to grow 7% this year.

The IMF lowered its outlook for China by 0.3 percentage point, to 8.1%.

On the economic data front, June new home sales came in well below expectations at a 676,000 annualized rate, while the S&P CoreLogic Case-Shiller home price index for May had the 20-city index rising 17% from a year earlier, better than the 15.3% forecast, and the biggest increase since August 2004.

The hottest markets were Phoenix (where prices surged 25.9%), San Diego (24.7%) and Seattle (23.4%).

June durable goods figures were disappointing, up just 0.8% when a 2.1% increase was expected, up 0.3% ex-transportation.

So heading into Thursday’s first look at second-quarter GDP, the Atlanta Fed’s GDPNow barometer had fallen to 6.4% on Wednesday, though consensus was still 8% to 8.5%.

And what do we get?  6.5%.  Highly disappointing to some, but no real surprise.

It’s interesting to look at the last six quarters during this historic period of coronavirus, lockdowns, reopenings and new uncertainty.

GDP (annualized)

Q1 2020… -5.1%
Q2 2020… -31.2%
Q3 2020… 33.8%
Q4 2020… 4.5%
Q1 2021… 6.3%
Q2 2021… 6.5%

While the latest report may have missed consensus expectations, there were supply chain bottlenecks that exerted a stronger-than-predicted drag on companies’ efforts to restock their shelves.  So chalk it up to a slowdown in inventory rebuilding, which subtracted 1.1 percentage points from last quarter’s annual growth.

Consumer spending, on the other hand, was strong…up an 11.8% annual rate, with spending on everything from services, to restaurants to airline tickets, as vaccinations encouraged more  Americans to get out and shop, travel and eat out.

Most economists still peg growth for 2021 at around 7%, which would be the strongest calendar-year growth since 1984, and a sharp reversal from last year’s 3.4% contraction – the worst in 74 years.

The total size of the economy has now surpassed its pre-pandemic level.

Finally, Friday, we had more data.  The June personal income report showed a gain of 0.1%, vs. a prior revised mark of -2.2%.  Consumption was up 1.0%, better than expected.

The important personal consumption expenditures index (PCE) that is the Fed’s preferred inflation barometer, rose 0.4% on core, and 3.5% year-over-year, which was actually a bit below consensus, a potential sign of moderation.

Lastly, the Chicago PMI for July was a robust 73.1 (50 the dividing line between growth and contraction), so your first reading on third-quarter activity.

Europe and Asia

Next week we’ll be inundated with the July PMI readings for the eurozone.  This week we had some data courtesy of Eurostat.

A preliminary flash reading on GDP for the euro area in the second quarter showed growth at 2.0% over the previous quarter, but up 13.7% from Q2 2020, at the height of the Covid lockdowns across the continent.

Year-over-Year….

Germany 9.2%
France 18.7%
Italy 17.3%
Spain 19.8%

The euro area unemployment rate for June was 7.7%, down from 8.0% in May, and 8.0% in June 2020.

Germany 3.7%, France 7.3%, Italy 9.7%, Spain 15.1%, Ireland 7.6%, Netherlands 3.2%.

A flash estimate for eurozone inflation in July came in at 2.2%, up from 1.9% in June and 0.4% in July 2020.

Ex-food and energy, though, the rate was just 0.9%.

Brexit: The EU backed off its threat of imminent legal action against the UK over breaches of the Northern Ireland protocol as the two sides attempt to work out their differences.  Officials from Brussels and London have agreed to talk through the summer to find technical solutions.  One thing the EU won’t allow is for Britain to renegotiate the deal it signed.

The UK’s Brexit minister, David Frost, has suggested a tiered system in which goods produced for consumption in Northern Ireland only would not need to be inspected at Irish Sea crossing points, and that goods that were made to standards that equaled those of the EU should be able to circulate freely.

Turning to Asia…I’ve been waiting tonight for the release of China’s July PMI numbers, but they aren’t coming up yet on the old ticker tape.

[I worked briefly at Prudential Securities, after they acquired the Thomson McKinnon branch network, and I was seated next to the legendary Larry Wachtel…who had the ticker tape / news wire at his side and would read headlines to the sales force over the squawk box, while doing his three reports a day for a New York all-news radio station.  The guy was a lot of fun.  On the other side of me was Tony Dwyer, who has become a market strategist of note.  Another great guy.  I admire the hell out of Tony and his success.]

But wait…China’s figures are coming out…50.4 for July manufacturing, vs. 50.9 in June; and for non-manufacturing we have 53.3 vs. 53.5 prior, data courtesy of the National Bureau of Statistics.

Japan’s flash PMI on manufacturing for July was 52.2 vs. 52.4 in June, with services a putrid 46.4 vs. 48.0.

June retail sales were up 0.1% year-over-year (two months, 2020 and 2021, with Covid restrictions), while industrial production was up a solid 22.6% Y/Y.

South Korea’s GDP for the second quarter came in at 5.9%, annualized, the fastest pace in a decade.

Street Bytes

--The market started the week with the major averages all hitting new highs on Monday, but then stocks skidded the rest of the way, the Dow Jones and S&P 500 down 0.4% for the week, Nasdaq off 1.1%.  For July the S&P rose 2.3%.

As you see below, quarterly earnings reports have been coming in largely better than expected, but investors are concerned that the recovery may be slowing, especially amid impacts from the Delta variant.

Next week it’s all about the July jobs report, released Friday, and some readings on manufacturing and the service sector.

--U.S. Treasury Yields

6-mo. 0.05%  2-yr. 0.19%  10-yr. 1.23%  30-yr. 1.90%

--Investors world-wide funneled more than $900 billion into U.S.-domiciled mutual and exchange-traded funds, on a net basis, during the first half of the year, according to data compiled by Refinitiv Lipper. That is a record going back to 1992 and is more than investors have put into funds elsewhere around the world combined during the first two quarters of 2021.

