Week in Review

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Week in Review

01/30/2021

For the week 1/25-1/29

[Posted 10:00 PM ET, Friday]

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Special thanks this week to Dan C., L.S., and John B.

Edition 1,137

Back on 10/10/20 in this space, I wrote of the vice presidential debate (Oct. 7) between Mike Pence and Kamala Harris and how reassuring it was, after the chaos of the first presidential debate, and then President Trump’s battle with Covid, his Il Duce impersonation on his return and everything else that was going on. 

One was conservative.  One was liberal.  If you don’t like what the one side is doing during an administration, you vote them out of office.  That’s the normal way of politics that so many of us yearn for.  As Nebraska Republican Senator Ben Sasse wrote in a book a few years ago, politics was never supposed to consume us as it has the past four years.  It was supposed to be about leading your life, going to your kid’s sporting events, doing work within your church, caring about your neighbor’s welfare…that sort of thing.  Government was supposed to be in the background.  Caring for your basic needs, like security, and otherwise leaving you alone.  But boy have we gotten away from that.

Alas, it’s unfortunate we aren’t about to get back to normal, namely because we are still in the midst of a freakin’ pandemic, but while I’m not enamored with a lot of President Biden’s early executive orders, on Day No. 11 of his presidency I’m going to hold back a bit.  That said, these next two weeks will be critical.  Next week, Biden has time to give compromise on his main legislative goal a last chance, before taking some drastic action, i.e., like “reconciliation,” passing the $1.9 trillion stimulus bill by a simple majority, thus infuriating Republicans, while the following week is the impeachment trial, on which he has little say, but which will roil the nation further.

For now, the White House left the door open to changes to President Biden’s Covid-19 relief proposal but ruled out splitting up the package, even as prospects for a bipartisan agreement fade.

While many Republicans agree to pieces of it, like money for vaccine distribution, potentially a third round of direct checks and some other measures, all Republicans question the price tag, let alone the proposal for a $15 minimum wage, and aid for state and local governments. 

The GOP wants to see the bill split up.  But thus far, the president is saying no.

Before you know it February’s over, with the Presidents weekend holiday and such, and you’re into March, a month when provisions for much of the $900 billion package that was approved at yearend expires.  Tonight, United Airlines warned some 14,000 employees that they might be furloughed as their latest round of payroll support expires on April 1.  Other airlines will follow.  You can’t bail out the airlines forever, but it’s a critical segment of the economy and as we’ve learned, it’s not just the airlines, it’s all the workers at the airports and other connected businesses.  [More on the airlines below.]

Meanwhile, you have the debate over the executive orders.  I’m not happy with the decision on the Keystone pipeline, but just as many of President Trump’s executive orders were overturned or delayed by the courts, so will some of President Biden’s.  The fossil fuel industry may not win on Keystone XL, but it will on other Biden EOs.

Think about this.  As a Washington Post story pointed out, “Federal fossil fuel leasing generated nearly $8.1 billion in tax revenue in fiscal 2020, according to the Interior Department’s Office of Natural Resources Revenue, a sum shared among federal, state, local and tribal governments.  The practice also accounts for nearly a quarter of U.S. greenhouse gas emissions."

“Over the years, right or wrong, state budgets and social service provisions have become insidiously entangled with fossil fuel energy profits,” said Chase Huntley, who directs the Wilderness Society’s energy and climate program.

Yes, big battles ahead.

Editorial / Washington Post

“Ask any economist about ‘Buy American’ laws, and he or she will tell you: All else being equal, they are counterproductive. Such laws, which require federal and state governments to purchase goods and services from U.S. companies, are touted as a way to boost production within the United States.  In fact, they raise the average cost and lower the average quality of everything government buys.  That is the inevitable consequence of limiting choices available to government purchasing managers, just as it is for ordinary consumers.  Jobs created may be offset by those lost when other countries retaliate.

“Ask a political consultant, though, and you’ll get a different answer: Many voters support the practice.  In a 2020 survey for the nonprofit Hinrich Foundation, 75 percent of Americans backed Buy American policies…  Organized labor, a key Democratic constituency, is especially supportive.

“So it’s unsurprising, but unfortunate, that President Biden, in one of the few instances where he did not differ from President Donald Trump, campaigned on tougher Buy American rules.  And he has delivered: His ‘Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers,’ issued Monday, would tighten what critics regard as unjustified loopholes in current Buy American laws, which allow the government to buy foreign products or services when U.S. equivalents are either unduly expensive or unavailable.

“Henceforth, agency heads will have to pre-clear such waivers with a new special office within the White House.  They will also have to lay bare more of their internal decision-making on the Internet, so the public can more easily hold them accountable – or interested companies and unions can more easily badger them….

“There are real issues related to the supply chain for strategic goods, as U.S. dependence on China for medical equipment during the pandemic has shown….

“Still, the Biden administration is letting itself in for new layers of bureaucracy and friction with U.S. trading partners, whose own government procurement is already more protectionist than this country’s.  The ultimate goal should be talks whereby the United States and other countries reciprocally open their markets, so all governments, at home and abroad, can buy American.  We hope Mr. Biden’s order will spur mutually beneficial opening; our fear, all too realistic, is that it will prompt a response in kind.”

Editorial / New York Times

“A week into his presidency, Mr. Biden has issued a raft of executive orders and other actions.  Already, he has committed to rejoining the Paris climate change agreement, ended the Muslim travel ban, canceled the permit for the Keystone XL pipeline, rescinded funding for and halted construction on the wall at the southern border, reaffirmed the Deferred Action for Childhood Arrivals program, mandated mask-wearing on federal grounds, moved to end the federal government’s reliance on private prisons, reversed the ban on transgender military service and called for agency assessments aimed at advancing racial equity – just to name a few.  The coming days will bring more such action.

“These moves are being met with cheers by Democrats and others eager to see the legacy of Donald Trump’s presidency dismantled posthaste.  Republicans, meanwhile, are grumbling about presidential overreach and accusing Mr. Biden of betraying his pledge to seek unity.

“In other words, things are going the same way they often do in Washington.  ‘There’s a sort of tribalism when it comes to the use of executive orders,’ observes John Hudak, a senior fellow in governance studies at the Brookings Institution.  ‘When your party’s in the White House, it’s the greatest thing on earth.  When your party’s out, it’s undemocratic.  It’s basically Satan’s pen.’

“But this is no way to make law.  A polarized, narrowly divided Congress may offer Mr. Biden little choice but to employ executive actions or see his entire agenda held hostage.  These directives, however, are a flawed substitute for legislation.  They are intended to provide guidance to the government and need to work within the discretion granted the executive by existing law or the Constitution.  They do not create new law – though executive orders carry the force of law – and they are not meant to serve as an end run around the will of Congress. By design, such actions are more limited in what they can achieve than legislation, and presidents who overreach invite intervention by the courts.

“But legal limitations are not the only – or even perhaps the biggest – point of concern.  Executive actions are far more ephemeral and easily discarded than legislation, which can set up a whipsaw effect, as each president scrambles to undo the work of his predecessor.  Just as Mr. Trump set about reversing as many of President Barack Obama’s directives as possible, Mr. Biden is now working to reverse many of Mr. Trump’s reversals.  With executive orders, there is always another presidential election just a few years off, threatening to upend everything.

“This creates instability and uncertainty that can carry significant economic as well as human costs.  Just consider how the Dreamers…have had their lives disrupted in recent years.  Mr. Obama established DACA to protect them from deportation.  Upon taking office, Mr. Trump moved to end the program, setting off years of legal challenges and throwing these people’s lives into a nightmarish limbo… Dreamers deserve better than to be subject to the whims of whoever holds the White House…

“Undoing some of Mr. Trump’s excesses is necessary, but Mr. Biden’s legacy will depend on his ability to hammer out agreements with Congress. On the campaign trail, he often touted his skill at finding compromise, and his decades as a legislator, as reasons to elect him over Mr. Trump.  The country faces significant challenges to recovering from the pandemic, from a global recession, from years of safety nets and institutions and trust being eroded.  Now it is time for the new president to show the American people what permanent change for a better nation can look like.”

David Rothkopf / USA TODAY

“The January 2021 nominee for most abused word in the English language must be ‘unity.’

“Within hours of the insurrection on Capitol Hill, the Republicans behind the attack were using calls for ‘unity’ as a cynical shield to deflect demands that they be held accountable.  Impeaching a president who egregiously and publicly violated his oath and provoked an attack on his own government was decried as ‘divisive.’  Even in the few days since President Joe Biden made unity the core theme of his inaugural address, Republicans have twisted the word to suggest they should have veto power over the initiatives of the new administration and the Democratic majorities in the House and Senate. The Republican message seems to be bipartisanship on their terms, or bust.

“When Biden spoke of unity, however, he was clear.  He explicitly did not mean he expected we would all agree on every initiative.  Rather, his intent as laid out in the speech, was to remind Americans that we are all in this together.  He has said that his goal is to detoxify American politics, to end the zero sum, us vs. them mentality that dominated during the Trump years.  He wants to make sure people understood that under his administration, no state, city or individual will be penalized for legitimate political beliefs.

“Now, as Biden and Congress get down to business, it is time for a practical reckoning about what it means to have a president who seeks to bring America together and what it does not mean.

“Unity is an aspirational goal.  But we must not mistake it for the impossible ideal of unanimity or even for bipartisan collaboration on every issue.  That’s especially important when some have already demonstrated they are perfectly willing to exploit the president’s worthy goal to ensure his failure and their own political success….

[Ed. Mr. Rothkopf then spends time talking about the filibuster, which I don’t need to rehash here.]

“The point is, as the GOP has repeated ad nauseum for the past four years, elections matter.  The people have sought a different approach from a new president who won 7 million more votes than his now disgraced opponent.  Senate Democrats represent tens of millions more Americans than the GOP.  It is time to give those voters a chance to be heard and Biden a chance to carry out the ideas on which he was elected – even if that means playing political hardball.

“Many of those ideas – including ending the Covid-19 catastrophe, getting the economy back on its feet, rebuilding infrastructure, improving schools, combating the climate crisis, ensuring health care for all and fixing our broken democracy – in fact happen to benefit all Americans and have the support of a vast majority of Americans. That makes them pretty darned unifying.”

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Monday, House Democrats walked over to the Senate chamber to present the single article of impeachment.  The senators then took the juror oath on Tuesday, at which point Sen. Rand Paul (R-Ky.) made a motion that the impeachment trial against Donald Trump is unconstitutional, arguing that Trump couldn’t be tried as a private citizen. 

The motion was rejected by a 55-45 vote, which suggests a lack of support for convicting Trump on the charge of inciting insurrection.  Essentially, 45 Senators voted that the trial was unconstitutional, signaling they’re likely to vote against conviction.

For the record, Republican Sens. Mitt Romney, Susan Collins, Lisa Murkowski, Ben Sasse and Pat Toomey joined Senate Democrats in killing Paul’s motion.

Trump’s second impeachment trial begins the week of Feb. 8.

Monday, President Biden told CNN he didn’t believe there will be enough votes to convict Trump, and after Tuesday’s move, that’s obviously the case.

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Then there is the dysfunctional Republican Party.

House Minority Leader Kevin McCarthy went to Mar-a-Lago on Thursday to kiss Donald Trump’s ring and ask for forgiveness, after McCarthy had said the former president “bears responsibility” for the Jan. 6 attack on the U.S. Capitol by a mob of his supporters.

McCarthy has since said he did not think Trump provoked the insurrection.  Rather, the House GOP leader said, “I think everybody across this country has some responsibility.” Really, this POS said that.

In the meantime, Donald Trump now wants revenge on the 10 House Republicans, including a top McCarthy lieutenant, Liz Cheney, who voted for Trump’s impeachment.  There is a Republican caucus next Wednesday when all the internal bickering is to be worked out, including whether Cheney maintains her leadership position. 

Well at the tete-a-tete in Mar-a-Lago, Trump agreed to help the GOP retake control of the House in 2022…as if that will be a plus.  I mean, after all, Donald Trump lost the House, the Senate and the White House…three times a loser.  Four, if you count the ‘suburbs.’

The fact is the Republican Party is at war with itself, split between a faction still fiercely loyal to Trump and others that want to see him held accountable, and, more importantly, finished in terms of future influence.  At the heart of it all is Liz Cheney.

