Week in Review

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Week in Review

10/23/2021

For the week 10/18-10/22

[Posted 9:30 PM ET]

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Edition 1,175

The news for Joe Biden continues to get worse, though perhaps he can salvage a large portion of his economic agenda over the coming week, and whether you like what might be coming legislatively or not, it would be a big win for the president.

The thing is, Gallup just released its latest update on Biden’s approval ratings and at 42%, it’s poor, and in keeping with other polls recently.

But what stands out is his approval rating among independents is down to 34%, from 61% right after his inauguration, and 58% in April.

Democrats will get slaughtered at the polls Nov. 2022 unless this figure improves significantly, and that’s where the Democratic infighting must stop, though there are signs some of those on the left, like Rep. Pramila Jayapal, are getting the message.

What’s also worrisome for the president is that next week we’ll have our first look at third-quarter gross domestic product, GDP, and my preferred barometer for such things is down to 0.5%, with consensus at 2.5%, a big comedown from the second quarter’s 6.7%.

Recession fears are rising.  A new CNBC survey has 47% fearing recession over the next 12 months, up from 28% in December 2019, pre-pandemic, with only 34% saying there won’t be one.  79% say the economy is fair or poor, and 84% expect the cost of living to continue to rise.

Not exactly a vote of confidence for the administration and its economic policies.

Nor could most Americans take comfort from the president’s performance at Thursday night’s CNN town hall with Anderson Cooper from Baltimore.

Yes, it’s painful watching Mr. Biden.  I will give him credit, though, for pulling back the curtain on the negotiations over his “Build Back Better” plan.  Anyone wondering what was really going on behind closed doors was indeed given some details on the debates that are taking place within the Democratic Party…and that’s good for all of us.

But President Biden can’t stand before the nation and for the second time in two months, recklessly say the United States will defend Taiwan if China attacks.  That is not accurate, and not longstanding American policy.  So immediately, as described further below, the White House has to walk it back.  It’s dangerous.

And he can’t say he’s going to deploy the National Guard to help alleviate the supply chain bottleneck, such as in filling the gaps in the trucking industry, when it’s the governors who must authorize such a deployment, so the administration had to walk that back.  [Plus the head of a truckers trade group told the Wall Street Journal, any National Guardsman with a commercial trucking license is probably already driving commercially.]

For now, we’ll see if the president can pull out some pearls from the pile of merde he’s sitting in these days.  The infrastructure bill would be good for America, and the president would deserve credit if he can get his progressive wing to wise up.

Biden doesn’t want to fly to Europe next Thursday, Oct. 28, for a pair of summits, the G20 in Rome and the most ambitious climate change meeting in years in Glasgow, empty handed, so he’s racing to conclude contentious congressional negotiations by then. 

In the immediate term, passage of at least the infrastructure bill could prove critical for Democrat Terry McAuliffe and his gubernatorial contest in Virginia. 

McAuliffe is tied in his race with Republican challenger Glenn Youngkin, according to a poll cited below, and as he has very publicly said, he needs to tout a win from the administration.

Biden Agenda, part deux

--As I go to post, Democratic leadership seems pretty optimistic they are closing in on a deal on the president’s sweeping social and climate change agenda, with House Speaker Nancy Pelosi saying following a visit to the White House Friday morning: “We had a very positive meeting.  I’m optimistic,” she told reporters.  “We have a couple outstanding issues that just need a decision.”

Democrats in the House, Senate and White House hope for an agreement on a framework of $2 trillion or less that will allow the House to move forward next week on a $1 trillion bipartisan infrastructure bill and set the stage for passage of Biden’s larger “Build Back Better” social package.

Disagreements over the scale of the latter package have held up Biden’s domestic agenda, with progressives refusing to vote for the infrastructure bill, which has already passed the Senate, until a deal was reached on “Build Back Better.”

Moderate Democrats, notably Sens. Manchin and Sinema, had objected to the original $3.5 trillion price tag and some provisions in the bill.  Republicans oppose that measure, but support the infrastructure legislation.

--Editorial / Washington Post

“For a moment, progressives seemed to have a dream opportunity to imprint their vision on the country.  Democrats in March muscled through a big Covid-19 relief bill on a party-line vote. The party seemed unified enough to leverage its thin majorities, as senior lawmakers prepared infrastructure and social spending bills that would cost trillions.

“These dreams were never realistic, and they are now evaporating.  But many progressives are having trouble accepting this, looking for gimmicky ways to enact broad structural change despite centrists’ objections.

“To address the demands of key moderates, Democrats must cut back their big social spending bill from $3.5 trillion to $2 trillion or less.  While all seem to agree that there is no way around slashing the price tag for Sens. Joe Manchin and Kyrsten Sinema, they disagree on how to do it.  House Speaker Nancy Pelosi sent a letter to lawmakers last week arguing that Democrats should ‘do fewer things well.’  House progressives responded with a letter arguing that Democrats should not cut programs but merely fund all of them for a shorter period of time.  ‘This is our moment to make the President’s vision a reality,’ the letter read.  ‘This bill offers us a chance to fundamentally transform the relationship between the American people and their government.’

“But that is not what President Biden promised when he ran for president.  Mr. Biden handily beat the left’s candidate, Sen. Bernie Sanders, in the Democratic primaries, arguing that one need not stage a revolution to do good.  He spoke about returning normalcy and competence to Washington, not renegotiating the social contract.

“To be sure, Mr. Biden emphasized certain policy goals, particularly addressing climate change.  Democrats still have a chance to make concrete progress on climate, family, health and education issues – if they set aside grandiose ideological ambitions and prioritize.  They do not need to expand Medicare for seniors who already have ample benefits; shoring up the Affordable Care Act for Americans of working age is a higher priority. They do not have to provide universal free community college when enhanced Pell Grants can pay the neediest Americans’ tuition bills.  They can put stricter income limits on the child tax credit, ensuring that it still cuts child poverty without wasting taxpayer money on higher-income people….

“This does not mean Democrats should settle for little.  If the 2020 election was not a vote for revolution, neither was it an endorsement of stasis.  Mr. Biden promised that a return to normalcy would produce tangible results….

“Both sides of the party must keep this in mind as the Democrats pare their legislative ambitions.”

Wall Street and the Economy

According to a Quinnipiac University national poll, more than half of Americans (55 percent) think the nation’s economy is getting worse, while 15 percent think it’s getting better, and 28 percent believe it’s staying the same.

If you looked at the Atlanta Fed’s GDPNow barometer, you’d go along with the 55%, as its forecast of third-quarter growth has plummeted from 6%+ in August to just 0.5% as of this week. 

On Friday, Fed Chairman Jerome Powell said that the U.S. central bank is “on track” to begin reducing its purchases of assets, and noted that he expects inflation to abate next year as pressures from Covid fade.

“Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages,” Powell said in a virtual appearance.  The most likely case is for inflation pressures to abate and job growth to resume its pace from his past summer, he said, but “if we were to see a risk of inflation moving permanently higher, we would certainly use our tools,” meaning actually raising interest rates, which would spook the market if the Fed felt forced to do so much sooner than now forecast.

But Powell said today, “It is time to taper, not to raise rates,” adding he believes Fed policy is “well positioned” to handle a variety of scenarios.

Powell said he expects economic growth to be below trend through the end of the year before accelerating in 2022 as supply chain constraints diminish amid strong demand and further recovery in employment.

The easing of supply constraints that have kept inflation elevated should give the Fed’s policymakers time to consider further policy adjustments without risking choking off the recovery, Powell said.

As for the economic data on the week, September industrial production was weak, -1.3%, when a slight gain was forecast, with August revised downward.

September housing starts came in less than expected at 1.555 million units, annualized, while existing home sales in the month were up 7% from August, 6.29 million, with the median existing-home sales price climbing 13.3% year-over-year to $352,800, according to the National Association of Realtors.  Unsold inventory sits at just a 2.4-month supply.

Lastly, the U.S. budget deficit totaled $2.77 trillion for 2021, the second highest on record but an improvement from the all-time high of $3.13 trillion reached in 2020.  The deficits in both years reflect trillions of dollars in government spending to counteract the effects of the pandemic.

Before the pandemic, the biggest deficit the federal government recorded was a shortfall of $1.4 trillion in 2009 during the Obama administration as the government spent heavily to lift the country out of a severe recession following the 2008 financial crisis.

The improvement over 2020 is the result of receipts for the full fiscal year, running from Oct. 1, 2020 to Sept. 30, 2021, totaling $4.046 trillion, an increase of $626 billion, or 18.3%, from fiscal 2020, with higher individual and business income taxes from an improving economy fueling the rise.  Republicans argue, why raise taxes when receipts are flooding in?  They have a good point.

At the same time, fiscal outlays jumped by $266 billion, or 4.1%, to $6.818 trillion, with the increase driven by continued spending from legislation enacted to support the economy through the pandemic, the Treasury Department said.

Europe and Asia

We had flash PMI data for the month of October in the eurozone.

The composite reading for the EA19 was 54.3, a 6-month low (50 the dividing line between growth and contraction).  Manufacturing 58.5, Services 54.7.

