Week in Review

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Week in Review

11/20/2021

For the week 11/15-11/19

[Posted 9:00 PM ET, Friday]

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Edition 1,179

I was pretty prescient last week when I told you of how I got a Covid-19 booster shot, even though I didn’t technically qualify for one.  By Friday, 10 states and various cities had issued their own booster guidelines, expanding the CDC’s existing parameters.  And then as noted below, the FDA and CDC acted further themselves.

But it was also a depressing week on the Covid front.  Anyone following the numbers overseas knows another wave is well under way in some parts.

Austria will become the first country in western Europe to reimpose a full Covid-19 lockdown for 20 days, and neighboring Germany warned it may follow suit, sending shivers through financial markets worried about the economic fallout.  Vienna is bracing for a massive demonstration on Saturday.

Austria said it would require the whole population to be vaccinated as of February, further infuriating many in a country where vaccine skepticism runs high, encouraged by the far-right Freedom Party, the third-biggest in parliament, which is riling up the base with claims Austria “is now a dictatorship.”

Meanwhile, a fourth wave of infections has plunged Germany into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.

Elsewhere in Europe, the Netherlands is in a partial lockdown, Hungary reported new daily case highs this week, Belgium, one of the first major hot spots, is spiking all over again, ditto Poland. 

The thing is, throughout the pandemic, what started in Europe found its way to our shores.

I’ve been depressed because I’d love to travel overseas, including to Europe, and get back to Ireland to golf, but it’s hard to make long-term plans when you see what’s happening in Austria.

And when it comes to the supply chain, take Vietnam.  The Delta variant surged there in the summer, forcing factories to shut and the nation to largely lockdown.

It worked. The number of cases, and deaths, plummeted.  But the workers haven’t been coming back as the government has urged.  And now, cases are spiking all over again.  It’s sickening.

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In a new Washington Post/ABC News poll, 70 percent of Americans said the economy is in bad shape, while for President Joe Biden, overall approval of his handling of the economy sits at just 39 percent – and half of those surveyed blame the president directly for soaring inflation, according to the survey.

A national Quinnipiac University Poll revealed that on four separate issues, Biden receives his lowest grades so far on each of them.  Americans were asked about his handling of…

the response to the coronavirus: 45% approve, 50% disapprove;
climate change: 41% approve, 48% disapprove;
the economy: 34% approve, 59% disapprove;
foreign policy: 33% approve, 55% disapprove.

When it comes to Biden’s personal traits, Americans were asked whether or not Biden is honest: 42% say yes, 51% say no.

So in the midst of this awful polling data, the president did end up having a helluva week, if you are in favor of his agenda.  Monday, he signed into law a sweeping bipartisan package, the largest investment in the country’s infrastructure in decades, and then today, the House passed the Build Back Better Act.

Approval came on a near party-line vote, 220-213, sending the measure to the Senate, where that chamber’s strict rules seem certain to force significant changes, which will prompt fresh disputes between party moderates and progressives that will take weeks to resolve.

But it’s a win for Joe Biden, for now, as the bill in its present form contains far-reaching changes in taxation, health care, energy, climate change, family services, education and housing.  Yes, Democrats are going for it all while they control the White House and Congress – a dominance that is currently expected to end after the midterms.

Earlier, for over 8 ½ hours, ending at 5:15 a.m., Republican House Minority Leader Kevin McCarthy delivered the longest ever speech of its kind against the bill, calling it “the single most irresponsible and reckless” spending plan in U.S. history.

“Let me be clear: Never in American history has so much been spent at one time – at one time,” McCarthy said.  “Never in American history will so many taxes be raised and so much borrowing to be needed to pay for all this reckless spending.”

The non-partisan Congressional Budget Office on Thursday released its full cost estimate of Build Back Better, the CBO reporting the measure would raise more than $1.2 trillion in the form of increased IRS crackdowns on tax cheats, higher taxes and other increased revenues but that overall spending on a myriad of social and climate priorities would lead to a net cost.  Covering the period from 2022 to 2031, the projection concludes that expenses would outweigh revenues by $367 billion but that beefed up IRS enforcement would bring in another $207 billion, leaving a deficit of roughly $160 billion.

No one actually believes these figures, as both political parties over the years have vastly overestimated the impact of an IRS crackdown, or the traditional war on ‘waste, fraud and abuse.’

“The CBO score did not turn out well for this legislation,” said Oklahoma Rep. Tom Cole, the top Republican on the House Rules Committee, while the administration insisted the bill would be fully paid for.

So Republicans now have a big issue for the mid-term elections. For example, the bill would increase costs to Social Security by $121.7 billion over the next 10 years, according to the CBO.  But “the budgetary effects would be noticeably greater during the following decade, resulting in an increase in the unified deficit totaling $369 billion over the 2032-2041 period,” the agency said.

But according to the Washington Post/ABC News poll, 63% of Americans support the infrastructure bill, while 58% support Build Back Better.

The latter as noted above now goes to the Senate, and it’s all about two moderate Democrats, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who were instrumental in getting House Democrats to scale back the bill from its initial $3.5 trillion.  The two have objected to certain provisions relating to the energy industry, prescription drug pricing, and taxes.  Manchin has also said he would take his time.  To a lesser extent, Sen. Bernie Sanders will be weighing in on an issue or two of chief import to him.

Plenty of time to get into the minutiae over the coming weeks.

Biden Agenda, part II….

--Last Saturday in Glasgow, almost 200 nations accepted a contentious climate compromise aimed at keeping a key global warming target alive, but it contained a last-minute change that some high officials called a watering down of crucial language about coal.

Several countries, including small island states, said they were deeply disappointed by the change put forward by India to “phase down,” rather than “phase out” coal power, the single biggest source of greenhouse gas emissions.

Nation after nation had complained earlier on the final day of two weeks of UN climate talks about how the deal isn’t enough, but they said it was better than nothing and provides incremental progress, if not success.

Some nations, such as Switzerland, said the late change on coal will make it harder to achieve the international goal to limit warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) since pre-industrial times.  The world has already warmed 1.1 degrees Celsius (2 degrees Fahrenheit).

Greenpeace International Executive Director Jennifer Morgan said: “It’s meek, it’s weak and the 1.5C goal is only just alive, but a signal has been sent that the era of coal is ending.  And that matters.”

The final agreement at COP26 did recognize the scientific reality that putting the brakes on climate change will require nations to almost halve emissions in the next decade, rather than merely commit to far off “net zero” targets.

Meanwhile, deforestation in Brazil’s Amazon rainforest soared 22% in a year to the highest level since 2006, the government’s annual report showed on Thursday, undercutting President Jair Bolsonaro’s assurances that the country is curbing illegal logging.

--Rich Lowry / New York Post

[Referring to Joe Biden’s dismal poll ratings and a generic congressional ballot that has Republicans leading Democrats by 10 points.]

“Biden is stumbling, out of touch and weak.  Two of his major initiatives, at the border and in Afghanistan, created completely avoidable catastrophes. He has given no sense of being in control of events or even his own party. He is an accidental president who is running smack into his own inadequacies and absurd pretensions.

“No one in Washington over the last four decades ever said that Joe Biden was just the man with the foresight, wisdom and deft political touch to lead the free world.

“No, he was an average senatorial bloviator whose three presidential campaigns flamed out in embarrassing fashion before he hit the jackpot when Barack Obama chose him as his running mate in 2008.

“Showing the advantage of hanging around for a very long time, Biden won both the 2020 Democratic nomination and the presidency by default.  In the primaries, the former vice president looked good in comparison with Sen. Bernie Sanders, and he ran in the general on not being Donald Trump.

“Now, everything has changed.  Biden is allied with Sanders, who helped write the first version of his Build Back Better plan, and Trump, back in Mar-a-Lago, no longer looms as large as Biden’s foil.

“The best case for Biden’s presidency was that he could be a kind of consensus caretaker – restoring a sense of normality and maintaining a low profile while riding in the slipstream of improving economic conditions and a diminishing pandemic.

“Instead, he’s been carried along by the left-wing of his party, repeatedly engaged in unconstitutional executive overreach and brought his own brand of incompetence – exemplified by the botched Afghan pullout – to it all.

“His foremost mistake was overestimating an attenuated electoral mandate for pedestrian governance as a permission slip for passing nearly the entirety of the progressive agenda in the space of less than a year.