And now, incredibly, the Republican Party is split between those who allow the likes of Rep. Marjorie Taylor Greene to get away with her conspiracy lunacy that will reduce the party to a pile of ashes if it is allowed to persist, and grow, and a staunch party conservative, traditional conservative, bedrock leader that I wholeheartedly support, Liz Cheney.  It’s absolutely nuts.

Greene, when asked about efforts to remove her from the House or committees, blamed Democrats and the media: “They are coming after me because they know I represent the people, not the politicians.  They are coming after me because, like President Trump, I will always defend conservative values. They want to take me out because I represent the people.  And they absolutely hate it,” she said.

“Assigning her to the Education Committee when she has mocked the killing of little children at Sandy Hook Elementary School, when she has mocked the killing of teenagers in high school at the Marjory Stoneman Douglas high school – what could they be thinking?” House Speaker Nancy Pelosi asked Thursday.

Much more on the Republican Party down below.

Biden Bits….

--Janet Yellen was confirmed as Treasury secretary on Monday by an 84-15 vote in the Senate, becoming the first woman to hold the top job in its 232-year history.  The Senate then backed secretary of state nominee Antony Blinken 67-17.

--The Trump administration’s decision to relocate most of the Bureau of Land Management from Washington to Grand Junction, Colo., resulted in an exodus by 2020 of more than 87 percent of the affected employees, who either quit or resigned rather than move, according to data obtained by the Washington Post.

The exit of longtime career staffers from the agency, including former high-ranking Interior officials, has deprived an agency responsible for managing more than 10 percent of the nation’s land of needed expertise and disrupted its operations.  The bureau oversees all oil and gas drilling on federal lands, which is now a flash point in the early days of the Biden administration.

The Pandemic….

Covid-19 death tolls, as of tonight….

World…2,216,279
USA…447,459
Brazil…222,775
Mexico…156,579
India…154,176
UK…104,371
Italy…87,858
France…75,620
Russia…72,815
Spain…58,319
Iran…57,807
Germany…57,052
Colombia…53,284
Argentina…47,775
South Africa…43,633
Peru…40,686
Poland…36,780
Indonesia…29,518
Turkey…25,736
Ukraine…22,479
Belgium…20,982

Source: worldometers.info

U.S. daily death tolls…Sun. 1,844; Mon. 1,897; Tues. 4,201; Wed. 4,256; Thurs. 3,919; Fri. 3,652.

Covid Bytes

--Johnson & Johnson said on Friday that its single-dose vaccine was 66% effective in preventing Covid-19 in a large global trial against multiple variants, giving health officials another weapon to tackle the coronavirus.

In the trial of nearly 44,000 volunteers, the level of protection against moderate and severe Covid-19 varies from 72% in the United States, to 66% in Latin America and 57% in South Africa, where the worrying variant has spread.

Moderna and Pfizer/BioNTech set a high bar with their 95% efficacy, but those trials were conducted mainly in the United States and before new variants emerged.  J&J’s main goal was the prevention of moderate to severe Covid-19, and the vaccine was 85% effective in stopping severe disease and preventing hospitalization across all geographies and against multiple variants 28 days after immunization.  That “will potentially protect hundreds of millions of people from serious and fatal outcomes of Covid-19,” Paul Stoffels, J&J’s chief scientific officer, said in a statement with the results, which were based on 468 symptomatic cases. 

The company is seeking emergency use authorization from the U.S. Food and Drug Administration next week.  It said it has plans to deliver 1 billion doses in 2021 and will produce the vaccine in the United States, Europe, South Africa and India.  The U.S. has a deal to buy 100 million doses of the vaccine and option for an additional 200 million.

The market reacted to the Johnson & Johnson vaccine news by taking the stock down over 3.5%, which was more than a bit unfair and showed a lack of understanding on the results and what they really mean.  Gimme this shot over the others thus far, sports fans.

--Health authorities in South Carolina said Thursday they have identified two people who were infected with the South African variant.

What was particularly concerning is that the two adults hadn’t traveled to South Africa and aren’t connected to one another.  Ergo, the variant, known as B.1.351, is potentially circulating in the community.

--The European Union is asking AstraZeneca to publish the contract it signed with the bloc on Covid-19 vaccine supplies after the company’s chief executive revealed confidential clauses, an EU official said on Wednesday.

In an interview with newspapers on Tuesday, AstraZeneca CEO Pascal Soriot said the EU contract was based on a best-efforts clause and did not commit the company to a specific timetable for deliveries.  The interview followed the company’s announcement of a cut in supplies to the EU in the first quarter.

All the while, rich countries squabbling over vaccine supplies, and ignoring poorer parts of the world, “keeps the pandemic burning,” the WHO said Friday.  The WHO was reacting the European Union’s announcement it had agreed on a plan late today to control exports of vaccines from the EU, including to Britain, argued it needed to do so to ensure its own supplies.

Britain said today it was urgently seeking answers from the EU over its decision to restrict the export of vaccines to Northern Ireland.

--Novavax Inc. said on Thursday its coronavirus vaccine was 89.3% effective in preventing Covid-19 in a trial conducted in the United Kingdom, and was nearly as effective in protecting against the more highly contagious variant first discovered in the UK, according to a preliminary analysis.  A mid-stage trial of the vaccine in South Africa, where a potent variant of the virus is common, showed 60% effectiveness among people who did not have HIV.  Novavax will shortly be applying for regulatory review in Britain, the European Union and other countries.

Johns Hopkins Center for Health Security notes that 60% efficacy against the new South African variant is acceptable and they are worried people would focus too much on the weaker effectiveness shown there.

--British Prime Minister Boris Johnson said his government had done everything it could to minimize loss of life in the coronavirus pandemic after the country’s death toll exceeded 100,000.

“I take full responsibility for everything that the government has done,” Johnson said on Tuesday. “What I can tell you is that we truly did everything we could, and continue to do everything we can, to minimize loss of life and to minimize suffering.”

But amid calls for an investigation into how the government has botched the handling of the pandemic, Johnson has argued that this would be counterproductive, and that the time for investigation will be later.

--Mexican President Andres Manuel Lopez Obrador (AMLO), who has resisted wearing a face mask and who has been criticized for his handling of the pandemic, announced he had tested positive and had mild symptoms.

--Colombia’s defense minister, Carlos Holmes Trujillo, died of Covid the other day.  The nation has recorded more than 2 million infections and 53,000 deaths.

--Canada’s major airlines have agreed to suspend all flights to Mexico and the Caribbean until April 30, starting on Sunday, as part of the fight against a second wave of the coronavirus, Prime Minister Justin Trudeau said on Friday.  Trudeau also said that all arriving airline passengers would be required to take a mandatory Covid-19 test at the airport and then wait in a hotel for up to three days at their own expense until the results arrived.

--The New York State Department of Health’s public data may have undercounted Covid-19 deaths in some nursing homes “by as much as 50 percent,” according to a scathing report from the state attorney general’s office.  AG Letitia James launched an investigation last spring into “allegations and indications of Covid-19-related neglect of residents in nursing homes.”

Using a sample size of 62 nursing homes, about 10% of the state’s total facilities, the attorney general’s office looked into discrepancies between the number of deaths being reported by the health department and the homes themselves.

The nursing homes reported 1,914 deaths of residents from Covid-19, while the health department logged only 1,229 deaths at those same facilities.

The report confirms what watchdogs had been looking at: that the official count reflected only deaths that happened inside the four walls of a nursing home.  Any nursing home resident who was transferred to a hospital and died there was not counted.

--Finally, you have the issue of the schools.  NBC national news had a good report last weekend on the disparity between the public and private schools here in my state of New Jersey, which is no different than elsewhere in the country.  The private school kids have been holding in-person learning since virtually day one of the pandemic, after an initial pause to put safety precautions in place, while the public schools have in many cases been largely remote.

Here in Summit and surrounding communities, at least the schools, with a pause or two because of an outbreak in a particular school, have been using a hybrid formula, generally 8:00-12:30 in-person, remote after.  It’s been critically important to get the kids together not just with the teachers, but with their friends.  I’ve heard the teachers’ unions have been bitching non-stop, however, though the towns themselves are holding firm.

But in so many cities, be it Elizabeth, N.J., or Chicago, the unions hold sway and while I’m not a parent myself, I’m sick of it just like so many of you are.

Matt Bai / Washington Post

“It won’t be easy for President Biden to get America’s teachers back into public schools.  Teachers unions are a powerful force in Democratic politics, and they’re resisting calls to return to classrooms where about half the nation’s kids ought to be sitting.

“When asked about the issue on Monday, Biden seemed to back up the unions, saying the onus was on districts and governments to make the classrooms safer.

“Behind closed doors, however, Biden’s message to the teachers should be straightforward and emphatic: You are vital, irreplaceable public servants.  And it’s time you started acting like it.

“You don’t have to be a parent to understand the growing perils of what’s euphemistically known as ‘remote learning.’ It is basically a hollow and socially isolating echo of real school that has dragged on for almost a year now in scores of large districts.

“According to Erica L. Green in the New York Times, a stunning 18 students in Clark County, Nev., committed suicide between March and December. Adolescence is hard enough under normal circumstances; navigating it alone, caught up in currents of social media and eddies of academic confusion, can be dangerous….”

Regarding the disproportionate impact of online learning and children with richer parents and better access to high-end technology….

“African American and Latino children from low-income families in (Montgomery) county – Maryland’s largest – are failing classes at five to six times the rate they did a year earlier, compared with only minimal increases for White students.

“These children are the most at risk, but any parent can tell you that the rising toll of teaching-by-Zoom is getting harder to calculate, even for those of us with all of the advantages.  We’re spending untold hours counseling our kids through an emotional wasteland, Google searching late into the night so we can coach them through algebra or hydroponic gardening.

“Last week, Montgomery County teachers rebelled against yet another plea from Gov. Larry Hogan to get back to school.  The defiant district and its union claim that transmission rates are too high and that there isn’t time to put sufficient safeguards in place for teachers – although there is little evidence, to this point, that masked schoolchildren are actually spreading the virus in districts where they have returned to school….

“What I keep thinking about, though, are all the times over the years I’ve asked leaders of teachers’ unions about some of the controversial reforms they’ve long resisted – merit pay, relaxed tenure, scaled back pension plans.

“Every time, they’ve dismissed these ideas with the argument that teachers belong in a special category – that they are public servants, every bit as essential as soldiers and first responders, who forgo careers with higher pay and more prestige for the privilege of educating our children….

“But all of those other public servants whom we can’t do without – cops and firefighters, nurses and National Guard troops, mail carriers and DMV workers, spies and bureaucrats – have been back on the job for months or never left.  (Not to mention the workers at your local supermarket and drugstore.)

“They show their courage and dedication every day, assuming some risk for themselves and their families.  They were needed, and they answered the call.

“Our teachers are needed, too. We can’t keep telling ourselves that online learning is almost as good, that there’s no incalculable cost to keeping a generation out of the classroom for a year or even two, that our schools are ingeniously fulfilling their missions under the most trying circumstances.

“They’re not….

“And so this is the message I hope Biden will have the fortitude to deliver to one of his party’s most steadfast constituencies.  Simply put: We believe that public school teachers are devoted public servants whose expertise and sacrifice are indispensable to the nation.

“The time has come to show us that they believe it, too.”

Wall Street and the Economy

The International Monetary Fund said Tuesday that the world economy is gearing up for a strong recovery this year with global output growing 5.5%, up from the IMF’s October forecast of a 5.2% increase.  Last year’s estimated contraction of 3.5% was smaller than October’s forecast of 4.4%.  China was the only major economy to grow last year, expanding by 2.3% amid effective containment measures and forceful economic support, the IMF said.

The outlook has been buoyed by hopes for increasing vaccination and improved therapies to combat Covid-19, the IMF assuming “broad vaccine availability in advanced economies and some emerging market economies in summer 2021 and across most countries by the second half of 2022,” the IMF said.

IMF Chief Economist Gita Gopinath said in a press briefing Tuesday: “Much depends on the outcome of this race between a mutating virus and vaccines, and the ability of policies to provide effective support until the pandemic ends.  There remains tremendous uncertainty, and prospects vary greatly across countries.”

The IMF expects the U.S. to grow 5.1% this year and Japan’s economy to expand by 3.1%.  However, it lowered its forecast for the euro area to 4.2% growth from 5.2%.

China is expected to expand by 8.1% in 2021 and 5.6% in 2022.

