Week in Review

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Week in Review

04/01/2023

For the week 3/27-3/31

[Posted 6:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs, and your support is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974.

Edition 1,250

*I’m posting as we are beginning to get some details on the horrendous tornado outbreak sweeping through the Southeast and Midwest tonight.  Prayers for those in the impact zone, after the tragedies of just a few days ago.

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Early in the week, we were told that the Manhattan grand jury investigating the Stormy Daniels hush money probe was essentially recessed until after the Easter holidays.

Then suddenly, late Thursday afternoon, Donald Trump was indicted, an unprecedented move that marks the first time criminal charges in U.S. history are being brought against a former president.

We are learning today that Trump will be returning to New York on Monday and will be arraigned Tuesday afternoon.

Some of you will be disappointed that as the indictment, which reportedly contains 34 counts (the figure likely deceiving), is yet to be unsealed, and likely won’t until Tuesday, I’m invoking my “wait 24 hours” rule.

It is totally irresponsible to say much until we know all the facts.

Yes, we do know this is about a $130,000 payoff to Stormy Daniels on the eve of the 2016 election in exchange for her silence about an extramarital affair they allegedly had a decade earlier, and it now seems rather clear a separate payoff of $150,000 to Playboy model Karen McDougal is part of the indictment, but we don’t know what all the evidence is that convinced Manhattan District Attorney Alvin Bragg to proceed with this highly controversial, politically charged case.

Bragg pushed back against House GOP members nosing into the criminal investigation, calling their interference “improper and dangerous.”

The House Judiciary Committee (chaired by Jim Jordan) has demanded Bragg testify before Congress about the confidential investigation that led to the indictment.

In a letter sent Friday, Bragg acknowledged the charges publicly and doubled down on a previous letter telling the committee to back off.

Bragg’s office also denounced the committee for attacking him instead of condemning Trump’s social media polemics ahead of his indictment threatening violence would break out.

Bragg’s general counsel Leslie Dubeck wrote:

“As Committee Chairmen, you could use the stature of your office to denounce these attacks and urge respect for the fairness of our justice system and for the work of the impartial grand jury.  Instead, you and many of your colleagues have chosen to collaborate with Mr. Trump’s efforts to vilify and denigrate the integrity of elected state prosecutors and trial judges and made unfounded allegations that the Office’s investigation, conducted via an independent grand jury of average citizens serving New York State, is politically motivated.”

Dubeck also chided Republicans for not respecting due process.

“Yesterday, the District Attorney of New York County filed charges against Donald Trump for violations of New York law. The charges filed yesterday were brought by citizens of New York, doing their civic duty as members of a grand jury, who found probable cause to accuse Mr. Trump of having committed crimes in New York,” she wrote.

“Even worse, based on your reportedly close collaboration with Mr. Trump in attacking this Office and the grand jury process, it appears you are acting more like criminal defense counsel trying to gather evidence for a client than a legislative body seeking to achieve a legitimate legislative objective.”

For his part, Donald Trump claimed he is “completely innocent” and a victim of “political persecution.”

In a statement issued from Mar-a-Lago, Trump said:

“The Democrats have lied, cheated and stolen in their obsession with trying to ‘Get Trump,’ but now they’ve done the unthinkable – indicting a completely innocent person in an act of blatant Election Interference.

“Never before in our Nation’s history has this been done,” he continued.  “The Democrats have cheated countless times over the decades, including spying on my campaign, but weaponizing our justice system to punish a political opponent, who just so happens to be a President of the United States and by far the leading Republican candidate for President, has never happened before. Ever.”

Michael Cohen, who went from being Trump’s loyal fixer to testifying before Bragg’s grand jury multiple times (after pleading guilty to crimes related to the case in 2018), said after the indictment that he takes “no pride” in paving the way for his former boss’ prosecution.

“However, I do take solace in validating the adage that no one is above the law; not even a former president,” he said in a text message, and on various media outlets.

Some opinion….

Gary O’Donoghue, Washington correspondent / BBC News

“In some ways, a former head of state being charged with a crime and possibly even going to prison is not news.  It’s happened all over the world down the ages: hundreds of presidents, prime ministers and military leaders turfed out of palaces and straight into prisons.

“But America regards itself as exceptional; and Washington, the city on a hill that provides a moral and democratic beacon for the world.

“So joining this particular club is not just a problem for Donald Trump. It’s a further blow to America’s confidence and self-belief.

“And those other blows have been serious.

“We have already seen a violent attack on the very seat of democracy on January 6th, 2021, with parliamentarians running for their lives and the mob rampaging through the Capitol for hours unthwarted.

“The country is divided: north versus south; the coasts versus the center; urban versus suburban – all riven with culture wars that are tearing the nation apart.

“Add to all that China’s new assertiveness and Russian aggression in Ukraine, and it’s plain there are rising geopolitical challenges on multiple fronts that threaten its status around the world.

“Historians refer to the 20th Century as The American Century – will they do the same for this one?”

Edward Luce / Financial Times

“Trump’s charge sheet has more of the flavor of a Shakespearean farce than tragedy.  There is not a soul in America who was not long ago deeply appraised of his history with women. It is hard to believe it would badly harm his presidential campaign in the short term. He may even get a boost.  Trump will milk every drop he can squeeze from his narrative of a crooked deep state that is out to get him.

“That is how it looks today.  But there could well be squads, if not battalions, of future indictments to come. Whatever the legal merits of the case that Alvin Bragg…has brought, nobody could accuse him of lacking courage.  Having broken the dam, Bragg has made it easier for other public prosecutors to make the leap.  They will no longer be jumping alone into the darkness or taking the risk of being the first official to aim at the king and miss.  That is on Bragg’s shoulders. The very least that Bragg has done is to pave the way for other prosecutors to take lesser reputational risks on far graver charges….

“Shortly after news of Trump’s indictment broke, Ron DeSantis, Trump’s most serious rival for the 2024 Republican nomination, accused Bragg in a tweet of advancing a ‘political agenda’ that is ‘un-American.’  Much of the rest of the Republican party issued similar Trumpian missives.

“It is an extraordinary moment.  The party of law and order may be lining up against an American bedrock principle that no person shall be above the law.  But the situation could be even riskier than that.  Bragg is African-American.  Trump has described Bragg as an ‘animal’ and ‘degenerate psychopath.’  A Republican senator, Rand Paul, has demanded Bragg’s arrest.  Republican lawmaker Marjorie Taylor Greene has called for George Soros, who indirectly funded Bragg’s campaign for district attorney, to be stripped of his citizenship.

“The most important court will thus ultimately be U.S. public opinion.  If past is prologue, America’s political reactions will be deeply polarized.  All things being equal, having a potential criminal – indeed a potentially serial criminal – as your presidential nominee ought to be bad for the Republican party.  But all things in today’s America are not equal. The country is entering a deeply consequential struggle about whether America has a government of laws, or of men.”

For now, personally, I’m disappointed this case is being brought first (if at all), as I long said the Georgia case was a layup…and it should be.  Before even Special Counsel Jack Smith’s Jan. 6 and classified documents investigations.

Alas, all eyes will be on New York, Monday and Tuesday.  It was on Jan. 4, 2021, that Fox News host Tucker Carlson messaged, “We are very, very close to being able to ignore Trump most nights.”  [Revealed as part of the Dominion Voting Systems’ defamation lawsuit against Fox.]

Not quite, Tucker.  And that’s not good for the country…at all.

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This Week in Ukraine….

--Saturday, President Vladimir Putin announced that Russia would station tactical nuclear missiles in its close ally Belarus, which borders both Russia and Ukraine, sending a warning to NATO over its military support for Kyiv and escalating a standoff with the West.

Since Putin’s invasion to “demilitarize” Ukraine got bogged down in the fall, he and other top Russian officials have played up the prospect the war could escalate to involve nuclear weapons.

Kyiv and its Western allies reacted angrily to the plan to base tactical nukes in Belarus.

“Russia’s nuclear rhetoric is dangerous and irresponsible,” a NATO spokesman said on Sunday.

Ukraine’s security chief, Oleksiy Danilov, said Russia’s plan would destabilize Belarus, which he said had been taken “hostage” by Moscow.

Ukraine called for a meeting of the UN Security Council and Lithuania called for new sanctions against Moscow and Minsk.

EU policy chief Josep Borrell urged Belarus not to host the weapons and threatened more sanctions.

White House National Security Council spokesman John Kirby said, “We’ve seen nothing that would indicate Mr. Putin is preparing to use tactical nuclear weapons in any way whatsoever in Ukraine.”  [Tactical nukes are used to make specific gains on a battlefield, rather than those capable of wiping out cities.  It is unclear how many such weapons Russia has, since the topic is shrouded in Cold War secrecy.]

Putin framed the decision as a response to armor-piercing rounds the Brits are sending to Kyiv that contain trace quantities of depleted uranium.