“Not only has there been sticker shock over the price tag of the Biden agenda, it has little connection to things people truly care about.  The infrastructure bill polls well, but no one goes about their daily lives worried about the alleged crisis of crumbling bridges and tunnels.

“Meanwhile, the Build Back Better bill started as a $3.5 trillion grab bag of everything that progressives want but couldn’t get in the infrastructure bill.  Passing as much spending as you possibly can before you lose Congress a year from now, which is essentially the rationale behind Build Back Better, is not a compelling reason for a historic spate of federal spending.

“That legislation has been pared down to largely a child-care and climate-change bill.  That’s an unnatural pairing that came about not because those are the top two things the public wants from Washington but because they happen to be what Democrats think they can pass.

“Only now is the White House trying to argue that the infrastructure bill and Build Back Better will address real public concerns, the supply-chain disruptions and the inflation eroding the value of workers’ wages.  This is clearly a tendentious, after-the-fact argument.

“The White House can hope that the supply-chain bottlenecks ease and inflation declines, but Biden’s disastrous first year speaks to a more intractable problem with the occupant of the Oval Office himself.”

Progressives would no doubt argue with much of the above after today’s action in the House.

Wall Street and the Economy

The economy continues to surge in the fourth quarter after the Delta variant slowed activity in Q3.  A report on October retail sales came in better than expected, up 1.7%, while industrial production in the month rose 1.6%.

October housing starts, however, fell a second month to a 1.52 million annualized level, but building permits were up.

The weekly jobless claims figure hit another post-pandemic low, 268,000, and the Atlanta Fed’s GDPNow barometer for fourth-quarter growth is at a rather robust 8.2%.

Chicago Federal Reserve President Charles Evans on Wednesday reiterated that it will take until the middle of next year to complete the Fed’s wind-down of its bond-buying program even as the central bank checks to see if high inflation recedes as he expects.

“We learned back in 2013 that tapering these asset purchases was preferable for financial market functioning; that if we did a sudden stop on our purchases that wasn’t well received,” Evans said at a virtual conference.  “It’s going to take us until the middle of next year to complete that; we are going to be mindful of inflation; we’re going to be looking to see how much additional accommodation is boosting inflation; if indeed that is the case, we’ll be thinking about when the right time to start raising rates will be.”

Evans’ timeline reflects the central bank’s guidance last month when it announced the beginning of the end of its asset purchasing program, put in place as the pandemic bore down on the economy in March 2020.

Under the Fed’s schedule, it began trimming what had been $120 billion in bond purchases at a monthly pace that puts it phasing out all purchases by June.

Evans said he is less confident than a few months ago about his baseline view that inflation will recede next year, given how long price pressures have been building already.

But other Fed policymakers, including St. Louis Fed President James Bullard, say that with a falling unemployment rate, strong consumer demand and high and rising inflation, the Fed ought to speed up the taper to be ready in case it needs to raise rates earlier.

So that’s the debate…the two camps…and it comes as President Biden nears a decision on who will lead the Fed for the next four years, Chair Jerome Powell or Fed Governor Lael Brainard.

Speaking of which, now we are told the White House will have more to say on the Fed chief issue early next week.  Senator Joe Manchin said he has not yet decided which candidate to support and wants to meet with both a second time.  Democratic senators Sheldon Whitehouse and Jeff Merkley, two progressives, say they won’t support Powell because he hasn’t done enough to combat climate change, an absurd assertion.

Another Democratic senator, Jon Tester, has confirmed his support for Powell.

Biden needs to renominate Powell, period.  But Powell is a Republican, and Brainard is a Democrat.

Back to Charles Evans, he did also note, “Things are improving at the ports” and expects issues on this front to be rectified.

Meanwhile, Treasury Secretary Janet Yellen indicated to lawmakers that they risked a government default if they failed to lift the legal debt ceiling by Dec. 15.

Earlier, on CBS’ “Face the Nation,” Yellen said the pandemic is “responsible” for inflation that’s been shocking Americans.  Yellen explained that the outbreak disrupted supply chains and shifted consumer demand away from services and toward products.

“It’s important to realize that the cause of this inflation is the pandemic,” Yellen said.  “It led to a dramatic increase in demand…for products,” she continued.  “And although the supply of products has increased in the United States and globally, not as much as demand.”

Yellen added in the interview: “The pandemic has been calling the shots for the economy and for inflation. And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”

Europe and Asia

A flash estimate of GDP in the eurozone for the third quarter was up 2.2% over the second quarter, 3.7% vs. a year ago.

Germany 2.5% (Q3 2021 over Q3 2020), France 3.3%, Italy 3.8%, Spain 2.7%, Netherlands 5.0%.

An October reading on inflation for the EA19 (also from Eurostat) had it at 4.1% annualized, up from 3.4% in September.  A year earlier, the rate was -0.3%.

Germany 4.6%, France 3.2%, Italy 3.2%, Spain 5.4%, Netherlands 3.7% and Ireland 5.1%.

Brexit: Britain’s Brexit minister David Frost said today that significant gaps remained with the European Union across most issues relating to the Northern Irish protocol and that if no solution could be found, then Article 16 would be used.

“Significant gaps remain,” said Frost.  “We have not yet made substantive progress on the fundamental customs and (other) issues relating to goods moving from Great Britain to Northern Ireland.”

Frost said Britain wanted a consensus solution but one that constituted “a significant change from the current situation.”

“If no solution can be found, we remain prepared to use the safeguard provisions under Article 16, which are a legitimate recourse under the Protocol in order for the government to meet its responsibilities to the people of Northern Ireland,” he said.

But triggering Article 16 could unravel some of the benefits reaped by Northern Irish businesses from the post-Brexit landscape.  Under the protocol with the EU, the region benefits from being both part of the UK and EU single markets for goods.  Many companies saw orders jump as customers in the Republic of Ireland sought to avoid the complications of receiving goods from other parts of the British Isles.  Ripping up the protocol would erase that advantage.

Recently, former British prime minister John Major, an opponent of Brexit, told the BBC: “I think it would be colossally stupid (to trigger Article 16).  To use Article 16, to suspend parts of the protocol, would be absurd.

“This protocol is being denounced week after week by Lord Frost and the prime minister. Who negotiated the wretched protocol?  Lord Frost and the prime minister.

“They negotiated it, they signed it, they now wish to break it….

“This is silly politics to placate a few extreme Brexiteers, and the price will be paid by businesses, people in Northern Ireland and the reputation of the United Kingdom.”

Turning to Asia…China’s factory activity and consumer spending were surprisingly robust in October, official monthly figures showed Monday, though there were fresh signs of weakness in the property sector, underscoring concerns for the outlook of the world’s second-largest economy.

Industrial production rose 3.5% from a year earlier in October, per the National Bureau of Statistics, accelerating from September’s 3.1% pace and beating estimates.

Retail sales increased 4.9% from a year ago, higher than September’s 4.4% growth rate.

At the same time, China’s property slump has deepened, official data showed, with new home prices seeing their biggest month-on-month decline since 2015.

New construction starts in January through October also fell 7.7%, compared to a year earlier.

While the drop in new home prices in October, 0.2%, is tiny, it’s the biggest decline since February 2015.

The real estate sector accounts for about a quarter of the country’s economic activity, and it’s been rocked as major property developers, such as giant Evergrande, grapple with huge debts.

Japan issued a preliminary report on third-quarter GDP and it shrank -0.8% quarter-over-quarter, -3% annualized, owing to a fall in exports caused by supply-chain constraints and lower consumer spending (-1.1%) during a Covid-19 state of emergency. Monday’s data showed Japan’s GDP was still smaller than it was in the final quarter of 2019, just before the pandemic got going around the world. 

Separately, industrial production for September was -2.3% year-over-year.

But the situation has been improving in the fourth quarter.  October exports rose 9.4% Y/Y, with imports up 26.7%.

On the inflation front, prices in October rose a whopping 0.1% year-over-year, and fell 0.7% Y/Y ex-food and energy.

Street Bytes

--It was retailer week on the earnings front, all the major giants reporting, and for the most part the reports were strong, with hopeful views concerning the holiday shopping season.  But the energy sector took it on the chin as oil prices fell hard and, in the end, the major averages finished mixed.

The Dow Jones fell 1.4% to 35601, while the S&P 500 added 0.3%, hitting a new record on Thursday, while Nasdaq, up 1.2%, closed at a new high Friday, its first close over the 16000 mark (16057).

Next week we have a slew of economic data prior to the Thanksgiving holiday.

