Week in Review

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Week in Review

10/30/2021

For the week 10/25-10/29

[Posted 9:00 PM ET]

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Edition 1,176

President Joe Biden, in a visit to Capitol Hill on Thursday to drum up support for his sweeping domestic policy package, a dramatically scaled-back deal announced hours before he departed for twin summits in Europe, said, “We are at an inflection point.  The rest of the world wonders whether we can function.”

He added it’s not “hyperbole to say that the House and Senate majorities and my presidency will be determined by what happens in the next week.”

But with support for even the slimmed down package still an issue, Biden said as he left the Capitol, “I think we’re going to be in good shape.”

It is far from a done deal, though one of the two holdouts, Sen. Kyrsten Sinema (D-Ariz.), struck a similar optimistic tone: “I look forward to getting this done.”

The other main holdout, Sen. Joe Manchin (D-W.Va.), was less committal: “This is all in the hands of the House right now.”

It was pathetic the president could not get progressives to hand him a ‘win’ on the infrastructure bill prior to his trip (and the Virginia gubernatorial election).

Biden, and his progressive wing, needed to understand the president didn’t receive a mandate to go big, but for normalcy.

So Biden took off for Rome and the Group of 20 gathering, as well as a visit with the pope, and then he has the critical climate summit in Glasgow, Scotland.

Back in June when Biden gathered with world leaders at the Group of 7 summit, he declared “America is back at the table.”

But in the four months since, virtually nothing has gone right, and the president has seen his poll numbers plummet.  When it comes to our European allies, Biden received harsh criticism for his haphazard, disastrous withdrawal from Afghanistan where he did not come clean with NATO on his plans.

By the time the president returns, he may have received a resounding ‘No’ from Virginia voters, as the race is clearly as much a referendum on his presidency as it is on Terry McAuliffe, and a Federal Reserve meeting that will be addressing the inflation topic, among other things, that are also critical to success, or failure, in 2022.

Biden Agenda

--The White House’s Build Back Better plan unveiled Thursday represents the biggest clean-energy investment in U.S. history, with a $555 billion package of tax credits, grants and other policies aimed at reducing greenhouse gas emissions.

Sen. Manchin forced Democrats to drop a key provision targeting the electric power sector, but the final bill includes an array of tax credits for companies and consumers that will make it easier to buy an electric vehicle, install solar panels, retrofit buildings and manufacture wind turbines and other clean-energy equipment in the United States.

--With the Glasgow climate summit (COP26) in focus, a survey of 30,000 people by BBC World Service finds that 56% want their countries to play a leadership role at the meeting next week.

Concern about climate change is also at its highest point since 1998.

But unless China and India come on board, the whole exercise is worthless.

--Democrats are floating a billionaires’ tax to help pay for Build Back Better that is going nowhere.  It would tax unrealized capital gains, vs. the current situation when taxes are only due when stocks are sold.  Just impossible to implement and totally unrealistic.

A separate plan to tax companies that report more than $1 billion in profits to shareholders at a minimum 15% - even if they qualify for lots of tax breaks, is only slightly better in theory.  I’m not saying I like it.

--Editorial / Washington Post

“The framework that President Biden presented to Congress on Thursday represents the core of his domestic agenda. It is a wide-ranging social spending and climate proposal designed to be a down payment on big structural changes that would make the United States fairer and more environmentally responsible.

“Though the package, as it stands, is far from perfect, it represents a significant step toward both of those goals, while being reasonably fiscally responsible.  As recently as a few days ago, such an outcome looked very much in doubt.

“It is not as large or ambitious as most Democratic lawmakers wanted.  Important policies, particularly on climate, have been badly compromised.  But if Democratic lawmakers keep its core elements intact in the coming days of dealmaking, the measure will do substantial good.

“It would fund for six years universal prekindergarten.  It would spend half a trillion dollars over 10 years on climate change programs, including expanded green energy subsidies and hardening infrastructure against more violent climatic conditions.  It would offer subsidized health-care coverage through 2025 to millions of low-income Americans stuck in the Medicaid ‘coverage gap,’ who currently lack a plausible path to getting insurance.  It would also shore up the Affordable Care Act, on which millions of other Americans depend for coverage.

“The plan would maintain an expanded child tax credit, which drastically cut child poverty this year, through 2022.  It would also extend for a year the enhanced earned-income tax credit, a highly successful anti-poverty initiative.  Additional funding for Pell grants would help more Americans attend college.

“The White House estimates that spending on these and other programs would cost $1.75 trillion over a decade.  Negotiators excised some of the least defensible ideas, such as an expensive Medicare expansion for already highly subsidized seniors.

“To pay for these programs and cut the deficit, the White House proposes raising $2 trillion in revenue, including a 15 percent minimum tax on big companies, multinational corporate tax reform that would make it harder for firms to hide money in tax havens, a surtax on incomes over $10 million and better Internal Revenue Service tax enforcement.  Enhanced tax enforcement, which the White House estimates would bring in an extra $400 billion over 10 years, may not prove as rich a revenue source as Democrats imagine.  But other pay-fors are credible, and if Democrats hold to them, would bring in substantial new tax revenue.

“It is disappointing that the Democrats could not bring themselves to support income and inheritance tax reforms that would have broadened the revenue base for these programs while ameliorating inequality.  It is particularly disappointing that they failed to embrace a carbon tax, carbon cap or any enforceable clean energy standard that would ensure all the green spending translates into greenhouse emissions reductions.  But the pressing nature of the problem argues for accepting suboptimal policy in the interest of addressing an environmental crisis on which there is little time left to act.  Similarly, the prospect of preserving recent gains in cutting childhood poverty and shoring up health-care coverage helps make the other compromises worthwhile.

“It is now time for Democrats on Capitol Hill to put aside their differences and pull this package over the legislative finish line.  This is an imperative upon which Mr. Biden said his presidency and their majority now rest.  More important, it is something the country needs and deserves.”

--The president had an unusually long meeting with Pope Francis at the Vatican today as a debate raged back home about Biden’s support for abortion rights as a Catholic.

A White House statement made no reference to the abortion issue.  It said Biden thanked the pope for “his advocacy for the world’s poor and those suffering from hunger, conflict, and persecution.”

The president said the pope told him he should continue receiving communion, with Biden’s most ardent critics in the Church hierarchy saying Biden should be banned from receiving it.

Pope Francis, who has called abortion “murder,” has at the same time criticized U.S. bishops for dealing with the issue in a political rather than a pastoral way.

“Communion is not a prize for the perfect. …Communion is a gift, the presence of Jesus and his Church,” the pope has said.

--In a meeting with French President Emmanuel Macron, President Biden called U.S. government actions “clumsy,” after a diplomatic crisis erupted last month over a U.S. security pact with Britain and Australia.  Biden used the meeting at the G20 to try to turn the page on a relationship that came under strain over the alliance known as AUKUS. 

The pact effectively canceled a 2016 Australian-France submarine deal.  The U.S. decision to secretly negotiate a new deal drew outrage from Paris.

“I think what happened was, to use an English phrase, what we did was clumsy.  It was not done with a lot of grace,” Biden said.  “I was under the impression certain things had happened that hadn’t happened… but I want to make it clear: France is an extremely, extremely valued partner – extremely – and a power in and of itself.”

Macron said his meeting with Biden was “important” and that it was a key to “look to the future” as his country and the United States work to mend fences.

Wall Street and the Economy

As expected, the first estimate of third-quarter GDP was down significantly from Q2, 2.0% vs. 6.7% annualized.  The quarter was marked by rising Covid-19 cases and persistent supply shortages and there’s really no mystery here.  Consumption in the quarter was down to a 1.6% pace vs. the prior quarter’s 12.0% surge as the U.S. was reopening.

