Week in Review

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Week in Review

05/21/2022

For the week 5/16-5/20

[Posted 8:30 PM ET, Friday]

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Edition 1,205

Two weeks ago, I said I totally agreed with the great Wall Street trader Paul Tudor Jones, who said on CNBC May 3, he “can’t imagine a worse environment for financial assets than we have now,” noting the Federal Reserve is in uncharted waters.

And then last week, I talked about rising prices “and what it all adds up to is soaring airfare and hotel room rates, which coupled with the high cost of gasoline will see some families, kids’ happiness be damned, drastically curtailing plans they had for that big trip.”

So this morning, Tom Costello had a report on NBC’s “Today” show talking about just that…families beginning to change their vacation plans.

Gasoline prices at the pump continue to set new records, now $4.59 for regular, $4.00+ in every state for the first time, over $6.00 in California, and diesel at $5.57, though at least diesel prices seem to be levelling off after a big spike that is killing retailers, for one.

And the rate on a 30-year fixed rate mortgage is between 5.25% and 5.35%, vs. 3.11% at the start of the year (Freddie Mac).

Last week I noted “Prices of all kinds are in the process of resetting at much higher levels.” There’s a lot of pain out there, and as reflected in the story on families rethinking vacation plans, consumer confidence is taking a hit.

Again, whether we actually go into recession, as classically defined, isn’t as important as the trend…declining growth, falling confidence, and increasing anger at the inability of our leaders to do anything about it…this last bit may not always be warranted, but that won’t matter to the masses.

President Biden and the Democrats, per all the polls, are setting up for a helluva beating come November.

And the administration suffered another defeat tonight as U.S. District Judge Robert Summerhays in Lafayette, Louisiana, ordered that the Title 42 restrictions on migrants seeking asylum on the southern border must remain in place while a lawsuit led by Arizona and Louisiana – and now joined by 22 other states – plays out in court.

The states have argued that the administration failed to adequately consider the effects that lifting the restrictions would have on public health and law enforcement.  We’ll see what happens over the coming days and weeks.

Lastly, Russia can claim its first major victory in Putin’s War with Ukraine, the strategic port city of Mariupol, where the last group of Ukrainian forces holed up in the massive Azovstal steel works surrendered today, 531, according to the Russians.  The International Committee of the Red Cross is desperately trying to ensure the now 2,200 Ukrainian prisoners from Azovstal are treated as prisoners of war under the Geneva Convention, but this will be the story over the coming weeks…no doubt more accounts of summary executions and people just disappearing into Russia.

I get into the destruction of the Donbas, eastern Ukraine, below, but it is sick beyond belief what Vlad the Impaler is doing.  Again, pure evil.

And there’s the growing food crisis I’ve been writing about for weeks.

Editorial / The Economist

“Mr. Putin must not use food as a weapon. Shortages are not the inevitable outcome of war. World leaders should see hunger as a global problem urgently requiring a global solution.

“Russia and Ukraine supply 28% of globally traded wheat, 29% of the barley, 15% of the maize and 75% of the sunflower oil. Russia and Ukraine contribute about half the cereals imported by Lebanon and Tunisia; for Libya and Egypt the figure is two-thirds.  Ukraine’s food exports provide the calories to feed 400 million people. The war is disrupting these supplies because Ukraine has mined its waters to deter an assault, and Russia is blockading the port of Odessa.

“Even before the invasion the World Food Program had warned that 2022 would be a terrible year.  China, the largest wheat producer, has said that, after rains delayed planting last year, this crop may be its worst ever.  Now, in addition to the extreme temperatures in India, the world’s second-largest producer, a lack of rain threatens to sap yields in other breadbaskets, from America’s wheat belt to the Beauce region of France.  The Horn of Africa is being ravaged by its worst drought in four decades. Welcome to the era of climate change.

“All this will have a grievous effect on the poor.  Households in emerging economies spend 25% of their budgets on food – and in sub-Saharan Africa as much as 40%.  In Egypt bread provides 30% of all calories.  In many importing countries, governments cannot afford subsidies to increase the help to the poor, especially if they also import energy – another market in turmoil.

“The crisis threatens to get worse.  Ukraine had already shipped much of last summer’s crop before the war.  Russia is still managing to sell its grain, despite added costs and risks for shippers.  However, those Ukrainian silos that are undamaged by the fighting are full of corn and barley.  Farmers have nowhere to store their next harvest, due to start in late June, which may therefore rot.  And they lack the fuel and labor to plant the one after that.  Russia, for its part, may lack some supplies of the seeds and pesticides it usually buys from the European Union….

“The response by worried politicians could make a bad situation worse. Since the war started, 23 countries from Kazakhstan to Kuwait have declared severe restrictions on food exports that cover 10% of globally traded calories.  More than one-fifth of all fertilizer exports are restricted.  If trade stops, famine will ensue.”

The solution? Break the Black Sea blockade, but that ain’t happenin’. At least not anytime soon, though as noted below, the U.S. is sending Ukraine anti-ship missiles for such a purpose.

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As the week unfolded in Ukraine….

--Over the weekend, NATO Secretary-General Jens Stoltenberg said Russia’s war is not going to plan and that its attempts to capture the eastern Donbas region had “stalled.”  Stoltenberg also said Ukraine could win the conflict.

Britain’s Ministry of Defense estimates that Russia has lost about a third of its ground combat force since the war began in February.

Speaking at a meeting of NATO foreign ministers, Stoltenberg said: “(Russia) failed to take Kyiv, they are pulling back from around Kharkiv, their major offensive in Donbas has stalled. Russia is not achieving its strategic objectives.”

And now Russia is facing an expanded NATO.

In an interview with The Mirror, Aleksey Zhuravlyov, the deputy chairman of the Russian parliament’s defense committee, said: “If Finland wants to join (NATO), then our goal is absolutely legitimate – to question the existence of this state.  This is logical. The Finns in general should be grateful to Russia for their statehood, for the fact that Finland exists as a country.”

“If the United States threatens our state, it’s good: here is the Sarmat [Satan-2] for you, and there will be nuclear ashes from you if you think that Russia should not exist,” he continued. “And Finland says that it is at one with the USA.  Well, get in line.”

Reminder: The Satan-2 is a ballistic missile capable of carrying 10 to 15 nuclear warheads.

Zhuravlyov added: “And if we strike (Western Europe) from Kaliningrad…the hypersonic’s reaching time is 200 seconds – so go ahead, guys.”

--The G7, in a statement released at the end of a three-day meeting on Germany’s Baltic Sea coast, called on China not to help Russia, including by undermining international sanctions or justifying Moscow’s actions in Ukraine.

“Russia’s war of aggression has generated one of the most severe food and energy crises in recent history which now threatens those most vulnerable across the globe,” the group said.

“We are determined to accelerate a coordinated multilateral response to preserve global food security and stand by our most vulnerable partners in this respect.”  The G7 asked Beijing to support the sovereignty and independence of Ukraine, and “not to assist Russia in its war of aggression.”

The group – which comprises Britain, Canada, France, Germany, Italy, Japan and the U.S. – also called on China “to desist from engaging in information manipulation, disinformation and other means to legitimize Russia’s war of aggression against Ukraine.”

German Chancellor Olaf Scholz said in an interview Saturday that he had not detected any change in Putin’s stance recently.

“Putin should slowly begin to understand that the only way out of this situation is through an agreement with Ukraine.”

--Saturday, Ukrainian President Zelensky met with a U.S. Senate delegation led by Minority Leader Mitch McConnell in Kyiv, calling the visit “a powerful signal of bipartisan support for Ukraine from the U.S. Congress and the American people,” his presidential office said.

--Monday…Ukraine said it had given up fighting at the Azovstal steel complex in Mariupol, allowing hundreds of its fighters who had been taking a last stand there to be moved to Russian-controlled territories, securing for Russia a hard-fought and costly victory to seize a swath of the country’s south.

President Zelensky praised the soldiers bravery and said, “We hope that we will be able to save the lives of our guys.”

--Russia on Monday said its forces shot down three Ukrainian fighter jets, one near Snake Island in the Black Sea and the others in the Mykolaiv and Kharkiv regions, while its missiles continued to pound targets in the east of the country.

Russia said that since the start of the war, its forces had destroyed 168 aircraft,125 helicopters, 889 unmanned aerial vehicles, 307 anti-aircraft missile systems, and 3,108 tanks and other armored combat vehicles. But none of these reports from the Russian defense ministry can be independently confirmed.

--Belarusian President Alexander Lukashenko on Monday urged other members of Russian-dominated military alliance to stand united and accused the West of hoping to prolong the conflict in Ukraine to try to weaken Russia as much as possible.  Lukashenko, speaking at a summit of the leaders of the Collective Security Treaty Organization (CSTO) in Moscow, said ‘hellish sanctions’ against his country and Russia could have been avoided if the group had spoken with one voice.  “Without a united front, the collective West will build up pressure on the post-Soviet space,” Lukashenko said in opening remarks, addressing Vladimir Putin and the leaders of Armenia, Kazakhstan, Kyrgyzstan and Tajikistan.

But Belarus was the only party to the summit that supported Russia!

--Sweden’s prime minister announced Monday that Sweden will join Finland in seeking NATO membership, after more than 200 years of military nonalignment. 

There was huge support in Sweden’s parliament, the Riksdagen, for joining the alliance.

--President Putin then, kind of out of nowhere, appeared to climb down from Russia’s objections to Sweden and Finland joining NATO, saying Moscow had no issues with them entering the U.S.-led military alliance.  Saturday, he had warned his Finnish counterpart Sauli Niinisto it would be a mistake for Helsinki to abandon its neutral status and join NATO, the Kremlin said.

Monday, though the Russian leader said Moscow would take action if NATO were to move more troops or hardware onto the territory of its new members – steps Finland and Sweden have both already ruled out – he said NATO’s expansion itself was not a threat.

“As far as expansion goes…Russia has no problems with these states – none. And so in this sense there is no immediate threat to Russia from an expansion to include these countries,” Putin said.

This was a major shift in rhetoric.  Last Thursday (May 12), Kremlin spokesman Peskov, asked if Finland joining NATO was a threat to Russia, said: “Definitely. NATO expansion does not make our continent more stable and secure.” 

But faced with the prospect that his own actions may cause the very expansion of NATO he had opposed, Putin appears to have decided not to object directly.  He did however say NATO enlargement was being led by the United States in an “aggressive” way to aggravate an already difficult global security situation, and that Russia would respond if he alliance moves weapons or troops forward.

“The expansion of military infrastructure into this territory would certainly provoke our response.  What that (response) will be – we will see what threats are created for us,” Putin said.  “Problems are being created for no reason at all. We shall react accordingly.”

