Week in Review

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Week in Review

04/22/2023

For the week 4/17-4/21

[Posted 5:15 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 1,253

[I am posting before the Supreme Court’s important ruling on an abortion drug, Mifepristone.  Technically, they have until 11:59 p.m. tonight, the decision on a lower court ruling that imposes restrictions on access to the drug.]

President Biden is launching his reelection bid this coming week, as discussed below, even as the walls finally close in on Hunter, though an indictment is far from certain.

The U.S. economy is slowing, yet another hike in interest rates from the Federal Reserve looms in less than two weeks.  Inflation is sticky, while a credit crunch has followed the collapse of Silicon Valley Bank.

If you watched “60 Minutes” last week and its segment on artificial intelligence, you should be scared to death as it will lead to an increased spread of disinformation, with fake images and videos predominating.  You only hope the bad guys don’t get hold of the nuclear codes of the U.S., Russia, and China.  [Perhaps more likely, India and Pakistan suddenly start firing at each other.]

Meanwhile, Sudan could be in the news in a big way in the coming days as the State Department just announced U.S. citizens should have no expectations of a government coordinated evacuation from the country, amid heavy fighting in the capital Khartoum (despite a supposed ceasefire). With the airport closed and the uncertain security situation, citizens there should make their own arrangements to stay safe.  Large numbers of U.S. troops are, however, being sent to a base in nearby Djibouti.  More below on this situation as well.

Lastly, while Ukraine wouldn’t formally announce that the long-awaited counteroffensive is probably underway, there are growing signs it is, and what will Putin do if Ukraine starts making significant gains, taking advantage of the new weaponry from the West that is making its way into the field?  Does he attempt to decapitate the leadership in Kyiv out of desperation?

So let’s start there….

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This Week in Ukraine….

--Both sides celebrated Orthodox Easter last Sunday.  Ukrainian President Volodymyr Zelensky addressed Ukrainians in a video from the Kyiv Monastery of the Caves, one of the country’s holiest sites that the government is seeking to wrest from the control of the local arm of the Russian Orthodox Church.  He pledged to return all occupied lands to Ukrainian control.

Russian President Vladimir Putin attended a midnight service held by Patriarch Kirill, the leader of the Russian Orthodox Church, in Moscow’s Christ the Savior Cathedral.  Two evil ones, paying homage to the devil.

--The death toll in last Friday’s missile strike on apartment blocks in the eastern Ukrainian city of Sloviansk rose to 11, wounding 21.  In another town south of Sloviansk, Yasynuvata, four were killed in Ukrainian shelling of a residential area, so the Russians claimed. A Russian artillery strike on Kherson killed a mother and daughter Saturday.

--President Zelensky visited frontline troops in the eastern city of Avdiivka on Tuesday – the same day Vladimir Putin’s state-run media publicized his recent visit to two occupied Ukrainian cities far from the conflict’s front lines.  A Kremlin spokesman on Tuesday insisted his leader’s visit occurred the day prior, after reporters questioned the truthfulness of the same Putin regime that told the world it had no plans to invade Ukraine just days before it invaded.

Zelensky dropped by Donetsk in part to present awards to troops serving in Avdiivka, and to memorialize soldiers who’ve been recently killed by Russian shelling.  “I have the honor to be here today, to thank you for your service, for defending our land, Ukraine, our families,” Zelensky told his troops.  “I wish good health to all of you and your families, and I am sincerely grateful on behalf of every Ukrainian for the great path that you overcome every day,” he said.

Putin visited the farther-east Luhansk region, which borders Russia and is at least 200 kilometers from Avdiivka. Putin also flew via helicopter to the occupied southern region of Kherson, which is just north of the occupied Ukrainian peninsula of Crimea.  During his visit, he gave some invading troops an icon once owned by “one of the Russian Empire’s most successful defense ministers,” according to state-run media RIA.  Max Seddon of the Financial Times commented on Twitter that the icon seems to be clearly “reinforcing the [Kremlin’s] narrative [that] Russia is fighting an imperialist holy war.”

--But it's still largely about Bakhmut, with Russia reportedly making incremental gains, building by building fighting, massive Russian bombardments on the same areas bombarded hundreds of times (it seems) before.  Saturday, Ukraine’s military said the two sides were fighting extraordinarily bloody battles in the city.

“Our soldiers are doing everything to grind down the enemy’s fighting capacity in bloody and brutal battles,” Serhiy Cherevatiy, a Ukrainian military spokesman, told Ukrainian television.

Sunday, Russia’s defense ministry said Wagner units captured two more city blocks in Bakhmut.  That’s how progress is being measured.  How many died, on both sides, taking those two blocks?

--President Zelensky inspected the frontier with Belarus and Poland on Wednesday, and thanked border guards for their defense of the country.

Zelensky said after discussing border protection measures at a meeting in January that Ukraine must “be ready” at the frontier with Belarus even though Kyiv did not see “anything powerful” there apart from statements.

--According to the Washington Post, as part of the Discord leaks: “Egypt paused a plan to secretly supply rockets to Russia last month following talks with senior U.S. officials and instead decided to produce artillery ammunition for Ukraine,” the Post said citing “five leaked U.S. intelligence documents.”

[As Defense One pointed out, the Post last week claimed to be sitting on nearly 300 of the leaked documents, most of which have not yet been reported out, “So this trickle of alleged U.S. intelligence assessments can be expected to continue for the next several months.”]

--Russian drones struck Ukraine’s Odesa region overnight Tuesday and caused a large fire at an infrastructure facility.

--Ukraine’s Defense Minister Oleksii Reznikov announced Wednesday that “Patriot air defense systems have arrived in Ukraine,” as the military appears to be gearing up for a counteroffensive.  “Our air defenders have mastered them as fast as they could, and our partners have kept their word,” Reznikov tweeted Wednesday morning.

Ukraine had sent about 65 troops to Oklahoma’s Fort Sill to train on the systems, which can engage enemy aircraft, ballistic missiles, and cruise missiles at a distance of about 60 miles and up to an altitude of about 18 miles.

But Russia has been increasingly using glide bombs to hit targets inside Ukraine.  And Patriot systems aren’t known to be as effective against glide bombs, which are released by jets at a significant distance beyond the Patriot’s 60-mile range.

U.S.-provided Bradley Fighting Vehicles have arrived in Ukraine as well.  More than 100 are expected over time.

--President Zelensky finally spoke with House Speaker Kevin McCarthy by phone on Tuesday.  Zelensky’s office says he thanked the Speaker “for the unflagging bipartisan support of Ukraine from the United States Congress,” and told him the country badly needed “armored vehicles, long-range weapons, artillery, air defense and aircraft.”

McCarthy has been walking an awkward line between complaining the Biden administration wasn’t sending arms quickly enough to Ukraine, while also vowing there would be no “blank check.”  The speaker is trying to appease far-right isolationists like Florida Rep. Matt Goetz.

Over 24 hours later, McCarthy hadn’t tweeted about the chat with Zelensky, even though he has tweeted on several other topics.

--Regarding Vladimir Putin’s above-noted trip to Ukraine, it appears the Kremlin lied about when it took place.  Originally reporters were told it happened on Monday, April 17.  But analysts at the Washington-based Institute for the Study of War noted Tuesday evening that Putin was recorded “stating that Orthodox Easter holiday is ‘coming up’ in one of the videos, which suggests that his visit occurred prior to April 16.  The Kremlin later edited the video to exclude Putin’s statement about the then-upcoming Easter holiday.”

--NATO chief Jens Stoltenberg made his first trip to Kyiv since the war on Thursday, with President Zelensky telling him it was time for the military alliance to offer his country membership and that Ukraine needed more weapons.

Stoltenberg said Ukraine’s rightful place was in NATO, and that membership and security guarantees for Ukraine would be high on the agenda of a July summit in Vilnius.

The Kremlin reiterated to reporters on a conference call that Moscow opposed NATO admitting Ukraine, a former Soviet republic, “…otherwise it will present a serious, significant danger to the security of our country,” spokesman Dmitry Peskov said.

--The Russian defense ministry announced Friday that a Russian fighter jet accidentally bombed the city of Belgorod near the border with Ukraine.

Three people were injured, and several buildings were damaged, according to the regional governor.  The blast left a crater 60-feet wide.

--A former Wagner mercenary has admitted to killing and torturing dozens of Ukrainian prisoners of war, in one of the most detailed first-person accounts of atrocities committed by Russian forces in Ukraine.

Alexey Savichev, a former Russian convict recruited by Wagner last September, told the Guardian in a telephone interview that he participated in summary executions of Ukrainian prisoners of war during his six months of fighting in eastern Ukraine.

“We were told not to take any prisoners, and just shoot them on the spot,” he said.

--Russia has a program to sabotage wind farms and communication cables in the North Sea, a joint investigation by several Nordic broadcasters has claimed.

The investigation – carried out by public broadcasters in Denmark, Norway, Sweden and Finland – says Russia has a fleet of vessels that are disguised as fishing and research vessels in the North Sea.

According to the BBC, the investigation alleges that these carry underwater surveillance equipment and are mapping key sites for possible sabotage.

According to the broadcasters, they have studied intercepted Russian communications that indicate some Russian ships in Nordic waters have switched off their transmitters so as not to reveal their locations.