But we’re now at the end of October, one month into a new quarter, and with confirmed Covid cases declining, and vaccination rates rising (haltingly), more Americans are venturing out to spend money and there is no doubt we will see a healthy rebound in Q4.

I have my New Providence, NJ, commuter parking lot indicator and one of them that I pass every day is beginning to fill up.  I told you how at the height of the pandemic, there would be no more than 3 cars in a lot of about 150, for those commuting into New York.  One day this week it was 30, a high by my reading.  That’s significant.  Since a large proportion of these workers are in the financial services industry, it’s a good look into the momentum for back to the office, back to normalcy behavior.

Personally, I have not traveled a lick since March 2020.  Much of that was due to my caregiver duties (like all of it), and then the last six+ months on settling affairs after the death of our Dr. Bortrum, and I’m anxious to get out.

But at the same time the recovery gains speed again, rising prices, especially for gasoline, food, rent and other staples, presents a burden on American consumers, which is eroding the benefit of higher wages.

Befitting the surge in activity at the start of the fourth quarter, we had a Chicago purchasing managers’ report for October today and it came in at a robust 68.4 (50 representing the dividing line between growth and contraction).

The weekly jobless claims figure was also down again, another post-pandemic low of 281,000.

In other data, the S&P CoreLogic Case-Shiller 20-city home price index for August was up 1.4% month-over-month, and a whopping 19.8% vs. Aug. 2020.

September new home sales came in higher than expected at an 800,000 annual rate.

September durable goods were down 0.4%, while personal income in the month was down a worse than expected 1.0%*, with consumption for September up 0.6%.

*Supplemental unemployment and other pandemic relief programs expired.

The core personal consumption expenditures index, the Federal Reserve’s preferred inflation barometer, was unchanged at 3.6%, which is elevated for sure.

And so next week we have a biggie, the Fed’s Open Market Committee meeting where Chair Jerome Powell and Co. are expected to announce a tapering of the bond-buying program and weigh in on the inflation outlook.

Europe and Asia

A preliminary flash estimate for GDP in the eurozone for the third quarter has it up by 2.2% compared with the previous quarter, according to preliminary data from Eurostat, up 3.7% year-on-year.

Separately, a flash reading on October inflation for the euro area from Eurostat shows it surging to 4.1% annualized, a 13-year high, up from 3.4% in September and -0.3% a year earlier.  Ex-food and energy, inflation is 2.1% vs. 0.4% Oct. 2020.

Germany 4.6%, France 3.2%, Italy 3.1%, Spain 5.5%, Netherlands 3.8%, Ireland 5.1%.  [7.4% in Estonia.]

The headline numbers worsen a policy headache for the European Central Bank, which has consistently underestimated consumer price growth over the past year, a la the Federal Reserve.

Energy prices alone were up 23% compared to a year ago, making by far the biggest contribution to inflation.

Adding to price concerns, an ECB survey on Friday indicated that over 30% of companies surveyed by the bank expected supply constraints and higher input costs to last for another year or longer, while a slightly lower percentage of respondents predicted difficulties would last another six to 12 months.  Firms also reported “a scarcity of applicants” for jobs as people changed profession, country or lifestyle, which was likely to result in wage increases.

Brexit: British Prime Minister Boris Johnson is meeting French President Emmanuel Macron this weekend amid a row over post-Brexit fishing rights in which France has seized a British boat and London has threatened to board French trawlers.

The flare-up is part of a wider dispute over post-Brexit trade arrangements between Britain and the European Union that could severely disrupt cross-Channel trade and further undermine British-French relations if it spins out of control.

France said this week it would impose sanctions on Britain if London does not allow more French trawlers to fish in UK waters, and it detained a British scallop dredger.  French Agriculture Minister Julien Denormandie said earlier on Friday there had been no progress in talks on granting more licenses for French vessels to fish in UK waters, and said it was right for France to prepare sanctions against Britain.

Facing the threat of extra customs checks on British goods and potentially higher energy tariffs from France if talks fail, British Environment Secretary George Eustice said: “Two can play at that game.”

Some say that France’s defense of its fishermen is an attempt by Macron to show he is looking after their interests before an election in April in which he is expected to seek a new term. And Boris Johnson can also ill afford to look weak on fishing rights after leading the campaign to leave the EU and promising that leaving the bloc was in voters’ interests.

While the fishing industry is but a small part of each country’s economy, it is critical to some coastal communities.

On the economic front, Britain’s finance minister said this week he expected the British economy to grow 6.5% in 2021, and that economic activity would return to pre-Covid levels at the turn of the year, earlier than last forecast.  The Office for Budget Responsibility is forecasting GDP will grow 6% in 2022.

Turning to Asia…no economic news of note from China, with PMIs coming next week.

In Japan, retail sales for September were down 0.6% year-over-year, actually better than expected, with industrial production in the month -2.3% Y/Y.  The unemployment rate for September was unchanged at 2.8%.

Street Bytes

--It was the most important week of the earnings period, with all the tech heavyweights reporting, and stocks scored their fourth straight week of gains with all three major averages finishing the week at all-time highs.  The Dow Jones rose 0.4% to 35819, the S&P 500 1.3% and Nasdaq 2.7%.

For October, the S&P gained 6.9%, more than offsetting September’s 4.8% loss.

Strong earnings despite supply chain challenges continue to power the market higher.

--U.S. Treasury Yields

6-mo. 0.06%  2-yr. 0.50%  10-yr. 1.57%  30-yr. 1.94%

Despite the inflation data, bonds rallied on the long end ahead of next week’s Fed meeting.

Last Sunday on the talk shows, Treasury Secretary Janet Yellen said the United States was not losing control of inflation, and that she expected inflation levels to return to normal by the second half of next year.  Yellen did not say whether Biden’s spending plans would exacerbate inflation.

“On a 12-mointh basis, the inflation rate will remain high into next year because of what’s already happened.  But I expect improvement by the middle to end of next year – second half of next year.”

Regarding supply chain issues, Yellen said, “As we make further progress on the pandemic, I expect these bottlenecks to subside. Americans will return to the labor force as conditions improve.”

--Oil prices hit their highest level since 2014 on Tuesday, supported by a global supply shortage and strong demand in the U.S., the world’s biggest consumer.  Calls for OPEC to raise production continue to fall on deaf ears.  It hasn’t helped that U.S. operators haven’t yet signaled they will be increasing production in any big way.

Speaking of OPEC, last Saturday, the CEO of oil giant Saudi Aramco, Amin Nasser, said the hydrocarbon industry should not be demonized, and more investment is needed to ensure adequate spare capacity or else there could be an “economic crisis.”

Nasser, speaking at a conference, said crude oil spare capacity is “declining fast” and with the opening of economies post Covid-19, usage will increase.

However, in terms of the current supply, there was some positive news this week on the storage front as inventories rose, while OPEC+ technical experts downgraded their expectations for how tight global oil markets will be this quarter.

The global oil-supply deficit will be just 300,000 barrels a day on average in the fourth quarter, the coalition’s Joint Technical Committee concluded on Thursday, which is much smaller than the 1.1 million barrel daily shortfall shown in figures initially presented to the panel.

We have a key meeting of OPEC+ next week.

--Exxon Mobil and Chevron reported third-quarter results today that topped Wall Street  estimates as the two energy giants benefited from higher oil and gas prices, while Exxon Mobil laid out plans to repurchase $10 billion in shares starting in 2022.