Foreign investors are expected to put another $200 billion of U.S. equities into their portfolios this year, according to Goldman Sachs, in addition to the $712 billion added in 2020.  Foreign holdings of U.S. government bonds in May rose to their highest level since February 2020’s pandemic-fueled rally, according to recent Treasury Department data.

--Exxon Mobil on Friday posted its first quarterly results following a contested board fight over its direction, registering its biggest profit in more than a year on rebounding demand for oil, gas and chemicals.

Oil producers are taking advantage of a doubling of crude oil prices last quarter to pare debt and increase shareholder payouts rather than spending more to boost production.  Deep cost cuts undertaken last year as the pandemic slashed demand have remained, allowing price gains to bolster profits.

Exxon’s net income for the second quarter came in at $4.69 billion, compared with a loss of $1.08bn a year ago (which, unadjusted, was more like $3bn).

The company said its 2021 capital spending is expected to be at the lower end of the previously forecast range of $16 billion to $19 billion.

“Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products,” CEO Darren Woods said in a statement.

Shareholders had in May cast out three Exxon directors for a hedge fund’s nominees promising to boost returns and better prepare the company for a low-carbon world.

--Chevron reported revenue increased to $37.6 billion from $13.49 billion in Q2 2020, well above expectations.  The company reported quarterly net income of $3.08 billion, its highest profit in six quarters.

Chevron cut is annual capital spending forecast to about $13 billion, after slashing spending last year to allow profits to flow at above $50 a barrel.

The company said it expects output from the Permian basin to be almost the same as last year’s but will add drilling rigs in the second half.  Its production rate from the top U.S. shale basin is expected to be 600,000 barrels of oil per day by the end of the year.

Crude oil finished up this week, now $73.81 on West Texas Intermediate.  The Energy Information Administration reported oil inventories fell by 4.1 million barrels last week to their lowest level since January 2020, a sign that demand is continuing to improve.  But for how long, given the Delta variant?

--Zero-fee trading platform Robinhood Markets Inc.’s $2 billion initial public offering didn’t go as well as planned.  The stock plunged more than 12% off its IPO price of $38, before paring losses and closing the first day at $34.85, down 8%.  It finished the week at $35.25.

--Shares in Amazon.com Inc. fell over 6% after the company reported after the close on Thursday that sales growth would decelerate in the third quarter as customers leave their homes more, a slow start to the reign of new CEO Andy Jassy as investors weigh if he can steer the retailer as deftly as Jeff Bezos did for 27 years.

During the pandemic, shoppers turned to Amazon while brick-and-mortar stores closed.  The company posted record profits, drew more than 200 million Prime loyalty subscribers, and recruited over 500,000 workers to keep up with surging demand.

Now, the company’s breakneck growth is starting to subside.  Revenue climbed 27% to $113 billion for the second quarter ended June 30, shy of consensus, while for the third quarter, Amazon expects sales will grow at most 16%.

North America, Amazon’s largest market, saw sales increase only 22% in the second quarter, versus 43% in the same period a year earlier.

Amazon reported a profit of $7.78 billion, compared to $5.24 billion during the year-ago period.

Amazon Web Services was a bright spot.  The cloud computing division that Jassy formerly ran grew revenue 37% to $14.8 billion, ahead of estimates.

But enormous challenges come with Amazon’s size. Costs continue to rise, not just from the $200 million in extra stock Amazon plans to pay Jassy over the next 10 years.  The company has offered an average of $17 in hourly wages – more than double the U.S. minimum – plus signing bonuses to attract 75,000 workers during a labor shortage.  It has said it planned to hike pay for over half a million employees, costing more than $1 billion, and like other companies, it is facing clogged ports and other disruptions to the transportation supply chain.

--Microsoft Corp. beat the Street for quarterly revenue and profit on Tuesday, as demand soared for the software giant’s cloud-based services. 

The pandemic-driven shift to remote work has boosted consumer appetite for cloud-based computing.  Revenue in Microsoft’s “Intelligent Cloud” segment rose 30% to $17.4 billion, with 51% growth in its Azure cloud-computing business, in the quarter ended June 30.

Revenue from personal computing, which includes Windows software and Xbox gaming consoles, rose 9% to $14.1 billion.  But Xbox content and services revenue dipped, suggesting that a pandemic-fueled gaming boom is beginning to wane.

Overall revenue rose 21% to $46.2 billion. Net income was $16.5 billion.

But Microsoft’s market capitalization stands at nearly $2.2 trillion, fueling concerns the shares are overvalued after a 30% runup this year.

--Apple Inc. said on Tuesday that a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth, sending its shares lower.

Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4% growth rate in the just-ended third quarter. Growth will also slow in Apple’s closely watched services business, they said.

Apple also said that while the impact of the chip shortage was less severe than feared in the quarter, it will get worse in the current quarter, extending to iPhone production.

Total revenue hit $81.43 billion, Apple beating expectations for the fiscal third quarter on both sales and profits, the latter $21.74 billion.

During an investor call, CEO Tim Cook said that chips affected by the shortages are made with older technology but are still needed as supporting parts to make the company’s flagship device, the iPhone.

Upgrading for 5G appeared to be driving a better buying cycle for iPhones than many analysts expected. Apple said iPhone sales were $39.57 billion, up nearly 50% from a year earlier and above analysts’ forecasts.

China sales grew 58% to $14.76 billion in the quarter, which ended June 26.

Services revenue reached a record high of $17.49 billion, up by a third from a year earlier and above analyst expectations.

Cook said Apple now has 700 million subscribers on its various platforms, up from 660 million a quarter earlier, but growth will slow in the sector.

Sales of iPads and Macs were $7.37 billion and $8.24 billion.

--Google parent Alphabet Inc.’s quarterly revenue and profit surged to record highs, the company reported on Tuesday, powered by a rise in advertising spending as more consumers shopped online.  The shares rose 5% in response.