Germany: Manufacturing 58.2 (9-mo. low), Services 52.4
France: Mfg. 53.5 (9-month low), Services 56.6

UK: Mfg. 57.7, Services 58.0

Chris Williamson / IHS Markit

“A sharp slowdown in October means the eurozone starts the fourth quarter with the weakest growth momentum since April.  A manufacturing sector beset with supply chain delays saw production growth falter to the lowest since the first lockdowns of last year.  The services sector has meanwhile seen some of the summer rebound fade just as resurgent virus case numbers bring renewed concerns, notably in Germany. These worries have once again hit the consumer-facing travel, tourism and recreation sectors in particular.

“The ongoing pandemic means supply chain delays remain a major concern, constraining production and driving prices ever higher, both in manufacturing and in the services sector. Average selling prices for goods and services are rising at a rate unprecedented in over two decades, which will inevitably feed through to higher consumer prices in the coming months.

“While the overall rate of economic growth remains above the long-term average for now, risks seem tilted to the downside for the near-term as the pandemic continues to disrupt economies and push prices higher. After strong second and third quarter expansions.  GDP growth is looking much weaker by comparison in the fourth quarter.”

A report from Eurostat on government debt for the second quarter 2021 has it at 98.3% of GDP in the euro area, down from 100.0% in Q1.  Up from 94.4% a year ago.

Germany 69.7% Q2 2021, France 114.6%, Italy 156.3%, Spain 122.8%, Netherlands 54.2%, Greece 207.2%.

And we had a report from Eurostat on September inflation for the EA19, 3.4%, up from 3.0% in August and -0.3% a year ago.

But ex-food and energy, the figure was 1.9% vs. 0.5% in Sept. 2020.

Germany 4.1%, France 2.7%, Italy 2.9%, Spain 4.0%, Netherlands 3.0%.

Turning to Asia….China released the figure for third-quarter GDP, via the National Bureau of Statistics, and it was 4.9% for July-September from a year earlier, the weakest clip since the third quarter of 2020 and below forecasts.  On a quarterly basis, growth eased to 0.2% from a downwardly revised 1.2% in the second quarter.

The People’s Bank of China governor Yi Gang said the economy for the year is still expected to grow 8%.

Other data points were generally less than expected as well.

Industrial output rose just 3.1% in September from a year earlier, marking the slowest growth since March 2020, during the first wave of the pandemic.

Retail sales did grow 4.4% last month, faster than forecasts and the 2.5% growth in August.

Fixed asset investment (big stuff) climbed 7.3% in the first nine months from a year ago, also lower than forecast.

The jobless rate fell from 5.1% to 4.9%.

The world’s second-largest economy is facing several major challenges, including the China Evergrande Group debt crisis (see below), ongoing supply chain delays and a critical electricity crunch.

Meanwhile, President Xi Jinping is hitting the brakes, it seems, on some of the aggressive moves he took against key industries ahead of a political gathering that could decide whether he rules the country indefinitely.

In recent weeks Chinese authorities have moved to soften sweeping policies designed to make the economy less dependent on debt, monopolies and fossil fuels. Xi sought to chasten China’s corporate elites, but he soon saw his policies were hitting ordinary citizens as well in higher power bills, lost savings, and, if the slowdown continues, potentially fewer jobs.

Premier Li Keqiang expressed caution a month ago, saying China needed to rethink the pace of the country’s energy transition as a power crisis threatened to keep factories in the dark and homes without heat during the winter.

Xi has a party plenum next month and then next year’s Party Congress – a twice-a-decade leadership reshuffle at which he’s expected to secure a precedent-breaking third term.  It’s not going to look good if ordinary Chinese citizens are suffering, especially ahead of the big confab.

Separately, China’s pork output rose 38% in the first nine months of 2021 versus a year earlier. The NBS said China slaughtered 491.93 million hogs thus far in 2021, up 36% owing to last year’s swine fever epidemic.

In Japan, flash PMIs for the month of October showed the first expansion in six months, 50.7 for both manufacturing and services, owing largely to a reduction in Covid-19 cases and looser pandemic restrictions.

September exports rose 13% year-over-year, imports 38.6%, both above forecasts.

September inflation was 0.2% Y/Y, 0.1% on core, still far from the Bank of Japan’s long-held goal of 2.0%.

Street Bytes

--In a classic case of climbing the wall of worry, the Dow Jones finished the week at a new all-time high, with the S&P 500 hitting a new record on Thursday, before a slight pullback today, and Nasdaq is approaching a new high of its own.  All of this despite inflation and supply chain fears, and the wobbly economic recovery.  Progress on spending talks helped as well as some strong earnings reports.

But today was emblematic of the rollercoaster the market has been on recently.  Shares in American Express rose 5% on a strong earnings report today, helping to power the Dow, while the likes of Intel (disappointing earnings and outlook), Facebook and Snap cratered, the latter two on Snap’s earnings, which were hit by Apple’s new privacy changes that have impacted advertising.

For the week the Dow Jones rose 1.1% to 35677, the S&P 1.6%, and Nasdaq 1.3%.

--U.S. Treasury Yields

6-mo. 0.06%  2-yr. 0.45%  10-yr. 1.63%  30-yr. 2.07%

The 10-year traded over 1.70%, threatening to break through the high level for the year, 1.77%, but then backed off.  It’s been volatile, with every piece of information on inflation, and traders are watching it closely.

--Fed Chairman Jerome Powell sold between $1 million and $5 million in stocks at the beginning of October 2020 – a month that turned out to be the worst for Wall Street since the beginning of the Covid-19 pandemic.

The transaction, which is noted on a public disclosure form Powell signed off in May and was first reported by The American Prospect, is an echo of activities that led to the recent resignations of two regional leaders of the central bank.

The disclosure form indicates that Powell sold the Vanguard Total Stock Market Index Fund shares on Oct. 1, 2020.  Ten days earlier, a separate sale of shares from the same fund netted the Fed chair between $50,000 and $100,000.

As Powell played the market, he was calling on Congress to pass a Covid-19 relief bill even as negotiations between lawmakers and the Trump administration were in a stalemate.  The American Prospect, citing Powell’s public schedule, reported that he had spoken with then-Treasury Secretary Steven Mnuchin four times on Oct. 1, as well as with Speaker Nancy Pelosi.

The next day, Trump announced he had tested positive for Covid, and was helicoptered to Walter Reed.

Separately, Bloomberg reported on Oct. 1 of this year that Fed Vice Chair Richard Clarida had moved between $1 million and $5 million out of one mutual fund and into two other funds on Feb. 27, 2020, the day before Powell signaled a potential interest rate cut due to the pandemic.

The disclosures have drawn the ire of Sen. Elizabeth Warren (D-Mass.), who asked the SEC for an investigation into whether various Fed governors, and Clarida, violated insider trading rules.  Warren has also said Powell “failed as a leader.”

But other lawmakers have lined up behind Powell as President Biden nears a decision about whether to nominate him for a second four-year term that would begin in February.

So with all the above in mind, Thursday, Powell imposed sweeping personal-investing restrictions on senior officials in a bid to address the stock-trading controversy.

The new rules will restrict senior officials’ trading to broad-based investment vehicles such as mutual funds.  They also will require any trades to be preapproved and pre-scheduled.

The rules will apply to the system’s 12 reserve bank presidents and the seven governors on the central bank’s Washington-based board, as well as an unspecified number of senior staff.

--Despite hints from Russian President Vladimir Putin that state-owned Gazprom would be providing additional natural gas exports to Europe in November, the company has damped down expectations.

UK and European gas prices surged 18% after a key pipeline capacity auction showed no increase from Russia either through the Ukrainian pipeline system or lines passing via Poland to northwest Europe.

Russia seems to want to leave supplies tight as winter begins, further raising prospects of shortages should the weather be colder than normal.

The Kremlin, while hinting of sending more gas, has also alluded to Germany’s approval of the start-up of the controversial Nord Stream 2 pipeline – which bypasses Ukraine – as being key to boosting supplies.  The International Energy Agency said it believes Russia has the capacity to boost exports by 15 percent to Europe.

Nat gas prices are more than five times higher than a year ago, posing a distinct threat to Europe’s recovery from the pandemic.

--Tesla Inc. noted a third consecutive record quarterly profit, thanks in part to the electric-vehicle maker’s ability to navigate the supply-chain crisis.

Tesla reported a $1.6 billion third-quarter profit, up from $331 million a year earlier, on record revenue of $13.8 billion.  The results beat Wall Street expectations of a profit of around $1.3 billion and $13.6bn in revenue.

“Due to parts shortages and logistics variability, we have not been able to run our factories at full capacity,” Tesla CFO Zachary Kirkhorn said on an analyst call, adding that customers are having to wait longer for vehicles.

Tesla did deliver roughly 73% more vehicles than in the year ago period, driven by an uptick in sales of vehicles made in China, now home to Tesla’s largest auto plant by output.

Analysts expect vehicle deliveries to continue to climb in the current quarter to around 266,000, according to FactSet – positioning the company to hand over nearly 900,000 vehicles to customers in 2021.  The company has said it is aiming to increase deliveries by more than 50% over last year’s total of nearly half a million vehicles.