Exxon Mobil swung to adjusted earnings of $1.58 per share from a loss of $0.18 per share a year earlier.  Net income was $6.75 billion.  Total revenue surged to $73.79 billion from $46.42 billion. 

Chevron’s adjusted earnings jumped to $2.96 per share from $0.18 last year.  Revenue soared to $44.71 billion from $24.45 billion.

Exxon Mobil’s oil-equivalent production totaled 3.7 million barrels per day in the third quarter, virtually unchanged from last year, while Chevron reported a 7% increase to 3.03 million barrels.

--Amazon.com’s shares fell sharply after reporting a slump in profits that it expects will continue through the holiday quarter, as heavy spending to maintain delivery operations diminishes the company’s windfall from online shopping.

After a year of blockbuster results, the world’s largest online retailer is facing a tougher outlook.  In a tight labor market, it has boosted average warehouse pay and marketed ever bigger signing bonuses to attract blue-collar workers it needs to keep its high-turnover operation humming.  The company meanwhile is contending with global supply chain disruptions.  It has doubled its container processing ability, expanded its delivery service partner program and is ramping up its warehouse investments – all at a noteworthy cost.

The company said it expects operating profit for the current quarter to be between $2 and $3.0 billion, short of the $6.9 billion Amazon posted the year prior.

In the just-ended third quarter, net income fell by about 50% to $3.16 billion, a first since the start of the pandemic.

CEO Andy Jassy, who took over the helm from Jeff Bezos in July, said the company would incur several billion dollars of extra expenses in its consumer business to deal with higher shipping costs, increased wages and labor shortages.  Amazon is “doing whatever it takes to minimize the impact on customers and selling partners this holiday season,” Jassy said in a statement.  “It’s going to be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

The company forecast fourth-quarter sales to be between $130 billion and $140 billion, below expectations.

Amazon’s cloud computing division was a bright spot, with net sales of $16.1 billion in the third quarter.  Total net sales rose to $110.81 billion, from $96.15 billion a year earlier.  Analysts had predicted $111.60bn.

--Facebook whistleblower Frances Haugen told British politicians at Westminster on Monday that “anger and hate is the easiest way to grow on Facebook.”  Haugen told MPs that Facebook incentivizes hateful advertising by giving it more traction so that angry messages were cheaper to produce than positive ones.

“We are literally subsidizing hate on these platforms. It is substantially cheaper to run an angry hateful divisive ad than it is to run a compassionate, empathetic ad,” she told a parliamentary committee.

“Facebook has been trying to make people spend more time on Facebook, and the only way they do that is by multiplying the content that already exists on the platform with things like groups and reshares.  One group might produce hundreds of pieces of content a day, but only three get delivered.  Only the ones most likely to spread will go out.”

Haugen also accused the company of knowing that Instagram was dangerous for young users but not being willing to sacrifice “even a slither of profit” to keep them safe.  Ms. Haugen told MPs that Facebook’s own research found Instagram was more dangerous that TikTok and Snapchat because it focused on comparisons of bodies and lifestyles.

Facebook CEO Mark Zuckerberg rejected the charges.  In a statement the company responded to Haugen’s testimony:

“Contrary to what was discussed at the hearing, we’ve always had the commercial incentives to remove harmful content from our sites.  People don’t want to see it when they use our apps and advertisers don’t want their ads next to it.”  He said Facebook had spent $13 billion on keeping users safe and agreed regulation was needed across the industry, adding that it was pleased Britain is moving ahead with online safety laws.  The killing of Conservative MP David Amess has amplified calls for tougher action to clamp down on hate-filled social media posts particularly by anonymous users.

Zuckerberg fired back at the torrent of recent bad press, accusing whistleblowers and reporters of plotting against the company as it posted better-than-expected quarterly profits.

“My view is that what we are seeing is a coordinated effort to selectively use leaked documents to paint a false picture of our company,” Zuckerberg said in a Monday with investors.

“It makes it a good soundbite to say that we don’t solve these impossible tradeoffs because we’re just focused on making money, but the reality is these questions are not primarily about our business, but about balancing different difficult social values,” the CEO said.  “We believe that our systems are the most effective at reducing harmful content across the industry.”

Meanwhile, Facebook posted $3.22 in earnings per share during the third quarter, slightly ahead of expectations. Net income grew 17% in the July-September period to $9.19 billion, up from $7.85 billion.

But even as the company’s advertising revenue surged 33 percent to $28.3 billion in the third quarter, Facebook acknowledged in its earnings release that the company will continue to face “continued headwinds from Apple’s iOS 14 changes” in the future.

Facebook said it had 2.91 billion monthly active users, on average, as of Sept. 30, an increase of 6% from a year earlier.  The number of daily active users also grew 6% to 1.93 billion.

Facebook is looking to dramatically expand its augmented and virtual reality business as part of Zuckerberg’s push into the “metaverse.”  Underscoring that ambition, the company said that it would begin to report separate financials for “Facebook Reality Labs” – which includes its augmented and virtual reality business – and the “Family of Apps” like Facebook, Instagram and WhatsApp beginning next quarter.

And with the above in mind, on Thursday, Facebook revealed its new corporate name, the rebranding of the company as “Meta.”

The old name just “doesn’t encompass everything that we do,” Zuckerberg said in an online event.

Zuckerberg said the new name is part of the company’s long-term plan to create a virtual reality world where users can socialize, work, play games and create art.

The odds of me participating in a metaverse are zero.

Yup, the name change is a nice diversion from the torrent of scandals afflicting Facebook. One of its critics, The Real Facebook Oversight Board, a watchdog group focused on the company, announced it will keep its own name.

“Changing their name doesn’t change reality: Facebook is destroying our democracy and is the world’s leading peddler of disinformation and hate,” the group said in a statement.  “Their meaningless name change should not distract from the investigation, regulation and real, independent oversight needed to hold Facebook accountable.”

As for the name ‘Meta,’ us basketball fans are wondering if former NBA player “Metta World Peace” (Ron Artest) will sue, though he does have two ‘t’s’. 

Actually, Metta’s new name as of last year is Metta Sandiford-Artest….never mind.

Facebook will commence trading under a new ticker, MVRS, on Dec. 1, the symbol META taken by an ETF that launched in June.  I also saw where the word ‘meta’ in Hebrew references death.

--Microsoft Corp. continued to benefit from the global shift toward remote work as its cloud business boosted its revenue last quarter.

The company reported revenue of $45.3 billion for the three months through Sept. 30, up 22% from the year-earlier period.  Net income rose 48% to $20.5 billion, the results exceeding expectations.  And the software giant said it expected to bring in between $50.15 billion and $51.05 billion in revenue in the current quarter.

Microsoft is benefiting from the sustained shift to working-from-home and remote schooling as a result of the pandemic and companies and consumers embracing digital services that run on the cloud have been at the center of its growth.

The company said Azure and other cloud-computing services grew 50% in what was its fiscal first quarter.  Microsoft’s cloud business overall generated $20.7 billion in sales, up 36% from the previous year.

The company’s overall gaming business grew 16%, driven by high demand for its latest consoles which came out late last year.  Console sales jumped 166% from the year-earlier quarter.

Microsoft’s social network LinkedIn saw its sales expand 42% in the quarter.

On a different matter, Microsoft said the same Russia-backed hackers responsible for the 2020 SolarWinds breach continue to attack the global technology supply chain and have been relentlessly targeting cloud service companies and others since summer.

The group, which Microsoft calls Nobelium, has employed a new strategy to piggyback on the direct access that cloud service resellers have to their customers’ IT systems, hoping to “more easily impersonate an organization’s trusted technology partner to gain access to their downstream customers.”  Resellers act as intermediaries between giant cloud companies and their ultimate customers, managing and customizing accounts.