Kirby said in a call with reporters, “I think what’s really going on here is Russia just doesn’t want Ukraine to continue to take out its tanks and render them inoperative.”

“And if that’s really the concern,” Kirby continued, “If the Russians are very concerned about their tanks staying fully operational, they can just take them across the border back into Russia and take them out of Ukraine; they don’t belong there in the first place.”

Russia previously stationed 10 aircraft in Belarus capable of carrying tactical nuclear weapons, Putin said, adding that it had already transferred to Belarus a number of Iskander tactical missile systems that can launch nuclear weapons.

--Monday, Russia’s Defense Ministry said its forces were attacking Ukrainian positions in six different directions.

Ukraine shut the eastern town of Avdiivka to non-military personnel on Monday, describing it as a post-apocalyptic wasteland, as Kyiv seeks to break the back of Russia’s flagging winter offensive before a counterassault of its own.

A top Ukrainian general said Kyiv was planning its next move after Moscow appeared to shift focus from Bakhmut to Avdiivka, 55 miles further south.  Front lines in Ukraine have barely budged for more than four months despite a Russian winter offensive using hundreds of thousands of freshly called-up reservists and convicts recruited as mercenaries.

The Ukrainian military aims to wear down Russian forces before the counteroffensive in the coming weeks.  Ukrainian ground forces commander Colonel General Oleksandr Syrskyi, who said last week that the counterattack could come “very soon,” visited front line troops in the east and said his forces were still repelling Russian attacks on Bakhmut.

Last week, the Ukrainian military warned that Avdiivka could become a “second Bakhmut” as Russia turned its attention there.  Both towns have been reduced to rubble in fighting that both sides have called a “meat grinder.”

“I am sad to say this, but Avdiivka is becoming more and more like a place from post-apocalyptic movies,” said Vitaliy Barabash, head of the city’s military administration.  Only around 2,000 of a pre-war population of 30,000 remain and he urged them to leave. 

--Tuesday, Russian forces said they were moving forward in Bakhmut, despite fierce resistance and have almost taken full control of a metals plant there, a Russian-installed leader in the region said.

His assertion ran counter to Ukrainian and Wester descriptions of the situation in the city, which they have said is stabilizing as the Russian offensive falters.

Denis Pushilin, the Russian-installed leader of the part of Ukraine’s Donetsk region under Moscow’s control, said the bulk of Ukrainian forces had been forced to pull back from the AZOM metals factory on the western side of the Bakhmutka river.

Both sides say they are inflicting heavy casualties on each other.  Pushilin said fighters from Russia’s Wagener force were continuing to spearhead the offensive in the city.

“The (Wagner) guys are moving forward, of course they are moving forward, though it takes their hardest efforts to do that,” Pushilin told state television.  “They have created impossible conditions for the enemy to even carefully try to bring in combat equipment, bring in reserves, or take out even the wounded.  For the enemy, all this is extremely difficult because all the roads are under (Russian) fire control.”

Telegram channels associated with Wagner on Tuesday published images that they said had been taken inside the metallurgical plant.

--Monday, two people were killed and 32 wounded after Russian forces fired two S-300 missiles at the eastern city of Sloviansk northwest of Bakhmut.  President Zelensky posted a video of smoldering debris and vowed that “Ukraine will not forgive” such attacks.

Zelensky visited the southeastern Zaporizhzhia region on Monday, his third trip to the front line in less than a week.  He awarded soldiers and discussed nuclear safety with International Atomic Energy Agency chief Rafael Grossi, who traveled to the area, home to Europe’s biggest nuclear power plant, which has been occupied by Russian forces for the past year.

Wednesday, Grossi visited the Zaporizhzhia facility, seeking to assess first-hand the “nuclear safety and security situation” and press on with efforts to broker a deal to protect the plant.  “I am not giving up in any way.  I think on the contrary we need to multiply our efforts, we need to continue,” Grossi said in an interview with Reuters.

Grossi said Tuesday that the situation at the plant remained “very dangerous” and “very unstable,” noting that military activity in the region had increased in recent weeks.

Zaporizhzhia, which once accounted for 20% of national power generation before the Russian invasion, has not produced any electricity since September, when the last of its six reactors was taken offline.

--An ally of Putin warned that Russia has the weapons to destroy any enemy, including the United States, if its own existence is threatened, accusing Washington of underestimating Moscow’s nuclear might.

The comments from Nikolai Patrushev, the influential secretary of Russia’s Security Council, are the latest from a senior Russian official to raise the specter of a nuclear showdown between the world’s two largest nuclear powers, something Moscow says it wants to avoid.

“American politicians trapped by their own propaganda remain confident that, in the event of a direct conflict with Russia, the United States is capable of launching a preventive missile strike, after which Russia will no longer be able to respond.  This is short-sighted stupidity, and very dangerous,” Patrushev told the state Rossiiskaya Gazeta newspaper on Monday.

“Russia is patient and does not intimidate anyone with its military advantage.  But it has modern unique weapons capable of destroying any adversary, including the United States, in the event of a threat to its existence,” he said. 

--The 18 Leopard 2 battle tanks pledged by Germany to support Ukraine have arrived in the theater (along with 40 Marder infantry fighting vehicles), the German Defense Ministry said on Monday.  The German army trained the Ukrainian tank crews.  Three Leopard tanks donated by Portugal also reached Ukraine.

About a half dozen of Britain’s Challenger 2 tanks have arrived in Ukraine as well.

--In an interview with the Associated Press on Tuesday, President Zelensky warned that unless his nation wins a drawn-out battle for Bakhmut, Russia could begin building international support for a deal that could require Ukraine to make unacceptable compromises.

If Bakhmut fell, Putin would “sell this victory to the West, to his society, to China, to Iran,” Zelensky said. 

“If he will feel some blood – smell that we are weak – he will push, push, push,” Zelensky said.

As the war enters its second year, Zelensky finds himself focused on keeping motivation high in both his military and the general Ukrainian population – particularly the millions who have fled abroad and those living in relative comfort and security far from the front lines.

Zelensky is also well aware that his country’s success has been in great part due to waves of international military support, particularly from the United States and Western Europe, but some in the U.S. are questioning whether Washington should continue to supply Ukraine with billions of dollars in military aid.  Zelensky worries the war could be impacted by shifting political forces in Washington.

“The United States really understands that if they stop helping us, we will not win,” he said.

--By week’s end there were conflicting statements on who has the advantage in Bakhmut.  Ukrainian military officials said Wednesday evening that Russian forces have had some success.  “Enemy forces had a degree of success in their actions aimed at storming the city of Bakhmut,” the General Staff of the Ukrainian Armed Forces said in its regular nighttime report.  “Our defenders are holding the city and are repelling numerous enemy attacks.”

But there has been a decline in the number of daily Russian attacks on the front line, with journalists on the ground reporting a notable drop in the intensity of the attacks the past week.

Russian officials, however, say their forces are still capturing ground in street-by-street fighting inside Bakhmut.

But U.S. Joint Chiefs of Staff Chairman Gen. Mark Milley told lawmakers Wednesday: “For about the last 20 to 21 days, the Russians have not made any progress whatsoever in and around Bakhmut.”

--On Thursday, Putin formally authorized Moscow’s annual spring conscription campaign, which calls for adding 147,000 troops between April 1 and July 15.  The Institute for the War said, “The new conscripts will not increase Russian combat power in the short term, as Russian conscripts must undergo months of training and service before they see combat.”

--Friday, Belarusian President Alexander Lukashenko said he had intensified talks with Russia about deploying tactical nuclear weapons in his country, alleging there were plans to invade Belarus from neighboring Poland.

Speaking at an annual address to lawmakers and government officials, Lukashenko said Moscow’s plans to station nuclear arms in Belarus would help “safeguard” the country, which he said was under threat from the West.  “Take my word for it, I have never deceived you. They are preparing to invade Belarus, to destroy our country,” he told the audience.

In Friday’s speech, Lukashenko also called for an immediate, unconditional ceasefire in the Ukraine war, cautioning that Russia would be forced to use “the most terrible weapon” if it felt threatened.  “It is impossible to defeat a nuclear power.  If the Russian leadership understands that the situation threatens to cause Russia’s disintegration, it will use the most terrible weapon. This cannot be allowed,” he said.

Kyiv says Russia continues to use Belarusian airspace for drone and missile strikes against Ukraine and used Belarus as a launchpad for its invasion.

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--Russia’s top security agency arrested a reporter for the Wall Stret Journal on espionage charges.

The Federal Security Service (FSB), the top domestic security and counterintelligence agency that is the main successor to the KGB, said Thursday that Evan Gershkovich was detained in the Ural Mountains city of Yekaterinburg while allegedly trying to obtain classified information.

Gershkovich is the first reporter for an American news outlet to be arrested on espionage charges in Russia since the Cold War.

The FSB alleged that he “was acting on U.S. orders to collect information about the activities of one of the enterprises of the Russian military industrial complex that constitutes a state secret.”

