Week in Review

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Week in Review

06/02/2022

For the week 5/30-6/3

[Posted Thurs. 2:00 p.m., ET…I am out of pocket a few days and will be filling in some data points Sat.]

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Edition 1,207

The war in Ukraine is not going well and in a video address to Luxembourg’s parliament on Thursday, Ukrainian President Volodymyr Zelensky said Russia is currently occupying about 20% of Ukraine’s territory.

“We have to defend ourselves against almost the entire Russian army.  All combat-ready Russian military formations are involved in this aggression,” he said, adding that the front lines of battle stretched across more than 620 miles. 

Yesterday, Zelensky also said Ukraine was losing “60 to 100” troops a day.  With scores wounded.

For its part, as I note in detail below, Russia’s foreign ministry warned Thursday that the European Union’s decision to partially phase out Russian oil was likely to destabilize global energy markets.

“Brussels and its political sponsors in Washington bear full responsibility for the risk of an exacerbation in global food and energy issues caused by the illegitimate actions of the European Union,” the ministry said in a statement.

Speaking of food, there was a little hope that an effort to ship grain stranded by the war showed progress Wednesday, as a top Russian official blessed Turkey’s role in removing mines from the Black Sea and a top U.S. official said Washington was working to keep sanctions from blocking Russia’s exports.

UN Secretary-General Antonio Guterres has been leading discussions to find a way to ship grain and sunflower oil that has been blockaded in Ukrainian ports on the Black Sea – and to get Russian grain and fertilizer to world markets.

But there are no easy solutions, and nothing is imminent.  Meanwhile, a probable humanitarian crisis is looming because of the growing food shortage.

The UN has warned an estimated 13 million people were facing severe hunger in the Horn of Africa, and another 18 million in the Sahel, the part of Africa just below the Sahara Desert where farmers are enduring their worst agricultural production in more than a decade.  The UN World Food Program says food shortages could worsen further by late summer.

“Acute hunger is soaring to unprecedented levels and the global situation just keeps on getting worse,” WFP Executive Director David Beasley warned earlier this month.

According to the UN, African countries imported 44% of their wheat from Russia and Ukraine between 2018 and 2020.  And the African Development Bank is already reporting a 45% increase in wheat prices on the continent.

On the U.S. economy, there are some signs the global chip shortage is easing, and China Covid lockdowns are easing as well, but it’s too soon to know of the impacts.

Congestion at U.S. ports is easing on the west coast, but bottlenecks are apparently growing on the east coast.

We do know inflation is eroding purchasing power and weakening demand in some sectors.

And interest rates are going to continue to rise substantially in the United States, certainly on the short end of the yield curve.  Fed Vice Chair Lael Brainard, long known as a ‘dove’ on monetary policy, said in an interview with CNBC today that in calling high inflation the Fed’s “number one challenge,” a couple more half-point interest rate hikes are on the table, with more on tap if price pressures fail to cool.

“Market pricing for 50 bps potentially in June and July…seems like a reasonable path,” Brainard said. “But if we don’t see the kind of deceleration in monthly inflation prints…then it might be appropriate to have another meeting where we proceed at the same pace.”

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Back to Putin’s War in Ukraine….

--Sunday….

President Zelensky visited soldiers in Kharkiv, Ukraine’s second-largest city, where Ukrainian fighters pushed Russian forces back from nearby positions several weeks ago.  But Russia had kept up its bombardment of the city from afar, with shelling and airstrikes destroying more than 2,000 apartment buildings since the invasion.

“You risk your lives for us all and for our country,” the President’s office website cited him as telling the soldiers.  The president’s chief of staff added that 31% of Kharkiv region’s territory was currently occupied by Russia, and a further 5% had been taken back by Ukraine having been occupied earlier.

Referring to the city of Severodonetsk in the Donbas, Zelensky said, “As a result of Russian strikes…all the city’s critical infrastructure is destroyed… More than two-thirds of the city’s housing stock is destroyed,” Zelensky said in a televised speech.

--Turkish President Erdogan said his talks with Finland and Sweden were not at the “expected level” and Ankara cannot say yes to “terrorism-supporting” countries entering NATO, according to state television.

Turkey has objected to Sweden and Finland joining NATO and Erdogan was cited as telling reporters on his return from his trip on Saturday to Azerbaijan: “they are not honest or sincere.”

“For as long as Tayyip Erdogan is the head of the Republic of Turkey, we definitely cannot say ‘yes’ to countries which support terrorism entering NATO,” he said.

--Russian Foreign Minister Sergei Lavrov denied speculation that President Putin was ill.  In an interview with French TV, Lavrov said the Russian leader appears in public every day, and no sane person would see any signs of an ailment.

But Ukrainian intelligence and other experts believe he is suffering from ill health, possibly cancer.

Lavrov also said the “liberation” of the eastern region was an “unconditional priority” for Russia, repeating the Kremlin’s widely discredited line that Russia is fighting a “neo-Nazi regime.”

--Monday….

The European Union escalated its economic war against Russia’s “war machine.”  EU leaders said Monday evening that the 27-nation bloc will ban seaborne Russian oil, which affects about two-thirds of Moscow’s estimated $10 billion in monthly oil exports to Europe.  The ban will rise to about 90% of Russian oil imports by the end of the year, as Germany and Poland gradually turn away from those sources by the end of the calendar year to further punish Russia for invading its neighbor.

The new sanctions exempt Russian oil delivered via pipeline.  This “temporary” exemption was designed to allow the landlocked nations of Hungary, Slovakia, and the Czech Republic to continue their access to oil via Russia’s Druzhba (“friendship”) line, which has been in operation since 1964 and is the world’s longest oil pipeline, stretching nearly 3,500 miles.

“Two-thirds of the oil that we have in the European Union is seaborne, and one-third is pipeline,” European Commission President Ursula von der Leyen said when announcing the sanctions, which is the bloc’s sixth iteration, and includes removing Russia’s largest bank (Sherbank) from the Swift financial system and banning another three Russian state-run media outlets from broadcasting across the EU.  The new sanctions will “immediately” cover those “two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine,” European Council chief Charles Michel tweeted Monday.  “Maximum pressure on Russia to end the war,” he added.

--In his Monday night address, President Zelensky said the Donbas situation “remains extremely difficult” and said the Russian army was “trying to gather a superior force to put more and more pressure on our defenders.”

“The Russian army has now gathered there the maximum combat power,” he said of Donbas as a whole.

Luhansk governor Serhiy Gaidai said Russian troops “use the same tactics over and over again.  They shell for several hours – for three, four, five hours – in a row and then attack.  Those who attack die.  Then shelling and attack follow again, and so on until they break through somewhere.”  With temperatures rising, there was a “terrible smell of death” on the outskirts of Severodonetsk, Gaidai said.

A French journalist was killed near the city on Monday when shelling hit the vehicle he was traveling in during an evacuation of civilians.