Meanwhile, the Federal Reserve held its first policy meeting of 2021 and, as expected, left interest rates near zero and pledged to continue making huge bond purchases as Chairman Jerome Powell and Co. do what they can to help the economy weather the storm.

“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the Open Market Committee said in its policy statement.

Speaking at a press conference, Chair Powell said the virus resurgence was “weighing on economic activity and job creation,” and that the economic outlook hinged on the pandemic and “remains highly uncertain.”

Given the glum near-term assessment, Powell said the bigger risk to the economy in the coming months was in doing too little rather than too much, i.e., an aggressive spending response from Congress is needed and that concerns this would spur runaway inflation were unwarranted, whereas allowing displaced workers to remain on the job market’s sidelines could inflict lasting damage.

“I’m much more worried about falling short of a complete recovery and losing people’s careers, and the lives that they built, because they don’t get back to work on time,” Powell said.  Such damage would be “not just to their lives but to the United States economy – the productive capacity of the economy.”

“I’m more concerned about that than the possibility, which exists, of higher inflation,” he continued.  “Frankly, we’d welcome slightly higher inflation.”

As for the $120 billion in government-backed bonds the Fed is buying each month as part of the effort to keep interest rates at rock bottom and bolster the economy, Powell has been clear that officials are not yet anywhere near ready to set a date when they will taper off.

Separately, we did have a slew of economic data this week.  The November S&P CoreLogic Case-Shiller home price 20-city index for November rose 1.4% month-over-month, and a robust 9.1% year-on-year.  December new-home sales came in at 842,000 (annualized rate), a little below consensus.

December durable goods were less than expected, 0.2%, 0.7% ex-transportation. 

December personal income was greater than expected, 0.6%, while consumption in the month was down 0.2%.

The Chicago PMI for January was a super robust 63.8 (50 the dividing line between growth and contraction).  Next week, the national ISM figures on manufacturing and services.

The closely followed weekly jobless claims figure remained disturbingly high, 847,000, so since March, this data point has held well above the previous high set during the Great Recession of 665,000.

We also had the first look at fourth-quarter GDP, a little below estimates at an annualized 4.0%, meaning the economy contracted 3.5% for all of 2020, the worst reading since 1946.

[The Atlanta Fed’s GDPNow barometer was way off, though as expected since the start of the quarter, with its final Q4 reading at 7.2%.  Call it an anomaly.]

2020 GDP…seasonally adjusted annual rates

Q1…. -5.0%
Q2… -31.4%
Q3…. 33.4%
Q4….. 4.0%

Europe and Asia

Zero to report from the eurozone on the data front, but next week we’ll have a slew of PMI figures and other stuff.

Brexit: And nothing new to report on this front, except that a series of polls shows that with the Brexit debacle, voters across the UK believe Scotland is likely to become independent within the next decade – while more than half of those in Northern Ireland want a referendum on a united Ireland in the next five years.

The Sunday Times commissioned a series of surveys across the four nations of the United Kingdom to gauge attitudes towards the Union.

In Scotland, the poll found 49 percent backed independence compared to 44 percent against – a margin of 52 percent to 48 percent if the undecideds are excluded.

We have crucial elections to the Scottish Parliament coming up in May.  Depending on the results, and the path of Brexit at that time, we could be looking at a referendum on independence as early as 2022.

In Northern Ireland, 47 percent still want to remain in the UK, with 42 percent in favor of a united Ireland.  But when asked if they supported a referendum on the issue within the next five years, 51 percent said yes, compared to 44 percent who were against.

Italy: Prime Minister Giuseppe Conte resigned Tuesday, as Europe’s underlying problems of economic stagnation and political fragmentation start to reassert themselves amid the pandemic.

Conte’s government lasted just 17 months, despite having a solid 57% approval rating in a December poll.  He will stay on as caretaker while the president attempts to form a government.

Right-wing parties, currently in opposition, are demanding snap elections, two years ahead of schedule.

Turning to Asia…nothing from China this week.  But Japan reported that December retail sales fell 0.3% from a year earlier, while December factory output was down 3.2% for 2020.  The unemployment rate of 2.9% at yearend was unchanged.

South Korea reported its fourth-quarter GDP rose 1.1% over the third quarter, down 1.4% vs. a year ago.

Street Bytes

--Stocks suffered their worst week since October amid the extreme volatility in stocks that had been heavily shorted, fueling speculation hedge funds would need to reduce their market exposure.  At the same time there was growing uncertainty over the deployment of vaccines, while the European Union escalated the fight over vaccine supplies on the continent with an emergency plan to restrict exports, which is causing chaos tonight between the EU and Britain.

Meanwhile, earnings season continues and of the first 184 companies in the S&P 500 to report, 84.2% have topped analyst expectations, far more than usual, according to Refinitiv data.  Eventually, when the GameStop mania ends, and it will, the focus will return to fundamentals.  At least to a far greater extent than today.

On the week both the Dow Jones and S&P fell 3.3%, Nasdaq dropped 3.5%.

--U.S. Treasury Yields

6-mo. 0.07%  2-yr. 0.11%  10-yr. 1.07%  30-yr. 1.83%

Another week of little change in the Treasury market.

*Dan C., next week some budget deficit details.  I uncovered some stuff from 2012 that is very interesting.

--President Biden signed an executive order Wednesday suspending new oil and gas leasing on federal land, in what is widely seen as being a first step toward fulfilling his campaign pledge to stop drilling on federal lands and offshore.

Drilling on federal lands accounts for roughly 9% of U.S. onshore production, but oil industry leaders see a curtailment on future development as a significant threat.  Oil companies want to maximize their access to land and federal permits to help grow and sustain operations, and they plan to resist Biden’s efforts through lawsuits and lobbying Congress.  The pause will not restrict energy activities on lands that the government holds in trust for Native American tribes.

[Biden also set a goal to conserve 30% of federal land and waters to protect wildlife by 2030 and seek to double renewable energy production from offshore wind, also by 2030.]

“The early actions of the administration are unilaterally shutting down and restricting the ability of American oil and gas producers to run their operations,” said Anne Bradbury, chief executive of the American Exploration and Production Council, which represents independent U.S. oil companies.  “The scope and the lack of consultation with industry stakeholders has been alarming.”

Biden revoked the permit for the Keystone XL pipeline from Canada and moved to stop oil companies from drilling in Alaska’s Arctic National Wildlife Refuge.  No drilling has yet begun there, but the Trump administration had auctioned leases in the refuge earlier this month.

As a candidate, Biden had said climate change is one of the biggest crises the country faces, and that he would push the country to “transition away from the oil industry.”  According to Environmental Protection Agency data, oil in recent years has become the country’s top source of greenhouse-gas emissions, through gasoline burned by cars and trucks.

While Biden’s moves were expected, the speed at which his administration is implementing changes and targeting the industry seems to be a surprise to leaders and analysts.

On the Keystone Pipeline, it’s unclear whether TC Energy will pull the plug on the project, fight it in court, or wait four more years in the hopes of there being a new president who supports the pipeline.

Those in opposition to the project have of course praised President Biden’s move.  “It is rare that a promise to our people is kept by the United States,” Harold Frazier, chairman of the Cheyenne River Sioux Tribe, said in a news release.

Legal experts in South Dakota say they don’t expect TC Energy to have success in the courts, so it’s a decision on waiting four years for management.

Canadian-owned TC Energy first proposed the $8 billion pipeline in July 2008.  Since then, the pipeline has been presented to three presidents and been subject to protests and lawsuits filed by TC Energy and opponents.

The pipeline was to run 1,200-miles from the Alberta tar sands in Canada to Nebraska, where it would hook up with another TC Energy pipeline down to the Gulf of Mexico.

Canadian Prime Minister Justin Trudeau in his first call with Biden in November urged him to approve the pipeline, but upon his inauguration, the president canceled the permit.   South Dakota’s Republican representatives, including Senator John Thune and Mike Rounds, sent a letter to Biden asking him to approve the pipeline, as it is “not the same project first reviewed by the Obama administration,” they wrote.

Meanwhile, the expansion of Canada’s government-owned Trans Mountain pipeline assumes greater importance for the oil sector after the cancellation of Keystone XL reduced future options to carry crude.

Trans Mountain Corp. is spending $9.9 billion to nearly triple capacity to 890,000 barrels per day.  Justin Trudeau’s government bought the 68-year-old pipeline in 2018 when previous owner Kinder Morgan faced legal hurdles to expand the 715-mile line running from Alberta to the British Columbia coast.

Ottawa plans to sell the pipeline once there are fewer risks to completion and consultations wrap up with First Nations (indigenous groups).

Enbridge Inc., which runs North America’s Mainline oil network, stands to gain from KXL’s demise.  It intends to sell long-term contracts for most of the Mainline’s capacity, pending regulatory approval.

In the end, Canada may have surplus export pipeline capacity once TMX enters service.  And they’ll just sell their oil across the Pacific. 

Ergo, after doing a little work, I’m not as concerned for Canada as I was a few weeks ago; but canceling the project hurts U.S.-Canadian relations and obviously costs jobs in the U.S.

Meanwhile, crude oil ticked up midweek following a massive drawdown of 9.9. million barrels last week to their lowest inventories since March, the Energy Information Administration said in its weekly report.

Prices have been recovering from record lows in April due to a demand recovery, particularly in China, and huge supply cuts by OPEC and its allies such as Russia, though they edged up just  slightly on the week to $52.15 on West Texas Intermediate.

--Chevron Corp. swung to an $11 million fourth-quarter loss and missed Wall Street expectations as low margins on fuel, acquisition costs and foreign currency effects overwhelmed improved drilling results.

Oil companies are expected to benefit from a bounce-back in oil and gas prices after a one-two punch of falling demand and prices put the industry in a tailspin last year.

But as Chevron’s final quarter showed, pandemic-related travel restrictions continue to hammer fuel demand.  The company was quick to respond to the downturn last year, cutting up to 15% of its global workforce, slashing new project outlays more than a third, and pulling back on oil production goals.

The $11 million adjusted fourth-quarter loss, or 1 cent per share, compared with a profit of $2.8bn, or $1.49 per share, a year earlier.  It reported a full-year loss of $5.54 billion compared with earnings of $2.92 billion in 2019.

--General Motors said Thursday it wants to end production of all diesel and gasoline-powered vehicles and build only electric vehicles by 2035 as the auto giant aims to be carbon neutral in 19 years; the announcement coming a day after President Biden’s climate change-related executive orders.

The Detroit-based company said it would use 100% renewable energy to power its U.S. facilities by 2030 and worldwide five years after that.

“General Motors is joining governments and companies around the globe working to establish a safer, greener and better world,” Chief Executive Mary Barra said in a statement.  “We encourage others to follow suit and make a significant impact on our industry and on the economy as a whole.”

GM said it will offer 30 all-electric vehicles worldwide by the middle of this decade with 40% of its U.S. models being electric by the close of 2025.  It lifted its investment in electric and autonomous vehicles in the next five years to $27 billion from $20 billion it had planned before the beginning of the pandemic.

Yes, yet another developing rival for Tesla.

--Microsoft Corp. beat Wall Street estimates for Azure (cloud) revenue growth on Tuesday, as the software giant continued to benefit from a global shift to working and learning from home, the shares rising sharply in response.

The shift to work from home due to the Covid-19 pandemic has accelerated enterprises’ switch to cloud-based computing, benefiting Microsoft and rivals such as Amazon’s cloud unit and Alphabet Inc.’s Google Cloud.  Microsoft said revenue in its “Intelligent Cloud” segment rose 23% to $14.6 billion, with 50% growth in Azure, above expectations.  Last quarter Azure grew 48%.

The company bundles several sets of software and services such as Office and Azure into a “commercial cloud” metric that investors watch closely to gauge the company’s progress in selling to large businesses.

Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose 14% to $15.1 billion, driven by strong Xbox content and services growth, beating estimates.

Microsoft’s overall revenue rose to $43.08 billion in the second quarter ended Dec. 31, from $36.91bn a year earlier.

--Apple Inc. on Wednesday reported holiday quarter sales and profits that beat Wall Street expectations, as new 5G iPhones helped push handset revenue to a new record and sparked a 57% rise in China sales.

Apple shipped its iPhone 12 lineup several weeks later than usual, but an expanded number of models and new look appear to have tapped into pent up demand for upgrades, especially in China.  The company also posted strong sales of its Mac laptops and IPads in the quarter, driven by consumers working, learning and playing from home during the pandemic.

