Week in Review

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Week in Review

03/04/2023

For the week 2/27-3/3

[Posted 6:00 PM ET, Friday]

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Edition 1,246

It was back on Jan. 14, 2023, that I wrote:

“By all indications the battle in the east has not gone well, with one Ukrainian commander around Bakhmut, near the main fighting at Soledar*, saying: ‘So far, the exchange rate of trading our lives for theirs favors the Russians. If this goes on like this, we could run out.”

*Russia then gained control of Soledar in the eastern Donetsk region about a week later.

I wrote then, “Russia is seemingly flooding the area with fresh troops.”

Since that time, I have continuously expressed concerns over the attrition rate for Ukraine (Vladimir Putin not caring on his side, throwing tens of thousands at the battle for Bakhmut and the surrounding area).

Ukraine cannot continue to lose thousands of its soldiers over a city that has little strategic value,  but is huge for Putin and his propaganda machine; a steppingstone to potentially capturing the surrounding Donbas region, an important war aim.

President Volodymyr Zelensky said the other day: “Winter is over. It was a very difficult one and every Ukrainian, without exaggeration, felt the difficulties.”

And now a decision has to be made, today, as to what Zelensky and his generals will do next as Russian forces, Yevgeny Prigozhin’s Wagner Group, primarily, surround Bakhmut.

Ukraine cannot launch a spring offensive if its army is getting cut to shreds.  Prigozhin, appearing in combat uniform in a video filmed on a rooftop, urged Zelensky to order a retreat from Bakhmut to save his soldiers’ lives.

As I go to post, there are stories that Ukrainian units are indeed withdrawing, with only one road out left.

Ukraine has also ordered some residents to leave Kupiansk, a city Russia is seeking to re-take after leaving it last year.  Kupiansk is an important railway junction.

Editorial / The Economist:

“As the war enters its second year, some ask whether Ukraine is worth all this effort.  Isn’t the cost-of-living crisis more urgent?  Or climate change?  Imagine if the money spent on weapons could finance development instead.

“It is right to regret the war, but unwise simply to wish away Mr. Putin’s aggression.  A Russian victory in Ukraine would frog-march the world down a bleak path where might is right and frontiers are drawn by violence. It may hasten the next, even worse, confrontation in Europe.  And it would deepen a widespread sense that Western power, and the universal values it sustains, are in steep decline.

“Ukraine’s victory, by contrast, would bring hope that a sovereign democracy need not bow to its much larger, dictatorial neighbor. It would be a world that took heart from the resolve and courage of Mr. Zelensky and the Ukrainian people.”

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China’s key National People’s Congress gathers this weekend to implement the biggest government shuffle in a decade.

At the same time tensions between Washington and Beijing are at decades-high levels, whether it’s the spy balloon episode, U.S. claims China is about to arm Vladimir Putin, Taiwan, spying on Chinese dissidents, TikTok, data privacy, IP theft, and Covid origins, just for starters.  Both sides of the aisle in Congress have also had it. 

What concerns me is that you have an awful lot of generals in China with fancy epaulets on their uniforms who have done nothing, except build military bases on islands taken illegally, round up Uighurs, and fire a few shots at Indian soldiers from time to time.  Some of these generals have to be steeling for a fight..

Editorial / Washington Post

“It is all too rare these days to see House members working across the aisle with a shared – and serious – sense of purpose. So we should applaud even tentative signs that it’s still possible.

“The first prime time hearing of the House committee on China took place Tuesday night in the same grand room where the committee investigating the Jan. 6, 2021, attack on the Capitol gathered last year. If that insurrection was part of the gravest internal threat facing America, the committee on China is examining what might be the most significant international threat.

“The House created this panel in January on a bipartisan vote of 365-65.  By and large, its members struck a cooperative tone, and a sense of urgency, at the first hearing.  ‘Just because this Congress is divided, we cannot afford to waste the next two years,’ said Rep. Mike Gallagher (R-Wis.), the committee’s chairman. Rep. Raja Krishnamoorthi (Ill.), the panel’s ranking Democrat, added: “We must recognize that the [Chinese Communist Party] wants us to be fractious, partisan and prejudiced.”….

“In a telling indicator of how closely their endeavor is being watched in Beijing, China’s hypersensitive Foreign Ministry issued a blistering statement accusing the panel of operating with a ‘zero-sum Cold War mentality.’”

To which I’d say, keep it up, Reps. Gallagher (a potential GOP veep candidate, in my opinion) and Krishnamoorthi.  But Americans cannot be surprised over any backlash.

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This Week in Ukraine….

--Over the weekend President Putin cast the confrontation with the West over the Ukraine war as an existential battle for the survival of Russia and the Russian people – and said he was forced to take into account NATO’s nuclear capabilities.

“They have one goal: to disband the former Soviet Union and its fundamental part – the Russian Federation,” Putin told Rossiya 1 state television in an interview.

Putin said the West wanted to divide up Russia and then control the world’s biggest producer of raw materials, a step, he said, that could well lead to the destruction of many of the peoples of Russia including the ethnic Russian majority.

“I do not even know if such an ethnic group as the Russian people will be able to survive in the form in which it exists today,” Mr. Putin said.  He said the West’s plans had been put to paper, though did not specify where.

Russia’s senior diplomat to the United Nations accused the West on Sunday of “cowboy” methods and “arm twisting” of some countries during last week’s U.N. General Assembly vote demanding Moscow withdraw its troops from Ukraine.

Monday, Russia’s former president and ally of Putin, Dmitry Medvedev, said in published remarks in the daily Izvestia, that the continued arms supply to Kyiv risks a global nuclear catastrophe, reiterating his threat of nuclear war over Ukraine.

Medvedev, deputy chairman of Putin’s powerful security council, said: “Of course, the pumping in of weapons can continue…and prevent any possibility of reviving negotiations… Our enemies are doing just that, not wanting to understand that their goals will certainly lead to a total fiasco.  Loss for everyone. A collapse.  Apocalypse. Where you forget for centuries about your former life, until the rubble ceases to emit radiation.”

Oh brother.

At the same time, the commander of Ukrainian ground forces, Colonel General Oleksandr Syrskyi, visited besieged Bakhmut to boost morale and talk strategy with units defending the town and surrounding villages in eastern Ukraine, the military said over the weekend.

--Russian forces carried out continuous attacks on Bakhmut in their quest for a breakthrough in the year-long war.  Ukrainian aircraft launched three strikes on areas of concentration of Russian forces, according to a statement by the General Staff of the Ukrainian Armed Forces on Tuesday night.

Bakhmut had a pre-war population of around 70,000 (about 5,000 remain) but has been ruined during months of fighting.

“The most difficult part, as before, is Bakhmut and the fighting that is essential for the city’s defense,” President Zelensky said in his nightly video address.  “Russia in general takes no account of people and send them in constant waves against our positions, the intensity of the fighting is only increasing,” Zelensky said.

Monday, Zelensky said the situation in Bakhmut is becoming “more and more difficult.” 

“The enemy is constantly destroying everything that can be used to protect our positions,” he stated.

Zelensky once again called for modern combat aircraft to be sent so that “the entire territory of our country” can be defended from “Russian terror.”

Gen. Syrskyi said the situation around Bakhmut was “extremely tense.”

“Despite significant losses, the enemy threw in the most prepared assault units of Wagner, who are trying to break through the defenses of our troops and surround the city,” he said.

A Russian takeover of Bakhmut would open the way to seizing the last remaining urban centers in the industrial Donetsk province.

A senior U.S. defense official, Colin Kahl, told a congressional hearing on Tuesday that the front lines of the war were a “grinding slog” and there was nothing to suggest “the Russians can sweep across Ukraine and make significant territorial gains anytime in the next year or so.”

Each side is literally crawling for a few meters at a time.

--In a visit to Kyiv on Monday, Treasury Secretary Janet Yellen warned China against arming Russia.

--Kremlin spokesman Dmitry Peskov on Tuesday repeated Moscow’s stance that it is open to peace negotiations but Ukraine and its Western allies must accept Russia’s annexation of Donetsk, Luhansk, Kherson and Zaporizhzhia regions after referendums last September that most governments said were illegal.

--The Institute for the Study of War wrote on Monday that Russian officials are working overtime trying to discourage more Western aid to Ukraine.  “These statements are likely meant to discourage the West from providing long-range systems to Ukraine by suggesting that the provision of such systems will protract the war by ‘forcing’ Russia to take more Ukrainian territory to be ‘safe,’” ISW writes.

--A top Ukrainian intelligence official says Kyiv wants to “split the Russian frontline between Crimea and mainland Russia” with the upcoming Ukrainian spring offensive, expected in the coming weeks according to ISW.  But that is an ambitious goal, especially with Ukrainian forces pinned down in Bakhmut and nearly surrounded.

--President Zelensky announced in his nightly address on Tuesday that “There were no power outages across the country,” which is rather remarkable.  “Thousands of people have been working every day to achieve this result,” he said. “Of course, the threat still remains.  Of course, we will fight and defend ourselves.  We will definitely endure, no matter what the enemy does.”

--“More Russian soldiers have died in Ukraine than in all Russian wars COMBINED since World War II, including Chechnya and Afghanistan,” counterterrorism scholar Seth Jones of the Center for Strategic and International Studies wrote on Twitter promoting a new report on attrition during the war.  He added, “The average rate of Russian soldiers killed per month is at least 25x more than Chechnya and 35x more than Afghanistan.”