The FSB didn’t say when the arrest took place.  Gershkovich could face up to 20 years in prison if convicted of espionage.

Gershkovich has been a correspondent in the Journal’s Moscow bureau the past year, and he had accreditation from the Russian Foreign Ministry to work as a journalist. 

The Kremlin claims Gershokovich was “caught red-handed.”

Gershkovich appeared in a Moscow court Thursday, saying he was not guilty of espionage, the TASS news agency reported.  The same court ruled he should be held in pre-trial custody for nearly two months until May 29, according to court documents.

Editorial / Wall Street Journal

“Russia’s arrest of Wall Street Journal reporter Evan Gershkovich escalates the Kremlin’s habit of taking Americans hostage, and it’s more evidence that Russia is divorcing itself from the community of civilized nations.  President Vladimir Putin is now responsible for Mr. Gershkovich’s health and safety, and the Biden Administration has an obligation to press for his release….

“The Journal denies the allegation (of espionage), which is dubious on its face.  The government closely monitors foreign reporters in Russia, and Mr. Gershkovich has worked there for years.  The FSB could have expelled him long ago if it really believed he is a spy.

“The timing of the arrest looks like a calculated provocation to embarrass the U.S. and intimidate the foreign press still working in Russia.  The Kremlin has cowed domestic reporting in Russia, so foreign correspondents are the last independent sources of news.  Mr. Gershkovich’s arrest comes days after his byline was on a revealing and widely read dispatch documenting the decline of the Russian economy.  The Kremlin doesn’t want that truth told.

“The arrest could also be a response to charges brought last week by the U.S. Justice Department against Sergey Vladimirovich Cherkasov.  The Russian national was charged with various fraud offenses and being an agent of a foreign power.  Mr. Putin often takes hostages with a goal of exchanging them later for Russians who’ve committed crimes in the U.S….

“Thuggish leaders keep doing thuggish things if they think they will pay no price.  The Biden Administration will have to consider diplomatic and political escalation.  Expelling Russia’s ambassador to the U.S., as well as all Russian journalists working here, would be the minimum to expect. The U.S. government’s first duty is to protect its citizens, and too many governments now believe they can arrest and imprison Americans with impunity.”

--The U.S. has new information that Russia is actively seeking to acquire additional munitions from North Korea, White House national security spokesman John Kirby told reporters Thursday, adding that there is concern that Pyongyang will provide the aid.  Russia would offer food in exchange for weapons.

--Moscow test-fired anti-ship missiles in the Sea of Japan, Russia’s Defense Ministry said Tuesday, with two boats launching a simulated missile attack on a mock enemy warship about 100 kilometers (60 miles) away.

The ministry said the target was successfully hit by two Moskit cruise missiles.

The Moskit, whose NATO reporting name is the SS-N-22 Sunburn, is a supersonic anti-ship cruise missile that has conventional and nuclear warhead capacity.  The Soviet-built cruise missile is capable of flying at a speed three times the speed of sound and has a range of up to 155 miles.

The U.S. Navy’s 7th Fleet did not immediately respond to requests for comment.

Japan reacted calmly to the missile exercise, which was near Vladivostok, rather than directly in the waters between the two countries.

--More than 5,000 former criminals have been pardoned after finishing their contracts to fight in the Wagner Group, founder Yevgeny Prigozhin said on Saturday.

--A study released last week by the Social Policy Institute at Moscow’s Higher School of Economics showed that across all of its models, “one can expect the deteriorating of the middle class and of the population’s social and psychological well-being,” according to the report.  And that’s because, as Reuters reported, “real incomes would only exceed 2021 levels by 2% by the end of the decade,” which means “A middle class that has grown since Vladimir Putin became president in 2000 would shrink markedly.”

--A Russian who was investigated by police after his daughter drew an anti-war picture at school was sentenced on Tuesday to two years in a penal colony on charges of discrediting the armed forces.

But the court said the convicted man, Alexei Moskalyov, had fled from house arrest.  He has been separated from his 13-year-old daughter Masha since he was placed under arrest at the start of the month and she was moved to a children’s home in their hometown of Yefremov, south of Moscow.

The case has sparked an online outcry among Russian human rights activists.

--Turkey’s parliament approved a bill to allow Finland to join NATO, clearing the way for Helsinki to join the Western defense alliance as the war rages.

The Turkish parliament was the last among the 30 members of the alliance to ratify Finland’s membership, after Hungary’s legislature approved a similar bill this week.

But Turkey remains opposed, for now, to Sweden’s application to join the transatlantic military alliance, with Ankara claiming it harbors what it considers members of terrorist groups.

Opinion….

Karl Rove / Wall Street Journal

“Neo-isolationists on the right and left dismiss Russia’s invasion of Ukraine as of little consequence to the U.S.  To them, it’s a territorial dispute between faraway countries. Some even allege that America is largely responsible for the war.  By encouraging democracy’s spread in Eastern Europe, the U.S. unnerved Vladimir Putin.  It’s understandable, they say, that the dictator then unleashed his military to subjugate Ukraine.

“That’s claptrap.  Mr. Putin could have lived in peace with a democratic Ukraine just as Russia has coexisted for decades with neighboring democracies Finland and Norway.  And the latter was one of the founding members of the North Atlantic Treaty Organization.  The blame for this war’s death and destruction lies squarely with the man in the Kremlin. It was Mr. Putin’s ambition to reconstruct Russia’s imperial empire that led Russia to seize Crimea in 2014 and invade the rest of Ukraine more than a year ago.

“Well either way, the neo-isolationists argue, sending weapons and economic assistance to Ukraine takes away America’s ability to meet our own needs. And, besides, we won’t be affected by the war’s outcome.

“More claptrap.

“Ukraine’s heroic resistance to Russia, a power hostile to the U.S., has dramatically improved America’s strategic position world-wide.  The Kremlin has become far weaker, while NATO, which includes many of our most trusted allies, has become far stronger and more united than it has been since the Cold War. But if Russia prevails in the war, that progress would be reversed.

“A Putin victory would also embolden some very nasty characters on the world stage, including North Korea’s Kim Jong Un, Iran’s mullahs and China’s Xi Jinping.  As NATO Secretary General Jens Stoltenberg argues, ‘Beijing is watching closely and learning lessons that may influence its future decisions.  So, what happens in Europe today could happen in Asia tomorrow.’

“And Mr. Putin has made clear he’d prefer his bloody adventurism in Europe not to end in Ukraine… Neo-isolationists worry about what weapons and aid to Ukraine are costing America, but pulling our support risks American lives down the road….

“(Sending) military assistance to Ukraine is good for our economy to begin with.  Washington is largely paying for American workers to make the weapons, bullets, missiles and equipment we send.

“If the U.S. abandons Ukraine after all its courage and sacrifice, it would be a strategic, economic and moral catastrophe that would reduce our influence around the world and damage our economy.  Aiding Ukraine is putting America’s interests first.”

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Wall Street and the Economy

As I describe below, conveniently, the quarter ended on a Friday, a clean break in looking at the returns, and what a quarter it was, with Nasdaq up 17%, and the S&P 500 up 7%.  For 2022, Nasdaq plunged 33.1% and the S&P was down 19.4%.

Meanwhile, the Fed’s vice chair for supervision, Michael Barr, appeared at a Senate Banking Committee hearing along with other regulators and blamed Silicon Valley Bank’s demise on poor internal management and excessive risk-taking.

“SVB’s failure is a textbook case of mismanagement,” he said in his prepared remarks, while adding that the “failure demands a thorough review of what happened, including the Federal Reserve’s oversight of the bank.”

“As it turned out, the full extent of the bank’s vulnerability was not apparent until the unexpected bank run on March 9,” Barr added. “In our review, we are focusing on whether the Federal Reserve’s supervision was appropriate for the rapid growth and vulnerabilities of the bank.”

On the economic data front…

The S&P CoreLogic Case-Shiller Home Price indices continued to cool in January.  The 20-city index fell a seasonally adjusted 0.2% from December, up 2.5% year-over-year unadjusted.

According to mortgage-data firm Black Knight Inc.’s home price index, the U.S. is a country of two housing markets.  Falling in one, still rising in the other, and the division is down the center of the country.

In all of the 12 major housing markets west of Texas, plus Austin, home prices fell in January on an annual basis.  In the 37 biggest metro areas east of Colorado, except Austin, home prices rose year-over-year.

San Jose, Calif., and San Francisco home prices were down more than 10% from a year earlier in January, and Seattle prices fell 7.5%.

In the Eastern half of the U.S., Florida and other Southern markets are still attracting companies and adding jobs.  Orlando home prices were up 9.3%, while Miami prices rose 12%, the top increase among the 50 biggest metro areas.

Meanwhile, defaults and vacancies are on the rise at high-end office buildings, in the latest sign that remote work and rising interest rates are spreading pain to more corners of the commercial real estate market.

