Week in Review

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Week in Review

10/22/2022

For the week 10/17-10/21

[Posted 7:30 PM ET, Friday]

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Edition 1,227

I get it…I get why Ukraine is now way down the list of concerns for Americans these days.  The economy, inflation, crime, threats to democracy, and abortion rank higher.  Maybe in 2023, Taiwan is just as big a concern, with Chinese President Xi Jinping gaining a third, five-year term this weekend.

But there is nothing more important today than Vladimir Putin being defeated in Ukraine.  We’ve seen how this cornered rat has been lashing out in just the past few weeks, and this coming week’s story could be the dam and hydroelectric plant in the south (Kakhovka), or maybe the Zaporizhzhia nuclear plant is front and center again.  You’ll hear a lot about the city of Kherson in the coming days, and Bakhmut.

Today, at a press conference with his French counterpart, Secretary of State Antony Blinken said that while the United States will consider every means to advance diplomacy with Russia if it sees an opening, at the moment, “President Putin continues to push in the opposite direction,” Blinken adding that Moscow was “doubling and tripling down” on its aggression.

I held off posting the following until we were closer to winter, but this piece from the Washington Post’s Karoun Demirjian, posted on their website at 2:00 a.m., Oct. 6, proved to be most prescient, as a few days later, Russia’s major missile, and then drone, offensive commenced, days after the explosion on the Kerch bridge linking Russia to Crimea, Oct. 8.

“As Ukrainian forces endeavor to capitalize on recent battlefield wins, winter’s rapid approach threatens to stalemate the conflict and offer Russian commanders a chance to stall their momentum.

“Falling temperatures are expected to increase troops’ demand for even the most basic provisions, straining supply lines that are already overtaxed.

“Rain and snow will muddy the battlefield, rendering heavy military vehicles and equipment functionally immovable. It’s a particular concern in the south [Ed. Kherson region], where heavy fighting is ongoing and the ground has failed to freeze over in recent years.

“Many Ukrainians anticipate Russia will attack civilian infrastructure that supplies heat and electricity to major cities, just in time for the frost.

“In a few short weeks, for almost everybody with a stake in the fight, life is about to get much more difficult.  And at that point, observers say, the war will become a battle over which side can better withstand the other’s efforts to destroy morale.

“ ‘Russian strategy across the region is not about moving the front line; it’s about causing pain on civilians who are far away from the front line,’ said Sam Charap, a Russian expert with the Rand Corp.  Russian leaders might be mistaken in betting the winter will prove ‘too tough’ for Ukrainians and their European benefactors, but ‘they’re going to do their best to make it so,’ he said.”

And so look at the last two weeks.

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Ukrainians are going home even as the war rages on.  More than 6 million people who fled have since come back, with most returning from other parts of the country and around a fifth from abroad, according to UN estimates.

But what have they come home to? 

Russia continues to unleash waves of missile strikes and drone attacks as revenge for an explosion that damaged Russia’s bridge to Crimea.  The missile strikes have decreased…while the Iranian-origin drone attacks have picked up with devastating impact on Ukraine’s infrastructure.

Russia has destroyed a third of Ukraine’s power stations in the past week, and that was a figure of a few days ago, according to President Volodymyr Zelensky.  Ukrainians are being urged to cut back on electricity consumption in the evenings.

Further attacks continue to squeeze Ukraine and threaten misery for millions this winter.

Shelling has also been knocking out water systems, and hundreds, if not thousands, of villages are without power.  Zelensky tweeted Tuesday that with one-third of Ukraine’s power stations destroyed since Oct. 10, there are “massive blackouts” nationwide.

“The situation is critical now across the country… The whole country needs to prepare for electricity, water and heating outages,” Kyrylo Tymoshenko, deputy head of the Ukrainian president’s office, told Ukrainian television.

An attack on a power plant killed three people in Kyiv on Tuesday, employees of the facility.  President Zelensky wrote on Telegram: “Ukraine is under fire by the (Russian) occupiers.  They continue to do what they do best – terrorize and kill civilians.”

Scores have also died in attacks on residential buildings in major cities the past week, including five on an apartment building in Kyiv on Monday.

In his video address to the people Tuesday night, President Zelensky said Russia’s dependence on Iranian-made drones exposes Russia as “bankrupt in military and political terms.”  [Incredibly, both Iran and Russia deny using the “kamikaze drones,” though Iranian officials have told news media that Tehran had promised to provide Russia with more drones and surface-to-surface missiles.]

Ukrainian Foreign Minister Dmytro Kuleba said he would ask Zelensky to formally cut off diplomatic ties with Iran in protest over the drones.  “The actions of Iran are vile and deceitful,” he said.

NATO will deliver air defense systems to Ukraine “in the coming days” to help the country defend itself against drones, Secretary-General Jens Stoltenberg said.  “No nation should support the illegal war of Russia against Ukraine,” he added.

The new commander of Russian forces in Ukraine, Sergei Surovikin (aka “General Armageddon” in Russian media for his actions in Syria and Chechnya), made a rare acknowledgment of the pressures they were under from Ukrainian offensives to retake southern and eastern areas that Moscow claims to have annexed just weeks ago.

In another sign of Russian concern, the Kremlin-installed chief of the strategic southern region of Kherson on Tuesday announced an “organized, gradual displacement” of civilians from four towns on the Dnipro River.

“The situation in the area of the ‘Special Military Operation’ can be described as tense,” Surovikin, the Russian air force general now commanding Russia’s invasion forces, told state-owned Rossiya 24 news channel.  On Kherson, Surovikin said: “The situation in this area is difficult.  The enemy is deliberately striking infrastructure and residential buildings in Kherson.”

Russian forces in Kherson have been driven back by 20-30 km (13-20 miles) in the last few weeks and are at risk of being pinned against the western bank of the 2,200-km-long Dnipro River that bisects Ukraine.

Russian troop positions in Kupiansk and Lyman in eastern Ukraine and the area between Mykolaiv and Kryvyi Rih in Kherson province were cited by Surovikin as under continuous attack.  He appeared to concede that there was a danger of Ukrainian forces advancing towards the city of Kherson. Russia had captured the city in the early days of the invasion and it remains the only major city that Moscow’s forces have seized intact.

Reminder: Kherson is one of four partially-occupied Ukrainian provinces that Russia claims to have annexed*, and it controls both the only land route to the Crimea peninsula and the mouth of the Dnipro.

*The other three the border provinces of Donetsk and Luhansk (together known as the Donbas) – as well as Zaporizhzhia.

Vladimir Saldo, the Russian-installed Kherson region chief, said the risk of attack by Ukrainian forces had led to a decision to evacuate some civilians from four towns.  “The Ukrainian side is building up forces for a large-scale offensive,” Saldo said in a video statement.  The Russian military was preparing to repel the offensive, he said, and “where the military operates, there is no place for civilians.”  50,000 to 60,000 people would be moved out of Kherson in the next few days, Saldo said.

British Armed Forces minister James Heappey told BBC Radio that Gen. Surovikin was pursuing a cruel and pointless strategy that he said would fail in its aim of trying to “break the will of the Ukrainian people.”

So then on Wednesday, Vladimir Putin introduced martial law in the four regions he says Russia has annexed as some residents of the city of Kherson left by boat following warnings of a looming assault.  The images of people fleeing were broadcast by Russian state TV which portrayed the exodus as an attempt to clear the city of civilians before a combat zone.

In a move that looked designed to help Russia firm its grip on the Ukrainian regions it occupies – including Kherson – Putin told his Security Council he was introducing martial law in them.  Beyond much tighter security measures on the ground, it was unclear what the immediate impact of that would be, but the army was clearly being moved from one side of the river to the other.

Kyiv derided the move.  “‘Martial law’ implementation on the occupied territories by Russia should be considered only as a pseudo-legalization of (the) looting of Ukrainians’ property,” tweeted Mykhailo Podolyak, an adviser to Zelensky.  “This does not change anything for Ukraine: we continue the liberation and deoccupation of our territories.”

[The Russians could also try to force the residents of Kherson into the Russian army.]

Andriy Yermak, head of the Ukrainian president’s office, accused Russia of laying on a propaganda show in Kherson.  “The Russians are trying to scare the people of Kherson with fake newsletters about the shelling of the city by our army, and also arrange a propaganda show with evacuation,” Yermak wrote on Telegram.

Putin also issued a decree restricting movement in and out of eight regions adjoining Ukraine and ordered the creation of a special coordinating council under Prime Minister Mikhail Mishustin to step up the faltering war effort.

Also Wednesday, President Zelensky wrote on Telegram: “We are working to create mobile power points for the critical infrastructure of cities, towns and villages.  We are preparing for various scenarios of possible consequences.  Ukraine will defend itself.  No matter what the enemy plans and does.”

Ukrainians then endured the first scheduled power outages since the war began on Thursday and braced for more after further Russian airstrikes destroyed infrastructure, as Kyiv’s forces pressed on towards the city of Kherson.