--Turkish President Erdogan poured cold water on expectations that Turkish opposition to the enlargement plan could be easily resolved.

“These two countries lack a clear stance against terrorism” and “Sweden is a nesting ground for terrorist organizations,” Erdogan said at a press conference.  He also said that Turkey wouldn’t allow countries that impose “sanctions” on Turkey to join NATO, an apparent reference to restrictions on weapons sales imposed by several European nations.

At the heart of the matter is Erdogan’s deep resentment against NATO allies for what he sees as their refusal to take seriously Ankara’s concerns about Kurdish militants operating inside Turkey and across its borders in Syria and Iraq.

--Tuesday…

Russian Foreign Minister Lavrov said that Finland and Sweden joining NATO would probably make “not much difference” as the two countries had long participated in the alliance’s military drills.

“Finland and Sweden, as well as other neutral countries, have been participating in NATO military exercises for many years,” Lavrov said.  “NATO takes their territory into account when planning military advances to the East.  So in this sense there is probably not much difference.  Let’s see how their territory is used in practice in the North Atlantic alliance.”

--The Kremlin said on Tuesday that Russian fertilizer producers were trying to fulfill contracts despite Western sanctions against them, which posed a risk to global food security.

UN Secretary-General Antonio Guterres has proposed that Russia allow the shipment of some Ukrainian grain to alleviate a global food crisis in return for facilitation of Russian and Belarusian exports of potash fertilizer, currently restricted under sanctions.

Kremlin spokesperson Dmitry Peskov said Russia’s suppliers were interesting in fulfilling international contracts, but that “sanctions have been introduced, which are boomeranging all over the world.”

Aside from Russia and Ukraine combining for a third of global wheat supplies, Russia and Belarus account for more than 40% of global exports of the crop nutrient potash.

Guterres has said 36 countries count on Russia and Ukraine for more than half of their wheat imports, including some of the poorest and most vulnerable in the world.  A UN food agency recently said that nearly 25 million tons of grains were stuck in Ukraine with the main ports on the Black and Azov seas blockaded.

--Senate Republican leader Mitch McConnell urged the Biden administration to lead an effort to ensure broad, sustained international support for Ukraine and said Washington should remain a reliable supplier of advanced weaponry for the besieged country.

--Wednesday…

Russia said that a total of 959 Ukrainian fighters, including 80 wounded, had surrendered from the bunkers and tunnels below the Azovstal steelworks since Monday.

The defense ministry said 694 Ukrainian fighters – including members of the Azov regiment – had surrendered in the past 24 hours.

Russia also claimed it had destroyed Ukrainian Su-24 aircraft, Ukrainian arsenals and S-300 anti-aircraft missile systems, none of which was independently confirmed.

Donetsk separatist leader Denis Pushilin said that a court would decide the fate of the Ukrainian fighters who had surrendered.

After capturing the plant, Russian forces are reportedly seeking to demolish it, according to Pravda.

“The combat mission in Mariupol has ended,” said Pentagon Press Secretary John Kirby on Tuesday.

The UK Defense Ministry summarized the impact of the battle of Mariupol in an intelligence briefing Wednesday. “(Staunch Ukrainian resistance)…frustrated (Russia’s) early attempts to capture a key city and inflicted costly personnel losses amongst Russian forces.”

The battle for the strategic port city killed thousands.

--Ukraine’s military reported heavy artillery barrages and airstrikes along all its fronts on Wednesday morning, as Ukraine’s own thrust north of Kharkiv was being restrained by Russian forces.

--The Kremlin said Wednesday Ukraine was showing no willingness to continue peace talks, but officials in Kyiv blamed Russia for the lack of progress Russia.  The last known face-to-face peace negotiations were on March 29.

Officials said contacts had continued remotely but both sides said on Tuesday that the talks had stagnated.

“Negotiations are not progressing and we note the complete unwillingness of Ukrainian negotiators to continue this process,” Kremlin spokesman Peskov said Wednesday.

Russian Deputy Foreign Minister Rudenko said Tuesday that Russia and Ukraine were not holding talks “in any form,” as quoted by Interfax news agency.

Ukrainian interior ministry adviser Anton Gerashchenko blamed Vladimir Putin for the situation.  “Putin is not ready to hold talks,” he said on Telegram.  “The only chance (for peace) is the destruction of the Russian occupiers.  As for when they will be ready to accept defeat, I think it’s a matter of months.”

--Finland and Sweden formally submitted their bids for NATO membership on Wednesday morning, casting aside decades of strategic neutrality.

Finnish and Swedish envoys delivered letters of interest in joining NATO to Sec. Gen. Jens Stoltenberg at the alliance’s headquarters in Brussels. Stoltenberg said NATO would seek to fast-track both nations.

“Every nation has the right to choose its own path,” Stoltenberg said Wednesday. “You have both made your choice, after thorough democratic processes…Allies will now consider the next steps on your path to NATO,” Stoltenberg said, alongside the envoys.

“You are our closest partners,” he added.  “Your membership in NATO will increase our shared security.”

Vladimir Putin described NATO’s eastward expansion as one reason he felt compelled to invade Ukraine, hoping to fracture the alliance, and instead he strengthened it.

Now Putin is saying the accession of Finland and Sweden does not create a “direct threat” but that Russia’s response will depend on how NATO expands militarily in those nations.

Finland’s President Sauli Niinisto: “We believed that nonalignment would give us stability,” but Russia’s invasion “changed everything.”

Finland’s parliament endorsed the proposal to join NATO in a vote of 188 to 8.

In Sweden, the governing Social Democratic Party cast aside decades of misgivings and announced its decision to support the bid for accession to NATO.  Fifty-seven percent of the Swedish public now supports joining the alliance, up from 48 percent at the end of April.

Sweden’s prime minister, Magdalena Andersson, said that her nation was closely bound with Finland.  “This is a strong and clear signal that we stand united,” she said.

But all NATO members must approve, which leads back to Turkey.  President Erdogan has sharply criticized Sweden in particular as a haven for Kurdish separatists he regards as terrorists.

Erdogan is also upset that Sweden and Finland joined other European countries in sanctioning Turkish defense firms after Erdogan’s military carried out an offensive inside Syria in 2019.

Three days ago, the message from Ankara was that Turkey isn’t “closing the door” on Sweden and Finland’s NATO bids.  But then Erdogan said, “We will not say ‘yes’ to those who apply sanctions to Turkey to join security organization NATO.”

Erdogan seems to want nearly three dozen Kurds to be repatriated from Sweden and Finland. “So you won’t give us back terrorists but you ask for NATO membership?” Erdogan said on state TV Wednesday. “NATO is an entity for security, an organization for security.  Therefore, we cannot say ‘yes’ to this security organization being deprived of security,” he said.

--Russia’s foreign ministry said on Wednesday it was closing the Moscow bureau of Canada’s CBC and withdrawing visas and accreditation from the public broadcaster’s journalists after Ottawa banned Russian state TV station Russia Today (RT).

Canada on Tuesday introduced a bill in the Senate that will ban Vladimir Putin and around 1,000 members of his government and military from entering the country as it continues to ratchet up sanctions.

In March, Putin signed a law imposing a jail term of up to 15 years for spreading intentionally “fake” news about the military, prompting some Western media organizations to pull their reporters out of Russia.

--Thursday…

President Biden met the leaders of Sweden and Finland at the White House to advance their applications to join the NATO alliance, as Turkey repeated its opposition.

Biden stood with Swedish Prime Minister Magdalena Andersson and Finnish President Sauli Niinisto, cheering the “momentous” day and giving his strong support for the two “great democracies” to “join the strongest most powerful defensive alliance in the history of the world.”

President Erdogan said in a video posted on his Twitter account Thursday that Turkey had told allies it will reject Finland and Sweden’s membership.

National security adviser Jake Sullivan told reporters Wednesday he was confident Turkey’s concerns can be addressed, and Biden told reporters “I think we’re going to be okay.”

Niinisto said Finland was open to discussing Turkey’s concerns, adding that the country was ready to commit to Ankara’s security.

NATO Secretary-General Stoltenberg said he was “confident that we will come to a quick decision to welcome both Sweden and Finland to join the NATO family” despite Turkey’s opposition.

--President Zelensky, in a late Thursday address, said Ukraine’s industrial Donbas region, the focus of recent Russian offensives, has been destroyed.

Since turning away from Ukraine’s capital, Russia is using massed artillery and armor to try to capture more territory in the Donbas, comprised of Donetsk and Luhansk areas, which Moscow claims on behalf of separatists.

“The occupiers are trying to exert even more pressure. It is hell there – and that is not an exaggeration,” Zelensky said.

“[There are] constant strikes on the Odesa (Odessa) region, on the cities of central Ukraine.  The Donbas is completely destroyed,” he said.

Meanwhile, the number of Ukrainian soldiers who surrendered so far at the Azovstal steelworks in Mariupol was over 1,700 as of Thursday.*  Ukrainian officials are seeking a prisoner swap.  The International Committee of the Red Cross said it has registered hundreds of prisoners from the plant now held by Russia.

The leader of Russian-backed separatists in control of the area, Denis Pushilin, said nearly half of the fighters remained inside Azovstal, where underground bunkers and tunnels had protected them from weeks of Russian bombardment.  Pushilin insisted the prisoners who were sent to a POW camp were being treated well, but Russia denies it agreed to a prisoner swap.

*As alluded to above, potentially add 500+ to this total with Russia’s announcement today, Friday, of the surrender of the final soldiers from Mariupol.

--The Senate overwhelmingly approved a $40 billion infusion of military and economic aid for Ukraine and its allies on Thursday as both parties rallied behind the administration’s policy.

The 86-11 vote gave final congressional approval to the package, with every Democrat and all but 11 Republicans – many of them supporters of former President Trump’s isolationist agenda – backing the measure.

Last week the House passed the Ukraine bill 368-57, with all of those opposed Republicans.  It’s pathetic 68 Republicans in the two chambers voted against.  That’s not my Republican party.

Thankfully, Senate Minority Leader McConnell was a strong backer.  He has said Ukraine’s defeat would jeopardize America’s European trading partners, increase U.S. security costs there and embolden autocrats in China and elsewhere to grab territory in their regions.

“The most expensive and painful thing America could possibly do in the long run would be to stop investing in sovereignty, stability and deterrence before it’s too late,” McConnell said.

The G7 nations also agreed to provide Ukraine with $18.4 billion.

Treasury Secretary Janet Yellen told reporters: “The message was, ‘We stand behind Ukraine. We’re going to pull together with the resources that they need to get through this.’”

The White House is working to put advanced anti-ship missiles in the hands of Ukrainian fighters to help defeat Russia’s naval blockade.

--Secretary of State Antony Blinken accused Russia of using food as a weapon by holding “hostage” supplies for not just Ukrainians, but also millions around the world.