--U.S. Treasury Yields

6-mo. 0.06%  2-yr. 0.51%  10-yr. 1.55%  30-yr. 1.91%

Yields were essentially unchanged on the week, but they fell in Europe’s bond market over the renewed Covid fears.

--Oil prices fell a fourth straight week, all the way to $76.11 on West Texas Intermediate, after OPEC and the International Energy Agency warned of impending oversupply.  And now as Covid-19 cases in Europe increase, you have the downside risks to demand recovery.  While this week saw an unexpected decline in U.S. crude stockpiles, traders are starting to expect supply will rise before long, and as the Biden Administration tries to intervene more aggressively to lower fuel costs.

The IEA and OPEC both said this week that more supply could be on the way in the coming months, with OPEC and its allies (OPEC+) seeking to maintain a steady increase in output.  The U.S. and others have called for OPEC+ to boost output more swiftly, but OPEC Secretary General Mohammad Barkindo said the group sees signs of an oil supply surplus building from next month, adding its members and allies will have to be “very, very cautious.”

The IEA said U.S. oil production is expected to rise again in 2022, accounting for about 60% of its forecast of 1.9 million barrels per day for non-OPEC supply growth.  The IEA expects a rise of 1.5 million barrels per day in global oil output in the final three months of the year, with the U.S. alone accounting for 400,000 barrels of this growth.  By December, Saudi Arabia and Russia are each set to pump over 10 million barrels per day for the first time since April last year, the IEA said.

The administration has considered an emergency release of oil from the U.S. Strategic Petroleum Reserve (SPR), though the SPR is generally used during natural disasters or supply disruptions usually caused by wars.  And in their virtual meeting, President Biden raised the issue with China, asking President Xi to release some of their oil reserves to help stabilize prices.

The U.S. has the world’s largest reported strategic petroleum reserve at 727 million barrels whereas China has about 200 million barrels and is by far the world’s largest importer of crude oil.  The two working in tandem would have an impact on global oil prices.

The U.S. currently has discretion to sell some 18 million barrels from the SPR thanks to previous Congressional approval in years past.

Meanwhile, gas prices in California reached an all-time high as the average price of a gallon of regular soared to $4.68, according to the AAA.  The national price hovered around an average of $3.41 per gallon.

--Shell is ditching the ‘Royal Dutch’ label, announcing on Monday it would move its head office to Britain from the Netherlands, pushed away by Dutch taxes and facing climate pressure in court as the energy giant shifts from oil and gas.

“Royal Dutch” has been part of the company’s identity since 1907, and now it will become Shell Plc.  The firm has been in a long-running tussle with Dutch authorities over the country’s 15% dividend withholding tax on some of its shares, making them less attractive for international investors.

Shell’s decision is seen as a vote of confidence in London after Britain’s exit from the European Union.

Monday’s move follows a major overhaul Shell completed this summer as part of its strategy to shift away from oil and gas to renewables and low-carbon energy.  The overhaul included thousands of job cuts around the world.  In May, a Dutch court ordered Shell to deepen its planned greenhouse gas emission cuts in order to align with the Paris climate deal which aims to limit global warming to 1.5 degrees Celsius.  Shell has said it would appeal.

--Walmart reported better-than-expected third-quarter results on Tuesday as the world’s biggest retailer gained ground in the U.S. grocery market, while it lifted full-year guidance for comparable sales and earnings.

Sales before membership and other income rose 4.1% to $139.21 billion, ahead of consensus, while adjusted earnings increased to $1.45 a share from $1.34 a year before.

“Our momentum continues with strong sales and profit growth globally,” said CEO Doug McMillon.  “We gained market share in grocery in the U.S., and more customers and members are returning to our stores and clubs around the world.”

Total revenue was up 4.3% year-on-year to $140.53 billion, with U.S. sales up 9.3% to $96.61 billion.  Walmart’s U.S. comparable store sales rose 9.2%, ex-fuel, while comp sales for its Sam’s Club warehouse unit jumped 14%.

Walmart International sales fell 20% to $23.6 billion as the company has in recent years sold investments in holdings in Argentina, Japan and the UK.

The company said it now sees full-year U.S. comp sales growth of 6%, ex-fuel.

“We have the people, the products, and the prices to deliver a great holiday season for our customers and members,” McMillon said in a statement.

But the shares fell on the earnings news because Walmart said high supply chain costs ate into margins, even as it limits disruption from shortages by chartering its own vessels to ship goods, ordering products into the United States well ahead of time and re-routing deliveries to less crowded ports.

Walmart is eating the higher costs and keeping prices low to increase market share, but with bulging inventories, post-holidays could see heavy discounts to offload the products.  I was at a Walmart myself the other day and was surprised prices on goods I purchase regularly hadn’t increased.

--Target Corp. raised its sales forecast for the holiday season, boosted by early Christmas shopping by Americans, even as the retailer grappled with higher costs stemming from the supply chain crisis.  Target said its inventory levels were up more than $2 billion from a year earlier ahead of the holiday rush, while adding that it had maintained lower prices despite an increase at the vendor side due to higher raw material costs.  The added costs in getting goods to its stores have weighed on its gross margins, which fell over 2 ½ percent in the quarter.

Target shares, which had risen about 50% this year, fell nearly 5% on the news, Wednesday.  Analysts believe, though, that Target will ultimately increase market share, a la Walmart, in keeping prices low.

For the quarter ended Oct. 30, comparable sales rose 12.7%, beating expectations, with store traffic jumping nearly 13% as Target attracted more shoppers through its quick same-day delivery services.  Revenue was $25.65 billion, up from $22.63 billion a year ago.

“We’ve seen strength throughout the year and we’ve seen it punctuated during key seasonal moments… That’s going to continue as we move into the holidays,” CEO Brian Cornell said.  The company now expects current quarter same-store sales to rise in the high single- to low double-digit range, up from its prior forecast.  But it did not raise its operating-margin expectations for the full year and that hurt the share price.

--TJX Cos. Inc., owner of T.J. Max, like Walmart and Target, said it was well-positioned for the holiday season, easing concerns of product availability due to supply-chain bottlenecks, after the discount store operator reported quarterly sales that beat estimates on Wednesday.  Shares rose in response.

TJX said comp store sales for the start of the fourth quarter were up in the mid-teens percentage range over the fourth quarter two years ago.

Net sales rose 24% to $12.53 billion for the third quarter ended Oct. 30, beating estimates, while net income gained 18% to $1.02 billion.  The company also hiked its share repurchase program.

--Home Depot’s fiscal third-quarter results beat Wall Street estimates amid strong demand for large home improvement projects, which helped push the retailer’s comparable sales growth above market expectations.

“Home improvement demand remains strong,” CEO Craig Menear told analysts on a conference call.  Customers are still taking on bigger projects, fueling growth in the professional contractors’ category, which again outpaced expansion at the do-it-yourself group, Menear said.

“We remain encouraged by what we are hearing from our Pros as they tell us their backlogs are healthy,” Chief Operating Officer Edward Decker said on the call.

Comparable sales gained 6.1% annually in the fiscal third quarter, versus market expectations for a 2.1% increase.  The metric logged growth of 3.1% in August, 4.5% in September and 9.9% in October, the company said.  Same-store sales in the U.S. grew 5.5% during quarter.

Revenue rose 9.8% to $36.82 billion, exceeding estimates.  The company earned $4.13 billion, topping last year’s figure of $3.4 billion.

--HD rival Lowe’s Cos. Inc. raised its full-year sales forecast on Wednesday, as home improvement chains get a boost from resurgent demand for tools and building materials in a strengthening U.S. housing market.  High-spending professional contractors have been splurging on tools and building materials at Lowe’s and Home Dept over the past few months on the back of a rush to complete a backlog of home repair and upgrade jobs that were put off during the pandemic.  Rising home prices have also given people confidence to invest in upgrade jobs for their homes.

Lowe’s said it now expects fiscal year 2021 total sales of about $95 billion, compared to a previous forecast of $92 billion.  Same-store sales rose 2.2% in the third quarter ended Oct. 29, less than Home Depot’s.

Net earnings rose to about $1.9 billion in the quarter from $692 million, better than expected.

--Shares in big-box department store chains Macy’s and Kohl’s soared on Thursday after both raised guidance, benefiting from Americans stepping out to shop more following the easing of pandemic restrictions.

Macy’s swung to a profit in the third quarter and sales surged 36% as shoppers begin to buy dresses, luggage and other goods that fell to the bottom of the shopping list last year when the pandemic struck.