“Fortunately, we have discovered this campaign during its early stages, and we are sharing these developments to help cloud service resellers, technology providers, and their customers take timely steps to help ensure Nobelium is not more successful,” a Microsoft vice president said in a blog post.

--Apple Inc. said supply chain woes cost it $6 billion in sales during the company’s fiscal fourth quarter, which missed Wall Street expectations, and CEO Tim Cook said that the impact will be even worse during the current holiday sales quarter.  Cook told reporters that the quarter ended Sept. 25 had “larger than expected supply constraints” as well as pandemic-related manufacturing disruptions in Southeast Asia.

While Apple had seen “significant improvement” by late October in those Southeast Asian facilities, the chip shortage has persisted and is now affecting “most of our products,” Cook said.  “We’re doing everything we can to get more (chips) and also everything we can do operationally to make sure we’re moving just as fast as possible,” he said.

As for the current quarter, Cook expects year-over-year growth, “But we are also predicting that we’re going to be short of demand by larger than $6 billion.”

Apple said revenues and profits for the fiscal fourth quarter were $83.4 billion, up 29% from a year ago, with earnings of $20.6 billion, a 62% increase from the same time last year. 

Fourth-quarter iPhone sales were $38.9 billion, short of estimates. The company’s accessories segment, which contains fast-growing categories like its AirPods wireless headphones, came in at $8.8 billion, half a billion dollars lower than forecast.

Sales for iPads and Macs were $8.3 billion and $9.2 billion, better than expected.  The company’s services segment – which contains its App Store business – had sales of $18.3 billion in revenue, up 26%, beating expectations.  Apple now has 745 million paid subscribers to its platform, up from 700 million a quarter ago.

--Alphabet Inc.’s Google tallied its highest sales growth in more than a decade and nearly doubled its profit in the third quarter; the pandemic turbocharging the company’s core advertising business.

Alphabet said revenue rose 41% to $65.12 billion, its largest increase in 14 years.  It posted a profit of $21.03 billion, nearly three times what it reported before the pandemic.

The company’s ad business, led by Search, Maps and YouTube, posted $53.13 billion in sales from advertising, a 43% increase.

YouTube had been another major driver of Google’s advertising gains.  The video behemoth reported sales grew 43% to $7.21 billion in the quarter.

Incredibly, YouTube is on tract to generate nearly as much revenue this year as Netflix.

--Twitter reported a 37% jump in third-quarter revenue as it didn’t suffer as much from Apple’s new privacy policies and supply-chain disruptions.

The company posted revenue of $1.28 billion, in line with expectations, with ad sales rising 41% from the year-ago period.

Twitter’s revenue isn’t as tied to targeted digital ads as the businesses of some of its social-media rivals.  CFO Ned Segal told the Wall Street Journal that brand advertising that generates around 85% of Twitter’s ad sales is experiencing less of an impact from Apple’s new rules.

Facebook and Snap (last week) said supply-chain constraints hitting the global economy also weighed on ad sales, but more than half of ads on Twitter are linked to services and digital goods, such as financial tech company services or movie releases, which are less affected by supply disruptions.

Twitter use, measured by monetizable daily active usage, was up 13% year-over-year to 211 million in the third quarter, topping the 11% increase seen in the second quarter.

--General Motors missed revenue estimates for the third quarter as the automaker continued to grapple with the ongoing supply chain crisis, while it raised the full-year profit outlook amid a strong pricing environment.

The company reported that revenue declined to $26.78 billion during the three months to Sept. 30 from $35.48 billion a year ago, down 25%, compared with the Capital IQ-polled consensus of $27.88 billion.  Adjusted earnings fell to $1.52 per share from $2.83 but came in ahead of the Street’s view of $0.98.

‘The quarter was challenging due to continuing semiconductor pressures,” CEO Mary Barra said in a letter to shareholders.  The company expects the chip shortage, along with rising commodity prices, to continue until late 2022.  The stock fell on the news.

GM does still expect full-year results will approach the high end of its guidance for operating earnings in the range of $11.5 billion to $13.5 billion, but this implied fourth-quarter earnings would be below current consensus.

--Ford Motor fared better than GM as its revenue fell about 5% over last year to $35.7 billion.  And while it said, “Semiconductor availability remains a challenge, (it is) markedly improved from the second quarter.”

Ford forecast further improvement in the fourth quarter for chips, though tight supply is likely to dog the auto industry for some time.

The automaker reported $1.8 billion in net income in the three months that ended in September, compared with $2.4 billion a year earlier.

Both Ford and GM have announced big electric vehicle pushes, with GM vowing to introduce 30 new electric models around the world by 2025, including 20 in North America.  Ford recently introduced an electric version of its top-selling F-150 truck.

--Tesla received an order for 100,000 vehicles from car-rental company Hertz Global that was reported to likely yield nearly $4.2-$4.4 billion in revenue.  Tesla shares then soared in response, above $1,000, surpassing the closing record level of $909.68 struck last Friday.

So Tesla hit the $1 trillion market value level as a result, which compares to Toyota Motors (around $240 billion), Germany’s Volkswagen ($165bn) and General Motors ($84 billion).

Other companies with trillion-dollar market caps include Apple, Microsoft, Amazon and Alphabet.

[At the end of the week, MSFT leads AAPL in market cap…$2.49 trillion to $2.476 trillion.  TSLA is at $1.119tn., the shares closing the week at $1,121, up 23% in five days.]

Hertz, just months after emerging from bankruptcy, is taking a step toward changing its entire fleet to electric vehicles.  The 100,000 are to be delivered by end of 2022.

Customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations throughout the United States and Europe. 

--Boeing Co. reported a quarterly net loss after fresh charges on its problem-plagued 787 and Starliner spacecraft programs, masking a small underlying profit as air travel recovers from the pandemic.  The 737 MAX and 787 are integral to Boeing’s ability to rebound from the pandemic and a safety scandal caused by two fatal crashes, while its Starliner has fallen behind dominating space rival Elon Musk’s SpaceX.  Boeing shares fell on the news.

Boeing said the price tag for inspections and repairs due to 787 structural defects amassed over the last two years would be roughly $1 billion.  The company has twice halted 787 deliveries, with the latest stoppage ongoing since May and resulting in an inventory of more than 100 jets.

Boeing also booked a charge of $185 million on its long-delayed Starliner astronaut capsule for NASA’s Commercial Crew Program, due to delays and repairs from faulty fuel valves that sidelined the spacecraft after its August flight attempt.  Meanwhile, SpaceX’s Dragon capsule has ferried astronauts and supplies to orbit four times. 

Revenue rose 8% to about $15.3 billion, fueled by 737 MAX deliveries and growth in Boeing’s services unit as it sees recovery in the air travel market.  Boeing delivered 62 of its 737s in the quarter, with some 370 of its 737 MAX jets in inventory, a third of which were for customers in China, executives said.  It is now producing 19 of the jets monthly, up from 16 in the last quarter, with ongoing plans to push to 31 per month in early 2022.  Any further ramp up in production depends on the supply chain.

Boeing’s net loss for the quarter was $132 million, compared with a loss of $466 million a year ago.

Rival Airbus SE is charging forward with planned production increases to a record 64 per month by second-quarter 2023, with possible further increases beyond that.  Its plans have produced a backlash from suppliers and leasing companies, but Airbus is basing its decision on expectations for post-pandemic demand.

Major lessors have joined engine makers in warning Airbus that an aggressive output increase could upset the market and hurt aircraft values while the recovery from the coronavirus crisis remains fragile.

Airbus responds the “demand is there.”