Apple’s revenue for the quarter ended Dec. 26 rose 21% to $111.44 billion. Earnings per share rose to $1.68 from $1.25, beating the Street on both.   

CEO Tim Cook said in an interview that the company now has an active installed base of 1.65 billion devices, compared with 1.5 billion devices a year ago.  Cook also said Apple now has an installed base of more than 1 billion iPhones, an increase over the 900 million the company most recently disclosed in 2019.

Cook said that Apple gained iPhone sales in China both from customers switching from rival Android devices as well as existing customers upgrading devices, but said “upgraders in particular set an all-time record in China.”

Mac sales reached $8.68 billion.  Sales of iPads were $8.44 billion.  Cook said “semiconductors are very tight” as Macs, iPads and the iPhone 12 Pro model all ran into “supply constraints.”

The company’s services business, which includes its new Apple One bundle of television, music and cloud storage services, had $15.76 billion in revenue, compared with analyst estimates of $14.80bn.  Apple has 620 million paying subscribers on its platform.  The services segment also includes sales from Apple’s App Store, whose billing practices have become a flashpoint of conflict with “Fortnite” creator Epic Games and whose privacy rules have led to a public spat with Facebook.

Wearables, which includes the Apple Watch and AirPods product lines, hit $12.97 billion in revenue.

Data from research firm IDC showed Apple’s smartphone sales surged 22% in the quarter, giving it a global market share of 23.4%, a record for the company.

--Facebook Inc. soundly beat quarterly revenue estimates on Wednesday after heavy holiday advertising by e-commerce retailers, but it warned Apple’s impending privacy changes could hurt revenue by interfering with ad targeting.

The world’s biggest social media company said it expected to face “significant ad targeting headwinds in 2021.”  Facebook forecast that Apple’s update of its iPhone operating system to iOS 14 could start biting into revenues as early as the end of the first quarter.

The company said the pandemic-driven surge in online commerce and shift in consumer demand to products over services buoyed revenue growth, which has been cooling as the business matures.

Total revenue, which consists almost entirely of advertising sales, rose 33% to $28.07 billion in the fourth quarter ended Dec. 31 from $21.08 billion a year earlier, well above expectations.  Net income came in at $11.22 billion, compared with $7.35 billion a year earlier.

Monthly active users rose 12% to 2.80 billion, above the 2.75bn expected by analysts.  Daily active users were 1.84bn on average in December, an 11% jump year-over-year.

Headcount was 58,604 as of December, a surge of 30% from a year ago.

Facebook has faced criticism about misinformation and calls for violence on its platforms tied to the U.S. presidential election, including the storming of the Capitol.  CEO Mark Zuckerberg told investors in a call that he wanted to “turn down the temperature” of political conversations because “people don’t want politics and fighting to take over their experience on our services.”

--Tesla Inc.’s fourth-quarter profit fell short of Wall Street expectations on Wednesday and the company failed to provide a clear target for 2021 vehicle deliveries, sending shares down 4% in after-market trading.  The disappointing results come after shares of the electric carmaker led by Elon Musk surged nearly 700% over the past 12 months, a valuation rooted in expectations that Tesla will quickly and profitably expand.

Investors had hoped for a significant increase over the company’s 2020 delivery goal of half a million vehicles, but Tesla provided only a vague outlook and did not state a concrete delivery goal.

“Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries.  In some years we may grow faster, which we expect to be the case in 2021,” Tesla said in a statement.  The fuzzy guidance also comes after Musk fanned hopes during an October earnings call.  Asked by an analyst whether Tesla aimed to deliver 840,000 to 1 million vehicles in 2021, based on its factories’ current maximum capacity, Musk responded the target was “in that vicinity,” while another Tesla executive said the company would provide guidance next quarter.

Tesla delivered 180,570 vehicles during the fourth quarter, a quarterly record, even though it narrowly missed its ambitious 2020 goal of half a million deliveries.  And while it has increased deliveries, the company said on Wednesday that the average sales price per vehicle dipped 11% on a yearly basis, with more consumers switching to the less expensive Model 3 and Model Y.

Net income excluding share-based compensation payouts to Musk rose to $903 million from $386 million last year, but the company fell short of average analyst expectations for a $1.08bn quarterly profit.  Revenue at $10.74bn was above forecasts.

Throughout 2020, Tesla ramped up production in China and last month began selling its locally made Model Y sport utility vehicle there at a price analysts’ say will disrupt the conventional premium car market.  But the company faces growing competition by local challengers, including Nio Inc. and Xpeng Inc.

And within the auto industry, the race is now on to develop electric vehicles to meet emissions targets and challenge Tesla’s market lead.  Several carmakers are slated to release new EV models this year, including SUVs to compete with the Model Y, such as Ford Motor Co.’s Mustang Mach-E and Volkswagen’s ID.4.

Competitors’ uptick in EV sales will also dry up Tesla’s income from environmental regulatory credits, which it sells to other automakers.  This is not a small deal.  In the fourth quarter, 4% of Tesla’s automotive revenue, $401 million, came from those credits.

--American Airlines reported an adjusted net loss for the fourth quarter of $3.86 per share, compared with adjusted earnings of $1.15 a share during the same quarter a year earlier.  Revenue totaled $4.03 billion for Q4, down from $11.31bn a year earlier. 

American said it expects Q1 revenue to be down 60% to 65%.  The company also estimates Q1 system capacity to be down 45%.

“As we look to the year ahead, 2021 will be year of recovery,” CEO Doug Parker said in the earnings statement.  “While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready.”

--Southwest Airlines reported a Q4 net loss of $1.29, compared with a gain of $0.98 per share a year earlier.

The airline said operating revenue was $2 billion, compared with $5.7 billion a year earlier, slightly below the Street’s consensus.

CEO Gary Kelly said in a statement: “Our annual 2020 operating revenues declined approximately 60 percent, year-over-year, and we experienced our largest monthly decline in operating revenues in April 2020, down 92 percent, year-over-year, when the pandemic spread and shelter-in-place orders and similar restrictions were implemented throughout the country.”

Separately, Southwest said Tuesday it was offering employees another round of voluntary leave as its staffing levels remain high and the coronavirus outbreak crimps travel.  The company said in a statement: “Southwest remains overstaffed in many areas.  As a result, some departments will be offering additional opportunities for Employees to take Extended Time Off (ExTO) beginning in March 2021, based upon projected staffing levels.  The additional opportunities for leave align with the period when some Employees will return from previously-awarded, six-month leaves on March 1, 2021,” the company added.

The “Big Four” U.S. airlines – Southwest, Delta, American and United – are receiving $15 billion in new payroll assistance, money allocated by Congress to help more than 32,000 aviation workers return to jobs through at least March 31.

--Delta Air Lines plans to bring back 400 full-time pilots by this summer.  Having avoided furloughs last year, the company said it was restoring the pilots to full-flying status due to the federal payroll support program and available training capacity starting in March and April.

“We’re cautiously optimistic that demand will increase as vaccinations roll out across the world, and we look forward to restore all affected pilots back to full flying status as the recovery continues,” a senior Delta executive said.

However, Delta reiterated it expected its average cash burn rate in the first quarter to be between $10 million and $15 million per day, with customer demand likely to be similar to the depressed levels seen in the fourth quarter.

--So speaking of customer demand, the latest TSA checkpoint travel numbers remain sickly.

1/28…36 percent of 2020 levels (still weeks before last year’s shutdown)
1/27…30
1/26…28
1/25…35
1/24…39
1/23…37
1/22…35
1/21…35

--Cathay Pacific Airways Ltd. on Monday warned passenger capacity could be cut by about 60% and monthly cash burn may rise if Hong Kong installs new measures that require flight crews to quarantine for two weeks.

“The new measure will have a significant impact on our ability to service our passenger and cargo markets,” Cathay said in a statement.  Cathay added that expected curbs will also reduce its current cargo capacity by 25%. 

In December, Cathay’s passenger numbers fell by 98.7% compared to a year earlier, though cargo carriage was down by a smaller 32.3%.

--Boeing saw its fourth-quarter revenue collapse, down 14.6% year/year to $15.3 billion, and the company reported a loss of $15.25 per share, a massive miss from the consensus of ($1.63).

Results reflected lower commercial deliveries and services volume primarily due to the pandemic as well as 787 production issues, partially offset by a lower 737 MAX customer considerations charge in the quarter vs. last year.

The deep impact of the pandemic on commercial air travel, coupled with the 737 MAX grounding, challenged BA’s results, though now the MAX is returning to service in the U.S. and several other markets.  Since the FAA’s approval to return to operations, Boeing has delivered over 40 737 MAX aircraft and five airlines have safely returned their fleets to service. 

Ryanair has ordered 75 737 aircraft, while Alaska Airlines committed to 23 MAX planes.  Boeing also received orders for eight 777 freighters from DHL.

But Boeing now anticipates that the first 777X delivery will occur in late 2023 from prior guidance of 2022, and Wall Street did not like this pushback in delivery dates. 

Separately, a former senior manager at Boeing’s 737 plant in Seattle has raised new concerns over the safety of the company’s 737 MAX.  In a new report, Ed Pierson claims that further investigation of electrical issues and production quality problems at the 737 factory is badly needed.

Regulators in the U.S. and Europe insist their reviews have been thorough, and that the 737 MAX aircraft is now safe.

--Starbucks Corp. reported a larger-than-expected fall in quarterly sales as the renewed surge in coronavirus cases in the United States kept customers at home.  The world’s largest coffee chain’s global same-store sales fell 5% in its first quarter, which ended Dec. 27, more than analysts’ estimates of a 3-4% decline.

The second wave of Covid-19 infections and accompanying restrictions dented traffic at the chain’s stores, with comp sales declining 6% for the Americas region.  But in China, Starbucks’ biggest growth market, comparable sales rose 5%.

For the second quarter, Starbucks said it expects U.S. comp sales to rise between 5% and 10%, while in China they were forecast to grow nearly two-fold a year after the pandemic hit the region.  The company did not change its global comp sales forecast for 2021 of 18% to 23%.

Net revenue in fiscal Q1 fell 5% to $6.7 billion, missing expectations of $6.93bn.

The Seattle-based company has been closing some stores, adding drive-thrus to others, while it is remaking some of its smaller cafes and building a few with no seating as it focuses on expanding to-go options.  Overall, the company opened 278 net new stores in the quarter, for 4% year over year growth.  It now has 32,938 stores around the world.

Separately, Chief Operating Officer Roz Brewer is leaving to become CEO at Walgreens Boots Alliance Inc., setting her up to be the only Black woman leading a Fortune 500 company today.

--McDonald’s Corp. missed Wall Street estimates for quarterly profit and revenue on Thursday, though the shares held their own.  Revenue was hit in Europe amid the second round of coronavirus lockdowns, which countered sales growth in the U.S. market.

Comparable sales for the international markets segment fell 7.4% in the fourth quarter, largely due to weakness in France, Germany, Italy and Spain, where the health crisis has been more intense.

Comp sales in the U.S., however, rose 5.5%, an improvement over the prior quarter and better than estimates.

Overall, global comp sales fell 1.3% for the quarter ended Dec. 31.  Total revenue fell 2.1% to $5.31 billion, missing forecasts.

“Against an uncertain backdrop, we are committed to staying true to our values and our brand purpose to feed and foster communities,” said Chris Kempczinski, CEO of McDonald’s.  He said the company will continue to invest in strategies including drive-thru, delivery and its digital presence.  “We’re confident we can continue to capture market share and drive long-term sustainable growth for all stakeholders.”

--Prior to its exciting vaccine news today, Johnson & Johnson on Tuesday issued higher-than-anticipated 2021 earnings guidance as the consumer products and pharmaceutical giant’s fourth-quarter results top views amid the continuing Covid-19 pandemic.

The maker of Tylenol and Band-Aid products expects sales for the year of between $90.5bn and $91.7bn, above last year’s $82.58bn, and ahead of current expectations.

For the three months through December, sales rose to $22.48 billion from $20.75 billion in the prior-year quarter, topping the Street.  Adjusted earnings also beat.

Pharmaceutical sales rose about 15% on an adjusted, operational basis to $12.27 billion.  Medical-device sales slipped 1.5% to $6.59 billion, and consumer health sales were $3.62bn, up 2.1%.

--General Electric shares rose after the industrial conglomerate reported better-than-expected revenue and higher free cash flow in the final quarter of 2020.