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--A Moscow court on Tuesday rejected an appeal from Wall Street Journal reporter Evan Gershkovich to be freed from pre-trial detention, meaning he will stay in a former KGB prison until at least May 29 while a spying case against him is investigated. 

Gershkovich denies the espionage charges.  His legal team had asked that he be freed on bail of 50 million rubles ($614,000) supplied by his publisher Dow Jones or placed under house arrest, his lawyer Tatiana Nozhkina said.  “He’s in a combative mood,” she told reporters outside the court.  “He is ready to defend himself and to show that he is innocent.”

The Kremlin has said Gershkovich, the first U.S. journalist detained in Russia on espionage charges since the end of the Cold War, was caught “red-handed.”  The United States has deemed him “wrongfully detained,” his employer and colleagues have said he is innocent, and President Biden has called his detention illegal.

Nozhkina told reporters Gershkovich was reading Tolstoy’s “War and Peace” about the French invasion of Russia in 1812, in the original Russian.

Gershkovich, a son of Soviet emigres, is being held at notorious Lefortovo prison.  Traditionally it has been used to hold those suspected of spying and other grave crimes.

Yaroslav Shirshikov, a political expert in Yekaterinburg whom Gershkovich interviewed in mid-March and had been due to meet again, was reported on Tuesday to have been charged with inciting terrorism for publicly expressing views on the killing of the pro-war military blogger Vladlen Tatarsky in St. Petersburg this month.

--Outspoken Kremlin critic Vladimir Kara-Murza was jailed for 25 years by a Moscow court on Monday, the harshest sentence of its kind since Russia invaded Ukraine, after being found guilty of treason and other offences he denied committing.

Kara-Murza, 41, a father of three and an opposition politician who holds Russian and British passports, spent years speaking out against Vladimir Putin and lobbied Western governments to impose sanctions on Russia and individual Russians for purported human rights violations.

Prosecutors, aside from accusing him of treason, said Kara-Murza discredited the Russian military after spreading “knowingly false information” about its conduct in Moscow’s “special military operation” in Ukraine.

In an interview with CNN broadcast hours before his arrest, Kara-Murza, whose family home is in Washington, alleged that Russia was run by a “regime of murderers.”  He had also used speeches in the United States and Europe to accuse Russia of bombing civilians in Ukraine, a charge Moscow has rejected.

After the charges were read against him, Kara-Murza, sitting inside a glass courtroom cage, said “Russia will be free,” a well-known opposition slogan.

One of his lawyers, Maria Eismont, said he regarded the harsh sentence as recognition of his effective work as an opposition politician.  “When he heard he’d got 25 years he said: ‘My self-esteem has gone up, I understand that I did everything right. It’s the highest score I could have got for what I did, for what I believed in as a citizen and a patriot.’”

U.S. Ambassador Lynne Tracy, in attendance with British Ambassador Deborah Bronnert, said Kara-Murza’s conviction was an attempt to silence dissent.

“Criminalization of criticism of government action is a sign of weakness, not strength,” said Tracy.

In 2015 and 2017, Russian security services tried to poison Kara-Murza.

--Russian Foreign Minister Sergei Lavrov will discuss the Ukraine Black Sea grain export deal with UN Secretary-General Guterres in New York next week, just weeks before the pact could expire unless Russian demands regarding its own exports are met.  Lavrov is due to chair two UN Security Council meetings as Russia holds the presidency of the 15-member body for April.  A bad joke.

Russia has warned that the outlook for the deal allowing the safe wartime export of grain and fertilizer from Ukrainian Black Sea ports beyond May 18 is “not so great.”

Russia has said its own food and fertilizer exports are being blocked by Western sanctions imposed on Moscow over the invasion.

The grain exports deal was brokered by the UN and Turkey in July last year to help tackle a global food crisis that had been worsened by the invasion.  It was extended in November and then last month Russia only agreed to renew the deal for at least 60 days, half the intended period.  Moscow has said it would only consider a further extension if several demands in relation to its own exports were met.

But you know how I wrote a few weeks ago, when President Zelensky was in Poland to thank leadership and the people there for their aid and support, that Polish farmers were upset over Ukrainian grain coming into the country, thus reducing the price of Polish farmers’ products?  I said at the time this was a real problem.  And sure enough, this week Poland, Hungary and Slovakia banned grain imports from Ukraine, as even Kyiv’s staunchest allies come under domestic pressure to shield their agriculture markets.

The heat is mounting on Brussels to work out a European Union wide solution.

In Poland, the issue has created a problem in an election year for the ruling nationalist Law and Justice (PiS) party that relies on rural areas for much of its support.

“Ukraine needs help, but the costs of this help should be spread over all European countries, not just the frontline countries, especially Poland.  We do not agree to this, because it harms our farms,” Polish Agriculture Minister Robert Telus said after talks began in Warsaw on Monday.

Kyiv said it aims to re-open food and grain transit via Poland as “a first step” to ending import bans, but Telus said that no solution had so far been found to guarantee that the grain in transit would not end up on the local market.

--It is sickening and deeply disturbing how Brazilian President Luiz Inacio Lula da Silva (“Lula”) has been parroting the Russia-China line on the war in Ukraine, saying this week while visiting China that the United States is encouraging the war, which earned praise from Russian Foreign Minister Lavrov.

Lavrov, on a visit to Brasilia, met with Lula and thanked Brazil for its efforts to resolve the conflict.  Lula angered many in the West with comments over the weekend, when he called for Western powers to stop providing arms for the war.  The comments came shortly after he returned from China, where he discussed the matter with President Xi.

The White House has accused Lula of “parroting Russian and Chinese propaganda without looking at the facts.”

John Kirby, the White House national security spokesperson, said on Monday that Lula’s comments were “simply misguided” and missed the mark by “suggesting the United States and Europe are somehow not interested in peace, or that we share responsibility for the war.”

--The Washington Post reported that among other Discord documents that were leaked was one that showed the Russian government has become more successful at manipulating social media and search engine rankings than previously known, boosting lies about Ukraine’s military and the side effects of vaccines with hundreds of thousands of fake online accounts.

As reported by Joseph Menn: “The Russian operators of those accounts boast that they are detected by social networks only about 1 percent of the time, one document says.”

“Google and Meta and others are trying to stop this, and Russia is trying to get better.  The figure that you are citing suggests that Russia is winning,” said Thomas Rid, a disinformation scholar and professor at Johns Hopkins University’s School of Advanced International Studies.  He added that the 1 percent claim was probably exaggerated or misleading.

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Wall Street and the Economy

We had two data points on the housing market this week.  March housing starts were a little above expectations, 1.42 million annualized units, but down from a revised 1.432m in February, while existing home sales for March fell by 2.4% to a 4.44 million seasonally adjusted annual rate, following a sharp increase to 4.55 million in February.  Total sales were down 22% from a year earlier.

“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said National Association of Realtors Chief Economist Lawrence Yun.  “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand.  It’s a unique housing market.”

The median home price rose to $375,700 from $363,600 in February but was down 0.9% from the $379,300 level a year ago.

Separately, one of the red lights flashing across the U.S. economy is the Conference Board’s Leading Economic Indicators Index – which attempts to predict economic conditions six months out and dropped unexpectedly sharply to its lowest level since November 2020. It was the 12th consecutive monthly decline, the longest such run since the period from 2007-2009, i.e., the global financial crisis.

The Atlanta Fed’s GDPNow barometer for first-quarter growth is at 2.5%.  We get our official first look at Q1 GDP next Thursday.

Freddie Mac’s 30-year fixed-rate mortgage is 6.39%.

But next week it’s all about the PCE, personal consumption expenditures index, one of the Fed’s key primary inflation barometers these days.  The week after is the Fed’s Open Market Committee confab and what is expected to be another 25-basis point hike in the benchmark funds rate.

Whether the vote to hike another 25 is unanimous will be interesting to watch, because Chicago Fed President Austan Goolsbee, a new member of the FOMC and a voting one at that, said last week: “At moments like this of financial stress, the right monetary approach calls for prudence and patience.  We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation.”

But others, including Fed governor Christopher Waller, have argued that higher interest rates haven’t led to a significant deterioration in lending conditions and that high growth continues to pressure prices.

Thursday, Philadelphia Fed chief Patrick Harker, who also has a vote this year, had a similar message to that of Waller’s:

“I anticipate that some additional tightening may be needed to ensure policy is restrictive enough to support both pillars of our dual mandate,” he told an event organized by the Wharton School.

“Once we reach that point, which should happen this year, I expect that we will hold rates in place and let monetary policy do its work,” he said.

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The debt ceiling issue is coming to a theater near you sooner than anticipated, raising the prospect of a short-term debt limit extension, according to some analysts.  Goldman Sachs said weak tax collections so far in April indicate a higher probability that the so-called “X-date,” when the government is no longer able to pay all its bills, would be reached in the first half of June.  [Goldman had previously projected early to mid-August.]

The Treasury Department has warned that the federal government could reach the moment when it will no longer be able to meet its financial obligations as early as June 5, while the nonpartisan Congressional Budget Office has forecast that moment would come sometime between July and September.

“As the debt limit deadline comes into better focus with additional tax receipt data we expect to see somewhat greater pricing of debt limit risks in financial markets,” Goldman analysts said in a note.

Monday, House Speaker Kevin McCarthy outlined spending cuts his fellow Republicans would demand in exchange for voting to raise the debt limit.  Tuesday was Tax Day, when individual tax returns are due to be submitted, meaning the Treasury will soon know the size of its take.