Ukraine is advancing in the east and the south, but struggling to protect power generating facilities and other utilities from missile and drone strikes.  People across the country were urged to use less power as the government enforced nationwide curbs on electricity usage between 7 a.m. and 11 p.m.

German Chancellor Olaf Scholz accused Vladimir Putin of using energy and hunger as weapons. “Scorched earth tactics will not help Russia win the war. They will only strengthen the unity and resolve of Ukraine and its partners,” Scholz told the German parliament.

Putin on Thursday inspected a training ground for mobilized troops and was shown firing shots from a sniper rifle in footage apparently intended to show his personal backing for soldiers heading to fight in Ukraine.

Russia’s defense ministry said it was indeed targeting Ukrainian energy infrastructure, a strategy it has stepped up since the appointment of Gen. Surovikin.

Ukraine’s energy minister said Russia had carried out more than 300 air strikes on Ukrainian energy facilities since Oct. 10.

European Union members agreed on new measures against Iran over its supply of drones to Russia.

“Iran’s support for Putin’s brutal and illegal war against Ukraine is deplorable,” Britain’s foreign secretary James Cleverly said in a statement.

--President Zelensky, in his Sunday address to the people:

“The situation on the frontline has not undergone significant changes over the past day. The key hotspots in Donbas are Soledar and Bakhmut, where extremely heavy fighting continues.  The occupiers threw everyone they could against our forces, including 2,000 ‘prisoners’ – they are among the mercenaries right there.

“And these are ‘convicts’ with long sentences for serious crimes. They are kept at the front not only with money, but also with the promise of amnesty.

“This is how the Russian state sponsors terror – it looks for murderers in prisons and promises them freedom if they kill again. Does anyone in the world still doubt whether Russia should be officially designated as a terrorist state?  I don’t think so.

--Russia’s defense ministry said on Tuesday that two of its nuclear-capable Tu-95MS strategic bombers had conducted a flight of more than 12 hours over the Pacific Ocean, the Bering Sea and the Sea of Okhotsk.

--A Gallup poll conducted in September had 70 percent of Ukrainians as determined to keep fighting until their country wins the war.  The majority of Ukrainians backing the war – 91 percent – defined victory as retaking all territories seized by Russia since 2014, including Crimea.

The Gallup poll showed strong support for fighting until victory in the capital, Kyiv (83 percent) and western Ukraine (82 percent).  But there is less enthusiasm in the east (56 percent) and in the south (58 percent), where the front lines are.  Twenty-six percent said the Ukrainian government should negotiate an end to the fighting as quickly as possible.

--The death toll from a Russian fighter-bomber crash in Russia rose to 13, Russia reported Tuesday.  The Su-34 aircraft crashed into a residential building Monday near the Russian city of Krasnodar, about 120 miles east of Crimea.

--Saturday, at least 11 people were killed and more than 15 wounded at a Russian military training ground when two attackers opened fire on a group of volunteers who wished to fight in Ukraine, RIA news agency said.  Later in the week, after initially blaming Ukraine, Russia said the two men were from a former Soviet republic, without naming it.

--Norway police arrested a Russian man at the airport in the arctic town of Tromsoe and charged him with flying a drone, marking the second such arrest in one week.  Police seized a large amount of photographic gear, including a drone and several memory cards.  The man was taking pictures of a different airport and defense force helicopters.

The first arrest was of a Russian citizen for flying drones in Norway.  The country has seen an increase in drone sightings close to its oil and gas infrastructure in recent weeks and in response to the Sept. 26 leaks on the Nord Stream gas pipeline in the Baltic Sea.

--The United States has determined that Iranian military personnel were on the ground in Crimea helping the Russian military operate drones provided by Tehran.

Retired Navy Rear Adm. John Kirby of the National Security Council said Thursday: “Russian military personnel that are based in Crimea have been piloting Iranian UAVs, using them to conduct strikes across Ukraine, including strikes against Kyiv in just recent days.  We assess that Iranian military personnel were on the ground in Crimea and assisted Russia in these operations.”

“The fact is this: Tehran is now directly engaged on the ground and through the provision of weapons that are impacting civilians and civilian infrastructure in Ukraine.  In fact, they are killing civilians and destroying civilian infrastructure in Ukraine,” Kirby told reporters in a call.

--Elon Musk said Saturday that his rocket company SpaceX would continue to fund its Starlink internet service in Ukraine, a day after he said it could no longer afford to do so.  Musk tweeted: “the hell with it, even though starlink is still losing money & other companies are getting billions of taxpayer $, we’ll just keep funding ukraine govt for free.”

It was not clear if Musk was being sarcastic or sincere, but later in the week, the Pentagon said it was exploring paying for Starlink to keep it up.  [More on a related Musk topic below.]

--Jailed Russian opposition leader Alexei Navalny said on Thursday that authorities had opened a new criminal case against him for promoting terrorism and extremism.  Navalny is already serving sentences totaling 11 ½ years for fraud, contempt of court and parole violations, all of which he rejects as trumped-up charges intended to silence him.

“I am a genius of the underworld,” said Navalny, who is able to post on Twitter through his lawyers and allies.  “You all thought I had been isolated in prison for two years, but it turns out I was actively committing crimes.  Luckily, the Investigative Committee was vigilant and didn’t miss a thing.”

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Wall Street and the Economy

It’s all about the upcoming Federal Reserve Open Market Committee meeting, Nov 1-2, and another expected 75-basis point hike in the benchmark funds rate.  As for December, with the recent strong September inflation data there was a growing belief there would be another 75 bp increase, but according to media reports today, and reading between the lines of some comments issued by Fed governors, there may be an intense debate in November as to just high to go in December, i.e., maybe just 50 basis points more.

What the market will be looking for is the commentary surrounding the November confab, and the comments from Chair Jerome Powell in the press conference after, as to whether the Fed will commit (kind of, sort of) to perhaps pausing after December’s meeting.

Next week we’ll have our first look at third-quarter GDP* and, importantly for the Fed, September personal income and consumption data that includes the Fed’s preferred inflation barometer, the PCE (personal consumption expenditures index).

*The Atlanta Fed’s GDPNow barometer for Q3 is at 2.9%, after two consecutive negative quarters.

Jeff Bezos, a rather smart guy, said in a tweet Tuesday that “the probabilities in this economy tell you to batten down the hatches.”

This week we had further evidence of the slowing housing market, with housing starts for September coming in worse than expected, 1.439 million annualized, down 8.1% from the prior month.

And on the existing-home sales front, they sagged for an eighth consecutive month in September to a seasonally adjusted annual rate of 4.71 million, down 1.5% from August and 23.8% from the prior year.

The median existing-home sales price increased to $384,800, up 8.4% from one year ago, though this was the third month in a row that the median sales price faded after reaching a record high of $413,800 in June.  This is for completed transactions that include single-family homes, townhomes, condominiums and co-ops.

If you look at just existing single-family homes, the median sales price of $391,000 in September is down from June’s peak of $420,900.

It hasn’t helped that Freddie Mac’s 30-year fixed-rate mortgage is at 6.94%, up from 3.09% a year ago, with other mortgage indicators well over 7.00%.  Just follow the ongoing rise in the 10-year Treasury.

Editorial / Wall Street Journal…on the topic of oil

“White House officials accuse OPEC and its allies of manipulating oil prices, but then what do you call what President Biden is trying to do?  Three weeks before Election Day, Mr. Biden is ordering 15 million more barrels released from the nation’s Strategic Petroleum Reserve (SPR) to reduce gasoline prices.

“The new releases are a sign of political desperation. Crude prices climbed after OPEC+ this month announced a two million barrels a day cut in production. This is really closer to one million barrels a day since many countries aren’t meeting their quotas now. But as day follows night, U.S. gas prices have increased, and the political timing couldn’t be worse for Democrats.

“The Administration says its planned drawdown will add about 500,000 barrels a day to global supply in December. That’s misleading. About one million barrels a day on average have been released since this spring. The drawdowns were scheduled to end next month, so the new releases will merely prevent supply from contracting more than it otherwise would.

“The Administration first started tapping the SPR last fall to combat rising gas prices. Please, Mr. President, stop calling it ‘Putin’s price hike.’ Russian exports have fallen a mere 560,000 barrels a day from pre-Ukraine war levels on a global supply of 101 million.

“The main problem is that oil demand has outstripped supply amid the post-pandemic economic recovery owing to a lack of investment, especially in the U.S., which had been the world’s swing producer.  U.S. production has been flat since May.  Now the swing producers are Saudi Arabia and the United Arab Emirates.  OPEC countries and their allies, which account for 45% of global oil production, accounted for 85% of new supply in September.

“The Biden SPR releases have probably helped reduce prices at the margin. But one risk was always that crude prices would rise when the releases tapered off. And here we are.

“The Administration said Wednesday it may continue releases as long as ‘conditions’ – i.e., political conditions – require, but this is unsustainable. The SPR has fallen by about 210 million barrels since last fall.  The Administration says the 400 million or so barrels that remain are ‘more than ready to respond to energy security needs today.’  That’s also far from clear….