--Speaking to reporters in Uzbekistan Wednesday, Sec. or State Antony Blinken said the U.S. still sees no Russian efforts to negotiate any end to the invasion.  “The war could end tomorrow – it could end today – if President Putin so decided,” Blinken said.  “He started it; he can stop it.  It’s, on one level, as simple as that. And we should never lose sight of that fact.”

“Just listen to President Putin’s own words,” Blinken said.  “To cite just one example, he said recently, and publicly, that unless and until Ukraine recognizes what he called ‘the new territorial realities,’ there’s nothing to talk about.”  And that means “unless and until Ukraine accepts the fact that Russia has seized their territory and gets to keep it, they won’t even talk,” said Blinken, who stressed, “That’s obviously a nonstarter and it should be a nonstarter not just for Ukraine or for us, but for countries around the world,” including China, he said.

Blinken said of Chinese leaders and their 12-point “peace plan” for Ukraine, that they have “been doing the opposite in terms of its own efforts to advance Russian propaganda and misinformation about the war, blocking and tackling for Russia in international organizations,” Blinken said.  “And, as we’ve made clear recently, now contemplating the provision of lethal military assistance to Russia for its aggression against Ukraine.”

“So China can’t have it both ways,” said Blinken.  “It can’t be putting itself out as a force for peace in public while it, one way or another, continues to fan the flames of this fire that Vladimir Putin started.”

--Wednesday, Ukrainian forces continued to fiercely resist a Russian attempt to seize Bakhmut and are throwing massive extra reserves into the bloody battle, Yevgeniy Prigozhin, founder of the Wagner Group, said.  Prigozhin’s men have spearheaded the assault in eastern Ukraine for months.

“The Ukrainian army is throwing extra reserves into Artyomovsk and trying to hold the town with all strength,” Prigozhin said in a message released by his press service. “Tens of thousands of Ukrainian army fighters are putting up furious resistance.  The bloodiness of the battles is growing by the day.”

“The enemy continues to advance. The assault on the city of Bakhmut continues,” the general staff of the Ukrainian armed forces said in a Facebook post.

Hours later, Zelensky said in a video address that “we are keeping each sector of the front under control.”  He accused Russian forces of shelling cities on the frontline in a campaign of “deliberate terror.”

As Russia kept Ukraine under pressure around Bakhmut, its defense ministry said its forces had repelled what it described as a massive drone attack on Crimea by Kyiv’s forces. 

--Thursday, Vladimir Putin said Russia had been hit by a “terrorist attack” in the southern Bryansk region bordering Ukraine, and vowed to crush what he said was a Ukrainian sabotage group that had fired at civilians.  Ukraine accused Russia of staging a false “provocation,” but also appeared to imply some form of operation had indeed been carried out by Russian anti-government partisans.

Videos have surfaced of armed men calling themselves the “Russian Volunteer Corps,” who said they had crossed the border to fight what they referred to as “the bloody Putinite and Kremlin regime.”  They describe themselves as Russian “liberators,” the group calling on Russians to take up arms and rise up against the authorities.  They said they did not open fire on civilians.

--Three people were killed and six injured when a Russian missile hit a five-story apartment building in a city in southeastern Ukraine, police said.

--The Ukrainian military may decide to withdraw its forces from Bakhmut, an economic advisor to President Zelensky said Thursday. “Our military is obviously going to weigh all of the options.  So far, they’ve held the city, but if need be, they will strategically pull back,” said Alexander Rodnyansky on CNN.  “We’re not going to sacrifice all of our people just for nothing.”

Ukrainian member of parliament Serhiy Rakhmanin said on Ukrainian radio: “I believe that sooner or later, we will probably have to leave Bakhmut. There is no sense in holding it at any cost.”

--Secretary of State Blinken and Russian Foreign Minister Sergei Lavrov met for about 10 minutes on the sidelines of the G20 in India, the first face-to-face between the two since Moscow’s invasion of Ukraine.  Blinken told Lavrov to end the war and urged Moscow to reverse its suspension of the New START nuclear treaty, a senior U.S. official said.  The Russian foreign ministry said Blinken and Lavrov spoke “on the move” at the end of the closed-door session and did not engage in negotiations.

Lavrov blamed the West for global political and economic crises.  “A number of Western delegations turned the work on the G20 agenda into a farce, wanting to shift the responsibility for their failures in the economy to the Russian Federation,” he said, according to a Russian statement.

The G20 produced an “outcome document,” not a joint statement due to differences over the war.  India declined to blame Russia for the war and has sought a diplomatic solution while boosting its purchases of Russian oil.  Russian and Chinese delegates released a statement denouncing Western “blackmail and threats.”

Sounds like a good time was had by all.

Meanwhile, Russian Deputy Foreign Minister Sergei Ryabkov, speaking a U.N. conference in Geneva, said the United States had attempted “to probe the security of Russian strategic facilities declared under the New START Treaty by assisting the Kyiv regime in conducting armed attacks against them.”

--The British military said winter is effectively over in Ukraine because the muddy conditions known as “bezdorizhzhia” have begun to set in, making transportation considerably more difficult.

“It is almost certain that by late-March, [transportation conditions] will be at their worst following the final thaw,” the Brits said on Twitter.  “This will add further friction to ground operations and hamper the off-road movement of heavier armored vehicles, especially over churned-up ground in the Bakhmut sector.”

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--At the G20 meeting of economic policymakers in India last weekend, Treasury Secretary Janet Yellen said, “Ukraine is fighting not only for their country, but for the preservation of democracy and peaceful conditions in Europe.  It’s an assault on democracy on territorial integrity that should concern all of us.”

As for India, with their close economic ties to Russia, Moscow being a major supplier of energy and military equipment to India, the United States is India’s largest trading partner.

So to remain neutral, India has avoided describing the conflict as a “war” and instead focused on other issues.  Prime Minister Narendra Modi, in his opening address to the summit, laid out the threats to the global economy, but made no mention of Russia, pointing instead to “rising geopolitical tensions in many parts of the world.”

India is irritating the hell out of me these days.

Back to Yellen, countering critics back home over the money spent to support Ukraine, she said the United States can afford to bear the costs and that supporting Ukraine was a priority for national security and economic reasons.

“The war is having an adverse effect on the entire global economy,” Yellen said, “and providing the support that’s necessary for Ukraine to win this and bring it to an end is certainly something that we really can’t afford not to do.”

--A demonstration against supplying Ukraine with weapons for war with Russia attracted 10,000 people on Saturday in Berlin, drawing criticism from top German government officials and a large police presence.  It was organized by a prominent left-wing German politician.

German Finance Minister Christian Lindner said the protest must be “clearly opposed.”  “Whoever does not stand by Ukraine is on the wrong side of history,” Lindner said on Twitter.

--Belarus said it has as many as 1.5 million potential military personnel outside its armed forces, a senior official was quoted as saying on Saturday.  President Alexander Lukashenko ordered the formation of a new volunteer territorial defense force of up to 150,000.  He has said his army would fight only if Belarus was attacked.

Belarus, with a population of around 9.3 million, has a professional army of about 48,000 troops and some 12,000 state border troops, according to the International Institute for Strategic Studies’ Military Balance report.

Separately, Lukashenko met with Chinese officials in Beijing on Wednesday, including President Xi, and the two called for the “soonest possible” peace deal.  “Belarus and China are interested in averting an escalation of the crisis and ready to make efforts to restore regional peace and order,” they added in a joint statement.

Otherwise, China and Belarus signed a range of cooperation documents in economy and trade, industry, agriculture, science et al.  Belarus, despite its tiny size, is a major producer of fertilizer.

No doubt Belarus will become a convenient transport destination for Chinese arms shipments intended for Moscow.  There would be a semblance of plausible deniability in such a move.

--Staying in Belarus, human rights activist Ales Bialiatski, who won the 2022 Nobel Peace Prize while in prison, was sentenced to 10 years in a penal colony as his country’s authoritarian government continues a crackdown on opponents.

Two other members of the Bialiatski-led Viasna Human Rights Center were sentenced to nine and seven years each, according to state-owned news agency Belta.

All three were convicted on charges of financing anti-government protests and “smuggling cash” in an organized group. They have denied wrongdoing.

The United Nations called on Belarusian authorities in January to drop the charges and immediately release them.  Germany’s Foreign Ministry condemned the “show trial” against Bialiatski and his colleagues.

Opinion….

Editorial / Washington Post

“Even as the Biden administration has secured tens of billions of dollars in U.S. aid to supply Ukraine’s military with the weapons it needs to fight bigger, stronger Russian forces, the U.S. response has lacked long-term thinking in a war that will not end soon.

“A prime example is Washington’s resistance to preparing Ukraine’s air force to fly advanced U.S. fighter jets, a component of defense strategy it will surely need. Supplying Kyiv with U.S.-made F-16s, top-notch fighter jets used for decades by military pilots in this country as well as a number of NATO nations, would take time – well over a year given the intensive training needed not only for aviators but also for mechanics and other logistical personnel. It is time to start. But Mr. Biden has said no even as top defense officials and experts here and in Europe acknowledge the necessity.