McCarthy unveiled a plan that includes $4.5 trillion in cuts, drawing immediate resistance from President Biden as the standoff intensifies.

McCarthy’s “Limit, Save, Grow Act” would return discretionary spending to Fiscal Year 2022 levels, limit the growth of spending to 1% per year, reallocate unspent Covid funds and limit other government spending, the speaker said.  The cuts would be tied to a $1.5 trillion increase in the debt ceiling.

But Biden and the Democrats won’t negotiate the debt ceiling.  They would negotiate after a clean debt ceiling increase is passed.

Europe and Asia

The March inflation reading for the eurozone came in at 6.9%, down from 8.5% in February, and 7.4% a year earlier.

Germany 7.8%, France 6.7%, Italy 8.1%, Spain 3.1%, Netherlands 4.5% (down from 16.8% in October), Ireland 7.0%.

S&P Global* released flash PMIs for the euro area, and the composite was at 54.4, an 11-month high.  [50 the dividing line between growth and contraction.]

Manufacturing is at 48.5, 4-month low; services 56.6, 12-month high.

*S&P Global has a new alliance with Hamburg Commercial Bank, or HCOB.

Germany: manufacturing 50.3; services 55.7, 12-month high.

France: manufacturing 41.9, 35-month low; services 56.3, 11-month high.

UK: manufacturing 48.5; services 54.9, 12-month high.

Dr. Cyrus de la Rubia, Chief Economist, HCOB:

“The (PMIs) for the eurozone show a very friendly overall picture of an economy that continues to recover. However, a closer look reveals that growth is very unevenly distributed. For example, the gap between the partly booming services sector on the one hand and the weakening manufacturing sector on the other has widened further. The sharp decline in output in France’s manufacturing sector is also noteworthy, while this sector is still expanding slightly in Germany.

“Price developments in the services sector are likely to continue to worry the European Central Bank. Neither input nor sales prices are showing any significant slowdown in the upward momentum of prices.  Services prices play a particularly large role in the core inflation rate on which the ECB is currently focusing. This increases the likelihood that the ECB will tighten monetary policy more, or for longer.”

Lastly, Eurostat reported that government debt to GDP was down to 91.6% in the euro area for the fourth quarter of 2022, vs. 93.0% in Q3 2022.

Germany 66.3%, France 111.6%, Italy 144.4%, Spain 113.2%, Netherlands 51.0%, Greece 171.3% (but down from 194.6% a year earlier).

Britain: Prime Minister Rishi Sunak had five pledges for the new year back in January, one of which was that inflation would be halved by the end of the year.

But Tuesday’s consumer price index came in at 10.1% for March, and another quarter-point rise in the Bank of England’s benchmark rate to 4.5% is a certainty come May 11, with 5% in the cards by the end of the year.

Inflation in the UK is sticky, while in Germany it has fallen from 9.2% to 7.8% (Jan.-Mar.), and in the eurozone from 8.6% to 6.9% the last two months.

Meanwhile, Deputy Prime Minister and Justice Minister Dominic Raab was forced to resign from the cabinet following an independent investigation into formal complaints about his behavior and bullying.

France: Protesters greeted President Emmanuel Macron with boos and calls for him to resign in his first public appearance since he signed into law the unpopular rise in the retirement age. Outside a factory he was visiting in the eastern Alsace region, Macron was faced with hostile banners and banging on pots.

Then, as he walked through a crowd in a nearby village, many shouted “Macron, resign!” and one man told him: “We don’t want this pension (reform), what don’t you get?”  But there were a few who thanked him.

Macron signed the legislation last weekend, raising the retirement age to 64 from 62.  Macron has said “the country must move forward.”

Turning to Asia…China’s National Bureau of Statistics reported that the Chinese economy grew by 4.5% in the first quarter of 2023 amid Beijing’s intensive efforts to consolidate the post-pandemic recovery.  This was above the consensus of 4%, and 2.9% in the fourth quarter.

After its growth slowed to the second worst in nearly five decades at 3% last year, China set a modest growth target for 2023 at around 5%.

Other indicators showed the recovery may be uneven, with retail sales up by 10.6% in March from a year ago, rising from 3.5% combined for January and February.

Industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, rose by 3.9% in March, year-over-year.

But fixed-asset investment – a conventional tool for Beijing to drive up growth through projects like airports, roads and rails – rose by just 5.1% in the first three months of 2023, year-on-year, down from a rise of 5.5% in the first two months.

The urban unemployment rate came in at 5.3% in March, down from 5.6% in February.

The jobless rate for the 16-24 age group remained at an elevated 19.6%, up from 18.1% in February, which is interesting.

Japan reported inflation of 3.2% in March, year-over-year, but the core rate, ex-food and energy, was 3.8% vs. 3.5% in February, the fastest pace in four decades.  This is huge, sports fans, and really puts the Bank of Japan in a bind.

Separately, flash PMI readings for April showed manufacturing at 49.5, services 54.9.

Taiwan’s export orders in March plunged by the most since the global financial crisis as global demand for semiconductor shows little sign of improving.

Overseas orders to Taiwanese companies shrank to $46.6 billion last month, a 25.7% drop compared to a year ago, and far worse than the consensus of an 18.6% decline.  It was the largest contraction since January 2009.

Earlier sales data from industry leader Taiwan Semiconductor Manufacturing Co. indicated the weakness in global demand.

TSMC CEO C.C. Wei said the company was “passing through the bottom of the cycle” of its business in the second quarter, and that the market for PCs and smartphones “continues to be soft.”

Street Bytes

--Stocks finished with marginal losses among the major indices, the Dow Jones down 0.2% to 33808, while the S&P 500 lost 0.1% and Nasdaq 0.4%.  As noted below, many companies posted solid Q1 earnings, but guidance was often weak as executives warned of challenges down the road.

Next week is rather important, to say the least, as we get earnings from the likes of Microsoft, Alphabet/Google, Apple, Meta/Facebook, and Amazon.

--U.S. Treasury Yields

6-mo. 5.05%  2-yr. 4.17%  10-yr. 3.57%  30-yr. 3.77%

Unease over the debt ceiling and the likelihood of another interest rate hike led to higher rates midweek, but then they backed off a bit on growth concerns, though still up overall by Friday’s close.  The yield on the 10-year is at its highest level in six weeks.

--Crude oil fell this week over the feared impact of a global slowdown on demand, West Texas Intermediate closing at $77.81 today.

But the International Energy Agency has warned of a far larger oil deficit sooner than expected following surprise production cuts from OPEC+.

The gaping hole in the global oil market between the availability of crude and rebounding demand will reach 2 million barrels a day by the third quarter of the year, the Paris-based energy watchdog said in its monthly report.

The gap, which oil producers outside of OPEC will be unable or unwilling to fill, risks sending crude prices sharply higher and worsening inflation just as it appears to be moderating, the agency said.

Natural gas futures were on a rollercoaster.  After hitting $1.96 per million Btu, the price surged to $2.36 Tuesday on record exports from Freeport LNG’s plant in Texas and forecasts for cooler weather and more heating demand over the coming weeks.  Then the forecasts called for warmer weather and nat gas closed the week at $2.21.

--Bank of America said its profits grew 15% last quarter, the latest of the big banks to do exceptionally well this earnings season as investors and consumers flock to Wall Street for safety after the failure of Silicon Valley Bank and Signature Bank.

The nation’s second-largest bank by assets posted a profit of $8.2 billion, up from $7.1 billion in the same period a year earlier.  Earnings per share came in at 94 cents from 80 cents. The results beat analysts’ expectations.

Like its major competitors, BofA has benefitted from wealthy clients, businesses and other customers running to the bank as a place of safety after last month’s bank failures.  The nation’s biggest banks are seen as having an implicit government backstop, due to their “too big to fail” status among the country’s financial institutions.

Deposits were down 1% from the beginning of the year, which executives said would have been greater had new clients hadn’t started banking with BofA in March.  Banks across the industry have been largely seeing deposits decline as inflation makes customers and businesses tap savings to pay expenses.

Net interest income rose 25% to $14.4 billion in the quarter as higher interest rates allow the bank to charge more for customers to borrow.

But BofA has to pay more to depositors to keep them, as customers look for alternatives to store their cash.

Revenue, net of interest expense, increased 13% to $26.39 billion, beating estimates of $25.13 billion.

Traders in fixed income, currencies and commodities stayed in high demand, bringing in $3.5 billion in revenue, up 27% from a year earlier.  Revenue at the company’s consumer banking unit rose 21% to $10.7 billion in the first quarter.

The bank set aside roughly $930 million to cover potentially bad loans in the quarter.  But BofA said it’s not concerned about consumer health as charge-offs remain below where they were before the pandemic.

The shares were largely unchanged.

--Goldman Sachs reported Q1 earnings Tuesday of $8.79 per diluted share down from $10.76 a year earlier. Net profit of $3.09 billion in the quarter compared with $3.83 billion, down 19%, as dealmaking and bond trading slumped in the first quarter, while losses from the sale of some loans from its consumer unit weighed on earnings.  Total net revenue for the quarter ended March 31, expressed as the sum of net interest income and total noninterest revenues, was $12.22 billion, down from $12.93 billion a year ago.  So not great, and the shares fell hard on the open Tuesday, but did rally back some.