“A true national emergency could…fast deplete the reserve. …Though prices exceeded $90 a barrel from 2011 o 2014, Barack Obama didn’t resort to emergency drawdowns to reduce gas prices….

“The Administration now says it plans to encourage ‘near-term production’ by announcing its ‘intent’ to repurchase oil for the reserve when the price of West Texas Intermediate crude oil falls to $67 to $72 a barrel. Who knows when this will happen since the Saudis have indicated their intent to keep prices around $90 to $100 a barrel.

“We’ve been writing for months that Mr. Biden could deflate oil prices by giving a simple speech declaring an end to his political war on fossil fuels. Instead he resorts to gimmicks like the SPR releases and cozies up to dictators.  Hours after OPEC announced its production cut, news leaked that the White House plans to ease sanctions on Venezuela to liberate its oil production.

“Perhaps the Administration hoped the leak would reduce oil prices. It didn’t.  Neither did Wednesday’s SPR announcement.  Markets are smarter than Administration officials think, and so are voters.”

The price of regular gas, nationally, is down to $3.82 from $3.90 a week ago, but up from $3.68 a month ago, the high being $5.01 on June 14. [It’s $5.01, not $5.02 as some put it.  When you quote commodities, and bonds, you don’t round up…so the high of $5.016 is $5.01, not $5.02.  Just had to get that off my chest.]

But the price of diesel, $4.92 a month ago, is back up to $5.34, and you know how important that is, sports fans, when it comes to inflation and the prices you pay at the grocery and drug stores.

Europe and Asia

The inflation data for September in the euro area continued to be awful, 9.9%, up from 9.1% in August.  A year earlier, the rate was 3.4% [Eurostat] Ex-food and energy, the core rate was 6.0% vs. 5.8% in August.

Germany 10.9%, France 6.2%, Italy 9.4%, Spain 9.0%, Ireland 8.6%, Netherlands 17.1%, Greece 12.1%.

Inflation in the UK hit 10.1% last month from a year earlier.

Food prices across the eurozone rose 14.1% in September (14.5% in the UK).

Eurostat also released the second quarter government debt figures, down to 94.2% of GDP in the euro area.

Germany 67.2%, France 113.1%, Italy 150.2%, Spain 116.1%, Netherlands 50.9%, Greece 182.1%.

Britain: Prime Minister Liz Truss resigned as PM and leader of the Conservative Party on Thursday, 45 days after taking office, which followed the resignation of Prime Minister Boris Johnson.  Truss becomes the shortest-serving PM in UK history.

As Bloomberg’s Allegra Stratton put it, “The PM was, in the end, outlived by a lettuce.”

Yup, 24 hours earlier, Truss had gone before a raucous Questions session in parliament and said, “I’m a fighter…I’m not a quitter.”

Truss said she had entered office with “a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit.”

She went on: “I recognize that, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party.  I have therefore spoken to His Majesty the King to notify him that I am resigning as leader of the Conservative Party.”

This kickstarted a one week contest to find the next Tory leader and PM – with hopefuls needing to get the backing of 100 MPs (out of 357) by Monday afternoon.

The newly-appointed Chancellor Jeremy Hunt ruled himself out.  But Rishi Sunak (who finished second to Truss) and Penny Mordaunt are seen as contenders, along with, guess who, Boris Johnson.  Both Sunak and Mordaunt got more than 100 in the previous contest.

So a nasty, brutish and short contest is underway.  Nominations will close at 1 or 2 p.m. on Monday, and first results announced at 5 or 6 p.m. (1700 GMT).

If only one candidate meets the 100 threshold, that candidate will be declared the winner on Monday.

If two candidates make it to the ballot, the party’s wider membership will decide the winner in an online ballot.

Any third candidate will be eliminated in a ballot of lawmakers, leaving two to go forward to the online vote, with the winner declared Friday, Oct. 28.

In the end, it’s not that Truss’s ideas were that bad, it’s just that by rushing them through in a really dicey time they were viewed (certainly by the markets, which then influenced political reaction) as incredibly reckless and insensitive, as the beneficiaries of many of the policies were the rich.

As CNN’s Richard Quest put it: “It was an unforced error born out of arrogance and hubris…introducing economic policies with no chance of success.”

Jeremy Hunt had scrapped Truss’s economic plan and scaled back her vast energy support scheme on Monday, making a historic policy U-turn to try to stem the dramatic loss of investor confidence.  The markets stabilized.  Three days later, though, Truss was out.

Opposition parties called for an immediate general election, saying the Conservatives had no mandate to govern.  What’s true is that a very small percentage of the people (Conservative MPs and party members) is selecting the leader of the nation.  Not exactly democratic, and the new prime minister will have to immediately address this elephant in the room.

Labour Party leader Keir Starmer said: “After 12 years of Tory failure, the British people deserve so much better than this revolving door of chaos.  In the last few years, the Tories have set record-high taxation, trashed our institutions and created a cost-of-living crisis.  Now, they have crashed the economy so badly that people are facing 500 pound a month extra ($560) on their mortgages.  The damage they have done will take years to fix.”

The Tories could not respond by again “shuffling the people at the top without the consent of the British people,” the Labour leader added.

Italy: Giorgia Meloni has agreed to form Italy’s next government, clearing the way for her to become the country’s first woman prime minister, and first far-right leader since World War II.

Meloni, head of the nationalist Brothers of Italy, led an alliance of conservative parties to victory at a Sept. 25 election.  The new government will formally be sworn in Saturday morning.

Meloni heads a coalition including Silvio Berlusconi’s Forza Italia and Matteo Salvini’s League.  A leaked audio of Berlusconi this week reinforced that he is a Putin butt-boy to this day, which is rather disturbing.

This is Italy’s 68th government since 1946 and Meloni faces daunting challenges, including a looming recession, rising energy bills and how to present a united front over the Ukraine war.  Berlusconi, 86, has repeatedly been trying to undermine Meloni’s authority. 

Turning to Asia…China held off on embarrassing President Xi during the party congress and opted to withhold all economic data until Sunday evening (New York Time), after it was over, including the trade data, which had mysteriously been pulled the Thursday before the congress commenced.

So a slew of data next week, including GDP.  This is going to be interesting.  China’s 2022 growth target was “around 5.5 percent” and it’s likely to be below 4%, with a figure of 3.5% to 4% for the third quarter.

The International Monetary Fund and the World Bank recently slashed their 2022 growth outlook for the country to 3.2% and 2.8%, respectively.

In Japan…September trade figures were released, with exports up 28.9% year-over-year, and imports rising 45.9%.

Exports were led by transport equipment (motor vehicles), and increased 45.2% to the U.S., 17.1% to China, and 33.2% to the European Union.

Imports continue to be influenced by petroleum, as well as the slump in the yen.

September inflation was up an annualized 3%, ex-food and energy 1.8%.

Street Bytes

--Owing to the talk of a less aggressive Fed, perhaps, and a slowing pace of rate hikes, as well as earnings that were better than feared, all the major indexes had their best week in four months, with the Dow Jones up 4.9% to 31082, the S&P 500 surging 4.7%, and Nasdaq 5.2%.

But next week we have the tech heavyweights reporting their earnings for Q3…Microsoft, Apple, Amazon, Google, Meta, and more.  They’ve been beaten down already, so the market’s reaction to even more bad news may not be as expected.  For sure, though, any positive reaction would be tied to the hoped for Fed pause after December.

--U.S. Treasury Yields

6-mo. 4.40%  2-yr. 4.48%  10-yr. 4.21%  30-yr. 4.33%

The yield on the 10-year rose for a 12th consecutive week, the longest such streak since 1984, with the yield hitting 4.29% intra-day, the highest since 2007, as policy makers signaled their determination to keep raising rates until they are sure inflation is under control…before the late-week chatter of a ‘pause.’

--As alluded to above, the Biden administration announced it will release the final tranche of oil from the Strategic Petroleum Reserves, 15 million barrels from the original release of 180 million first put forward in March, to address high gas prices stemming from Russia’s invasion of Ukraine and now other factors.  The SPR is at its lowest level since 1984, in what the administration called a “bridge” until domestic production could be increased.  The president on Wednesday then said he may consider significantly more releases this winter, which would be incredibly reckless.

--Goldman Sachs Group Inc. reported profit fell to $2.96 billion, or $8.25 per share, in the quarter ended Sept. 30, from $5.28 billion, or $14.93 per share a year ago.  But this beat expectations.

Total revenue fell 12% to $11.98 billion in the quarter.

Goldman announced a broad restructuring that will see investment banking and trading folded into one unit, while merging asset and wealth management into another – giving it a higher profile.

The restructuring reflects CEO David Solomon’s broader goal to shift Goldman’s focus away from the high-risk, high-reward Wall Street units that have long defined it and toward businesses that generate steady fees no matter the environment.

This is what Morgan Stanley did, years ago.

Investment banking and trading have long been Goldman’s power centers, and those units generate huge profits in times when markets reward risk-taking.  But you have to take the bad with the good.  Goldman’s investment-banking revenue fell 57% in the third quarter; trading revenue rose 11%.