Tesla is also going to start producing vehicles at two new factories by the end of the year, one in Austin, Texas, and the other outside Berlin.

Put it all together and today, Tesla shares hit a new record, $910, before finishing the week at $909.

--United Airlines on Tuesday reported higher-than-expected revenue for the third quarter as travelers returned in the summer, despite a hit from the Delta variant, which slowed bookings and drove up cancellations.  The airline didn’t give a timeline for when it would return to profitability.

United posted net income of $473 million thanks to a boost from $1.13 billion in federal payroll aid.  Its third-quarter sales totaled $7.75 billion compared with Wall Street analysts’ expectations for $7.64 billion and down 32% from the same quarter in 2019, before the Covid-19 pandemic began.  It posted a per-share adjusted loss of $1.02, better than analysts expected.

United said it expects its fourth-quarter capacity to be down 23% compared with 2019 and that its sales for the last three months of the year would be down 25% to 30% from the same period two years ago.

CEO Scott Kirby warned about jet fuel costs in the short term, which threatens the pace of recovery for the industry.

“Ultimately higher jet fuel prices lead to higher ticket prices,” Kirby said in an interview with CNBC.  Last week, Delta Air Lines warned it may have to pass on higher costs to consumers.

--American Airlines reported a third-quarter profit of $169 million after collecting nearly $1 billion in federal pandemic aid, and it expects big crowds and more flights during the upcoming holidays.  AAL reported a Q3 adjusted net loss of $0.99 per share, compared with a loss of $5.54 a year earlier.

Total operating revenue rose to $8.97 billion in the quarter ended Sept. 30 from $3.17 billion a year earlier.

The airline felt the late-summer impact of the highly contagious Delta variant, but as Chairman and CEO Doug Parker said, “It has not stopped our progress.”

American said it expects fourth-quarter revenue to be down 20% compared with the same quarter in pre-pandemic 2019. The Fort Worth, Texas-based airline said passenger-carrying capacity in Q4 will be only 11% to 13% below the same period of two years ago.

American plans to operate more than 6,000 flights a day during peak days in the fourth quarter, which compares with an average of just more than 5,600 flights a day during the third quarter, which included most of the summer vacation season.

--Southwest Airlines said several days of delays and cancellations earlier this month ended up costing it $75 million, the carrier showed in its earnings report on Thursday.

Southwest canceled about 2,000 flights over a four-day period this month due to, the airline said, disruptions related to weather, air traffic control and staffing difficulties.

In its report on Thursday, the budget carrier said the bulk of the cost came from customer refunds, lost revenue from the canceled flights and unspecified “goodwill gestures.”

Southwest reported net income of $446 million over the third quarter, which is more than many analysts anticipated.  The carrier warned that despite improving conditions, it expects a difficult fourth quarter.

“The company is encouraged by recent improvements in underlying revenue trends as Covid-19 cases have declined; however, the lingering effects from the deceleration in bookings in the third quarter are estimated to negatively impact fourth quarter operating revenues by approximately $100 million,” the airline said in a statement.

“October operating revenues include two headwinds – an estimated $40 million negative impact due to the lingering effects of the Delta variant and an estimated $75 million negative impact as a result of flight cancellations from operational challenges experienced earlier this month.”

The airline said it now expects fourth-quarter capacity to be down 8% from 2019, compared with the 5% reduction it had previously planned.

CEO Gary Kelly said during a conference call Thursday, “I pushed a little too hard there in the third quarter with capacity.”

Southwest’s total third-quarter revenue, $4.68 billion, increased 161% over the same period in 2020, but was 17% below the figure for the penultimate quarter of 2019.

--TSA checkpoint travel numbers vs. 2019…

10/21…81 percent of 2019 level
10/20…73
10/19…68
10/18…80
10/17…85
10/16…83
10/15…78
10/14…79

--Helped by the breakout hit “Squid Game,” Netflix on Tuesday reported higher quarterly profit and more subscriber growth than expected.

The Korean series, in which characters desperate for money enter a deadly competition, was viewed by 142 million households in its first four weeks – the largest series launch in Netflix history, the company said.  The program ranked first in 94 countries, including the U.S.

The show’s popularity helped Netflix add 4.38 million subscribers in the third quarter, up from 2.2 million a year earlier.  Analysts had expected the company would add 3.78 million paying subscribers in the quarter.  Netflix now has 222 million customers, about 67 million of them in the United States. 

The streamer’s revenue rose 16% to $7.48 billion in the third quarter, compared with a year earlier.  Net income was $1.45 billion, up from $790 million a year ago, and easily surpassed analyst estimates.

Netflix’s foreign-language shows are booming, with many of them costing less than U.S. programs.  For example, “Squid Game” cost Netflix $21.4 million (and is worth at least $891 million by one Netflix metric), compared with the $24.1 million that the company paid stand-up comic Dave Chappelle for his special, “The Closer,” according to Bloomberg.  “The Closer” was viewed by a much smaller audience pool of at least 10 million people.

But Netflix has received substantial backlash from controversial remarks Chappelle made in his special about trans people, which some believe could cause further violence toward the trans community.

Netflix said it doesn’t plan to take down the special and does not believe it incites violence.

On Wednesday, trans employees at Netflix and their supporters staged a walkout.

Netflix’s share of the streaming pie has continued to shrink as competitors like Disney+, AppleTV+ and HBO Max have entered the market.

Overall, the shares were largely unchanged on the week.

--Johnson & Johnson raised its 2021 profit forecast again after growing sales of the cancer treatment Darzalex and other drugs pushed it past Wall Street’s third-quarter earnings expectations.

The health care giant also said Tuesday that sales of its single-shot Covid-19 vaccine started to pick up in the quarter, nearly doubling what it brought in during the first half of the year.

JNJ expects adjusted earnings to range between $9.77 and $9.82 per share this year, with sales, ex-the impact of exchange rates, in a $92.8 billion to $93.3 billion range including vaccine sales, higher than the Street expects on the former, a little under on the latter.

Global sales of the multiple myeloma treatment Darzalex jumped 44% in the quarter to $1.58 billion.

JNJ rang up $502 million in sales from its Covid-19 vaccine in the third quarter, after pulling in $264 million during the first half of 2021.  The company will benefit from a recent FDA ruling that an extra shot of the vaccine is recommended, though J&J has said it doesn’t intend to profit from its vaccine, which it is selling for $5 to $8 per dose.

Overall, the company’s net income climbed 3% to $3.67 billion in the third quarter, while sales grew nearly 11% to $23.34 billion.

--Procter & Gamble Co. warned that higher commodity and freight costs would take a bigger bite out of earnings, but kept its full-year forecasts intact, banking on higher prices and resilient demand for personal care products.

The Tide detergent maker said it now expects a hit of about $2.3 billion from commodity and freight expenses this fiscal year, compared with a prior forecast of about $1.9 billion, as the stop-and-start nature of the pandemic, worker shortages and clogged shipping ports affect global supply chains.

Price hikes due to rising costs and an increase in demand for personal care products spurred by people returning to social events helped boost P&G’s sales by 5% to $20.34 billion in the quarter.  Net income fell 4% to $4.11 billion.

--IBM reported weaker-than-expected revenue in the latest quarter, weighed down by its cloud business.  The company’s cloud and cognitive-software business had $5.69 billion in revenue, shy of estimates.

CEO Arvind Krishna acknowledged the segment missed internal projections but pointed to the 17% revenue growth from Red Hat, the software company IBM bought in 2019.

The Red Hat acquisition laid the foundation for IBM’s decision to split into two pieces and focus on fast-growing businesses like cloud-computing and artificial intelligence.

Total revenue for the September quarter rose to $17.62 billion, from $17.56 billion a year earlier.

IBM said it expects to end 2021 in position to deliver mid-single-digit revenue growth, but the shares fell hard on the poor earnings.

--Intel Corp. reported third-quarter net income of $6.82 billion, $1.67 per share, on revenue of $19.19 billion, beating the Street’s consensus.

But for the current quarter ending in December, Intel said it expected per-share earnings to be 90 cents, vs. expectations of $1.02.  The company did forecast revenue that is greater than what the Street is calling for.

All told, the Street was confused by Intel’s long-term outlook and took the shares down 11%, as the company also said the chip shortage will last into 2023.

--American Express saw its profits surge last quarter by 70%, the company said Friday, as Americans and companies pulled out their cards to start traveling, dining out and entertaining as they had done before the pandemic.

AmEx earned $1.83 billion last quarter, compared with a profit of $1.07 billion in the same period a year ago.  Revenue came in at $10.93 billion.  The results were significantly better than what the Street expected.

The company attributed the surge in profit to cardmember spending, which the company said jumped to a record high in the third quarter.  AmEx earns most of its revenue from the fees it charges merchants to accept its cards, and the more money spent on its network, the higher the company’s profits tend to be.

AmEx cardmembers spent $330.7 billion on their cards, an average of $5,771 per card issued, up from $225.5 billion on its network in the same period last year.

The company said card spending by Gen Z and Millennials rose a whopping 38% in the quarter.  Overall, AmEx said U.S. consumer card spending is at 98% of what it was before the pandemic.