CEO David Solomon said, “The events of the first quarter acted as another real-life stress test, demonstrating the resilience of Goldman Sachs and the nation’s largest financial institutions.”

Global mergers and acquisitions activity shrank to the lowest in more than a decade in the first quarter, according to data from Dealogic, which hurt Goldman’s investment banking fees, which dopped 26% to $1.58 billion.  Revenue from fixed income, currency and commodities trading, usually a bright spot, plunged 17% to $3.93 billion, while equity trading revenue sank 7% to $3.02 billion.  Goldman’s asset and wealth management unit boosted revenue by 24% to $3.2 billion.

Goldman is exploring strategic options for its consumer platform business, which has lost about $3 billion in three years, executives told investors in February.  But deposits held in the Marcus business remain core to Goldman and are not under review.

--Morgan Stanley’s first-quarter profit beat expectations as rising revenue from its wealth management division offset declines in its investment banking and trading units.  Shares, after opening lower, ended up about flat on the session, Wednesday.

Revenue from investment banking fell 24% to $1.25 billion, while the wealth management unit saw an 11% jump, bringing in $110 billion in new net assets.  The downswing in investment banking activity, which forms the core of the bank’s business, dragged its total revenue down nearly 2% to $14.5 billion in the quarter.

“The investments we have made in our Wealth Management business continue to bear fruit,” CEO James Gorman said in a statement. 

Morgan Stanley set aside $234 million in the quarter compared with $57 million a year ago, bracing for a deterioration in commercial real estate and customers potentially falling behind on loan payments amid rising costs of borrowing and recession worries.

The bank earned $1.70 per share, beating estimates of $1.62. Profit fell to $2.83 billion, compared with $3.54 billion a year earlier.

--United Airlines said Tuesday that it lost $194 million in the first quarter, but its revenue soared compared with last year, and the airline said consumer demand remains strong despite economic uncertainty.

United predicted that results in the April-through-June quarter will be slightly better than Wall Street expects.

Like Delta Air Lines, which reported last week, United faces much higher costs for labor and fuel than it did a year ago.  Both, however, were upbeat about strong ticket sales heading into the crucial summer travel season.

“We are watching the macroeconomic risks carefully, but demand remains strong, especially internationally, where we are growing at twice the domestic rate,” CEO Scott Kirby said in a statement.

To take advantage of that international demand, United announced that it plans to expand service to Australia and New Zealand next winter by 40%.

Ex-items, United would have lost 63 cents per share, better than the Street’s forecast of a loss of 73 cents.

Revenue jumped 51% to $11.43 billion, about in line.

United forecast that it will earn between $3.50 and $4 a share in the April-through-June quarter, which is better than the midpoint forecast of $3.60.

The company’s shares rose 7.5% on the news.

--Air traffic is on course to break above pre-pandemic levels buoyed by a rebound in Chinese traffic after extended lockdowns, Airbus CEO Guillaume Faury said on Wednesday.

“The reopening of China is proving to be a strong driver of air traffic as it progressively recovers and all regions should now converge towards normalized levels or even higher levels than before Covid,” he told a shareholder meeting.

The head of the world’s largest planemaker voiced disappointment, however, with the speed of recovery of supply chains, telling shareholders Airbus had not been satisfied with deliveries that fell below company forecasts last year.

--TSA checkpoint numbers vs. 2019

4/20…99 percent of 2019 levels
4/19…98
4/18…93
4/17…94
4/16…109
4/15…108
4/14…103
4/13…93

--Tesla cut prices for some of its Model Y and Model 3 vehicles in the U.S., the sixth time it has done so this year as it looks to spur demand even at the cost of its industry-leading profit margins.  The cuts came ahead of the EV maker’s first-quarters earnings, which then came out after the close on Wednesday.

Tesla’s website showed late on Tuesday that it cut prices of its Model Y ‘long range’ and ‘performance’ vehicles by $3,000 each and of its Model 3 ‘rear-wheel drive’ by $2,000 to $39,900.  The company has cut U.S. prices of its base Model 3 by 11% so far this year and that of its base Model Y by 20%, moves that come as the United States, its largest market, prepares to introduce tougher standards that will limit EV tax credits.

So, for the quarter, Wall Street expected the company’s gross margin to hit a more than three-year low of 23.2%, while revenue was forecast to rise 24.2% year-on-year to $23.29 billion.

And after the market closed Wednesday, Tesla issued a downbeat earnings report.

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” said CEO Elon Musk adding that he expects to be able to harvest additional software revenue down the line.

Teslas sold for an average of around $46,000 in the first quarter, less than the company had forecast and down from some $52,200 in the first three months of 2022.

Lower prices weighed on first-quarter profit, which fell to $2.5 billion, down from $3.3 billion a year earlier.  Revenue rose 24% from the year before to $23.3 billion, slightly below expectations.

Tesla’s operating margin took a hit, falling to 11.4% from 19.2% in Q1 2022.  [Gross margin was just 19.3%, well below the Street’s forecast.] 

But Tesla’s margin remains among the highest in the auto industry.  Ford Motor’s was around 4% in 2022, and General Motors’ was about 6.6%, according to FactSet.

Tesla produced 440,808 vehicles in the quarter and delivered 422,875, up from Q1 2022 deliveries of 310,048 (36%).

The company again said it aims to deliver some 1.8 million vehicles this year, or around 37% more than it did in 2022.

But the shares fell nearly 10% Thursday to $163, the same day SpaceX’s Starship rocket exploded four minutes into flight. I have more details on that down below.

Oh, and Musk took away legacy blue checkmarks on Twitter for those choosing not to pay $8 per month.  In all, his net worth dropped by $12.6 billion, according to the Bloomberg Billionaires Index, though he remains the world’s second-richest person behind French luxury tycoon Bernard Arnault.

--Netflix reported Q1 earnings late Tuesday of $2.88 per share, down from $3.53 a year earlier.  Consensus was at $2.86.

Revenue for the quarter ended March 31 was $8.16 billion, up from $7.87 billion a year earlier.  Analysts projected sales of $8.18 billion.

The streaming giant said its global paid net additions stood at 1.75 million in the quarter, vs. expectations for about 2 million.

Netflix expects Q2 EPS of $2.84 on revenue of $8.24 billion, less than current forecasts for $3.08 and $8.47 billion.

So the shares in after-hours trading initially plummeted as much as 11%, but then recovered…

Netflix shifted a wider launch of a plan to crack down on unsanctioned password sharing into the second quarter to make improvements, delaying some financial benefits, but said it was pleased with results so far.  The company also said it was “on track to meet our full year 2023 financial objectives.”

The clampdown on password sharing will begin in the United States during the current quarter, and it is hoped the crackdown could fuel Netflix’s nascent advertising business, as it drives these “sharers” to the lower-priced version of the service.

--Alphabet shares fell as much as 4% on Monday following a report South Korea’s Samsung Electronics was considering replacing Google with Microsoft-owned Bing as the default search engine on its devices.  The report, published by the New York Times over the weekend, underscores the growing challenges Google’s $162-billion-a-year search engine business faces  from Bing – a minor player that has risen in prominence recently after the integration of the AI tech behind ChatGPT.

Google’s reaction to the threat was “panic” as the company earns an estimated $3 billion in annual revenue from the Samsung contract, the report said, citing internal messages.  Another $20 billion is tied to a similar Apple contract that will be up for renewal this year, the report added.

Google has for decades dominated the search market with a share of over 80%, but Wall Street fears the company could be falling behind Microsoft in a fast-moving AI race. Parent firm Alphabet lost $100 billion in value on Feb. 8 after its new chatbot, Bard, shared inaccurate information in a promotional video and a company event failed to dazzle.

--Meta Platforms Inc. on Wednesday carried out another round of job cuts, this time hitting engineers and adjacent tech teams, as CEO Mark Zuckerberg further moved to streamline the business in a bid to make 2023 a “year of efficiency.”

Meta in March became the first Big Tech company to announce a second round of mass layoffs, which it said would take place in three main batches over several months and impact 10,000 employees.  Wednesday’s cuts, though expected, prompted expressions of frustration from Meta employees.  Layoffs were the subject of the most popular questions posted on an internal company forum on Wednesday ahead of an upcoming employee town hall.

“You’ve shattered the morale and confidence in leadership of many high performers who work with intensity.  Why should we stay at Meta?” read one question seen by Reuters.

The question references comments Zuckerberg made last year urging employees to work with more “intensity” to meet the Facebook and Instagram parent company’s business challenges.

Meta’s first round of layoffs in the fall hit more than 11,000 employees, or 13% of its workforce at the time.  The company’s shares have surged about 80% this year.

--Apple Inc. opened its first flagship store in India in a much-anticipated launch Tuesday that highlights the company’s growing aspirations to expand in the country it also hopes to turn into a potential manufacturing hub.

CEO Tim Cook posed for photos with a few of the 100 or so Apple fans who had lined up outside the sprawling 20,000-square-foot store in Indian’s financial capital, Mumbai.  A second store will open Thursday in the national capital, New Delhi.

“India has such a beautiful culture and incredible energy, and we’re excited to build on our long-standing history,” Cook said in a statement earlier.

The tech giant has been operating in India for more than 25 years, selling its products through authorized retailers and the website it launched a few years ago.

Separately Apple unveiled a high-yield savings account with an interest rate of 4.15%, in partnership with Goldman Sachs, in its latest bid to push into financial services, a potentially big blow/threat for banks.