Asset-management revenue fell 20% to $1.82 billion in the third quarter. Wealth-management revenue was flat at $1.63 billion.

--Bank of America reported better-than-expected third-quarter results, driven by higher client activity.

The banking giant posted earnings of $0.81 per share for the September quarter, down from $0.85 a year earlier, but ahead of consensus of $0.78.  Revenue advanced to $24.5 billion from $22.77 billion, surpassing the Street’s view for $23.46 billion.

“We continued to see strong organic client growth across our businesses, with increased client activity helping to drive revenue up by 8%,” CEO Brian Moynihan said in a statement.  “Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts.”

Consumer banking revenue increased 12% to $9.9 billion on higher balances and rates, while global wealth and investment management edged up 2% to $5.43 billion.

Bank of America recorded $898 million in provisions for credit losses, compared with a benefit of $624 million.

--United Airlines reported third-quarter earnings that trounced expectations, delivering what CEO Scott Kirby called “the best operational quarter in our history,” by most metrics.

United also said it expects fourth quarter adjusted operating margin will surpass 2019 figures.

The Chicago-based carrier cited three durable trends for air travel demand that are more than fully offsetting any economic challenges.  Air travel is still in the recovery phase from Covid, hybrid work is giving customers the freedom and flexibility to travel for leisure more often, and external supply challenges will limit industry supply for years to come.

“Despite growing concerns about an economic slowdown, the ongoing Covid recovery trends at United continue to prevail and we remain optimistic that we’ll continue to deliver strong financial results in the fourth quarter, 2023 and beyond,” Kirby said in a statement.

United last week added more flights to its summer 2023 schedule after seeing “historic levels of demand for travel to Europe,” up 20% compared with 2019.  United said its flights to 37 cities in Europe, Africa, India and the Middle East next summer will be more than all other U.S. airlines combined.

United reported third-quarter adjusted earnings of $927 million, and total operating revenue of $12.9 billion, up 13.2% from the third quarter of 2019.  The shares climbed 5% in response.

--American Airlines Group Inc. on Thursday forecast that fourth-quarter profit would exceed analyst estimates after posting better-than-expected earnings in Q3, as demand for travel remained resilient despite higher airfares and growing risks of an economic recession.

Total revenue in the fourth quarter is projected to be up 11% to 13% from the same period in 2019, while capacity is estimated to be down 5% to 7%.

“Demand remains strong, and it’s clear that customers continue to value air travel and the ability to reconnect post-pandemic,” CEO Robert Isom said in a statement.

American said demand for domestic and short-haul international travel is “very strong,” and lifting of travel restrictions and testing requirements around the globe are expected to further drive up long-haul international traffic.  It said debt reduction remained a “top priority,” adding the company is on track to reduce total debt levels by $15 billion by 2025.

Revenue for the quarter jumped 13% versus 2019 to $13.5 billion.  American reported an adjusted profit of $478 million, vs. an adjusted loss of $641 million a year ago.

--Spirit Airlines shareholders voted to approve a $3.8 billion merger proposal with JetBlue.  If approved by regulators, it will create the fifth-largest airline in the U.S.

The combined airline would have a fleet of 458 aircraft. The airlines will continue to operate independently until after the transaction closes.

--TSA checkpoint travel numbers vs. 2019

10/20…95 percent of 2019 levels
10/19…93
10/18…94
10/17…94
10/16…96*
10/15…99
10/14…94
10/13…93

*The TSA screened 2.49 million passengers on Sunday, the highest daily number since February 2020, but still below the 2.61 million screened on the same day in 2019.

--Tesla reported slightly better-than-expected third-quarter earnings, but the stock dropped because its bottom-line numbers aren’t enough to quell investor questions about the company and the industry.

In its report, Tesla reiterated its guidance for 50% volume growth for the foreseeable future, but there isn’t much added detail about that future. 

Tesla reported $1.05 per share from $21.5 billion in sales, while the Street was looking for $1 a share from $22 billion in revenue.

Third-quarter operating profit came in at $3.7 billion, a record, but below analysts’ forecasts of $3.9 billion.

Gross profit per car delivered was a hefty $15,200 per unit, but this was down from $16,000 in the second quarter of 2022, so it probably unnerved a few investors.

In a conference call with analysts, CEO Elon Musk dismissed concerns about slowing demand. “We will sell every car we make,” he said.  He also said Tesla’s Berlin factory is now making 2,000 cars each week and the Austin plant would reach that pace soon.  Tesla builds cars at factories in Berlin, California, China and Texas.

Musk said Tesla had seen signs of slowing economic activity in China and Europe while the United States “is actually looking pretty healthy.”

“I wouldn’t say we’re recession proof, but it’s certainly recession resilient,” he said.

Previously, Tesla had repeatedly said it was aiming for 50% growth this year from the 936,172 cars it delivered in 2021, but fourth quarter deliveries will be less than 50%.

Tesla has managed to increase its output of cars despite a global shortage of computer chips and other automotive parts.  But it is still facing some manufacturing challenges.  The company’s assembly plant in Berlin halted production temporarily in July and suffered a fire in September.

The company recently said it expected to start production of a battery-powered semi truck on Dec. 1.  Musk first unveiled the truck in 2017, saying it would go into production by 2019.  On Wednesday, he said the first trucks would be delivered in December and that the company would eventually aim to make 50,000 a year for the North American market.

Musk said he saw a path for Tesla to be worth more than two mammoth companies, Apple Inc. and Saudi Aramco, combined.  Tesla’s market cap is now under $700 billion (about $670 billion), while Apple is worth $2.35 trillion and Saudi Aramco is worth $2.1 trillion.

Separately, Musk acknowledged that he was paying a lot more for Twitter than investors think the company is worth but that he expected to significantly increase its value.  “Long-term potential, in my view, is an order of magnitude greater than its current value,” he said.

Lastly, the Biden administration is discussing whether the U.S. should subject some of Elon Musk’s ventures to national security reviews, including the deal for Twitter Inc. and SpaceX’s Starlink satellite network.

Officials have grown uncomfortable over Musk’s recent threat to stop supplying the Starlink satellite service to Ukraine and what they see as his increasingly Russia-friendly stance following a series of tweets that outlined peace proposals favorable to Vladimir Putin.  And there is his purchase of Twitter with a group of foreign investors.

Speaking of Twitter, we had a report Thursday that Musk planned to lay off up to 75% of the employee base of 7,500 workers, leaving the company with a skeleton crew, according to the Washington Post.

--Florida Sen. Rick Scott (R) called for action from the Transportation Department and automakers after a series of electric vehicle fires tied to Hurricane Ian.

The storm caused flooding and destruction across the state, and fire officials say they are still seeing its impact with EV batteries catching fire after saltwater damage.  The National Highway Traffic Safety Administration is aware of multiple fires in Tesla vehicles, the agency said in a letter to a Florida official obtained by Bloomberg.

“This emerging threat has forced local fire departments to divert resources away from hurricane recovery to control and contain these dangerous fires,” Scott said.  “Car fires from electric vehicles have proven to be extremely dangerous and last for a prolonged period, taking in many cases up to six hours to burn out.”

Florida’s chief financial officer and state fire marshal, Jimmy Patronis, noted two houses burned down last week after an EV caught fire.

“Lithium-ion vehicle battery fires have been observed both rapidly igniting and igniting several weeks after battery damage occurred,” Jack Danielson, executive director at NHTSA, wrote in a letter to Patronis.

Florida has more than 95,000 electric vehicle registrations, second-most to California.

--The Internal Revenue Service adjusted key tax code parameters for 2023 to reflect higher inflation, raising the standard deduction and the income thresholds where tax rates take effect.

The 37% top marginal tax rate will apply to individual income above $578,125 and married couples’ income above $693,750 next year, as those thresholds go up 7% from 2022 under inflation adjustments announced by the agency on Tuesday.

The standard deduction will climb to $27,700 for married couples and $13,850 for individuals, both also up about 7% from this year, letting taxpayers shield more of their earnings from income taxes. The maximum contribution to a healthcare flexible spending account will climb to $3,050 from $2,850.

Retirement savers can sock away significantly more in their tax-deferred retirement accounts next year, as the IRS has boosted the 401(k) and IRA contribution limits to account for inflation.  Check with your financial adviser.

--IBM reported better-than-expected Q3 results and the shares rose, with growth across all of the company’s business segments, despite stiff headwinds from the strong dollar.

For the quarter, revenue came in at $14.1 billion, up 6%, well above consensus of $13.5 billion.  The company’s revenue beat Street estimates in the software and hardware businesses, while falling a bit below for consulting.

IBM lost $3.2 billion on the quarter, but this reflected a $5.9 billion pretax charge related to the previously announced transfer of a portion of the company’s U.S. defined benefit pension obligations to third party insurers.

IBM said software revenue was $5.8 billion, up 7% (14% in constant currency terms), with Red Hat up 12%.  Infrastructure revenue, including the company’s mainframe business, was $3.4 billion, up 15%.  Consulting revenue was up 5%.