--TSA checkpoint travel numbers vs. 2019….

10/28…94 percent of 2019 level
10/27…75
10/26…79
10/25…85
10/24…85
10/23…84
10/22…81
10/21…81

*Aug. 1st is still the highest post-pandemic day with 2,238,462 travelers.

--UPS’ third-quarter results beat analysts’ expectations, as consumers are paying higher rates to have the package delivery company fulfill their shipping needs.

UPS earned $2.33 billion, or $2.65 per share for the period ended Sept. 30, vs. $1.96bn and $2.24 a year ago.

Revenue improved to $23.18 billion from $21.24 billion.  In the U.S., revenue climbed 7.4% to $14.21 billion, helped by a 12% increase in revenue per piece.  International revenue rose 15.5% to $4.72 billion.

--Caterpillar reported a jump in sales and earnings for the third quarter as the maker of heavy equipment saw growing demand, with stronger sales projected for the final period of 2021 even as the company faces supply chain issues.

Sales in Q3 climbed 25% to $12.4 billion, with the gain bolstered by higher volumes of sales as dealers made inventory changes amid higher demand for equipment and services.

Construction industry sales rose 30% to $5.26 billion while energy and transportation was up 22% to $5.08 billion.

--General Electric reported Q3 adjusted earnings of $0.57 per diluted share, up from $0.38 a year ago, beating consensus.

Net revenue for the quarter ended Sept. 30 was $18.43 billion, down from $18.53 billion a year ago.

GE raised its full-year 2021 outlook for adjusted EPS to $1.80 to $2.10, from a prior forecast of $1.20 to $2.00.

The company now expects GE Industrial’s adjusted organic revenue growth to be flat, compared with the previous outlook of low single-digit growth.

--3M reported Q3 earnings that were flat with a year earlier.  Sales for the September quarter were $8.94 billion, up from $8.35 billion a year earlier.

The company expects full-year sales growth of 9% to 10%.

--Hilton Worldwide Holdings Inc. beat revenue estimates for the third quarter on Wednesday, as easing pandemic restrictions drive a recovery in leisure travel.

“Leisure travel remained strong and business travel continued to pick up during the quarter,” CEO Christopher Nasseta said, adding global tourism is likely to see a strong recovery in the months and years ahead.  Hotel operators around the world, including Hilton, are seeing occupancy rates inch towards pre-pandemic levels amid rising vaccination rates. 

However, labor shortages in the U.S. and tighter social restrictions in southeast Asia, especially in China, continue to weigh on the tourism and hospitality sectors.  Occupancy in Hilton’s Asia Pacific region came in at 49.5% for the third quarter, down 4.8% from a year ago.  The company reported total expenses in the quarter of $1.31 billion, up 42% versus last year.

But comparable RevPAR or ‘revenue per available room,’ was $90.39 for the quarter, up 98.7% from the same period a year ago.

Revenue in the quarter rose 87.5% to $1.75 billion, beating estimates, but earnings, ex-items, missed, 78 cents per share.  Net income came in at $241 million compared with a net loss of $79 million a year earlier.  The shares hit a record high this week.

--McDonald’s Corp. reported that higher U.S. prices and celebrity-themed meals boosted quarterly comparable sales, though the company struggled to keep restaurants open at full capacity amid labor shortages and Covid outbreaks.

U.S. same-store sales grew 9.6% in the third quarter ended Sept. 30, compared with estimates for 8.3%.  Global comp sales also jumped 12.7% in the quarter vs. estimates of 10.3% as international markets slowly recovered from the pandemic.

The U.S. labor shortage caused some locations to close early and lose speed of service, CEO Chris Kempczinski said in an earnings call, adding problems were not “unsolvable.”  McDonald’s has had to push back some new restaurant openings into early 2022 in part because of global supply-chain problems that made it difficult to get kitchen and tech equipment. 

Seating areas remained closed in about 20% of McDonald’s American locations – roughly 3,000 restaurants – in regions with high rates of Covid-19.  But many pandemic-related restrictions have eased, luring more customers into restaurants.

McDonald’s crispy chicken sandwich and latest celebrity partnership with rapper Saweetie also boosted sales.

The Chicago-based company has also raised U.S. prices about 6% versus 2020 to help cover rising commodity and labor costs. Higher prices, combined with larger order sizes, drove sales.

Net income rose 22% to $2.15 billion.

--Coca-Cola reported better-than-expected results in the third quarter as pandemic uncertainty eased while the snacks and soft drinks company said it’s expecting “elevated” commodity inflation next year.

In the three months through Oct. 1, revenue rose 16% to $10.04 billion, ahead of consensus.  Earnings of $0.65 per share also beat the Street.

Coca-Cola said its unit case volume rose 6% and was ahead of 2019 levels as markets continued to recover from the pandemic, driving up consumption away from home.  Sparkling soft drinks volume was up 6%.  Volume for hydration, sports, coffee and tea was also up 6%.

For 2021, the company said it now sees organic revenue growth of 13% to 14%.

The maker of Powerade and Fanta beverages said 2022 is expected to see “underlying momentum in the business.”

--Starbucks said it will raise pay for its U.S. employees in a bid to retain staff and boost recruitment.

Employees who have been working with the company for at least two years could get up to a 5% raise while those with at least five-year employment could receive a 10% increase starting early next year.  Average wage will range between $15 and $23 an hour and could rise to $17 an hour by summer of 2022.

As for its recent quarterly results, revenue rose 31% to $8.15 billion from $6.2 billion in the year-ago quarter, shy of expectations but an all-time high..

Global comparable store sales rose 17%, driven by a 15% increase in comp transactions and a 2% increase in average ticket.

Same-store sales in China fell 7% as coronavirus cases once again disrupted store traffic.

North America comp store sales increased 22%. 

Net income more than quadrupled to $1.76 billion.

Starbucks shares fell 6%.

--Disneyland and neighboring California Adventure Park raised most daily ticket prices Monday and are adopting an even higher price to visit on the most popular days of the year, such as Christmas and New Year’s Eve.

Daily ticket prices are jumping 3% to 8%, with standard daily parking rates going up by 20%.

--Hershey Co. raised its annual sales forecast, benefiting from strong demand during its “biggest ever” Halloween season.  The company expects net sales to grow 8% to 9% for all of 2021, higher than previously forecast.

Boo!

I can’t help but add a Boston Globe article this week had Butterfinger at the top of its candy list.  No way…I couldn’t stand when I got a Butterfinger when out trick or treating.  Baby Ruth is superior.

The Pandemic

More than 10 months after U.S. adults started receiving coronavirus vaccines, advisers to the Food and Drug Administration on Tuesday endorsed the Pfizer-BioNTech vaccine for ages 5 to 11, saying the benefits outweigh the risks, specifically the risks of a rare cardiac side effect.  The vote was 17 to 0 with one abstention.

Then today, the full FDA authorized the Pfizer shot for kids, so this goes to the CDC for probable action next week.

A pediatric vaccine has been eagerly anticipated by many parents who want to ensure their children’s safety in school and holiday gatherings.

Moderna said Monday that a low dose of its Covid-19 vaccine is safe and appears to work in 6- to 11-year-olds, as the manufacturer joins its rival Pfizer in moving toward expanding shots to children.

Moderna hasn’t yet gotten the go-ahead to offer its vaccine to teens but is studying lower doses in younger children while it waits.

Covid-19 death tolls, as of tonight….