“Several NATO allies are more clear-eyed. British Prime Minister Rishi Sunak has approved fighter jet training for Ukrainian pilots.  Both Poland and the Netherlands, whose air arsenals include F-16s, have signaled they are prepared to do the same or more. French President Emmanuel Macron has said he is considering providing Kyiv with fighter jets.  Yet without leadership from Washington, nothing much is likely to happen.

“That’s been the pattern since the beginning of Russia’s full-scale invasion of Ukraine a year ago, most notably with the supply of top-of-the-line battle tanks.  Ukraine needed them months ago. But it was only Mr. Biden’s decision in January to supply U.S.-made M1 Abrams tanks that ended foot-dragging by German Chancellor Olaf Scholz, whose approval was needed before his own military and those of other NATO partners could send German-made Leopard 2 tanks to Ukraine….

“Dithering over weapons for Ukraine is likely to translate into stalemate, which serves Russian President Vladimir Putin’s interests.  The Kremlin dictator believes that his determination to subjugate Ukraine will outlast the West’s patience to stand steadfast with Kyiv.  If he is right, U.S. and NATO credibility, influence and prestige will be irreparably damaged.  Mr. Biden deepens the risk of that damage by withholding fighter jets, which could provide protection for Ukrainian forces and help deter further Russian aggression….

“Advanced fighter jets are not a panacea; they are one element of deterrence.  If the Biden administration insists, they could be provided on the understanding that Ukraine will not use them to attack targets in Russian territory – where, in any event, Russian air-defense systems would make such sorties too dangerous. Within Ukraine’s own airspace, however, F-16s could narrow the gap between Moscow’s air power and Kyiv’s, and operate safely in coordination with other Wester-supplied weapons….

“What’s more, F-16s are becoming more available as a number of NATO countries shift to the more advanced U.S.-made F-24. Yet without an official say-so from Washington, F-16s cannot be provided to Ukraine.

“All wars end, but history is replete with ones that drag on, waxing and waning without a real cessation of hostilities.  If that is the scenario Ukraine faces – and there is reason to believe it is – the United States and its allies need to start thinking beyond spring offensives or annual appropriations or the next election cycle.  Long fights call for long-term planning and vision, and effective air power is essential on that horizon.”

Wall Street and the Economy

It was an up and down week for equities, while interest rates continued to surge, as the markets wait for next week’s jobs report, and then critical inflation data the following week in the runup to the Federal Reserve’s Open Market Committee gathering on March 21-22, when it’s expected to hike the funds rate another ¼-point, 25 basis points, with a further hike in May.  As for June, we’re likely to learn more about the Fed’s direction beyond May in Chair Jerome Powell’s accompanying comments in his press conference March 22, though most now expect a further 25 basis point hike in June as well, which would bring the funds rate to 5.25% to 5.50%.

Various Fed officials this week cautioned that stronger-than-expected readings on the economy could push them to raise interest rates by more than previously expected.

Atlanta Fed President Raphael Bostic told reporters: “I want to be completely clear.  There is a case to be made that we need to go higher.  Jobs have come in stronger than we expected. Inflation is remaining stubborn at elevated levels.  Consumer spending is strong.  Labor markets remain quite tight.”

This week the January durable goods number was -4.5%, though up 0.7% ex-transportation; January construction spending was down 0.1% after a revised December decline of 0.7%.

The S&P CoreLogic Case-Shiller home price index for December continued to show declines, -0.5% month-over-month, and up just 4.6% from a year ago, after a record peak of 20.8% year-over-year last March.

The Chicago area purchasing managers index for February was down a sixth straight month, 43.6 (50 the dividing line between growth and contraction).

The ISM manufacturing figure for February was 47.7, vs. 47.4 prior, so still contraction, while the service sector reading was a robust 55.1.

The Atlanta Fed’s GDPNow barometer for first quarter growth is down to 2.3% from last week’s high of 2.8%.

Freddie Mac’s 30-year fixed-rate mortgage is at 6.65%, up from 6.50% last week, and a low of 6.09% Feb. 2, after November’s peak of 7.08%.  A year ago, it was 3.76%, and about to start its long climb upward as inflation soared.  This benchmark will rise further next week.

Europe and Asia

We had euro area PMI readings for February, courtesy of S&P Global, and the manufacturing PMI came in at 50.1 vs. 48.9 in January, a 9-month high.  The service sector reading was 52.7, an 8-month high.  The composite number was also an 8-month high at 52.0.

Germany: 46.3 mfg., 50.9 services
France: 47.4 mfg., 53.1 services
Italy: 52.0 mfg., 51.6 services
Spain: 50.7., 56.7 services
Ireland: 51.3 mfg., 58.2 services
Netherlands: 48.7 mfg.
Greece: 51.7 mfg.

UK: 49.3 mfg., 53.5 services

Chris Williamson/ S&P Global

“A resounding expansion of business activity in February helps allay worries of a eurozone recession, for now.  Doubts linger about the underlying strength of demand, especially as some of the February uplift appears to have been driven by temporary drivers, such as unseasonably warm weather and a marked improvement in supplier delivery times – likely linked in part to China’s recent reopening.

“Nevertheless, there are clear signs that business confidence has picked up from the lows seen late last year, buoyed by fewer energy market concerns, as well as signs that inflation has peaked and recession risks have eased.

“Not only has the upturn in confidence led to a welcome return to growth of output across both manufacturing and services, but firms are also back in hiring mood to suggest an increasing appetite to invest in expansion in the light of brightening business prospects.

“There is a concern, however, that signs of persistent elevated selling price inflation, combined with the surprising resiliency of the economy, will embolden the ECB into more aggressive monetary policy tightening, which poses a downside risk to demand growth in the months ahead.”

We also had a flash inflation reading for February in the eurozone (courtesy of Eurostat), 8.5%, down from January’s 8.6% and October’s peak of 10.6%.  Ex-food and energy, however, the figure rose to a record 7.4% from 7.1%, and has been rising on core since September’s 6.0%.  So the European Central Bank, as alluded to above, has further ammunition to keep on hiking interest rates.

Germany 9.3% (headline), France 7.2% (a record), Italy 9.9%, Spain 6.1%, Netherlands 8.9%, Ireland 8.0%.

Eurostat also released the euro area unemployment rate for January, 6.7%, unchanged from December and down from 6.9% in January 2022.

Germany 3.0%, France 7.1%, Italy 7.9%, Spain 13.0%, Netherlands 3.6%, Ireland 4.4%.

One more from Eurostat, January producer prices fell 2.8% in the EA19, but are still up 15.0% vs. a year ago, however the trend is in place.  Energy prices fell 9.4% in the month.

Britain: Reminder…Article 16 is part of the Northern Ireland protocol, the section of the Brexit withdrawal agreement which deals with the North.  The protocol avoided a hard border on the island of Ireland by placing a customs and regulatory border in the Irish Sea (meaning ports), which means additional paperwork and physical checks on some goods coming from Great Britain to Northern Ireland.

It’s been a disaster.  So Prime Minister Rishi Sunak and European Commission president Ursula von der Leyen reached a new deal to change the trade rules for Northern Ireland on Monday.  Since they met in Windsor, England, it’s being called the Windsor agreement, or “Windsor Framework,” what Sunak is calling a “decisive breakthrough” with the EU that “removed any sense of a border in the Irish Sea.”

Unionists in the North have opposed the protocol because they believe a trade border between Northern Ireland and Britain undermined Northern Ireland’s position in the United Kingdom.

Under the Windsor Framework, goods arriving from Britain destined for Northern Ireland will travel through a new “green lane” where customs and regulatory paperwork, checks and duties will be scrapped, while goods at risk of moving on to the Republic or the rest of the EU will travel through a “red lane” where they will be subject to normal checks.

The big issue has been food.  To ensure the same food products can be sold in Belfast as in Birmingham, food destined for consumption in Northern Ireland can pass through the inspection-free green lane at Northern Ireland’s ports through a ‘scheme’ that will allow goods imported into the North to be subjected to a single document – electronically and remotely processed – confirming that the goods are staying in Northern Ireland.  This foregoes the need for official veterinarians or plant inspectors.  Bans on certain products, such as chilled sausages, entering Northern Ireland from Britain will be scrapped.

It is far from a done deal, however, as the Unionists, the Democratic Unionists Party, or DUP, still has to approve it and end its boycott of Northern Ireland’s power-sharing arrangements, let alone Sunak’s Conservatives in parliament, some of whom remain wedded to Brexit.

At stake is the 1998 peace deal known as the Good Friday Agreement which ended three decades of sectarian and political violence in Northern Ireland.

A big issue for Unionists remains the idea of the EU and its top court retaining a role in the province over rules and regulations.

So if you follow such things, get used to the name Jeffrey Donaldson, who is leader of the DUP.

Sunak says the agreement will create “the world’s most exciting economic zone,” which was met by bemusement by those who opposed the UK ever leaving the EU.

Meanwhile, former Prime Minister Boris Johnson, who led the UK out of the European Union and still remains popular within the governing Conservative Party, said he will struggle to support a revised Brexit deal.

There’s no love lost between Sunak and Johnson, as it was Sunak’s resignation as chancellor of the exchequer last July that precipitated Johnson’s downfall as PM.