Google advertising rose nearly 70% to $50.44 billion during the second quarter.  Retail brands were the biggest contributor to the ads’ business growth.

Ad revenue for the company’s streaming video platform YouTube jumped 83.7% from the year-ago quarter to $7 billion – nearly as much as Netflix generated in quarterly revenue.  All three lines of Google’s ad business: search, Google Network and YouTube were strong.

Total revenue for Alphabet rose 61.6% to $61.88 billion, well above the Street’s expectations.  Quarterly profit was $18.5 billion.

Google Cloud, which trails Amazon.com Inc. and Microsoft Corp. in market share, narrowed its operating loss to $591 million during the quarter.

*By the way, the cumulative profit for Microsoft, Apple and Alphabet was $56.8 billion, 30 percent more than the Street forecast.

--Shares in Facebook fell nearly 4% after the company warned of a slowdown in revenue growth. The warning overshadowed the company’s beat on Wall Street estimates for quarterly revenue.

Facebook’s revenue, which primarily consists of ad sales, rose to $29.08 billion, with ad revenue up 56% to $28.58bn in the second quarter.

Net income in the second quarter more than doubled to $10.4 billion, from $5.18 billion.

Monthly active users came in at 2.90 billion, up 7% from the same period last year but missing the Street’s forecast of 2.92 billion and marking the slowest growth rate in at least three years.

The company said it expects revenue growth in the third and fourth quarters to “decelerate significantly,” as Facebook said it expects Apple’s recent update to it iOS operating system to impact its ability to target ads and therefore ad revenue in the third quarter.  The iPhone makers’ privacy changes make it harder for apps to track users and restrict advertisers from accessing valuable data for targeting ads.  The company also announced on Wednesday that it would require anyone working at its U.S. offices to be vaccinated against Covid-19.

While analysts described Facebook’s quarter in mostly glowing terms, there are regulatory concerns and mounting antitrust scrutiny as headwinds for the company in the months ahead as the Biden administration has made it clear it wants to rein in big tech.

--Advanced Micro Devices Inc. reported sales of $3.85 billion, almost double that of a year ago.  Sales in AMD’s computing and graphics segment, which includes graphic chip sales to data centers, rose 65% to $2.25 billion, beating analysts’ estimates.  The company projects third-quarter revenue of about $4.1 billion, above expectations.

--Airlines have been facing fuel shortages at some smaller and mid-size airports and in some cases they have been adding refueling stops or flying fuel into locations where the supply is tight.

American Airlines, for example, said the shortages showed up first in the West, where they could affect efforts to fight wildfires.

Supplies are being squeezed in some areas mostly because of a shortage of tanker trucks and drivers.  Delta Air Lines said pipelines have been devoting more space to gasoline and diesel and less to jet fuel during the pandemic.

Southwest said the fuel situation hasn’t affected its flights, but it has added more fuel on some planes to limit the amount needed at airports with shortages.

--Boeing posted its first profit in almost two years, as deliveries of its best-selling 737 MAX jets to airlines gained traction amid a sharp rebound in travel bookings following an increase in Covid-19 vaccinations. 

The 737 MAX is integral to Boeing’s financial recovery, as the company scrambles to recoup billions of dollars in lost sales from the pandemic, and deals with production-related structural defects of its bigger, more profitable 787 planes.

CEO David Calhoun said the company now plans to keep staffing levels stable at around 140,000 employees, after previously targeting a reduction to 130,000 by the end of 2021.

Boeing said it is currently building 16 737 MAX jets per month.  The company has said it would up the jet’s output to 31 a month by early 2022.

Total company backlog at quarter-end was $363 million.  The Commercial Airplanes division secured orders for 200 737 aircraft from United Airlines, 34 for Southwest, and a total of 31 freighter aircraft.

Since the FAA’s approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 130 737 MAX aircraft and airlines have returned more than 190 previously grounded airplanes to service.

Boeing’s core operating profit was $755 million in the second quarter ended June 30, compared with a loss of $3.32 billion a year earlier.  Revenue rose 44% to about $17 billion, both figures above expectations and the shares rallied.

--Ryanair reported it carried 8.1 million passengers in the second quarter (fiscal first quarter), compared with just 500,000 in the same period a year earlier.

“Covid-19 continued to wreak havoc on our business during the first quarter with most Easter flights cancelled and a slower than expected easing of EU travel restrictions into May and June,” said group CEO Michael O’Leary.

“Based on current bookings, we expect traffic to rise from over five million in June to almost nine million in July, and over 10 million in August, as long as there are no further Covid setbacks in Europe,” he added.

O’Leary said he was encouraged by the high rate of vaccinations across Europe, which could lead to a strong second half and well into 2022.

--TSA checkpoint travel numbers vs. 2019 levels….

7/29…78 percent of 2019 base
7/28…76
7/27…76
7/26…81
7/25…81
7/24…82
7/23…79
7/22…78

*I missed the post-pandemic record was back on 7/18…2,227,704 travelers.  I mistakenly wrote last time that 7/16 was the highwater mark at 2,199,815.  My bad.

--Tesla Inc. reported better-than-expected second-quarter earnings, buoyed by strong demand for its electric vehicles as it suggested that deliveries this year may exceed its longer-term projections for 50% growth.

Second-quarter revenue grew to $11.96 billion from $6.04 billion a year earlier, while profit from the sale of regulatory credits was $354 million. 

Quarterly profit surpassed $1 billion for the first time at $1.1bn.

Total production reached 206,421 in Q2, most in its history.  The goal is still 800,000 vehicles for the year, a significant increase from nearly 510,000 last year.

Tesla is expanding on three continents, including constructing new factories in Austin, Texas, and Berlin.