World…5,003,929…5 million
USA…765,720
Brazil…607,504
India…457,773
Mexico…287,631
Russia…236,220
Peru…200,179
Indonesia…143,361
UK…140,392
Italy…132,037
Colombia…127,225
Iran…125,998
France…117,649
Argentina…115,935
Germany…96,176
South Africa…89,151
Spain…87,368
Poland…76,875
Turkey…70,207
Ukraine…66,852
Romania…46,911
Philippines…42,621
Chile…37,729
Ecuador…32,958
Hungary…30,729
Czechia…30,705
Canada…28,951
Malaysia…28,832
Pakistan…28,431
Bangladesh…27,854
Belgium…25,976
Tunisia…25,231
Bulgaria…23,872
Iraq…23,111
Vietnam…21,966

[Source: worldometers.info]

U.S. daily death totals…Sun. 519; Mon. 640; Tues. 1,451; Wed. 1,583; Thurs. 1,208; Fri. 1,553.

Covid Bytes

--A new Axios/Ipsos poll finds Americans are uncertain about how well the Covid-19 vaccines work, despite reams of data about their ability to protect people from severe disease, hospitalization and death, and to a lesser extent infection.  That lack of knowledge is likely contributing to the continued vaccine holdout of 60 million people who are eligible for the shots, and to diminished faith in the Biden administration.

Confidence that his government can make sure the economy recovers quickly after the pandemic dropped from 52% in late January to 44% in the latest poll.

--The White House has outlined new rules for foreign travelers to the U.S., as flight restrictions lift for the first time since the pandemic began in 2020.

The plan to reopen the U.S. border next month to foreign flights includes a requirement that almost all foreign visitors be vaccinated against Covid.

The proclamation signed by Mr. Biden on Monday says that airlines will be required to check travelers’ vaccination status before they can board departing planes.

--With a Tuesday immunization deadline looming, some 12,000 Air Force personnel have not been fully vaccinated against the coronavirus.  That’s a relatively small number – the Air Force says more than 96 percent of active-duty members have gotten the shots.  But the refusal to follow vaccination orders poses a major test for military leaders and later compliance deadlines.

--A Brazilian Senate panel backed a report calling for charges against President Jair Bolsonaro over his handling of the Covid pandemic, including crimes against humanity, after 600,000 deaths in the country.

There is no guarantee this vote will lead to criminal charges, as it is now up to the Prosecutor-General, who is expected to protect the president.

Foreign Affairs

Iran: Tehran has agreed to return to nuclear negotiations in Vienna by the end of November, the top negotiator said Wednesday, for what it’s worth.

Ali Bagheri, the deputy foreign minister, said he had engaged in “very serious and constructive dialogue” with Enrique Mora, the European Union’s deputy secretary general for political affairs, “on the essential elements for successful negotiations.”  But Peter Stano, a foreign affairs spokesman for the EU, said “there is nothing to announce at the moment.”

For months, the government of President Ebrahim Raisi has said it would return to the negotiating table but declined to set a date, feeding a growing sense of pessimism.

Of course Iran is just jerking everyone around, while it progresses with its nuclear program, breaking all the rules, while the European parties to the nuclear agreement have repeatedly threatened to reimpose sanctions if Iran doesn’t comply with verification commitments.

Lebanon:  This country is in a total state of chaos.  A new series of lawsuits filed by Lebanese ex-government officials on Thursday threatened once again to stall an investigation into the devastating Beirut port blast that has faced fierce opposition from the political establishment.

The investigation into the Aug. 4, 2020, mammoth explosion has made little headway amid a smear campaign against probe investigator Judge Tarek Bitan and pushback from powerful factions, such as Hezbollah.

Potential foreign aid donors have called for a transparent investigation into the catastrophe, which was triggered by a huge quantity of unsafely stored ammonium nitrate.

Bitar suspended the interrogation of former Prime Minister Hassan Diab after Diab on Wednesday filed a suit questioning the judge’s authority.  Diab, who has been charged in connection with the explosion, had already missed at least two interrogation sessions.  Kind of like Trump’s aides stonewalling in the Jan. 6 investigation, I can’t help but muse.  Other officials are suing to avoid questioning.

The row over the probe has paralyzed the cabinet with Prime Minister Najib Mikati suspending sessions until a solution to the standoff is found.  Hezbollah and its allies have called for Bitar’s removal.

While all this goes on, Lebanon’s economic crisis, described as one of the worst in world history by the International Monetary Fund, worsens.

China/Taiwan: The top U.S. diplomat in Taipei, Sandra Oudkirk, head of the new American Institute in Taiwan, the de facto U.S. embassy in the absence of formal diplomatic ties, said on Friday that Washington’s defense ties with Taiwan are rock solid.

“The United States has a commitment to help Taiwan provide for its self-defense.  The value of our partnership and our support for Taiwan is rock solid.”

When asked if the United States would come to Taiwan’s defense if mainland China attacked, Oudkirk said the policy towards Taiwan had been clear and remained unchanged, citing U.S. laws governing its relations with the island.

Taiwan’s Foreign Minister Joseph Wu said tensions between Taiwan and China have escalated in recent weeks.

“The situation (in the strait) is growing tense and seems to be growing more dangerous,” Wu said from Prague, after meeting with Czech Republic leaders.

Taiwanese President Tsai Ing-wen, in an interview with CNN’s Will Ripley, said, “The threat from China is increasing every day.”

Elbridge Colby / Wall Street Journal…Colby a former deputy assistant secretary of defense in the Trump administration…

“The U.S. and China are engaged in a ‘strategic competition,’ as the Biden administration has put it, with Taiwan emerging as the focal point.  But an ascendant view inside the administration seems to be that while China represents a serious economic, political and technological challenge to American interests, it doesn’t pose a direct military threat.  This is a very imprudent assumption that could lead to war and, ultimately American defeat.  To avoid that disastrous outcome, the U.S. must recognize that China is a military threat – and conflict could come soon.

“What makes China an urgent military threat?  First, Beijing has made clear it is willing to use force to take Taiwan.  Subordinating the island isn’t only about incorporating a putative lost province – it would be a vital step toward establishing Chinese hegemony in Asia. And this isn’t mere talk.  The Chinese military has rehearsed amphibious attacks, and commercial satellite imagery shows that China practices large-scale attacks on U.S. forces in the region.

“Second, China doesn’t merely have the will to invade Taiwan, it increasingly may have the ability to pull it off.  China has spent 25 years building a modern military in large part to bring Taiwan to heel.  China now has the largest navy in the world and an enormous and advanced air force, missile arsenal and network of satellites.  This isn’t to say China could manage a successful invasion of Taiwan tomorrow – but Beijing could be very close.  It will be ‘fully able’ to invade by 2025, Taiwan’s defense minister said recently.  China’s military power is improving every month.

“Third, China may think its window of opportunity is closing.  Many wars have started because one side thought it had a time-limited opening to exploit.  Certainly this was a principal factor in the outbreaks of the two world wars.  Beijing may reasonably judge this to be the case today.

“The U.S. military is finally, if too slowly and fitfully, waking up to the China challenge and reorienting its military efforts toward Asia.  But these investments won’t really start to pay off until later this decade.  Meanwhile, coalitions like the Quad (the U.S., Australia, Japan and India) are coalescing to deny China the ability to dominate the region.  From Beijing’s view, if it waits too long, America’s military investments will yield a much more formidable opponent, while an international coalition works to frustrate Chinese ambitions.

“This all adds up to a situation in which Beijing may reckon it would be better to use force sooner rather than later. [Ed.  That was my point two weeks ago for those talking about 2025… “Try tomorrow.”] To avoid a conflict, and possible defeat, the U.S. must act quickly to deter Beijing.  Repeatedly declaring our ‘rock solid’ commitment to Taiwan is fine but insufficient.