Turning to Asia…China’s manufacturing activity expanded at the fastest pace in more than a decade in February, smashing expectations as production zoomed after the lifting of Covid-19 restrictions late last year.  The official manufacturing purchasing managers’ index (PMI) stood at 52.6 vs. January’s 50.1, according to the National Bureau of Statistics.  Analysts were calling for 50.5, 52.6 the highest reading since April 2012.  The official non-manufacturing PMI rose to 56.3 from 54.4.

Caixin’s private Feb. mfg. PMI was 51.6 vs. 49.2 prior.  Services came in at 55.0 vs. 52.9 in January.

The above figures come ahead of next week’s National People’s Congress, beginning this weekend, where a new growth target will be disclosed.  In the run-up to the event, President Xi Jinping moved to consolidate the Communist Party’s hold over the economy and said it would roll out plans for “deepening structural reform” in the financial sector and exercise more control over science and technology work.

Japan’s manufacturing PMI for February was just 47.7, down from 48.9 in January, but the service sector was 54.0, up from 52.3 prior.

Separately, January retail sales rose 6.3% year-over-year, while industrial production for the month fell 3.1% Y/Y.

South Korea’s February mfg. PMI came in at 48.5; Taiwan’s 49.0, an improvement from January’s 44.3, but still deterioration.

Street Bytes

--Thanks to a stupid two-day rally, Thursday and Friday, stocks finished up, the Dow Jones gaining 1.8% to 33390, the S&P up 1.9%, and Nasdaq 2.6%.  The market largely ignored the talk from Fed governors who are clearly in the ‘higher for longer’ camp, which would impact the cost of capital…the lag effect…but in true Bart Simpson fashion, traders said ‘no problemo.’

--U.S. Treasury Yields

6-mo. 5.11%  2-yr. 4.86%  10-yr. 3.95%  30-yr. 3.87%

A wild week, with the yield on the 10-year up to 4.07%, the two-year over 4.90%, highest since 2007, but in the end, Treasuries were largely unchanged.

Across the pond, the yield on the German 10-year has risen from 2.18% to 2.71% in four weeks.  Britain’s 10-year from 3.05% to 3.84%.  All about central banks needing to hike further.

--The U.S. is enjoying a record boom in crude oil exports more than 12 months into Russia’s Ukraine war.  That includes a 38% rise in monthly seaborne cargo to Europe – with Spain alone buying 88% more from the U.S. than it did during the prior year, according to ship-tracking firm Kpler (sic).

The Wall Street Journal reported Sunday: “The shale boom in hydraulic fracturing and horizontal drilling has made the U.S. a major producer again, tapping gushers of fossil fuels for delivery to destinations opened by the Ukraine conflict.”

Crude rallied $3 on the week to $79.80, but it remains in a roughly $73 to $80 range on West Texas Intermediate.

As for natural gas, it has moved from $1.96, intraday, to $3.00 in ten days and boy did I blow my call of last week that it would fall from $2.57.  I’ll have much more to say next time, including my UNG play.  For now, exports of liquefied natural gas hit a daily record high on Friday as Freeport LNG’s facility in Texas continues to ramp up following last year’s fire that shut down operations in June.  I didn’t see the recovery coming this quickly.

--Target Corp. on Tuesday forecast muted profit growth in 2023 and warned of the need for more discounts to woo shoppers cutting their discretionary spending due to surging inflation.  The retailer’s discounting strategy powered its sales and profit in the holiday quarter to exceed market expectations for the first time in a year, lifting its shares up 2%.

Discounts boosted customer traffic in the fourth quarter but weighed on Target’s gross margins as retailers are forced to cut prices on everything from toys to electronics to clear stocks.  The big-box retailer warned that promotions could increase further in 2023 due to a “constrained environment for consumer spending.”

Target forecast annual earnings of $7.75 to $8.75 per share, below analysts’ estimates of $9.23.  “We’re planning cautiously, and we believe appropriately given the economic challenges we anticipate this year,” CEO Brian Cornell said.

Target said it will not buy back shares until its cash flow improves but will spend $4 billion to $5 billion this year to remodel stores, expand capacity for same-day fulfillment and launch new private label brands.

The company’s comp sales in the quarter ended Jan. 28 rose 0.7%, while analysts expected a 1.5% fall.  Target said it expects full-year comp sales in a wide range from a low-single digit decline to a low-single digit increase, reflecting the company’s uncertainty over the economy.

--Lowe’s Cos. Inc. forecast full-year sales below market expectations on Wednesday, hammered by weak demand for home improvement products as inflation forces consumers to pause spending on home-related projects.  A pandemic-fueled boom in demand for its products such as kitchen equipment and gardening tools is now fading as household budgets come under pressure from higher prices for everyday essentials.  Americans are also directing their attention back to activities such as traveling and vacations and spending more on services rather than goods as they return to a more normal lifestyle.

Visits to Lowe’s stores dropped 18% in November compared to a year earlier, followed by declines of 12.6% and 11% in December and January, respectively, a report from location analytics firm Placer.ai showed.  Larger rival Home Depot had also last week warned of a moderation in demand this year, while struggling with elevated costs and wage raises amid a tight U.S. labor market.

Lowe’s said on Wednesday it has awarded $220 million in bonuses to its employees, including supply chain supervisors and hourly workers, in the fourth quarter.

Still, the company reported quarterly adjusted profit of $2.28 per share, topping consensus of $2.21, as expenses tied to shipping and commodities eased.  Lowe’s projected full-year total sales of $88 billion to $90 billion, while analysts on average are estimating $90.5 billion.  The company also forecast earnings for the year of $13.60 to $14.00, the midpoint of an estimate of $13.80.

Lowe’s reported a 1.5% decline in comparable sales for the three months ended Feb. 3, worse than expectations for unchanged comps.

The shares cratered 6% on all the news, as Home Depot’s shares also fell further after getting hammered last week following their rather dismal earnings report.

--Europe’s largest discount airline, Ryanair, said it flew 10.6 million passengers last month, 22 percent more than the 8.7 million it carried in Feb. 2022, and slightly ahead of the 10.5m passengers that travelled on the airline in Feb. 2020, the month before the pandemic struck.

Ryanair sold 92 percent of the seats available on its aircraft last month, vs. 86 percent a year ago.  Over the last 12 months, it has sold 93 percent of its seats.

--Pilots at Delta Air Lines approved a new contract that will increase wages 34 percent by 2026 and includes improvements to scheduling, retirement and other benefits, raising the standard for contract negotiations underway at other large U.S. airlines.

Voting was conducted in February, with the results announced Wednesday, and 78 percent of pilots approved the contract.

--TSA checkpoint numbers vs. 2019

3/2…96 percent of 2019 levels
3/1…96
2/28…95
2/27…99
2/26…104
2/25…102
2/24…130
2/23…107

--China is warning Twitter CEO Elon Musk against sharing posts that promote the lab leak theory of the coronavirus, suggesting that such commentary could hurt Tesla’s relationship with the company’s second-largest market.  The cryptic warning came on a social media post by the state-run Global Times newspaper.

The writer was reacting to Musk commenting on a tweet that mentioned the Department of Energy’s conclusion that Covid-19 originated at a lab in Wuhan, China.

The original tweet, from the account “Kanekoa The Great,” questioned whether Dr. Anthony Fauci was involved in the development of Covid-19 because he had funded “gain-of-function research at the Wuhan lab.”

“He did it via a pass-through organization (EcoHealth),” Musk responded, referring to the nonprofit group that was awarded nearly $8 million in federal research grants to study bat coronaviruses in China.

Meanwhile, Musk’s latest master plan for Tesla fell flat as the company shared scant details about next-generation models that will underpin its next phase of growth.

The almost four-hour presentation Wednesday evening was long on calculations of what the sustainable energy transition will require, along with boasts about manufacturing and engineering efficiencies.  But Musk and the executives who joined him on stage wrapped Tesla’s investor day without giving a glimpse of cheaper EVs that may still be years away.

“I’d love to really show you what I mean and unveil the next-gen car, but you’re going to have to trust me on that until a later date,” Franz von Holzhausen, Tesla’s design chief, said at the company’s headquarters in Austin, Texas.  “We’ll always be delivering exciting, compelling and desirable vehicles, as we always have.”

To which I’d say, what the hell do you do all day?  Your title is design chief.  Design something!

Musk did confirm Tesla will build a new plant in Monterrey, Mexico, which he admitted was probably the most significant announcement of the day.  He said the next-gen vehicle will be built there and that Tesla will hold a “proper sort of product event” at some point when the prototype is available, but didn’t say when.

So, for good reason after such an underwhelming non-reveal, the shares fell.

Lastly, on the Twitter front, Musk ordered another round of bruising job cuts over the weekend, with some of its highest-profile leaders affected, as he continued his efforts to bring costs under control.

Among those impacted was Esther Crawford, Twitter’s director of product management, who had been one of the few women at the top of the company under Musk, leading its new moneymaking initiatives, such as the Twitter Blue subscription service.

According to the New York Times, headcount appeared to have dropped by more than 200 people in its internal systems.

--Nissan is recalling more than 809,000 small SUVs in the U.S. and Canada because a key problem can cause the ignition to shut off while they’re being driven.

The recall covers certain Rogues from the 2014 through 2020 model years, as well as Rogue Sports from 2017 through 2022.