The Chicago area PMI for manufacturing in March was 43.8; 50 the dividing line between growth and contraction.

We had a final look at fourth-quarter GDP, 2.6%, a tick down from prior estimates, which follows 3.2% growth in the third quarter of 2022.  The core PCE component came in at 4.4%, up a tick from the second estimate.

The Atlanta Fed’s GDPNow barometer for first quarter growth is down to 2.5% from last week’s 3.2%.

But the key figures for the week were on February personal income, up 0.3%, and consumption, up 0.2%, both in line with consensus.  This report, however, contains the personal consumption expenditures index closely followed by the Fed, and on headline, it was up 0.3%, and 5.0% year-over-year, the latter vs. 5.3% prior revised.

The key is the core reading, ex-food and energy, which was up 0.3% month-over-month, and 4.6% year-over year, vs. 4.7% prior.  If you had to pick just one number, this monthly figure is what the Fed values over any other in making its determinations on interest rates, and at 4.6%, yes, it’s coming down, and for various reasons the Fed may pause its rate-hike regime soon, but it’s hardly about to lower rates, as the market keeps projecting.

The Fed will receive another full round of inflation news – CPI, PPI and PCE – prior to its May 2-3 FOMC gathering.

One more…Freddie Mac’s 30-year fixed-rate mortgage stands at 6.32% this week, down from 6.42% prior.

Europe and Asia

Eurozone inflation dropped by the most on record in March, according to a flash estimate put out by Eurostat today, down to 6.9% from 8.5% in February, the fall almost exclusively due to a drop in energy prices.

But the growth in core prices accelerated, likely strengthening the case for further rate hikes by the European Central Bank.

Ex-food and energy, the inflation rate was 7.5%, vs. 6.4% in October, and 3.2% last March.

Headline flash readings:

Germany 7.8%, France 6.6%, Italy 8.2%, Spain 3.1%, Netherlands 4.5% (down from 16.8% in October), Ireland 7.0%.

Separately, Eurostat reported that the February unemployment rate was stable at 6.6%, down from 6.8% a year earlier for the euro area.

France: Tuesday, President Emmanuel Macron’s government rejected a new demand by unions to rethink the pension bill (raising the retirement age from 62 to 64), infuriating labor leaders who said the government must find a way out of the crisis.  There was sporadic violence amid the largely peaceful nationwide protests and strikes.

Public frustration has evolved into broader anti-Macron sentiment, and the protests have intensified since the government used special powers to push the bill through parliament without a vote.

Turning to Asia…China’s National Bureau of Statistics reported the manufacturing PMI for March was 51.9 vs. 52.6 in February, but the service sector reading, 58.2, was the highest since 2011, a major sign of reopening.  We will get the private Caixin PMI figures next week.

Japan reported February retail sales were up 6.6% year-over-year, but industrial production was down 0.6% Y/Y.

Street Bytes

--As noted above, stocks finished the quarter on a powerful note, the Dow Jones up 3.2% for the week to 33274, the S&P 500 rose 3.5% and Nasdaq 3.4%. 

For the first three months, the Dow ended up eking out a gain of 0.4%, despite all the turmoil, while the S&P and Nasdaq brushed it all off to the tune of +7% and +17%, respectively, Nasdaq’s best quarter since June 2020, as signs of cooling inflation bolstered hopes the Fed might soon end its aggressive policy. [I believe this is misguided.]

Nasdaq’s outperformance over the Dow was by the widest margin since 2001.

The Stoxx Europe 600 (the continent’s benchmark) also had a great quarter, up 7.8%.

--U.S. Treasury Yields

6-mo. 4.86%  2-yr. 4.04%  10-yr. 3.47%  30-yr. 3.65%

With a little stability in the banking sector, rates rose some, the flight to safety trade unwinding a bit.  It could unwind a lot, however, if normality becomes the rule again.

Remember, just a few weeks ago, the yield on the 2-year was 5.07% before closing last Friday at 3.76%.

--Oil, as measured by West Texas Intermediate, was mired in a $73 to $80 range for months, before breaching that to the downside three weeks ago, falling to $66, and now it’s attempting to get back over $73.  For this week, at least, there was some optimism on the banking sector, and therefore lending, which would be healthy enough and maybe the demand picture would be better as well, and the price closed the week at $75.55.  So the market is looking for signs that crude has bottomed.

--Natural gas prices fell to the $2.00 level this week, the lowest since September 2020, before finishing the week at $2.19.  The price has been pressured by persistently weak demand due to above-normal temperatures and ample inventories.  Working stocks in underground storage amounted to the highest level for the time of year since 2020, according to the EIA.

--UBS Group AG said its former leader Sergio Ermotti will return as chief executive, as the Swiss banking giant moves into a new era with its takeover of Credit Suisse Group AG.

Ermotti previously ran UBS for nine years.  He will succeed current CEO Ralph Hamers, who will stay on as an adviser for a transition period.

Ermotti previously ran UBS from 2011 to February 2020.  He was credited with repositioning the bank’s strategy and focusing it on less risky businesses after UBS suffered big losses during the global financial crisis.  That transformation included scaling back UBS’ investment banking operations and building up its wealth and asset management units.

UBS now has to figure out how to integrate Credit Suisse into its business, which divisions to downsize, as well as reassure clients, employees and investors.

“The task at hand is an urgent and challenging one,” said Ermotti, who is a Swiss citizen, in a statement.

--Shares in First Citizens BancShares soared nearly 50% after the announcement late Sunday that it would take over substantially all of the assets and liabilities of Silicon Valley Bank.  News of the deal brokered by the Federal Deposit Insurance Corp. sent bank stocks and the broader market climbing.

The FDIC will share up to 50% of SVB commercial loan losses in excess of $5 billion with First Citizens.  So this isn’t without cost to the federal insurance fund.

Editorial / Wall Street Journal

“It’s good to be a banker at the remainder counter, especially when the feds are helping with the purchase.  First Citizens BancShares on Sunday night was the lucky winner of the bidding to buy the assets of Silicon Valley Bank, and what a deal it is.  Rather than minimize the cost to the deposit insurance fund as required by law, the Federal Deposit Insurance Corp. seems to have chosen the best political match.

“North Carolina-based First Citizens will acquire all of SVB’s deposits, loans and branches but leave $90 billion in securities and other assets with the FDIC.  First Citizens will buy SVB’s $72 billion in loans at a sizable $16.5 billion discount and share future losses or gains with the FDIC.  How sweet it is for First Citizens, whose shares rose 45.5% Monday.

“The FDIC loss-share agreement is a tacit recognition that SVB’s large book of loans to unprofitable startups carries substantial credit risk.  SVB’s business model involved extending low-cost credit to tech startups, many with no revenue, and getting repaid when they were acquired by larger companies, raised more private funds or floated shares publicly.

“Problem is, rising interest rates have caused venture funding and the market for initial public offerings to dry up.  Market valuations for startups have slumped.  Bigger companies aren’t in the market to buy startups with large amounts of debt relative to revenue.  That means big loan losses could be coming….

“After the deal closes, First Citizens will have $219 billion in assets – double what it had at the end of last year.  This would make it among the 25 largest banks in the U.S. and puts it on the cusp of being classified as too-big-to-fail.  The losers in this sweetheart deal will be other banks (and their customers) that will have to pick up the estimated $20 billion cost to replenish the deposit insurance fund.   That’s about 15% of the entire fund.  By comparison, the 214 bank failures between 2011 and 2022 cost the fund $12.4 billion.”

--Meanwhile, Ammar Al Khudairy, the chairman of Credit Suisse Group’s largest shareholder, resigned just days after his comments helped trigger a slump in the stock and bonds that prompted the Swiss government to step in and arrange its takeover.

Al Khudairy, who became chairman of Saudi National Bank in 2021 when it was created via a merger, is leaving “due to personal reasons,” according to a statement.

The departure comes twelve days after he said in a Bloomberg TV interview that Saudi National Bank would “absolutely not” be open to further investments in Credit Suisse if there was another call for additional liquidity.

The Swiss bank’s stock plunged to the lowest level on record and its credit spreads surged following his comments.  That helped drag all European banks lower as investors shied away from risk following the collapse of three lenders in the U.S.

--The question of the day has been, are tech companies moving too fast in rolling out powerful artificial intelligence technology that could one day overwhelm/outsmart humans?

A group of prominent computer scientists and other tech industry notables such as Elon Musk and Apple co-founder Steve Wozniak are calling for a 6-month pause to consider the risks.

Their petition published Wednesday is a response to San Francisco startup OpenAI’s recent release of GPT-4, a more advanced successor to its widely-used AI chatbot ChatGPT that helped spur a race among tech giants Microsoft and Google to unveil similar applications.

The letter warns that AI systems with “human-competitive intelligence can pose profound risks to society and humanity,” from flooding the internet with disinformation and automating away jobs to more catastrophic future risks out of the realms of science fiction.