--President Putin, in talks with Turkish President Erdogan, said Russia was ready to facilitate unhindered grain exports from Ukrainian ports in coordination with Turkey.  Empty words.  Putin would only do such a thing if sanctions were lifted, which isn’t happening, nor is it clear which ports he was referring to.

As satellite images have also shown, Russia has been stealing Ukrainian grain stored in silos.

--Tuesday/Wednesday….

In response to the European Union’s move to ban Russian oil, Moscow widened its gas cuts to Europe, with Gazprom saying it would cut supplies to several “unfriendly” countries which have refused to accept Russia’s rubles-for-gas payment scheme.

--The White House announced it was sending Ukraine advanced long-range artillery that President Zelensky had requested for weeks, but administration officials said it would only be armed with limited-range munitions and would not be used to strike targets inside of Russia.

The M142 High Mobility Artillery Rocket System, or HIMARS, would be part of a new $700 million arms package for Ukraine, which has received increasingly more advanced and lethal weapons.

“At this time, we’ve decided not to provide the longer range of munitions,” a senior administration official said.

Monday, President Biden had told reporters that his administration will “not…send to Ukraine rocket systems that can strike into Russia.”

But medium-range rockets could reach Russia, if fired from positions near its border.

The same senior administration official then said, “The Ukrainians have given us assurances they will not use these systems against targets in Russian territory.”

In an op-ed published Tuesday in the New York Times, Biden wrote, “We are not encouraging or enabling Ukraine to strike beyond its borders.”  He wrote that the weapons sent to Ukraine were intended to help Zelensky “fight on the battlefield and be in the strongest possible position at the negotiating table.”

This is the fourth major tranche of weapons sent to Ukraine since the invasion. The White House announced three $800 million weapons packages to aid Ukraine between March 16 and April 21.

After exhausting the funds Congress had allotted, Biden asked for an additional $33 billion to keep weapons flowing to Kyiv, in addition to providing money for economic aid, humanitarian recovery efforts, and restocking American weapons stockpiles.

Lawmakers then overwhelmingly surpassed Biden’s request and authorized $40 billion.

In response to the long-range artillery shipment, Russian Foreign Minister Lavrov said this raised the risks of a “third country” being dragged into the conflict.

--President Zelensky said that Ukrainian forces have had some success near the southern city of Kherson and are advancing in parts of the Kharkiv region to the east of Kyiv.

“Our defenders are showing the utmost courage and remain masters of the situation at the front despite the fact the Russian army has a significant advantage in terms of equipment and numbers.”

--Russian troops were fighting to take complete control of the eastern industrial city of Severodonetsk, after the Biden administration’s announcement on providing Ukraine with advanced rockets.

In Luhansk, one of two provinces in the Donbas, regional governor Serhiy Gaidai said Russian troops had taken control of most of Severodonetsk.

Moscow has drained manpower and firepower from across other parts of the front to concentrate on Severodonetsk, hoping a massive offensive will achieve one of its stated aims, to secure surrounding Luhansk province for separatist proxies.

Jan Egeland, secretary general of the Norwegian Refugee Council aid agency which has long operated out of Severodonetsk, said he was “horrified” by its destruction.  “We fear that up to 12,000 civilians remain caught in crossfire in the city, without sufficient access to water, food, medicine or electricity,” he said.  “The near-constant bombardment is forcing civilians to seek refuge in bomb shelters and basements, with only few precious opportunities for those trying to escape.”

“Putin is now hurling men and munitions” at Severodonetsk, “as if taking it would win the war for the Kremlin. He is wrong,” the Washington-based Institute for the Study of War think tank wrote this week.

--Russia’s nuclear forces are holding drills in the Ivanovo province, northeast of Moscow, the Interfax news agency cited the Russian defense ministry as saying on Wednesday. Some 1,000 servicemen are exercising in maneuvers using over 100 vehicles including Yars intercontinental ballistic missile launchers.

--President Zelensky accused Moscow of “madness” after Russian troops hit a chemical plant in their bid to capture Severodonetsk, a nitric acid tank, prompting local officials to warn people to stay indoors.

In his Tuesday night address, Zelensky said: “Given the presences of large-scale chemical production in Severodonetsk, the Russian army’s strikes there, including blind air bombing, are just madness.”

There are heavy casualties on both sides in the battle for this city.

--The Pentagon said Tuesday that the Russian military, beaten down and demoralized after three months of war, is making the same mistakes in its campaign in the Donbas that forced it to abandon its push to take the entire country.

While Russian troops are capturing territory, a Pentagon official said that their “plodding and incremental” pace was wearing them down, and that the military’s overall fighting strength had been diminished by about 20 percent.  And since the war started, Russia has lost 1,000 tanks, according to the Pentagon in a statement last week.

--After the EU move on Russian oil, the next step was to figure out how to get a supposed 22 million tons of Ukrainian grain out to markets.

U.S. Joint Chiefs of Staff Chairman Army Gen. Mark Milley said Tuesday in London: “Right now, the sea lanes are blocked by mines and the Russian navy. In order to open up those sea lanes would require a very significant military effort” and “would be a high-risk military operation.”  [Defense News]

--Russian opposition leader Alexei Navalny said Tuesday that he is facing new criminal accusations that could extend his current nine-year prison term.

Navalny said on Instagram that an investigator visited him in prison to declare that the authorities have opened a new investigation against him on charges of “creating an extremist group to fan hatred against officials and oligarchs” and trying to stage unsanctioned rallies.

He added that the charges could keep him in prison for another 15 years if he’s convicted.

In March, Navalny was sentenced to nine years in prison on trumped up fraud and contempt charges.  The Biden administration needs to keep Navalny’s name front and center, every week.

Some commentary….

Editorial / Wall Street Journal

“Behold, after a month of wrangling, the European Union’s 27 member states have agreed to a new package of sanctions targeting Russian oil.  While the sanctions won’t turn the tide of war in Ukraine, they raise the cost for Vladimir Putin and demonstrate Europe’s resolve to punish him.

“The new round of sanctions that Brussels announced this week will ban imports of Russian oil by sea as well as insurance for shipping companies that transport it globally.  These combined measures could severely crimp oil sales that fuel Mr. Putin’s war machine and Russia’s economy, but they are also important political symbolism.

“About two-thirds of Europe’s Russian oil imports come by tanker. The sanctions exempt pipeline imports as a concession to land-locked countries – Hungary as well as Slovakia and the Czech Republic – that can’t easily replace Russian crude.  Germany and Poland also consume piped Russian oil but have pledged to phase out imports this year.

“This amounts to an effective embargo on 90% of Russian oil imports by year-end.  Critics say the oil embargo won’t hurt Russia as much as banning natural gas imports would since its crude can be redirected to other countries, and that’s true.  China and India have been buying Russian crude at a steep discount and filling their reserves.

“But don’t underestimate the impact, especially when combined with the ban on insuring ships that carry Russian oil. Europe accounts for about half of Russia’s crude exports.  The rest of the world can’t mop up all of its imports, not least because many refineries in other regions aren’t well-suited to process Russian blends.