Supply chain challenges, in particular global semiconductor shortages and port congestion, continue to be present.  “With global vehicle demand at record levels, component supply will have a strong influence on the rate of our delivery growth for the rest of this year.”

In a conference call, CEO Elon Musk said Tesla has kept its manufacturing lines running largely by finding chips from alternate suppliers and then scrambling to rewrite some of the software in its cars to ensure all the technology remained compatible.  Although he said things appear to be slightly improving, Musk described the chip shortage as still being “quite serious,” making it difficult to plan for the second half of the year.

“The chip supply is a governing factor on our output,” Musk said.  “It is out of our hands.”

In a telling sign that Tesla isn’t immune to the shortage of chips and other components, the company disclosed that it will delay the introduction of a highly anticipated semi-truck to some time next year, after originally planning to launch it this year.

Although Tesla is still by far the world’s largest automaker by market value, its shares have declined 3% this year as the S&P 500 has reached new highs.  More-established peers, such as General Motors and Ford, have rallied as they have aggressively pushed into the electric-vehicle market.  Investors also have mulled over Tesla’s challenges in China and the profusion of U.S. regulatory investigations into crashes that have raised safety concerns.

--Ford Motor Co. posted a surprise second-quarter profit and raised its earnings outlook for the year, saying it sees an easing to the computer-chip shortage that has hampered vehicle output for months.

Ford said it expects to boost deliveries to dealerships globally by 30% during the second half of the year, which should bolster the bottom line despite the sting of rising commodity costs.  The chip shortage prompted Ford to slash in half its second-quarter production plans, to about 700,000 vehicles.

Still, Ford CEO Jim Farley called the chip-shortage situation fluid, though the company nonetheless sees things improving during the third quarter, which should allow Ford to clear a backlog of orders for new vehicles, including the electric Mustang Mach-E SUV and a new Bronco SUV that is just entering production.

The company posted a $561 million net profit in the second quarter, with revenue of $26.8 billion.

Ford also raised its full-year pretax profit guidance to between $9 billion and $10 billion, up from $5.5bn to $6.5bn earlier. 

The company’s shares rose 6% in response.

--Shares in General Electric Co. rose after the company said all of its industrial segments saw an improvement in profit margin in the latest quarter, with the aviation unit posting the biggest improvement.  The aviation business, usually the company’s cash cow, has been hammered by the pandemic as airlines cut back on flights and grounded aircraft. GE said the business is showing “early signs” of recovery.

A recovery in the aviation business is critical for CEO Larry Culp to deliver $7 billion in free cash flow by 2023, which would provide greater resources to the company to invest in its businesses, pay a more competitive dividend and buy back shares.

Free cash flow is closely watched as a sign of health of GE’s operation and ability to repay debt.

Revenue rose to $18.28 billion from $16.81 billion in the quarter ended June 30. GE reported adjusted profit of 5 cents per share for the quarter, better than expected.

But Culp said the company is facing inflationary pressure that is set to intensify the remainder of the year, though he said the company is managing through a combination of price increases, better sourcing of parts and raw materials, elimination of waste and higher productivity.

--Caterpillar said today that rising demand for machinery fueled sales at the company during the second quarter as the rollout of vaccines helped to revive construction projects.

Revenue was $12.89 billion, up from $10 billion, beating expectations.

Construction sales spiked 40% on both rising volumes and prices.

For the three months ended June 30, CAT earned $1.41 billion, vs. $458 million a year ago.

--Procter & Gamble Co. reported fourth-quarter sales today that beat analysts’ estimates, but warned that rising commodity and freight costs would take a $1.9 billion bite out of its earnings this year.

But the vaccine-aided easing of Covid restrictions in the United States and parts of Europe helped the company post an 11% increase in sales at its beauty segment in the reported quarter, as consumers returning to social events, spent more on personal care products.

P&G said net sales rose 7% to $18.95 billion in the quarter, while the company forecast fiscal 2022 core earnings to rise between 3% and 6%, and sales to increase in the 2% to 4% range.

The company also announced Chief Operating Officer Jon Moeller will take over as CEO from David Taylor, who will become executive chairman on Nov. 1.

--3M reported revenue for the June quarter was $8.95 billion, up from $7.18 billion last year, better than forecast.  The company, maker of N95 face masks and Scotch-Brite home care products, also raised its full-year sales and profit outlook, with sales growth of 7% to 10% compared with a prior forecast of 5% to 8%.

Net income rose to $1.52 billion, up from $1.30 billion.

--UPS reported second-quarter revenue and earnings that came in ahead of Wall Street’s expectations, while U.S. domestic package volumes slowed from the surge of a year ago.

Revenue rose 15% to $23.4 billion, with U.S. domestic revenue rising 10% to $14.4 billion with ground service up 8.6% to $10.6 billion.  The international package business saw revenue jump 30% to $4.82 billion.

Volumes for U.S. domestic packages fell 2.9% to 20.51 million, while international volume rose 13% to 3.73 million packages.

The shares fell on tepid guidance, as residential volumes slow amidst reopenings.  But now Covid variants could drive people back indoors and ordering online.

--McDonald’s Corp. said easing Covid restrictions and the roaring popularity of a new meal inspired by South Korean pop band BTS helped the world’s biggest fast-food chain beat Wall Street expectations for global sales on Wednesday.

Same-store sales jumped 40.5% in the second quarter and exceeded the pre-pandemic levels of 2019 for the second straight quarter.

McDonald’s sales jump from new menu items, especially the BTS celebrity meal and its crispy chicken sandwiches launched in the United States, helped it counter industry-wide labor shortages and higher ingredient costs.

The Grammy-nominated boy band’s meal was launched in nearly 50 countries and includes chicken McNuggets, fries and two dips.

Comparable sales in the United States rose 25.9% from a year earlier when the restaurant chain’s sales took a hit from government curbs, including limited dine-in capacity and dining room closures.