--Facebook reports its earnings next week and it is expected the company will change its name to emphasize its new focus on the “metaverse,” as reported by the Verge on Tuesday, citing a source with direct knowledge of the matter.

Facebook CEO Mark Zuckerberg has been talking up the metaverse, a digital world where people can move between different devices and communicate in a virtual environment and the group has invested heavily in virtual reality and augmented reality, developing hardware such as its Oculus VR headsets and working on AR glasses and wristband technologies.

The move would likely position the flagship app as one of many products under a parent company overseeing brands such as Instagram and WhatsApp, according to Verge.

Google adopted such a structure when it reorganized into a holding company called Alphabet in 2015.

Today, Facebook’s core business is less important to the group and it’s looking to revamp an image tarnished by regulatory and legal scrutiny of how it handles user safety and hate speech.

So it’s hoped that having a different parent brand name guards against having a negative association transferred into a new brand.

Separately, Facebook plans to hire 10,000 in the European Union over the next five years to help build the ‘metaverse.’

--Former president Donald Trump took advantage of one of Wall Street’s hottest fads, SPACs, or special purpose acquisition companies, to launch a social media company.  SPACs go public first and raise money from investors with the goal of finding a private company to merge with.

And so Thursday, a SPAC called Digital World Acquisition (symbol DWAC) announced it was acquiring Trump’s latest company, Trump Media and Technology Group (TMTG) – incorporated in Delaware in February, with no revenue or tested business plan.  But Wednesday they reached a deal to merge with Digital World and the company, which commenced trading on Sept. 30, hit the market with a new partner.

Assuming the merger is consummated down the road, the money raised last month by Digital World, $300 million, will soon be bankrolling the Trump media venture, which is looking to launch next year with a Twitter-like social media app, “Truth Social”.

One slide in a TMTG presentation on its website includes a graphic of its potential competitors, which range from Facebook an Twitter to Netflix and Disney+ to CNN.  The same slide suggests that over the long term TMTG will also become a power in cloud computing and payments and suggests it will go head-to-head with Amazon, Microsoft, Google and Stripe.

TMTG aims to create “a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America,” it said in a filing with the SEC late Wednesday.

Shares of the newly merged company soared on Thursday, rising more than 300 percent to close at $45.50, and then just kept moving higher amidst expectations that Trump’s media company could be very profitable.

Again, there is zero real business plan, no revenue, no executives named to run the company, no chief engineer, no nuthin’.

So what happened today?  The stock zoomed to $175!...before collapsing all the way back to $75, and it sits at $81, as I go to post, in the aftermarket.

This is a stock that went public at $10 on Sept. 30, and like virtually every SPAC, sits at that level until an announcement on an acquisition, but because of the Trump name, and DWAC thus becoming the latest ‘meme’ stock, it took off like none other.

It is likely to be months before we even see a formal business plan, let alone a listing of key employees, through an SEC filing.

--Shares in embattled Chinese property giant Evergrande opened up 6% in Hong Kong Friday after Chinese media reported it had made a key interest payment before a crucial deadline.

The company missed an $83.5 million payment last month, triggering a 30-day grace period set to expire on Saturday.

A string of Chinese officials in recent days have sought to reassure investors, saying that creditors’ interests would be protected.  Market participants nevertheless expressed shock at news of the payment, but it is unlikely to allay longer-term investors concerns.

--Bitcoin hit a new high Wednesday, powered by a wave of buying after the first U.S. exchange-traded fund linked to the cryptocurrency started trading.

Bitcoin traded as high as $66,974, passing a previous high of $64,889 set in April, according to CoinDesk.  It fell to as low as $29,608 in July before roaring back on a series of developments that signal the digital currency’s move from the shadowy fringes of the investing world to the regulated main.

The latest of them was the approval by the SEC for the first bitcoin-focused ETF, which began trading Tuesday.

--Real-estate company Zillow Group saw its shares crater after it announced it would stop buying and flipping new houses for the remainder of the year.

The online home-listing platform, which got into the business of buying, refurbishing and quickly selling homes more than three years ago, said it would instead focus on closing existing purchase contracts and selling the homes it has on hand.

Zillow said it has stopped the practices because it was experiencing backlogs related to renovating the homes and that it faces constraints for on-the-ground workers.

Zillow Offers, the company’s hose-flipping outfit, accounted for more than half the company’s revenue last year.  The unit produced $772 million in revenue in the second quarter of this year, a 70% increase over the same period in 2020, according to earnings reports.  As of the end of the second quarter, the company still had 3,142 unsold homes on hand with a total value of $1.17 billion.

But Zillow may have purchased more homes than anticipated in the third quarter, leading the company to scale back for the remainder of 2021, according to RBC Capital Markets analyst Brad Erickson, who added in a note that the company is under-staffed in many markets.

I’m in the process of selling a home and have been amazed how many “all-cash” offers from companies I’m receiving (though we had a contract in two days).

--Amazon announced it was hiring 150,000 seasonal jobs across the country, some 3,300 in New Jersey, and as they’re offering $18 an hour, plus $3,000 signing bonuses in some cases, this only adds to the angst of those in the restaurant industry, for one, who can’t afford to pay staff $18 an hour, and were having trouble finding workers during the pandemic to begin with even as the reopening continues and with vaccines readily available.

--Chipotle Mexican Grill Inc. beat estimates for quarterly same-store sales on Thursday as Covid-19 vaccinations and its new menu items encouraged more people to dine out at its restaurants despite higher menu prices.

The fast-casual chain posted a 15.1% surge in comparable sales for the quarter ended Sept. 30, compared with analysts’ average estimate of 13.4% growth.  The company also forecast sales growth in the low to mid double digits range in the current quarter, compared with estimates of 14% growth.

Digital orders – as opposed to those placed in person – grew 8.6% and accounted for 42.8% of sales.

--Microsoft executives warned Bill Gates in 2008 about inappropriate emails he had sent to a female employee, a Microsoft spokesman said on Monday.

The warning involved messages in which Gates, who at the time was a full-time employee and the company’s chairman, asked an employee out on a date.  Senior Microsoft executives learned of the emails in 2008, according to the spokesman.

“These emails proposed meeting outside of work and off campus,” the spokesman said.  “While flirtatious, they were not overtly sexual, but were deemed to be inappropriate.”

Gates left the company shortly thereafter in a long-planned departure, though he remained a member of its board until last year.

--The union representing Hollywood crews reached an agreement on a new contract last weekend that avoided a historic strike that would have disrupted film and TV production nationwide.

The International Alliance of Theatrical Stage Employees and the Alliance of Motion Picture and Television Producers said they have concluded an agreement on a new three-year contract covering some 40,000 film and TV industry workers represented by 13 Hollywood union locals.

--As the news cycle has calmed under the Biden presidency and the pandemic has eased, U.S. media groups have suffered big ratings declines, with primetime ratings for CNN and MSNBC falling more than 50 percent in the third quarter compared with a year ago, when you had Trump, a raging Covid crisis, the election and racial protests driving a record interest in following the news.

CNN dropped 52 percent in the third quarter for viewers  aged 25 to 54, the key demographic for advertisers, according to Nielsen, while MSNBC suffered a 51 percent fall.  Fox News faired comparatively better, but its primetime viewership was still down 37 percent in this demographic.

The fallout is not limited to television.  The New York Times in the first half of this year added 443,000 digital subscribers, a steep slowdown from the 1.2 million added in the first half of 2020.

The Pandemic

Americans are now able to get a free booster dose of all three Covid-19 vaccines, and can even choose to mix and match, after the director of the Centers for Disease Control and Prevention signed off on new recommendations Thursday night.

At the same time, the CDC recommended boosters for certain people who got Moderna’s vaccine and all 15 million Americans who got the Johnson & Johnson shot.

Clinics, doctors and pharmacies can begin giving boosters as soon as Friday.

“The evidence shows that all three Covid-19 vaccines authorized in the United States are safe – as demonstrated by the over 400 million vaccine doses already given. And, they are all highly effective in reducing the risk of severe disease, hospitalization, and death” Dr. Rochelle Walensky, the CDC’s director, said in a statement.

A booster dose is not required for a person to be considered fully immunized.  People who received two doses of either Pfizer or Moderna, or one dose of J&J, are fully immunized.

More than 189 million people in the United States have been fully vaccinated against Covid, about 57% of the total population.  Hospitalization rates among unvaccinated Americans are between nine and 15 times higher than among vaccinated people, according to the CDC.

Pfizer and BioNTech said their booster shot was 95.6% effective against symptomatic Covid in a study of 10,000 people aged 16 and older.  The Delta variant was the predominate strain during the trial, which bolsters the argument for giving a third dose more widely.

Pfizer also said its vaccine had 90.7% efficacy in 5-11 year olds.

Johnson & Johnson presented data showing that a single dose of its vaccine provided 74% protection against severe disease globally and 70% protection against all symptomatic disease.

Covid-19 death tolls, as of tonight….