Warnings Monday from State Street and Charles Schwab were reminders that banks are struggling to keep hold of their customers’ cash – both reporting a fall in deposits in the first quarter.

Apple, a trusted brand with a huge consumer base when it comes to iPhones, adds to the competition and gives consumers another option for where to put their cash.  It will also put pressure on the big banks currently offering low rates.

--IBM Corp. beat Wall Street expectations for first-quarter profit on Wednesday and signaled demand for IT services was better than feared, which initially sent the shares up after the bell.

The company’s software and consulting businesses rose 6% and 8.2%, respectively, at constant currency in the first quarter, in line with IBM’s targets.

The IT industry is facing a slowdown after a post-pandemic surge in demand for services such as consulting, as high inflation and interest rates have forced customers to put the brakes on spending.

Growth at IBM’s consulting and software business has also slowed from the mid-to-high teens it saw last year.  CEO Arvind Krishna said clients were prioritizing digital transformation projects that focus on “cost takeout, productivity and quick returns,” mirroring comments by Accenture executives last month.  As a result, IBM cut its full-year consulting revenue growth forecast to 6% to 8% from earlier expectations of high single-digit percentage growth.

Total revenue for the quarter rose 4.4% to $14.25 billion, a little shy of consensus.  Ex-items, earnings per share came in at $1.36, beating estimates of $1.26.

But the share price gains in the after-market were cut on concerns over deceleration in the consulting business.

--AT&T Inc. shares had their worst day since Dec. 19, 2000, on Thursday, down 10.4%, as executives said the recent rounds of corporate cost cutting and layoffs as well as the return of employees to offices are denting business demand for wireless plans.

CEO John Stankey said the company is also seeing signs that some Americans, particularly those with lower incomes, are tightening their budgets.

“It’s not an issue of them not wanting the service,” he said.  “They’re just making a decision to stick with their current handset a little bit longer and maybe pushing that discretionary decision to move up, so we’ve seen a little bit of a drop-off relative to some of the traditional upgrade rates.”

For the first three months of the year, AT&T added 424,000 of its most lucrative connections – postpaid phones – matching Wall Street’s expectations but the lowest number the company has recorded since early in the pandemic.

Revenue came in at $30.1 billion, up 1.4%, but below the Street’s forecasts.

--Johnson & Johnson beat first-quarter profit estimates on Tuesday and raised its 2023 profit forecast, as it banks on its newer cancer treatments and multiple myeloma drug Darzalex to soften the blow from declining demand for older drugs.

Darzalex and newer cancer therapies are key to the company achieving its goal of $60 billion in drug sales by 2025 as older treatments such as Crohn’s disease drug Stelara face impending competition.  The company, which is spinning off its consumer health business, swung to a loss of 3 cents per share for the first quarter due to a one-time charge related to the second bankruptcy filing for its talc liabilities.  JNJ has said it would take a charge of $6.9 billion related to the bankruptcy.

The company reported sales of $2.44 billion for its blockbuster drug Stelara for the first quarter, slightly above expectations.  But Stelara is set to lose exclusivity in the U.S. by late 2023, while older cancer drug Imbruvica is facing fierce competition. 

On an adjusted basis, the drugmaker posted first-quarter earnings of $2.68 per share, beating forecasts, helped by strong sales across its businesses, including medical devices and consumer health.  The healthcare conglomerate now expects to earn between $10.60 and $10.70 per share on an adjusted basis this year, a bit ahead of its prior forecast.

--Procter & Gamble shares rose nearly 4% today as it reported fiscal Q3 earnings that beat expectations.  Ditto net sales of $20.07, also ahead of consensus.

For the full year 2023, the company said it reaffirmed its earnings guidance of flat to up 4%, while raising its sales outlook to growth of about 1% from a prior forecast of flat to down sales.

P&G said its repeated price hikes boosted margins and offset the hit from consumers trading down to cheaper brands. 

Companies such as P&G and Unilever are usually among the last to see a slowdown in demand during economic downturns, unlike discretionary items including appliances and furniture.  These companies have hiked prices repeatedly to pass on steep input costs that stemmed from supply-chain snags and were worsened by the Ukraine war.

I just realized I’m running low on laundry detergent…time for a post-it note to self to purchase same. 

“Beer…laundry detergent…Funny Bones…olive oil…capers...”

--Disney will reportedly lay off “thousands” of employees next week in the second wave of an ongoing bloodbath that is expected to result in 7,000 job cuts.

Some of the impacted Disney workers will receive their pink slips as soon as April 24, Bloomberg reported.

The layoffs are expected to hit jobs across Disney’s global business, which was reorganized into three segments in February – one called “Disney Entertainment” that includes its film TV and steaming assets, one for sports media giant ESPN and one for the Mouse House’s theme parks and experiences.

Disney Entertainment will bear a significant chunk of the job cuts – with approximately 15% of the division’s staffers set to exit next week, according to the report.

Disney has more than 200,000 employees across its various businesses.

ESPN will also slash staff levels as part of next week’s wave of layoffs, according to CNBC, including some on-air talent and management.

Meanwhile, the battle with Florida Gov. Ron DeSantis (R) continues.  DeSantis said that he’s looking for ways to reverse changes that Disney pushed through two months ago to weaken the municipal authority that governs its Florida theme parks and was hand-picked by DeSantis.

“They thought they could create some kind of development agreement that would essentially render everything that we did null and void, and put them in control for perpetuity,” DeSantis said at a press conference on Monday in Lake Buena Vista, Florida. “Now that’s not going to work, that’s not going to fly.”

DeSantis foreshadowed more actions against Disney including studies on what to do with the land owned by the district itself, which could mean creating a state park or another amusement park near Disney.

“Someone even said maybe you need another prison. Who knows? The possibilities are endless,” he said.

--According to the Bureau of Labor Statistics, 12 states hit record-low unemployment rates in March…Montana, South Dakota, Arizona, Wisconsin, Ohio, Kentucky, West Virginia, Arkansas, Mississippi, Alabama, Maryland, and Maine.

--EY has told staff it will cut 3,000 jobs in the U.S. to eliminate “overcapacity,” with the axe falling mainly on the consulting side of the firm.

The redundancies account for about 5 percent of EY’s U.S. workforce.

The cuts were announced less than a week after the collapse of a plan to spin off EY’s global consulting business into a new company, codenamed Project Everest.

“After assessing the impact of current economic conditions, strong employee retention rates and overcapacity in parts of our firm, we have made the difficult business decision to separate approximately 3,000 U.S. employees,” an EY spokesman said.

Consulting businesses have slowed sharply over the past year after a period of outsized growth when clients were racing to upgrade their IT during the pandemic. A mergers and acquisitions boom that boosted consultants’ deal advisory work has also petered out as interest rates have risen.

EY’s cuts are deeper than those announced by other consulting groups in recent months.  KPMG laid off close to 2 percent of its U.S. staff in February and Accenture has said it would cut 2.6 percent of its global workforce over the next 18 months.  McKinsey is restructuring its back office in a way that will reduce about 3 percent of its workforce.

And then today, the Financial Times reported that Deloitte will cut around 1,200 jobs or 1.5% of its U.S. workforce.

--Opendoor Technologies Inc. on Tuesday said it cut roughly 560 jobs, or 22% of its remaining workforce, citing a declining housing market.  The staff reduction follows a cut of 550 jobs at the San Francisco company in November, or about 18%.  Most of the job cuts were in its operations unit.

--Lyft is planning another round of layoffs which will “significantly reduce” the company’s workforce, CEO David Risher said Friday in an email to employees.  The employees will find out their status on April 27, when all Lyft offices will be closed.

Risher, who just took over in the past week or so, told staffers the company intends to use the savings from the layoffs to “invest in competitive pricing, faster pick-up times, and better driver earnings.”

The Wall Street Journal reported Lyft may be laying off 1,200 people, or about 30% of employees.  Lyft shed 700 jobs in November.

--BuzzFeed News is shutting down its namesake news division, falling prey to the punishing economics of digital publishing.   The same issue has been plaguing Vox Media and Vice.

--Bed Bath & Beyond Inc. is now expected to file for bankruptcy this weekend.  I wrote a while back on how employees are not getting any severance pay, which is an outrage.  This will be a real shame, but watch for massive liquidation sales, even if the company attempts to stay alive with a limited number of stores.

--Bitcoin was at $30,400 late Tuesday afternoon (remember, it never stops trading), and as of 4:00 p.m. today, the price was $27,300.  Potentially a bad sign.  Or maybe not.

--Budweiser factories nationwide were reportedly the targets of bomb threats as emotions run high over parent company Anheuser-Busch’s marketing deal with its new Bud Light pitchwoman Dylan Mulvaney.

Last Friday, the company’s top executive, Brendan Whitworth, released a statement that made no mention of Mulvaney, offering a mealy-mouthed apology as the company continues to resist calls to end its Bud Light sponsorship deal with the controversial transgender influencer who has more than 10 million followers on social media.

Anheuser-Busch VP of marketing Alissa Heinerscheid defended the campaign: “I’m a businesswoman, I had a really clear job to do when I took over Bud Light, and it was ‘This brand is in decline, it’s been in a decline for a really long time, and if we do not attract young drinkers to come and drink this brand, there will be no future for Bud Light,” she said.