“The Russian government seems to think that using food as a weapon will help accomplish what its invasion has not – to break the spirit of the Ukrainian people.  The food supply for millions of Ukrainians and millions more around the world has quite literally been held hostage by the Russian military.”

Global prices for grains, cooking oil, fuel and fertilizer continue to soar.

--Friday…

President Putin said that the number of cyberattacks on Russia by foreign “state structures” had increased several times over and that Russia must bolster its cyber defenses by reducing the use of foreign software and hardware.  The websites of many state-owned companies and news websites have suffered sporadic hacking attempts since the invasion of Ukraine was launched, often to show information that is at odds with Moscow’s official line on the war.

--Russia’s Gazprom informed Finland today that it will halt flows of natural gas from Saturday morning.  Finland state-owned gas wholesaler Gasum has refused to pay Gazprom in rubles as Russia has requested European countries to do.

Gasum said it was prepared for the situation and there will be no disruptions in the transmission network.

--In an interview with the Wall Street Journal’s Yaroslav Trofimov, Ukraine’s military intelligence chief said the country would keep fighting until it evicts Russian forces from all of its territory – including Crimea and other areas effectively seized by Moscow in 2014.

“I don’t know any borders except the borders of 1991,” Maj. Gen. Kyrylo Budanov said, referring to the year of Ukraine’s independence from the Soviet Union.  “Who can force Ukraine to freeze the conflict?  This is a war of all Ukrainians, and if someone in the world thinks that they can dictate to Ukraine the conditions under which it can or cannot defend itself, then they are seriously mistaken.”

Budanov said that to speed its counteroffensive Ukraine urgently needs medium- and long-range missile systems, large-caliber artillery and strike aircraft to offset Russian advantages in manpower and equipment.

“We have already begun an offensive in certain points, but a large-scale offensive without these weapons will be very difficult,” he said.

The general said he believes Russia has the wherewithal to keep fighting at least until the end of the year.  But he said the war was already a strategic defeat for Russia and its leader, Vlad the Impaler.

“Putin is in an absolute dead end.  He cannot stop the war and he cannot win it.  He cannot win for objective reasons.  And to stop it, he must acknowledge that Russia is not at all the kind of strong and great state that he wanted to portray,” Gen. Budanov said.

Putin, he said, faces a threat from within Russia once his inability to conquer Ukraine becomes obvious: “If they finally realize that the czar is not as great and mighty as he pretends to be, it’s a step toward the destruction of the statehood of today’s Russia.”

--There have been periodic reports on Putin’s health and I have not been writing this up, because to me, reports from a Telegram ‘channel,’ like the one that said he had undergone stomach surgery of some kind, which was then covered up using “deepfake” technology to simulate his presence in videos of a scheduled meeting of Russia’s security council, simply haven’t been confirmed.  There is propaganda on both sides of this war.

The Telegram channel “General SVR,” claims there is prerecorded footage of Putin and to cover up future surgeries, there were plans to use body doubles if need be.

Some commentary….

Editorial / Washington Post

“There seems no end to the bloodshed in Ukraine, and yet the tide of war is clearly shifting against the aggressor, Russia.  May was expected to be the month in which President Vladimir Putin’s troops, having failed to take Kyiv, regrouped in southern and eastern Ukraine for a stronger offensive that would push westward.  May is more than half over now, however, and it is clear that this Russian Plan B is fizzling, too.  In the face of stiff Ukrainian resistance – bolstered by timely and massive shipments of Western arms – Russia has retreated from Kharkiv, the second-largest city in Ukraine, reportedly, in some areas, all the way back to the international border Mr. Putin sought to erase. Russia has ‘likely abandoned the objective of completing a large-scale encirclement of Ukrainian units’ in eastern Ukraine, the Washington-based Institute for the Study of War reported Sunday. It now appears to be aiming to take, at most, the entirety of a single Ukrainian region, Luhansk.

“And even that might be beyond the capability of Russia’s depleted, poorly led forces.  Quite the contrary: The more likely next game changer in this war would be a widening Ukrainian counteroffensive that brought still more of the Russian-held south and east of Ukraine back under the control of its legitimate government.  Certainly, that is the result that would do the most to compound the strategic defeat of Mr. Putin, and that Ukraine’s supporters in the United States, Europe and elsewhere should therefore be pursuing in unison.

“Now is not the time, therefore, to go for a negotiated case-fire between Ukraine and Russia, as France, Germany and Italy have proposed in recent days. Their desire to shorten this destructive war – and thus limit the damage both to Ukraine and to their own hard-pressed economies – is understandable.  Their promises not to impose terms on Kyiv are undoubtedly well intentioned. Still, the risks of relaxing the pressure on Mr. Putin before he is thoroughly beaten, and maybe not even then, are too high.

“That much became clear in the May 10 congressional testimony of Avril Haines, the director of national intelligence, who told lawmakers that U.S. agencies ‘do not see a viable negotiating path forward, at least in the short term.’  The main reason for this is that Mr. Putin remains bent on conquest, regardless of near-term military losses. He ‘is preparing for a prolonged conflict,’ Ms. Haines said, ‘during which he still intends to achieve goals beyond the Donbas,’ as the eastern region currently at the center of the fighting is known.  More likely than a Russian turn to good-faith bargaining, Ms. Haines warned, is a ‘turn to more drastic means – including imposing martial law, reorienting industrial production, or potentially escalatory military actions,’ the latter phrase being an especially ominous one, given Russia’s nuclear and chemical capabilities.

“Mr. Putin ‘is probably counting on U.S. and [European Union] resolve to weaken as food shortages, inflation, and energy prices get worse,’ Ms. Haines said.  NATO leaders must give Mr. Putin no reason to believe that such a strategy will work.”

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Biden Agenda

--President Biden began a five-day Asia trip with a visit to a Samsung semiconductor plant Friday, a stop meant to demonstrate the growing cooperation between the U.S. and South Korea on technology and other issues.  Particularly when it comes to semiconductors and batteries for electric cars, the intent is to expand production of key products and strengthen supply chains to be less reliant on China.  The plant Biden toured is similar to one Samsung is building in Texas.

New South Korean President Yoon Suk-yeol promised during his campaign to deepen the nation’s alliance with the United States, after his predecessor, Moon Jae-in, had taken a more cautious approach to the relationship with Washington, not wanting to provoke China.

Yoon wants to play a more active role in the Indo-Pacific, where the Biden administration is working to bolster an alliance among democratic countries to counter China’s growing military might.

Separately, and embarrassingly, two U.S. Secret Service agents who were working on President Biden’s trip to Asia were sent home after one was accused of drunkenly assaulting a South Korean the day before the president arrived in Seoul, officials said.  One of the agents was reportedly arrested after getting into a fight over a taxi, though it’s unclear if the agent was actually detained.  Regardless, they are in serious trouble back home.

--A new AP/NORC poll shows only about 2 in 10 adults say the U.S. is heading in the right direction or the economy is good, both down from about 3 in 10 a month earlier. Those drops were concentrated among Democrats, with just 33% within the president’s party saying the country is headed in the right direction, down from 49% in April.

Of particular concern for Biden ahead of the midterm elections, his approval among Democrats stands at 73%, a substantial drop since earlier in his presidency.  In AP/NORC polls conducted in 2021, Biden’s approval rating among Democrats never dropped below 82%.

Overall, two-thirds of Americans disapprove of Biden’s handling of the economy.

Just 18% of Americans say Biden’s policies have done more to help than hurt the economy, down slightly from 24% in March.

Only 38% back Biden on immigration.

--Abbott Laboratories and the Food and Drug Administration are on track to reopen the company’s critical baby formula manufacturing plant in Sturgis, Mich., within one or two weeks, FDA Commissioner Robert Califf said on Thursday.  Abbott is the biggest supplier of powder infant formula including Similac.

Califf caught major heat, and deservedly so, from a House panel on Thursday for not identifying the supply crisis sooner, especially after Abbott closed the plant in February after reports of serious bacterial infections in four infants.

President Biden invoked the Defense Production Act on Wednesday to help manufacturers obtain ingredients to ramp up supply and ordered the Pentagon to fly in shipments from overeas.

The FDA said on Monday it would allow baby formula imports from foreign makers that do not usually sell their products in the United States to help ease the shortage.

Califf said formula would only be imported after the FDA reviews it and determines it is safe.

--The Department of Homeland Security paused its new disinformation governance board Wednesday and its board’s director will resign, following weeks of criticism from Republicans and questions about whether the board would impinge on free speech rights.

While the board was not formally shuttered, it will be reviewed by members of a DHS advisory council that’s expected to make recommendations in 75 days. Nina Jankowicz, picked to lead the board, wrote in her resignation letter, obtained by the Associated Press, that the board’s future was “uncertain.”

The board was hampered from the start by questions about its purpose, with the phrase “Ministry of Truth” – a reference to George Orwell’s “1984” – repeatedly attached to it on social media.

Conservative pundits and right-leaning media had a field day as they focused on Jankowicz, pointing to some of her own social media posts.

Federal and state agencies treat disinformation as a national security threat (see Russia), and DHS has several ongoing programs to counter disinformation, including the U.S. Cybersecurity and Infrastructure Security Agency’s efforts to debunk claims of election fraud.

Ironically, Amazon.com founder Jeff Bezos just days earlier accused President Biden of “misdirection” on Twitter in response to Biden’s tweet saying inflation could be tamed by making wealthy corporations “pay their fair share.”

Bezos tweeted: “The newly created Disinformation Board should review this tweet, or maybe they need to form a new Non Sequitur Board instead,” referring to the above.  “Raising corp taxes is fine to discuss.  Taming inflation is critical to discuss.  Mushing them together is just misdirection.”

Wall Street and the Economy

In a Tuesday interview with the Wall Street Journal, Fed Chair Jerome Powell said the Fed will continue to raise interest rates until it is certain inflation is abating, warning “there could be some pain involved” as the Fed makes its moves.

“What we need to see is inflation coming down in a clear and convincing way,” Powell said.  “And we’re going to keep pushing until we see that.”

“What we need to see,” he added, “is clear and convincing evidence that inflation pressures are abating and inflation is coming down.  And if we don’t see that, then we’ll have to consider moving more aggressively. It we do see that, then we can consider moving to a slower pace.”

Powell said the Fed “wouldn’t hesitate” to push its benchmark rate to a point that would slow the economy if needed.

Speaking in Germany, ahead of a meeting of leaders of the G7, Treasury Secretary Janet Yellen became the latest leader to warn of turbulence for the global economy.

“Certainly the economic outlook globally is challenging and uncertain,” Yellen said.  “Higher food and energy prices are having stagflationary effects, namely, depressing output and spending and raising inflation all around the world.”