World…4,952,848
USA…755,642
Brazil…605,211
India…453,742
Mexico…285,669
Russia…228,453
Peru…199,978
Indonesia…143,153
UK…139,326
Italy…131,763
Colombia…126,994
Iran…124,928
France…117,440
Argentina…115,819
Germany…95,794
South Africa…88,891
Spain…87,132
Poland…76,359
Turkey…68,700
Ukraine…63,003
Romania…43,844
Philippines…41,520
Chile…37,651
Ecuador…32,937
Czechia…30,953
Hungary…30,492
Canada…28,729
Pakistan…28,344
Malaysia…28,312
Bangladesh…27,805
Belgium…25,835
Tunisia…25,132
Iraq…22,901
Bulgaria…22,839
Vietnam…21,543

[Source: worldometers.info]

U.S. daily death totals…Sun. 337; Mon. 660; Tues. 1,563; Wed. 2,018; Thurs. 1,428; Fri. 1,547.

Covid Bytes

--More than a year and a half since the Covid-19 pandemic hit the United States, an overwhelming majority of Americans (81 percent) do not expect life to return to normal in the U.S. anytime soon, according to a Quinnipiac University national poll of adults released Wednesday.

--Former FDA commissioner Scott Gottlieb called for “urgent research” into a mutation of the Delta variant – known as “Delta Plus” – following a surge in Covid cases in the UK.

“We need urgent research to figure out if this Delta Plus is more transmissible, has partial immune evasion,” Gottlieb said in a tweet.

Gottlieb’s comments come as the UK reported the highest daily jump in new cases on Sunday since mid-July – around when Prime Minister Boris Johnson authorized the removal of most Covid-related restrictions in what was dubbed “Freedom Day.”

As a follower of the Premier League, and seeing packed stadiums in the UK, you do wonder, even though Britain has as high a rate of fully vaccinated people as just about any other nation on earth.  But the graph (look it up on worldometers) is rather ugly, though the death rate is not spiking, yet.

--I was talking about the situation in Russia long before others and this week, President Vladimir Putin on Wednesday ordered most Russians to stay off work for a week later this month amid rising Covid-19 infections and deaths, and he strongly urged reluctant citizens to get vaccinated.

Russia continues to report record numbers of cases and deaths, daily.  Putin said he supports the Cabinet’s proposal to introduce a nonworking period starting Oct. 30 and extending through the following week, when four of seven days already are official state holidays. 

“Our task today is to protect life and health of our citizens and minimize the consequences of the dangerous infection,” Putin said in a video call with top officials.  “To achieve that, it’s necessary to first of all slow the pace of contagion and mobilize additional reserves of the health care system, which is currently working under a high strain.”

It is estimated that only about a third of Russia’s 146 million people are fully vaccinated.

But while the upcoming restrictions will help limit the spread by keeping people out of offices and off crowded public transportation, Moscow and many other cities haven’t curbed access to restaurants, cafes, bars, movies and gyms.

Putin said he’s puzzled to see hesitancy about vaccines, even among his close friends.

“I can’t understand what’s going on.  We have a reliable and efficient vaccine (Sputnik V).  The vaccine really reduces the risks of illness, grave complications and death.”

Russians have shown a reluctance to get the shots, a skepticism that has been blamed on conflicting signals from authorities.

While extolling Sputnik V and three other domestic vaccines, state-controlled media were often critical of Western-made shots, a message that many saw as feeding public doubts about vaccines in general.

Meanwhile, Putin is not attending the G20 summit in Rome in person this month due to concerns about the pandemic, the Kremlin said on Tuesday.  Putin briefly self-isolated last month after dozens of people in his entourage tested positive.

--A major inquiry in Brazil concluded the president, Jair Bolsonaro, should be accused of a series of crimes over his handling of the country’s pandemic.  The report is the culmination of a six-month inquiry that has revealed scandals and corruption in government.

Bolsonaro has been accused of failing to control the virus that has killed more than 600,000 Brazilians.

Initial drafts of the report recommended the president be charged with homicide and genocide against indigenous groups.  But the recommendations were dropped from the 1,200 page report and the senate lessened the potential penalties that Bolsonaro could face, and there is no guarantee he’ll actually face any criminal charges.

But he does face reelection next year amid plummeting poll numbers.

--Longtime Fox News anchor Neil Cavuto is off the air after contracting Covid-19. Cavuto, who has multiple sclerosis and is a survivor of Hodgkins lymphoma and has undergone triple bypass surgery, said Tuesday in a statement that he is fully vaccinated.

“While I’m somewhat stunned by this news, doctors tell me I’m lucky as well,” Cavuto said.  “Had I not been vaccinated, and with all my medical issues, this would be a far more dire situation.  It’s not because I did, and I’m surviving this because I did.  I hope anyone and everyone gets that message loud and clear.”

Unlike some of his colleagues on the opinion side of Fox News, Cavuto, 63, has never expressed skepticism about the effectiveness of the vaccine or mandates requiring it.  He has dismissed theories that drugs including ivermectin and hydroxychloroquine were effective alternatives in treating the virus.

Foreign Affairs

Iran: I said my piece on this topic last week, that Israel is going to have to act soon because Tehran is rapidly developing a nuclear weapons capability, but at a Jerusalem Post conference this week, former Mossad director Yossi Cohen had a different opinion:

“I think that Iran, to this day, is not even close to acquiring a nuclear weapon… This is due to longstanding efforts by some forces in the world,” alluding to Israeli covert actions in the Islamic Republic.

Iran’s position is also weaker in that there is “less foreign support for what [it is] doing than in the past,” he said.

But Cohen added, if Iran develops a nuclear weapon, Israel must be able to stop it on its own.

At the same conference, Prime Minister Naftali Bennett said Israel is “not going to wait (to take action).  I expect global powers to hold (Iran) accountable, to bring them to the UN Security Council.  That would be the peaceful route.”

“There are other routes, but that is the right thing to do, and we are going to continue pursuing that over the coming weeks and months,” he added.

I agree more with the following.

Reuel Marc Gerecht and Ray Takeyh / Wall Street Journal

“It is a common hope within Washington’s foreign-policy establishment that no matter how close Iran gets to the atomic threshold, it won’t detonate a bomb. The intelligence community claims Tehran isn’t currently taking steps to build a nuclear weapon. Many want to believe that Supreme Leader Ali Khamenei’s fatwa against the production and use of nuclear weapons will keep Iran a threshold state.  These hopes are delusional.

“The Islamic Republic of Iran is led by an ardent ideological regime that frequently relies on conspiracies to explain its predicament.  Leaders of the regime speak incessantly about the cabal of Zionists and Jews who control America and plot against the Islamic revolution.  Mr. Khamenei and his henchmen haven’t spent billions and endured a tidal wave of sanctions and social unrest only to get close to a nuclear weapon.  They will build the bomb as soon as they can and justify it afterward.

“The Iranian theocracy has gradually transformed itself.  Mr. Khamenei has purged the pragmatists from Iranian leadership.  The reformers who rallied around Mohammad Khatami (president from 1997 through 2005) and believed the theocracy could be softened, even superannuated, through the ballot box have been banned from the corridors of power.  Even conservatives who contemplated diplomatic engagement with the West to enhance the regime’s status and economic power, like former President Hassan Rouhani (2013-21) and former Parliament Speaker Ali Larijani (2008-20), are denied a seat at the table.  Iran is becoming less subtle.  The new president, Ebrahim Raisi, is the personification of the new elite – cruel, dogmatic and indifferent to Western sensibilities….

“Iran has other compelling reasons for developing atomic weapons. So far, the theocracy has relied on Shiite proxies and militias to project its power and influence across the Middle East in a relatively low-cost and effective way.  To ensure that Iran can counter the West, Israel and the Arab Gulf States, the regime will need more weapons.  Building armies, armadas and air forces is expensive and requires too much foreign input; relying on proxies against well-armed adversaries is precarious.  Hegemony on the cheap can come only from the atomic bomb.

“There is no longer any meaningful obstacle to the regime’s nuclear ambitions.  The Biden administration is too predictable and fearful. The debacle in Afghanistan and the rhetoric about ending ‘forever wars’ has emboldened Tehran, which now toys with the U.S. through on-and-off nuclear talks.  In his truculent address to the UN General Assembly last month, Mr. Raisi mocked America.  ‘From the Capitol to Kabul,’ he said, ‘one clear message was sent to the world: The U.S. hegemonic system has no credibility, whether inside or outside the country.’….

“The notion that Israel can come to the rescue with a military strike is also doubtful. Jerusalem has had its share of tough-talking prime ministers, but so far it has relied on sabotage and targeted assassinations to stall Iran’s nuclear program.  Such measures won’t alter Iran’s atomic trajectory.  Tehran’s advances in centrifuge development will soon make pre-emption impossible.

“No force in history has proved more powerful than self-delusion.  Mr. Khamenei has already thought what the West still believes is unthinkable  He believes he is on the cusp of getting even. The White House and Congress should start thinking about what to do after Iran’s first detonation to ensure an Iranian bomb becomes a liability for the regime, not an asset.

“The administration should try to marshal an international consensus against trade with Tehran by first getting the French, the European country most serious about nonproliferation, on board.  Congress could pass legislation restricting access to U.S. markets for those who trade with Iran.

“If nothing is done, realism and defeatism – the two often travel together – could play decisively to the regime’s advantage.”