Macy’s earned $239 million, or 76 cents per share, for the three-month period ended Oct. 30, handily exceeding the Street’s forecasts.  The company lost $91 million last year during the same period.  Sales reached $5.44 billion for the quarter, also topping expectations.

Sales at stores opened at least a year rose 35.6%.  Online sales rose 19% compared with the year ago period, and rose 49% compared with the same quarter in 2019.

Significantly, Macy’s added 4.4 million new customers into Macy’s brand, a 28% increase over 2019.

Macy’s was able to increase inventory 19.4% compared with last year’s third quarter, navigating shortages and slowed supplies.

Kohl’s reported fiscal Q3 adjusted earnings of $1.65 per diluted share, compared with $0.01 a year ago and well above estimates.

The retailer posted revenue of $4.6 billion for the quarter ended Oct. 30, compared with $3.98 billion a year ago.

Kohl’s said it expects 2021 net sales to increase in the mid-twenties percentage range, slightly better than prior forecasts.

--Airbus shaved its forecast for airplane demand by 0.5% compared with pre-pandemic projections on Saturday, offset by a brighter outlook for freighters as the world’s largest jetmakers fight for inaugural sales of large new cargo planes.

Airbus issued new long-term demand forecasts on the eve of the Dubai Airshow, where a battered aviation industry is reeling from the loss of two years’ growth to Covid-19, while striving to defend its environmental plans amid growing climate pressure.

Airbus said it expected a market total of 39,020 jetliner deliveries in the next 20 years, fractionally lower than what it predicted two years ago in its last rolling forecast.  The estimate for small planes like the best-selling A320 was essentially flat at 29,690 units, but the outlook for big jets that traditionally dominate the region fell 3.1%, reflecting a drop in long-haul travel on top of a glut of such aircraft.  The view echoes that of Boeing which in September cut its 20-year delivery forecast by 1% compared to 2019.

Airbus said, “The fastest traffic growth will be in Asia with domestic China becoming the largest market.”

--Shares in Boeing fell 6% today on a Wall Street Journal report the company has slowed the manufacturing of its 787 Dreamliner jets to resolve flaws related to the areas adjacent to passenger and cargo doors.

--The Transportation Security Administration (TSA) said Wednesday it expects to screen about 20 million air passengers during the Thanksgiving travel period, which starts Friday and runs through Sunday, Nov. 28.  TSA said the passenger volumes “may be very close to pre-pandemic levels this holiday.”

At the same time, however, as many as 40% of TSA screeners haven’t been vaccinated for Covid-19 as a Nov. 22 deadline for TSA workers to do so fast approaches.

Neither Hydrick Thomas, president of the American Federation of Government Employees’ division representing front-line airport security officers, nor the TSA foresee any travel disruptions occurring around Thanksgiving, but the union chief said there could be staffing shortages during the Christmas holidays if the agency takes a hard line on unvaccinated workers.

“They are not going to be ready for Christmas if they get rid of everybody who chooses not to get vaccinated,” Thomas said.

--TSA checkpoint travel numbers vs. 2019….

11/18…84 percent of 2019 levels
11/17…78
11/16…78
11/15…87
11/14…90
11/13…86
11/12…82
11/11…87

But Aug. 1st remains the highest post-pandemic day with 2,238,462 travelers.

Now we await news on the impact of rising Covid cases in Europe and international travel plans.

--Deere and the United Auto Workers union reached a third tentative agreement on a contract in the latest bid to end a strike at the agricultural and construction equipment maker that started Oct. 14.  It was then ratified by a 61%-39% margin on Wednesday.

The UAW, which represents more than 10,000 Deere production and maintenance employees, said the latest offer included “modest modifications” to a proposal that union members rejected on Nov. 2 by a 55% to 45% margin.

The new deal, some details of which had yet to be released, but apparently contains automatic cost-of-living adjustments (which the Wall Street Journal editorial board railed against as emblematic of a wage-price spiral and durable inflation), is supposed to be close to Deere’s last offer that included an immediate 10% increase in hourly pay, plus an $8,500 bonus for each worker, and additional 5% pay raises for 2023 and 2025, as well as lump sum bonuses in three other years.

The company apparently stepped up messaging to employees after the last offer (the above) was rejected.

The settlement is a relief to the agriculture industry that is already grappling with parts shortages and a tight labor market amid the U.S. corn and soybean harvest season.

--Saturday, Kaiser Permanente and the Alliance of Health Care Unions reached tentative agreement on a four-year contract, covering nearly 50,000 Kaiser Permanente health care employees in 22 local unions, and strengthening the Labor Management Partnership.

This was big, as it was a looming disaster amid Covid-19.  Kaiser has 34,000 workers in Southern California, with another 6,300 in Oregon and Washington.

--Medicare’s “Part B” outpatient premium will jump by $21.60 a month in 2022, one of the largest increases ever (largest in dollar terms, although not percentage-wise).  The increase, blamed on a new Alzheimer’s drug for half of it, gobbles up a big chunk of the recently announced Social Security cost-of-living allowance, a boost that had worked out to $92 a month for the average retired worker, intended to help cover rising prices for gas and food that are pinching seniors.

--Elon Musk exercised options and sold more Tesla Inc. shares, though this week the stock rose.  After his Twitter poll asking whether he should dispose of 10% of his Tesla stock, to help pay taxes on the exercise of 2.1 million options, the stock cratered.

But to meet the 10% threshold he gave in the poll, Musk would need to sell some 17 million shares, and he’s offloaded roughly 7.5 million in recent days.

--Graphics-chip company Nvidia Corp. posted another quarter of record sales amid supercharged demand for videogaming and data centers.

America’s largest chip company by market value has enjoyed a period of strong growth with the pandemic boosting consumer spending on videogames and the wider adoption of digital services that run on data centers.

Third-quarter sales rose 50% to $7.1 billion, generating net income of $2.46 billion, exceeding Street forecasts on both. Videogaming sales hit a record $3.2 billion, up 42% from the year-ago period, with record data-center sales, up 55%.

Nvidia said it has taken extra steps to assure long-term supply agreements and made $1.64 billion in advance payments in the third quarter.  “We feel very good about our supply situation, particularly starting in the second half of next year and going forward,” CEO Jensen Huang said on an analyst call.  The company’s sales to the auto market did fall 11% from the second quarter, but were still up 8% from a year ago.

CEO Huang now has his sights set on the so-called metaverse, a loosely defined group of online realms where users playing as avatars hang out and participate in immersive experiences with others, oblivious to the real world, where I will be my remaining years on the planet.

Anyway, shares in Nvidia soared on the report, up 10%.

--The Nvidia news was in sharp contrast to that of network equipment maker Cisco Systems, which said component shortages were hurting its ability to meet customer demand.  CEO Chuck Robbins said on the company’s earnings calls:

“We have been taking multiple steps to mitigate the supply shortages and deliver products to our customers, including working closely with our key suppliers and contract manufacturers, paying significantly higher logistics costs to get the components where they are most needed…

“When combined with cost increases we are seeing from many of our suppliers, these factors are putting pressure on our gross margins.”

The company generally met expectations on earnings and revenue, but the supply chain overhang had the Street lowering its forecasts and Cisco shares fell 6% on the news.

--Tyson Foods Inc. reported a jump in sales after sharply raising prices for its beef, chicken and pork, citing growing costs the company said were likely to persist.

The Arkansas-based meat giant lifted prices across all of its major divisions as executives said Tyson’s cost of cattle jumped by one-fifth year-over-year in the quarter ended Oct. 2.  Tyson’s logistics expenses climbed about 30%, they said, while the company also has paid more for ingredients and packaging materials.

“I can’t think of a single thing that has either stayed the same or gone down,” said Donnie King, Tyson’s chief executive, on a Monday call with reporters.

Rising prices helped lift Tyson’s revenue by 12% to $12.8 billion in the company’s fiscal fourth quarter, while earnings increased to $1.36 billion, more than doubling from the same quarter last year.  Operating margins in Tyson’s beef business jumped to 22.9% in the most recent quarter, compared with 9.7% in the same quarter in 2019.  But margins in Tyson’s chicken business were negative in the quarter, as the company dealt with labor challenges and problems in its poultry-breeding operations.  I heard the chickens went on strike, demanding an extra two days of life.

Tyson produces roughly 1 of every 5 pounds of chicken, beef and pork in the U.S., and other meatpackers have been struggling to keep up with demand from supermarkets and reopening restaurants.