Such an environment rippled through Wall Street the day Yellen made those comments, Wednesday, after large retailers reported disappointing earnings due in part to their own soaring costs.  The Dow Jones tanked 1164 points.

Yellen indicated that inflation, specifically the rising cost of food and energy, is becoming a greater long-term concern and is going to be a dominant theme among leaders around the world.

Wall Street has been lowering its U.S. growth forecasts rapidly.  Goldman Sachs is the latest to do so…1.25% for GDP in the fourth quarter compared with the same period in 2021.  And an expansion of just 1.5% for 2023.

Domestic demand will largely drive the U.S. slowdown, Goldman’s chief economist, Jan Hatzius, said, “Higher interest rates, lower stock prices, somewhat wider credit spreads and to some degree” a stronger dollar will all impinge on demand.

Goldman still sees the Fed raising its benchmark rate to a 3% to 3.25% range from its current 0.75% to 1.00%.

“The risk case is that they have to do more and that then also raises the risk of a hard landing,” Hatzius said.

April housing starts fell by 0.2% to a 1.724 million annual rate in April from a downward revised 1.728 million in March, with a sharp decline in single-family starts offset by an increase in multi-family starts, continuing that trend.

Existing home sales for April dropped more than expected, down 2.4% from March to a seasonally adjusted annual rate of 5.61 million, the third consecutive month of declines, according to the National Association of Realtors. Annually, home sales were down 5.9%.

“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” NAR Chief Economist Lawrence Yun said.

The median home price last month rose almost 15% year-over-year to a record $391,200. NAR said 88% of homes sold in April were on the market for less than a month.

Unsold inventory reflects a 2.2-month supply, up from 1.9 months in March.

Mortgage application volume fell sharply for the first time in three weeks as rates remained close to the highest levels since 2009, the Mortgage Bankers Association said Wednesday.

Separately, April retail sales were a little better than expected, up 0.9%, and 0.6% ex-autos. April industrial production also exceeded forecasts, 1.1%.

The Atlanta Fed’s GDPNow barometer for second-quarter growth is at 2.4%.

Europe and Asia

April inflation in the eurozone was stable at 7.4% compared to March, per a report from Eurostat.  A year earlier the rate was 1.6%.  Ex-food and energy, the rate was 3.9%, up from 0.8% April 2021.  Not good.

Germany 7.8%, France 5.4%, Italy 6.3%, Spain 8.3%, Ireland 7.3%, Netherlands 11.2% (yikes).

Consumer prices in the UK rose at a 9% rate in April, per the Office for National Statistics, the highest annual rate since 1982. British households are getting killed, especially in energy prices, and the Bank of England this month forecast inflation would top 10% later this year.

Eurostat also released a flash report on GDP for the euro area in the first quarter, 0.3% compared with the previous quarter.  Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 5.1%.

Germany 3.7% (2022Q1 vs. 2021Q1), France 5.3%, Italy 5.8%, Spain 6.4%, Netherlands 6.8%.

Brexit: British foreign secretary Liz Truss said on Tuesday she intends to introduce legislation in the coming weeks to make changes to the Northern Ireland protocol, which was part of the Brexit divorce deal.

“I am announcing our intention to introduce legislation in the coming weeks to make changes to the protocol,” she told parliament.

Truss said Britain’s preference remained a negotiated solution with the European Union, and she said a legislative solution was not about scrapping the Northern Ireland protocol and remained consistent with Britain’s obligations in international law. 

The legislation, she said, would involve a dual regulatory regime designed to ensure goods moving to Northern Ireland and staying there would be free of unnecessary administrative burden.

“Businesses will be able to choose between meeting UK or EU standards in a new dual regulatory regime,” she said.

“It will continue to ensure there is no hard border on the island of Ireland.”

I’m so tired of this issue, but it is important.  I just keep going back to the fact that the freakin’ administration of Boris Johnson negotiated the protocol that Britain is now threatening to break.   It’s nuts.

Turning to Asia…China reported some key economic data for April and none of it was good.

Industrial production fell 2.9% year-over-year, with retail sales down a whopping 11.1% Y/Y.  Fixed asset investment (big-ticket projects like airports, railroads and highways) was up 6.8% for the first four months of the year, but this was down from March’s pace.

April new-home prices, as measured by the 70-city index, rose 0.7% year-on-year, the weakest rise since Oct. 2015. 

The unemployment rate was 6.1%, up from 5.8% the prior month, all of the above courtesy of the National Bureau of Statistics and indicative of the severe impact the Covid lockdowns are having.

[Taiwan’s April export orders – a bellwether for global technology demand – fell for the first time in 25 months in April, -5.5% from a year earlier, taking a larger-than-expected hit from Covid lockdowns in China and broader global supply chain disruptions.  April orders from China fell 16.9%, compared with an increase of 9.1% in the previous month.]

In Japan…a preliminary reading on first-quarter GDP was at -1.0% annualized, owing to the Omicron wave.  March industrial production fell 1.7% year-on-year.

April exports were up 12.5% Y/Y, and imports rose 28.2%, but both of these were worse than expected.

On the inflation front, April consumer prices rose 0.8%, but the core was 2.1%, the highest since March 2015 and above the Bank of Japan’s 2% target.

However, Japan measures its core rate differently than the U.S. does, taking out just food, not energy.  If you measure the CPI ex-both, it was 0.8% Y/Y.

Meanwhile, April producer prices soared a record 10% year-over-year.

Street Bytes

--Yes, the action in the stock market has been brutal.  As I alluded to, historically so.  The Dow Jones fell an eighth consecutive week, its longest such streak since 1932*, while the S&P 500 and Nasdaq have now fallen seven straight weeks, which the two haven’t done since Feb./Mar. of 2001, at the height of the crash from the dot-com bubble.

*Some stories are saying 1923, but 1932 was the year the Dow Jones bottomed at 41.22!

For this week, the Dow fell 2.9% to 31261, while the S&P flirted with an official bear market, intraday Friday, before a late rally kept it from a 20% loss off its high, still down 3.1%, and Nasdaq lost 3.8% on the week.

Nasdaq’s seven-week loss is a sickening 20.4%.

This week the consumer-related stocks were the big losers, with Walmart and Target down 19% and 29%, respectively.  Disappointing earnings and sales guidance, the impacts of inflation on profit margins, ongoing supply chain disruptions…not a good recipe.  And the Fed will be tightening for a while…which doesn’t help consumer confidence.

--U.S. Treasury Yields

6-mo. 1.46%  2-yr. 2.58%  10-yr. 2.78%  30-yr. 2.99%

Lowest weekly closing yield on the 10-year in six weeks as some market participants believe the economy could slow so quickly, the Fed won’t be hiking rates as much as feared.

--Oil prices rallied as a planned European Union ban on Russian oil balanced demand concerns over slowing economic growth, including in China.

Total crude inventories unexpectedly fell by 8.4 million barrels in the week ended May 13, including 5 million barrels from the Strategic Petroleum Reserve, the Energy Information Administration said.  Analysts were expecting an increase of 1.38 million rather than the commercial 3.4 million drawdown.

Total inventories are 14% below the five-year average for this time of year, the government’s data showed.

--Saudi Aramco posted its highest profit since its record stock-market listing, after oil prices surged in the wake of Russia’s invasion of Ukraine.

Aramco, which last week surpassed Apple Inc. to become the world’s most valuable company, followed Big Oil rivals such as Shell Plc and BP Plc in reporting bumper earnings for the first quarter.  Like them, the Saudi Arabian firm’s results were boosted by crude’s jump to $110 a barrel after Moscow’s attack in late February.

State-controlled Aramco made net income of $39.5 billion, up 82% from a year earlier, when global energy demand was still severely suppressed by the pandemic.

The kingdom’s crude output averaged 10.2 million barrels a day between January and March, up 20% year-on-year.

Aramco is spending billions of dollars to increase its maximum sustainable crude production to 13 million barrels a day from 12 million by 2027.  It’s also aiming to raise natural gas output more than 50% by 2030.

--Target missed its first-quarter adjusted earnings forecast by a huge margin, $2.19 vs. an estimate of $3.06, and down from last year’s $3.69.  CEO Brian Cornell said, “Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.” 

Target warned of a bigger margin hit on Wednesday due to rising fuel and freight costs, in a clear sign that deep-pocketed U.S. retailers are no longer immune to surging inflation.

“We were less profitable than we expected to be or intend to be over time,” Cornell said.  “These (costs) continue to grow almost on a daily basis and there is no sign right now…that it is going to abate over time.”

Target said rising fuel and freight expenses will add nearly $1 billion more than originally expected in annual cost.  Its quarterly gross margin dipped to 25.7% from 30%.

Many companies have dealt with inflation by raising product prices, but Target has so far looked to undercut peers by doing that only for some products.

The shares then fell a staggering 25%, for Target’s worst day since Oct. 1987.

Profits for major retailers have come under pressure from both surging inflation and stubborn clogs in the global supply chain.

Target’s net income fell roughly 52% from a year ago to $1.01 billion, down from last year’s profit of $2.09 billion.

Revenue rose 4% to $24.83 billion, a little better than expected.  Sales at Target stores open at least a year increased 3.4% during the quarter.  It posted an 18% increase in the same quarter last year.  Online sales increased 3.2%, following growth of 50.2%.  More than 95% of Target’s first quarter sales were fulfilled by its stores.

Sales growth was driven by items that shoppers frequently purchase like food and beverages, beauty and household essentials.

During a media call with reporters on Tuesday, executives with the Minneapolis company said that customers remain financially healthy, but they are switching up their buying as they become more social.  For example, instead of buying TVs, they’re buying luggage as they travel more.

--Target’s earnings miss came a day after Walmart cut its fiscal 2023 profit forecast and missed Wall Street expectations, with its shares falling 11% Tuesday and another 7% Wednesday, Tuesday’s performance also the worst since Oct. 1987.

Walmart reported stronger sales for the first quarter, but its profits took a beating as the nation’s largest retailer grappled with surging inflation on food and fuel and higher costs from a snarled global supply chain.

Walmart on Tuesday reported earnings of $2.05 billion, or $1.30 per share, adjusted, but that was far short of the $1.48 the Street expected.  It also fell below last year’s earnings of $2.73 billion.  Sales rose 2.4% to $141.57 billion, which was a little better than analysts had projected.

Same-store sales rose 3%, below the fourth quarter pace of 5.6%, and the 9.2% jump in the third quarter.  Online sales rose 1% in the fiscal first quarter as growth has slowed from the pandemic-infused sprees of early 2021.  That’s down from 8% in the third quarter.

During periods of high inflation, Walmart typically benefits as Americans trade down to lower-priced stores.