Revenue totaled $21.93 billion, down from $26.24bn in the prior-year quarter, but above forecasts.  GE expects 2021 adjusted EPS below the current consensus estimate, but for now, investors chose to focus on the ongoing cost-cutting efforts and improving cash flows from operations.

--Germany asked Taiwan to persuade Taiwanese manufacturers to help ease a shortage of semiconductor chips in the auto sector which is hampering their economic recovery.

Automakers around the world are shutting assembly lines due to problems in the delivery of semiconductors, as noted last week, which in some cases have been exacerbated by the former Trump administration’s actions against key Chinese chip factories.

The shortage has affected Volkswagen, Ford Motor, Subaru, Toyota, Nissan, Fiat Chrysler and others.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world’s largest contract chipmaker and one of Germany’s main suppliers, said the issue of chip shortages for auto companies was “our top priority, and TSMC is working closely…to resolve the capacity support issues.”

--Samsung Electronics Co. Ltd. on Thursday forecast solid demand for its chips in the current quarter and stronger mobile sales after bringing forward the launch of its flagship Galaxy S smartphone to grab market share.

The world’s top maker of memory chips warned, however, that a stronger currency and costs related to new chip production would lead to a weaker profit result, after posting a 26% jump in operating profit in the fourth quarter.  Samsung expects overall profit to weaken in the first quarter of 2021.  The company said in a statement: “For 2021, (Samsung) expects a recovery in overall global demand but uncertainties persist over the possibility of recurring Covid-19 waves.”

Samsung has been hurt by the strong South Korean won against the dollar, which erodes the value of overseas sales.

--3M Company reported gains in revenue and earnings in the final quarter of 2020 as demand for its products advanced, driving up sales across all of its segments while the industrial giant outlined guidance for further growth in the current year.

3M’s sales rose to $8.58 billion through Dec. 31 from $8.11 billion a year earlier.  Earnings rose to $2.38 a share from $1.95 a share in the same period of 2019.  The Street consensus was sales of $8.39bn and EPS of $2.17.

The company saw strong demand in segments from personal safety to home improvement and biopharmaceutical filtration.  Elective health care, consumer electronics and office supplies were among the segments that saw year-on-year declines amid the continued Covid-19 pandemic.

CEO Mike Roman said: “Throughout 2020 we distributed 2 billion respirators globally and supported the development and manufacturing of vaccines and therapeutics to help the world respond to Covid-19.”

For the current year, 3M sees total sales growth of between 5% and 8%.

--Ant Group will see results if the company follows the legal processes following the suspension of its IPO, according to China’s central bank governor Yi Gang.  Beijing has signaled that it wants to strengthen its oversight, particularly of technology firms looking to expand into the financial space, a reversal of its once laissez-faire approach. 

The drive has spotlighted Alibaba’s fintech affiliate, Ant Group, whose record $37 billion listing was halted by Beijing in early November, with its executives called into meetings and told to expect more regulation.  “I’d say that you just follow the standard of legal instruction, you will have the result,” Yi said on Tuesday, speaking at a virtual meeting of the World Economic Forum.

Regulatory authorities are working to strike a delicate balance in their effort to fend off risk without discouraging innovation, Yi added, speaking in English.

Well, it seems that Ant Group is going to turn itself into a financial holding company overseen by China’s central bank.  This had been part of the original plan, but only for subsidiaries housing licensed businesses such as asset management and consumer lending.  But to turn the entire company into a holding company, subjecting Ant to a slew of regulations similar to those governing banks, will impact its growth and profitability, which wasn’t the business model envisioned by the company’s executives and stakeholders.

Reports are that the restructuring plan will be made official in the next few weeks; any final plan needing to be signed off on by China’s Financial Stability and Development Committee.

So much for the dreams of going public at a valuation greater than $300 billion.

--New York City saw its lowest amount of construction activity last year in almost a decade, as the industry spent much of the year grappling with the pandemic, according to a new report from the Real Estate Board of New York.

Major construction projects, which REBNY defines as ones that span more than 300,000 square feet, were at their lowest total since 2012, a 35% decline from the year before.

Construction firms filed plans for 1,760 new buildings last year – also the lowest number since 2012.

Separately, New York state shed 1 million jobs during the pandemic in 2020 amid lockdowns and meltdowns in tourism and business activity, the state Labor Department found.  New York City lost the majority – 578,000.

In other words, one out of eight jobs in the Big Apple – 12 percent – disappeared. 

Much of this job loss was in the food services, restaurant and beverage industry, which saw a 43% loss in employment from 324,500 in the New York City region in Dec. 2019 to 183,800 last month.

The larger tourism-heavy leisure hospitality sector that includes hotels and arts and entertainment venues lost 366,600 jobs statewide or 39% of the total.

--The crop glut that battered American farmers is subsiding, fueling a surprising recovery in the U.S. Farm Belt after a yearslong agricultural recession.  Prices for corn, soybeans and wheat are at their highest levels in more than six years as dry weather and strong export demand from China drain U.S. stockpiles.

Quite a reversal from recent years in which bumper harvests swelled U.S. grain supplies, pushing prices lower and slashing farmers’ incomes.  The Midwest suffered through a wave of bankruptcies, followed by trade disputes and then the pandemic, deepening farmers’ struggles.

But now, China’s push to increase pork production and fulfill recent trade commitments is propelling large volumes of U.S. crops overseas.  At the same time, American food processors and manufacturer have to ensure they have adequate grain and oilseed supplies to meet burgeoning consumer demand.  The U.S. Agriculture Department forecast inventories of corn, soybeans and wheat are on track to hit their highest levels in six years.

Prices for some farmland are approaching the levels of 2012, during the last farm boom.

--Godiva is closing all of its U.S. locations as in-store visits for its luxury chocolate dip during the pandemic.  All 128 locations in North America, which includes 11 in Canada, will close by the end of March.  But Godiva chocolates aren’t disappearing completely. You can still get them online as well as at grocery and other stores.

Most of the Godiva boutiques are located in shopping malls, such as next door at The Mall at Short Hills.

The move by Godiva represents quite a turnaround as it was just in April 2019 that the company announced a large expansion plan to open 2,000 cafes around the world in six years.  There are currently seven in the U.S. listed on its website.

Godiva said it would continue to maintain retail operation in Europe, Middle East and Greater China “in formats that reflect the unique cultural preferences of those markets,” the company said.

--Leon Black said on Monday he would relinquish his chief executive post at Apollo Global Management Inc. following an independent review of his ties to the late financier and convicted sex offender Jeffrey Epstein.  The review, conducted by Dechert LLP, found Black was not involved in any way with Epstein’s criminal activities.

But Black paid Epstein $158 million for advice on tax and estate planning and related services between 2012 and 2017, according to the review.  What’s up with that?

Well, Black argues he just paid Epstein a fee, 5%, commensurate with the tax savings conferred by Epstein’s advice.

Black, 69, said although the Dechert review confirmed he did not engage in any wrongdoing, he “deeply” regretted his involvement with Epstein. “I hope that the results of the review, and related enhancements, will reaffirm to you that Apollo is dedicated to the highest levels of transparency and governance,” Black wrote in a note to Apollo fund investors.

Apollo co-founder Marc Rowan, 58, will take over as CEO, with Black remaining Apollo’s chairman.

Black and Rowan co-founded Apollo 31 years ago and turned it into one of the world’s largest private equity and credit investment groups.  Apollo executives had warned in October that some investors had paused their commitments to the buyout firm’s funds as they awaited the review’s findings.

--Toy sales surged 16% to $25.1 billion last year, according to NPD Group, a prominent research firm. The surge comes amid hot demand during pandemic lockdowns for Barbie, Star Wars and Pokemon merchandise; parents searching for ways to distract their kids amid widespread lockdowns, school closures and stimulus checks, according to NPD.

The last time the toy industry experienced similar growth was in 1980 and 1982 when Cabbage Patch dolls were all the rage and in 1999 when Pokemon became a phenomenon, according to analysts.

I can’t believe the Cabbage Patch craze was that long ago.  Yikes.

--Budweiser became the latest Super Bowl commercial stalwart to sit out this year’s broadcast, announcing Monday it was foregoing its annual slot for the first time in 37 years, joining Coke and Pepsi, among others. 

Budweiser said instead of paying to air a Super Bowl ad, it will reallocate the media investment to raise awareness about the Covid-19 vaccine throughout the year, in partnership with the Ad Council.

A Budweiser spokesperson said in a statement: “Like everyone else, we are eager to get people back together, reopen restaurants and bars, and be able to gather to cheer with friends and family. To do this, and to bring consumers back into neighborhood bars and restaurants that were hit exceptionally hard by the pandemic, we’re stepping in to support critical awareness of the Covid-19 vaccine.”

--Mike Lindell, MyPillow CEO, was permanently barred from Twitter following numerous tweets by Lindell promoting debunked conspiracy theories about election fraud.

Twitter said he the act was taken “due to repeated violations of our Civic Integrity Policy.”  As noted last time, Kohl’s, Bed Bath & Beyond and J.C. Penney are among the retailers that have removed MyPillow products from their stores.

--Finally we have the issue of GameStop Corp.  On Monday, when it was at $77 a share, hoisted by a short squeeze ignited and arguably organized in chat rooms, the game retailer’s stock was about $63 above the average forecast of equity analysts tracked by Bloomberg.  The ratio between the two was by far the biggest in the Russell 3000 and jumped for a third day, as crazed trading capped a stretch in which the 37-year-old company burned bears who had shorted 140% of its shares.  The buying frenzy as short sellers rushed to cover positions enticed retail investors to pile on in hopes of riding the stock’s momentum higher.

Users of social media, like three main Reddit investing groups, circulated memes mocking the losing bets by intuitional traders and gains made by “mom and pop” retail traders long derided on Wall Street as “dumb money.”

Over a quarter of all posts on the Reddit trading groups last Friday were about GameStop, according to a Thomson Reuters analysis, vs. about 1% in November.

Back on Jan. 8. GameStop shares closed at $17.70, $39.90 on Jan. 14, $65 Jan. 22 (last Friday), then $77 on Monday, Jan. 25, though it hit $159 that day, triggering at least nine trading halts.  Tuesday it closed at $148.

Well, Thursday, GameStop shares hit $515 in the pre-opening market, crashed to $112 at one point and closed at $193 amid the issues with Robinhood.  But they opened today at $397, traded in a range of $250 - $414 and closed the week at $313.

Last week, noted short-seller Citron Research said the stock would be “back to $20 fast.”  The Wall Street Journal reported that Melvin Capital Management had a short position against GameStop and Melvin needed a $2.75 billion investment from Citadel and Point72 Asset Management (Ken Griffin and Steve Cohen, respectively) to stabilize the fund.

But some Wall Street pros have benefited from the crazy trade, and other stocks of its ilk.  Private equity firm Silver Lake converted AMC Entertainment debt it held to equity, according to a regulatory filing. That meant Silver Lake, which has $75 billion in assets and committed capital, in a flash turned its going-nowhere $600 million AMC investment into a $900 million winner.  Executives couldn’t have done it without Reddit novices driving up the ailing movie-theater’s stock price from $4.96 a share to $19.90 on Wednesday.

Barstool Sports’ Dave Portnoy jumped into the fray after Robinhood stopped trades in GameStop, tweeting Robinhood’s “Trying to force a crash by closing the Open Market is fair?” adding, “They should all be in jail.”

Robinhood raised over $1 billion on Thursday to help meet the increased demand from amateur investors using the stock trading app amid this week’s frenzy, a report said.

The brokerage was in need of the cash infusion in part to pay out users for their trades, the New York Times reported.

Editorial / Wall Street Journal

“The GameStop stock mania has captivated market speculators, spectators, politicians and even morning TV. It’s certainly high financial drama to see armies of retail investors on Reddit hunting the so-called wolves of Wall Street. This may be a new example of the power of social media, but it isn’t a crisis of capitalism or the stock market.

“There are two broad theories of how equity markets work.  One is to focus on fundamentals like the growth part of the U.S. economy and the prospects and earnings of companies.  You buy and hold a stock, or you invest in a fund that tracks an index like the S&P 500 or Russell 2000.  This is what most people do.

“Yet we market fundamentalists have to admit that more than a few people have become very rich betting on the famous phrase ‘popular delusions and the madness of crowds.’  Stock manias are common – and wonderful until they become panics.  This is where we seem to be this week as investors used online brokerage platforms like Robinhood Markets to bid up shares in companies hyped on social media that may or may not deserve their soaring market capitalization.