--CVS Health announced Thursday that the company plans to close 900 stores nationwide over the next three years because of what executives described as changes in consumer shopping behavior, population, and the future of health care needs.  Closures are set to begin in the spring of 2022.

The Woonsocket, R.I.-based company employs more than 300,000 workers across the U.S. in about 9,000 stores.

Because of the planned closures, CVS said it expects to record an impairment charge in the fourth quarter of this year between $1 billion and $1.2 billion.

--Shares in Foot Locker fell nearly 12% today after the athletic footwear retailer reported Q3 earnings and revenue that were above Wall Street forecasts, but the company said it remains “appropriately cautious in the near term” amid persistent supply chain constraints.

--Los Angeles’ Staples Center, home of the Lakers and Clippers’ basketball teams, is being renamed Crypto.com Arena after the Singapore-based bitcoin exchange bought the naming rights Wednesday for a reported $700 million over 20 years.

But as Aaron Elstein of Crain’s New York Business posits, “When will the crypto-craze peak?  Watch the signs.”

“History tells us, again and again, that deals like this represent the frothiest moment of a bubble and it’s time to pocket your winnings and get out.

“Don’t believe it?

“Citigroup’s share price has crumbled by 90% since acquiring the naming rights to the Mets ballpark in late 2006 for $400 million over 20 years.  It’s a similar story with Barclays, down 80% since buying the rights to the Brooklyn Nets’ arena for $200 million in early 2007.  Both those deals were seen as well-considered marketing agreements at the time, but alas they were struck at the most frantic stage of housing mania.  Both banks collapsed in 2008, only to be bailed out by taxpayers.

“The song remains the same with MetLife, which in 2011 spent about $500 million for the naming rights to the Giants and Jets stadium.  Since then the giant insurer’s stock price has risen by more than 100%, which sounds impressive except the S&P 500 is up 300%.

“The phenomenon of naming rights as a contrarian indicator has been studied ever since companies started slapping their names on stadiums around 30 years ago.  Money manager Victor Niederhoffer found that between 1990 and 2001 companies that bought naming rights underperformed the S&P 500 by a median of 27%

“ ‘Corporations are beset by the same harmful tendencies as investors,’ Niederhoffer wrote.  ‘When they are at their peak, they reach for the sun.’”

Of course many of us remember Enron Field, home of the Astros.  Or the Oklahoma City Thunder’s home, Chesapeake Arena, until their bankruptcy filing.  Charlotte, N.C. once had Blockbuster Pavilion.

And then there was CMGI, whose name adorned the New England Patriots’ field, only to crash and burn in the dot-com bubble.

Now this is all partly in jest when it comes to Crypto.com Arena.  Or maybe not.

The Pandemic

The Food and Drug Administration opened up Covid-19 booster shots to all adults, expanding the government’s campaign to shore up protection and get ahead of rising coronavirus cases that may worsen with the holidays.

Pfizer and Moderna announced the FDA’s decision after at least 10 states already had started offering boosters to all adults.  The latest action simplifies what until now had been a confusing list of who’s eligible by allowing anyone 18 or older to choose either company’s booster six months after their last dose – regardless of which vaccine they had first.

But there was one more step: The Centers for Disease Control and Prevention needed to agree to expand both boosters to even healthy young adults and the CDC’s scientific advisers debated it today, approved both, and then Director Rochelle Walenksky signed off this evening.

“Booster shots have demonstrated the ability to safely increase people’s protection against infection and severe outcomes and are an important public health tool to strengthen our defenses against the virus as we enter the winter holidays,” Walensky said in a statement.

The CDC, however, muddied the waters in saying that for those aged 18 to 49, individuals may get the vaccine if they choose to, but stopped short of saying all adults should get the booster.

Just stupid.

Anyone who got the one-dose Johnson & Johnson vaccine was already able to get a booster.

While all three Covid-19 vaccines used in the U.S. still offer strong protection against severe illness including hospitalization and death, protection against infection can wane with time.

While boosters for everyone was the Biden administration’s original goal, in September, a panel of FDA advisers voted overwhelmingly against that idea based on the vaccines’ continued effectiveness in most age groups.  Instead they endorsed an extra Pfizer dose only for the most vulnerable.  And that was a dumb decision…causing needless confusion.

Covid-19 death tolls, as of tonight….

World…5,154,868
USA…791,068
Brazil…612,411
India…465,082
Mexico…291,929
Russia…261,589
Peru…200,767
UK…143,716
Indonesia…143,714
Italy…133,082
Iran…128,734
Colombia…128,013
France…118,423
Argentina…116,360
Germany…99,399
South Africa…89,562
Spain…87,810
Poland…80,399
Ukraine…80,231
Turkey…74,646
Romania…54,624
Philippines…46,698
Chile…38,079
Ecuador…33,088
Hungary…32,780
Czechia…31,979
Malaysia…29,937
Canada…29,481
Pakistan…28,648
Bangladesh…27,946
Bulgaria…27,124
Belgium…26,526
Tunisia…25,334
Iraq…23,628
Vietnam…23,578
Thailand…20,303

[Source: worldometers.info]

U.S. daily death tolls…Sun. 126; Mon. 467; Tues. 1,282; Wed. 1,416; Thurs. 1,147; Fri. 1,302.

Covid Bytes

--There have been 10,600 people in Israel who have been fully vaccinated with three shots but still contracted Covid-19, the Health Ministry said this week.

Does this mean the vaccines are not working?

Just the opposite, health experts say: Those 10,600 out of four million people who received the third jab are only 0.27%.

“No one said that the vaccine is 100% able to stop infections,” stressed Prof. Cyrille Cohen, head of the immunology lab at Bar-Ilan University.

Breakthrough infections always happen after vaccination, generally in people with weaker immune systems, such as the elderly or individuals with underlying medical conditions ranging from HIV to cancer.

In addition, the Pfizer vaccines were not evaluated for preventing infection, but rather symptomatic or severe disease and death.  And when it comes to these statistics, the vaccines – at least for now – seem to be doing their job.

As more people in Israel received a third jab, the number of daily cases rapidly started to decline.  In the second half of August, Israel was averaging 8,300 daily cases.  Today, it is only 480.

--Ireland, where some 90 percent of adults are vaccinated, but where boosters have yet to be rolled out, has seen hospitalizations spike to levels not seen since February.  The healthcare system there is in crisis mode.

--New York City nurses are once again sounding the alarm that staffing shortages at local hospitals are jeopardizing the well-being of themselves and their patients.

The nurses say the hospitals failed to staff jobs that started to become vacant after the first pandemic wave roared through the region, and now some hospitals have nurse-to-patient ratios as high as 30 to 1 and many nurses overworked to the point of complete burnout.

The outgoing administration of Mayor Bill de Blasio in New York City cleared the way Monday for all adults in the city to receive a booster shot of Covid-19 vaccine as colder weather threatens to bring a wave of new infections.

--It was disturbing to learn over the weekend that three snow leopards died of Covid-19 at the Lincoln, Nebraska Children’s Zoo.  The three died of complications from Covid about one month after the animals had tested positive.

Snow leopards are vulnerable to extinction, with just a few thousand estimated to be living in the wild.

At the same zoo, two Sumatran tigers were also infected, but they “have made a seemingly full recovery from their illness.”

According to the Cornell Feline Health Center, there is not yet evidence that cats can infect people.

Foreign Affairs

Iran: Tehran has resumed production of equipment for advanced centrifuges at a site the United Nations’ atomic-energy agency has been unable to monitor or gain access to for months, diplomats familiar with the activities said this week, presenting a new challenge for the Biden administration as it prepares for nuclear talks that are slated to begin Nov. 29.

The recent work at Karaj has taken place without any official International Atomic Energy Agency monitoring.  Iran tightened security at Karaj after a sabotage attack last June that Tehran blamed on Israel.

According to the diplomats, Iran has now produced significant amounts of centrifuge parts since late August, centrifuges used to spin enriched uranium into higher levels of purity either for civilian use or, at 90% purity, for nuclear weapons.

Production of centrifuges will be front and center in the discussions, which the White House is hoping leads to restoration of the 2015 nuclear deal that former President Trump withdrew from in May 2018.

Afghanistan: The UN envoy here on Wednesday delivered a bleak assessment of the situation following the Taliban takeover, saying that an affiliate of the Islamic State group has grown and now appears present in nearly all 34 provinces.