Compared to 2019, U.S. sales grew nearly 15%.  Total revenue surged by a better-than-expected 57% to $5.89 billion in the three months ended June 30, compared to a year ago when McDonald’s posted a 30% drop due to coronavirus restrictions.

Net income more than quadrupled to $2.22 billion.

CEO Chris Kempczinski said: “Our performance is a continued demonstration of the broad-based strength and resiliency of our business as global comp sales in the second quarter increased nearly 7% over 2019.  For 65 years, we’ve created iconic experiences for billions of people around the world.  Along the way, we’ve always focused on following our customers’ needs, finding the most convenient and engaging ways for them to enjoy McDonald’s.  It’s clear that our next chapter will be driven by our leadership in digital.”

--Starbucks delivered record fiscal third-quarter earnings results on Tuesday, with revenue surging 78% from a year ago during the depths of the pandemic.

For the quarter ended June 27, comparable sales were up 73% globally, above estimates.

In the U.S., revenue grew 90% year-on-year, with same-store sales increasing 83% from a year ago.  Also in the U.S., Starbucks cold beverages accounted for 74% of beverage sales, a new record.

The company also raised its full-year fiscal 2021 EPS guidance, with Starbucks expecting Americas and U.S. comp store sales growth of 21% to 22%.  Starbucks sees international comp-store sales growth of 15% to 17%, lower than initial guidance, including China, which investors did not like to see.

In the quarter, Starbucks opened 352 net new stores.  The company stands at a record 33,295 stores globally, with 5,135 in China and 15,348 in the U.S., accounting for 62% of the total store portfolio.

“Starbucks delivered record performance in the third quarter, demonstrating powerful momentum beyond recovery.  Our ability to move with speed and agility and to be out in front of shifting customer behaviors has helped further differentiate Starbucks, positioning us well for this moment,” CEO Kevin Johnson said in the release.

Meanwhile, the worst frost to strike Brazil’s coffee-growing region in more than 25 years is set to cut a chunk out of next year’s crop, sending prices of the bean to six-year highs on global markets.

Before the frost in Brazil, the world’s biggest coffee producer, there was a drought that parched the 2021 crop.

--Twitter is re-closing its New York and San Francisco offices shortly after they reopened, the company said Wednesday, owing to the spike in Covid-19 cases.

“After careful consideration of the CDC’s updated guidelines, and in light of current conditions, Twitter has made the decision to close our opened offices in New York and San Francisco as well as pause future reopenings, effective immediately,” Twitter said.

The social media company had just reopened the offices two weeks ago, the San Francisco Chronicle reported.

--Apple will require shoppers to wear masks again at half of its U.S. stores, the company announced Wednesday, the first major retailer to confirm a change to its policy.

Similar to Twitter’s move, the change at Apple comes just weeks since it stopped requiring masks in most of its stores in June.  Most retailers quickly dropped mask guidelines for fully vaccinated customers this May following the CDC’s last update.

--Scarlett Johansson, star of the latest Marvel movie “Black Widow,” filed a lawsuit against Disney, alleging her contract was breached when the media giant released the film on its Disney+ streaming service at the same time as its theatrical debut.

Johansson said in the suit that her agreement with Disney’s Marvel Entertainment guaranteed an exclusive theatrical release, and her salary was based in large part on the box-office performance of the film.

A Disney spokesman said Ms. Johansson’s suit had no merit and is “especially sad and distressing in its callous disregard for the horrific and prolonged global effects of the Covid-19 pandemic.”

The suit also notes that annual bonuses for Disney Chairman Robert Iger and Chief Executive Bob Chapek are tied to the performance of Disney+  and cites that as further motivation for putting “Black Widow” on the service.

--Finally, we note the passing of legendary TV pitchman Ron Popeil, 86.

Popeil pioneered what became known as the informercial, as both Popeil and his products became part of the pop-culture landscape.

With typical aplomb, Popeil called his 1995 autobiography “The Salesman of the Century,” a bit grandiose, but it reflected the truth.

Years ago I saw a story on Popeil’s gated Beverly Hill home that was a shrine to some of the silly-sounding devices he sold over and over with such signature lines as “But wait, there’s more!” and “Isn’t that amazing?”

Products like an Inside-the-Shell Electric Egg Scrambler, spray-on fake hair in a can, the Pocket Fisherman (“the biggest fishing invention since the hook…and still only $19.95!”), and the counter-size Showtime Rotisserie & BBQ (“Set it and forget it!”), one of his biggest successes.

His redesigned 1975 Veg-O-Matic is enshrined in the Smithsonian’s American Legacies collection alongside the Barbie doll, and comedian Dan Aykroyd vigorously parodied both salesman and machine in Bass-O-Matic skits on “Saturday Night Live” in the 1970s.

Years before he sold his company, Ronco, for $55 million in 2005, Popeil insisted he had moved more than $1 billion worth of merchandise.

“What Henry Ford was to industrial strength and genius, Ron Popeil is to the next generation of American ingenuity,” Robert Thompson, a professor of television and pop culture at Syracuse University once told the Associated Press.  “People 100 years from now are going to be writing dissertations on him.”

Without Popeil, “there’d be no home shopping channels, no ‘I’ve fallen and I can’t get up’ Medic Alert gadgets, no Clapper,” John Mingo, editor of “The Whole Pop Catalog” told USA Today in 1993.

Popeil had a poor childhood living in Florida and then Chicago.  He and an older brother spent their early years at a boarding school in upstate New York, living with his grandparents after his mother and father divorced and essentially abandoned him.

But his father, who he barely knew, Samuel Popeil, was a descendant of sidewalk hustlers and manufacturer of kitchenware.  He also came up with such gadgets as the original Veg-O-Matic and Pocket Fisherman.

So Popeil turned to selling his father’s inventions on Chicago’s gritty Maxwell Street and found he was good at it.