“Banning insurance for shippers will further hinder Russia from rerouting exports.  Worries among traders and shippers about sanctions risk has already curbed demand for Russian oil. This is why crude prices have hovered above $100 per barrel since the war in Ukraine started and closed Tuesday at $116.

“Higher oil prices no doubt will hurt the West, but perhaps not as much as the sanctions could hurt Mr. Putin.  Russia exported about $180 billion of oil last year, about three times as much as it did gas. Revenue from Rosneft alone constitutes about a fifth of the Kremlin’s budget.  With fewer buyers, Russian companies will have no choice but to scale back production, which could damage its energy infrastructure and constrain future production.

“Mr. Putin hopes to erode the West’s support for Ukraine by increasing the war’s economic costs. The longer the war drags on, the longer energy and food prices will stay high.  His hope is that, if the pain increases enough, perhaps Europe and the U.S. will stop providing military support for Ukraine and push for a truce on his territorial terms.  Western European leaders do have to worry about the impact that an economic recession would have on popular support for Ukraine.

“But the oil sanctions show that Europe is willing to make some economic sacrifices to help Ukraine and deter Kremlin aggression.  It’s also notable that Europe went ahead with oil sanctions despite quiet lobbying by the U.S. in favor of an alternative tariff proposal.  The Biden administration is worried about the impact of withdrawing Russian crude from the world market on gasoline prices and the November elections.

“But the White House could help itself and the world on that score if it ceased its political and regulatory war on fossil fuel.  One of the many mysteries of this Presidency is why Mr. Biden has responded to the Ukraine invasion by pressing for more oil production everywhere but in the domestic U.S.”

Biden Agenda

--The President doesn’t understand why he is doing so poorly in the polls, and I’m reminded of someone during the campaign (whose name escapes me) who said that the thing about Joe Biden is he thinks he’s very smart, and he isn’t.  And that, my friends, sums up the Biden presidency thus far.

So now the president has taken to blaming everyone else, and having insiders fall on their swords for him, and Democrats are staggering towards November.

A new Gallup poll, taken May 2-22, has some deadly research for the donkeys. 

Currently, 14% of U.S. adults rate economic conditions as either “excellent” or “good,” while 46% say they are “poor,” with another 39% rating them as “only fair.”  The Confidence Index takes into account the net of excellent and good versus poor responses, which is -32 this month. In April, 20% of Americans rated the economy positively and 42% said it was poor, a net of -22.

Meanwhile, 20% of Americans say the economy is getting better and 77% say it is getting worse, essentially the same as in April and March.

Time is running out for major improvement in such matters and confidence levels usually change gradually…so zero hope for the Democrats on this critical front when it comes to Americans going to the polls. Throw in immigration, crime, and the shortage of baby formula, and you have the prescription for a blowout victory for the Republicans.

Abortion, however, could be a key, certainly in selected races, and we’ll see how things play out after the Supreme Court’s ruling on the issue.

--Rich Lowry / New York Post

“The president of the United States is a blowhard – again.

“If the country thought that it was getting a buttoned-up, by-the-books communicator after four wildly undisciplined years of Donald Trump, it knew nothing about Joseph R. Biden’s long career as Washington’s standout long-winded, seat-of-the-pants, poorly informed and misleading talker.

“Joe Biden blew up two presidential campaigns with his verbal idiocy, and no one thought during his decades as a senator that he was just the statesman the country needed to handle sensitive international questions with precise, cogent communications.

“Winston Churchill famously mobilized the English language and sent it into battle. Joe Biden tries to muster the English language but confuses and dispirits it, until the poor language slinks off ready to get its discharge papers and return to civilian life.

“Biden’s handling of Russia and China in recent months has been marked by a basic inability to stay within the lines of U.S. policy – by seeming to give a kind of green light to a ‘minor’ Russian incursion into Ukraine; by calling for Russian President Vladimir Putin to go; and by committing to defend Taiwan by force.

“All these wayward statements required immediate and utterly predictable cleanup by a White House staff that must be on constant alert to explain on a moment’s notice what the president meant, after he says something completely different.

“Rarely have so few had to clarify so much….

“His anecdotes and personal stories are invariably studded with exaggerations or outright fictions.  As the Washington Post wrote of a story Biden told about Afghanistan on the campaign trail in 2019, ‘It appears as though the former vice president has jumbled elements of at least three actual events into one story of bravery, compassion and regret that never happened.’

“An NBC News report about Biden’s White House relates that – showing colossal but typical lack of self-awareness – Biden resents his staff following him around with a broom and dustpan: ‘He makes a clear and succinct statement – only to have aides rush to explain that he actually meant something else.’  This, according to Biden, ‘smothers the authenticity that fueled his rise.’

“Uh, no.  The sentiment that motivated voters to switch to Biden in 2020 wasn’t: ‘We’re going to vote for this blustery guy who says anything that comes into his head because that will be such a refreshing change.’  Rather, it was, ‘This guy in his basement seems relatively restrained compared to the blustery guy who says anything that comes into his head.’

“Biden is less flagrant than Trump – he’s not firing top officials on Twitter or making pronouncements based on the last thing he saw on TV.  But he’s also less entertaining.  Biden imagines himself the adult in the room at the same time that he routinely beclowns himself and makes potentially consequential verbal missteps.

“This is, indeed, the authentic Biden, but it’s not inspiring, praiseworthy – or reassuring.”

--The Biden administration said Wednesday it would forgive all of the loans outstanding held by students who attended Corinthian Colleges, which at $5.8 billion amounts to the largest single action of debt cancellation ever by the federal government.

The Education Department estimated that 560,000 student borrowers would be affected by the move involving the defunct, for-profit education company.

“As of today, every student deceived, defrauded and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” said Education Secretary Miguel Cardona in a statement.

Wall Street and the Economy

JPMorgan Chase CEO Jamie Dimon warned investors Wednesday to prepare for an economic “hurricane” as the economy struggles against an unprecedented combination of challenges, including tightening monetary policy and the war in Ukraine.

“That hurricane is right out there down the road coming our way,” Dimon said at a conference.  “We don’t know if it’s a minor one or Superstorm Sandy.  You better brace yourself.”

JPMorgan economists last month lowered their growth outlook for the second half of 2022 to a 2.4% rate from 3%, for the first half of 2023 to 1.5% from 2.1% and for the second half of 2023 to 1% from 1.4%.  They cited falling stock prices, higher mortgage rates and a stronger dollar relative to trading partners.

Former Fed vice-chair Alan Blinder, in a Wall Street Journal op-ed, wrote in part that the Fed “can’t do anything about food and energy prices.”  But we don’t know when they will level off as no one knows when or how the war in Ukraine in end.  “But we do know it must happen at some point.  Oil prices have soared past $100 a barrel, but they won’t keep rising to $200 or $300 a barrel.”