CEO Arvind Krishna said the strong dollar remains an ongoing concern, noting that IBM will gradually pass along to customers some of the added costs for both its software and hardware businesses from weakening foreign currencies.

Krishna added the company expects to exceed full-year revenue growth targets as robust demand for the company’s digital services helps cushion the blow from the strong greenback.

--Netflix Inc. reversed customer losses that had hammered its stock this year and projected more growth ahead, reassuring Wall Street as it prepares to offer a new streaming option with advertising.

The shares jumped 13%, boosted in part by the streaming giant’s forecast that it would pick up 4.5 million customers in the fourth quarter.

The company’s stock had fallen nearly 60% this year before the earnings report.

“Thank God we’re done with shrinking quarters,” said CEO Reed Hastings, adding the company needs to continue gathering momentum by focusing on content, marketing and a lower-priced plan with advertising.

From July through September, Netflix attracted 2.4 million new subscribers worldwide, more than double what Wall Street expected.

During the quarter Netflix released the final episodes of Sci-Fi hit “Stranger Things” plus serial-killer series “Dahmer – Monster: The Jeffrey Dahmer Story,” which became one of Netflix’s most-watched series of all time.

Netflix is working to kick-start membership growth after a sudden decline in the first half of the year, when the company’s subscriber base shrunk 1.2 million amid a rocky global economy and growing competition for online video viewers.  Most established services have stopped growing in the U.S. Newer entrants, such as Paramount Global’s Paramount+, are picking up market share thanks to live sports programming.

But Netflix has pointed out its competitors are losing gobs of money, compared with its operating profit of $5 billion to $6 billion.

For the third quarter, Netflix topped Street projections with revenue of $7.9 billion, up 6% from a year earlier, while earnings were $3.10 per share.  For the current quarter it projects revenue of $7.78 billion, owing to the strong dollar taking a toll.

But $7.8 billion would translate into a 4% increase from the same time last year.  By comparison, Netflix’s year-over-year revenue gain was 16% in its 2021 holiday-season quarter.

Netflix is also launching a $7-per-month streaming plan with advertising in early November to attract cost-conscious customers, a move executives had long resisted.  The new service will include four to five minutes of advertising per hour for streaming movies and TV shows.  “Basic with Ads” is $3 cheaper than the company’s Basic plan, which is $9.99 a month, and a dollar a month cheaper than the new ad-supported tier on Walt Disney’s Disney+.

--Snap Inc. shares cratered about 30% after the company reported a slowdown in sales growth and signaled the digital-ad market could remain lackluster for some time.

Snap, in an investor letter Thursday, said it is operating on an assumption of no revenue growth this quarter from the year-ago period, even though it has seen about 9% growth so far for the period.

The parent of the Snapchat app is among several social-media companies that have been struggling to respond to the sagging ad market and privacy policy changes Apple Inc. introduced last year that make it more difficult to target ads and track their performance.

Snap said it generated $1.13 billion in sales in the most recent quarter, or 6% above the year-earlier figure.  That was the slowest rate of growth since going public and below the 8% figure Snap said in August it was seeing.

The company didn’t issue detailed financial projections for the current quarter.

Snap is the first of the digital-ad-dependent companies to report, with Facebook parent Meta Platforms Inc. and Google parent Alphabet up next week.

--Microsoft Corp. laid off more employees this week, becoming the latest tech company to show signs of concern about future demand.

In July the software maker said it had plans to cut a number of positions, affecting less than 1% of its total workforce (which was more than 200,000 at the time).

On Monday, the company didn’t give a figure for the number of layoffs that have started this week.  We should learn more when Microsoft reports earnings next week.

--Johnson & Johnson reported adjusted Q3 earnings of $2.55 per share, down from $2.60 a year earlier but above estimates.

Sales for the quarter totaled $23.79 billion, up from $23.34 billion a year earlier.   Profit climbed 22% to $4.46 billion.

The company basically maintained its guidance for the full-year 2022.

J&J brings in nearly half of its sales from outside the U.S., and a strong dollar, which is now worth more than a euro for the first time in 20 years, can affect sales for companies that do a lot of international business.

Revenue climbed 9%, without the impact of foreign exchange, to $13.2 billion, led by sales of the blood cancer treatment Darzalex, which soared nearly 30% to $2.06 billion.

The company’s one-shot Covid vaccine had no U.S. sales, and $489 million in revenue from international markets.

The medical devices unit reported a 2% rise in sales on demand for contact lenses, but the division has been under pressure from extended lockdowns in China and a slow recovery in demand for some non-urgent surgery delayed due to Covid-19.

--Procter & Gamble dampened its fiscal 2023 earnings and sales outlook on higher combined foreign exchange and cost headwinds, as the consumer goods company reported mixed first-quarter results that topped analysts’ expectations.

The company said Wednesday it now anticipates earnings per share to be towards the low end of its previously issued guidance range of flat to up 4%.  Sales are expected to be down 1% to 3%, compared with the original forecast of flat to up 2%, while the company reiterated its organic revenue growth outlook of 3% to 5%.

At the same time P&G raised its cost expectations by $600 million to $3.9 billion, citing unfavorable foreign exchange rates, commodity and materials, as well as freight costs.

For the quarter sales ticked up 1% to $20.61 billion, slightly above expectations, though volume dropped.

“We delivered solid results in our first quarter of fiscal 2023 in a very difficult cost and operating environment,” CEO Jon Moeller said in a statement.

Sales in the beauty segment were unchanged year-on-year at $3.96 billion, while grooming fell 4% to $1.63 billion.  Healthcare sales advanced 3% to $2.78 billion, while the fabric and home care and baby, feminine and family care segments each logged revenue growth of 1%.

--AT&T beat both sales and earnings metrics for the third quarter and raised its forecast for profit on Thursday, the stock having its best day since mid-March 2020, up nearly 8%.

Revenue was $30 billion for the September quarter, slightly ahead of expectations, and the company adjusted its full-year earnings projection up a few pennies.

The company intends to spend roughly $24 billion this year to build out its 5G and fiber networks.

AT&T reported 708,000 in postpaid phone net adds compared with the 552,300 Wall Street predicted.  The 338,000 in Fiber net adds was close to analyst estimates and the second-best quarter for AT&T Fiber subscriber growth in history.

--Union Pacific Corp. on Thursday cut its annual volume growth forecast despite a rise in third-quarter shipments, as the railroad operator struggles with worker shortages.

The company also lowered its forecast for 2022 operating ratio, a key profitability metric for railroads, to around 60% from around 58%, in part due to a new tentative labor deal with unions.

Shares of the company, which connects West Coast ports to key terminals such as Chicago, were down 3% on the news.

The railroad industry has come under severe criticism from shippers and the U.S. Surface Transportation Board for cutting staffing levels to the bone in pursuit of a leaner operating model, which has left it struggling to fulfill demand. Apart from labor shortages, supply-chain snags and port congestion have also disrupted railroad operators’ shipments over the past year.

“Inflationary pressures and operational inefficiencies continued to challenge us,” Union Pacific CEO Lance Fritz said in a statement.  The company trimmed its forecast for full-year volume growth to about 3% from 4%-5%.  Quarterly net income rose 13% to about $1.9 billion.  Revenue rose 18% to $6.57 billion, helped by higher shipment prices.

--French cement maker Lafarge pleaded guilty in U.S. court on Tuesday to a charge that it made payments to groups designated as terrorists by the United States, including Islamic State, so the company could keep operating in Syria.

The admission in Brooklyn federal court marked the first time a company has pleaded guilty in the United States to charges of providing material support to a terrorist organization.

Lafarge, which is now part of Swiss-listed Holcim, agreed to pay $778 million in forfeitures and fines as part of the plea agreement.  U.S. prosecutors said Lafarge and its Syrian subsidiary paid Islamic State and al Nusra Front, through intermediaries, the equivalent of approximately $5.92 million between 2013 and 2014 to allow employees, customers and suppliers to pass through checkpoints after civil conflict broke out in Syria.  That allowed the company to earn $70 million in sales revenue from a plant it operated in northern Syria, prosecutors said.

“Lafarge made a deal with the devil,” Breon Peace, the top federal prosecutor in Brooklyn, told reporters following the guilty plea.  “This conduct by a Western corporation was appalling and has no precedent or justification.”

Foreign Affairs, Part II

China: In a two-hour speech to the Chinese Communist Party congress, President Xi Jinping, who will be awarded an unprecedented third term on Sunday, declared China’s global power had increased while warning of “dangerous storms” ahead, striking a defiant tone.

“China’s international influence, appeal and power to shape the world has significantly increased.”  Still, he warned of a more unstable international environment, saying China must be prepared for “strong winds and high waves and even dangerous storms.”

On Taiwan, Xi said the “wheels of history are rolling” toward “reunification,” adding “it can without a doubt be realized.”

For those looking for signs that the Covid restrictions would be gradually rolled back, Xi defended the policy of eradicating the coronavirus, saying it protected the people and the economy.

“We have adhered to the supremacy of the people and the supremacy of life, adhered to dynamic zero-Covid…and achieved major positive results in the overall prevention and control of the epidemic, and economic and social development,” Xi said.