UN Special Representative Deborah Lyons told the UN Security Council that the Taliban’s response to Islamic State-Khorasan Province’s expansion “appears to rely heavily on extrajudicial detentions and killings” of suspected ISKP fighters.  “This is an area deserving more attention from the international community,” she said.

The Taliban, Lyons said, has been unable to stem ISKP’s growth, the group responsible for 334 attacks this year, compared with 60 strikes in 2020.

[In the West African nation of Burkina Faso, ISIS attacked a military post near a gold mine, killing 53, including 49 military police.]

China/Taiwan:  President Biden and Chinese President Xi Jinping spent more than three hours together in a virtual meeting that concluded with both leaders agreeing they need to tread carefully as their nations find themselves in an increasingly fraught competition.

Biden and Xi seemed determined to lower the temperature in what for both sides is the most significant relationship on the global stage.

“As I’ve said before, it seems to me our responsibility as leaders of China and the United States is to ensure that the competition between our countries does not veer into conflict, whether intended or unintended,” Biden told Xi at the start of the meeting Monday.  “Just simple, straightforward competition.”

Xi greeted Biden as his “old friend” and echoed Biden’s cordial tone in his own opening remarks, saying, “China and the United States need to increase communication and cooperation.”

The White House in a statement said that Biden again raised concerns about China’s human rights practices, and made clear that he sought to “protect American workers and industries from the PRC’s unfair trade and economic practices.”  The two also spoke about key regional challenges, including North Korea, Afghanistan and Iran.

As Biden’s poll numbers plummet amid concerns about the lingering pandemic, inflation and supply chain problems, he’s looking for a measure of equilibrium on the most consequential foreign policy matter he faces.

For his part, Xi is dealing with a Covid-19 resurgence, with the Winter Olympics just months away, and a looming housing crisis that has the ability to hurt the global economy.

“Right now, both China and the United States are at critical stages of development, and humanity lives in a global village, and we face multiple challenges together,” Xi said.

In the end, however, zero was really accomplished.  It’s always better for the two sides to talk to each other, but this meeting had no deliverables, though the two agreed to explore talks on arms control, even as the White House conceded the discussion on the topic was tentative.

Instead, as Chinese Foreign Ministry spokesperson Zhao Lijian said Monday ahead of the talks, it’s really all about Taiwan.

“The Taiwan issue concerns China’s sovereignty and territorial integrity, as well as China’s core interest,” Zhao said. “It is the most important and sensitive issue in China-U.S. relations.”

China’s state-run Global Times said Xi blamed recent tensions on “repeated attempts by the Taiwan authorities to look for U.S. support for their independence agenda as well as the intention of some Americans to use Taiwan to contain China.”

“Such moves are extremely dangerous, just like playing with fire. Whoever plays with fire will get burnt,” it said.

Meanwhile, according to a report from a bipartisan advisory body to the U.S. Congress published Wednesday, urgent measures are needed to strengthen the credibility of U.S. military deterrence of any potential Chinese aggression against Taiwan.

The influential U.S.-China Economic and Security Review Commission (USCC) included a range of recommendations about Taiwan in its annual report to Congress, amid heightened tensions.

The report said Congress should authorize and appropriate funds for Taiwan to purchase defense articles from the U.S. and finance the deployment of cruise and ballistic missiles and other munitions in the Indo-Pacific while increasing funding for surveillance.

“A lack of clarity in U.S. policy could contribute to a deterrence failure if Chinese leaders interpret that policy to mean opportunistic aggression against Taiwan might not provoke a quick or decisive U.S. response,” the report said.

The USCC report addressed a range of economic issues between the United States and China, including recommending Congress consider legislation to address risks to U.S. investors and interests in China investment, a topic I can directly relate to.

Commission chair Robin Cleveland said in an opening statement that China’s capital controls “may limit investors’ abilities to move money out of equity and bond investments and the lack of oversight by trusted authorities may jeopardize investors’ funds.  More importantly, numerous companies which will benefit from U.S. investment have been formally identified as threats to U.S. national security interests.”

John Bolton / Wall Street Journal

“America has no China strategy 10 months after President Biden’s inauguration.  Monday’s Zoom meeting between Mr. Biden and Xi Jinping only highlighted that void.  Dulcet tones and torrents of presidential words are no substitute for clear policies.  Beijing could perceive White House emphasis on ‘cooling tensions’ as a green light to continue its assertive behavior. What explains the absence of U.S. direction? Insufficient presidential engagement?  Conflicting advice?  Indecision?

“Whatever the reason, there is a pressing need to articulate a China policy. That’s not only because the White House has to lead a vast U.S. bureaucracy but because the nation faces momentous choices requiring informed public debate…. 

“China strategy doesn’t immediately require a 1,000-page opus. It does require addressing core bilateral issues. Two stand out.

“First is the defense of Taiwan, a de facto American ally and important trading partner, an enormously consequential country for Japan, and a key link in the ‘first island chain,’ the geographic defense line between the Chinese mainland and the Pacific Ocean.  But many Americans don’t know Taiwan from Thailand. To protect Taiwan, not to mention East and Southeast Asia generally, we need animated and sustained U.S. public support.  Mr. Biden didn’t provide it Monday. He simply mouthed longstanding bromides.

“The enormous damage caused by withdrawing from Afghanistan would be multiplied if Washington left Taipei to Beijing’s mercies.  If Mr. Xi believed U.S. indecision and weakness suggested Washington would yield, he would be encouraged to provoke a crisis, hoping to subjugate Taiwan without a fight.  Rather than risk a less feckless president after Mr. Biden, Mr. Xi may feel he has three years to act.  How do we deter him during that period?  The question is intricate and dangerous, requiring considerable creativity.  Mr. Biden has shown precious little.

“Second, China’s expensive buildup of strategic weapons and manifold other military capabilities existentially threatens America as well as allies.  It may determine whether our 75-year-old global nuclear umbrella, and the international stability it provides, will survive or wither away, succeeded by far wider nuclear proliferation.  The pressures on India to increase its own nuclear assets and Japan to acquire nuclear weapons will be considerable, with consequences for Asia and the world. Pentagon planning in a world with two major nuclear adversaries will be akin to multidimensional chess.

“Whether China learned anything from the Cold War about prudent political management of a large strategic arsenal is unknown, but the signs are worrying.  One telling move: Beijing refuses to engage in serious arms negotiations while rapidly accumulating such assets.  Mr. Biden has so far been unwilling to insist with both Vladimir Putin and Mr. Xi that bilateral Russian-American nuclear deals are relics of the Cold War.  No American strategist should consider limiting U.S. nuclear capabilities in a deal with Russia while allowing China unrestrained growth.  Even trilateral strategic-weapons arrangements may be insufficient, although broader multilateral nuclear negotiations boast a record only of failure.

“Neither Taiwan nor strategic arms are a hot campaign topic, and China is not yet at the forefront of public consciousness. Nonetheless, issues reminiscent of China’s 1958 attacks on Quemoy and Matsu and John F. Kennedy’s 1960 drumbeat about a ‘missile gap’ with the Soviet Union could soon again be top of mind.  To ensure America’s eventual strategy is workable, political leaders need to debate the challenges so citizens can appreciate the implications of the choices they will have to make.

“If Mr. Biden doesn’t use his Presidency’s bully pulpit to launch that debate, his potential opponents should.”

Matt Brazil and Peter Singer / Defense One

“China faces an immediate future with a leader who is likely surrounded by the political equivalent of yes-men.  (There is only one woman in the Politburo, and none on its all-powerful Standing Committee.)  If they wish to survive, China’s elite leaders have little choice but to heap praise upon Xi or risk accusations of secretly plotting his downfall.  This atmosphere is not conducive to managing increasingly complex challenges.

“And in a system as controlling as modern China’s, this suffocating dynamic shapes far more than internal party politics.  It affects everything from political discourse to media and social media.  Praise for the Party and its leader is the only kind of utterance tolerated in the public square of China’s internet.  The CCP, which has for decades sought to erase undesirable online content, has worked under Xi to fabricate positive social media posts as well – in toto, what the Stanford researcher Jen Pan calls ‘the largest selective suppression of human expression in history.’

“Though the situation appears stable on the outside, this dual dynamic creates strategic risks.  Such an absolutist atmosphere relies on suppressing not just history, but any truthful information that doesn’t shine a positive light on Xi. It could foster risky delusions in Beijing about China’s power and influence, make it harder to tackle its very real domestic challenges, and misunderstand or deliberately misreport the intentions and activities of the U.S. and its allies.  In turn, if China’s 68-year-old leader should suddenly become ill or pass from the scene, a succession crisis could easily follow.  More directly, any miscalculations made by Xi from this point forward are on him: when it comes to major decisions, there is no one else who can take credit…or blame.”