OK, but then Blinder goes:

“Notice the important subtle point here.  For food and energy inflation to decline does not require those prices to fall back to earlier levels, only that they stop rising so fast.”

Yeah, but that’s been my point for weeks now.  Prices, particularly for food and energy, are “resetting” at much higher levels and this is not good. 

Fed Governor Christopher Waller made news this week in a speech when he said the Fed needs to move interest rates much higher and soon if high inflation does not begin to subside.  “If inflation doesn’t go away, that…rate is going a lot higher, and soon.  We are not going to sit there and wait six months…I am advocating 50 [basis points] on the table every meeting until we see substantial reductions in inflation.  Until we get that, I don’t see the point of stopping.”

And so reading between the lines, Waller is strongly hinting at 50 bps the next three meetings, June, July and September, instead of the new consensus, at least among stock and bond traders, that it is 50, 50 and 25.

But it all depends on the data, and this is what is going to become increasingly confusing.  Yes, the rate of inflation is eventually going to come down, and probably substantially, because you’ll be rolling out of some big numbers.  Like oil went from $66 on Dec. 3, 2021, to $116.  If oil settles at, say, $100, eventually you’ll have comparisons for the energy component that show an annual rate of decline, but you are still up 50% from $66!  A majority of Americans can’t deal with what under that scenario would be roughly $4.20-$4.40 at the pump, and food prices that are still substantially higher than last fall, without severely cutting back on spending elsewhere, ergo, a stagnant economy.  That’s my pretty simplistic take on things. It doesn’t have to be recession…but much slower growth and, thus, current corporate earnings estimates are simply too high.

That’s what the likes of JPMorgan, and Goldman Sachs, and the IMF, and the World Bank, and others are saying in reducing their growth forecasts.  We’ve already had a big hit in global stock markets.  The preceding doesn’t mean stocks will go down a lot further, but I would argue any gains are limited.  At some point the current volatility we’ve experienced for months will also wane.  The markets will become very boring.

Finally, for the record, this week Treasury Secretary Janet Yellen said in multiple interviews that “I think I was wrong…about the path that inflation would take,” and that she and others in the administration downplayed the threat of rising inflation last year.

Yellen in March 2021 said inflation posed only a “small risk.”  Two months later, she said she didn’t anticipate inflation would “be a problem.”  Earlier that spring, Biden signed his $1.9 trillion Covid-19 rescue plan into law, providing a boost in spending that his critics blame for accelerating inflation.

“As I mentioned, there have been unanticipated and large shocks to the economy that boosted energy and food prices, and supply bottlenecks, that have affected our economy badly that I, at the time, didn’t fully understand,” Yellen told CNN.  “But we recognize that now.”

Heck, I was in the transitory camp in those days as well.

This week, President Biden met with Fed Chair Jerome Powell in a very public manner and promised to give him the space to tackle surging consumer prices.

“My plan to address inflation starts with a simple proposition: Respect the Fed.  Respect the Fed’s independence,” Biden said in remarks from the Oval Office ahead of the meeting.

On the data front, the March S&P Case-Shiller CoreLogic home price index rose a record 20.6% over the past year, the highest rate since the index began in 1987. The 20-city index was up 21.2% vs. 20.3% in February.

The Chicago ISM manufacturing reading for May was much better than expected, 60.3 (50 the dividing line between growth and contraction).  The national ISM manufacturing reading for May was also better than consensus at 56.1 vs. 55.4 prior.

April factory orders were up less than forecast, 0.3%.

The Atlanta Fed’s GDPNow barometer for second-quarter growth is down to 1.3%.

Finally, there was a survey by industry publication Pymnts.com and LendingClub Corp. that was a bit disturbing.

More than a third of Americans earning at least $250,000 annually say they are living paycheck to paycheck, with more than half of millennials earning four times the median U.S. salary saying they have little left every month, underscoring how inflation is taking a bigger bite out of Americans’ budgets at all ends of the pay spectrum.

Some 36% of households taking in nearly four times the median U.S. salary devote nearly all of their income to household expenses, according to the research.

Europe and Asia

S&P Global reported on eurozone manufacturing for May, 54.6, down from 55.5 in April and an 18-month low.

Germany 54.8, France, 54.6, Italy 51.9, Spain 53.8, Netherlands 57.8 (18-mo. low), Ireland 56.4, Greece 53.8.

UK 54.6.

Chris Williamson / S&P Global

“Euro area manufacturing continues to struggle against the headwinds of supply shortages, elevated inflationary pressures and weakening demand amid rising uncertainty about the economic outlook.  However, the manufacturing sector’s deteriorating health has also been exacerbated by demand shifting to services, as consumers boost their spending on activities such as tourism and recreation.”

Eurostat issued a flash estimate on euro area inflation for May, up to 8.1%, an all-time high, from 7.4% in April, a new high.  Ex-food and energy 4.4% vs. 3.9% the prior month.

Germany 8.7%, France 5.8%, Italy 7.3%, Spain 8.5%, Netherlands 10.2%, Ireland 8.2%.

We then had a report on April industrial producer prices, up 1.2% in the eurozone compared with March, and a staggering 37.2% from a year ago.

Here are some of the year-on-year changes in individual countries.

Germany 33.1%, France 27.8%, Italy 44.1%, Spain 45.1%, Netherlands 39.2%.

In the euro area, energy is up 99.2%.

The European Central Bank will finally be raising its benchmark rate in July.

Eurostat reported the April unemployment rate was at 6.8%, stable with March and down from 8.2% in April 2021.

Germany 3.0%, France 7.2%, Italy 8.4%, Spain 13.3%, Netherlands 3.2%, Ireland 4.8%.

Britain: Some of the UK’s coal-fired power plants slated for closure this year might need to stay open to ensure electricity supply this winter, the government said on Monday.  Countries across Europe are drawing up contingency plans against potential disruption to flows of Russian gas because of the war in Ukraine.  Russia typically supplies about 40% of Europe’s gas.

Britain can generate about 50% of its electricity from gas. Although Russia only meets about 4% of Britain’s gas needs, a significant disruption in supply would affect prices in Europe and make it harder for Britain to secure gas from others, thus the potential need to keep the coal-fired plants available.

Turning to Asia…China’s government PMI readings were released for May, with manufacturing at 49.6 vs. 47.4 in April, services 47.8 vs. 41.9.  [National Bureau of Statistics]

The private Caixin reading on manufacturing was 48.1 vs. 46.0, the services reading next week.

So all are still in contraction mode, but just not as bad with an easing of Covid curbs and lockdowns.  June and July will be interesting for this data.

Japan reported its May PMI for manufacturing was 53.3.

April retail sales there rose 2.9% year-over-year; industrial production was down 4.8% Y/Y.  And the unemployment rate for April was 2.5%.

South Korea’s May manufacturing PMI came in at 51.8; Taiwan’s 50.0 vs. 51.7 in April.