But the biggest applause came when Xi restated opposition to Taiwan independence.

“The next five years will be crucial,” Xi said in the speech before some 2,000 delegates in the Great Hall of the People.  He repeatedly invoked his slogan of the “rejuvenation of the Chinese nation,” which includes reviving the party’s role as economic and social leader in a throwback to what Xi regards as a golden age after it took power in 1949.

The party’s military wing, the People’s Liberation Army, needs to “safeguard China’s dignity and core interests,” Xi said, referring to a list of territorial claims and other issues over which Beijing says it is ready to go to war.

“We will work faster to modernize military theory, personnel and weapons,” Xi said.  “We will enhance the military’s strategic capabilities.”

Xi made no mention of Russia’s invasion of Ukraine, which Beijing refuses to criticize. And he defended a crackdown on a pro-democracy movement in Hong Kong, saying the party helped the former British colony “enter a new stage in which it has restored order and is set to thrive.”

Amnesty International warned Sunday that extending Xi’s time in power will be a “disaster for human rights.”  In addition to conditions within China, it pointed to Beijing’s efforts to “redefine the very meaning of human rights” in the United Nations.

China’s top military brass have vowed to be on high alert and prepared for war as the nation faces mounting military confrontation with the United States.

The remarks were delivered during panel discussions on the sidelines of the party congress.

Defense Minister General Wei Fenghe said China was running into “severe and grave national security conditions” and that it was important for the military to adhere to President Xi’s directives.

The military must implement Xi’s thought on “strengthening the military and improving its ability to win,” Wei was quoted as saying by state-run Xinhua on Wednesday.

“The military has to maintain a high degree of vigilance, always prepare for war and resolutely defend the country’s sovereignty, security and development interests.”

The pledge came following Xi’s call on Sunday for the PLA to move quicker with troop training and new strategies to become a world-class military.

Monday, Secretary of State Antony Blinken said China has made a decision to seize Taiwan on a “much faster timeline” than previously thought.

“There has been a change in the approach from Beijing toward Taiwan in recent years,” Blinken said at an event at Stanford University.

Blinken said China had made a “fundamental decision that the status quo was no longer acceptable, and that Beijing was determined to pursue reunification on a much faster timeline.”

In response to a question from the audience, Blinken said China was willing to do what it takes to win over Taiwan.

“If peaceful means didn’t work, then it would employ coercive means,” he said.  “And possibly, if coercive means don’t work, then maybe forceful means to achieve its objectives.  And that is what is profoundly disrupting the status quo and creating tremendous tensions.”

David Ignatius / Washington Post

“As Chinese President Xi Jinping prepared for his coronation this week as China’s 21st-century emperor, he trumpeted the success of his hard-line policies over the past five years – and, in the process, offered an ominous warning of what’s to come.

“Xi’s self-celebration came in the ‘work report’ he delivered Sunday to the National Congress of the Chinese Communist Party that’s meeting in Beijing.  It was an unyielding official affirmation of the leftward turn he has adopted – without any sign that he recognizes the damage these policies have caused for China’s economy or reputation abroad.

“The congress will conclude this weekend by granting Xi an unprecedented third term as China’s leader and installing a new generation of reliable Xi supporters to the ruling Politburo.  Most telling in this festival of personal celebration: Xi’s utter lack of self-criticism.

“Outside the echo chamber of Chinese propaganda, there’s growing evidence that Xi is making mistakes. China’s economic growth is slowing, to what many expect could be under 3 percent this year, and the party was evidently so nervous about this issue that it delayed this week’s scheduled release of third-quarter gross domestic product numbers. China’s business elite, meanwhile, are struggling to cope with Xi’s emphasis on inefficient state-run companies rather than Chinese innovators.  And Chinese citizens have suffered under an oppressive ‘zero Covid’ lockdown.

“Some analysts expected he might offer some modest concessions to his critics at home and abroad – scaling back the zero-Covid policy, for example….

“But Xi offered no apologies for China’s recent course, only praise for his policies and pointed insults for his critics.  The setting of the party congress gave his self-assessment special importance.  The bottom line: If Xi has been moving in the wrong direction in recent years, as many Chinese and foreign analysts believe, he is now promising to run even faster in that direction in the future.

“Xi’s speech was encyclopedic…80 mentions of security, 45 of socialism, 23 of technology.  It mentioned freedom once.

“Xi’s tone toward the United States was not bellicose, but he signaled that China is hunkering down for a period of intense competition with what he suggested was a bullying America: ‘Confronted with drastic changes in the international landscape, especially external attempts to blackmail, contain, blockade and exert maximum pressure on China, we have put our national interests first, focused on internal political concerns, and maintained firm strategic resolve,’ he said….

“On his police-state Covid-19 lockdowns, Xi said he had launched ‘an all-out people’s war to stop the spread of the virus,’ and he made no mention of the human costs of these policies. With the coronavirus, China truly has been caught between the health risks for an aging population and the costs of strangling commerce and social interaction.

“As for the economy, Xi defended his neo-Maoist emphasis on state-run firms, and the consequent throttling of entrepreneurs.  He attacked ‘money worship, hedonism, egocentricity and historical nihilism’ and said of the once-vibrant Chinese internet sector, ‘online discourse was rife with disorder.’ Chinese business leaders were already intimidated by Xi’s attacks; now they are likely to retreat from any Western business contacts that might be dangerous.

“Taiwan is the issue that most concerns many Western analysts. They will hardly be reassured that Xi got loud applause when, after saying he wanted peaceful reunification, that ‘we will never promise to renounce the use of force, and we reserve the option of taking all measures necessary.’  He blamed ‘interference by outside forces’ (meaning the United States) and a ‘few separatists seeking ‘Taiwan independence,’’ for any troubles.

“Xi spoke like the modern-day emperor he has now become.  As we read his strident work report, we should remember that its author will be the most powerful Chinese leader in history – whose response to China’s sagging economy and international isolation is full speed ahead.”

Editorial / Wall Street Journal

“The most important election in the world this year is no election at all.  It’s a coronation. When China’s Communist Party anoints President Xi Jinping for a third five-year term this week, it will confirm China’s combination of aggressive nationalism and Communist ideology that is the single biggest threat to world freedom. It all but guarantees an era of confrontation between China and the U.S.

“We say this with regret, and not only because war with China would be a catastrophe. When China embarked on its reform project under Deng Xiaoping in the early 1980s, there was reason to hope that the Middle Kingdom might eventually leave behind its murderous Communist past.  For a time, into the 2000s, that still seemed possible as reforms continued and Chinese living standards increased.

“The bet, which was worth taking for the sake of a better world, was that China would follow the path of other East Asian nations that evolved into democracies as the middle-class grew.  But China’s Communist Party has never relinquished its grip on power as the authoritarians of Taiwan, South Korea, Indonesia and the Philippines did….

“In a decade Mr. Xi has crushed all dissent, imposed a vast censorship regime, and created an intrusive surveillance regime beyond anything the East German Stasi imagined.  He has erased the autonomy for 50 years that China had promised Hong Kong and made Xinjiang province a prison camp for the Uyghurs.

“He has also restored the Communist Party to the commanding heights of the economy, putting decades of market reform in reverse.  Private companies that grew large have been subjected to political control and state-owned companies receive preference in capital allocation. Theft from foreign businesses, inside and outside of China, is a state-sanctioned practice.

“Mr. Xi has also abandoned the restraint abroad that marked the first 30 years after Mao. He has occupied and militarized disputed islands in the South China Sea, though he had promised not to.  He has fanned disputes with India, Australia and Japan, and he is menacing Taiwan militarily. He is building a military that can project power globally and hold the U.S. homeland vulnerable.   Mr. Xi believes in a potent combination of Marxism-Leninism at home and nationalist expansion abroad.

“All of this in service of Mr. Xi’s view that Communist China is destined to replace the U.S. as the world’s leading power….

“(The Xi challenge) is the most formidable the U.S. has faced since World War II, with economic and military power backed by ideological conviction and nationalist ambition.  The West has been slow to recognize the seriousness of the threat, but perhaps the coronation of Mr. Xi will be the catalyst for a bipartisan awakening.

“A U.S. response to Xi Jinping’s challenge is a subject for other editorials on other days. But any response has to start with the recognition that the U.S. military isn’t currently prepared to meet China’s threat. If Mr. Xi becomes convinced China has an advantage in hard power, he will find a moment to act against Taiwan or some other U.S. strategic interest.  The U.S. must rally its confidence and resources, and soon, if it doesn’t want a world dominated by Xi Jinping thought.”

North Korea: The North fired about 100 more artillery shells toward the sea Wednesday in response to South Korean live-fire drills at border areas as the rivals accuse each other of dialing up tensions on the Korean Peninsula with weapons tests.

North Korea has called its missile tests simulated nuclear attacks on South Korean and U.S. targets.

If Pyongyang, as expected, conducts its first nuclear test since 2017, it could well come next week following the conclusion of China’s Communist Party congress.