“Through sales I could escape from poverty and the miserable existence I had with my grandparents,” Popeil wrote in his autobiography.  “I had lived for 16 years in a home without love, and now I had finally found a form of affection and a human connection through sales.’

As a teen out on his own, he peddled his wares in the flagship Woolworth’s downtown, doing as many as six demonstrations in an hour.

Popeil dropped out of the University of Illinois after 18 months, and worked the fair circuit.  He claimed he cleared $1,000 a week, a fortune in the 1950s, and did it by talking 10 to 12 hours a day, almost nonstop.

Well, one thing led to another.  Popeil would cut two-minute spots and buy TV ad time on local stations.  Eventually, his Chop-o-Matic led to the reimagined Veg-O-Matic, which was largely responsible for sales growing from $200,000 to $8.8 million in just four years, according to Popeil’s memoir.  [Valerie J. Nelson / Los Angeles Times]

Foreign Affairs

Iraq: President Biden confirmed in a meeting Monday with Iraqi Prime Minister Mustafa al-Kadhimi that the United States will end its combat mission in Iraq by the end of the year.

“We’re not going to be, by the end of the year, in a combat mission,” Biden said in the Oval Office.

Biden said U.S. troops would continue to train and assist Iraqi forces as they battle the Islamic State.

The United States has about 2,500 troops in Iraq after a series of drawdowns in recent years.  Their assignments include counterterrorism operations and training Iraqi security forces.

“There is no need for any foreign combat forces on Iraqi soil,” al-Kadhimi told the Associated Press on Sunday.  Al-Kadhimi did not provide a timeline for American troops to leave, but he said Iraq’s security forces and army are capable of defending the country without U.S.-led coalition troops.

He emphasized that Iraq will still seek U.S. military assistance in training and intelligence gathering.

“I’d like to thank the American people on behalf of all Iraq’s people,” he said during the Oval Office meeting with Biden.  “Today our nation is stronger than ever.”

This is not Afghanistan.  A drawdown of U.S. combat troops in Iraq will ease the political pressure on al-Kadhimi from pro-Iranian militia forces and Iraq’s internal tensions.  But it’s not a stable popular government.

Iraqi leaders faced intense domestic pressure to negotiate an exit by U.S. troops after President Trump ordered the drone strike that killed Iranian Gen. Qasem Soleimani in 2020.

The U.S. will continue to provide humanitarian aid…$200 million this fiscal year and another $155 million in additional assistance in the coming year.

Afghanistan: Finally, the first 240 Afghans, interpreters and their families, arrived at Fort Lee in Virginia, the first planeload.

But up to 88,000 remain, made up of about 20,000 interpreters and their families.

The Biden administration has known about this for months and has done nothing to prepare.  It’s estimated at least half of the interpreters are now living in territory controlled by the Taliban, with little hope of getting them to Kabul, the only place from where they can be flown out of the country.

It seems a virtual certainly the United States will leave tens of thousands behind to be slaughtered by the Taliban.  An utter disgrace.

China: Beijing for the first time has given the U.S. a list of red lines and remedial actions it must take to repair relations, including lifting sanctions and dropping its extradition request for Huawei financial chief Meng Wanzhou.

Chinese Foreign Vice-Minister Xie Feng told U.S. Deputy Secretary of State Wendy Sherman on Monday that U.S.-China relations had reached a “stalemate” and faced “serious consequences,” according to a Chinese foreign ministry statement.

“The foundational reason is that some people in the U.S. are treating China as an ‘imagined enemy,’” it quoted Xie as saying.

After the meeting, Xie said China gave two lists to the U.S. – one with remedial actions for Washington to take towards China, and the other a series of Beijing’s key concerns.

Items on the remedial list include lifting the visa restrictions on Communist Party members, their families, and Chinese students; lifting the sanctions imposed on Chinese leaders, government officials and agencies; removing restrictions on Confucius Institutes and Chinese companies; cancelling rulings determining Chinese media as foreign agents; and dropping its requests to extradite Meng from Canada.

Xie said the Chinese side also “expressed its strong dissatisfaction towards the wrong remarks and actions of the U.S.” in relation to investigations into the origins of Covid-19, Taiwan, Xinjiang, Hong Kong and the South China Sea.

“We urge the United States not to underestimate the strong determination, firm will and strong ability of the 1.4 billion Chinese people to safeguard national sovereignty, security and development interests,” state news agency Xinhua quoted him as saying.

“The U.S. side talks about China at every turn, and it seems as if it is unable to speak or do anything if it does not involve China,” he was quoted as saying.  “We urge the U.S. side to change its incorrect thinking and very dangerous policy towards China.”

Defense Secretary Lloyd Austin said the United States will continue to help Taiwan and other allies in the Pacific defend themselves against aggression from China even as he said a new, more transparent relationship with Beijing is desired.

“We will not flinch when our interests are threatened, yet we do not seek confrontation,” Austin said at the International Institute for Strategic Studies in Singapore on Tuesday.

Austin’s visit to the region came after President Biden had announced the second withdrawal of forces deployed in counterterrorism missions, this time from Iraq.

Administration officials argue that the military must draw down its forces in Iraq and Afghanistan and focus on the Pacific.  It is part of a larger belief that future U.S. security threats will revolve around cyber, space, and resource conflicts with China and Russia, and less so with the terrorism threats that have emanated from the Middle East, North Africa, and southwest Asia for the last two decades.

To that end, Austin said, the U.S. and allies in Asia were increasing their networks and capabilities “to deter coercion and aggression across the spectrum of conflict.”

“We’re working to ensure that our allies and partners have the capabilities, the capacities, and the information that they need.”

If a conflict with China arises, it could easily be over the defense of Taiwan.

To wit:

In a fake battle for the island, U.S. forces lost network access almost immediately in a wargaming exercise last October that convinced the Vice Chairman of the Joint Chiefs Gen. John Hyten to scrap the joint warfighting concept that had guided U.S. military operations for decades.