Street Bytes

--Stocks resumed their down ways, the Dow Jones falling 0.9% in the holiday-shortened week to 32899.  The S&P 500 lost 1.2% and Nasdaq 1.0%.  A solid jobs report, vs. expectations, reinforced fears the Fed will be aggressive for longer.

--U.S. Treasury Yields

6-mo. 1.62%  2-yr. 2.65%  10-yr. 2.93%  30-yr. 3.09%

Big spike back up in yields this week as the Federal Reserve is about to take center stage again, June 14-15.

--Gas prices continued to soar over the Memorial Day holiday, a record $4.60 for regular, nationwide, though diesel has stabilized for a few weeks now, but still way too high at $5.52.

Thursday, the price at the pump was up to $4.71 ($6.21 in California), with diesel at $5.55.

But the high prices are having an impact on demand, which for the four-week rolling average through May 20, fell at a level for this time of year not seen since 2013 (excluding 2020’s steep drop due to the pandemic).

That said, OPEC and its allies on Thursday agreed to accelerate oil production in July and August, as Saudi Arabia bowed to U.S. pressure to cool a crude price rally that has threatened to stall the global economy.

The cartel said it would increase output by almost 650,000 barrels a day in both months, up from planned increases of 432,000 b/d (which in actuality has been closer to 400,000).

Saudi Arabia and the UAE, OPEC’s two powerhouse producers, are likely to account for most of the supply increases, as Riyadh signaled earlier it was prepared to increase output to overcome Russian shortages.  It’s the first time the Saudis have deviated from a measured supply policy agreed to two years ago at the height of the pandemic.

But oil prices, as measured by West Texas Intermediate, which fell from $116 to $112 as rumors of the new agreement swept through the markets early Thursday, then rose right back to $116.

U.S. crude inventories fell more than expected last week by 5.1 million barrels, while prices were also supported by the EU’s latest package of sanctions against Russia, and now the potential demand increase from China and its gradual emergence from lockdowns.  Analysts further agreed that the increase in production from OPEC+ does very little to add additional supplies.

--I’ve been talking about what a chaotic scene it could be at the airports, around the world this summer, as the airlines, and airports, remain understaffed (including a severe shortage of pilots).

You saw how a few weeks ago it was pure chaos at Amsterdam’s main airport, with officials urging travelers not to show up, and we had a similar situation in Dublin, Ireland, this past weekend.  The airport was significantly understaffed, with hundreds having taken voluntary retirement during the pandemic.  And this coming weekend could be worse as it’s a bank holiday, where many travel to other destinations in Europe from Ireland or the UK.

So just be prepared and try to get a sense of the airport you may be traveling to, let alone your own, before you travel.  And aim to get to an airport long before you would, pre-pandemic. In Ireland this past weekend, it was called a “national disgrace.”

--The number of flights, worldwide, that were canceled Friday through Monday was over 7,000, according to FlightAware.  The total in the U.S. was roughly 1,500, Saturday through Monday.

--Delta Air Lines said Wednesday it expects Q2 revenue to return to pre-pandemic levels seen in 2019 to a range of $12.4-$12.5 billion, per an SEC filing.

“The demand is off the charts,” said CEO Ed Bastian at a conference Wednesday.  United’s Scott Kirby, speaking at the same conference, echoed the comments.

But the shares in both Wednesday were down about 5%.

--Europe’s discount airline behemoth Ryanair announced Thursday that traffic had increased to 15.4 million passengers in May from 1.8 million a year earlier.  The load factor was 92% last month.

--TSA checkpoint travel numbers vs. 2019

6/1…84 percent of 2019 levels
5/31…83
5/30…93
5/29…82
5/28…94
5/27…93
5/26…96

--Sheryl Sandberg is leaving Facebook/Meta after being Mark Zuckerberg’s longtime deputy as chief operating officer since 2008.

It was a surprise announcement, Sandberg, 52, to be replaced by Javier Olivan, the company’s chief growth officer.

Sandberg has been one of the most powerful women in Big Tech – with an estimated net worth of $1.6 billion, according to Forbes.  She will step down in the fall but remain a member of the company’s board of directors.

“When I took this job in 2008, I hoped I would be in this role for five years,” Sandberg said in a Facebook post.  “Fourteen years later, it is time for me to write the next chapter of my life.”

Sandberg has long been seen by many as the “adult in the room” who helped shepherd the company to its initial public offering in 2012.

“Mark is a true visionary and a caring leader,” Sandberg said Wednesday.  “He was just 23 and I was already 38 when we met, but together we have been through the massive ups and downs of running this company.”

In a separate Facebook post Wednesday, Zuckerberg praised Sandberg as “an amazing person, leader, partner, and friend.”

Sandberg is planning to marry her boyfriend, Tom Bernthal, this summer and will focus on philanthropy after she leaves.  Her first husband died in Mexico in 2015 after suffering a heart attack while they were on vacation.

--Tesla Inc. CEO Elon Musk has asked employees to return to the office or leave the company, according to a memo sent to staff that has been circulating in social media.

“Everyone at Tesla is required to spend a minimum of 40 hours in the office per week,” Musk wrote in an email titled “To be super clear.”

“Moreover, the office must be where your actual colleagues are located, not some remote pseudo office. If you don’t show up, we will assume you have resigned.”

In a follow-up to everyone confirming the companywide policy:

“Anyone who wishes to do remote work must be in the office for a minimum (and I mean minimum) of 40 hours per week or depart Tesla,” the memo said.

“The more senior you are, the more visible must be your presence,” Musk wrote.  “That is why I lived in the factory so much – so that those on the line could see me working alongside them. If I had not done that, Tesla would long ago have gone bankrupt.”

The emails were later deemed to be authentic by multiple sources, citing Tesla employees.

Musk was criticized during the early days of the pandemic when in May 2020, he reopened a Tesla factory in Fremont, California, defying local lockdown orders, and 440 cases of Covid-19 were reported from May to December 2020, according to county data.

Last year, Musk’s SpaceX reported 132 cases at its headquarters in the Los Angeles-area city of Hawthorne, according to the county. 

Musk previously played down the risks of coronavirus and later got it twice himself.  Last month he said, “American people are trying to avoid going to work at all,” whereas Chinese workers “won’t even leave the factory type of thing. …They will burning the 3 a.m. oil,” he said at a conference.

Alphabet Inc.’s Google is requiring employees to return to the office gradually, but requiring employees to be in offices at least three days a week, though many employees have been approved for fully remote work.

--Driven by strong business demand for personal computers, HP Inc. posted better-than-expected earnings for its fiscal second quarter ended April 30, while boosting its guidance for the year.  The shares rose 4% in response.

For the quarter, HP reported revenue of $16.5 billion, up 3.9% from a year ago, and ahead of the Street consensus.  Adjusted profits of $1.08 a share were at the high end of the company’s target range.