Lastly, we have the issue of Peng Shuai, a top Chinese tennis player who accused a Communist Party leader of sexual abuse and has since vanished from public view.

This is a big deal, with Beijing preparing to host the Winter Olympics.

Peng, 35 and a former world No. 1 player in doubles, with Wimbledon and French Open titles to her credit – accused former Vice Premier Zhang Gaoli, 75, of pressuring her into sex 10 years ago when he was the party chief of Tianjin, a port city near Beijing, and then again three years ago after he had retired.

Friday, China’s Foreign Ministry stuck to its line that it wasn’t aware of the controversy surrounding Peng.

The International Olympic Committee declined to comment Friday, saying in an emailed statement: “Experience shows that quiet diplomacy offers the best opportunity to find a solution for questions of such nature.  This explains why the IOC will not comment any further at this stage.”

But Steve Simon, the chairman and CEO of the Women’s Tennis Association, has threatened to end the WTA’s extensive relationship with China, involving multiple tournaments, unless it is proved Peng is safe.

Russia/Ukraine/Belarus: Poland confirmed that migrants have left a camp on the border with Belarus, and on Thursday, hundreds of Iraqi Kurds were flown home to Erbil in northern Kurdistan from Minsk.  As you can imagine, many of them were rather dejected, vowing to try again to emigrate.  Many in Kurdistan live in towns still lacking basic services such as electricity and healthcare years after Islamic State’s defeat.

So it would appear the manufactured crisis between Belarus and the EU is over, for now.

On Thursday, Vladimir Putin said the West was taking Russia’s warnings not to cross its “red lines” too lightly and that Moscow needed serious security guarantees from the West.

In a wide-ranging foreign policy speech, the Kremlin leader also described relations with the United States as “unsatisfactory” but said Russia remained open to dialogue with Washington.

The Kremlin said in September that NATO would overstep a Russian red line if it expanded its military infrastructure in Ukraine, and Moscow has since accused Ukraine and NATO of destabilizing behavior, including in the Black Sea.

In the televised speech, Putin complained that Western strategic bombers carrying “very serious weapons” were flying within 20 km (12.5 miles) of Russia’s borders.  “We’re constantly voicing our concerns about this, talking about red lines, but we understand our partners – how shall I put it mildly – have a very superficial attitude to all our warnings and talk of red lines,” Putin said.

Last Saturday, Ukrainian President Volodymyr Zelensky said there were nearly 100,000 Russian soldiers near Ukraine’s border and that Western countries had shared information with Kyiv about active Russian troop moments.

“I hope the whole world can now clearly see who really wants peace and who is concentrating nearly 100,000 soldiers at our border.”

But then we had the Russian anti-satellite missile launch that blew up a Russian satellite on Monday, generating debris that now endangers the International Space Station.

“Today, miles above us, there are American astronauts and Russian cosmonauts on the International Space Station. What the Russians did today, with these 1,500 pieces of trackable orbital debris, poses a risk not only to those astronauts, not only to those cosmonauts but to satellites of all nations,” said State Department spokesman Ned Price.

Price added that the impact also generated hundreds of thousands of pieces of debris too small to be tracked.

Pentagon press secretary John Kirby said the United States was given no advance notice of the launch.

This test has thus created long-term risk to low Earth orbit, Space Command said in a statement.

“Russia has demonstrated a deliberate disregard for the security, safety, stability, and long-term sustainability of the space domain for all nations,” U.S. Army Gen. James Dickinson, U.S. Space Command commander, said in a statement.

Space Command has previously warned that the number of objects and pieces of debris from past collisions of objects or old parts of aging or no-longer functioning systems now cluttering low Earth orbit has grown 22 percent in the last two years, to about 35,000 trackable items, not including the new debris generated from Monday’s ASAT test.

On Monday, the astronauts and cosmonauts aboard the ISS were directed to shelter as the orbiting debris field neared them.

Random Musings

--Presidential approval ratings…

Gallup: [New figures]  42% approve of President Biden’s job performance, 55% disapprove; 37% of independents approve (Nov. 1-16).  This contrasts with figures of 42, 52, 34 for the period Oct. 1-19.  The critical number for the White House is independents, which peaked at 61% approval on Inauguration Day. 

Rasmussen: 41% approve of Biden’s performance, 58% disapprove (Nov. 19).

The above-noted Washington Post/ABC News poll shows Biden’s approval rating sinking to 41%, a new low, 53% disapproving, largely because of a negative shift among Democrats and independents; 45% of independents strongly disapprove of Biden’s performance.

Biden’s approval rating is down from 50% in June and 44% in September.

Barely 4 in 10 Democrats strongly approve of Biden today, down from about 7 in 10 who did so in June.

Meanwhile, Republicans hold their largest lead in midterm election vote preferences in Wash Post/ABC News polls dating back 40 years.

If voters headed to the polls today, 51 percent of registered voters said they would back the Republican running in their congressional district, while just 41 percent would choose the Democratic candidate.

So then Thursday, a new Quinnipiac University national poll had President Biden’s approval rating all the way down to just 36%, 53% disapproving, the lowest approval rating for the president in this survey.  In mid-October, the split was 37-52.

Independents disapprove of Biden’s performance by a whopping 56-29 margin, deadly for Democratic hopes come the midterms.  And, similar to the Wash Post/ABC poll, Americans say 46-38 percent they would want to see the Republican Party win control of the House of Representatives, while 16 percent did not offer an opinion.

Americans say 46-40 percent they would want to see the Republican Party win control of the U.S. Senate.

--The House voted Wednesday to censure Republican Rep. Paul Gosar of Arizona for posting an animated video that depicted him killing Democratic Rep. Alexandria Ocasio-Cortez with a sword, an extraordinary rebuke that highlighted the differences and political strains testing Washington these days.

Calling the video a clear threat to a lawmaker’s life, Democrats argued Gosar’s conduct would not be tolerated in any other workplace – and shouldn’t be in Congress.

The vote to censure Gosar, and also strip him of his committee assignments, was approved by a vote of 223-207, almost entirely along party lines.

Republican Minority Leader Kevin McCarthy called the vote an “abuse of power” by Democrats to distract from national problems.  He said of the censure, a “new standard will continue to be applied in the future,” a signal of potential ramifications for Democratic members in future Congresses.

But Democrats said there was nothing political about it.

Ocasio-Cortez herself said in an emotional speech, “Our work here matters.  Our example here matters.  There is meaning in our service.  And as leaders, in this country, when we incite violence with depictions against our colleagues that trickles down to violence in this country.  And that is where we must draw the line.”

Unrepentant, Gosar said the cartoon was not “dangerous or threatening.”

“I do not espouse violence toward anyone.  I never have.  It was not my purpose to make anyone upset,” Gosar said.

He compared himself to Alexander Hamilton, whose censure vote in the House was defeated: “If I must join Alexander Hamilton, the first person attempted to be censured by this House, so be it, it is done.”

The decision to censure Gosar, one of the strongest punishments the House can dole out, was just the fourth in nearly 40 years.

The resolution removes him from two committees: Natural Resources and the Oversight and Reform panel, limiting his ability to shape legislation and deliver for constituents.

Adam Kinzinger, one of two House Republicans to vote for censuring Gosar, along with Liz Cheney, tweeted: “We have to hold Members accountable who incite or glorify violence, who spread and perpetuate dangerous conspiracies.  The failure to do so will take us one step closer to this fantasized violence becoming real.”

--The Republican party of Wyoming will no longer consider their sole U.S. House lawmaker, Rep. Liz Cheney, as a member of the GOP, the latest reprimand for Cheney, having been one of 10 Republicans who voted to impeach Trump in January following the insurrection attempt on the U.S. Capitol on Jan. 6.

Cheney has repeatedly defended her vote.  Last week, she reupped her battle with Trump, calling him a “dangerous and irrational man” who is at “war with the rule of law and the Constitution.”

--Another one of the 10 Republicans to vote to impeach Trump, Ohio Rep. Anthony Gonzalez, who is not running for reelection, appeared on Jake Tapper’s “State of the Union” Sunday program and had this response to a question from Tapper on how worried Gonzalez is about Trump undermining democracy in 2024.