“The drama was heightened as the Reddit pack pumped up stocks like GameStop and the movie-theater company AMC that were shorted by hedge funds.  Most are hoping to make a quick buck by riding the roller-coaster up and selling before shares crash, though some also want to squeeze the hedgies.

“Short sellers have to deliver real shares when their short contracts expire, which means buying shares and raising the price even more.  The losses can be high.  Some in the Reddit pack triumphed this week when Citadel LLC and Point72 Asset Management had to rescue Melvin Capital Management from its short bet against GameStop.  Hedge funds are sophisticated investors and know the risks.

“As for the Reddit investors, many may soon learn Herbert Stein’s Law that if something can’t continue, it won’t.  If GameStop’s future earnings don’t warrant a valuation of $28 billion, which it reached this week, it will eventually fall back down to earth.

“That process has already begun as Robinhood and other online trading platforms first raised margin requirements for investors and then put restrictions on buying shares like GameStop and AMC.  GameStop shares fell 44% Thursday.  Many Robinhood customers are angry, and so are politicians who want to speak up for small investors….

“The focus of regulators should be fraud or those who might be coordinating a pump-and-dump scheme.  It’s possible someone nefarious is driving the mania in one or more stocks.  But the Occam’s razor explanation is the madness of crowds rather than market manipulation.

“The government body that should come in for more introspection is the Federal Reserve. The central bank may be feeding the asset frenzy as it holds interest rates near zero and crushes the long bond yield curve so it doesn’t send accurate price signals.  As investors search for yield, they have moved into commodities, real estate, junk bonds, foreign currencies – and stocks.

“We don’t profess to know if stock prices are overvalued, and perhaps investors are right that Tesla deserves its price-earnings ratio of 1,600 based on future sales of its electric cars.  But in the Federal Reserve’s current world of negative real interest rates, there is also plenty of speculative money chasing higher returns.

“Many young people can’t go to Las Vegas or even a bar, so they are playing roulette on Robinhood.  Asked about the craze, White House press secretary Jen Psaki said Wednesday that Treasury Secretary Janet Yellen was ‘monitoring the situation’ and ‘it’s a good reminder, though, that the stock market isn’t the only measure of the health of our economy.’

“How about reminding people that investments carry risk, that stocks fall and rise, and that the GameStop losers won’t be bailed out?”

Foreign Affairs

China: Beijing toughened its language towards Taiwan on Thursday, warning after recent stepped-up military activities near the island that “independence means war” and that its armed forces were acting in response to provocation and foreign interference. 

Taiwan reported multiple Chinese fighter jets and bombers entering its southwestern air defense identification zone last weekend, prompting Washington to urge Beijing to stop pressuring Taiwan.

China believes that Taiwan’s democratically-elected government is moving the island towards a declaration of formal independence, though Taiwan President Tsai Ing-wen has repeatedly said it is already an independent country called the Republic of China, its formal name.  Asked at a monthly news briefing about the air force’s recent activities, Chinese Defense Ministry spokesman Wu Qian said Taiwan is an inseparable part of China.

“The military activities carried out by the Chinese People’s Liberation Army in the Taiwan Strait are necessary actions to address the current security situation in the Taiwan Strait and to safeguard national sovereignty and security,” he said.  “They are a solemn response to external interference and provocations by ‘Taiwan independence’ forces,” he added.  Wu said a “handful” of people in Taiwan were seeking the island’s independence.  “We warn those ‘Taiwan independence’ elements: those who play with fire will burn themselves, and ‘Taiwan independence’ means war,” he added. 

While China has never renounced the use of force to bring Taiwan under its control, it is unusual for Beijing to make such overt, verbal threats of conflict.

Pentagon spokesman John Kirby said there was no reason that tensions between China and Taiwan “need to lead to anything like confrontation.”  He also reaffirmed longstanding U.S. military support to Taiwan’s self-defense.  “We have obligations to assist Taiwan with their self-defense and I think you’re going to see that continue,” said Kirby, a retired admiral.

Taiwan’s Mainland Affairs Council said China should think carefully and not underestimate the island’s determination to defend its sovereignty and uphold freedom and democracy.

Taiwan’s Defense Ministry reported six Chinese air force aircraft, including four J-10 fighter jets, flew into its air defense zone on Thursday.  Last weekend, China conducted larger-scale incursions.

The Biden administration has reaffirmed its commitment to Taiwan as being “rock solid.”

Meanwhile, President Xi Jinping issued a veiled warning against the new Biden administration’s preparations to rally allies to challenge Beijing on a range of issues, urging multilateral coordination to tackle global challenges such as the pandemic.

“To build small circles or start a new Cold War, to reject, threaten or intimidate others, to willfully impose decoupling, supply disruption or sanctions, to create isolation or estrangement, will only push the world into division and even confrontation,” Mr. Xi told the World Economic Forum, which this year convened online instead of Davos, Switzerland.

Xi offered no initiatives to address Western criticisms of Chinese policies in such areas as trade, human rights and the military.

Anger simmers in many capitals over China’s lack of transparency over the coronavirus outbreak and the government’s refusal to address scientific questions about the efficacy of its vaccine program.

Xi warned, “It serves no one’s interest to use the pandemic as an excuse to reverse globalization and go for seclusion and decoupling.”

Xi called for stepped-up global macroeconomic policy coordination and said nations should abandon “ideological prejudice” about a single kind of governance.

Editorial / Wall Street Journal

“Chinese President Xi Jinping knows his audience. In his Monday address to the World Economic Forum, the annual meeting of global luminaries in Davos, Mr. Xi sounded like a liberal internationalist in good standing. He pulled out all the buzzwords that make Davosians swoon: ‘inclusive growth,’ ‘green development,’ ‘global governance’ and ‘consensus building.’

“The Davos website effused that this was a ‘historic opportunity for collaboration.’ But Mr. Xi’s People’s Liberation Army told a different story over the weekend, menacing Taiwan with back-to-back military flyovers of more than a dozen planes. The provocation is a reminder that while the government has changed hands in Washington, it hasn’t in Beijing, which still sees extending sovereignty over Taiwan – possibly by force – as a priority.

“Mr. Xi said in his speech that ‘the strong should not bully the weak,’ but that admonition doesn’t seem to apply to his own government.  ‘We should stay committed to international law and international rules, instead of seeking one’s own supremacy,’ he added.  Tell that to the people of Hong Kong who were promised autonomy through 2047 in a treaty Beijing signed with Britain but are now being arrested for even mild political dissent.

“Judging from comments by Secretary of State nominee Tony Blinken and Secretary of Defense Lloyd Austin in their Senate hearings, the new Administration seems to recognize the importance of Taiwan’s independence and U.S. predominance in the Western Pacific.

“Yet many in the Administration are also true believers in the types of global-governance values Mr. Xi claimed to endorse in his Davos speech, which they see as the best way to solve problems like climate change.  Unlike Mr. Xi, they aren’t experienced in using those values as a shield to relentlessly push their own national interest.

“The contrast between Mr. Xi’s Monday sweet talk and the weekend Taiwan incursions is designed to throw the world off balance.  The test for the Biden team is whether it will be tripped up by the feints toward international norms and comity that punctuate Mr. Xi’s pattern of regional aggression.”

On a different issue, the origins of the coronavirus in China a year ago, HBO financed what the Washington Post is calling a “scathing new documentary by the Oscar-shortlisted filmmaker Nanfu Wang,” “In the Same Breath,” that argues the alleged suppression of information by authorities “led to an untold number of deaths and the virus spreading rapidly, as unaware people kept taking risks.”

The Washington Post has seen the documentary, which will air at some point this year on HBO, which is a surprising development that a media conglomerate such as HBO would take on the Chinese government, representing the world’s largest entertainment market.

“In the Same Breath” argues that President Xi Jinping’s government “was eager to sweep away talk of Covid during the critical early period, both with suppression tactics and with propaganda dismissing the dangers.  The film highlights many reports, well into January 2020, stating ‘no clear evidence shows human-to-human transmission’ – even as victims are dying in the streets and thousands of people desperately upload their medical information hoping someone will see it and offer them care.

“It was only later – after, Wang notes, the Communist Party held its annual Lunar New Year meetings and wrung maximum public-relations benefits from them – that the government began publicly acknowledging the risks and imposed the famous Wuhan lockdown.”  [Steven Zeitchik / Washington Post]

North Korea: Editorial / Washington Post

“Reports that North Korea might be preparing a provocative test of a submarine-launched ballistic missile surely will not have surprised the seasoned foreign policy hands beginning to populate the Biden administration.  The regime of Kim Jong Un, like that of his father, has a history of greeting new U.S. presidents with tests of nuclear warheads or long-range missiles.  In the case of the Obama administration, the result was a deep freeze in relations; President Donald Trump’s response was threats of war, followed by failed summit meetings.

“Kurt Campbell, a senior State Department official during the Obama administration who just became President Biden’s Asia coordinator at the National Security Council, warned last month about the need ‘to make an early decision about what to do about North Korea’ to head off the predictable provocations. The problem is what to do.  As Antony Blinken, Mr. Biden’s nominee for secretary of state, told the Senate Foreign Relations Committee this week, North Korea has ‘plagued administration after administration,’ even as its arsenal of nuclear warheads and missiles – including intercontinental ballistic missiles that can reach the continental United States – has steadily grown.

“That doesn’t seem likely to change anytime soon.  At a rare conference of the ruling Communist Party this month, Mr. Kim said the development of its nuclear force had been ‘the exploit of the greatest significance in the history of the Korean nation’ and promised a host of new weapons, including hypersonic missiles, nuclear submarines and ICBMs with multiple warheads.  Some of those ambitions might be out of reach at a time when North Korea, having sealed its borders in an attempt to avoid the Covid-19 pandemic, is suffering another severe economic crisis.

‘Yet the regime’s arsenal is already formidable.  The U.S. Army reported last summer that North Korea might have 20 to 60 nuclear bombs and the capacity to produce a half-dozen more every year.  While Mr. Trump’s showy but shallow attempts to engage Mr. Kim staved off further nuclear or intercontinental missile tests during the past three years, the stockpile of warheads never stopped growing….

“Mr. Blinken told the Senate the new administration would ‘review the entire approach and policy toward North Korea’ to ‘look at what options we have.’  Yet as Mr. Campbell pointed out, the Obama administration’s ‘prolonged period of study’ was punctuated by the regime’s provocative acts.  Perhaps there is no way to avoid a showy missile firing or other martial demonstration by Mr. Kim in the coming weeks.   If there is, the Biden team probably needs to come up with it fast.”

Russia: Tens of thousands of protesters took to the streets across Russia last Saturday to demand the release of Alexei Navalny from jail, and police rounded up an estimated 3,000.  The problem is the jails in Moscow are now full after the mass arrests.  And Sunday is bringing further protests across the country.  As CNN’s Matthew Chance observed. the protesters are losing all fear, as they fight with police.

Navalny, at a court hearing on Thursday, urged his supporters to come out in great numbers this weekend, but there are growing concerns he will be formally sent to prison for as long as ten years as early as next week, which was the term granted dissident and former oligarch Mikhail Khodorkovsky, now in exile after serving out his term.

Max Boot / Washington Post

“(Navalny’s) foundation, with limited resources, has done a heroic job of exposing the extravagant corruption of the Putin gang. Think of how much more could be done if the U.S. government devoted serious resources to the task.  Indeed, much of the information might already exist in the top-secret files of the intelligence community.  And if it doesn’t exist, it should be acquired – and then partially declassified.

“Putin wants to masquerade as a champion of Russia while victimizing its people.  Expose him as the crook that he is.

“There is no time to lose.  Navalny could all too easily go from prison straight to the morgue.  In a chilling Instagram post (last) Friday, he warned of attempts to kill him in prison: ‘Just in case: I don’t plan to either hang myself on the window or cut my veins or throat open with a sharpened spoon. I use the staircase very carefully [and] they take my blood pressure every day so a sudden heart attack is ruled out.’

“The Biden administration must do what it can to protect Navalny’s life – and the flickering hopes of freedom in Russia.”

Meanwhile, in their first call as counterparts, President Biden and Russian President Putin had a frank discussion on a variety of topics, including the ongoing opposition protests in Russia and an extension of the last remaining U.S.-Russia nuclear arms pact.