“Without overstating the issue, it failed miserably.  An aggressive red team that had been studying the United States for the last 20 years just ran things around us.  They knew exactly what we’re going to do before we did it,” Hyten told an audience Monday at the launch of the Emerging Technologies Institute, an effort by the National Defense Industrial Association industry group to speed military modernization.

The Pentagon would not provide the name of the wargame, which was classified, but a defense official said one of the scenarios revolved around a battle for Taiwan.  One key lesson: gathering ships, aircraft, and other forces to concentrate and reinforce each other’s combat power also made them sitting ducks.

Even more critically, the blue team lost access to its networks right from the start.

“We basically attempted an information-dominance structure, where information was ubiquitous to our forces.  Just like it was in the first Gulf War, just like it has been for the last 20 years, just like everybody in the world, including China and Russia, have watched us do for the last 30 years,” Hyten said. “Well, what happens if right from the beginning that information is not available?  And that’s the big problem that we faced.”  [Tara Copp / Defense One]

In Hong Kong, the first resident convicted under the national security law has been sentenced to nine years in prison for driving his motorcycle into a group of police officers last year while flying a flag calling for the city’s “liberation.”

Leon Tong was back before three High Court judges hand-picked by the city’s leader on Friday, three days after he was convicted of terrorism and incitement to commit secession over the incident on July 1, 2020 – the day after the Beijing-imposed security law came into effect.

The trio sentenced Tong to 6 ½ years on the secession charge and eight years for terrorism, with 5 ½ years of the latter term to run concurrently with the first.

The judges held in a 62-page judgment on Tuesday that the defendant, a restaurant worker at the time of his arrest, had advocated Hong Kong independence by flying a black flag on his motorcycle emblazoned with the signature rallying call of the 2019 anti-government demonstrations: “Liberate Hong Kong; revolution of our times.”

Russia: President Vladimir Putin said last Sunday the Russian navy can detect any enemy and launch an “unpreventable strike” if needed, weeks after a UK warship angered Moscow by passing the Crimea peninsula.

“We are capable of detecting any underwater, above-water, airborne enemy and, if required, carry out an unpreventable strike against it,” Putin said, speaking at a navy day parade in St. Petersburg.

Russia annexed Crimea from Ukraine in 2014, but Britain and most of the world recognize the Black Sea peninsula as part of Ukraine, not Russia.

Putin said last month Russia could have sunk the British warship HMS Defender, that it accused of illegally entering its territorial waters, without starting World War Three and said the United States played a role in the “provocation.”

Tunisia: The president sacked the prime minister and suspended parliament, after violent mass protests nationwide on Sunday.

Anger over the government’s handling of a massive recent spike in Covid cases has added to general unrest over the nation’s economic and social turmoil.

President Kais Saied, who was elected in 2019, announced he was taking over.

His supporters erupted in celebration, but opponents in parliament immediately accused him of staging a coup.

The recent coronavirus surge – which saw the health minister sacked last week after a bungled vaccination operation – has fueled long-standing frustration.

Random Musings

--Presidential approval ratings….

Gallup: 50% approve of Biden’s job performance, 45% disapprove; 48% of independents approve ( July 6-21).

Rasmussen: 47% approve of Biden’s performance, 51% disapprove (July 30).  Last week it was 50-48.

--I can’t say I disagree with the prognostication of Sen. Lindsey Graham (R-SC), who said on Fox News’ “Hannity” that next year’s midterm elections will be as good to Republicans as the seminal 1994 vote which gave the GOP unified control of Congress for the first time in more than 40 years.

“I think there’s a tidal wave brewing,” he told Sean Hannity.  “I think this is going to be 1994 all over again. When you look at rampant inflation, out-of-control crime and a broken border and just [a] general lack of knowing what you’re doing, lack of competency…the Republican Party’s going to have a great comeback if we recruit the right people.”

In 1994, the GOP picked up a net of 54 House seats to gain the majority for the first time since 1952.  On the Senate side, Republicans picked up a net of eight seats to regain control of the upper chamber for the first time in eight years.

In 2022, Republicans need to make a net gain of just five seats to regain control of the House and a net gain of just one seat to take the Senate.

--Former President Trump endorsed Texas Attorney General Ken Paxton Monday, rebuffing the incumbent’s primary challenger and Bush family scion George P. Bush.

Trump praised Paxton in a statement for being “bravely on the front line in the fight for Texas, and America, against the vicious and very dangerous Radical Left Democrats, and the foolish and unsuspecting RINOs that are destroying our Country.

“Ken is strong on Crime, Border Security, the Second Amendment, Election Integrity and, above all, our Constitution,” Trump continued.  “He loves our Military and our Vets…” Yada Yada Yada….

This was almost comical because Bush, the son of former Florida Gov. Jeb Bush, was trying so hard to suck up to Trump to get his endorsement, but Trump hates the Bushes.

Paxton is the subject of numerous legal investigations.  Last fall, eight of his deputies resigned and accused him of abusing his office to help a wealthy donor by ordering an investigation into whether federal authorities tampered with warrants and illegally seized property during a search of the donor’s home.  The FBI is reportedly looking into the claims.

Paxton is also awaiting trial on charges of securities fraud, to which he pleaded not guilty in 2015.

And the Texas state bar association opened an investigation into whether Paxton committed professional misconduct by bringing a lawsuit aiming to overturn the 2020 president election results in Georgia, Michigan, Pennsylvania and Wisconsin.  The suit was thrown out by the Supreme Court.

--Speaking of Trump, in mid-May, partisan investigators hired by Arizona state lawmakers backed off their allegation that the state’s most populous county had destroyed its 2020 election database. Confronted with proof that the data still existed, they admitted everything was there.

Two months later, the tale lives on. At an event Saturday, Trump presented the debunked allegation as a key piece of evidence that the state’s electoral votes were stolen from him in 2020.