This week, President Raisi said Iran backs talks with the six major powers that are “result-oriented,” adding “the unjust U.S. sanctions imposed on Iran must be lifted.”

Syria: Two bombs attached to a bus carrying Syrian troops exploded in Damascus early Wednesday, killing 14, a military official said.  It was the deadliest attack in Damascus in several years, and especially rare since government troops in 2018 captured suburbs once held by insurgents in Syria’s decade-long conflict.

The attack was a little surprising in that days earlier, the United Nations Special Envoy for Syria said the Bashar Assad government and opposition had agreed to start the process of drafting a new constitution.

But Assad, while recovering most of Syria, still has to deal with Turkish forces deployed in much of the north and northwest and U.S. forces, which are stationed in the Kurdish-controlled east and northeast.

Lebanon: The leader of Hezbollah, Sheikh Nasrallah, said Beirut’s violence of ten days ago was a dangerous and important event and marked a new phase in dealing with internal politics.

Nasrallah lashed out at the Christian Lebanese Forces party and its head Samir Geagea, repeating accusations that they were responsible for the killing of seven Shiites who died Thursday, Oct. 14, in a major gun battle.  The Lebanese Forces, which has close ties to Saudi Arabia, has denied the accusation.

Meanwhile, Lebanon’s Maronite Patriarch, Bechara Boutros Al-Rai, the top Christian cleric, said on Sunday the country’s judiciary should be free of political interference and sectarian “activism” amid tensions over a probe into last year’s blast at Beirut’s port.

The inquiry into the Aug. 4, 2020 explosion, which killed more than 200 and devastated large swathes of Beirut, has made little headway, with Hezbollah calling the lead investigator, Judge Tarek Bitar, biased and politicized.

China: As noted above, President Biden at Thursday’s town hall in Baltimore said the United States would come to Taiwan’s defense, but the White House said later there was no change in policy towards the island.  Although Washington is required by law to provide Taiwan with the means to defend itself, it has long followed a policy of “strategic ambiguity” on whether it would intervene militarily to protect Taiwan in the event of a Chinese attack.

“Yes, we have a commitment to do that,” Biden said when asked if the United States would come to the defense of Taiwan. 

In August, a Biden administration official said U.S. policy on Taiwan had not changed after the president appeared to suggest the United States would defend the island if it were attacked.

A White House spokesperson said after Biden’s most recent pronouncement:

“The U.S. defense relationship with Taiwan is guided by the Taiwan Relations Act.  We will uphold our commitment under the Act, we will continue to support Taiwan’s self-defense, and we will continue to oppose any unilateral changes to the status quo.”

Taiwan’s presidential office, responding to Mr. Biden’s remarks, said their position remains the same, which is it will neither give in to pressure nor “rashly advance” when it gets support.

Taiwan will show a firm determination to defend itself, presidential office spokesperson Xavier Chang said in a statement, noting also the Biden administration’s continued concrete actions to show its “rock-solid” support for Taiwan.

Bided added on Thursday: “I don’t want a cold war with China. I just want China to understand that we’re not going to step back, that we’re not going to change any of our views.”

China says Taiwan is the most sensitive and important issue in its ties with the United States and has denounced what it calls “collusion” between Washington and Taipei.

As for the reported test of a Chinese hypersonic missile, military officials at the Pentagon found it “deeply concerning,” adding that the U.S. has “a lot of work to do” on technology and policy, as reported by Patrick Tucker of Defense One.

The August test, first reported earlier this week in the Financial Times, featured a hypersonic glide vehicle that entered orbit.  Hypersonic weapons descend at more than five times the speed of sound while retaining enough maneuverability to evade missile defenses designed for the more predictable paths of ICBMs.  China’s recent orbital test suggests that a weapon based on its vehicle could have essentially unlimited range.

In 2019, Gen. Paul Selva, then vice chief of the Joint Chiefs of Staff, described the problem with hypersonics thusly:

“If you’re going Mach 13 at the very northern edge of Hudson Bay, you have enough residual velocity to hit all 48 of the continental United States and all of Alaska.  You can choose to point it left or right, and hit Maine or Alaska, or you can hit San Diego or Key West.  That’s a monstrous problem.”

Sen. Michael Bennet (D-Colo.) said on Monday: “China’s capabilities are extraordinary.  We have a lot of work to do to make sure that we’re defending the United States of America in the case of potential aggression. I hope it never comes to that but we need to make sure that we’ve got a strategy and approach to neutralize these threats as they arise.”

Rep. Jason Crow (D-Colo.) said that the test “underscored the important decision President Biden made to end our combat operations in Afghanistan, because we can’t do everything.  We have limited resources. We have extraordinary threats, and it’s our job to decide how we’re going to allocate those very limited resources to the biggest and the growing and the most evolving threats.  That’s what we’re working to do.”

Sen. Lindsey Graham (R-S.C.) told Fox News: “If in fact, the Chinese have developed a hypersonic missile that can deliver a nuclear weapon, it’s a military game-changer when it comes to nuclear forces.  We’ve allowed the Chinese to leapfrog us and we’re going to have to do one of two things, get them to stand down, and I don’t know how Joe Biden convinces anybody to stand down.

“If they don’t stand down, we’re going to have to develop a capability to neutralize this and one-up China,” Graham added.

For its part, China claimed they conducted a routine test of a space vehicle to verify the technology of their reusability.  A foreign ministry spokesman said the launched object “was not a missile” with a military purpose, but “a space vehicle” for civilian aims, he emphasized.

While the foreign ministry was denying it was a missile launch, the Chinese Communist Party mouthpiece Global Times editorialized:

“If the FT report is to be believed, it means that there is a key new member in China’s nuclear deterrence system, which is a new blow to the U.S.’ mentality of strategic superiority over China.”

Separately, NATO Secretary-General Jens Stoltenberg said countering the security threat from the rise of China will be an important part of NATO’s future rationale, marking a significant rethink of the Western alliance’s objectives that reflects the United States’ geostrategic pivot to Asia.

In an interview with the Financial Times, Stoltenberg said China was already having an impact on European security through its cyber capabilities, new technologies and long-range missiles.  How to defend NATO allies from those threats will be “thoroughly” addressed in the alliance’s new doctrine for the coming decade, he said.

“NATO is an alliance of North America and Europe. But this region faces global challenges: terrorism, cyber, but also the rise of China.  So when it comes to strengthening our collective defense, that’s also about how to address the rise of China,” Stoltenberg said.  “What we can predict is that the rise of China will impact our security. It already has.”

Stoltenberg also said Russia and China should not be seen as separate threats.  “First of all, China and Russia work closely together,” he said.  “Second, when we invest more in technology…that’s about both of them….

“It’s one big security environment and we have to address it all together.  What we do on readiness, on technology, on cyber, on resilience, matters for all these threats,” he added.

North Korea: State media KCNA reported on Wednesday that the country successfully tested a new submarine launched ballistic missile on Tuesday, in its first such underwater test-launch in two years and one it says will bolster its military’s undersea capabilities.

The test was the fifth round of missile launches since September and came as North Korea steps up pressure on Washington and Seoul to abandon what Pyongyang sees as hostile policies such as joint U.S.-South Korea military drills and international sanctions on the North.

Separately, in a newly-released interview with Bob Woodward in July, Colin Powell had some of the following thoughts on North Korea.

“How does anybody think that North Korea would find a way to attack us without us destroying them the next morning,” he said.  “How can anyone think equally of Iran.  Iran and North Korea cannot be our enemies because they cannot stand the results of such a conflict.  We’re going to be terrified of these people?  No.  Would they dare?”

“But sometimes you get a leader who’s suicidal,” Woodward said.

“True… The Chinese are not going to let us start a war with North Korea.  They love North Korea.  They want North Korea.  I don’t.  North Korea doesn’t bother me.  Let the little jerk [Kim Jong Un] have his parades and what not.  He’ll never try to attack us because he knows it would be assisted suicide.”

Russia: Vladimir Putin on Thursday said the Western-backed military development of Ukraine posed a real threat to Russia and the U.S. secretary of defense had effectively paved the way for Kiev (Kyiv) to join NATO after a visit earlier this week.

“Formal membership (of Ukraine) in NATO may not take place, but military development of the territory is already under way,” Putin said.  “And this really poses a threat to Russia. We are aware of that.”

NATO defense ministers agreed to a new master plan on Thursday to defend against any potential Russian attack on multiple fronts.  Defense Secretary Lloyd Austin said earlier Russia had no right to veto Ukraine’s aspirations to join NATO.

Separately, Putin could not have been pleased with the news that jailed Kremlin critic Alexei Navalny was awarded the European Parliament’s annual human rights prize on Wednesday for his efforts to challenge the Russian leader’s grip on power.

Haiti: A U.S. Christian aid organization first announced on Sunday that 17 of its members were kidnapped in Haiti, and then we learned the nation’s most prominent gang carried it off and was asking for $1 million a person in ransom.

The Ohio-based Christian Aid Ministries was in Haiti to visit an orphanage when their bus was hijacked.  One of the 17 is Canadian, and the group includes five children from one family.

At week’s end there was no resolution, as the leader of the gang vowed to kill all 17 if the ransom demands weren’t met.