But retailers are also facing inflationary pressure with labor and shipping as supply chain backups hit companies worldwide, and it doesn’t look like the situation is getting dramatically better given Covid-19-lockdowns in China.  Walmart is particularly sensitive to rising food prices because it’s the largest seller in the U.S.

The company estimates fiscal 2023 earnings per share to fall about 1%, compared to its previous forecast of a mid-single digit increase.  Walmart also tempered its second-quarter expectations, with earnings per share now expected to be flat to up slightly, compared to a low to mid-single digit increase previously.

--Home Depot’s first-quarter sales improved despite a slow spring start and the home improvement chain raised its full-year guidance.

Revenue increased about 4% to $38.91 billion, easily beating Wall Street expectations, and up from $37.5 billion a year earlier.

Sales at stores open at least a year climbed 2.2% globally, and 1.7% in the U.S.

Home improvement stores have remained busy during the pandemic as people working from home took on new projects and now they’re in their traditional busy spring season as home owners head out for flowers, vegetables and other gardening and landscaping goods.

HD earned $4.23 billion, or $4.09 per share, for the quarter, topping analyst projections.  A year earlier, the company earned $4.1 billion, or $3.86 per share.

Home Depot now foresees earnings growth to be mid-single digits, with comp store growth of 3%.  The company previously predicted fiscal 2022 sales growth and same-store growth to be slightly positive.

--Home Depot rival Lowe’s Companies reported fiscal Q1 earnings of $3.51 per share, up from $3.21 a year earlier and well above forecasts.

Sales for the quarter ended April 29 totaled $23.66 billion, down from $24.42 billion a year earlier, but basically in line with expectations.

Comp-store sales fell 4%, vs. an expected 1% drop.

For full-year 2022, Lowe’s maintained its past guidance of EPS of $13.10 to $13.60 on sales of $97 billion to $99 billion.

Regarding the same-store sales miss, Lowe’s blamed the cold and wet weather during April that hit demand for seasonal goods.  Seasonal goods account for 35% of Lowe’s first quarter.

Lowe’s is also dependent on do-it-yourself (DIY) customers for sales. The return of people to offices is affecting demand from DIY customers.

“Because 75% of our customer base is DIY, our Q1 sales were disproportionately impacted by the cooler spring temperatures,” said CEO Marvin Ellison in a statement.

--Kohl’s Corp. cut its full-year earnings forecast on Thursday, joining many of the other big retailers in warning that four-decades high inflation is starting to erode profit margins and consumer spending power.

Kohl’s shares fell 11% Wednesday, in sympathy with Target and Walmart, but held their own Thursday, while the other two continued to swoon, partly on the belief Kohl’s is a takeover target.  [The board requested that fully-financed bids for a potential acquisition be submitted in the coming weeks.  Non-binding proposals have been received, pending further due diligence.]

The department store chain said first-quarter sales started off strong, but demand “considerably weakened” as consumers started to experience inflationary pressure in April, Kohl’s CEO Michelle Gass said.

The company’s net sales fell 5.2% to $3.47 billion in the quarter ending April 30.  On an adjusted basis, the company earned 11 cents per share, missing estimates of 70 cents.

For fiscal 2022, Kohl’s lowered its adjusted earnings guidance to a range of $6.45 to $6.85 per share, compared with a previous outlook of $7.00 to $7.50.  Full year net is expected to rise 1%, compared with a prior forecast of 2% to 3%.

--The Wall Street Journal reported on Tuesday that the flight controls of the China Eastern Airlines flight 5735 on March 21 had pushed the plane into a dive, citing people familiar with U.S. officials’ early assessment of the cause of the crash of the Boeing 737-800 that killed all 123 passengers and nine crew.

The plane dived from a cruising altitude of 29,199 feet and disintegrated after ramming into a hill.

The aviation disaster, the deadliest in China since 1994, shocked the country, which has one of the safest flying records.

Investigators at the U.S. National Transport Safety Board (NTSB) have helped China’s Civil Aviation Administration, which is leading the investigation, to download information from the cockpit voice recorder and the flight data recorder at its lab in Washington.

The Journal said information from the flight data recorder showed the plane was acting as directed by the cockpit controls.

When you first saw the video taken of the plane’s last moments, it seemed clear what the cause could be, but it’s an explanation no one wants to be the first to put forward.  I mentioned it to a pilot friend of mine in the first days of the disaster and he said, “I hope not.”

A key would be the cockpit voice recorder, but it was damaged during the crash and it’s unclear whether investigators have been able to retrieve any information from it.

--The CEO of Ryanair Holdings PLC, one of Boeing Co.’s biggest customers, took aim at the planemaker’s sales team and its 737 MAX delivery schedule and said the company needed to reboot its commercial-aircraft division.

Michael O’Leary also questioned Boeing’s pending shift of its headquarters from Chicago to Virginia.  While the move “may be good for the defense side of the business, it doesn’t fix the fundamental underlying problems on the civilian aircraft side in Seattle,” O’Leary told analysts on a conference call after the company’s earnings release Monday.  “And Seattle needs a reboot. It needs a reboot quickly.”

O’Leary, known for being blunt and outspoken, added: “We’re a willing customer, but we’re struggling with slow deliveries and an inability to do a deal on new aircraft.  You wonder what the hell their sales team have done for the last two years.”

Ryanair is Europe’s biggest airline by passenger numbers, and O’Leary bet big on Boeing early on, relying on the 737 MAX to propel the discount giant’s growth as it looks to take market share from rivals still reeling from Covid.  [As an example, Ryanair will have almost 40 percent of the Italian market this summer, from around 30 percent pre-Covid.]

Ryanair on Monday said it flew 97.1 million customers last year as it continued to recover itself from the pandemic.  It plans to fly 165 million passengers in the current fiscal year, ahead of the 148.6 million it flew in 2019.

But O’Leary said its expansion plans have been impacted by Boeing’s failure to deliver aircraft on time, and Ryanair has been forced to cut back its capacity plans for May and June as a result of the delays.

Ryanair is now considering bringing more Airbus aircraft into its fleet to facilitate growth through the rest of the decade.

--United Airlines lifted its revenue outlook because of improved travel demand and said it would resume passenger flights with its Boeing Co. 777-200 jetliners, adding more seats ahead of an expected busy summer travel season.

United now expects second-quarter revenue per available seat mile to be between 23% and 25% higher than in 2019, before the pandemic hammered demand.  Last month, the company said it expected the figure to be 17% higher than in 2019.

The resumed use of Boeing’s 777-200s comes 15 months after 52 Pratt & Whitney-powered planes were grounded following an engine failure.  United’s 777-200s have 276 seats, and the prolonged grounding removed 10% of its capacity during a period of surging domestic travel and rapid growth in international demand, especially to and from Europe and Latin America.

Separately, United said last weekend that it reached an agreement in principle with the union representing its pilots, the first major airline to reach this step in contract talks this year.

Neither side offered details on the preliminary agreement, and the Air Line Pilots Association, which has been negotiating for higher pay and other improvements for its 13,700 United pilots, told its members in a statement that the deal had to be formalized.

But, “United Airlines was the only airline to work with our pilots to reach an agreement during Covid,” CEO Scott Kirby said in a statement.

--JetBlue Airways Corp. plans to launch a hostile takeover attempt for discount carrier Spirit Airlines Inc., after Spirit rejected JetBlue’s $3.6 billion offer in favor of an existing deal with Frontier Airlines.

JetBlue plans to appeal directly to Spirit’s shareholders by launching a tender offer for their shares, in hopes of pressuring Spirit’s management to re-engage in negotiations.

Well, as anyone with half a brain knows, this is ludicrous.  A JetBlue-Spirit combination would never be approved by antitrust regulators, and JetBlue’s advisers are just trying to rack up some money.

I believe the Spirit story that a combo with Frontier, on the other hand, makes eminent sense, and could be approved, with the usual givebacks.

--TSA checkpoint travel numbers vs. 2019

5/19…88 percent of 2019 levels
5/18…85
5/17…88
5/16…87
5/15…91
5/14…95
5/13…88
5/12…89

--Cisco Systems Inc. cut its full-year earnings forecast on Wednesday after Covid lockdowns in China and the war in Ukraine dragged sales below estimates in the third quarter, sending shares down 13% in extended trading.

Cisco is the latest U.S. company to lay out a hit to earnings from Beijing’s “Zero Covid” policy that has worsened supply-chain issues and dampened demand for firms already under pressure from rising inflation.  Executives also said ceasing operations in Russia and Belarus hurt revenue growth.

Cisco now expects revenue growth of 2% to 3% in fiscal 2022, compared with an earlier forecast of 5.5% to 6.5%.

“We believe that our revenue performance in the upcoming quarters is less dependent on demand and more dependent on the supply availability in this increasingly complex environment,” said CEO Chuck Robbins.

Third quarter adjusted earnings of $87 cents were a penny above expectations, but revenue of $12.8 billion was well shy of forecasts for $13.87 billion.  Cisco expects fourth-quarter revenue to decline by 1% to 5.5%, with earnings well below current estimates.

--Shares in Deere & Co. cratered 14% on Friday after the company raised its 2022 profit forecast, but the heavy equipment maker’s stock fell after its quarterly revenue missed forecasts.

Deere forecast fiscal 2022 net income, including special items, of $7.0 billion to $7.4 billion, from a prior estimate of $6.7bn to $7.1bn.  Deere’s net income was $2.09 billion for the quarter ended May 1.

It was just confusing. The company said total net sales and revenue rose about 11% to $13.37 billion from $12.06 billion in the quarter, but the market was expecting more given the environment and Deere’s outlook was tepid vs. some of its rivals.

--Twitter’s board said it plans to enforce its $44 billion agreement to be bought by Elon Musk, saying the transaction is in the best interest of all shareholders.

“We intend to close the transaction and enforce the merger agreement,” the board said in a statement to Bloomberg News.  Directors voted earlier to unanimously recommend that shareholders approve Musk’s $54.20-a-share offer.

The board’s statement came as Musk was clearly maneuvering to ditch or renegotiate his offer.  Musk said last week that the deal was “on hold” until he gets more information, specifically proof from Twitter that so-called spam bots make up less than 5 percent of its users.

On Monday, Musk stoked speculation that he could seek to renegotiate the takeover, saying at a tech conference in Miami that a viable deal at a lower price wouldn’t be “out of the question.”

Twitter has said it’s committed to completing the sale.

Musk, ever the pain in the ass, tweeted “this deal cannot move forward” unless Twitter provides proof of its claims, reiterating his view that the percentage of bots was higher than 5 percent.  He told a tech conference in Miami on Monday that fake users make up at least 20% of all Twitter accounts.

But the guy made an offer for the company that the board then accepted!  The proposed takeover includes a $1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised.