Iran: As the protests over the death of 22-year-old Mahsa Amini continued, a fire at Iran’s notorious Evin prison last weekend killed at least eight detainees and injured over 60, state media reported.

Iranian authorities said on Saturday that a prison workshop had been set on fire “after a fight among a number of prisoners convicted of financial crimes and theft.”

Evin holds many detainees facing security charges, including Iranians with dual nationality.  In 2018 it was blacklisted by the U.S. government for “serious human rights abuses.”

The latest death toll in the protests was 240, according to rights groups, including 32 minors.  Over 8,000 had been arrested in 111 cities and towns.  The authorities have not published a death toll.

Sunday, President Ebrahim Raisi blamed President Biden for inciting “chaos, terror and destruction” in Iran, the official IRNA news agency reported.

“The American president, who allows himself through his comments to incite chaos, terror and destruction in another country, should be reminded of the eternal words of the founder of the Islamic Republic, who called America the great Satan,” Raisi said. 

“Iran has to end the violence against its own citizens simply exercising their fundamental rights,” Biden said on Saturday.

Saudi Arabia: The U.S. raised concerns with the kingdom about an American citizen whom the Saudis sentenced to 16 years in prison for posting tweets critical of the Saudi government.

The State Department on Tuesday confirmed the man, Saad Ibrahim Almadi, remained in detention.  Almadi had posted the tweets when he was in Florida, and then he was arrested when he went to visit family in Saudi Arabia.

Japan: Prime Minister Kishida Fumio ordered an official inquiry into the Unification Church, a cult-like religious group. The group attracted scrutiny after the assassination of former prime minister Shinzo Abe.  The family of the man accused of killing him was linked to the church, and it was later revealed that almost half of Abe’s and Kishida’s Liberal Democratic Party had some contact with it as well.

Brazil: The run-off in the presidential election between incumbent Jair Bolsonaro and Luiz Inacio Lula da Silva, the former president, is Oct. 30.  The two met for a televised debate this week with Lula calling Bolsonaro “the king of fake news,” saying his policies were responsible for half of Brazil’s 680,000 Covid-19 deaths.  Bolsonaro attacked his opponent’s alleged history of corruption.  Lula is a slight favorite.

Random Musings

--President approval ratings….

Gallup: 42% approve of President Biden’s job performance, 56% disapprove; 39% of independents approve (Sept. 1-16).

Rasmussen:  44% approve of Biden’s performance, 54% disapprove (Oct. 21).

A New York Times/Siena College poll has Biden’s overall job approval number among likely voters at 39%, while his disapproval number stood at 58%.  But broken down further, 18% strongly approve of the job Biden is doing, while 45% strongly disapprove.  That is ugly, if you’re a Democrat.

The latest Reuters/Ipsos national poll completed Tuesday found 40% of Americans approve of Biden’s job performance, unchanged from a week earlier.  [Biden’s low in this survey was 36% in May and June.]

A Fox News poll has Biden’s approval rating at 46%, 53% disapproving.  This is the highest in this survey since January, when it stood at 47%.

--A new Yahoo News/YouGov poll shows that on the generic ballot question, which candidate would you vote for in your congressional district if the election were held today, 46% of registered voters chose the Democrat; 44% pick the Republican.

In August, Democrats were ahead by 6 points (45% to 39%).  So Republicans are gaining support.

But a New York Times/Siena College poll showed that 49% of likely voters said they planned to vote for a Republican to represent them in Congress, with 45% planning to vote for a Democrat.

In this survey, the share of likely voters who said economic concerns were the most important issues facing America has leaped since July, to 44% from 36% - far higher than any other issue.

Separately, I wrote long ago that my own congressional district, N.J.-7, was going to be a national barometer for the midterms…a rematch of incumbent Democratic Rep. Tom Malinowski and Republican challenger and former state Senate Republican leader Tom Kean Jr.

Kean barely lost in 2020…and it was funny how the lead kept narrowing, weeks after the election, due to Kean receiving most of the mail-in ballots (one of which was mine).

I fully expect Kean to win this time, particularly since the latest redistricting moves were to his benefit.

But it’s not going to be an important barometer because the House race is going to be a blowout, nationwide.

Literally, about a block away from me, and across the Passaic River, is District 11, with Democrat incumbent Rep. Mikie Sherrill, who should win her race against the Republican challenger.  [I’m voting for Kean, again, and frankly I’d vote for Sherrill.]

--Various polls show the lead Democratic Gov. of New York Kathy Hochul holds over her Republican challenger, Lee Zeldin, is narrowing.  In a Siena College poll, Hochul drew 52% of likely voters to 41% for Zeldin.  Last month Hochul led 54%-37% in this survey.

But a Quinnipiac University poll released this week had Hochul with only a 4-point lead…50%-46%.

Democrats support Hochul, 91-8; Republicans support Zeldin, 92-7; but independents support Zeldin 57-37.

Hochul leads in Gotham, 59-37; with Zeldin having an edge in the suburbs, 50-49; and leading upstate, 52-44.

Hmmm…the plot thickens. 

--After I posted last time, early Friday evening, they held the Georgia Senate debate between incumbent Democrat Raphael Warnock and Republican challenger Herschel Walker.

Having disparaged Walker in my column, calling him an “idiot,” later Friday as I flipped from baseball to cable to see how the debate went, all the analysts were saying Walker “exceeded expectations.”  Granted, they all quickly said there was a “low bar,” but I thought, ‘Uh oh,’ maybe I shouldn’t have been so harsh on Walker.

So Saturday morning I watched the entire debate, courtesy of YouTube, and, no, I was right.  Herschel Walker is an idiot.  I’m not apologizing for anything.  [Warnock is hardly a star, either.  And the female moderator was horrendous.]

And one other point, while I recognize there is only so much you can get in in a 60-minute debate, there was one question on foreign policy, about how the candidates would react if Putin launched a tactical nuclear weapon, and both deflected and addressed previous issues brought up in the debate, which was beyond pathetic that the moderators didn’t force Walker and Warnock to give an answer, which would have revealed their depth of knowledge on Ukraine overall (or lack thereof).

Biden Agenda

--On Tuesday, President Biden said that he will sign a law to codify abortion rights in January if Democrats control the legislature next year, but opinion polls have shown voters are much more concerned about the economy, which under Biden has seen the highest rates of inflation since the 1970s and 1980s, a turbulent time that helped Ronald Reagan unseat Democratic President Jimmy Carter in the 1980 election.

About one in three respondents in the above-noted Reuters/Ipsos poll pointed to the economy as the biggest problem facing America.  Only one in ten pointed to the end of national abortion rights.

Trump World

--A California federal judge has found evidence that former president Trump allegedly engaged in “a conspiracy to defraud the United States,” ordering the transfer of four emails from Trump attorney John Eastman to the House committee investigating the Capitol attacks.

In an 18-page order Wednesday, U.S District Judge David Carter said the emails were used to press false claims of voter fraud in Georgia even though “President Trump knew that the specific numbers of voter fraud were wrong” and that Trump “continued to tout those numbers, both in court and to the public.”

“The Court finds that these emails are sufficiently related to and in furtherance of a conspiracy to defraud the United States,” the judge concluded as part of a continuing review of Eastman’s communications and the lawyer’s efforts to resist disclosure to the House committee.

Eastman has sought to shield the disclosure of the communications, saying they represent attorney-client contact.  But the judge concluded that no such privilege exists when they offer possible evidence of a crime, known as the ‘crime-fraud exception.’

Back in March, Judge Carter ruled that Trump “corruptly attempted to obstruct” the Jan. 6, 2021 certification of President Joe Biden’s election.

“The illegality of the plan was obvious,” Carter said in the earlier ruling that emerged from the same review of Eastman’s communications.

In the Wednesday ruling, Carter referred to false claims Trump and his attorneys made in December 2020, asserting that Fulton County, Georgia authorities improperly counted the votes of 10,315 dead people, 2,560 felons, and 2,423 unregistered voters.

“President Trump and his attorneys ultimately filed the complaint with the same inaccurate numbers without rectifying, clarifying, or otherwise changing them,” Carter wrote.  “President Trump, moreover, signed a verification swearing under oath that the incorporated, inaccurate numbers ‘are true and correct’ or ‘believed to be true and correct’ to the best of his knowledge and belief.”

Bradley P. Moss, a national security lawyer, said Trump is criminally liable because “he swore under oath information he submitted to the court was accurate when he knew it was not.”

A major focus of the Georgia inquiry continues to be Trump’s Jan. 2, 2021, telephone call to Georgia Secretary of State Brad Raffensperger in which the former president urged the state official to tilt the 2020 statewide vote in his favor.

“So look, all I want to do is this: I just want to find 11,780 votes, which is one more than we have. Because we won the state,” Trump told Raffensperger, according to audio of that call.