Nissan says the SUVs have jackknife folding keys that may not stay fully open.  If driven with the key partially folded, a driver could touch the fob, inadvertently turning off the engine.

Nissan hasn’t come up with a fix yet.  The automaker says owners with keys that won’t stay in the open position should contact their dealers.

--India and Vietnam are emerging as Apple Inc.’s next manufacturing hubs as assembly partners seek to add resilience to a supply chain heavily centered on China and shaken by its geopolitical challenges, as well as health mandates.  Of course they should have started this process years ago.

--Salesforce Inc.’s shares soared 15% after the cloud-based enterprise software provider posted better-than-expected results for its latest quarter.

The company, which has received increased attention from activist investors in recent months, also announced an expansion of its stock repurchase program to $20 billion from $10 billion.

CEO Marc Benioff said on the company’s call with analysts that its board has formed a “business transformation committee,” and disbanded a committee focused on mergers and acquisitions, which pleased investors who think the company is too focused on growth via M&A.

For the fiscal fourth quarter ended Jan. 31, Salesforce posted revenue of $8.38 billion, up 14% from a year ago, and well ahead of its guidance range of about $8 billion.  Earnings of $1.68 a share were also ahead of the company’s forecast of $1.35 to $1.37 a share.

For the full year, Salesforce posted revenue of $31.4 billion, up 18%, or 22% adjusted for currency.  The company sees full-year revenue for the January 2024 fiscal year of $34.5 billion to $34.7 billion, up 10%, and ahead of the Street consensus of $34 billion.  And Salesforce sees adjusted eps of $7.12 to $7.14 a share, well above consensus of $5.84.  The company gave a similar bullish forecast for the fiscal first quarter.

Salesforce said it did not see customer “degradation” like it had in the third quarter owing to macroeconomic conditions, and that demand was stronger in some segments, such as travel and hospitality, and weaker in others, in particular technology.

--Dell Technologies posted better-than-expected financial results – despite continued weakness in the company’s personal-computing business – as corporate IT spending outpaced estimates.

But the company’s guidance fell shy of Street estimates, pressuring the company’s stock price.

Dell also said CFO Tom Sweet will retire after 26 years, effective at the end of its fiscal second quarter. 

For its fiscal fourth quarter ended Feb. 3, Dell reported revenue of $25 billion, down 11% from a year earlier, but ahead of the Street’s consensus view of $23.4 billion.  Dell posted adjusted earnings per share of $1.80, also above consensus at $1.65.

Revenue in the company’s infrastructure solutions group was $9.9 billion, up 7%, with servers and networking revenue up 5% and storage revenue up 10%.

The company’s PC business, the client solutions group, had revenue of $13.4 billion, down 23% but ahead of consensus of $12.3 billion.  In the quarter, commercial PC revenue was off 17%, while consumer was down 40%.

For the full year, Dell posted revenue of $102.3 billion, up 1%.

On the company’s call with analysts, Sweet said the company expects April-quarter revenue to be “seasonally lower than average,” down between 17% and 21% sequentially, which implies revenue of $20.75 billion, below consensus of $21.6 billion.

For the fiscal year, Dell sees revenue falling between 12% and 18%, worse than the Street’s forecast for a decline of 9.6%.

--Dell rival HP Inc. reported a 19% revenue decline for its latest quarter, including a 24% drop in the company’s personal systems unit. HP’s consumer PC revenue was off 36%, with commercial revenue off 18%.

HP said there was a “slowdown” in orders from businesses, as companies are now becoming “much more careful in how they manage budgets.”

HP said revenue from the personal systems unit, which includes computers and notebooks, will decline by a high single-digit percentage sequentially in the second quarter.

PC shipments are expected to be down 6.8% this year, compared with a decline of 16% last year, according to market research firm Gartner.

In the event of a mild recession in 2023, there will be further pressure on consumer budgets, Gartner said.

--In his annual letter to Berkshire Hathaway shareholders, issued Saturday, Warren Buffett retained his sense of optimism:

“I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America,” he said.

Buffett, 92, saw his portfolio take a hit in 2022, but the volatility offered Berkshire an opportunity to jump in and buy stocks.

As of the end of 2022, Berkshire was the largest shareholder of eight companies – American Express Co., Bank of America Corp., Chevron Corp. Coca-Cola, HP Inc., Moody’s Corp., Occidental and Paramount Global.

Berkshire is able to make big investments because its insurance operations generate billions of dollars of float, or premiums that customers pay upfront, which Berkshire can in turn put to work in the markets.

Buffett and right-hand man Charlie Munger have both said they refrain from basing their decisions on where they think interest rates, oil prices, or other factors that affect markets will be in a year’s time.

“Though economists, politicians and many of the public have opinions about the consequences of that huge imbalance, Charlie and I plead ignorance and firmly believe that near-term economic and market forecasts are worse than useless,” Buffett said in the letter.

He also lashed out at critics of stock buybacks, such as Sens. Elizabeth Warren and Bernie Sanders, as well as President Biden, saying they can benefit shareholders if they are executed when a company’s share price is trading below its value.

“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue,” he said.

The Omaha, Neb., company, which owns businesses including insurer GEICO, railroad BSNF Railway and chocolate maker See’s Candies, posted a loss of $22.82 billion for the year, stung by $67.9 billion in investment and derivative contract losses.  In 2021 when stocks surged, Berkshire posted a profit of $90.8 billion.

Total revenue rose 9.4% to $302.1 billion.

--Dollar Tree’s shares rose some Wednesday after the company delivered higher fiscal fourth-quarter results that topped analysts’ estimates, but the discount retailer still issued a downbeat full-year profit outlook.

Earnings rose to $2.04 a share for the three months ended Jan. 28, from $2.01 the year before and topping consensus of $2.02.  Sales advanced 9% to $7.72 billion, also ahead of the Street.

Same-store sales climbed 7.4%, also beating forecasts.  DLTR comp sales advanced 8.7% driven by a 10% jump in the average size of each sale, while the Family Dollar brand grew 5.8%.

But for fiscal 2023, the retailer expects per-share profit to be in a range of $6.30 to $6.80, while the Street is looking for $7.64.

Sales are pegged at $29.9 billion to $30.5 billion, compared with analysts’ $29.85bn estimate.  Comp store sales are expected to rise by a low- to mid-single digit, including a low single-digit increase in the Dollar Tree segment.

“We expect to see continued cost pressure from inflation and margin pressure from merchandise mix as consumables are expected to outpace discretionary sales,” CFO Jeffrey Davis said on an analysts call. 

I gotta tell ya…I’ve been reducing my Dollar Tree purchases, once they became $1.25 Tree.  There are some products that still make sense, dishwashing liquid, shampoo, Campbell’s chicken soup…but they drastically reduced the size of toothpaste, paper goods are no longer a good buy, ditto garbage bags.

--Next to the Dollar Tree I go to is a Kohl’s, and on Wednesday they forecast full-year profit below analysts’ estimates, squeezed by dwindling demand for clothing and accessories at the department store chain as consumers tighten their belts amid inflation.  The company reported a quarterly loss of $273 million.

Surging prices of food and other essentials over the last year have driven down demand for non-essential products, forcing Kohl’s and other retailers into steeper discounts and promotions to clear excess stocks of casual and athleisure apparel.

The company expects fiscal 2023 earnings per share of $2.10 to $2.70, compared with analysts’ estimates of $3.20.  Comp sales fell a sickly 6.6% in the quarter ending Jan. 28, compared with forecasts for a 3.7% decline.

I haven’t been to Kohl’s in a few months…time to look for some bargains.

--Macy’s shares rose a bit after the retailer reported profit and sales for the holiday quarter slid with inflation leading some customers to pull back, but it beat Wall Street expectations and its outlook for 2023 didn’t disappoint given the uncertain economic environment.

Major retailers in the past two weeks have told investors they don’t know what to expect in 2023 with so many questions about the strength of the U.S. and global economy.

However, Macy’s on Thursday provided a relatively positive outlook on profit for this year, as the company now expects to earn between $3.67 and $4.11 per share, compared with analysts projections for $3.78.

But Macy’s said it “anticipates that the heightened level of uncertainty within the macroeconomic environment will continue” this year.

In early January, Macy’s talked of shoppers spending less than expected during the lull between Thanksgiving weekend and the final days before Christmas.

Macy’s earned $508 million, or $1.88 adjusted per share, in the quarter ended Jan. 28, topping forecasts for $1.57.  Sales declined to $8.26 billion from $8.67 billion, but that also topped the Street.  Macy’s expects sales of $23.7 billion to $24.2 billion for 2023, which is on the lighter side compared with analysts’ expectations.  Comp sales dropped 3.3%.

“We were competitive, but measured in our promotions, took strategic markdowns and intentionally did not chase unprofitable sales,” Chairman and CEO Jeff Gennette said in a statement.

--Best Buy Co. on Thursday reported fiscal fourth-quarter profit of $495 million.  Adjusted earnings came in at $2.61 per share, topping Wall Street expectations of $2.09.  Revenue of $14.74 billion missed the Street’s forecasts by a smidgen.

But the company joined its peers with a cautious forecast as uncertainty over the U.S. economic outlook tempers expectations for a recovery in demand for TVs, laptops and other electronic products.