HP’s Personal Systems business, which includes both consumer and commercial PCs, had revenue in the quarter of $11.5 billion, up 9%. Commercial PC revenue, which accounted for 65% of the company’s PC business, increased 18%, while consumer revenue was down 6%, a reflection of a sharp slowdown in demand following a pandemic-era surge.  Notebooks were down 23% and desktops up 11%.

--S&P Global suspended financial guidance for this year, and as Crain’s New York Business’ Aaron Elstein opines, this is a major potential canary in the coal mine.  It’s a sign that the market turmoil is taking a toll on top Wall Street institutions, which also poses a threat to New York City’s finances.

S&P’s problem is that it has fewer new bonds to rate, as corporate debt markets have turned frigid, while issuance of junk bonds has plunged.

“Debt issuance volumes have been extraordinarily weak year-to-date,” S&P said in a statement Wednesday.  “Given the volatility and uncertainty in the issuance environment, the company cannot affirm its previously issued guidance.”

The company said revenue could be reduced by $600 million as it rates 35% fewer bonds than last year and 40% fewer leveraged loans.

Dealogic recently found that investment-banking revenues are down nearly 40% globally this year.

As for Gotham’s finances, last year Wall Street generated $58 billion in profits, the second-most ever, but the Independent Budget Office estimates that sum will fall by more than half this year, to $25 billion.

--Congratulations to Tom Cruise, as his “Top Gun: Maverick” took in an estimated $156 million in North America from Thursday night through Monday.  Add in overseas ticket sales, and the global opening total over that period approached $300 million.

John Fithian, CEO of the National Association of Theatre Owners, told the New York Times, “People are ecstatic.  We’ve spent two years answering God-awful existential questions about the future of moviegoing.”  Fithian noted he was particularly encouraged how the older audience, largely absent these last two years, returned en masse over the weekend, “ending the debate about a full recovery.”

About 55 percent of ticket buyers were over the age of 35, according to Paramount Pictures, which released “Top Gun: Maverick.”  The film cost roughly $170 million to make, while a global marketing campaign will cost another $125 million.

The original “Top Gun” in the summer of 1986 cost about $40 million to make and collected $942 million at the global box office, adjusted for inflation.

Next up, “Jurassic World: Dominion,” as well as “Lightyear,” “Minions: The Rise of Gru” and “Thor: Love and Thunder.”  And we have “Elvis.”

--Good news for lobster lovers.  The wholesale price of a live, 1.25-pound hard-shell lobster fell from $12.35 per pound on April 1 to $9.35 per pound on May 1, according to business publishing company Urner Barry.  While lobster prices typically fall between April and May (I had no idea), this year’s price drop was the largest since 2018.

--Lastly, I just have to note the passing about two weeks ago of Ron Rice, 81.  Rice was a dirt-poor boy from North Carolina’s Blue Ridge Mountains who fell in love with Florida’s ocean shores while on a family vacation in the 1940s.  Years later, after a visit to Hawaii, he was inspired to take on Coppertone, then the leading brand of suntan lotion.

After graduating from college in 1964, he transplanted himself to Florida and while in various teaching and coaching positions, on the side he blended myriad combinations of coconut oil, exotic fruits, aloe, avocado, Kukui, mineral oil and cocoa butter until they combined into a lotion that a few 11-year-olds he enlisted from the neighborhood poured from a 20-gallon garbage can in his garage into bottles labeled Hawaiian Tropic and sold for the first time on the beach on July 20, 1969.

By 2006, through relentless promotion through beauty pageants (judged by celebrities such as Donald Trump, who met his second wife, Marla Maples, when she was a Hawaiian Tropic pageant contestant), auto racing and not-so-subtle product placements on television show and films, sales hit $110 million, making it the second-largest sun-care product company in the world.

A year later, Rice sold it to Playtex Products for $83 million.

“Suntan is sex,” he once said.  “That’s what it all boils down to.  Sex and vanity.”

Rice was born on Sept. 1, 1940, in Asheville, N.C., which was a lot different then compared to today, and from the time he was 5, he would join his siblings at their roadside stand selling apples, cider and Christmas wreaths to supplement their father’s income.

With his success, Rice built a 12,000-square-foot home in Ormond Beach, just north of Daytona Beach, and the house had a disco and an indoor-outdoor pool.  He owned an 80-foot yacht and a Lamborghini.  As he liked to say of his lifestyle, “there’s a lot of extra toys involved, and a lot of fun times, and I drink a little better-quality wine, of course, but I’m still a country boy.”

And the original garbage can in which he perfected the formula was placed in his living room. He had it silver plated.  [Sam Roberts / New York Times]

I smiled when I saw this story because I had a childhood friend, who will go nameless, that I was proud of because he dated a Hawaiian Tropic girl for a spell back in the 1980s. 

The Pandemic

--Shanghai authorities on Tuesday began dismantling fences around housing compounds and ripping police tape off public squares and buildings, to the relief of the city’s 25 million residents, before a painful two-month lockdown was lifted at midnight.

On Monday evening, some the people allowed out of their compounds for brief walks took advantage of suspended traffic to congregate for a beer and ice cream on deserted streets, but some felt a sense of wariness and anxiety.  A ruthless lockdown will do that to you.

The prolonged isolation fueled public anger and rare protests inside Shanghai and battered the city’s manufacturing and export-heavy economy.  Supply chains were disrupted around the world, slowing international trade.

But Wednesday, life returned to something more like normal, with public transport resuming, residents allowed to return to work.  Those who did return to work were taking clothes and supplies with them in case someone in the office tested positive and they had to isolate there.

--North Korea said it had removed its virus lockdown measures that had been in place for more than two weeks in its capital, after saying policies by leader Kim Jong Un have controlled the country’s first Covid outbreak.

Kim’s regime partially lifted the lockdown in Pyongyang and eased curbs in “stabilized areas”, Yonhap News Agency of South Korea reported diplomatic sources as saying.  Residents in Pyongyang were allowed to leave their homes for the first time since May 12.

North Korea has not allowed in outside workers to help with the pandemic or verify any of its numbers for a public health crisis that no doubt overwhelmed its antiquated medical system.

As I noted the other week, only North Korea and Eritrea have not administered vaccines.

If it wasn’t so serious it would be a joke, as North Korea reports cases of “fever,” not Covid.

--A third dose of messenger RNA Covid-19 vaccine provides a key boost to immunity against the coronavirus, regardless of the original type of immunization, researchers said.

An mRNA booster following an initial course of two shots of the same type is the most effective way to prevent non-severe Covid infections, according to an analysis of studies published Wednesday in the BMJ medical journal.  Adding a third mRNA shot to other primary vaccination regimens raises protection to almost the same level, the authors from the Chinese University of Hong Kong said.

“Our results imply that mRNA vaccines will continue to be the preferred vaccine type, either as primary vaccines or booster doses,” the researchers wrote.

*I’ll have the global death tolls next time.

Foreign Affairs

China / Taiwan / Pacific Islands / Hong Kong: The People’s Liberation Army Eastern Theatre Command said its combat-readiness patrols in air and sea territories near Taiwan this week were “necessary action” against “collusion” between Taiwan and the United States.