It was one of a number of fabricated and familiar stories Trump told the crowd in his relentless effort to deny the well-established legitimacy of his defeat at the hands of President Biden.

For two hours, Trump revisited his volumes of grievances, leveling allegations of fraud that election officials and judges have systematically refuted.  But it was all about Trump wanting to inject himself into the widely discredited Arizona audit, as he seeks to get other states to launch similar efforts.

Trump spoke of untold thousands of dead people voting, and alleged 168,000 Arizona ballots were fraudulent.

Trump: “Unbelievably, the auditors have testified that the master database for the election management system, I’m sorry to tell you, has been deleted… Meaning the main database for all of the election-related data in Maricopa for 2020 has been illegally erased.  It’s been erased.”

No it hasn’t.

Trump: “There were 18,000 people who voted in Arizona in 2020 who were then purged from the rolls immediately after the election.”

Never happened.

There were voters removed from the rolls in the two months after the election, but these were for routine reasons as people move, die, get convicted of felonies or have their voting rights revoked because of incapacitation.

--But wait…there’s more!  President Trump last year attempted to pressure his Justice Department to declare the results of the 2020 presidential election corrupt, according to handwritten notes by a department official released today.

Rep. Carolyn Maloney, chairwoman of the House Committee on Oversight and Reform, released the notes taken by former acting Deputy Attorney General Richard Donoghue during a Dec. 27 phone call between Trump and acting Attorney General Jeffrey Rosen.

She said the notes indicate that Trump tried to “directly pressure” the two most senior Justice Department officials by threatening their jobs.

According to the notes, Rosen told Trump the Justice Department “won’t snap its fingers” and “change the outcome of the election.”  Trump responded that he only expected the department to “say that the election was corrupt” and to “leave the rest to me and the [Republican] congressmen.”

“We have an obligation to tell people that this was an illegal, corrupt election,” Trump said, according to the notes.

Trump, they said, went on to threaten to replace Justice Department leadership, saying officials weren’t doing enough to combat voter fraud.

Donoghue noted that department officials told Trump they were conducting dozens of investigations, but that his “major allegations are not supported by [evidence] developed.”

“We are doing our job.  Much of the info you’re getting is false,” the notes read.

Maloney said the oversight committee has scheduled interviews with “key witnesses” to investigate Trump.

“These handwritten notes show that President Trump directly instructed our nation’s top law enforcement agency to take steps to overturn a free and fair election in the final days of his presidency,” she said.

“I will exercise every tool at my disposal to ensure all witness testimony is secured without delay.”

--Today wasn’t a good day for the former president.   The Justice Department ordered the Internal Revenue Service to hand over Trump’s tax returns to the House Ways and Means Committee, saying the panel has offered “sufficient reasons” for requesting the material.

The department’s Office of Legal Counsel reversed course and declared that the department erred in 2019 when Trump was still in office when it found that the request for his taxes was based on a “disingenuous” objective aimed at exposing them to the public.

--The chief executive of MyPillow Inc., one of Fox News’ big advertisers, said he is pulling his ads from the network after a disagreement over a proposed commercial.

As first reported by the Wall Street Journal, Mike Lindell said he made the decision after Fox News declined to run a commercial linked to his efforts to promote his claims of widespread fraud in the 2020 presidential election.  Again, there is no proof of this.

Lindell has emerged as one of the most prominent proponents of unproven theories that the election was stolen from Trump.  Voting-machine maker Dominion Voting Systems sued Lindell and MyPillow in February for defamation, seeking more than $1.3 billion in damages.  He has countersued.

Fox News has been sued by both Dominion and Smartmatic USA Corp., which allege the network’s hosts and guests made defamatory on-air comments about the companies’ products.

--Defrocked Catholic cardinal Theodore McCarrick was criminally charged Wednesday with sexually assaulting a 16-year-old boy during a wedding reception at Wellesley College in Massachusetts in 1974. The charges make McCarrick the highest-ranking Catholic official in the country to face criminal charges for alleged sex abuse.

The case was able to be prosecuted because McCarrick was not a Massachusetts resident and the statute of limitations essentially expired when he left the state.

McCarrick, 91 and now living in Missouri, is expected to appear at the court for arraignment in Dedham, Mass., on Sept. 3.

--The Federal Aviation Administration issued new rules that say astronaut hopefuls must be part of the flight crew and make contributions to space flight safety.

That means Jeff Bezos and Sir Richard Branson may not yet be astronauts in the eyes of the U.S. government.

These are the first changes since the FAA wings program began in 2004.

The Commercial Astronaut Wings program updates were announced the same day that Amazon’s Bezos flew aboard a Blue Origin rocket to the edge of space.

To qualify as commercial astronauts, space-goers must travel 50 miles above the Earth’s surface, which both Bezos and Branson accomplished.

But altitude aside, the agency says would-be astronauts must have also “demonstrated activities during flight that were essential to public safety, or contributed to human space flight safety.”

What exactly counts as such is determined by FAA officials.

In a statement, the FAA said that these changes brought the wings scheme more in line with its role to protect public safety during commercial space flights.

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

We thank our first responders and healthcare workers.

God bless America.

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Gold $1817
Oil $73.70

Returns for the week 7/26-7/30

Dow Jones  -0.4%  [34935]
S&P 500  -0.4%  [4395]
S&P MidCap  +1.2%
Russell 2000  +0.8%
Nasdaq  -1.1%  [14672]

Returns for the week 1/1/21-7/30/21

Dow Jones  +14.1%
S&P 500  +17.0%
S&P MidCap  +17.2%
Russell 2000  +12.7%
Nasdaq  +13.9%

Bulls 52.6
Bears 16.5…there appears to have been a revision of prior week, which is now 53.1 / 16.7.

Have a good week. 

Brian Trumbore

 

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