The White House said in a short statement: “President Biden made clear that the United States will act firmly in defense of its national interests in response to actions by Russia that harm us or our allies.”

The U.S. said the two presidents also discussed the massive SolarWinds cyberattack, which has been blamed on Moscow; reports that the Kremlin placed bounties on U.S. soldiers in Afghanistan; and the poisoning of Navalny.

The Kremlin statement about the call did not refer to any points of friction the White House said had been raised by Mr. Biden, who has in the past referred to Putin as “a KGB thug.”

Russian officials said their president had “noted that the normalization of relations between Russia and the United States would meet the interests of both countries and – taking into account their special responsibility for maintaining security and stability in the world – of the entire international community.”

“On the whole, the conversation between the leaders of Russia and the United States was of a business-like and frank nature,” the Kremlin statement added.

The two leaders did appear to seal an agreement to renew New START (Strategic Arms Reduction Treaty), an Obama-era accord that limits the amounts of warheads, missiles and launchers in the U.S.-Russian nuclear arsenals.  It was the Kremlin that declared the breakthrough, which was widely anticipated.  It’s not known how the extension will be formally signed off on, but it is to expire on Feb. 5.

Most are in agreement that with relations with Moscow at a low point, the extension makes even more sense.  Through New START, at least the U.S. has a window into Russia’s nuclear activities.  Much more on this topic in the coming weeks.

Separately, President Biden believes the Nord Stream 2 natural gas pipeline is a “bad deal for Europe” and the administration will be reviewing restrictions on the project included in a bill that passed during the Trump administration. 

The restrictions were placed in the annual defense policy bill that passed on Jan. 1.  Sanctions in the measure apply to any companies helping Gazprom, the Russian state energy company leading the project, to lay pipeline, insure vessels or verify equipment.  The Trump administration, like the Obama administration before it, opposed the project on the grounds it would strengthen Vladimir Putin’s economic and political influence over Europe.  Russia has cut deliveries of the fuel to Ukraine and parts of Europe in winter during pricing disputes.

Biden has also opposed the project, which would bypass Ukraine and deprive it of lucrative transit fees, since he was vice president under Obama.  Russia and Germany say the pipeline is a purely commercial project.  “We continue to believe, the president continues to believe, that Nord Stream 2 is a bad deal for Europe,” said White House Press Secretary Jen Psaki on Tuesday.  The $11 billion pipeline, which is 90% complete, would double the capacity of the existing Nord Stream duct to deliver gas from Russia to Europe via Germany under the Baltic Sea.

Iran: Tehran’s ambassador to the United Nations, Majid Takht-Ravanchi, in exclusive remarks to USA TODAY, warned the Biden administration it “must act quickly” to return to the 2015 nuclear deal abandoned by President Donald Trump “because the window is closing” for Washington to lift economic sanctions before Tehran’s deadline.

Iran’s hardline dominated parliament set a deadline of Feb. 21 for Biden to lift the sanctions as part of a move back into the now-breached agreement known as the Joint Comprehensive Plan of Action, or JCPOA.  If the United States fails to act, Iran plans to suspend some inspections of tis nuclear sites by UN nuclear inspectors – a key provision of the accord – and further boost uranium enrichment.

“We have said time and again that if the U.S. decides to go back to its international commitments and lift all the illegal sanctions against Iran, we will go back to the full implementation of JCPOA, which will benefit all sides,” said Ravanchi.

If Iran’s deadline passes without some kind of compromise, it could effectively push Iran one step closer to the 90% uranium enrichment level required for a nuclear weapon.  Iran has been moving its enrichment toward the 20% level, considered the “breakout” level, a violation of the accord, as part of the response to the U.S. exit from the deal.

Secretary of State Antony Blinken said the United States will rejoin the accord only after Iran comes back into compliance.  This means, in part, limiting uranium enrichment to less than 4%.

Tehran wants Washington to rejoin on the same terms it left the accord.  Ravanchi said Iran cannot accept a “renegotiation of the nuclear deal.”

Separately, an American B-52 bomber flew to the Persian Gulf and back to the United States on Tuesday as a show-of-force intended to reassure allies and deter Iranian aggression in the region during the U.S. presidential transition.  This was the fourth such mission in the last two months.

A U.S. military official said: “We do know that U.S. policy is evolving with respect to Iran right now and the new administration will make some decisions here over the next while.  I do know if we can continue to deter Iranian aggression…that it gives the policymakers more decision space.  [Defense One]

As for Israel and its concerns, Prime Minster Benjamin Netanyahu is expected to seek an in-person meeting with President Biden in Washington, which is customary during the first few months of a new administration, however, Biden may not want to meet with Netanyahu before the March 23 election in order not to appear like he is taking sides.

Afghanistan: White House national security adviser Jake Sullivan told his Afghan counterpart last weekend that the U.S. will review the peace agreement reached with the Taliban last year.  Under a February 2020 deal between the United States and the Taliban, U.S. forces are to leave Afghanistan by May 2021 in exchange for counter-terrorism guarantees. 

Last week the number of U.S. troops in Afghanistan went down to 2,500, the lowest level of American forces there since 2001.  But violence levels in Afghanistan have surged, hastening international calls for a ceasefire between the Afghan government and the Taliban.

Random Musings

--Ohio Republican Senator Rob Portman issued a surprise retirement announcement on Monday, saying he wouldn’t run again in 2022, and thus joining Pennsylvania Republican Sens. Pat Toomey and North Carolina’s Richard Burr, who are also not running for another term next year.

As the Cook Political Report noted last year:

“Fact: when President Trump took office in January 2017, there were 241 Republicans in the House. Since then, 115 (48%) have either retired, resigned, been defeated or are retiring in 2020.”

Portman said: “I don’t think any Senate office has been more successful in getting things done, but honestly, it has gotten harder and harder to break through the partisan gridlock and make progress on substantive policy, and that has contributed to my decision.”

Portman spent the last four years disagreeing with President Trump on a lot of issues, aside from those dealing with the president’s character.  And if he ran again, no doubt he would face a Trump-backed primary challenge – maybe from Rep. Jim Jordan.

Jordan, however, said Thursday, through a spokesperson, that he was “focused on representing the great people of Ohio’s Fourth District, and will not be running to fill the seat.”

--Marc A. Thiessen / Washington Post

“So let’s get this straight: After a pro-Trump mob stormed the U.S. Capitol waving Confederate flags and chanting, ‘Hang Mike Pence!’ the person some House Republicans want to vote to remove from office is…Liz Cheney?

“Trump loyalists want to oust Cheney (Wyo.) as chair of the House Republican Conference to punish her after her vote to impeach President Donald Trump for inciting the Jan. 6 Capitol riot.  On Thursday, Rep. Matt Gaetz (R-Fla.) is speaking at an anti-Cheney rally at the Wyoming Capitol.  Reps. Andy Biggs (R-Ariz.) and Matthew M. Rosendale (R-Mont.) are circulating a petition calling for a vote on Cheney’s removal from the GOP leadership. The matter may come to a head when the House Republican Conference meets next week.

“The irony is that many of those leading the charge against Cheney helped Trump spread the Big Lie – that the election was stolen and that Congress could overturn the result.  Rep. Paul A. Gosar (R-Ariz.) tweeted a photo of the crowd at the Jan. 6 rally with the message: ‘Biden should concede.  I want his concession on my desk tomorrow morning. Don’t make me come over there.’  Rep. Mo Brooks (R-Ala.) told rally attendants, ‘Today is the day that American patriots start taking down names and kicking ass!’  Yet they have the audacity to allege that it is Cheney who brought the Republican conference ‘into disrepute’?

“When Trump was firing up the crowd at the rally, he went after two people by name: then-Vice President Mike Pence and Cheney.  ‘We’ve got to get rid of the weak congresspeople, the ones that aren’t any good, the Liz Cheneys of the world, we’ve got to get rid of them,’ Trump said.  Yet for Cheney, it’s not just Trump’s incitement of the riot that justified his impeachment, but the fact that he refused to send help once the assault began.  When House Minority Leader Kevin McCarthy (R-Calif.) and others trapped inside the Capitol urged the president to call for calm, Trump refused.  To the contrary, he incited the rioters further, tweeting as Pence was hiding from a mob demanding his execution that ‘Mike Pence didn’t have the courage to do what should have been done to protect our Country.’  Not until some three hours into the assault did Trump finally post a video telling his supporters to go home.  ‘The President could have immediately and forcefully intervened to stop the violence,’ Cheney said.  ‘He did not.  There has never been a greater betrayal by a President of the United States of his office and his oath to the Constitution.’

“But what is most stunning to Cheney and others is the lack of reverence on the part of some Republicans for the Capitol and the Constitution.  A mob attacked Congress in an effort to steal an election by forcibly stopping the counting of electoral votes.  Five people died. And as bad as the riot was, it could easily have been far worse. Imagine what might have happened if the throng, carrying zip ties and weapons, had found Pence?  Imagine if they had found the boxes containing the electoral votes?  Yet McCarthy has backed off his statement that Trump ‘bears responsibility’ for the Capitol siege, and is visiting Mar-a-Lago on Thursday to mend fences with the former president.

“The willingness of so many Republicans, in Congress and across the country, to move past the events of Jan. 6 as if nothing happened is deeply troubling.  One of the best arguments for proceeding with Trump’s Senate trial is that it will force them to confront what happened.  The entire country will watch the video of a Metropolitan Police officer being dragged down the steps of the Capitol and beaten, in a scene reminiscent of ‘Black Hawk Down.’  They will see rioters attacking officers with hockey sticks and flags, parading through the Capitol with handcuffs in search of lawmakers, waving Confederate flags inside the Capitol Rotunda, and rampaging through the Senate chamber.  Too many Republicans want to avert their eyes.  A trial will not permit them to look away.

“Reasonable people can disagree over whether it is constitutional to try a president after he has left office, or prudent to do so.  But no reasonable person can argue that voting to hold the president accountable for his role in one of the darkest moments in American history makes one unfit to serve.

“Before leaving office, Trump issued the report of his 1776 Commission, which urged educators to ‘teach our founding principles and the character necessary to live out those principles.’  Cheney showed that character.  If the Republican reaction to the Capitol riot is to excommunicate her, then the future of the party is bleak.”

--Calls are mounting for Rep. Scott Perry, a Republican from York County, Pa., to resign after a report late Saturday exposed his “significant role” in trying to overturn the 2020 presidential election.

Perry connected President Trump with a Justice Department official to try to remove the acting U.S. attorney general from his post and pressure Georgia lawmakers to overturn the results of the 2020 presidential contest, as first reported by the New York Times.

It was Perry, the Times reported, who made Trump aware that Jeffrey Clark, “a relatively obscure Justice Department official” and acting chief of the civil division, supported the former president’s view that the election had been stolen.

Trump considered firing acting Attorney General Jeffrey Rosen, who was named to the position after Attorney General Bill Barr resigned.   Barr and Rosen did not support Trump’s claims that the election was fraudulent or stolen.

“As the date for Congress to affirm Mr. Biden’s victory neared, Mr. Perry and Mr. Clark discussed a plan to have the Justice Department send a letter to Georgia state lawmakers informing them of an investigation into voter fraud that could invalidate the state’s Electoral College results,” the report said.

Perry was one of Trump’s first supporters during the 2016 election and was instrumental in spreading the former president’s claims that the 2020 election was stolen.

After the pro-Trump mob attack at the U.S. Capitol on Jan. 6, Perry led a House floor objection to Pennsylvania’s election results.

Perry condemned “any violence and criminal acts taking place” after the attack on the U.S. Capitol, but he supported the president’s claims before and after the insurrection. The congressman then attended Biden’s inauguration and released a statement afterward saying he would look for ways to work together.

--Appearing on ABC News’ “This Week” last Sunday, Kentucky Republican Sen. Rand Paul continued to spread election misinformation, where Paul refused to acknowledge that the 2020 president election was not stolen.

Paul argued that “we do need to look at election integrity” because polls have found most Republican voters believe the election was somehow stolen.  ABC News’ George Stephanopoulos said this was because many were “fed a big lie” by President Trump.

“This election was not stolen,” former New Jersey Gov. Chris Christie, a “This Week” panel member, said after Paul’s interview.  “There were no type of irregularities that would have changed the result in one state,” he said, adding that many in the party are being “lied to” by Trump and his allies.