A statement by the Eastern Theatre Command issued on Wednesday accused the U.S. of hypocrisy on the issue of Taiwan, with alleged support for advocates of Taiwan’s independence, a position it said was a betrayal of U.S. alignment with the one-China policy.

“Taiwan is a part of China. The Eastern Theatre Command troops will continue to strengthen training to prepare for battle, raising its capacity to complete missions and resolutely thwarting any foreign intervention and conspiracies on ‘Taiwan independence,’” Shi Yi, army senior colonel and spokesman for the Eastern Theatre Command, said on Wednesday.

Taiwan responded to the incursions this week, which consisted of 30 PLA aircraft, with a combat air patrol and radio warnings, and deployed its air-defense missile system to track the PLA planes.

On the issue of the Pacific islands, President Xi Jinping said China will always be “a good friend, a good brother and a good partner,” as Beijing pushes for further engagement with the strategically important region as a wary U.S. and its allies keep watch over China’s actions.

But Monday, Beijing’s efforts suffered a setback when the foreign ministers of 10 Pacific island nations failed to endorse a proposed security cooperation deal with China after meeting with Chinese Foreign Minister Wang Yi in Fiji.

In a written address to the foreign ministers, Xi said: “China has always insisted on the equality of all countries, large and small, and has developed friendly relations with the Pacific island countries based on the correct concept of justice and benefit and the concept of genuine goodwill.

“No matter how the international situation changes, to the Pacific island nations, China has always been a good friend that shares the same vision, a good brother in the same boat and a good partner who walks side by side.”

President Xi was a busy beaver this week, praising Hong Kong’s incoming leader as a patriot dedicated to safeguarding national security, and expressed confidence in John Lee Ka-chiu’s ability to take the city to new heights.

Xi stressed the central government’s commitment to the “one country, two systems” principle – under which Hong Kong is allowed a high degree of autonomy – had “never been shaken” and would not change.

Total B.S. from Xi. Ditto his comments on the Pacific islands.

Xi noted that under the new system and sweeping national security law, Hong Kong had successfully held (rigged) polls for its Election Committee, Legislative Council and chief executive.

“This proves that the new electoral system has played a decisive role in ensuring ‘patriots administer Hong Kong,’ protecting Hong Kong residents in exercising their right to be their own masters and promoting the formation of a good environment in which all sectors can work together in building Hong Kong,” Xi said.

It’s all rather sickening.

Finally, back to Taiwan, the U.S. will launch new trade talks between the two, just days after President Biden launched an economic plan for Asia intended to push back on China that excluded Taipei.  The exclusion was sharply criticized in some circles.

But it’s true that some of the 13 Asian countries that would be part of the administration’s Indo-Pacific Economic Framework would be hesitant to join a grouping that included Taiwan for fear of angering Beijing.

Iran: Tehran has done little to answer the UN nuclear watchdog’s long-standing questions on the origin of uranium particles found at three undeclared sites despite a fresh push for a breakthrough, the International Atomic Energy Agency said in a report on Monday.

The lack of progress sets up a diplomatic clash with the West when the IAEA’s Board of Governors meets next week.  If Western powers seek a resolution criticizing Iran it could deal a further blow to stalled efforts to revive the 2015 nuclear deal.

The new report details Iran’s continued failure to provide satisfactory answers and now the United States and its allies have to take action against Iran at the board meeting, since Tehran and the IAEA had announced a renewed push in March to clear things up by now.

“Iran has not provided explanations that are technically credible in relation to the Agency’s findings at those locations,” the report said, adding: “The safeguards issues related to these three locations remain outstanding.”  The IAEA said Iran’s stockpile of enriched uranium is now a “significant quantity,” defined as “the approximate amount of nuclear material for which the possibility of manufacturing a nuclear explosive device cannot be excluded,” i.e., enough for a nuclear bomb if enriched further.

Separately, Iran’s energy export revenues are 60% higher in the first two months of the Iranian year (March 21 to May 21) compared to the same period a year ago, an official from the Iranian oil ministry told the ministry’s news agency on Sunday.

Lebanon: The new legislature narrowly elected veteran Shiite Muslim politician Nabih Berri for a seventh term as speaker of parliament. Berri, 84, won 65 votes in the 128-member parliament, where the role of speaker is reserved for a Shiite under the sectarian political system. But this was Berri’s slimmest margin ever, reflecting the fractured makeup of the new parliament in which Iran-backed armed Shiite movement Hezbollah and its allies lost the majority they won in 2018.

Since the Beirut port explosion of 2020, the country has been suffering through its worst economic collapse since the 1975-90 civil war and analysts have been warning that political paralysis could further delay passing reform laws needed to secure financial aid.

The president, Michel Aoun, a Maronite Christian, has to consult with lawmakers on their choice for prime minister, which must go to a Sunni Muslim.  Outgoing Prime Minister Najib Mikati is seen as the leading candidate to remain in the post.

So then the Christian Lebanese Forces party said it will veto as prime minister anyone aligned with Hezbollah and stick to its boycott of government if a new consensus cabinet is formed that looks like the last one, the party’s leader said Wednesday.

It’s a mess, as it always is here.

Israel / UAE: The two signed a free trade agreement on Tuesday, Israel’s first with an Arab state and one which eliminates most tariffs and aims to lift their annual bilateral trade to more than $10 billion.  Israeli data showed trade between the two at $1.2 billion in 2021.

Tariffs will be removed or reduced on 96 percent of goods traded between the nations.

Random Musing

--Presidential approval ratings….

Gallup: 41% approve of President Biden’s job performance, 54% disapprove; 39% of independents approve (May 2-22).

Rasmussen: 41% approve of Biden’s performance, 57% disapprove (June 2).

--Canadian Prime Minister Justin Trudeau said parliament should introduce a total ban on the buying and selling of all handguns.  The government is proposing a new law that would freeze private ownership of all short-barreled firearms.

The legislation would not ban the ownership of handguns outright – but would make it illegal to buy them.

“Other than using firearms for sport shooting and hunting, there is no reason anyone in Canada should need guns in their everyday lives,” Trudeau told reporters. “As we see gun violence continue to rise, it is our duty to keep taking action,” he said.

The bill would also require rifle magazines to be reconfigured so they can hold no more than five rounds at a time.

--Editorial / Wall Street Journal

“Police have been vilified nationwide these past two years for excessive use of force, so there’s no small irony in the criticism raining down on police in Uvalde, Texas, for waiting outside Robb Elementary School while Salvador Ramos was barricaded inside a classroom where he had murdered 19 children….

“The anger of parents is all the more acute because police blocked at least one mother from entering the school. Another mother went in on her own and escaped with her children.

“It isn’t clear if charging the gunman sooner would have saved lives, but that is what we expect of law enforcement. In the event, a tactical team from Customs and Border Protection arrived, stormed the classroom, and killed Ramos. One of the agents was grazed in the head with a bullet, meaning he was a half-inch away from death.