--Ford Motor Co. said Thursday it is recalling 39,000 Expedition and Lincoln Navigator SUVs in the U.S. after 16 reported incidents as the vehicles may pose a risk of under hood fire.

Fourteen of the incidents happened on vehicles owned by rental companies across several locations and two were in retail customer vehicles, the carmaker said.  The affected models were built between Dec. 1, 2020, and April 30, 2021, and the fire risk includes while the vehicles are parked and off.

Ford said it is advising owners of the vehicles to park them outside and away from structures while it investigates the cause of the fires.  The investigation into the issue started in March, it said.

--Prime Minister Justin Trudeau’s government joined Canada’s closest intelligence allies in banning Huawei Technologies Co. from fifth-generation wireless networks.

The Chinese state-championed telecommunications firm poses a threat to Canada’s national security, Industry Minister Francois-Philippe Champagne said Thursday, confirming an earlier Bloomberg News report.  ZTE Corp. equipment will also be prohibited.

Firms that already have Huawei or ZTE gear installed will have to remove it by the end of 2027.  Trudeau’s government had delayed the decision for more than three years, as relations between Canada and China deteriorated, and a ban will further stoke tensions.

The Biden administration has sought to steer countries away from Huawei, and since 2019, the U.S. has imposed what may be the strongest sanctions it has ever placed on a single company.

--Two months after the Berlin Wall fell, McDonald’s opened its first store in Moscow. It was the first American fast-food restaurant to enter the Soviet Union. 

McDonald’s, wildly popular in the USSR and then Russia, expanded to 850 stores in the country, but this week, the company announced it will sell all its Russian stores and exit the market in response to the invasion of Ukraine.  It’s the first time McDonald’s has exited a major market.

The company said it will look for a buyer who will employ its 62,000 Russian workers and will continue to pay them until a sale is finalized.

McDonald’s entry into the Soviet Union was so groundbreaking it gave rise to a political theory. The Golden Arches Theory (or “McDonald’s peace theory” first put forward by the New York Times’ Thomas Friedman), which holds that two countries that both have McDonald’s in them won’t go to war, because the presence of a McDonald’s is an indicator of the countries’ level of inter-dependence and their alignment with U.S. laws.

That theory held until 2014, when Russia annexed Crimea.

McDonald’s CEO Chris Kempczinski left open the possibility that McDonald’s might be back someday.  In a letter to employees, he said in part: “Let us not end by saying, ‘Goodbye.’  Instead, let us say as they do in Russian: Until we meet again.”

But by week’s end, McDonald’s agreed to sell the Russian business to existing licensee Alexander Govor, who will acquire the entire restaurant portfolio in Russia and operate the restaurants under a new brand.  Govor currently operates 25 restaurants in Siberia, the company said.

The sale and purchase agreement provides for employees to be retained for at least two years on equivalent terms, McDonald’s said.

McDonald’s said it expects to record an accounting charge of between $1.2 billion and $1.4 billion, and recognize a significant foreign-currency translation loss.

--On Tuesday, Allianz agreed to pay more than $6 billion and its U.S. asset management unit will plead guilty to criminal securities fraud over the collapse of its Structured Alpha funds early in the pandemic.

Allianz’s settlements with the U.S. Department of Justice and the Securities and Exchange Commission are among the largest targeting a global financial institution.

Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, is also being indicted for fraud, conspiracy and obstruction, while two portfolio managers entered related guilty pleas.

Once with more than $11 billion of assets under management, the Structured Alpha funds lost more than $7 billion as the spread of Covid roiled markets in February and March 2020.  Prosecutors said the U.S. unit, Allianz Global Investors US LLC, misled teacher pension funds, clergy, bus drivers, engineers and other investors by understating the funds’ risks and overstating how well they were being monitored.

Investors were told the funds employed options that included hedging positions designed to protect against market crashes, but prosecutors said the individual defendants repeatedly failed to buy the promised hedges.

The defendants also inflated fund performance to boost their own pay, collecting 30% of excess returns over relevant benchmark indexes, prosecutors said.

Tournant made $13 million in 2019, court papers show.

Tuesday’s settlement calls for Allianz to pay a $2.33 billion criminal fine, make $3.24 billion of restitution and forfeit $463 million, court papers say.  Allianz also agreed to a $675 million civil fine to settle with the SEC. 

As someone who worked at a senior level for an Allianz unit, and was rather heavily involved in sales, what I found particularly egregious was that Tournant and his cohorts altered more than 75 risk reports before sending them to investors, to reduce projected losses in market-stress scenarios. The SEC said potential losses in one market crash scenario were changed to 4.15% from the actual 42.15%, simply by removing the “2.”

Another part of the settlement is that the company will transfer most of Allianz Global Investors’ U.S. business to Voya Investment Management in exchange for a 24% equity stake in the combined money manager.

Following the transaction, Allianz Global Investors would no longer operate as an investment adviser to U.S. mutual funds.  A separate unit will continue to advise on private funds in the U.S.  Allianz also agreed to distribute Voya’s funds outside the U.S.

The guilty plea and agreement won’t affect Allianz Life or its other U.S. money manager, PIMCO.

--Melvin Capital, the hedge fund run by Gabe Plotkin that suffered heavy losses from wrong-way bets on Game Stop, AMC Entertainment and other mainstays of last year’s meme trade, is shutting down, Plotkin sending a letter to investors on Wednesday.

Plotkin wrote that he had decided that the “appropriate next step” was to liquidate the fund’s assets and return cash to all investors, adding he needed to “step away from managing external capital.”

Plotkin, a protégé of hedge fund billionaire and New York Mets owner Steven A. Cohen, had wagered that shares in Game Stop, AMC and other mall mainstays from the 1990s would fall as their businesses shrank.

But the stocks skyrocketed when amateur investors, coordinating via Reddit, Twitter and other social media sites and determined to outsmart big Wall Street funds, kept buying up shares and propping up their price.

Melvin, which started 2021 with more than $12 billion, lost 53 percent in January 2021, forcing it to scramble to cover its short positions.  Melvin was then bailed out by Cohen’s hedge fund, Point72, and Citadel.

--Netflix laid off about 150 staff, just a month after the entertainment giant said it was losing subscribers for the first time in a decade. The layoffs will mostly affect its office in California and accounts for about 2% of its North American workforce.

Netflix said the job losses were due to the slump in the company’s revenue.

--The Justice Department on Tuesday sued Steve Wynn, the former CEO of Wynn Resorts, to compel him to register as an agent of China and accused him of lobbying then-President Donald Trump at Beijing’s behest in 2017.

Wynn’s lawyers denied the allegations, saying he had never acted as an agent of the Chinese government.

From at least June through August 2017, Wynn contacted Trump and members of his administration to convey a Chinese request that Trump cancel the visa of a Chinese businessperson who had sought asylum in the United States, the department said.

The department’s civil suit alleges it had advised Wynn in 2018, 2021 and April 2022 to register as an agent of China under the Foreign Agents Registration Act but he declined to do so.

Wynn conveyed the requests to cancel the businessperson’s visa to the Trump administration on behalf of Sun Lijun, a former vice minister in China’s Ministry of Public Security, the statement said.

The businessperson in question, who wasn’t named, left China in 2014 and was later charged with corruption by Beijing.

Wynn stepped down as Wynn Resorts CEO in early 2018.

--Weber Inc. on Monday cut its profit outlook for the second consecutive quarter and said sales would fall for the year due to global supply-chain disruptions and slowdowns in retail traffic.

The company said the disruptions are making it hard to source products needed to assemble its grills and other products.  At the same time, in-store and online sales traffic slowed down at the beginning of this year as more customers opted to travel more.  Unfavorable weather also turned people away from grilling, the company said.

Net sales fell 7% to $607 million amid product shortages.

--Con Edison expects residential electric bills will jump 11% to 12% in New York City during the summer air conditioning season.  Con Edison’s Westchester County territory could see bills jump 15%, the company said.

The Pandemic

--North Korea said on Friday it was achieving “good results” in the fight against the country’s first confirmed Covid-19 outbreak, as the number of people with fever symptoms surpassed 2 million.  North Korea reported 263,700 more people with symptoms and two more deaths, taking the total “fever” caseload to 2.24 million as of Thursday evening, including 65 deaths, according to state media KCNA.  It did not report how many of those cases actually tested positive for the coronavirus.

Earlier in the week, Kim Jong Un told an emergency meeting of the ruling Workers’ Party: “The spread of the malignant epidemic is a great turmoil to fall on our country since the founding.  But if we don’t lose focus in implementing epidemic policy and maintain strong organization power and control based on single-minded unity of the party and the people and strengthen our epidemic battle, we can more than overcome the crisis,” KCNA reported.

By week’s end, despite the caseload, the North was saying farming continues, factories are running, and it was planning a state funeral for a former general.

“Even under the maximum emergency epidemic prevention situation, normal production is kept at key industrial sectors and large-scale construction projects are propelled without let-up,” KCNA said.  “Good results are reported steadily in the ongoing anti-epidemic war,” it added.

The UN’s human rights agency has warned of “devastating” consequences for North Korea’s 25 million people, while World Health Organization officials worry an unchecked spread could give rise to deadlier new variants…which is what I would worry about.

[The recent military parade in Pyongyang was obviously a superspreader event.]

Officials in South Korea say it is hard to draw any conclusions on the situation in the North.  South Korea and the United States have both offered help to fight the virus and have not received a response.  China has also offered its help.  Ditto the World Health Organization, which said Tuesday Pyongyang has not responded to its request for more data about its outbreak.

North Korea and Eritrea are the only sovereign UN-member countries not to have rolled out vaccines, and neither has responded to WHO’s offers of help.

--Shanghai’s health authorities will relax the city’s lockdown on June 1, in a “phased” plan to gradually return China’s commercial hub to normality by late June, as daily infections of Covid continue to drop.

--According to the Centers for Disease Control and Prevention, about a third of the U.S. population is in an area with high or medium infection rates for covid.  The high-transmission areas at this moment are in the Northeast, particularly New York and New Jersey, and stretch over to Michigan and Wisconsin.

Despite the high community spread in New York City, Mayor Eric Adams said he has no plans to reinstate mask requirements there, suggesting we’ve got to learn to live with Covid-19.

“Variants are going to come,” he said in an interview.  “If every variant that comes, we move into shutdown thoughts, we move into panicking, we’re not going to function as a city.”

Mayor Adams argued the city’s hospitalization rate is stable, and roughly 78% of city residents are fully vaccinated, which is above the U.S. population’s 67% vaccination rate, though this doesn’t include boosters.

Less than half of fully vaccinated Americans have received a booster dose, while about 38% of New Yorkers have.