It says “recent months have seen AI labs locked in an out-of-control race to develop and deploy ever more powerful digital minds that no one, not even their creators, can understand, predict, or reliably control.”

“We call on all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4,” the letter says.  “This pause should be public and verifiable, and include all key actors.  If such a pause cannot be enacted quickly, governments should step in and institute a moratorium.”

A number of governments are already working to regulate high-risk AI tools.  The U.K. released a paper Wednesday outlining its approach, which it said “will avoid heavy-handed legislation which could stifle innovation.”  Lawmakers in the 27-nation European Union have been negotiating passage of sweeping AI rules.

Among the signees on the petition was Rachel Bronson, president of the Bulletin of the Atomic Scientists, a science-oriented advocacy group known for its warnings against humanity-ending nuclear war.

OpenAI, Microsoft and Google didn’t immediately respond to requests for comment.

James Gimmelmann, a Cornell University professor of digital and information law, commented to the Associated Press: “A pause is a good idea, but the letter is vague and doesn’t take the regulatory problems seriously.  It is also deeply hypocritical for Elon Musk to sign on given how hard Tesla has fought against accountability for the defective AI in its self-driving cars.”

Doh!

--United Airlines reached tentative agreements with the International Association of Machinists and Aerospace Workers for providing improved wages to its nearly 30,000 ground workers, the union said on Wednesday.  While details were not disclosed, the union said it offers “industry-best” wage rates, better job security, insourcing of five previously outsourced locations and prohibiting outsourcing at 17 additional U.S. locations.

The agreements cover seven different work classifications at the carrier, including fleet service workers and passenger service workers.  United is also separately locked in negotiations with its pilots over a new contract, with U.S. carriers under pressure to better Delta Air Lines’ pilot deal, which provided for a 34% cumulative pay increase and other benefits.

--Boeing Co.’s 737 MAX production rate will go higher “soon,” the CEO of commercial airplanes Stan Deal said.

Boeing has been producing MAX jets at a rate of about 31 a month for several months.  The company plans to ramp that up to about 50 a month by 2025 or 2026.  Engine supply, parts supply, Boeing’s own internal constraints and the overall economy are all factors limiting increases in production.

But the company believes things are set to improve.  It hopes to deliver about 400 to 450 MAX jets in 2023, up from 374 delivered in 2022, thus Deal’s comments were a comfort to investors and the shares rose roughly $4 on the news.

--TSA checkpoint numbers vs. 2019

3/30…102 percent of 2019 levels
3/29…103
3/28…100
3/27…101
3/26…100
3/25…102
3/24…99
3/23…98

--Chinese e-commerce giant Alibaba Group Holding Ltd. said it plans to split itself into six independently run companies that could seek separate IPOS, effectively dismantling a business empire built over two decades by charismatic entrepreneur Jack Ma just as the tycoon reappeared in China.

The reorganization of one of China’s largest private-sector companies, once valued at more than $800 billion but now worth about a quarter of that, comes after Chinese authorities signaled in recent months they were winding down a sweeping regulatory clampdown aimed at reining in the country’s powerful tech sector, a thaw in its regulatory winter.

Ma got in trouble years ago for his outspoken views and kept a low profile while living abroad.  He returned to mainland China in recent days for the first known time in a year, visiting a school in the eastern city of Hangzhou where Alibaba is based.  The Wall Street Journal reported today that Ma engineered the breakup.

Alibaba shares surged 17%.

--Micron Technology shares rose a bit after the memory chip company posted financial results for its fiscal second quarter ended March 2 that were about in line with expectations, as a weak market for PCs and smartphones continued to weigh on the company’s results.  Micron said that as part of its cost-reduction program, it will reduce staff by about 15% - up from a previous plan to cut heads by 10%.

But the company noted that high customer inventories, which have been weighing heavily on the company’s results, are showing signs of improvement.  The company says there has been “a lot of progress” on inventory reductions at PC vendors, and improvement as well on inventories held by smartphone producers.

For the quarter, Micron reported revenue of $3.69 billion, about in line with the Street consensus, but it was down 53% from a year ago, and 10% from the fiscal first quarter.

On an adjusted share basis, the company lost $1.91 in the quarter, worse than both the company’s forecast for a loss of 62 cents, and the Street consensus forecast for a loss of 80 cents.  Micron said it took an inventory write-down in the quarter of $1.34 billion, or $1.34 a share.

Despite the ugly results, the company struck an upbeat tone in its press release and conference call remarks, suggesting that better times are ahead.

“Micron delivered fiscal second-quarter revenue within our guidance range in a challenging market environment,” Micron CEO Sanjay Mehrotra said in a statement.  “Customer inventories are getting better, and we expect gradual improvements to the industry’s supply-demand balance. We remain confident in long-term demand and are investing prudently to preserve our technology and product portfolio competitiveness.”

Mehrotra said that the memory and storage industry is facing its worst downturn in 13 years, “with an exceptionally weak pricing environment.”

But he also thinks that inventory days outstanding has peaked, and that the company is “close” to returning to sequential revenue growth.  “Beyond this downturn, we anticipate a return to normalized growth and profitability in line with our long-term financial model,” he said.

So then Micron shares gave up their gains, Friday, as China’s cyberspace regulator said it will conduct a cybersecurity review of products sold in the country by Micron. The move is aimed at protecting the security of the supply chain for critical information infrastructure, prevent hidden risks and safeguard national security, the Cyberspace Administration of China said in a brief statement.  It gave no other details.

Micron makes NAND memory chips that serve the data storage market as swell as DRAM chips that are widely used in data centers, personal computers and other devices.

In early 2022, the company announced it would shut its DRAM design operations in Shanghai.

--Japan’s government on Friday said it plans to restrict exports of 23 types of semiconductor manufacturing equipment, aligning it with a U.S. push to curb China’s ability to make advanced chips.

The export restrictions, which will come into force in July, are likely to affect equipment manufactured by a dozen Japanese companies, such as Nikon Corp and Tokyo Electron Ltd.

Tokyo’s decision comes after the U.S. in October imposed sweeping restrictions on chipmaking tool exports to China citing concerns that Beijing planned to use advanced chips to enhance its military power.

Earlier in the month, the Netherlands also said it plans to restrict chipmaking equipment exports.

--Walt Disney will start implementing planned layoffs this week, per an internal memo by CEO Bob Iger.

“As I shared with you in February, we have made the difficult decision to reduce our overall workforce by approximately 7,000 jobs as part of a strategic realignment of the company, including important cost-saving measures necessary for creating a more effective, coordinated and streamlined approach to our business,” Iger said in the memo.

As part of the restructuring, Disney is eliminating its next-generation storytelling and consumer experiences unit, the small division that was developing metaverse strategies.  All of the team’s roughly 50 members have lost their jobs, according to insiders.

Iger has been bullish about the metaverse, but Disney is under pressure from investors to make deep cuts to nonessential businesses.

Slow growth in the popularity of the metaverse has frustrated tech companies that have bet on new entertainment formats.  Meta Platforms Inc., the parent of Facebook and Instagram, has shifted billions in resources to the metaverse, only to find low user demand and widespread confusion among users about how to use the technology.

Among the layoffs was Isaac (Ike) Perlmutter, chairman of Marvel Entertainment, who unsuccessfully worked to shake up the Disney Company’s board in the past year, including pushing for a friend, activist investor Nelson Peltz, to join the board.  [Peltz withdrew when Iger unveiled a restructuring and the cost cuts, along with the likely restoration of Disney’s dividend.]

Perlmutter, 80, was told by phone on Wednesday, according to the New York Times.  Marvel Entertainment, a small division centered on consumer products and run separately from Marvel Studios, which was folded into larger Disney business units.  He hasn’t been involved with Marvel movies since 2015.

We also learned that a total of 50 ABC News staffers, including senior managers, are being laid off.

--Electric-vehicle maker Lucid Group Inc. is planning to lay off about 18% of its workforce, according to an internal memo.  The company’s shares fell more than 7%.

In a letter to employees, CEO Peter Rawlinson said Lucid needs to cut costs due to “evolving business needs and productivity improvements.”

The company produced 7,180 vehicles in 2022, failing to meet an original estimate of 20,000 announced in November 2021 but beating revised estimates from August.

--The value of second-hand Tesla cars has collapsed since the EV maker embarked on a series of price cuts for new models in the past six months, according to sales data.

The value of a new Model 3 with a long-range battery bought in January this year in the UK for $70,700 (57,435 pounds), is forecast to fall 46 percent to $38,600 by January 2024, according to industry pricing agency CAP HPI.

--U.S. regulators on Monday sued Binance Holdings Ltd., alleging the operator of the world’s largest cryptocurrency exchange kept an illegal foothold in the American market and violated rules designed to prevent illicit financial activity.

The lawsuit sets up a battle between the Commodity Futures Trading Commission, one of the smallest financial regulators, and a global company whose chief executive, Changpeng Zhao, is one of the industry’s most influential figures. 