Despite this endorsement of the campaign by a high-ranking executive at the company, other anonymous executives have reportedly distanced themselves from it.

--McDonald’s is tweaking its Big Mac and other hamburgers and cheeseburgers, including softer buns and onions added to the patties on the grill. The chain is also adding more sauce to its Big Mac burgers.  I’m drooling.

Foreign Affairs, Part II

China: Singapore’s Prime Minister Lee Hsien Loong has described tensions over the Taiwan Strait as the “most dangerous flashpoint” in the growing U.S.-China rivalry, adding that risks of “miscalculation or mishap” were growing.

Addressing key foreign policy matters during a broad speech to parliament, the Singapore leader detailed the divergent views in Beijing and Washington about ties between the superpowers.

While in Beijing there was a belief that the U.S. was seeking to hold back China’s growth, in the U.S. there was now bipartisan consensus that “China’s growing strength and assertiveness is becoming a grave threat to U.S. interests and values,” Lee told lawmakers.

Foreign ministers from the Group of Seven nations meeting in Tokyo agreed on the need to stand up to any Chinese “coercion” or efforts to exert control in the Taiwan Strait, the State Department said.

“The message is the same across the G7: that we want to work with China in those areas where China is prepared to work with us,” a senior State Department official told reporters on a call.  “We are certainly going to stand up against any coercion, any market manipulation, any efforts to change the status quo in the Taiwan Strait,” the official said.

The G7 ministers have been keen to demonstrate a united front, especially after recent comments by French President Macron which were perceived in some Western capitals as too weak towards China and sparked a backlash.

German Foreign Minister Annalena Baerbock said on Monday, “Many of our partners in the region feel more and more that China increasingly wants to exchange the existing common binding international rules with its own rules.”

Baerbock told reporters that a “military escalation” in the Strait “would be a horror scenario for the whole world.”

The House Select Committee on China and the Center for a New American Security think tank on Wednesday ran a tabletop exercise examining how the U.S. would respond if China invaded Taiwan.

In opening remarks for that exercise, committee chair Rep. Mike Gallagher (R-Wis.), said he believes the “business community is not taking the threat of a Taiwan crisis seriously enough.  I recently had a meeting with an executive from a leading financial services company who told me that the chance of a Taiwan conflict was ‘near-zero’… If the Chinese do invade Taiwan, any business or investor that is overly dependent on the Chinese market, including both suppliers and customers located there, will suffer.  We want American businesses to deal with these risks responsibly, not stick their head in the sand.”

According to some of the leaked Pentagon documents, the Washington Post reported on a detailed assessment on the Taiwan situation…specifically, if China does attack Taiwan by air, the island is unlikely to be able to detect or stop that attack, noting that the documents reveal that Taiwanese officials don’t think their equipment can “accurately detect missile launches,” and that only about half of their aircraft are “fully mission capable.”

Taiwan announced this week it would buy as many as 400 U.S. land-launched Harpoon missiles in the face of China’s rising threat.

China successfully tested a ground-based midcourse ballistic missile interception, the defense ministry announced last weekend. The result brought the number of such missile interceptions to at least six.

These expensive missiles are intended to intercept ICBMs carrying nuclear warheads.

Midcourse interception is an advanced technology whereby an incoming ballistic missile is knocked down during its mid-phase as it cruises outside the earth’s atmosphere.  So think about that advancement.  The goal is to hit the missile before re-entry when it could split into multiple warheads traveling at up to 20 times the speed of sound.

Chinese Foreign Minister Qin Gang said at a forum Friday that China is not inflaming the situation in Ukraine and advocates a peaceful resolution of international disputes through dialogue and diplomacy, adding that China opposes attempts to build walls and barriers to interrupt international supply chains.

But Qin also said that both sides of the Taiwan Strait belong to China, and it is right and proper for China to uphold its sovereignty.  “Recently there has been absurd rhetoric accusing China of upending the status quo, disrupting peace and stability across the Taiwan Strait,” Qin said.  “The logic is absurd and the conclusion dangerous.”

Demographics were in the news this week, as China’s leading exporting province of Guangdong suffered its first population decline in over four decades last year, the latest sign of a demographic challenge that could reshape the country’s economic landscape.

The southern province said its resident population – people living in the region for more than six months – fell by 272,000 from a year earlier to 126.57 million, according to data released by the Guangdong Provincial Bureau of Statistics earlier this month.

At the same time this was being announced, the United Nations Population Fund’s State of World Population report showed that India’s population will be 1.4286 billion by the middle of 2023 compared to China’s 1.4257 billion.

In the long run, and back to Guangdong, a shortage of factory workers in China – driven by a better-educated work force and a shrinking population of young people – could raise costs for consumers outside China, potentially exacerbating inflation in countries like the United States that rely heavily on Chinese imports.  But, facing rising labor costs in China, that’s why many companies are shifting production to lower-paying countries like Vietnam and Mexico.

Separately, the FBI arrested two alleged Chinese agents and federal prosecutors have charged dozens of others with working to silence and harass dissidents within the United States – with some even operating an “undeclared police station” in New York City.

The Justice Department announced charges against 34 officers of the national police of the People’s Republic of China with harassing Chinese nationals in the U.S. critical of the Chinese government.

All 34 of the defendants are believed to live in China and remain at large, according to the Justice Department.

The agents allegedly used social media to post favorably about the PRC and to attack their “perceived adversaries,” including the United States and Chinese pro-democracy activists around the world, the DOJ said.

Agents also posted videos and articles targeting Chinese pro-democracy advocates in the U.S., the Justice Department alleged, some of which included explicit death threats. In addition, the agents allegedly used threats to intimidate people into skipping pro-democracy protests within the United States.

No surprise here…as I told you for years of the Chinese in my building who were clearly agents or spies.  [Think Celgene, a major biotech company, directly across the street, now part of Bristol Myers, as well as easy access to New York City.]  One man I tried to engage at the elevator on occasion would give me a look that burned a hole through my brain.

Lastly, there was an awful fire at a Beijing hospital, killing at least 29, including 26 patients, with authorities detaining a dozen people in response.  Officials believe it originated from welding sparks from work being done in the hospital’s inpatient wing.  Aside from the patients, a nurse, a medical assistant and a family member were victims.

North Korea: The North’s position as a nuclear weapons state will remain undeniable and it will “continue necessary action” until military threats from the United States and its allies are eliminated, state media KCNA said on Friday.

North Korea’s foreign minister Choe Son Hui issued a statement criticizing the United States and other Group of Seven countries, as the G7 foreign ministers met in Japan.

The G7 condemned the North’s April 13 test of an intercontinental ballistic missile and urged denuclearization.  Choe accused the G7 countries of illegally interfering in North Korea’s internal affairs by demanding they get rid of their nukes, saying Pyongyang will take strong action if they attempt to violate its sovereignty and fundamental interests.

Meanwhile, Kim Jong Un has ordered officials to prepare the launch of its first military spy satellite as planned, state media reported on Wednesday.

Chinese President Xi told Kim that the two countries should step up communication amid heightened tensions on the Korean peninsula.

“The international and regional situations are now changing seriously and in a complicated way,” Xi told Kim, according to KCNA.

“I am willing to strengthen strategic communication with Comrade General Secretary [Kim], jointly lead the direction of development of China-DPRK relations and promote friendly cooperation between the two sides to a higher level,” the message said.

Iran / Israel: Iranian President Ebrahim Raisi said Iran will destroy Haifa and Tel Aviv if Israel takes “the slightest action” against it, Raisi warned on Tuesday during an Army Day address, according to the Iranian Tasnim media agency.

“The extra-regional and American forces should leave the region as soon as possible because it is in their own interest and in the interest of the region,” he said.

Tuesday happened to be Holocaust Remembrance Day.

Separately, according to a new poll published Friday by Maariv, the National Unity party, headed by MK Benny Gantz, would earn 27 seats if elections were held today, while the Likud party headed by Prime Minister Netanyahu would earn 26 seats.

When you include other parties such as Yesh Atid (19 seats), the results leave the current opposition with 68 seats and the current coalition with 52 seats.

Sudan: The country’s top general on Friday declared the military’s commitment to a civilian-led government, an apparent bid for international support days after brutal fighting between his forces and a powerful paramilitary group derailed hopes for the country’s democratic transition.

Army chief Gen. Abdel Fattah Burhan pledged the military would prevail and secure the vast African nation’s “safe transition to civilian rule.”  But for many Sudanese, Burhan’s claim rang hollow 18 months after he joined forces with his current rival to seize power in a coup that cast aside Sudan’s pro-democracy forces.

Burhan’s appearance was the first time he was seen in public since violence erupted in Khartoum and other areas of the country last weekend.

The fighting has killed at least 300 people thus far.

The two generals, the other being the head of the Rapid Support Forces, Gen. Mohamed Hamdan Dagalo (known as Hemedti), are vying for acceptance by foreign powers, which have tried to usher in Sudan’s much-awaited transition to democracy.

But the conflict stems from a power struggle between the two leaders over a plan to integrate the paramilitary fighters into the regular military.

Sudan is Africa’s third-largest country by area and straddles the Nile River.  It uneasily shares its waters with regional heavyweights Egypt and Ethiopia.  Egypt relies on the Nile to support its population of more than 100 million, and Ethiopia is working on a massive upstream dam that has alarmed both Egypt and Sudan.