Gonzalez: “It looks to me – and I think any objective observer would come to this conclusion – that he evaluated what went wrong on January 6.  Why is it that he wasn’t able to steal the election?  Who stood in his way?

“Every single American institution is just run by people. And you need the right people to make the right decision in the most difficult times.  He’s going systematically through the country and trying to remove those people and install people who are going to do exactly what he wants them to do, who believe the big lie, who will go along with anything he says.

“And, again, I think it’s all pushing towards one of two outcomes.  He either wins legitimately, which he may do, or, if he loses again, he will just try to steal it.  But he will try to steal it with his people in those positions.

“And that’s then the most difficult challenge for our country.  You ask yourself the question, do the institutions hold again?  Do they hold with a different set of people in place?  I hope so. But you can’t guarantee it.”

Tapper then asked Gonzalez what his message is to Republican voters.

Gonzalez: “Two things.  One, keep the faith.  This country’s been through a lot.  We have fought through it, and we have persevered.

“The country – as much as I despise almost every policy of the Biden administration, and we could talk about that for six hours, the country can survive…bad policy.  The country can’t survive torching the Constitution.  We have to hold fast to the Constitution.  That needs to be the bedrock upon which we build our party and our movement.

“We have to be a party of ideas.  We have to be a party of truth. And the cold, hard truth is, Donald Trump led us into a ditch on January 6.  The former president lied to us.  He lied to every one of us. And, in doing so, he cost us the House, the Senate and the White House.

“I see, fundamentally, a person who shouldn’t be able to hold office again because of what he did around January 6.  But I also see somebody who’s an enormous political loser.  And I don’t know why anybody who wants to win elections going forward would follow that….

“Yes, I don’t trust him.

“January 6 was the line that can’t be crossed.  January 6 was an unconstitutional attempt, led by the president of the United States, to overturn an American election and reinstall himself in power illegitimately.

“That’s fallen nation territory. That’s Third World country territory.

“My family left Cuba to avoid that fate.  I will not let it happen here.

“Can I stop him? I have no idea.  But I believe, as a citizen of this country who loves this country and respects the Constitution, that’s my responsibility.”

--Rupert Murdoch urged Donald Trump to focus on the issues facing Americans today and in the future, rather than on relitigating the 2020 election.

“The current American political debate is profound, whether about education or welfare or economic opportunity,” Murdoch, executive chairman of News Corp., said on Wednesday during the company’s annual meeting of shareholders.

“It is crucial that conservatives play an active, forceful role in that debate, but that will not happen if President Trump stays focused on the past.”

Trump wrote in October: “If we don’t solve the Presidential Election Fraud of 2020…Republicans will not be voting in  ’22 or ’24.  It is the single most important thing for Republicans to do.”

Murdoch stressed that there are much more important issues.  “The past is the past, and the country is now in a contest to define the future,” he said.

--Jonathan Karl’s new book “Betrayal,” released Tuesday, documents the historic presidential election, unprecedented claims of fraud, the January insurrection at the Capitol and the stirrings of the novel Covid-19 virus that marked the final days of Trump’s presidency.

Opening with excerpts from a conversation with Trump, Karl chronicles Trump’s feelings about his supporters targeting former Vice President Mike Pence during the Jan. 6 insurrection.

“Well the people were very angry,” Trump said.

The response, Karl says, derives from a sense of betrayal by those within Trump’s inner circle.  His next moves in the public sphere will be designed to make “his erstwhile friends and allies pay a price for their betrayal,” a plan that made Trump “gleeful,” according to Karl.

Trump looks back on Jan. 6 “fondly,” Karl writes, “and believes that if events just had played out a little differently, he’d still be president.”

--Donald Trump received good news from a new Des Moines Register/Mediacom Iowa Poll.  In a hypothetical 2024 rematch, Trump leads Joe Biden by 11 percentage points (51-40).  In 2020, Trump defeated Biden by about 8 points (53-45).

Independents in Iowa favor Trump by 8 points, 45% to 37%.

--Editorial / Wall Street Journal

“A federal grand jury on Friday indicted former Trump adviser Steve Bannon on two counts of contempt of Congress, and the main fact to keep in mind is that Mr. Bannon brought this on himself.  He has refused a subpoena to testify before Congress’ Select Committee on the Jan. 6 riots, and the government has every right to enforce it.

“The fact that this is a Democratic Justice Department enforcing a contempt citation by a Democratic Congress doesn’t overrule the point.  Mr. Bannon has no legal standing to dodge a lawful subpoena, and this one is certainly within Congress’ authority.  The criminal contempt vote was 229-202, with nine Republicans joining the Democrats.

“Mr. Bannon could decline to answer questions by invoking his Fifth Amendment right not to incriminate himself.  But he can’t refuse to appear or refuse to turn over subpoenaed documents, which is the second count of the indictment….

“In this case Mr. Bannon was a former official in January during the events the committee wants to ask him about.  President Trump can’t shield him with a claim of executive privilege.  Mr. Bannon has no immunity as a private citizen simply for having talked to President Trump at that time.

“Meanwhile, former White House chief of staff Mark Meadows failed to appear for a scheduled deposition with the committee on Friday.  He may also face a contempt vote in Congress.  Some of his conversations with Mr. Trump may be privileged, but a claim (if he makes it) of blanket immunity from appearing before Congress is unlikely to stand up in court.

“The Select Committee no doubt has partisan motives, and Speaker Nancy Pelosi did the cause no favors by blocking two of Minority Leader Kevin McCarthy’s choices for the committee.  But the key point is that the institutional power of Congress to investigate needs to be vindicated.  Republicans will be grateful for that vindication when they next take power.”

--A jury today acquitted Kyle Rittenhouse on all counts in the Kenosha, Wisconsin shootings of August 2020.  After deliberating for nearly three and a half days, jurors found Rittenhouse, 18, not guilty of homicide, attempted homicide and other charges.

Rittenhouse, who was 17 at the time, shot and killed two people and injured a third.  Rittenhouse testified that he had fired in self-defense and pleaded not guilty to all counts.

The prosecution did a miserable job (compared with what most agree has been a master-class in the Ahmau Arbery case in Georgia), and the judge’s behavior was erratic.

But I just hope at this point that Rittenhouse, a fraud who was dangerously living out a fantasy, a vigilante/fake EMT, is not made out to be some hero.

Otherwise, the jury did its job.  That August night was one of bad actors all around.

--According to a report from the Centers for Disease Control and Prevention, looking at the latest available data, an estimated 100,300 Americans died of drug overdoses from May 2020 to April 2021.  It’s not an official count.  It can take many months for death investigations involving drug fatalities to become final, so the agency made the estimate based on 98,000 reports it has received so far.  But 100,000 would be a never-before-seen milestone that health officials say is tied to the pandemic and a more dangerous drug supply.

Overdose deaths have been rising for more than two decades, accelerated in the past two years and, according to new data posted Wednesday, jumped nearly 30% in the latest year.

Experts believe the top drivers are the growing prevalence of deadly fentanyl in the illicit drug supply and the Covid-19 pandemic, which left many drug users socially isolated and unable to get treatment or other support.

Drug overdoses now surpass deaths from car crashes, guns and even flu and pneumonia.  The total is close to that for diabetes, the nation’s No. 7 cause of death.

The CDC previously reported there were about 93,000 overdose deaths in 2020, the highest number recorded in a calendar year.  Robert Anderson, the CDC’s chief of mortality statistics, said the 2021 tally is likely to surpass 100,000.

Drug dealers have mixed fentanyl with other drugs – one reason that deaths from methamphetamines and cocaine also are rising.

The CDC estimated the death toll rose in all but four states – Delaware, New Hampshire, New Jersey and South Dakota – compared with the same period a year earlier.  The states with the largest increases were Vermont (70%), West Virginia (62%) and Kentucky (55%).

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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 $1847
Oil $76.11

Returns for the week 11/15-11/19

Dow Jones  -1.4%  [35601]
S&P 500  +0.3%  [4697]
S&P MidCap  -1.1%
Russell 2000  -2.9%
Nasdaq  +1.2%  [16057]

Returns for the period 1/1/21-11/19/21

Dow Jones  +16.3%
S&P 500  +25.1%
S&P MidCap  +24.5%
Russell 2000  +18.7%
Nasdaq  +24.6%

Bulls 56.5
Bears 22.3…for Nov. 9

Happy Thanksgiving!  Travel safe.  Get a booster!

Brian Trumbore

 

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