Best Buy expects full-year earnings in the range of $5.70 to $6.50 per share, vs. current estimates for $6.70, with revenue in the range of $43.8 billion to $45.2 billion.  The shares fell about 2% despite the decent holiday quarter.

The company offered bigger discounts than usual during the holiday season to stoke demand amid rising costs for rent and food over last year.  Best Buy sees no relief this year, forecasting full-year comparable sales to fall 3% to 6%, compared with analysts’ estimates for a 1.9% decline.

“As we enter fiscal 2024, macroeconomic headwinds will likely result in continued volatility, and we are preparing for another down year for the (consumer electronics) industry,” CEO Corie Barry said on an analyst call.

--Wendy’s reported fiscal fourth-quarter adjusted earnings Wednesday of $0.22 per share, up from $0.16 a year earlier and a penny ahead of expectations.

Revenue for the quarter ended Jan. 1 was $536.5 million, up from $473.2 million a year earlier, also a slight beat.

For 2023, the company is expecting adjusted earnings of $0.95 to $1 per share, in line with current expectations.

I love Wendy’s, and I have one pretty close to me, but I’m never in the area.  Plus, I’m making my own rather audacious burgers these days, I must say.

--Blackstone Inc. Chief Executive Officer Steve Schwartzman took home about $1.26 billion in pay and dividends for 2022, a regulatory filing showed.  JPMorgan Chase & Co. CEO Jamie Dimon’s total compensation was unchanged at $34.5 million.

Schwarzman, who was among Wall Street’s biggest contributors to Donald Trump’s 2020 re-election campaign, said in November that he will not back Trump in 2024.

Schwarzman owns about 230 million shares in Blackstone according to a filing from February, and the company paid $4.40 in annual dividends, filings showed.

--The White House is giving all federal agencies 30 days to wipe TikTok off all government devices, as the Chinese-owned social media app comes under increasing scrutiny over security concerns.  The White House and Departments of Defense, Homeland Security and State, already have restrictions in place.

Foreign Affairs, Part II

China: The People’s Liberation Army has sent at least 68 aircraft and 10 warships close to Taiwan since Monday, according to Taiwan’s defense ministry, while the U.S. confirmed its P-8A Poseidon reconnaissance plane had been deployed to fly through the Taiwan Strait.

Separately, Covid-19’s origins remain hazy, but this week the Energy Department confirmed that a classified report determined, with low confidence, that the virus escaped from a lab.  Previously the department was undecided on how the virus emerged.

The report has not been made public, and officials in Washington stressed that a variety of U.S. agencies are not in agreement on the origin.  But Tuesday, FBI Director Christopher Wray told Fox News that the FBI “has for quite some time now” assessed that the pandemic’s origins are “most likely a potential lab incident in Wuhan.”  Wray added that China “has been doing its best to try to thwart and obfuscate” efforts to identify the source of the pandemic.

But others in the intelligence community disagree, and there’s no consensus.  Many scientists continue to believe the likeliest explanation is that the coronavirus that causes Covid-19 jumped from animals to humans, possibly at Wuhan’s Huanan market, a scenario backed up by multiple studies and reports. The World Health Organization has said that while an animal origin remains most likely, the possibility of a lab leak must be investigated further before it can be ruled out.

The White House says there is no consensus across the U.S. government on the origins.

There’s also no reason, according to key members of Congress who have seen the classified report, not to release it.

I can’t help but note what Arkansas Sen. Tom Cotton (R) said in early 2020: “We don’t have evidence that this disease originated from (the Wuhan lab), but because of China’s duplicity and dishonesty from the beginning, we need to at least ask the question to see what the evidence says, and China right now is not giving evidence on that question at all.”

And China hasn’t for nearly three years. That’s the bottom line.  China claims no one got sick at the lab.  Eventually, the truth will come out on that front.  It’s a necessity in helping to prevent the next pandemic and take greater precautions in labs around the world.

Rep. Michael McCaul (R-Tex.), chairman of the House Foreign Affairs Committee, said the Energy Department finding was in line with a report he had issued back in 2021.  “While I wish it had happened sooner, I’m pleased the Department of Energy has finally reached the same conclusion that I had already come to,” he said.

Israel:  Israeli Finance Minister Bezalel Smotrich’s call for a Palestinian village to be “erased” amounted to incitement to violence and Prime Minister Benjamin Netanyahu must publicly disavow it, the U.S. State Department said on Wednesday.

An ultranationalist in Netanyahu’s right-wing coalition, Smotrich made the comments at a conference on Wednesday amid a spate of deadly Palestinian attacks and Israeli settler violence in the occupied West Bank.

Asked about a weekend settler rampage through the Palestinian village of Huwara, which an Israeli general on Tuesday described as a “pogrom,” Smotrich said: “I think that Huwara needs to be erased,” adding: “I think that the state of Israel needs to do it, but God forbid not individual people.”

State Department spokesman Ned Price told reporters that Smotrich’s comments “were irresponsible. They were repugnant.  They were disgusting.”  Price continued: “And just as we condemn Palestinian incitement to violence, we condemn these provocative remarks that also amount to incitement to violence.”

The rampage followed a Palestinian gun attack that killed two Israelis.  On Wednesday, Israeli forces killed one Palestinian and arrested six others suspected of involvement in the fatal shooting of an Israeli American in the West Bank on Monday.

Smotrich later said the media misinterpreted his statement, without retracting his call for the village to be erased.

Last Sunday he said he would not agree to any freeze in settlement activity in the West Bank, even after Israeli officials committed during a summit in Jordan to hold off on such construction in the coming months.

“I have no idea what they spoke about or not in Jordan,” Smotrich, who has responsibilities over Jewish settlements.  “But one thing I do know: there will not be a freeze on the building and development in settlements, not even for one day (it is under my authority),” he wrote on Twitter.

Thomas L. Friedman / New York Times

“Israel today is a boiler with way, way too much steam building up inside, and the bolts are about to fly off in all directions.

“Lethal attacks by Palestinian youths against Israelis are coinciding with an expansion of Israeli settlements and the torching of Palestinian villages by settlers, as well as with a popular uprising against Prime Minister Benjamin Netanyahu’s judicial power grab.  Together they are threatening a breakdown in governance the likes of which we’ve never seen before in Israel.

“It is a measure of how serious the situation has become that several former chiefs of the Mossad – some of the most respected public servants in the country – have denounced Netanyahu’s judicial putsch, most recently Danny Yatom. He told Israel Channel 13 News on Saturday night, according to Haaretz, that if Netanyahu continues with his plans to effectively eliminate the independence of Israel’s high court, fighter pilots and special forces operatives will be able to legitimately disobey the orders that come from the government.

“They ‘signed an agreement with a democratic country,’ said Yatom.  ‘But the moment that, God forbid, the country becomes a dictatorship,’ and they receive ‘an order from an illegitimate government, then I believe it would be legitimate to disobey it.’

“This is not idle speculation.  In the past few days, some 250 officers from the Military Intelligence’s Special Operations Division have signed a public letter stating that ‘they would stop showing up for duty’ should the government proceed with its autocratic judicial overhaul, The Times of Israel reported.  They added their voices to ‘groups of pilots, tankists, submariners, sailors and other special forces who have penned similar letters.’

“Israel has never experienced a Palestinian intifada, a Jewish settler intifada and an Israeli citizen judicial intifada all at once. But that’s begun to unfold since Netanyahu’s far-right government took office….

“Israel is not Hungary, where the leader can just cram autocracy down people’s throats. On Saturday night, a massive crowd gathered in central Tel Aviv to hear, among others, Ehud Barak, the former prime minister and army chief of staff.  Barack could not have been more clear about what an existential moment this is for Israel.

“In the next few weeks, if Netanyahu’s coalition passes these ‘new laws of dictatorship,’ Barak said, they will be ‘canceled by the Supreme Court’ as illegal. When that happens and the government then takes steps to annul some Supreme Court rulings, the four key ‘gatekeepers’ of Israeli security – the chief of staff of the Armed Forces and the heads of the Mossad, the Shin Bet and the police – will have to decide from whom to take orders.  ‘This will create an extremely severe constitutional crisis,’ said Barack.

“ ‘If the threshold is crossed,’ he added, ‘and the laws of the dictatorship are set in motion, the responsibility will pass to us, the citizens of the country.   We will have to follow the tradition set by Gandhi, 80 years ago in India, and of Martin Luther King, 60 years ago in the U.S., to follow the path of nonviolent civil disobedience. …This is the right, even the duty, of citizens when their government acts in ways which breaks the rules of the game and stands contrary to the country’s own fundamental norms and value system.’”

Thomas Friedman says it’s not an accident all he writes about these days is Ukraine and Israel.

“I believe that if Ukraine were to fall to Vladimir Putin and Israel were to become a phony democracy like Hungary, the whole world would tip the wrong way.

“Israel is the only real democracy with an independent judiciary in the Middle East.  Ukraine is defending the European Union, a giant engine of the rule of law, free markets, human rights and democratic norms, even if not every E.U. country has fully embraced all of them.  If democracy is undermined in the E.U. and Israel, democracy everywhere will be more endangered.”

Walter Russell Mead / Wall Street Journal

“(Iran’s) inexorable march toward nuclear weapons, combined with its deepening partnership with Russia, is driving the Middle East steadily closer to a war that is likely to engage the U.S. – one that the Biden administration desperately wants to avoid.