The CFTC is a civil regulator that has the authority to obtain fines against people who break its rules.  But its main enforcement hammer is its ability to seek orders that would permanently expel people from participating in U.S. derivatives markets or trading in cryptocurrencies that qualify as commodities, such as bitcoin, ether and some stablecoins – tokens that maintain a peg to $1.

“If you kick Binance and the individuals out of the U.S. markets, you have dried up a significant source of their income,” said David Slovick, a former CFTC enforcement attorney.

--The average Wall Street bonus fell 26% last year, the biggest percentage drop since the financial crisis, as a slump in deal making cut into bankers’ compensation. 

Financial employees received average bonus checks of $176,000 last year, compared with a record high $240,000 a year earlier, the New York state comptroller’s office said in a report Thursday.

Last year’s bonus pool was $33.7 billion, down from $42.7 billion the previous year, according to the comptroller’s office.

--Shares in Lululemon Athletica surged 13% Wednesday, after the company gave an upbeat fiscal 2023 outlook as the athletic apparel retailer delivered better-than-expected fourth-quarter results.

The company expects per-share profit to be in a range of $11.50 to $11.72 for the current year, and revenue to come in between $9.3 billion and $9.41 billion.   The consensus was at $11.51 and $9.29 billion.

“While we are mindful of the ongoing macro uncertainties and we continue to plan the business prudently, we’re excited with our sales trends in Q1 and also the benefits we expect to realize in 2023 from lower air freight and our new Lululemon Studio model,” CFO Meghan Frank said on an earnings call.  The company anticipates launching 45 to 50 new stores during the year.

For the quarter ended Jan. 29, revenue soared 30% to $2.77 billion, with a 29% increase in North America, while international sales rose 35%.

Comparable-store sales rose 15%, while direct to consumer revenue surged 37%.

I know every time I walk by the Lululemon store at the nearby Short Hills Mall, it is pretty crowded.

--Carnival Corp. reported a fiscal Q1 net loss of Monday of $0.55 per diluted share, narrowing from a loss of $1.66 per share a year earlier.  The Street expected a loss of $0.60.

Revenue for the quarter ended Feb. 28 jumped to $4.43 billion, up from $1.62 billion a year earlier.

Looking ahead, the cruise ship operator sees continued resilient demand for leisure travel and on-board spending.  Consumers at the higher end of the income rung who remain undeterred by elevated levels of inflation helped boost booking volumes and occupancy rates as restrictions imposed during the pandemic were lifted.

Carnival also benefited from the easing of on-board Covid-19 protocols that ensured strong spending in casinos and spas.  The company was well booked for the remainder of the year at higher prices, CEO Josh Weinstein said.

--Shares of AMC Entertainment Holdings Inc. jumped as much as 21% on Tuesday, following a report that Amazon.com was looking to buy the theater chain.

But by Wednesday, the story was dismissed by many analysts, who cited AMC’s massive debt and inflated valuation.

--Fellow meme stock Bed Bath and Beyond is planning to cut 1,300 jobs in New Jersey, including 377 employees at the Union, NJ, headquarters, and 572 at an e-commerce fulfillment center.  The company announced again it could file for bankruptcy.

--Finally, Intel co-founder Gordon Moore died last weekend, age 94.  He died at his home in Hawaii, surrounded by family.

Moore was the rolled-up-sleeves engineer within a triumvirate of technology luminaries that eventually put “Intel Inside” processors in more than 80% of the world’s personal computers.

Editorial / Wall Street Journal

“The last half of the 20th century was an era of American business invention and economic leadership, and one of the men who defined that era and launched the digital economy was Gordon E. Moore.

“Moore was present at the creation of the locus of innovation in northern California that became known as Silicon Valley. After studying at UC Berkeley and Cal Tech and a stint at Johns Hopkins studying solid rocket propellant, he moved to California to work on the nascent technology of transistors in William Shockley’s semiconductor laboratory.

“He soon left with others to join what became Fairchild Semiconductor, the company that spawned dozens of startups and from which the Valley grew.  In 1968 Moore and the legendary Robert Noyce, co-inventor of the integrated circuit, founded Intel, which married technology with precision design and engineering to become the world leader in memory chips.

“Moore became president in 1975 and CEO in 1979 until 1987 and remained as chairman until 1997.  As competitors rose in Asia, Intel leapt ahead again in the 1980s and 1990s by innovating on advanced microprocessors.

“Moore is most famous as the author of Moore’s Law, which posited that the number of transistors per silicon chip doubles every year. He later changed that to every two years, but the law has held with remarkable durability despite the difficulty of crowding transistors ever more closely together. This has made it possible to put far more computing power in the hands of the average person than was imagined at the dawn of the computer age.

“It’s a sign of America’s relative economic decline that Intel is one of the firms that lobbied for subsidies in last years’ Chips Act.  But that shouldn’t obscure the accomplishments of Noyce, Moore, later Intel CEO Andrew Grove, and others who made possible the advances that transformed the world economy and contributed to the greatest and most broadly based prosperity in human history.

“Moore’s life and career are a reminder of a golden age in U.S. entrepreneurship.  The challenge of our era is rediscovering the educational standards and freedom that helped to make his achievements possible.”

---

Moore, in an article he wrote back in 1965 that posited Moore’s Law, also said:  “Integrated circuits will lead to such wonders as home computers – or at least terminals connected to a central computer – automatic controls for automobiles, and personal portable communications equipment.”

That was two decades before the PC revolution and more than 40 years before Apple launched the iPhone.

In an interview around 2005, Moore said: “It sure is nice to be at the right place at the right time. I was very fortunate to get into the semiconductor industry in its infancy. And I had an opportunity to grow from the time where we couldn’t make a single silicon transistor to the time where we put 1.7 billion of them on one chip!  It’s been a phenomenal ride.”

[Our late Dr. Bortrum has a lot on Moore.  Check out his archives.]

Foreign Affairs, Part II

China:  The White House urged China on Wednesday not to use a “normal” stopover in the United States by Taiwanese President Tsai as a pretext to increase aggressive activity against the island.

China threatened to retaliate if Tsai meets with House Speaker Kevin McCarthy, saying such a move would be a “provocation.”

John Kirby, White House national security spokesperson, said, “We’re mindful that things are tense right now” between the United States and China, but he urged Beijing to keep lines of communication open.

Tsai’s first U.S. transit since 2019 and her seventh since taking office in 2016 is expected to include a meeting with McCarthy in Los Angeles on her return from Central America late next week.

China responded to a visit last August to Taiwan by former House Speaker Nancy Pelosi with large-scale war games around the democratically ruled island.

Tsai arrived in New York on Wednesday, greeted by crowds of supporters and protesters on a stopover, but she is trying to keep the trip low-key.

At an event Wednesday evening, Tsai said: “Taiwan is at the front lines of democracy.  The more united Taiwanese are, the safer Taiwan will be, and the safer the world will be.”

At week’s end, Taiwan had not seen any unusual Chinese military movements.

A new Pew Research Center survey has nearly half of adults in the United States – or 47 percent – believing tensions between Beijing and Taiwan are a very serious problem for the U.S.

The Pew survey found 66 percent of Americans view Taiwan favorably.  Frankly, that’s appalling it’s not at least 80 percent.

A Pew survey in April last year – two months after Russia invaded Ukraine – found that 82 percent of Americans viewed China negatively.

Separately, but very much related, Beijing announced formal ties with Honduras on Sunday – hours after the Central American nation officially cut decades-old ties with Taiwan – notching up yet another diplomatic victory amid rising cross-strait tensions.

“As an important nation in Central America, the government of Honduras has chosen to stand with 181 countries in the world, acknowledging and committing to the one-China principle, cutting the so-called ‘diplomatic relations’ with Taiwan,” Chinese state news agency Xinhua cited a foreign ministry spokesman as saying.

The move by Honduras, the ninth since President Tsai took office in 2016, leaves Taipei with just 13 diplomatic allies.

The Honduran foreign ministry said it would no longer maintain any relationship or official contact with Taiwan.

Editorial / Washington Post

“In the geopolitics of the 1970s, the United States’ seismic decision to normalize relations with Communist China and lift a ban on sales of sensitive military technology to Beijing was known as ‘playing the China card’ to thwart the Soviet Union. With President Xi Jinping’s high-profile three-day visit to Moscow this month, China has shown it is willing to play what might be called the Russia card to counter what Mr. Xi considers to be U.S. attempts to surround China and contain its economic and military rise.

“This growing alliance between America’s two greatest strategic and military challengers has the potential to shift the global order as profoundly as the United States did a half-century ago. America and its democratic allies had better be ready to respond.

“China and Russia share a common apprehension of encirclement by the United States and NATO.  Russia sees NATO’s eastward expansion as an existential threat – that was the main stated justification for its invasion of Ukraine. China, meanwhile, fears the United States is trying to create an ‘Indo-Pacific NATO’ with a string of Asian defense agreements from the Philippines to Australia.