“The most urgent priority: Taiwan must radically upgrade its defenses…. Taipei must multiply its defense budget, grossly neglected in recent decades, and focus its expenditures and efforts on two things: degrading a Chinese invasion with the help of the U.S. and making the island resilient to a blockade and bombardment by Beijing. …The U.S. will need to use every lever to prod or force Taipei to make this shift.

“Washington should also bring comparable pressure on Japan, America’s single most important ally.  If Taiwan falls, Japan will be under direct military threat from Beijing.  And Japan would play a critical role in any defense of Taiwan….

“Averting war against a superpower will require being ruthless about American priorities… Holding the line in Asia will mean the U.S. military will have to stop doing almost everything else other than nuclear deterrence and counterterrorism….

“China will surely pose a long-term challenge to the U.S. in areas outside the realm of military power.  But the most pressing risk is that Beijing may see an advantage in resorting to war. Convincing Beijing it won’t gain from aggression must be the overriding priority.”

As for China’s suspected hypersonic missile test, Chairman of the Joint Chiefs of Staff Mark Milley said in an interview with Bloomberg News that the Chinese military was “expanding rapidly.”

“What we saw was a very significant event of a test of a hypersonic weapon system. And it is very concerning,” Milley told Bloomberg.

“I don’t know if it’s a Sputnik moment, but I think it’s very close to that.  It has all of our attention.”

Milley’s comment was the first official acknowledgement by the U.S. of claims that China conducted two missile tests over the summer.  Reports indicate that it was a nuclear-capable missile that could evade U.S. air defense systems.

North Korea: The government in Pyongyang has told its people to tighten their belts for at least another three-plus years before it plans on reopening the country’s land border with China, Radio Free Asia reported this week.

“Two weeks ago, they told the neighborhood watch unit meeting that our food emergency would continue until 2025,” a resident of the city of Sinuiju, near the China border, was quoted as telling the outlet.  “Authorities emphasized that the possibility of reopening customs between North Korea and China before 2025 was very slim.”

North Korean authorities closed the border with China, its largest trading partner, in January of last year in a bid to stop the spread of Covid-19.  The move exacerbated inflation and food shortages caused in recent years by ongoing U.S.-led sanctions as well as typhoon-induced flooding.

“Some of the residents are saying that the situation right now is so serious they don’t know if they can even survive the coming winter,” the Sinuiju resident went on.  “They say that telling us to endure hardship until 2025 is the same as telling us to starve to death.”

Sudan: A military coup triggered deadly arrest, as Sudan’s two-year transition to democracy came to a screeching halt.

It was two years ago that a popular uprising ended decades of authoritarian rule, but then Monday, soldiers arrested Prime Minister Abdalla Hamdok and other civilians in the cabinet.  Seven were killed in clashes between protesters and the security forces.

Coup leader General Abdel Fattah al-Burham dissolved the military-civilian Sovereign Council set up to guide Sudan to democracy following the overthrow of long-ruling autocrat Omar al-Bashir in April 2019.  Burham announced a state of emergency, saying the armed forces needed to protect safety and security, and he promised to hold elections in July 2023.

Random Musings

--Presidential approval ratings….

Gallup: 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 of Biden’s performance, 57% disapprove, unchanged from last week.

--Next Tuesday it’s all about Virginia, where Democrat, and former governor, Terry McAuliffe and Republican Glenn Youngkin are in a dead heat according to multiple late polls.

But a Fox News poll released Friday has Youngkin leading McAuliffe by eight points (53-45) among likely voters, a dramatic turnaround from two weeks ago when the same poll showed McAuliffe leading 51-46 percent.

But among all “registered voters”, Youngkin only leads McAuliffe by a single point, 48-47.

One potential difference maker, according to a new USA TODAY/Suffolk University Poll that had the race at 45-45, Virginia voters only give President Biden a 41% approval rating, 52% expressing disapproval with his performance, Biden’s support cascading among Virginians since early in his administration.

The Fox News poll had Virginia’s registered voters giving Biden a 45% approval rating, 53% disapproving.

--In New Jersey, I believe the race between incumbent Gov. Phil Murphy and Republican challenger Jack Ciattarelli is much closer than a Monmouth University poll released Wednesday has it, Murphy up 50-39, vs. an earlier 51-38 margin in a Monmouth survey.

A Stockton University Poll this week has it 50-41.  I say it’s six points.

--And in New York City, Democratic nominee Eric Adams will romp by 35 points over Republican rival Curtis Sliwa.  Adams is the right man for this time…so most of us hope.  He will do the right things to reduce the crime rate, issue number one for the majority of the denizens of Gotham.

--Gerald F. Seib / Wall Street Journal

“It is an article of faith in political life that election campaigns – as least the successful ones – are about the future, not about the past.

“Donald Trump is trying to turn that adage on its head, and a lot of his fellow Republicans are going along, at some risk to themselves.

“Mr. Trump is inserting himself into this year’s Virginia gubernatorial race, and next year’s critical midterm congressional elections, in a manner designed to keep his party’s attention focused on his unsubstantiated claim that the 2020 presidential election was stolen from him. Accepting that claim, or at least declining to dispute it, has become a litmus test for Republican candidates hoping for Mr. Trump’s support.  His grievances feature prominently in rallies he is holding, nominally in support of other Republicans.

“In fact, Mr. Trump has gone so far as to suggest his supporters won’t vote in 2022 if his claims of fraud in 2020 aren’t ‘solved.’  If Republicans follow his lead that could lead to millions of lost votes nationally for the party.

“This Trump obsession poses two additional problems for Republicans.  First, it diverts the political focus away from President Biden’s struggles, and away from issues where Republicans might more productively focus their attention. Polls suggest the swing voters who decide close elections are more focused on rising inflation concerns, the difficulty in wrestling the coronavirus pandemic to the ground, a surge of immigration at the southern border and worries that woke culture is crowding out traditional values.

“ ‘I’m of the view that the best thing that President Trump could do to help us win majorities in 2022 is talk about the future,’ said Missouri Republican Sen. Roy Blunt on NBC’s ‘Meet the Press’ Sunday.

“Swing voters appear a lot less focused on re-litigating the 2020 election, or on defending those who attacked the Capitol on Jan. 6 in Mr. Trump’s name in an attempt to overturn the election results.

“Second, Mr. Trump’s prominence and focus on his own agenda figure to motivate Democrats to vote at a time when they might otherwise grow complacent or discouraged and stay home.

“Mr. Trump is a political anomaly; he probably is the biggest motivating force in both parties right now.  He certainly motivates his own supporters and sympathizers, and the rehashing of 2020 claims plays well with them. But such voters aren’t in any danger of moving to Democrats.

“The voters Republicans are in danger of losing are moderate Democrats and independents that President Biden claimed in winning the presidential election last year.  Fear and loathing of Mr. Trump is one force that may keep such voters active and in the Democratic column, despite misgivings about Mr. Biden and the agenda of progressive Democrats.

“This year’s governor’s election in Virginia on Nov. 2 is turning into a testing ground for these forces….

“In short, if Virginia is any indication, Democrats would be happy to have next year’s campaign focus on Mr. Trump, on whose watch Republicans lost control of the House, Senate and White House.

“The attempt to look backward at 2020 isn’t going to be a feature only of the most high-profile races.  Mr. Trump is endorsing state-level attorney general and secretary of state candidates – that is, candidates for the offices that actually oversee voting – on the grounds that they agree with him on last year’s election results.  In endorsing lawyer Matthew DePerno for Michigan attorney general, for example, Mr. Trump declared that ‘he relentlessly fights to reveal the truth about the Nov. 3 Presidential Election Scam.’