“For Mr. Putin, a major military confrontation in the Middle East would be an unmitigated blessing.  Oil prices would spike, filling Moscow’s coffers and intensifying pressures on Europe. The Pentagon would have to split available weapons between Ukraine and Middle East allies.  The balance in the Taiwan Strait would significantly shift in China’s favor.  Spiking energy prices would boost inflation in the U.S. just as Mr. Biden tries to persuade antiwar Democrats to support another American military venture in the Middle East.

“And while in a perfect world Russia might oppose an Iranian nuclear weapon, under current circumstances – in which Mr. Putin desperately needs Iran to help disrupt American strategy – Mr. Putin might well decide to help Iran cross the nuclear threshold.

“But the Russian dictator doesn’t need to go that far.  Simply by increasing Iranian military capabilities that limit Israel’s ability to attack Iran’s nuclear facilities, Mr. Putin could force Israel into a pre-emptive strike that would set off a regional war….

“The best way to avoid war, and to minimize direct American engagement should war break out, is to ensure that our Middle East allies have the power to defend themselves. We must make it unmistakably clear that we will ensure our allies win should hostilities break out.  Nothing else will do.

“The administration seems to be moving, slowly, in the right direction in the Middle East, but time is not on our side.  Wishful thinking and strategic incompetence led the bipartisan foreign-policy establishment first to ignore and then to appease rising challengers to the post-Cold War world order.

“Now the Biden administration faces the consequences of a generational failure in American foreign policy.  We must wish Team Biden success as it struggles to cope with a world that it, along with the American foreign-policy community as a whole, largely failed to foresee.”

North Korea: Kim Jong-un ordered improvements to infrastructure and expansion of farmland to ramp up food production, state media said on Thursday, amid warnings of an impending food crisis.  Kim gave instructions to revamp irrigation systems, build modern farming machines and create more arable land as he wrapped up the seventh enlarged plenary meeting of the ruling Workers’ Party’s powerful Central Committee.

South Korea has warned of an exacerbating food crisis in the isolated North, including a recent surge in deaths from hunger in some regions.  The South’s rural development agency estimated the North’s crop production fell nearly 4% last year from the year before, citing heavy summer rains and other economic conditions.  How the severe food issue impacts Pyongyang’s nuclear posture is anyone’s guess.

Iran: A recent spate of mass illnesses at girls’ schools in Iran was caused by deliberate poisoning using “chemical compounds,” a senior Iranian health official told the semi-official Fars news agency.

Younes Panahi, deputy health minister, told reporters on Sunday that “certain individuals sought the closure of all schools, especially girls’ schools,” Fars reported.  The poisonings have led to dozens of girls being hospitalized for treatment.

The poisonings come months after widespread protests against Iran’s Islamist leadership erupted over the death in police custody of 22-year-old Mahsa Amini.  The authorities have responded with deadly force and executed four protesters. Thousands remain in prison for taking part in demonstrations and rights groups say over 500 people have been killed by the security forces.

The poisonings, the work of Islamic fundamentalists, come at a time when the Taliban in neighboring Afghanistan continue to keep school and universities closed to girls and women, effectively banning them from education.

Greece: At least 57 people were killed when a passenger train and a freight train collided at high speed in northern Greece.  About 350 passengers were on the train as it traveled from Athens to Thessaloniki.  Over 85 were initially taken to hospital with injuries, and I’m not sure how many of these are now part of the death toll.  Many of the victims were students returning from a festival.

This has become a huge political issue, with major protests, demonstrators blaming the government for failing to maintain the railways.  In Athens, rioters clashed with police outside the headquarters of the company that manages Greece’s trains.  Greek officials charged a stationmaster of manslaughter by negligence.

Nigeria: Bola Tinubu, the candidate of the All Progressives Congress, won Nigeria’s presidential election, though international observers said that the vote “fell well short of Nigerian citizens’ legitimate and reasonable expectations” after polling stations opened late or did not open at all, and an electronic system for transmitting results did not work.

Random Musings

--Presidential approval ratings….

New numbers…Gallup: 42% approve of Biden’s job performance, 54% disapprove; 40% of independents approve (Feb. 1-23).

Rasmussen: 48% approve, 50% disapprove (Mar. 3)…surprising.

--President Biden once again made a false statement on the national debt, wrongly claiming he slashed it by $1.7 trillion – despite increasing it by $3.84 trillion over his first two years in office.

The president continually confuses budget deficit and national debt – while bashing House Republicans for demanding spending cuts in exchange for raising the debt ceiling later this year.

“You know you hear ads with the big-spending Joe Biden?” Biden said during a speech in Virginia Beach, Va.  “In two years, I reduced the debt by $1.7 billion - $1.7 billion.  It’s the largest deficit reduction in American history.”

The current national debt is up from $27.75 trillion when Biden took office, according to the Congressional Research Service – and $19.95 trillion in 2017 when Donald Trump took office.

Separately, asked by ABC’s David Muir if Biden’s age was an issue, the president said such concerns are “totally legitimate.” 

“It’s legitimate for people to raise issues about my age,” Biden told Muir.  “It’s totally legitimate to do that. And the only thing I can say is, ‘Watch me.’”

Which we are.  You are very old, Mr. President.  But at least you are now holding the handrail on airplane ramps.  Good.

[Today, the White House announced that Biden’s February biopsy confirmed a skin lesion removed from his chest was a basal cell carcinoma – a common form of skin cancer – and all the cancerous tissue was successfully removed.  But more ammunition for the ‘we want an alternative’ crowd.]

--Florida Gov. Ron DeSantis now trails former President Trump in a two-man race for the 2024 Republican nomination despite previously leading the former prez, according to a new Yahoo News/YouGov poll.

The survey of 1,516 adults, taken Feb. 23-27 online, revealed 47% of registered Republicans and Republican leaning independents said they would vote for Trump in their state’s primary whereas 39% said that of DeSantis.

A previous 4-point lead by the governor, plus Trump’s new 8-point lead, makes for a 12-point swing toward the former president.

In a wider Republican primary pool, Trump receives 45%, DeSantis 29%, and former South Carolina Gov. Nikki Haley comes in at 4%.

--In the Dominion Voting Systems defamation lawsuit against Fox News over the 2020 presidential election, Fox News owner Rupert Murdoch conceded some Fox hosts had “endorsed” baseless claims the election was stolen by voter fraud.

A legal filing on Monday revealed that Murdoch had told lawyers in the Dominion case that he did not believe Trump’s allegations of mass voter fraud and that he thought Fox News should have been “stronger in denouncing” them.

Fox News has argued that the commentary it aired is protected under the constitutional right to free speech, and that it was only reporting on the then-president’s allegations, not supporting them.

Dominion’s lawsuit argues that Fox embraced the election fraud conspiracy theory because of concerns that loyal conservatives were switching to more pro-Trump media outlets like Newsmax.

After Fox was first to declare Biden won the key state of Arizona, Murdoch said: “My friend Jared Kushner called me saying, ‘This is terrible,’ and I could hear Trump’s voice in the background shouting.”

He said that he had told Kushner he could not change the outcome for Trump because “the numbers are the numbers.”

Two days after the pro-Trump riot at the Capitol, Murdoch emailed a Fox executive to say the network is “very busy pivoting.”

“We want to make Trump a non person,” his publicly released emails show.

Asked by a Dominion lawyer if Murdoch could have prevented Rudy Giuliani from continuing to spread falsehoods about the election on air, Murdoch responded, “I could have.  But I didn’t.”

The filing also reveals that Fox Corp. board member Paul Ryan warned the Murdochs “that Fox News should not be spreading conspiracy theories,” according to testimony from the former House speaker.

“We are entering a truly bizarre phase of this where [Trump] has actually convinced himself of this farce and will do more bizarre things to de-legitimize the election,” Ryan told the Murdochs.  “I see this as a key inflection point for Fox, where the right thing and the smart business thing to do line up nicely.”

Former President Trump lashed out at Murdoch, accusing him of betraying Fox hosts in recent legal testimony.

On Tuesday, Trump posted on Truth Social: “Why is Rupert Murdoch throwing his anchors under the table, which also happens to be killing his case and infuriating his viewers, who will again be leaving in droves – they already are.”

Trump went on to repeat his unfounded claims of “large scale ballot stuffing.”

--The Republican Party plans to ask 2024 presidential candidates to pledge support for the eventual nominee, RNC Chairwoman Ronna McDaniel said on Sunday, espousing an idea so far not embraced by former President Donald Trump. Candidates who do not sign the pledge will not be allowed to participate in party-sponsored debates during the primary process, McDaniel said. 

“It’s kind of a no brainer, right?  If you’re going to be on the Republican National Committee debate stage asking voters to support you, you should say, I’m going to support the voters and who they choose as a nominee,” McDaniel said on CNN’s “State of the Union” program.

Trump has refused to commit to supporting the eventual nominee.  “It would depend,” he said early last month in a radio interview.  “It would have to depend on who the nominee was.”

McDaniel said signing the pledge would be an important move toward healing divisions within the party and having a united front.

Trump did not reply to McDaniel’s comments, but a campaign spokesperson told Reuters, “President Trump will support the Republican nominee because it will be him.”