“There are two sides to every story,” Paul said, promising to spend the next two years on election integrity and “going around state to state, fixing these problems.”

“There are not two sides to this story.  This has been looked at in every single state,” Stephanopoulos retorted.

--Controversial freshman Rep. Madison Cawthorn (R-N.C.) was so thoroughly schooled by CNN host Pamela Brown Saturday over his fact-free claims of election fraud that he did a full capitulation on the spot.

This is the same guy who urged Trump supporters in a speech late last year to “threaten” politicians and warn them: “I’m coming after you” while demanding that American voters’ choice for president be overturned.  Cawthorn also rallied the Trump supporters outside the Capitol against the election before they stormed the building Jan. 6.  He later revealed he was armed that day.

Brown pressed him on his reasons for contesting the presidential electoral votes in Congress. Cawthorn claimed that an official was “ballot harvesting” in the “parks” of Wisconsin.

Brown pointed out that no court had supported any of the baseless arguments about election fraud – including courts with judges appointed by Donald Trump.

“Indeed, I believe specifically – and this is the one that I debated on behalf of, on the House floor – in Wisconsin that was never heard because they dismissed it because of standing.  Now I don’t believe that is a concrete enough of a way to dismiss it,” Cawthorn incoherently attempted to clarify.

Pressed again to provide at least one specific example of election fraud, he responded, bizarrely: “Like I said, that’s not the reason I contested the election.”

Brown snapped: “So you wanted to throw out millions of votes without actually seeing any concrete evidence of fraud?”

Cawthorn then claimed he challenged the votes to “hold up the Constitution.”

Brown also nailed Cawthorn for saying he had issues with changes to election rules in other states when his own state of North Carolina made similar changes due to the pandemic.

“I’m not aware of the laws that were changed inside of North Carolina,” he explained, but he admitted the election was very “safe and secure” in his state, which voted for Trump.

Finally, Cawthorn said: “I think I would say the election was not fraudulent. The Constitution allowed for us to be able to push back as much as we could, and I did that to the…constitutional limits that I had at my disposal.  So now I would say that Joseph R. Biden is our president.”

What a pathetic punk.  The Paralympic world is also all over the guy because of his false claims about his success in various competitions.

--Editorial / USA TODAY

“If there were any lingering doubts about the undermining of science as the Covid-19 crisis erupted last year, Dr. Anthony Fauci has horror stories to prove otherwise. In a series of recent interviews, most notably with the New York Times, the nation’s leading infectious disease expert revealed how his informed advice for grappling with a growing pandemic was all but dismissed by a White House flirting with denialism.

“ ‘We would say things like, ‘This is an outbreak. Infectious diseases run their own course unless one does something to intervene,’’ Fauci recalled.  ‘(President Donald Trump) would get up and start talking about, ‘It’s going to go away, it’s magical, it’s going to disappear.’’

“A year and more than 424,000 dead Americans later, grim lessons have been learned about the costs of downplaying research-based measures such as mask wearing, social distancing and testing.  (Science is also riding to the rescue in the form of safe and effective vaccines.)

“The same kind of fact-based, science-based approach is also needed to tackle climate change, the other crisis threatening humanity.

“Levels of heat-trapping carbon dioxide in the atmosphere, produced in large part by the burning of fossil fuels, are higher than the Earth has seen in at least 800,000 years.  Last year tied 2016 as the hottest years on record within the hottest decade ever recorded.

“Mega-blazes across America last year incinerated towns and forests made tinder dry by prolonged drought.  Warming ocean waters helped transform storms like Hurricane Sally into slow-moving, water-deluging behemoths.

“New research this month reveals that freshwater frozen on Antarctica is melting into the oceans at a rate six times faster than 40 years ago, a clear sign of a warming planet and a harbinger of a precipitous sea rise in the decades to come.

“Although climate change is already a here-and-now problem, scientists say it’s still possible to slow the rise in global temperatures and mitigate the most catastrophic effects.  This will require reducing greenhouse gas emissions and even extracting gases from the skies, if science can find a way to do it at scale.

“President Joe Biden was elected on a platform that included prioritizing the fight against climate change.  Among his first actions were rejoining the Paris climate accord and rolling back Trump-era deregulation.  On Wednesday, he’s expected to announce a moratorium on new oil and gas leasing on federal land.

“In the weeks ahead, Biden will seek hundreds of billions of dollars in clean-energy investments, including projects such as installing vast numbers of electric vehicle charging stations.

“We continue to believe that a crucial step should be a refundable national carbon tax (about which Biden is silent) to make renewable sources and carbon-capture schemes more competitive with fossil fuels. And, in our view, Biden’s quick canceling of the Keystone XL pipeline is a largely symbolic move unlikely to keep oil from being extracted from Canadian oil sands.

“Nonetheless, with Biden’s election, the nation and Congress can begin the crucial and necessary debate over how best to attack this crisis.

“Denying that the crisis even exists – as Trump did with the coronavirus, and many still do with human-caused climate change – kills debate and ensures nothing is accomplished until it’s too late to avert calamity.”

--Chris Stirewalt / Los Angeles Times…Stirewalt having recently been fired by Fox News…

“In my career as a political analyst and, until my firing last week, an election forecaster on the decision desk at Fox News, I have always (wanted) to be first with the news to beat the competition and serve my audience.

“That’s why I was proud of our being first to project that Joe Biden would win Arizona, and very happy to defend that call in the face of a public backlash egged on by former President Trump.  Being right and beating the competition is no act of heroism; it’s just meeting the job description of the work I love.  But what happens now that there are almost no physical limits on the getting and giving of the news?

“Being first with the account or images of major events is a thing of scant value now.  What one outlet has, every outlet will have, usually within seconds.  Indeed, being first can prove to be a commercial disadvantage.

“Having worked in cable news for more than a decade after a wonderfully misspent youth in newspapers, I can tell you the result: a nation of news consumers both overfed and malnourished.  Americans gorge themselves daily on empty informational calories, indulging their sugar fixes of self-affirming half-truths and even outright lies.

“Can anyone really be surprised that the problem has gotten worse in the last few years?

“Bias in the coverage of politics and government is nothing new… What is (is) a marketplace that offers penalties for reporting the news but lots of rewards for indulging a consumer’s worst cravings.  Cable news producers work in a world of 15-minute increments in which their superiors can track even tiny changes in viewership.

“Ratings, combined with scads of market research, tell them what keeps viewers entranced and what makes them pick up their remotes. It’s no different from the pressure online outlets face to serve up items that will generate clicks and steer consumers ever deeper into the maw of ‘you might be interested in’ content.

“Whatever the platform, the competitive advantage belongs to those who can best habituate consumers, which in the stunted, data-obsessed thinking of our time, means avoiding at almost any cost impinging on the reality so painstakingly built around them.  As outlets have increasingly prioritized habituation over information, consumers have unsurprisingly become ever more sensitive to any interruption of their daily diet.

“The rebellion on the populist right against the results of the 2020 election was partly a cynical, knowing effort by political operators and their hype men in the media to steal an election or at least get rich trying.  But it was also the tragic consequence of the informational malnourishment so badly afflicting the nation.

“When I defended the call for Biden in the Arizona election, I became a target of murderous rage from consumers who were furious at not having their views confirmed.

“Having been cosseted by self-validating coverage for so long, many Americans now consider any news that might suggest that they are in error or that their side has been defeated as an attack on them personally.  The lie that Trump won the 2020 election wasn’t nearly as much aimed at the opposing party as it was at the news outlets that stated the obvious, incontrovertible fact.

“While there is still a lucrative market for a balanced offering of news and opinion at high-end outlets, much of the mainstream is increasingly bent toward flattery and fluff.  Most stories are morally complicated and don’t have white hats and black hats.  Defeats have many causes and victories are never complete.  Reporting these stories requires skill and dispassion.  But hearing them requires something of consumers, too: Enough humility to be open to learning something new.

“I remain confident that the current depredations of the digital revolution will pass, just as those of the telegraph, radio and broadcast television did.  Americans grew into those media and providers learned to meet the demands of a more sophisticated marketplace.  That’s the work that I’ve always aimed to do and hope to be part of for many years to come.

“What tugs at my mind after seeing a mob of enthusiastic ignoramuses sack the Capitol, though, is whether that sophistication will come quickly enough when outlets have the means to cater to every unhealthy craving of their consumers.”

--South Dakota Republican Gov. Kristi Noem refused to acknowledge Thursday that Joe Biden defeated Donald Trump in a free and fair election.

Noem, eyes firmly on 2024, said at a news conference: “I think that we deserve fair and transparent elections. I think there’s a lot of people who have doubts about that.”

Oh brother.

--We note the passing of the great Larry King, 87.  He had been hospitalized for some time with Covid-19.  His television production company said in a post on Twitter: “For 63 years and across the platforms of radio, television and digital media, Larry’s many thousands of interviews, awards, and global acclaim stand as a testament to his unique and lasting talent as a broadcaster.” 

CNN’s “Larry King Live”, which ran from 1985 to 2010, helped put the network on the map and his show was the prime attraction in those early years, with a mix of interviews, political discussions, current event debates and phone calls from viewers.  I know there were few nights after I got home from work where I didn’t at least flip it on to see who he had that evening.

King critics accused him of doing little pre-interview research and tossing softball questions to guests who were free to give unchallenged, self-promoting answers.

But King admitted he did little research so that he could learn along with his viewers, and as he would say, “My duty, as I see it, is I’m a conduit,” and that he never wanted to be perceived as a journalist.

And what he did was get his guests to talk, in a long-form format.  It worked.

--The world’s ice is melting faster than ever, according to a new global satellite survey that calculated the amount of ice lost from a generation of rising temperatures.

Between 1994 and 2017, the Earth lost 28 trillion metric tons of ice, the survey showed.  That is an amount roughly equivalent to a sheet of ice 100 meters thick covering the state of Michigan or the entire U.S. – and the meltwater from so much ice loss has raised the sea level just over an inch or so world-wide, the scientists said.

“It’s such a huge amount it’s hard to imagine it,” said Thomas Slater, a research fellow at the U.K.’s University of Leeds Centre for Polar Observation and Modelling and the lead author of a paper describing the new research.  “Ice plays a crucial role in regulating the global climate, and losses will increase the frequency of extreme weather events such as flooding, fires, storm  surges and heat waves.”

Previous research based on NASA satellite data showed that the land ice sheets in Antarctica and Greenland have been losing mass since 2002.

Adding up the loss from glaciers, ice shelves, polar ice caps and sea ice, Dr. Slater and his colleagues determined that the rate of global melting has accelerated 65% since the 1990s.

The ice loss has grown from 0.8 trillion tons a year to 1.3 trillion tons a year, driven by rising atmospheric and ocean temperatures resulting from greenhouse gas emissions, the scientists said.  Slightly more than half the ice loss occurred in the Northern Hemisphere.

--Uh oh…this year will mark the reemergence after 17 years of Brood X, or the Great Eastern Brood, of periodical cicadas.

“The end of May through June, it can get pretty loud – if you are in an area where they are numerous, there can be hundreds of thousands, or millions, of them,” said Howard Russell, an entomologist at Michigan State University.

One of the largest broods of periodical cicadas in the nation, Brood X will emerge this spring in 15 states: Delaware, Georgia, Illinois, Indiana, Kentucky, Maryland, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, as well as Washington, D.C.

The cicadas live only about a foot or two down, feeding on sap from tree roots.  It truly is one of nature’s great mysteries that they emerge in unison every 17 years.

But someone needs to tell their leader to wait at least another year…as in, the country really sucks, let alone social distancing restrictions in one form or another will still be in place.

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

Pray for the healthcare workers and first responders.

God bless America.

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Gold $1851
Oil $52.15

Returns for the week 1/25-1/29

Dow Jones  -3.3%  [29982]
S&P 500  -3.1%  [3714]
S&P MidCap  -5.0%
Russell 2000  -4.4%
Nasdaq  -3.5%  [13070]

Returns for the period 1/1/21-1/29/21

Dow Jones  -2.0%
S&P 500  -1.1%
S&P MidCap  +1.5%
Russell 2000  +5.0%
Nasdaq  +1.4%

Bulls 60.4
Bears 16.8

Hang in there.  Mask up…wash your hands.

Happy Birthday to my dear Aunt Rose…age 100, Saturday.

Good gawd!  I went to see her a final time about three years ago in Greensburg, Pa., and she’s still hanging in there. God love her.

Brian Trumbore

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