Random Musings

--Presidential approval ratings….

Gallup: New data: 42% approve of President Biden’s job performance, 52% disapprove, with only 34% of independents approving, the survey taken Oct. 1-19. 

Rasmussen: 42% approve, 57% disapprove (Oct. 22).

A Quinnipiac University national poll, released Oct. 20, gives Joe Biden a mere 37% approval rating, with 52% disapproving, and 12% not offering an opinion.  The number is essentially unchanged from a 38-53 split on Oct. 6.

--A House committee investigating the Jan. 6 Capitol riot unanimously supported holding onetime ex-President Trump aide Steve Bannon in contempt of Congress.

Bannon was summoned to testify before the panel, but refused to do so.

Then Thursday, the full House approved the matter, 229-202, with nine Republicans voting to refer it to the Justice Department, which has the final say on bringing charges.

Of the nine, seven voted to impeach Trump earlier this year.

In her opening remarks, Rep. Liz Cheney (R-Wy.) said Bannon had had “substantial advance knowledge of the plans” for the protest on Jan. 6 and of Trump’s plans to discredit the presidential election result.

Bannon had been fired from the White House in 2017, and was not in government at the time of the riot.

Meanwhile, President Trump sued the House select committee in an attempt to block the disclosure of White House documents, describing the panel’s demand as a “vexatious, illegal fishing expedition.”

Finally, Trump blasted Sen. Bill Cassidy (R-La.) Monday after Cassidy suggested Trump might not win the Republican nomination if he runs for president in 2024.

“Wacky Senator Bill Cassidy from Louisiana is a RINO Republican who begged for my endorsement in 2020 and used it all over the place to win re-election, much like Little Ben Sasse (R-Neb.), and then voted to impeach your favorite President,” Trump began an emailed statement.

Cassidy, one of seven Senate Republicans who voted to convict Trump of inciting insurrection in connection to the Jan. 6 insurrection, told “Axios on HBO” in an interview that aired Sunday night that the 45th president was “the first president – on the Republican side, at least – to lose the House, the Senate and the presidency in four years.”

“Elections are about winning,” Cassidy added.

Cassidy won reelection by 40 percentage points over his nearest Democratic competitor in November, while Trump defeated Biden by fewer than 19 points. 

“Now, Wacky Bill Cassidy can’t walk down the street in Louisiana, a State I won by almost 20 points,” Trump said in his email.  “He could not even be elected dog catcher today, the great people curse him.”

--Two-thirds of Republican voters say they want former president Trump to run for president in 2024, according to a new Morning Consult/Politico poll.

Eighty-two percent of Republicans view Trump favorably and 17 percent hold unfavorable views, indicating that a small chunk prefer someone new despite their admiration for him.

The above-mentioned Quinnipiac poll has Republicans by a 78-16 margin saying they do want to see Trump run for president.

Independents say 58-35 percent that they do not want to see Trump run.

Just over half of Americans (51 percent) say Trump has had a mainly negative impact on American politics, while 41 percent say he has had a mainly positive impact on American politics.

This last bit, the 41 percent, depresses the hell out of me. 

At the same time, by a 52-41 percent margin, Americans say the country is worse off today than it was a year ago and on that I don’t disagree.  Independents say 56-38 percent the country is worse off.

Separately, the Quinnipiac poll reveals that Americans give Democrats in Congress a negative 30-60 percent job approval rating.

And they give Republicans in Congress a negative 23-65 percent rating.

The poll also has, by a 59-35 percent margin, Americans saying they consider what happened at the Capitol on Jan. 6 an attack on the government.

--In a separate Monmouth University poll concerning the critical race this November, Republican Glenn Youngkin is even with Democrat Terry McAuliffe in Virginia at 46-46 among registered voters. McAuliffe held a 5-point lead in similar Monmouth polls in both August and September.

For McAuliffe, the biggest problem is with independents, who went from going for him in September by a 46-37 percent margin to a 39-48 percent deficit.

--In New Jersey, the other big gubernatorial race for 2021, Gov. Phil Murphy’s lead over Republican challenger Jack Ciattarelli is down to six points (50-44) according to an Emerson College/PIX 11 survey released Thursday.  If accurate, this is down from a 9-point margin in a Stockton University poll released in late September and a 13-point margin in a Monmouth University poll earlier that month.

To me, Ciattarelli has been running a highly effective ad campaign.

--General Colin Powell, former secretary of state and so much more, died Monday at age 84.  His family said he died of complications from Covid-19.  Powell was fully vaccinated, but severely immunocompromised as a result of his having multiple myeloma and Parkinson’s Disease.

Before he rose to the highest ranks of the U.S. military, becoming a four-star general and later the country’s first Black secretary of state, he was a New Yorker, proud of his upbringing in the South Bronx after being born in Harlem.  He went to the city’s public schools and then the City College of New York.  He later said his city childhood introduced him to “everything you can imagine in terms of a nationality,” reveling in New York’s cultural tapestry.

There were a few times when I wanted Colin Powell to run for president.  I didn’t care what political party he was, I just wanted a true leader.  There is no doubt he should have run in 1996, and he would have cruised to the Republican nomination, and instead we ended up with Robert Dole, a good man who ran just a godawful campaign.  Bill Clinton was reelected.

Among those paying tribute was President Joe Biden, who said of Powell: “Over our many years working together – even in disagreement – Colin was always someone who gave you his best and treated you with respect.  Colin embodied the highest ideals of both warrior and diplomat…having fought in wars, he understood better than anyone that military might alone was not enough to maintain our peace and prosperity… Colin led with his personal commitment to the democratic values that make our country strong.”

President George W. Bush called Powell “a great public servant.  He was such a favorite of presidents that he earned the presidential medal of freedom – twice.  He was highly respected at home and abroad.”

Tony Blair, who as British prime minister backed the Iraq invasion, called Mr. Powell a “towering figure in American military and political leadership over many years.  He inspired loyalty and respect…his life stands as a testament not only to dedicated public service but also a strong belief in willingness to work across partisan division in the interests of his country.”

After his time in government, Powell remained a hugely influential commentator on U.S. politics and public life.  Over the years he grew increasingly distanced from his own Republican Party, disillusioned by its rightward drift.

In 2008, despite party rivalries, he endorsed Barack Obama for president.  When Donald Trump launched his own bid for the White House, Powell became one of his leading critics.

Washington Post / Editorial

“Today there are those who would reduce Mr. Powell’s career to that mistake (leading up to the invasion of Iraq), or to others, such as his pushback in 1993 against efforts by a new president – Bill Clinton – to end the ban on gays serving openly in the military. This is myopic. Unlike some other powerful figures, Mr. Powell was capable, later, of taking responsibility and admitting his mistakes, which were outweighed by his accomplishments. And he never let the criticism dampen his generosity of spirit and determination to help others.

“Mr. Powell’s favorite quotation, which he displayed on his desk at the Pentagon, was from the ancient Greek historian Thucydides: ‘Of all the manifestations of power, restraint impresses men most.’  Though the attribution may actually be apocryphal, one can understand why Mr. Powell embraced the sentiment.  Experience – from the battlefield to the bureaucracy – had instilled a healthy suspicion of power untampered by character.  Certainly Mr. Powell was true to himself, and to the values of his country, when, in recent years, he broke with the Republican Party and denounced the wanton figure, Donald Trump, who has taken it over.

“In an interview with the New York Times in 2007, the old soldier spoke of himself in the third person, and in terms that, reading them today, define the missing ingredients of American politics: ‘Powell is a problem-solver. He was taught as a soldier to solve problems.  So he has views, but he’s not an ideologue.  He has a passion, but he’s not a fanatic.’  Always aspiring to that balance of passion and wisdom, Colin Powell carved a special place in the nation’s history.”

Gerald F. Seib / Wall Street Journal

“If you want to understand the man Colin Powell was, the thing to remember is that his hobby was repairing old Volvo cars….

“(He) once explained: ‘Cars are mechanical contraptions.  Whatever problem they have is diagnosable.  You can fix it, either by putting in a part, adjusting something, or throwing it away.’

“Car repair is hardly the standard pastime for Washington movers and shakers, though the late Mr. Powell certainly was one of those. As his hobby suggests, even as Mr. Powell stood comfortably atop the Washington hierarchy, he also stood slightly apart, never entirely comfortable in the various categories where people tried to slot him.

“In fact, in outlook as well as background, Mr. Powell was singular.  He was a Black man who rose to the top in what was, when he began his journey, a military hierarchy dominated almost exclusively by whites.

“He became the nation’s top uniformed military officer, but came from an ROTC program in a New York city college, not from the more prestigious military academies.

“He had led soldiers in battle, so was comfortable with Americans in uniform, yet also was considered a trusted comrade by a series of presidents and political leaders who had no such military experience – and, indeed, in some cases, had actively avoided the very Vietnam War in which he fought….

“Plenty of people thought he should run for president, and they tried over and over to get him to do so, but he never found a wholly comfortable spot for himself in the stratified and polarized political system that emerged during the course of his lifetime.  He was too conservative – politically and personally – for today’s version of the Democratic Party, yet couldn’t embrace the nationalist and isolationist tendencies that can be seen in today’s Republican Party.