Trump responded to Judge Carter’s missive on Truth Social:

“Who’s this Clinton appointed ‘Judge,’ David Carter, who keeps saying, and sending to all, very nasty, wrong, and ill informed statements about me on rulings, or a case (whatever!), currently going on in California, that I know nothing about – nor am I represented.  With that being said, please explain to this partisan hack that the Presidential Election of 2020 was Rigged and Stolen. Also, he shouldn’t be making statements about me until he understands the facts, which he doesn’t!”

--The special master reviewing documents seized from Donald Trump’s Mar-a-Lago estate warned Trump’s lawyers that their initial efforts to claim certain records were personal and not presidential might be lacking enough detail.

“Where’s the beef?  I need some beef,” U.S. District Senior Judge Raymond Dearie told the lawyers in a status hearing Tuesday.

--Last Sunday morning, for some reason, Donald Trump lashed out at the American Jewish population for not being ‘more appreciative’ of his administration’s work with Israel.

Trump claimed he was so popular there that he could be the country’s next prime minister.

Posting on his Truth Social app, and soon after his ally, rapper Ye (Kanye West) was removed from Instagram and Twitter for a string of anti-Semitic comments, Trump said:

“No President has done more for Israel than I have. Somewhat surprisingly, however, our wonderful Evangelicals are far more appreciative of this than the people of the Jewish faith, especially those living in the U.S.

“Those living in Israel, though, are a different story – Highest approval rating in the World, could easily be P.M.!”

Trump concluded: “U.S. Jews have to get their act together and appreciate what they have in Israel – Before it is too late!”

In a statement to the DailyMail.com, the Anti-Defamation League accused Trump of “Jewsplaining.”

“We don’t need the former president, who curries favor with extremists and antisemites, to lecture us about the U.S.-Israel relationship.

“It is not about a quid pro quo; it rests on shared values and security interests. This ‘Jewsplaining’ is insulting and disgusting.”

--Donald Trump’s real estate company dramatically overcharged the Secret Service, charging agents up to $1,185 a nice for rooms at his own hotel.

A report from the House of Representatives Oversight Committee accused Trump of “self-dealing” by soaking the taxpayer for about five times the government’s normal per diem rate ranging from $195 to $240.

Despite repeated claims that the former President would use his businesses to save the federal government money, including representations from Eric Trump that government employees traveling with former President Trump “stay at our properties for free,” documents obtained by the Committee show that the Secret Service was charged rates in excess of the government rate at least 40 times from January 20, 2017 to September 15, 2021.

This only includes the D.C. property.  The Committee has yet to see payments for visits to Mar-a-Lago, his golf course in Bedminster, N.J., or overseas properties during frequent foreign travel by the Trump family.

--Steve Bannon was sentenced to four months in prison Friday for refusing to cooperate with lawmakers investigating the Jan. 6, 2021, attack on the Capitol.

Bannon was convicted by a jury in July on two counts of contempt of Congress for failing to provide documents or testimony.

--Finally, the House committee investigating the Jan. 6 attack issued a subpoena to Donald Trump today, exercising its subpoena power against the former president who the committee claims “personally orchestrated” a multi-part effort to overturn the results of the 2020 election.

The nine-member panel issued a letter to Trump’s lawyers, demanding his testimony under oath by Nov. 14 and outlining a request for a series of corresponding documents, including personal communications between Trump and members of Congress as well as extremist groups.

As I go to post, it is unclear how Trump and his legal team will respond.

The Pandemic

--The World Health Organization said on Wednesday that Covid-19 remains a global emergency, nearly three years after it was first declared as one.  The WHO’s emergency committee first made the declaration for Covid-19 on Jan. 30, 2020.

The UN-agency has said in recent months that while cases are falling in parts of the world, countries still need to maintain their vigilance and push to get their most vulnerable populations vaccinated.

“Although the public perception is that the pandemic is over in some parts of the world, it remains a public health event that continues to adversely and strongly affect the health of the world’s population,” the WHO’s committee said. It noted that even though the number of weekly deaths are the lowest since the pandemic began, they still remain high compared to other viruses.  “This pandemic has surprised us before and very well may again,” WHO Director-General Tedros Adhanom Ghebreyesus told reporters.

--Vaccine experts advising the Centers for Disease Control and Prevention supported adding Covid-19 vaccines to the agency’s lists of recommended regular immunizations.

The Advisory Committee on Immunization Practices, or ACIP, voted unanimously on Thursday in support of including Covid-19 shots on the lists of measles, tetanus and other inoculations that adults and children 6 months and older should get in the U.S.

Now, it is up to the CDC to sign off.

The addition of the Covid-19 shots to the lists wouldn’t mean the CDC would require them. Rather, the CDC would be recommending people get the shots as a regular part of their vaccinations against long-running infectious diseases.

--Covid-19 drove a dramatic increase in the number of women who died from pregnancy or childbirth complications in the U.S. last year, a crisis that has disproportionately claimed Black and Hispanic women as victims, according to a government report released Wednesday.

It finds that pregnancy-related deaths have spiked nearly 80% since 2018, with Covid-19 being a factor in a quarter of the 1,178 deaths reported last year.  The percentage of preterm and low birthweight babies also went up last year, after holding steady for years.  And more pregnant or postpartum women are reporting symptoms of depression.

--Personally, it took ten days before I tested negative in my own little bout with Covid, but then I rolled right into a bad head cold.  I’m falling apart, like that guy in the Upwork commercials.

--Today, Spain became the last European nation to fully lift Covid-19 international travel restrictions, meaning travelers from the EU and non-EU nations will no longer be required to show proof of vaccinations or tests or file health control forms.

--The price of Pfizer’s Covid vaccine is going up…way up…to as much as $130 per dose when its current program with the U.S. government runs out.

But that’s not until the first quarter of next year, at the earliest, and people with government health insurance or private health insurance will still be able to get it for free…for now.

Rival Moderna plans to raise the price to about $60 at some point.

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--College enrollment dropped for the third consecutive school year after the start of the pandemic, dashing universities’ hopes that a post-Covid rebound was at hand.

According to National Student Clearinghouse, a nonprofit that released a report Thursday, the rate of the decline has slowed this fall, with college enrollment dropping 1.1% since last autumn.  Over the first two years of the pandemic, enrollment fell about 6.5%.

About 1.5 million fewer students are enrolled in college than before the pandemic.

Online schools and historically Black colleges and universities were among the few categories of schools to enroll more students in the fall, data show.

University enrollment was sinking for a decade before the pandemic and this year’s rate marks a return to the earlier, slower pace of decline.

--What an awful story in Florissant, Mo., specifically an elementary school in the St. Louis suburb that has been found to contain significant levels of radioactive contamination after a report by Boston Chemical Data Corp. confirmed fears about contamination at Jana Elementary School.

Boston Chemical did not say who or what requested and funded the report, but the school sits in the flood plain of Coldwater Creek, which was contaminated by nuclear waste from weapons production during World War II.  The waste was dumped at sites near the St. Louis Lambert International Airport, next to the creek that flows to the Missouri River.  The Army Corps of Engineers has been cleaning up the creek for more than 20 years, and a previous Corps study raised the initial fears about the school.

Levels of the radioactive isotope lead-210, polonium, radium and other toxins were “far in excess” of what Boston Chemical had expected.  Dust samples taken inside the school were found to be contaminated.

Inhaling or ingesting these radioactive materials can cause significant injury, the report said.

So the schoolchildren have gone remote for the rest of this semester and then are going to be placed in other schools the remainder of the school year.  What a tragedy.

--The Florida county that was devastated by Hurricane Ian has seen a surge in cases of flesh-eating bacteria illnesses and deaths.

Officials say Lee County, where the Cat 4 storm made landfall on Sept. 28, has recorded 29 illnesses and four deaths owing to the bacteria.

All but two cases were diagnosed after the hurricane.

Vibrio vulnificus infections can be caused after bacteria enters the body through open cuts.

The bacteria live in warm brackish water, like standing floodwaters.

A statement from the Florida Department of Health in Lee County called on residents to “always be aware of the potential risks associated when exposing open wounds, cuts, or scratches on the skin to warm, brackish, or salt water.”

“Sewage spills, like those caused from Hurricane Ian, may increase bacteria levels,” the statement continued.  “As the post-storm situation evolves, individuals should take precautions against infection and illness caused by Vibrio vulnificus.”

Yikes.  All those initial pictures of survivors wading through the polluted water is even more disturbing in hindsight.

--Last week I brought up the severe drought issue on the Mississippi River and this week you saw how it became national news.  Long-term weather forecasts are not good on this front.

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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 $1660
Oil $85.15

Regular Gas: $3.82, nationally; Diesel: $5.34 [$3.36 / $3.54 yr. ago]

Returns for the week 10/17-10/21

Dow Jones  +4.9%  [31082]
S&P 500  +4.7%  [3752]
S&P MidCap  +3.0%
Russell 2000  +3.6%
Nasdaq  +5.2%  [10859]

Returns for the period 1/1/22-10/21/22

Dow Jones  -14.5%
S&P 500  -21.3%
S&P MidCap  -18.6%
Russell 2000  -22.4%
Nasdaq  -30.6%

Bulls 31.3
Bears 40.3

Hang in there.

Brian Trumbore

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