“No doubt police everywhere are asking themselves how they would behave under such circumstances. But the terror in Uvalde is a reminder that, especially in these days of violence, we need the bravest to take those risks. And we need to give them the training, and the public support to do so.”

--Kathleen Parker / Washington Post

“Americans are fed up – and they’re not going to take it anymore.

“You’ve seen it over and over.  A misfit outlier, using a gun he should never have had, mows down everyday people going about their business….

“If my reading of social media is correct, public outrage seems finally to have reached a crescendo that might lead to change.  People are angrier than ever about the growing violence and lack of action.  One can stand the sight of only so many dead children. Since the first K-12 school mass shooting in Stockton, Calif., in 1989, we’ve had front-row seats to 13 more massacres. But those are just the spectacular ones.  Since 1970, there have been at least 188 school shootings, according to a New York Times analysis of data from the K-12 School Shooting Database. We’ve become a nation fluent in the shocked rhetoric of pain and loss.  ‘Thoughts and prayers,’ a hollow expression of condolence from overuse, may as well be ‘ham ‘n’ cheese.’  The names of our slaughterhouses have become as familiar as one-name celebrities: Columbine, Sandy Hook, Parkland – and now Uvalde.

“And nothing ever happens. A few public figures engage in performance outrage. Democrat Beto O’Rourke, now running for Texas governor, tried to commandeer a news conference as Gov. Greg Abbott and others were delivering updates on the massacre.

“Beto, baby, timing is everything, and yours was way off.

“President Biden strained his vocal cords as he asked, ‘When in God’s name will we do what we all know in our gut needs to be done?’  No kidding.  As ineffective as such strutting and fretting has proved to be, he was expressing what most are feeling right now.  When exactly did we lose our minds?  Will this time be any different?

“Maybe. Several things can be done that could reduce the bloodshed: deeper background checks; ‘red-flag’ laws allowing law enforcement officers with a court order to seize guns from someone considered a danger to themselves or others; closing gun show loopholes; and maybe banning kids from buying assault weapons.  All of these would help.

“And all are iffy at best, though several Republicans, including Sens. Lindsey Graham (S.C.), Marco Rubio (Fla.) and Rick Scott (Fla.) have indicated they could lean toward red-flag legislation.  This is hardly a demonstration of political courage, but it’s more than nothing – and seems the measure that could do the most good.

“More than half of Americans want some reasonable reforms.   A vast majority, including 69 percent of NRA members, support universal background checks.  Instead, we only get tiny, incremental tweaks here and there.

“When grade-school children are vulnerable to mass murderers, what’s the point of government? ….

“As a first step, we should change the name of the mission from gun control to gun safety, as pollster Frank Luntz has suggested.  ‘Control’ is a trigger for resistance when safety is what we’re really talking about.  Words matter.  Maybe some people could be more open to compromise and change if they weren’t immediately put on the defensive.

“The predictable constitutional arguments, meanwhile, have become offensive.  Yes, the Founding Fathers were concerned about another British invasion, and made it possible for early colonists to arm themselves in defense of their country. But those who wrote the Second Amendment in the 18th century could not have envisioned how their perfectly reasonable intentions would be distorted 235 years later – or how 18-year-olds would be able to buy and carry assault weapons meant for a modern battlefield into grade-school classrooms.

“There’s a galaxy of difference between a musket and an AR-15.  It’s time to remove these instruments of mass murder from the marketplace once and for all.

“We might not stop the next massacre, but we can stop making it so easy.”

--At the NRA convention in Houston last weekend, former President Donald Trump criticized federal aid to Ukraine, saying that if the United States could afford that and wars in Iraq and Afghanistan then the government should build more hardened schools.

Trump called for the elimination of gun-free school zones and Texas Sen. Ted Cruz said schools should have a single door guarded by armed police or trained military veterans – which kind of flies in the face of fire safety laws.

Trump said this when it came to school doors: “In addition, classroom doors should be hardened to make them lockable from the inside and closed to intruders from the outside.”

That’s kind of the way doors have worked since, ah, the invention of the door.  Front doors, side doors, bathroom doors….

“And above all, from this day forward every school in America should have a police officer or an armed resource officer on duty at all times.”

Trump also said that as president, he showed too much leniency to Democratic politicians running major cities and that he would act differently if he were elected again.

“If I ever do it again, namely run for president and win, I would no longer feel obligated to do it that way,” Trump said. “I would crack down on violent crime like never before.”

--Michael Sussman, a lawyer for Hillary Clinton’s 2016 presidential campaign, was acquitted Tuesday of lying to the FBI when he pushed information meant to cast suspicions on Donald Trump and Russia in the run-up to the election.

The case was the first courtroom test of special counsel John Durham since his appointment three years ago to search for government misconduct during the investigation into potential ties between Russia and Trump’s 2016 campaign.  The verdict is a big setback for Durham, as Trump supporters have long looked at the probe to expose what they contend was sweeping wrongdoing by the FBI.

The original Trump-Russia investigation, overseen for two years by former special counsel Robert Mueller, found multiple efforts by Russia to interfere on the Trump campaign’s behalf but did not establish that the two sides had worked together to sway the election.

After Mueller’s work was done, then-Attorney General William Barr named a new Justice Department prosecutor, then-Connecticut U.S. Attorney Durham, to examine whether anyone from the FBI or other agencies violated the law as the government opened its investigation into Russian election interference and the Trump campaign.

Durham has brought three cases so far, though the one against Sussman is the only one to have reached trial.  A former FBI lawyer, Kevin Clinesmith, was given probation after pleading guilty in 2020 to altering an email related to the surveillance of an ex-Trump campaign aide.

--A jury on Wednesday ruled in favor of Johnny Depp in his libel lawsuit against ex-wife Amber Heard, vindicating his stance that Heard fabricated claims that she was abused by Depp before and during their brief marriage.

Depp was awarded $10.35 million in damages, while Heard should receive $2 million, the jury also ruling in favor of Heard, who said she was defamed by Depp’s lawyer when he called her abuse allegations a hoax.

And so it goes.

--Finally, congratulations to Queen Elizabeth II on her incredible platinum jubilee, 70 years on the throne.

---

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

Pray for Ukraine.

God bless America.

---

Gold $1853
Oil $120.26

Returns for the week 5/30-6/3…data posted Saturday

Dow Jones  -0.9%  [32899]
S&P 500  -1.2%  [4108]
S&P MidCap  -0.7%
Russell 2000  -0.3%
Nasdaq  -1.0%

Returns for the period 1/1/22-6/3/22

Dow Jones  -9.5%
S&P 500  -13.8%
S&P MidCap  -11.3%
Russell 2000  -16.1%
Nasdaq  -23.2%

Bulls 35.2…up from 28.2 due to last week’s huge rally*
Bears 38.0

*Reminder, this is a contrarian indicator.

Hang in there.

Brian Trumbore

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