“His simple, direct approach to problem-solving was never more obvious than at a moment in the early days of the first Persian Gulf War when, as chairman of the Joint Chiefs of Staff, he succinctly explained the plan for driving Iraqi leader Saddam Hussein’s army out of Kuwait this way: ‘Our strategy to go after this army is very, very simple. First, we’re going to cut it off, and then we’re going to kill it.’  His Powell Doctrine on use of force – a last resort, but deployed decisively if chosen – might have prevented some unhappy engagements if followed in recent years….

“In short, he showed he could stand his ground in both the military and civilian worlds, and do so more comfortably than other military officers who tried to pull off the same feat in the years ahead. It was this comfort in multiple, parallel universes that explained his success in Washington.”

Editorial / Wall Street Journal

“Few men in American history came from more modest means and rose to more dramatic military and diplomatic heights than Colin L. Powell….

“Born in Harlem to immigrants from Jamaica, Powell went to City College when that institution had high standards and was still a path to upward mobility.  He enrolled in the Army’s Reserve Officers’ Training Corps, which launched him on a distinguished military career.  His service included combat tours in Vietnam, two Purple Hearts, and the Soldier’s Medal for returning to a crashed helicopter to rescue fellow soldiers.

“Powell was among the generation of Vietnam-era officers who sought to rebuild the military after the discord and demoralization of that conflict.  He won a White House fellowship working  in the Office of Management and Budget in 1972, where he met Caspar Weinberger and Frank Carlucci. The two became patrons as he rose in the military ranks, and he joined the National Security Council as deputy to Mr. Carlucci in the late Reagan years.

“Powell was named Chairman of the Joint Chiefs of Staff by President George H.W. Bush, and he presided over the enormous military deployment that won the Gulf War and ousted Saddam Hussein from Kuwait.  That success, along with his great personal charisma, catapulted him to public fame and had some Republicans courting him to run for President.

“Powell became George W. Bush’s first-term Secretary of State, and the media obituaries fault his famous speech* making the case for war with Iraq based on the threat of weapons of mass destruction.  This has always struck us as unfair.  Powell based his remarks on the intelligence offered by the CIA, and only later did the government learn that much of it was mistaken. He acted honorably in supporting Mr. Bush’s decision to invade Iraq.

“The fairer criticism is that Powell and the State Department never grasped the nature of the Iraq insurgency as rooted in Saddam’s former intelligence services.  His bureaucracy was in constant battle with Defense and the White House over Iraq, which is why Mr. Bush asked for his resignation after the 2004 election.

“Powell also did a great disservice by keeping quiet about the source of the leak of the name of CIA employee Valerie Plame, though he knew the leaker was his own deputy secretary, Richard Armitage.  The leak itself did little harm, but the investigation damaged the Bush Administration and led to the unfair prosecution of Scooter Libby.

“Colin Powell’s greatest legacy is less the decisions he made in office than the example of his life and service.  He exemplified what can be achieved in America, no matter your birth, and he repaid the country many times over for the opportunities it provided.”

*Powell admitted years later, “I will always regret it,” the speech to the UN Security Council.  “There were some people in the intelligence community who knew at that time that some of these sources were not good, and shouldn’t be relied upon, and they didn’t speak up.  That devastated me.”

But Powell didn’t give the order to attack Iraq, and he didn’t stand on an aircraft carrier in front of a banner that said, “Mission Accomplished,” when the war was really just getting started.

The Washington Post’s Bob Woodward interviewed Powell this past July, releasing details upon Powell’s death.

“I’ve got multiple myeloma cancer, and I’ve got Parkinson’s disease.  But otherwise I’m fine,” he said.

“Don’t feel sorry for me, for God’s sakes!  I’m [84] years old. I haven’t lost a day of life fighting these two diseases.  I’m in good shape.”

President Trump Tuesday derided Gen. Powell in death as a turncoat who “made plenty of mistakes.”  Trump slammed Powell as a “classic RINO,” or Republican in name only, “if even that.”

“He was…always the first to attack other Republicans,” Trump said in an email message.  “He made plenty of mistakes, but anyway, may he rest in peace!”

Trump also sought to turn Powell’s death from complications of Covid into an attack on his own critics.

He sarcastically noted that it was “wonderful” to see the media treat Powell with reverence despite his missteps, especially his checkered role in launching the second war with Iraq.

“Hope that happens to me someday,” Trump wrote.

Yup, just like Trump’s tasteless attacks on the late Sen. John McCain even after his death from brain cancer.

--Surgeons in New York have successfully attached a kidney grown in a genetically altered pig to a human patient and found that the organ worked normally, a huge potential breakthrough giving hope for severely ill patients who have trouble getting an organ.

Many questions remain about the procedure, the transplant taking place with a brain-dead patient who was followed for only 54 hours, but experts in the field say it was still a milestone.

“We need to know more about the longevity of the organ,” said Dr. Dorry Segev, professor of transplant surgery at Johns Hopkins School of Medicine who was not involved in the operation.  Nevertheless, he said: “This is a huge breakthrough.  It’s a big, big deal.”

100,000 Americans are currently on transplant waiting lists, including the 90,000 who need a kidney.  Other organs, including hearts, lungs and liver, could potentially be grown in pigs for transplantation into humans.

The surgery was carried out at N.Y.U. Langone Health.

--Actor Alec Baldwin shot two people, one fatally, in an incident involving a prop gun on the set of the Western film “Rust,” of which Baldwin is a co-producer, in the Santa Fe, N.M., area.

Halyna Hutchins, the film’s cinematographer, died after being taken by helicopter to University of New Mexico Hospital, while the director, Joel Souza, was injured but released from a local hospital the next day.

Baldwin tweeted Friday, “my heart is broken.”  “There are no words to convey my shock and sadness regarding the tragic accident that took the life of Halyna Hutchins, a wife, mother and deeply admired colleague of ours.

“I am in touch with her husband, offering my support to him and his family.  My heart is broken for her husband, their son, and all who knew and loved Halyna.”

It’s not likely we’ll get any real information from the Santa Fe Sheriff’s office this weekend.

Both the Los Angeles Times and Deadline Hollywood are reporting there were major problems on the set over safety concerns, among other things.

--Gov. Gavin Newsom declared a drought emergency across California on Tuesday, after the state saw its second driest year on record.

The state is experiencing its worst drought since the late 1800s, according to the governor’s office. August 2021 was the driest and hottest August on record since the state began reporting data.

Newsom had asked people and businesses back in July to voluntarily cut water use by 15%.  As of August, California reduced urban water use by 5%, the State Water Resources Control Board reported.

But the Southern California coast, home to more than half of the state’s nearly 40 million residents, only cut water use by 3.1% in August.

California relies on reservoirs, mainly along the Colorado River, for its water supply, and the two largest, Lake Mead and Lake Powell, are at record low elevations.

The low water levels triggered the first water shortage along the Colorado River, which means that starting in 2022, Arizona, Nevada, and Mexico will all have to cut their water use.

Separately, the water level at Lake Tahoe is so low, water is no longer flowing into the Truckee River and salmon aren’t expected to spawn in a major tributary this year.  It’s just the latest insult to the treasured tourist destination nestled in the Sierra Nevada, after its water were clouded by smoke and ash from multiple wildfires this summer.

However, for this immediate area there is some short-term hope as significant snows in the high mountains are expected from Sat.-Monday.  Hopefully, it’s the start of a good snow season, which was so lacking last winter, though the La Nina weather condition that has developed is not historically promising in the longer term for this region.  [Lots of big storms in the Northeast, though.  We’ll get my predicted 50-incher…really, I swear…]

Lastly, regarding the oil spill off Orange County, California, investigators now believe a 1,200-foot cargo ship dragging anchor in rough seas caught an underwater oil pipeline and pulled it across the seafloor, months before a leak from the line fouled the Southern California coastline with crude.

A team of federal investigators trying to chase down the cause of the spill boarded the Panama-registered MSC DANIT just hours after the massive ship arrived last weekend off the Port of Long Beach, the same area where the leak was discovered in early October.

During a prior visit by the ship during a heavy storm in January, investigators believe its anchor dragged for an unknown distance before striking the 16-inch steel pipe, the Coast Guard said Sunday.

The impact would have knocked an inch-thick concrete casing off the pipe and pulled it more than 100 feet, bending but not breaking the line, but still undetermined is whether that caused the October leak, which thankfully was not as bad as first feared.  That said, as I noted in the first days after, the politics of the spill will linger for a long while.

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

God bless America.

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Gold $1793
Oil $83.98

Returns for the week 10/18-10/22

Dow Jones  +1.1%  [35677]
S&P 500  +1.6%  [4544]
S&P MidCap  +1.8%
Russell 2000  +1.1%
Nasdaq  +1.3%  [15090]

Returns for the period 1/1/21-10/22/21

Dow Jones  +16.6%
S&P 500  +21.0%
S&P MidCap  +21.3%
Russell 2000  +16.0%
Nasdaq  +17.1%

Bulls 43.2
Bears 23.9

Hang in there.

Brian Trumbore

 

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