“Moreover, China and Russia both have a disdain for democratic values and a rules-based world order, which they see as outdated and dominated by the United States. Theirs is a confidence in the superiority of their autocratic governing systems.  When the two leaders met, Mr. Putin congratulated Mr. Xi on his ‘reelection’ to an unprecedented third term as president.  Mr. Xi said he expected Mr. Putin to prevail in his own reelection in 2024.

“Then there is the fact that Russia and China also hold the world’s largest and third-largest nuclear weapons stockpiles. China is expanding its nuclear arsenal to try to reach parity with the United States within the next decade.”

Editorial / The Economist

“You may have hoped that when China reopened and face-to-face contact resumed between politicians, diplomats and businesspeople, Sino-American tensions would ease in a flurry of dinners, summits and small talk. But the atmosphere in Beijing just now reveals that the world’s most important relationship has become more embittered and hostile than ever.

“In the halls of government Communist Party officials denounce what they see as America’s bullying.  They say it is intent on beating China to death. Western diplomats describe an atmosphere laced with intimidation and paranoia. In the Diaoyutai State Guesthouse, multinational executives attending the China Development Forum worried what a deeper decoupling would mean for their businesses. The only thing both sides agree on is that the best case is decades of estrangement – and that the worst, of a war, is growing ever more likely.

“Each side is following its own inexorable logic.  America has adopted a policy of containment, although it declines to use that term.  It sees an authoritarian China that has shifted from one-party to one-man rule.  President Xi Jinping is likely to be in power for years and is hostile to the West, which he believes is in decline.  At home he pursues a policy of repression that defies liberal values.  He has broken promises to show restraint when projecting power outward, from Hong Kong to the Himalayas.  His meeting with Vladimir Putin this month confirmed that his goal is to build an alternative world order that is friendlier to autocrats.

“Faced with this, America is understandably accelerating its military containment of China in Asia, rejuvenating old alliances and creating new ones, such as the AUKUS pact with Australia and Britain.  In commerce and technology America is enacting a tough and widening embargo on semiconductors and other goods. The goal is to slow Chinese innovation in order that the West can maintain its technological supremacy: why should America let its inventions be used to make a hostile regime more dangerous?

“To China’s leaders, this amounts to a scheme to cripple it. America, in their eyes, thinks it is exceptional. It will never accept that any country can be as powerful as itself, regardless of whether it is communist or a democracy.  America will tolerate China only if it is submissive, a ‘fat cat, not a tiger.’  America’s Asian military alliances mean that China feels it is being encircled within its own natural sphere of influence.  Red lines agreed on in the 1970s, when the two countries re-established relations, such as those on Taiwan, are being trampled by ignorant and reckless American politicians.  China’s rulers think it only prudent to raise military spending.

“In commerce, they view American containment as unfair. Why should a country whose GDP per head is 83% lower than America’s be deprived of vital technologies?  Officials and businesspeople were appalled by the spectacle of TikTok, the subsidiary of a Chinese firm, being roasted in an American congressional hearing this month.  Although some Chinese liberals dream of emigrating, even worldly, Western-educated technocrats now loyally condemn shows of wealth, promote self-reliance and explain why globalization must serve Mr. Xi’s political priorities….

“America and its allies must resist the temptation to resort to tactics that make them more like their autocratic opponent. In this rivalry, liberal societies and free economies have big advantages: they are more likely to create innovations and wealth and to command legitimacy at home and abroad.  If America sticks to its values of openness, equal treatment of all and the rule of law, it will find it easier to maintain the loyalty of its allies.

“America must be clear that its dispute is not with the Chinese people, but with China’s government and the threat to peace and human rights that it poses. The 21st century’s defining contest is not just about weapons and chips – it is a struggle over values, too.”

North Korea: Pyongyang unveiled new, smaller nuclear warheads and vowed to produce more weapons-grade nuclear material to expand its arsenal, state media said on Tuesday, as a U.S. aircraft carrier arrived in South Korea for military drills.

North Korea’s Korean Central News Agency (KCNA) released photos of the warheads, dubbed Hwasan-31s.  Kim Jong Un visited the Nuclear Weapons Institute and inspected new tactical nuclear weapons and technology for mounting warheads on ballistic missiles, as well as nuclear counterattack operation plans, KCNA said. Nuclear experts said the images could indicate progress in miniaturizing warheads that are powerful yet small enough to mount on intercontinental ballistic missiles capable of striking the United States.

Kim ordered the production of weapons-grade material in a “far-sighted way” to boost its nuclear arsenal “exponentially” and produce powerful weapons, KCNA said.

Monday, North Korea fired two short-range ballistic missiles into the sea as the U.S. aircraft carrier was set to arrive in South Korea.

Israel: Prime Minister Benjamin Netanyahu voiced confidence on Wednesday that he would find compromise with the political opposition over his judicial overhaul after the contested reforms drew a strong reproach from President Biden.  Israel “can’t continue down this road,” Biden told reporters on Tuesday in reference to the unprecedented protests that have swept the country and penetrated the military.

When asked Tuesday if Netanyahu might soon be invited to the White House after acceding to the compromise talks, Biden replied: “No, not in the near term.”

Netanyahu replied that Israel is sovereign and “makes its decisions by the will of its people and not based on pressures from abroad, including from the best of friends.”

Netanyahu, under immense, pressed the pause button on Monday to allow for negotiations with the opposition,

The opposition parties have accused the prime minister – who is on trial on corruption charges – of seeking to curb judicial independence.  He denies any wrongdoing.

Israel’s centrist opposition leader, Yair Lapid, tweeted: “For decades Israel was the closest of U.S. allies.  The country’s most extreme government ever ruined that in three months.”

But Netanyahu and his followers placed the judicial reform’s Judicial Selection Committee bill on the Knesset table, angering opposition members, who warned that any progress of the bill would not be allowed during negotiations.  In a joint statement, Yesh Atid and the National United warned: “If the law goes on the Knesset’s agenda, we will immediately leave the room.”

As in “ at any given moment it can be voted on and passed by the plenary.”

Protest leaders also accused Netanyahu and the coalition of placing the bill on the Knesset table as part of a fake negotiation.

Labor leader Merav Michaeli warned on Monday that the opposition was falling into a trap of delays and negotiation.

“The coup d’etat laws must be finally and completely scrapped and shelved,” wrote Michaeli.  “Consign this abomination to the dustbin of history.”

There were spontaneous mass protests Sunday evening when Netanyahu sacked his defense chief, Yoav Gallant, who had criticized the reform bill.  [Though it seems at week’s end, Gallant is still at the ministry, as he was seen holding a normal schedule this week.]

David Ignatius / Washington Post

“This was a self-inflicted wound for Netanyahu. When he took office in December, he said he wanted to focus on confronting Iran, expanding the Abraham Accords with moderate Arab states, improving relations with the Biden administration and tackling the country’s economic problems, recalls Dan Shapiro, a former U.S. ambassador to Israel.

“Instead, Netanyahu proposed a fundamental change in the judicial system that widened the fissure between secular Israelis, who want to retain the independent judiciary, and ultra-Orthodox Israelis who want a more religious state – and form an essential part of Netanyahu’s governing coalition.  That constituency will balk at the sort of compromise that Netanyahu apparently envisions, which could rupture his coalition and deepen the political instability.

“ ‘All of the oxygen has been sucked out of the political system’ by the debate over the judicial changes, says Shapiro.  He notes that the legal turmoil became a national-security problem, as Defense Minister Yoav Gallant argued when he noted that pilots and other military reservists weren’t showing up for duty in protest….

“A wild card in the Israeli turmoil is whether it will alter the enthusiasm for better relations with Jerusalem among moderate Arab states in the Gulf region, such as the UAE and Saudi Arabia….

“Ehud Olmert, a former Israeli prime minister who became a bitter opponent of Netanyahu, argued in his memoir ‘Searching for Peace’ that for the usually deft Netanyahu, ‘there’s always someone else to blame, someone who led him astray, someone who didn’t understand.’  Not this time.”

Iran / Syria:  In a partial victory for Iran, judges at the International Court of Justice (ICE) on Thursday ruled Washington had illegally allowed courts to freeze assets of some Iranian companies and ordered the United States to pay compensation, the amount of which will be determined later.

However, in a blow for Tehran, the World Court said it did not have jurisdiction over $1.75 billion in frozen assets from Iran’s central bank.

Acting Legal Adviser Rich Visek of the State Department said in a written statement that the ruling rejected the “vast majority of Iran’s case,’ notably where it concerned the assets of the central bank.  “This is a major victory for the United States and victims of Iran’s state-sponsored terrorism,” Visek added. 

Brazil: Former far-right president Jair Bolsonaro returned from self-imposed exile in Florida to lead the opposition to leftist President Luiz Inacio Lula da Silva.