But Sudan borders five additional countries: Libya, Chad, the Central African Republic, Eritrea and South Sudan, which seceded from Sudan in 2011 and took 75% of the nation’s oil resources with it.

The current fighting matters because what happens in Sudan will not just stay there.

And now the Wall Street Journal and CNN are reporting that Russia’s Wagner Group is heavily supporting the RSF, seeking instability.

Random Musings

--Presidential approval ratings….

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

Rasmussen: 48% approve, 50% disapprove (April 21).

The latest Reuters/Ipsos poll completed last Sunday showed Biden with just a 39% approval rating.

A new Wall Street Journal poll has Biden at 42% approval, 56% disapproving, matching his December numbers.

--A Yahoo News/YouGov poll released Tuesday found that Trump’s advantage over Ron DeSantis has dropped by 10 points in the last two weeks.

The survey of 1,530 U.S. adults, conducted from April 14-17, found 52% favoring Trump compared to 36% who said they supported DeSantis in a one-on-one matchup.

When the same poll surveyed voters 24 hours after the former president was hit with 34 felony counts of falsifying business records related to an alleged “hush money” payment scheme, Trump recorded his biggest lead ever over DeSantis to date – 57% to 31%.

Less than half of GOP voters, 49%, said they would prefer Trump to “someone else” as the party’s 2024 nominee, marking the first time since February that the former president hasn’t cracked 50% on that question.

--In the aforementioned Wall Street Journal poll released Friday show DeSantis, who had a 14-point advantage over Trump amid likely Republican primary voters in a hypothetical matchup against Trump back in December, now has fallen to a 13-point deficit, trailing Trump 51% to 38%.

In a fuller, potential field of 12 Republican contenders, Trump wins 48% support to 24% for DeSantis.  Nikki Haley is at 5%, and Tim Scott 3%.

DeSantis leads Biden 48% to 45% in a hypothetical contest, while Trump lags behind Biden by 3 points.

Separately, a six-week abortion ban that DeSantis signed into law last week is overwhelmingly popular with Republicans but opposed by 53% of voters overall, including 64% of white suburban women, a critical swing group.  By a two-to-one margin, voters oppose allowing people to carry a concealed handgun without a permit, another measure DeSantis signed into law.

--President Biden is supposedly going to launch his 2024 campaign with a video on Tuesday.  He’s going to tout his record in 27 months, including winning Congress’ approval for billions of dollars in federal funds to tackle the pandemic and for infrastructure, restoring what his supporters see as civility to the White House and overseeing the lowest levels of unemployment since 1969, but Americans will be focused on 40-year inflation under his watch.

But then there is Hunter Biden, with all mainstream media today noting the situation with the IRS special agent and information he has about how a criminal investigation into Hunter has been hampered by “political considerations,” according to his attorney, Mark Lytle.

Lytle is representing the unnamed agent who is seeking whistleblower protections from Congress to speak out.  Lytle says the agent alleges “preferential treatment and politics improperly infecting decisions” in the inquiry.

A White House official denied President Biden meddled in the probe of his son.

The employee is prepared to “contradict sworn testimony to Congress by a senior political appointee,” and reveal “clear conflicts of interest,” a letter to a bipartisan group of lawmakers said on Wednesday.

The “senior political appointee,” is apparently Attorney General Merrick Garland.

Garland has repeatedly claimed under oath that Delaware U.S. Attorney David Weiss, a Trump administration holdover recommended in 2017 by the state’s Democratic senators, is able to criminally charge Hunter Biden without the permission of other Justice Department leaders, despite Republicans challenging the factual accuracy of that claim.

But this isn’t all.  House Oversight Committee Chairman James Comer (R-Ky.) revealed on Monday: “We’ve identified six additional members of Joe Biden’s family who may have benefited from the Biden family’s business that we are investigating, bringing the total number of those involved or benefiting to nine.”

And Secretary of State Antony Blinken is being fingered as the motive behind the “51 intel experts” letter that quickly triggered broad suppression of the “laptop” scoops on Hunter’s overseas dealings.

According to House Judiciary Committee sources, former CIA chief Mike Morell admitted under oath that he got a call from Blinken (then a Biden campaign official) suggesting the laptop was a Russian plant, prompting Morell & Co. to rapidly produce the letter suggesting exactly that.

But the Hunter/Joe story is now about to explode…and the president is going to be announcing his reelection bid?

--Fox Corp. suddenly settled the defamation lawsuit brought by Dominion Voting Systems, as the case was about to go to trial in Delaware, but right after, everyone wondered why Fox hadn’t settled the case long ago at the same dollar figure, thus sparing the network immense embarrassment.

“The truth matters.  Lies have consequences,” Dominion lawyer Justin Nelson said in a news conference outside the courthouse after a judge announced the deal.

The resolution in Delaware Superior Court follows a recent ruling by Judge Eric Davis in which he allowed the case to go to trial while emphasizing it was “CRYSTAL clear that none of the statements relating to Dominion about the 2020 election are true,” he wrote. 

In his March 31 summary judgement ruling, Judge Davis pointedly called out the news organization for airing falsehoods while noting how the bogus election claims persist, 2 ½ years after Trump lost his bid for reelection.

“The statements at issue were dramatically different than the truth,” Davis said in that ruling.  “In fact, although it cannot be attributed directly to Fox’s statement*, it is noteworthy that some Americans still believe the election was rigged.”

*Fox lawyer Erin Murphy had said: “We never reported those to be true.  All we ever did was provide viewers the true fact that these were allegations that were being made.”

In a statement issued shortly after the announcement, Fox News said the network acknowledged “the court’s rulings finding certain claims about Dominion to be false,” adding the settlement “reflects Fox’s continued commitment to the highest journalistic standards.  We are hopeful that our decision to resolve this dispute with Dominion amicably, instead of the acrimony of a divisive trial, allows the country to move forward from these issues.”

Fox did not respond to an inquiry asking for elaboration and was not required to issue a public apology.  Fox anchors didn’t have to face the music, and indeed, ratings at the network haven’t suffered.

But the company’s legal (and financial) troubles are far from over.  Beyond the $787.5-million payout to end the Dominion case, Fox must contend with a second defamation suit filed by rival voting machine company, Smartmatic USA, which has demanded $2.7 billion.

And Fox investors are lining up their own lawsuits, alleging that Rupert Murdoch and other board members were derelict in their duties by allowing Fox News to promote election lies, which harmed the network’s reputation as a news organization.

But Tuesday’s resolution spared the 92-year-old mogul; his son Lachlin, the company’s chief executive; and their anchors from the embarrassment of having to take the witness stand in a courtroom packed with reporters to defend the indefensible.

Murdoch’s own testimony in late January during a deposition hurt the company’s case; Murdoch acknowledging then that Fox News hosts, including Maria Bartiromo and Sean Hannity, had “endorsed” the lies – far beyond pushing back on claims made by Trump’s supporters, and Murdoch testified that he believed the 2020 election was fair and had not been stolen from Trump.

“Fox knew the truth,” Dominion argued in court papers.  “It knew the allegations against Dominion were ‘outlandish’ and ‘crazy’ and ‘ludicrous’ and ‘nuts.’  Yet it used the power and influence of its platform to promote that false story.”

For its part, a Smartmatic spokesman said in a statement Tuesday: “Dominion’s litigation exposed some of the misconduct and damage caused by Fox’s disinformation campaign. Smartmatic will expose the rest.”

Smartmatic said in its complaint that Fox knowingly aired more than 100 false statements. A day after the suit was filed, Fox Business canceled the show of Lou Dobbs, who was named as a defendant.

Editorial / Wall Street Journal

“The wailing you heard across the land Tuesday afternoon was the sound of thousands of journalists lamenting the settlement of the defamation lawsuit by Dominion Voting Systems against Fox News. An entire industry of reporters has been denied the schadenfreude of seeing their hated political and media competitor in the dock….

“The settlement is a victory for Dominion, which said Fox will pay $787.5 million.  Fox didn’t apologize, though it said, ‘we acknowledge the Court’s rulings finding certain claims about Dominion to be false.’  Those claims involved statements aired on Fox from the likes of Rudy Giuliana and Sidney Powell that blamed Dominion’s voting machines for Donald Trump’s defeat in 2020.

“These columns never saw any evidence of such claims, and we said so in a Nov. 18, 2020, editorial, ‘Rage Against the Voting Machine.’ Dominion cited that editorial more than once in its legal filings….

“We share common ownership with Fox, and we have a weekend news program on the network. But neither Fox nor News Corp, our parent, is an ideological monolith, and our owners hire journalists to make independent judgments about what to cover or say in print or on television.  The press routinely asserts otherwise, despite evidence to the contrary, but that’s the truth of our experience since Rupert Murdoch purchased the Journal in 2007.

“As much as the media ached for a Fox defeat in court, they ought to thank the company for settling.  A verdict against the network might well have hurt the rest of the press by making it harder to defend against defamation claims.

“The network would no doubt have appealed a negative verdict in Delaware court, where the trial judge made rulings and comments that suggested an anti-Fox bias.  Had the appeal made it to the U.S. Supreme Court, the Justices might have reconsidered their 1964 precedent in New York Times Co. v. Sullivan.  That ruling requires plaintiffs to prove that false statements against public figures are made with ‘actual malice.’  Justices Clarence Thomas and Neil Gorsuch have said they would like to revisit that standard.