“The danger for Republicans isn’t merely that looking back at 2020 gets in the way of an agenda for 2022.  There also is a risk that Mr. Trump’s attacks on the election system will undermine confidence in the very democratic institution Republicans are counting on to return them to congressional power next year.”

Gerard Baker / Wall Street Journal

On temptations currently dangling before Republicans:

“First the Trump temptation. He delivered Republican majorities in 2016; he seems on current polling ready to do it again.

“But it’s a Faustian temptation, and most people know it.  For all the legitimate concerns conservatives have about the trashing of their values and the erosion of their cultural legacy Donald Trump promised to reverse, the man himself remains an ominous threat to the health of the republic.

“It takes an act of willful blindness to deny that his continuing rejection of the 2020 election is a unique challenge to orderly constitutional government.  I’m genuinely dismayed at the number of senior Republicans who acknowledge this in private but say nothing in public. Conservatives have their own cancel culture. Hundreds of top Republican officeholders are silenced today by fear of the Trump mob.

“The second temptation is the opposite: to attempt a reversion to Reaganism.

“This would not only miss the electrifying effect Mr. Trump had on voters angry at what’s gone wrong in America in the past 30 years. It would ignore also the failures the Republican Party itself contributed.  Ronald Reagan was a political genius whose economic policies transformed America’s fortunes.  But 1980 was a very different time.  The complex challenges the country faces today won’t be fixed by big tax cuts and deregulation….

“America has become an entrenched 50/50 nation – or maybe 52/48, with a slight tilt to the Democrats….

“The near symmetrical split is both a cause and a product of the caustic partisanship that is corroding faith in American institutions.

“Recent political trends suggest the electoral opportunity: a multiracial coalition of the working and middle classes that disdains the progressive authoritarianism of the left but wants policies that address their daily economic struggles. Republicans may simply choose to enjoy the bounty of Democratic failures.  But that would miss a rare opportunity to start the larger work of rebuilding a fractured nation.”

Editorial / Wall Street Journal

“The progressive parsons of the press are aflutter that we published a letter to the editor Thursday from former President Trump, objecting to our editorial pointing out that he lost Pennsylvania last year by 80,555 votes.  We trust our readers to make up their own minds about his statement.  And we think it’s news when an ex-President who may run in 2024 wrote what he did, even if (or perhaps especially if) his claims are bananas.

“Mr. Trump’s letter is his familiar barrage, with 20 bullet points about alleged irregularities that he says prove ‘the election was rigged.’  It’s difficult to respond to everything, and the asymmetry is part of the former President’s strategy.  He tosses off enough unsourced numbers in 30 seconds to keep a fact-checker busy for 30 days. When one claim is refuted, Mr. Trump is back with two more….

“This is how it goes for election truthers. First the allegation was ballots marked with Sharpies, then voting machines tied to Venezuela, then more votes than voters.  Now Mr. Trump apparently thinks his own Attorney General did an inside job.  Electoral fraud does happen: A Pennsylvania man received five years of probation this spring after voting for Mr. Trump on behalf of his dead mother.  The price of liberty, as they say, is vigilance.  But the evidence doesn’t show anything real that could dent Pennsylvania’s 80,555-vote margin.

“Even if it did, Mr. Trump would be two states short of victory. Georgia’s ballots were counted three times and a signature check done.  The Arizona audit was a dud. A Michigan inquiry led by a GOP lawmaker ended up keelhauling ‘willful ignorance’ and grifters who use misinformation ‘to raise money or publicity.’  Mr. Trump’s lawyers who made baseless claims have been sued for defamation – twice.  They’ve been sanctioned by a federal judge.  Does Mr. Trump imagine a conspiracy so deep that practically everybody is in on it?

“Mr. Trump is making these claims elsewhere, so we hardly did him a special favor by letting him respond to our editorial.  We offer the same courtesy to others we criticize, even when they make allegations we think are false.

“As for the media clerics, their attempts to censor Mr. Trump have done nothing to diminish his popularity.  Our advice would be to examine their own standards after they fell so easily for false Russian collusion claims.  They’d have more credibility in refuting Mr. Trump’s.”

--I was very disappointed to see Illinois Republican Rep. Adam Kinzinger, one of two Republicans on the House panel investigating the Jan. 6 Capitol attack along with Liz Cheney, announce he would not seek reelection next year. 

The military veteran who won a long-shot suburban congressional district a decade ago, became one of a handful of Republicans who voted to impeach Trump on the charge of inciting the Jan. 6 insurrection. 

Kinzinger, who was redistricted into what would have been a race with fellow Republican congressman Darin LaHood in their shared district, said in part, “My disappointment in the leaders that don’t lead is huge.”

Hinting at future plans, Kinzinger said: “I cannot focus on both a reelection to Congress and a broader fight nationwide.  I want to make it clear – this isn’t the end of my political future, but the beginning.”

Kinzinger said the county is “poisoned” and “we must unplug from the mistruths we’ve been fed.”

--Former New York Gov. Andrew Cuomo was issued a summons to appear in court later next month after a criminal complaint accused him of forcible touching of a former aide at the state mansion on Dec. 7.

The crime is punishable for up to a year in jail, if convicted.

In response to the complaint, Cuomo’s lawyer Rita Glavin argued Cuomo has never “assaulted anyone” and questioned Albany Sheriff Craig Apple’s motives.

--I wrote last time of the storm that was about to slam California, much needed, and in the end, Sacramento ended a record 212 day dry spell, reversing course and suddenly experiencing its wettest day on record on Sunday – 5.44 inches of rain in 24 hours, or 2 ½ months of normal.

And as I wrote, and hoped, the Sierras got feet of snow (for great snowstorm action, Google “Truckee webcams” and you’re led to others that give you real-time info when you hear there’s a biggie).

Mammoth Mountain not only had like five feet of snow but also a peak gust of 159 mph!

--We note the passing of legendary comedian and political satirist Mort Sahl.  He was 94.  Sahl skewered U.S. presidents from Dwight Eisenhower to Donald Trump, and his biting commentary won him legions of fans starting in the 1950s.  He is credited as the inspiration for modern stand-up comedy, with “Simpsons” stalwart Harry Shearer saying Sahl had “invented modern American political satire.”

I had the opportunity to see Mort Sahl in concert in New York way back in the 1980s. 

But younger folks have no idea how big this man was.  He actually hosted the first-ever Grammy Awards in 1959 and co-hosted the Academy Awards that same year.

He was featured on the cover of Time Magazine in 1960, and was a frequent guest host on Johnny Carson’s “The Tonight Show.”

Here’s your homework assignment, one you won’t mind.  Google “Mort Sahl stand up” and, for starters, just click on the one referencing “1960 and San Francisco”, about 7:30 in length.  60+ years later it’s amazing how well it holds up.

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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 $1784
Oil $83.30

Returns for the week 10/25-10/29

Dow Jones  +0.4%  [35819]
S&P 500  +1.3%  [4605]
S&P MidCap  -0.1%
Russell 2000  +0.3%
Nasdaq  +2.7%  [15498]

Returns for the period 1/1/21-10/29/21

Dow Jones  +17.0%
S&P 500  +22.6%
S&P MidCap  +21.1%
Russell 2000  +16.3%
Nasdaq  +20.3%

Bulls 43.2
Bears 23.9…no update this week

Hang in there.    

Brian Trumbore

*I just learned of the passing of a dear friend, “Boss Ross,” George Ross Sr., father of an equally dear friend, George Jr.

Mr. Ross gave me my start on Wall Street and was just a terrific man to work for and learn the business.  A man of character with a great sense of humor.

My thoughts and prayers go out to his family.

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