--In New Jersey, Gov. Phil Murphy (Dem.) still doesn’t envision an imminent return to the state’s prior mask mandate in schools. But some districts around the state recently brought back requirements for face coverings.  Nine of our 21 counties have “high” Covid community levels, while 11 are in the “moderate” category, according to the CDC.

Murphy lifted the school mask mandate March 7, but school districts have the option to enforce their own mask requirements.

--On the heels of the FDA’s authorization earlier this week, CDC vaccine advisers voted on Thursday to recommend a booster dose of the Pfizer/BioNTech vaccine for children ages 5 to 11.  CDC Director Rochelle Walensky signed off on the recommendation.

While two doses of the vaccine do appear to keep kids out of the hospital, according to reports, the effectiveness of the vaccine at stopping the spread of infection fell dramatically during the Omicron surge.

The extra dose is to be given to children five months after the second dose and is one-third the amount that those 12 years old and above receive.

Also Thursday, the CDC said it was strengthening its recommendation that people 12 years and older, who are immunocompromised, or who are 50 and older, should receive a second booster dose at least four months after their first.

--Another round of free Covid-19 tests for all Americans was made available by the Biden administration on Monday.  CovidTests.gov.

*I just took a whopping 45 seconds to order 8 test kits.

--On a totally different topic, monkeypox, health officials in Spain reported seven cases and Portugal updated its number of confirmed cases to 14 Thursday as an outbreak of a viral disease typically limited to Africa continues to spread globally.  The U.S. has now reported its first few cases.

What’s worrisome is that this virus, while not particularly fatal, has symptoms (high fever) that can last for weeks.

Covid-19 death tolls, as of early tonight….

World…6,298,376
USA…1,028,618
Brazil…665,493
India…524,323
Russia…378,168
Mexico…324,617
Peru…213,077
UK…177,890
Italy…165,827
Indonesia…156,513
France…147,780
Iran…141,262
Colombia…139,833
Germany…138,633
Argentina…128,776
Poland…116,255
Ukraine…108,497
Spain…105,947
South Africa…100,916

Canada…40,663

[Source: worldometers.info]

U.S. daily death tolls…Mon. 133; Tues. 385; Wed. 352; Thurs. 237; Fri. 205.

Foreign Affairs, part deux

China: Beijing’s top diplomat again warned the U.S. over its increased support for Taiwan, showing the island democracy remains a major sticking point between the world’s biggest economies as China sent more military aircraft toward the island.

“If the U.S. side insists on playing the Taiwan card and goes further and further down the wrong road, it will certainly lead to a dangerous situation,” Yang Jiechi, Beijing’s top diplomat, said in a phone call with National Security Advisor Jake Sullivan.

Yang said Washington should “have a clear understanding of the situation,” according to a statement posted online by his nation’s Foreign Ministry.  “China will certainly take firm action to safeguard its sovereignty and security interests,” he added.

The White House issued a short statement on the Wednesday call, saying the pair “focused on regional security issues and nonproliferation.”

The Yang-Sullivan call was the most high-level contact between the U.S. and China since Joe Biden and Xi Jinping spoke in March, their first conversation following Russia’s invasion of Ukraine.

Separately, the Chinese Communist Party has banned retired cadres from making “negative political speeches” in the run-up to a major leadership reshuffle later this year.

A statement from the General Office of the Central Committee said retired cadres and party members must “listen to the party and follow the party” and warned that “violations of disciplinary rules should be dealt with seriously.”

The Communist Party is gearing up for the party congress, a twice-a-decade event that is expected to see Xi Jinping being given a third term as the head of the party, making him the first person to do so after the death of Mao in 1976.

But there are rumblings and discord…to be continued…

North Korea: U.S. intelligence shows there could be a North Korean nuclear test, or a long-range missile test, or both, during or after President Biden’s trip to South Korea and Japan, national security adviser Jake Sullivan said on Wednesday. South Korea’s national security adviser agreed.

A weapons test would underscore the lack of progress in denuclearization talks with North Korea.  Pyongyang has conducted repeated missile tests since Biden took office last year and this year resumed launches of ICBMs for the first time since 2017, which was also the last time the North conducted a nuclear test.

North Korea has also resumed construction at a long-dormant nuclear reactor that would increase its production of plutonium for nuclear weapons by a factor of 10, U.S. analysts say.

Lebanon: The leader of Lebanon’s Iran-backed Hezbollah, Sayyed Hassan Nasrallah, acknowledged his party and its allies had lost their parliamentary majority in the first election since the 2020 Beirut port explosion, but said no single group had taken it, in his first televised speech since Sunday’s election.

Hezbollah and its allies gained 62 seats during Sunday’s polls, losing a majority they secured in 2018, when they and their allies won 71 seats in the 128-member parliament.

The results mark a blow for Hezbollah, and Iran, though Nasrallah declared the results “a very big victory.”  Nasrallah called for “cooperation” between political groups including newcomers, saying the alternative would be “chaos and vacuum.”

The results have left parliament split into several camps, none of which have a majority, and this is not good.  Lebanon’s economy has collapsed, and it needs reforms.  Lengthy negotiations between the various factions to form a government will probably go nowhere.

A prolonged deadlock would derail efforts to unlock the billions of dollars in international aid and loans that could help alleviate the country’s woes.

United Arab Emirates: Sheikh Mohammed bin Zayed al-Nahyan was elected president of the Gulf Arab state by a federal supreme council last Saturday, solidifying his rule over the key OPEC oil producer and regional player.  He becomes president at a time when the UAE’s longstanding ties with the United States have been strained over perceived U.S. disengagement from its Gulf allies’ security concerns and as Western countries seek support from the region to help isolate Russia.

Sheikh Mohammed, known as MbZ, was elected a day after the death of his half-brother, President Sheikh Khalifa bin Zayed, who was also ruler of Abu Dhabi.

The UAE, a trade and tourism hub, has deepened ties with Russia and China at a time when Washington’s political clout with Abu Dhabi and Riyadh has been eroded by differences over the Yemen war, Iran and U.S. conditions on lucrative arms sales.

Somalia: Editorial / Wall Street Journal

“President Biden ran on a promise to end ‘forever wars,’ a policy that culminated in a strategically and morally disastrous withdrawal from Afghanistan. The news this week that U.S. troops are returning to Somalia is a welcome sign that the White House knows it can’t continue to ignore inconvenient security problems.

“U.S. officials confirmed Monday that no more than 500 U.S. troops would redeploy to the East Africa nation, where al-Shabaab, perhaps al-Qaeda’s most powerful affiliate, continues to control territory and carry out terror attacks. Donald Trump withdrew from the country in the closing days of his Presidency, but U.S. forces have since made inefficient and dangerous trips in and out of Somalia for temporary deployments.

“The permanent presence is a small commitment but important part of the fight against terrorism… African Union countries contribute some 19,000 troops to a peacekeeping force, though American intelligence and air power are critical to the mission….

“The U.S. doesn’t have the power to drive events in Somalia or micromanage the deeply troubled country, but Washington needs to find a path between abandoning and enabling the central government. One option is for diplomats to look beyond the capital and elevate the country’s federal member states.  This requires long-term but manageable commitments like the one Mr. Biden has made.

“China and Russia pose greater threats to U.S. interests than Islamic terrorism, but that doesn’t mean that the likes of al-Shabaab and Islamic State will go away.  Credit to the President for taking action.”

Random Musings

--Presidential approval ratings….

Gallup: 41% approve of President Biden’s job performance, 56% disapprove; 35% of independents approve (Apr. 1-19).

Rasmussen: 40% approve of Biden’s performance, 58% disapprove (May 20). 

A new Reuters/Ipsos national poll has Biden’s approval rating at 42%, 50% disapproval.  [A similar Reuters poll at this stage in Donald Trump’s presidency had a 45-52 split.]

In the above-mentioned new AP/NORC survey, 39% approve of Biden’s job performance, 60% disapprove.  45% approved back in April.

--Former President Trump urged celebrity doctor Mehmet Oz to declare victory in Tuesday’s too-close-to-call Pennsylvania Republican Senate primary, even as votes show this race is headed to a runoff.

With 95%+ of the vote counted, Dr. Oz leads his main challenger Dave McCormick, 31.2% to 31.1%, while Kathy Barnette, who surged late in the race, had 24.7%.

State law says a recount must be held if a candidate’s margin of victory is under 0.5%.

Thousands of mail-in ballots must still be counted.

“Here we go again,” Trump said of the primary. “In Pennsylvania, they are unable to count the mail-in ballots. It is a big mess.”

In another post on his new social media platform, Truth Social, Trump urged Dr. Oz to “declare victory.”

“It just makes it harder for them to cheat with the ballots that they ‘just happened to find,’” he wrote, providing no evidence to back up his claims.

--Karl Rove / Wall Street Journal

“Tuesday’s primary elections were a political junkie’s delight, featuring surprising upsets, startling rebukes and razor-thin margins.  The Pennsylvania Republican Senate primary is still unresolved when I write, with celebrity TV doctor Mehmet Oz leading Wall Street banker David McCormick by only 1,684 votes – less than 0.13% of more than 1.3 million ballots counted.  The outcome depends on an unknown number of remaining mail-in votes – potentially tens of thousands – and 20,000 ballots in Lancaster County with a printing error that made them impossible for scanners to read. It may take until the weekend to get a final tally.

“As is often the case in primary elections, there are important takeaways about the state of politics and both parties.  Tuesday’s results should be a warning to Republicans and Democrats alike as they look ahead to the midterms this fall.

“As seen earlier in the Ohio, Indiana and Nebraska primaries, former president Donald Trump’s ‘Complete and Total Endorsement’ is still the most valuable backing out there for Republicans in primaries – but not a guarantee of victory. As of now, Mr. Trump is 3-2 in Tuesday’s six competitive Republican primaries, with the Pennsylvania Senate race (in which he backed Mr. Oz) still up in the air.

“Mr. Trump’s favorite prevailed in the North Carolina Senate primary. Aided by almost $12 million in spending by the Club for Growth, Rep. Ted Budd earned an impressive 59% of the vote.  After receiving the former president’s blessing this week, state Sen. Doug Mastriano won the Pennsylvania gubernatorial contest with 44%. In North Carolina’s 13th Congressional District, the Trump-approved 26-year-old college football star Bo Hines took 32% to capture the Republican nomination for the open seat.

“The results went against Mr. Trump’s endorsed candidates in North Carolina’s 11th congressional district, where the controversial Rep. Madison Cawthorn was defeated for renomination by state Sen. Chuck Edwards, and in Idaho, where incumbent Gov. Brad Little easily beat Trump-backed Lt. Gov. Janice McGeachin 53% to 32%.