Bolsonaro never conceded defeat in last year’s election.

Before boarding a plane in Orlando, Bolsonaro played down his leadership role and said he will use his experience to help his party, the Liberal Party, campaign in local elections, adding that the October vote he lost was a closed chapter.

“We have turned a page, and now we will prepare for next year’s election,” he told CNN Brasil.

Bolsonaro left for the U.S. two days before he was due to hand over the presidential sash to Lula on January 1st.  He said he needed rest, but critics say he was avoiding the risks of over a dozen legal investigations he may face in Brazil.

Random Musings

--Presidential approval ratings….

Gallup: New numbers…40% approve of Biden’s job performance, 56% disapprove; 35% of independents approve (Mar 1-23).

Rasmussen: 46% approve, 52% disapprove (Mar. 31).

--A majority of Americans do not want to see former President Donald Trump reelected to the White House, according to a new Marist poll, released Monday.  Nearly 61% of adults to not want Trump to become president again, compared to 38% who said they do want four more years of Trump.

The survey showed that 56% think the slew of criminal investigations into Trump – which include Bragg’s case as well as an election interference probe in Georgia, and federal investigations into his handling of classified documents and his involvement in the Jan. 6, 2021, riot at the Capitol Building – are “fair,” while 41% believe they are a “witch hunt.”

The vast majority of registered Democrats surveyed, 89%, and most independents, 64%, were averse to Trump being president again.

In contrast, 76% of registered Republicans said they want Trump to be elected again in 2024.

Eighty-one percent of past Trump voters also said they still back the 45th president in 2024, despite his possible indictment.

--I missed a March 21, 2023, Monmouth University Poll that had Trump making gains among nearly every voting bloc since the start of the year.  In a survey of Republican voters, 41% name Trump as the Republican nominee they would like to see for president in 2024, compared with 27% for DeSantis.  The two were tied in February (33% each), while the December results showed a greater preference for the Florida governor (39%) than the former president (26%).

Essentially a 15-point swing in three months.

Among MAGA supporters – who represent nearly 4 in 10 Republicans nationally – 73% prefer Trump to DeSantis (25%) in a head-to-head contest.

--A new Fox News poll had Trump leading DeSantis 54% to 24% among Republican presidential primary voters, and that was before the indictment news.  Mike Pence and Nikki Haley were in the single digits.

Trump crowed over the results, which he suggested showed his nasty attacks on DeSantis are working to turn GOP voters against him.

“The just released FoxNews Polling…shows [DeSantis] being absolutely CRUSHED and, more importantly, dropping like a ROCK!” Trump wrote on Truth Social.

Just last month in a similar Fox poll, Trump led by a smaller 43% to 28% margin.

--Rupert Murdoch’s disdain for Donald Trump’s actions after the 2020 election came out again in evidence presented in the $1.6 billion defamation suit against Fox News.

“Trump insisting on the election being stolen and convincing 25% of Americans was a huge disservice to the country,” Murdoch wrote to Fox News Media Chief Executive Suzanne Scott, according to recently unredacted evidence.  “Pretty much a crime.  Inevitable it blew up on Jan. 6th.”

Murdoch also acknowledged in his deposition testimony given in January that he told Scott to stop putting Trump on the network.

Tucker Carlson expressed his disgust with Sidney Powell and her inability to back up her claims.  In a Nov. 17, 2020, message to Powell, Carlson told her it was “reckless and cruel” to keep presenting the allegations without hard evidence.

On Nov. 21, 2020, Carlson wrote to Trump attorney Jenna Ellis and told her that it was “shockingly reckless” to keep making the allegations about Dominion using software to manipulate votes without providing evidence.

--A federal judge ordered former Vice President Pence to appear in front of a grand jury investigating Donald Trump’s attempts to overturn the election, sweeping aside two separate legal efforts by Pence and Trump to limit his testimony.

--At his Waco, Texas, rally last Saturday, Donald Trump cast the 2024 presidential vote in apocalyptic terms, slammed Ron DeSantis and railed against prosecutors pursuing him with criminal investigations.

Trump spent much of his nearly two-hour speech attacking the multiple investigations that have put him in legal peril as politically motivated.

“The Biden regime’s weaponization of law enforcement against their political opponents is something straight out of the Stalinist Russia horror show,” Trump said.

Trump spoke of “demonic forces” trying to demolish the country, which he said was at risk of falling into a “lawless abyss” unless he is voted back into the White Hose.

Trump depicted the United States as a failed state whose economy was in freefall – a description at odds with the country’s record-low unemployment rate.

Several times Trump repeated the false claim that his election loss in 2020 was due to a systemic fraud orchestrated by the Democrats.

And he described some American officials and senior politicians – including Sen. Mitch McConnell and Nancy Pelosi – as being bigger threats to America than China or Russia.

“Either the Deep State destroys America or we destroy the Deep State,” Trump said.

Oh, and “Canada treats us horribly on trade.”  Canada?!

And… “I never liked Horse Face.  That wouldn’t be the one…we have a great First Lady.”

And… “People don’t’ realize how brilliant she is,” referring to Marjorie Taylor Greene.

“2024 is the final battle,” Trump said. “It’s going to be the big one.  You put me back in the White House, their reign will be over, and America will be a free nation once again.”

--In a depressing new poll from Wall Street Journal-NORC, patriotism, religious faith, having children and other priorities that helped define the national character for generations are receding in importance to Americans.

The survey, conducted with NORC at the University of Chicago, a nonpartisan research organization, also finds the country sharply divided by political party over social trends such as the push for racial diversity in businesses and the use of gender-neutral pronouns.

Some 38% of respondents said patriotism was very important to them, and 39% said religion was important.  That was down sharply from when the Journal first asked the question in 1998, when 70% deemed patriotism to be very important, and 62% said so of religion.

The share of Americans who say that having children, involvement in their community and hard work are very important values has also fallen.  Tolerance for others, deemed very important by 80% of Americans as recently as four years ago, has fallen to 58% since then.

The only priority the Journal tested that has grown in importance in the past quarter-century is money, which was cited as very important by 43% in the new survey, up from 31% in 1998.

Younger Americans in particular place low importance on these values, many of which were central to the lives of their parents.

Some 23% of adults under age 30 said in the new survey that patriotism was very important to them personally, compared with 59% of seniors ages 65 or older.  Some 31% of younger respondents said that religion was very important to them, compared with 55% among seniors.

Only 23% of adults under age 30 said that having children was very important.

--Update: Since I mentioned the strike last Friday in Los Angeles that shut down the school system for three days, I have to note a tentative agreement was reached with the union representing support staff who won raises of about 30% or more for the lowest-wage workers, which was what the union was seeking.

--As our hearts go out to the victims and their families of the Nashville school shooting, our thanks also go to the heroic Nashville police unit that entered the building quickly, ran toward the shots, and promptly killed the attacker.    

--California’s Mammoth Mountain has broken its historic snowfall record – by a lot.

“With 28-30 inches of snow since yesterday afternoon, we just blew through our all-time season snowfall record of 668 inches,” Mammoth Mountain said in an Instagram post on Wednesday.

“We’ve received 695 inches of snowfall to date at Main Lodge, making the 22/23 season the biggest in our history!”

The annual April 1 snow survey for the statewide snowpack is tomorrow.  A week ago it was 228% of normal, hovering near the record level set in the April 1 survey of 1952, 237% of average.  With this week’s storms, we should officially have a record.

The reservoirs are full, the drought is over.  But we’ll see what summer brings.

The downside is flooding rains have led to levee breaches that caused severely flooded agricultural land in some key regions.

--Finally, Holy Week is upon us, and Pope Francis is expected to take part in Palm Sunday services in St. Peter’s Square.  The Vatican announced that the pope was set to leave the hospital on Saturday as he was responding well to treatment for a bronchitis infection.

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

*Our thoughts and prayers go out to the nine victims of the crash of two Black Hawk helicopters in Kentucky, members of the 101st Airborne division out of Fort Campbell.  The helicopters were medical evacuation variants of the Black Hawk, and were flying on a nighttime training mission, though the crash did not occur during the training exercise, Brig. Gen. John Lubas said at a press briefing.

Pray for Ukraine.

God bless America.

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Gold $1986
Oil $75.55

Regular Gas: $3.50; Diesel: $4.22 [$4.22 / $5.11 yr. ago]

Returns for the week 3/27-3/31

Dow Jones  +3.2%  [33274]
S&P 500  +3.5%  [4109]
S&P MidCap  +4.5%
Russell 2000  +3.9%
Nasdaq  +3.4%  [12221]

Returns for the period 1/1/23-3/31/23

Dow Jones  +0.4%
S&P 500  +7.0%
S&P MidCap  +3.7%
Russell 2000  +2.3%
Nasdaq  +16.8%

Bulls 40.8
Bears 26.8

Hang in there.

Brian Trumbore

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