“The media cheering for Fox to lose were in effect cheering for a verdict that could have meant more lawsuits, many of them meritless, against journalists. Their hatred of Fox and conservatives is so strong that they ignored their own self-interest.

“One journalistic lesson of the Dominion case is not to indulge crank claims because your audience wants to hear them. That includes claims about Russian collusion or stolen elections.  Mr. Trump could never admit he defeated himself in 2020, so he claimed the election was stolen.  He tweeted a false ‘report’ about Dominion, and the grifters who attend him, then and now, spread it.

“Journalism is an imperfect craft, and mistakes are inevitable. That’s why the bar for proving libel should be high.  But the obligation of a journalist is to discern the truth, or at least as close as one can get to knowing it, and tell it to your audience straight.”

[Ed. see yours truly.]

Editorial / Washington Post

“Politicians such as former president Donald Trump and Florida Gov. Ron DeSantis (R) are pushing new legal limits on press freedoms, arguing that the status quo over-protects journalists who write – unfairly, in their view – about the people and companies they cover.  In fact, Fox News’ decision to settle the defamation suit that Dominion Voting Systems brought against the channel – instead of risking a trial – suggests that news organizations can be held to account under existing rules even as responsible journalists enjoy a high level of protection.

“In other words, the system is working as the Supreme Court intended when it set down the rules in its 1964 New York Times v. Sullivan decision – and it does not require a rethink that would threaten journalists’ ability to report and criticize without fear of facing defamation suits for errors made in good faith….

“[A statement published with ‘actual malice’] is a high standard that exists because journalists should not be punished for honest mistakes.  But Fox News apparently worried enough about losing, even with such protections, that the company paid $787.5 million in the largest ever publicly disclosed settlement in a libel action.

“Delaware Judge Eric M. Davis ruled ahead of a potential trial that it was beyond dispute Fox News had aired false statements about Dominion’s voting machines after the 2020 election. This left a jury to decide whether the cable channel did so with actual malice.

“Through discovery and depositions, Dominion’s lawyers amassed significant evidence that Fox News’ executives and on-air talent knew better than to traffic in bizarre conspiracy theories. They argued that network brass allowed falsehoods on air because they feared viewers would migrate to other channels if they didn’t.  Fox News, bracing for the likelihood of defeat in district court, involved appellate lawyers in its defense at the trial court level, a sign it was preparing to go all the way to the Supreme Court.

“Fox News, which faces a separate defamation suit from Smartmatic, another voting-tech company, agreed to settle in part because a jury could have awarded Dominion even more than the $1.6 billion the company sought….

“The Fox News settlement comes amid an increasingly assertive movement to curb Sullivan’s media protections to make it easier to sue journalists, Mr. Trump has clamored to change libel laws for years. In a December court filing as part of a lawsuit against CNN, the former president called it a ‘perfect vehicle’ for the Supreme court to ‘reconsider whether Sullivan’s standard truly protects the democratic values embodied by the First Amendment.’

“Mr. DeSantis calls Sullivan a shield that allows reporters to ‘smear’ anyone they don’t like.  He’s pushing state legislation, likely to trigger a Supreme Court review, that would make it easy to successfully sue journalists who quote anonymous sources by creating the presumption, under the law, that any information attributed to them is false.

“Judge Laurence Silberman of the U.S. Court of Appeals for the D.C. Circuit cited media bias ‘against the Republican Party’ in a 2021 opinion that called on the high court to rethink the precedent.

“Yet Sullivan protects speakers equally no matter where they fall on the ideological spectrum. That’s why conservative talk-radio hosts and bloggers have mobilized against Mr. DeSantis’ assault on freedom of the press.

“Since the trial of New York printer John Peter Zenger in 1735, freedom of the press has been a foundational element in the success of the American experiment.  The Supreme Court recognized this history in its 1964 Sullivan decision. Back then, a local Alabama police commissioner sued the New York Times for running an advertisement decrying mistreatment of the Rev. Martin Luther King Jr. that contained a few factual inaccuracies.  An all-White local jury awarded $500,000 to the commissioner, L.B. Sullivan.

“Recognizing that this was an effort to bankrupt and harass those covering the civil rights movement, the Supreme Court overturned the verdict.  Justice William J. Brennan Jr. wrote about what he called ‘a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.’

“These principles are as applicable today as they were in 1964.  It’s as vital as ever for a robust and independent free press to be able to do its job without undue worries about being harassed by libel suits.  The Fox News settlement suggests that media outlets don’t have a blank check.  Sullivan does not need to be fixed. Rolling back the precedent, on the other hand, would profoundly imperil free speech.”

Meanwhile, the day before the settlement, Donald Trump called on Rupert Murdoch to back false information about the 2020 election, writing on Truth Social that Fox News is “in big trouble if they do not expose the truth on cheating in the 2020 election.”

“Rupert, just tell the truth and good things will happen,” Trump added.

--After mass shootings in Dadeville, Alabama, and Louisville, Kentucky, last weekend, the U.S. had suffered at least 162 mass shootings in the first 15 weeks of 2023, according to the Gun Violence Archive; mass shootings defined as those in which four or more people are shot, excluding the shooter.

--Rep. Nancy Mace (R-S.C.) bucked the majority of her Republican colleagues in Congress, calling on fellow GOP lawmakers to “no longer be silent” on gun violence and to find a middle ground on abortion rights.

“Every mass shooting, there’s just silence, and prayers are offered, Easter baskets are offered, but no real solutions,” Mace said on “Fox News Sunday.”

“Republicans can no longer be silent on this issue. And it’s not about the Second Amendment.”

Mace also criticized fellow Republicans and some organizations that oppose abortion for what she called “extreme” stances on abortion rights, especially “when it comes to rape and incest, protecting the life of the mother.”

“The middle, the independent voters, right of center, left of center, they cannot support us,” she said.

[See the above Wall Street Journal poll.]

“We’ve got 14 counties in South Carolina that don’t have a single OBGYN doctor. So if we’re going to ban abortion, what are we doing to make sure women have access to birth control?” Mace added.

And the congresswoman also questioned how lawmakers would improve adoption services in the country and care for unwanted children.

--Former Secretary of State Mike Pompeo said last weekend he wouldn’t run for president in 2024.

“The time is not right for me and my family,” Pompeo said in a statement.

The former Kansas congressman pointed out he’s only 59 and there might be other opportunities.

--Scientists say “flash droughts” – marked by rapid onset and quick loss of moisture from plants and soil – are increasing globally as climate change leads to higher temperatures and shifting precipitation patterns around the world.

Droughts have typically been a slow-onset phenomenon that can persist for months or years because of a lack of rainfall.

However, a study led by Chinese scientists found there has been a global transition from slow-growing droughts to flash droughts that develop rapidly and can become severe in a matter of weeks.  Flash droughts occur when there is low precipitation along with other factors such as high temperatures, which can quickly increase evaporation and remove water from soil and vegetation.

Separately, the World Meteorological Organization said last year was close to but not quite the hottest year on record, ranking fifth or sixth hottest depending on measuring techniques.  But the past eight years are the hottest on record globally, even as the last three featured La Nina, a natural temporary cooling of parts of the Pacific Ocean that changes weather worldwide.

The UK, France, Ireland, Portugal, Spain, Belgium, Luxembourg, Italy, Germany, Switzerland and New Zealand all had their hottest years on record.  For the first time in history, no snow survived the summer melt season on Switzerland’s glaciers, the report said, which is kind of depressing.

--Finally, I was watching SpaceX’s Starship liftoff Thursday morning on CNBC and their ‘space expert,’ M.B., was babbling on about what a success this mission was a few minutes in when very clearly the rocket was going haywire and then exploded.

But M.B. didn’t catch on, as Jim Cramer and David Faber, back on the floor of the New York Stock Exchange, seemed perplexed.  ‘Didn’t something bad just happen?’ you know they were thinking, but she’s acting like nothing went wrong.

I quickly switched to CNN and veteran Myles O’Brien was saying, ‘Well, that didn’t quite go as planned.’

Thankfully, no one was on board this major test flight for the world’s most powerful rocket, and Elon Musk had severely lowered the bar days before, saying he just hoped the rocket wouldn’t blow up the launch pad…and it didn’t.

An official said on the broadcast: “Starship just experienced what we call a rapid unplanned disassembly.”

And as CNN pointed out: “SpaceX is known to embrace fiery mishaps during the rocket development process.  The company maintains that such accidents are the quickest and most efficient way of gathering data, an approach that sets the company apart from its close partner NASA, which prefers slow, methodical testing over dramatic flareups.”

NASA, though, agreed with SpaceX…that this represented progress.

Meanwhile, M.B. needs to go back to rocket launch broadcast school.

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

Pray for Ukraine.

God bless America.

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Gold $1993
Oil $77.81…down nearly $5 on the week

Regular Gas: $3.68; Diesel: $4.19 [$4.12 / $5.06 yr. ago]

Returns for the week 4/17-4/21

Dow Jones  -0.2%  [33808]
S&P 500  -0.1%  [4133]
S&P MidCap  +0.4%
Russell 2000  +0.6%
Nasdaq  -0.4%  [12072]

Returns for the period 1/1/23-4/21/23

Dow Jones  +2.0%
S&P 500  +7.7%
S&P MidCap +2.8%
Russell 2000  +1.7%
Nasdaq  +15.3%

Bulls 50.7
Bears 24.0

Hang in there.

Brian Trumbore

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