--Ron DeSantis is carving out his foreign policy, which is really nothing but air, using Kevin McCarthyesque phrases when it comes to aiding Ukraine like no “blank checks,” seemingly joining former president Trump in a GOP surrender caucus.

But as the Wall Street Journal opined:

“Policy-wise, any presidential candidate needs to campaign as if he plans to win, and Mr. DeSantis might consider the world he’d inherit should Vladimir Putin prevail. A victorious Russia wouldn’t stop with Ukraine. China would delight in America’s retreat from the world stage and rush to fill the gap. Iran would double down on a bomb and on exerting greater hegemony over the Middle East.  Peace through weakness never words.

“Peace through strength does, and there’s a huge political opening for the candidate willing to take it.  Criticize Mr. Biden for the foreign-policy weakness that emboldened Mr. Putin to invade in the first place, and for his dawdling on getting Ukraine real firepower.  Describe what Ukrainian victory would look like and note that under a more decisive GOP presidency Ukraine would have already claimed it.  Project a future in which a victorious and united Europe stands alongside America to face the growing China threat. Criticize Mr. Trump for his retreatism and remind the country that a strong America (with a rebuilt military) is the best guard against global disorder and the basis of U.S. safety.

“National security remains a top voter priority; primary-goers want to know presidential aspirants have a coherent foreign-policy vision.  Mr. Trump’s position poses the GOP field’s first test.  Let’s see who passes.”

--A House ethics panel will investigate Rep. George Santos (R-N.Y.), who has admitted to fabricating large swaths of his biography, while being accused of breaking campaign finance laws.

Members of the House Ethics Committee voted unanimously to establish an investigative subcommittee to look into a litany of claims about the freshman congressman, including past business practices, campaign finance expenditures and an allegation of sexual misconduct.

Santos also faces multiple local, state and federal investigations following the reports of lies and fabrications.

I still say the FBI will be hauling him away in cuffs, sooner than later, and that he is a danger to the public, let alone his fellow House members.  He’s a sicko.

--Lori Lightfoot lost her bid for a second term as Chicago mayor Tuesday in the nation’s third-largest city after facing widespread criticism over her divisive leadership and rising crime.

Paul Vallas and Brandon Johnson will advance to the April 4 runoff to be the next mayor after none of the nine candidates won a majority.

Lightfoot made history in 2019 when she became the city’s first Black woman and first openly gay person to serve as mayor.  She was a miserable leader.  In her concession speech, Lightfoot said “we fought the right fights and we put this city on a better path.”

No you didn’t.

--The lead state prosecutor said on Wednesday that only Richard “Alex” Murdaugh could have killed his wife and son, telling the jury that the now-disbarred South Carolina lawyer was “living a lie” and sought to use the murders to cover his tracks.

Creighton Waters, in his closing argument, said the evidence given during more than a month of testimony, including of Murdaugh’s presence at the crime scene minutes before the killings on June 7, 2021, and his lies in its aftermath, all pointed in one direction.

“After an exhaustive investigation, there is only one person who had the motive, who had the means, who had the opportunity to commit these crimes, and also whose guilty conduct after these crimes betrays him,” Waters said.  “The defendant is the one person who was living a lie.”

Once Murdaugh took the stand in his own defense, I really began paying attention and the jury decision will be fascinating.  It only takes one to acquit.

So I wrote this Thursday afternoon, and then rather shockingly, Thursday evening, after just deliberating for three hours, they came back with a guilty verdict.  Good!

And this morning Murdaugh was sentenced to life in prison.  Judge Clifton Newman rocks.

Justice was served.

--The American Cancer Society said Wednesday that about 20% of new colorectal cancer diagnoses were in patients under 55 in 2019, compared with 11% in 1995. Some 60% of new colorectal cancers in 2019 were diagnosed at advanced states, the research and advocacy group said, compared with 52% in the mid-2000s and 57% in 1995, before screening was widespread.

Cases and death rates for colorectal cancer have continued a decadeslong decline overall thanks to screening, better treatments and reductions in risk factors such as smoking, the ACS report’s authors said.  But the shift of the burden toward younger people and diagnoses at more advanced stages has oncologists on alert.

Colorectal cancer is one of the most common cancer types in the U.S. and the second-deadliest behind lung cancer.  Actor Chadwick Boseman’s death in 2020 from colon cancer at age 43 drew attention to the disturbing trend among those under 55.

I saw a network report this week on a man, under 55, who took a Cologuard test and because of it, his advanced colon cancer was discovered in time to still cure it.  I mention this because my last two tests have been through Cologuard.  It’s not infallible, but it does work.

--Dilbert comic strip creator Scott Adams saw his syndication company, Andrews McMeel Universal, dump him, as hundreds of newspapers did, following Adams’ racist remarks.  Adams described people who are Black as members of “a hate group” from which white people should “get away.”

“Based on the current way things are going, the best advice I would give to white people is to get the hell away from Black people,” he said on his YouTube show.

Adams then tried to backtrack but to no avail.

--California has been the weather story for weeks now, with a real state of emergency in the mountains of San Bernardino County east of Los Angeles, where winter storms dumped so much snow some residents can barely see out their windows, are stranded, and running short of food.

As much as five feet of new snow fell late Tuesday, and roofs are starting to collapse.

Yosemite National Park was closed indefinitely after up to 15 feet of snow had fallen in some higher-elevation areas this week, making travel virtually impossible.

“In all of my years here, this is the most snow that I’ve ever seen at one time,’ said Scott Gediman, a spokesperson for Yosemite and ranger for 27 years.  “This is the most any of us have ever seen.”

But Tuesday’s water content of the snowpack in the Sierras, which provides about a third of California’s water supply, was 186% of normal to date, according to the state Department of Water Resources’ online data.

Lake Shasta, California’s largest reservoir, sat at 31% of capacity on Nov. 19, according to the Dept. of Water Resources, but on Monday, updated data had it at 60%, still below historical levels for February – 72% - but significantly higher, and rising.

Lake Oroville, a key component of California’s water supply, was at 28% of capacity on Nov. 19, and on Monday was at 72%* - well above its historical average for February, 63%, so great news.

*Thursday, Oroville was upped to 73%.

Also Thursday, the U.S. Drought Monitor showed almost 17% of California has exited drought completely, with an additional 34% now classified as “abnormally dry.”  That means less than half of the state remains under drought conditions.  At the end of last year, no part of the state was classified as out of drought and less than 1% was considered abnormally dry.

Another big storm this weekend.

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Pray for the men and women of our armed forces…and all the fallen.  This week we honor Col. Paris Davis, who was awarded the Medal of Honor today for his extraordinary service, and bravery, in Vietnam, June 1965. Davis was one of the nation’s first Black Special Forces officers.

Pray for Ukraine.

God bless America.

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Gold $1860
Oil $79.79

Regular Gas: $3.39; Diesel: $4.38 [$3.72 / $4.11 yr. ago]

Returns for the week 2/27-3/3

Dow Jones  +1.8%  [33390]
S&P 500  +1.9%  [4045]
S&P MidCap  +1.8%
Russell 2000  +2.0%
Nasdaq  +2.6%  [11689]

Returns for the period 1/1/23-3/3/23

Dow Jones  +0.7%
S&P 500  +5.4%
S&P MidCap  +9.0%
Russell 2000  +9.5%
Nasdaq  +11.7%

Bulls 38.4
Bears 28.8

Hang in there.

Brian Trumbore

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*Thursday evening, I attended an Anatomy Memorial at Rutgers University’s Robert Wood Johnson Medical School.  Our late Dr. Bortrum, aka Dad, along with the others who donated their bodies to medical science, was honored…and remembered.  It was very touching.

The medical students at RU put on the ceremony and I met some of them.  Just great kids.  Great future doctors.

One of the speakers, Dr. David Seiden, referenced a poem from 1999.  I contacted the University of Buffalo and special thanks to Renee Sciara, who passed the following on to me.

While in medical school at the University of Buffalo’s Jacobs School of Medicine and Biomedical Sciences, Jeffrey North, MD ’03, penned this poem about the meaningful impact that anatomical gift donations had made on his education.

Over the years, Dr. North’s poem has been read at memorial services across the country to recognize the selfless anatomical gifts made to programs like Rutgers’, and the University of Buffalo’s.

The Greatest Teachers, by Jeffrey North, MD

The greatest teachers we could ever ask for

Were once among you and me.

Walking the streets, going to work,
Making a living, living a life,
Probably very rarely thinking
About all that we would learn from them.
The greatest teachers we could ever ask for
Were once a friend to many.

Sharing a laugh, sharing a memory.
Sharing personal details,
Things that only the best of friends know.
Sharing a love, sharing a life, and sharing a soul
With the one they care most about.

The greatest teachers we could ever ask for
Never even knew any of us.
Yet had the courage, and the willingness
To be there for us, no matter how early or late.

They shared with us all we could ever ask for,
And we were eager to dive in,
And find out all there is to know.

The greatest teachers we could ever ask for
Were people we don’t even know,
But ones we know everything about.

They will forever be with us,
Still teaching and reminding us every step of the way.

They were more than notes, or lectures, or presentations.
They were the greatest people that we will have ever met.
May God bless each of their souls, and all of their families.
I thank every one of them
For the greatest gift one could ever give.

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God bless you, Bortrum.  You continue to inspire.

 

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