“A second takeaway from Tuesday’s results is that Republicans have a real enthusiasm edge.  In the Pennsylvania primaries, with potentially tens of thousands of ballots to be counted, at least 1.33 million Republicans voted, compared with 1.2 million Democrats.  In the last midterm primaries, four years ago, at least 737,312 Republicans and 775,660 Democrats voted in the Keystone State.  As of this writing North Carolina Republican turnout totaled 759,554 while Democratic turnout was 613,170.  Four years ago, 294,295 Republicans and 431,875 Democrats turned out in the Tarheel State primaries for Congress.  The GOP turnout increases of 80% in Pennsylvania and 158% in North Carolina should worry Democrats.”

Mr. Rove then gets into the schisms in both parties, as represented by the likes of Kathy Barnette and Doug Mastriano on one side, and Pennsylvania left-wing Lt. Gov. John Fetterman, who took 59% of the vote in his Senate race.

Rove concludes:

“Tuesday’s primaries confirmed that angry and highly energized factions are increasingly defining both parties; as a result, America’s politics continue to polarize.  The turbulence will increase as the fall election approaches.  Buckle up.”

I would have added, ‘and wait for the Supreme Court ruling on Roe.’  Then it will really get angry and ugly.

Such as in…adding fuel to the fire, Oklahoma’s state legislature on Thursday approved a near-total abortion ban, building on past laws that include a Texas-style prohibition after about six weeks of pregnancy and a so-called trigger ban that would take effect should Roe v. Wade be overturned.

This will be the most restrictive abortion law in the nation, banning abortions from the moment of “fertilization,” while including a provision that will allow civilians to press charges against those whom they believe have performed an abortion or helped someone obtain one.

--Editorial / Wall Street Journal

“An irony of today’s politics is that the left and Donald Trump often want the same result: the nomination of the Trumpiest GOP candidate on offer. Both got their wish in Pennsylvania on Tuesday, as Doug Mastriano easily won the Republican primary for Governor.  That’s the kind of day it was, as progressives and the Trumpist right both ran strongly.

“Mr. Trump endorsed late in that race, after Mr. Mastriano already had a substantial polling lead, so he can’t claim sole credit for the state Senator’s win in a multicandidate field.  But Mr. Mastriano played to Mr. Trump’s obsession that the 2020 election was stolen.  Mr. Mastriano is the candidate Democrats wanted to run against in November, and they ran ads essentially telling Trump voters he was their man.

“This should be a good GOP year everywhere, and certainly in Pennsylvania after two terms of Democratic Gov. Tom Wolf.  Yet Mr. Mastriano has an uphill fight against Democratic nominee Josh Shapiro, the state attorney general.

“Last month, Mr. Mastriano addressed a ‘Patriots Arise’ rally, where other speakers lamented ‘child satanic trafficking’ and other QAnon nonsense.  He sponsored a bill to ban abortion after about six weeks and said at a recent debate that, ‘I don’t give way for exceptions either.’  He wants to rip up contracts with ‘compromised voting machine companies,’ while doing a reset of the voter rolls.  ‘You’re going to have to re-register.’….

“If Republicans lost this election, it’s their own fault, and a warning about chasing 2020 ghosts instead of focusing on the future….

“[On the other hand]…The power of the left in the Democratic Party [Ed. see John Fetterman] has the paradoxical effect of strengthening those on the right who put a premium on political combat over policy – and vice versa. This is what the media fails to understand about the GOP, because the media is so psychologically wrapped up with Mr. Trump.  This mutually reinforcing polarization makes it harder for either party to govern with majorities, but it’s the reality of today’s politics.”

--The Pennsylvania and North Carolina senate races are critical, both seats currently held by retiring Republican senators.  In North Carolina, Ted Budd will face Democratic former state Supreme Court Chief Justice Cheri Beasley, who easily won her party’s nomination in the race to succeed Richard Burr.

And in Pennsylvania, the aforementioned Fetterman goes up against the winner of Dr. Oz vs. McCormick in the battle to replace Pat Toomey.

But Fetterman not only suffered what appeared to be a mild stroke, he then had a pacemaker implanted to address the irregular heart rhythms that caused the stroke.  This is an issue.

[Sen. Chris Van Hollen (D-Md.) announced Sunday that he suffered a minor stroke, but he said doctors do not expect he will have any long-term damage from it.]

--That was a rather delightful development...Madison Cawthorn going down.  Bye-bye.

--But next Tuesday, May 24, it’s all about Georgia, and Gov. Brian Kemp, one of the officials who refused to go along with Trump’s election schemes, battling Trump-backed former Sen. David Perdue.  Former Vice President Mike Pence is campaigning for Kemp, as well as Nebraska Gov. Pete Ricketts and Arizona Gov. Doug Ducey, both of whom have also drawn Trump’s ire or helped defeat a Trump-endorsed candidate, as Ricketts did this week.

And former New Jersey Gov. Chris Christie is campaigning for Kemp, who will kick ass.

The GOP primary for Georgia secretary of state is also rather important.

--Tesla CEO Elon Musk said on Wednesday that while he voted for Democrats in the past, he will now vote for Republicans.

“In the past I voted Democrat, because they were (mostly) the kindness party.  But they have become the party of division & hate, so I can no longer support them and will vote Republican,” he tweeted. “Now, watch their dirty tricks campaign against me unfold,” he added.

--Former Hillary Clinton campaign manager Robby Mook said he attended a meeting with other senior campaign officials where they learned about strange cyberactivity that suggested a relationship between the Trump Organization and Alfa Bank, based in Moscow in the fall of 2016.  The group decided to share the information with a reporter, and Mook subsequently ran that decision by Clinton herself.

“We discussed it with Hillary,” Mook said, later adding that “she agreed with the decision.”

A campaign staffer passed the info to a reporter from Slate magazine, which the campaign hoped the reporter would “vet it out, and write what they believe is true,” Mook said.  Slate published a story on October 31, 2016, raising questions about the odd Trump-alfa cyber links.

The testimony came in the criminal trial of Clinton campaign lawyer Michael Sussman, who is being prosecuted by the Trump-era special counsel John Durham.  Durham is investigating potential misconduct tied to the FBI’s Trump-Russia probe.  The trial has shed light on the dark arts of political opposition research – and how campaigns dig up dirt and plant stories.

Federal investigators ultimately concluded there weren’t any improper Trump-Alfa cyber links.

Sussman passed along the same information about Trump and Alfa Bank to an FBI official in September 2016.  Prosecutors charged him with lying to the FBI and allege that he falsely told the FBI official that he wasn’t there for a client, even though he was there on Clinton’s behalf.

Sussmann has pleaded not guilty and maintains that he went “to help the FBI” as a concerned citizen, and that the Clinton campaign wouldn’t have wanted him to meet with the FBI.

Mook and another top Clinton campaign official, general counsel Marc Elias, both testified they didn’t authorize or direct Sussmann to go to the FBI with the explosive Trump tip.  Mook said Friday that he didn’t even known who Sussman was during the 2016 campaign.

Mook said, “Going to the FBI does not seem like an effective way to get information out to the public.  You do that through the media, which is why the information was shared with the media.”

--President Biden, in a speech in Buffalo, the site of a hate-fueled attack that killed 10 people at a supermarket last Saturday, promised that “white supremacy will not have the last word.”

Biden touched on gun control, but focused on the scourge of white supremacy brewing beneath the surface of American society.

“White supremacy is a poison,” Biden declared. “It’s been allowed to fester and grow right before our eyes.  No more.”

“I’m not naïve – I know tragedy will come again….

“We can’t prevent people from being radicalized,” the president continued.  “But we can address the relentless exploitation of the internet to recruit and mobilize terrorism.  We just need to have the courage.”

--Road deaths soared more than 10 percent last year, compared with a year earlier, reaching 42,915, according to estimates released by the National Highway Traffic Safety Administration; the NHTSA also reporting it was the largest annual percentage increase in the history of its Fatality Analysis Reporting System, which began in 1975.

The agency said fatal multi-vehicle crashes and crashes on urban roads were up 16 percent.  Fatalities among senior citizens jumped 14 percent. Deaths involving at least one large truck soared 13 percent, as did pedestrian fatalities.

But driving was up 11 percent, so federal estimates showed there were 1.33 fatalities per 100 million miles traveled, down slightly from 1.34 fatalities in 2020.

--Congress held a rare public hearing Tuesday into the existence of what the government calls unidentified aerial phenomena, more commonly known as UFOs, a subject of scrutiny by the Pentagon and U.S. intelligence agencies following an increase in sightings by military personnel and pilots in recent years.

The Defense Department, since 2017, has been collecting eyewitness accounts, including from naval aviators who said they saw flying objects that seemed to lack any visible means of propulsion and defied human understanding of aerodynamics and physics.

The hearing, with the House Intelligence Committee’s panel on counterterrorism, counterintelligence and counterproliferation, was the first of its kind in more than 50 years that U.S. officials have provided testimony for public consumption about their investigation of UFOs.  The Air Force had closed its investigation into the topic, Project Blue Book, in 1970.

“We know that our service members have encountered unidentified aerial phenomena,” Ronald S. Moultrie, the undersecretary of defense for intelligence and security, told the bipartisan panel of lawmakers.  “We are committed to an effort to determine their origins.”

But there were zero revelations.  Just a lot of dots and dashes flittering about on film.

Scott Bray, deputy director of naval intelligence, said the United States has reports from nonmilitary sources, but he did not elaborate.

He did note that U.S. military pilots have had “11 near-misses” with UFOs.  There have been no collisions, he said.  He added that the military has never attempted to communicate with the objects nor fired on them.

Officials say they are doubtful that the handful of sightings for which there is no clear explanation point to a sophisticated, secretive military technology that Russia, China or other U.S. adversaries possess.

The government was unable to determine whether more than 140 UFOs were atmospheric events playing tricks on sensors or craft piloted by foreign adversaries, or whether the objects were extraterrestrial in origin.

Defense Department investigators don’t have any physical evidence that would suggest visitors from other worlds have come to Earth, Bray said.  But he implicitly acknowledged that the United States has collected tangible objects in the course of its investigation, though investigators don’t “have any wreckage that isn’t explainable, that isn’t consistent with being of terrestrial origin.”

---

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

Pray for Ukraine.

God bless America.

---

Gold $1845
Oil $112.70

Returns for the week 5/16-5/20

Dow Jones  -2.9%  [31261]
S&P 500  -3.1%  [3901]
S&P MidCap  -1.9%
Russell 2000  -1.1%
Nasdaq  -3.8%  [11354]

Returns for the period 1/1/22-5/20/22

Dow Jones  -14.0%
S&P 500  -18.1%
S&P MidCap  -16.1%
Russell 2000  -21.0%
Nasdaq  -27.4%

Bulls  27.8
Bears 43.0

Hang in there.

Brian Trumbore

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