Week in Review

---

Week in Review

08/12/2023

For the week 8/7-8/11

[Posted 5:30 PM ET]

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 1,269

Our thoughts go out to Hawaii, and its catastrophic fires on the island of Maui that as I go to post have claimed at least 55 lives, with far more feared dead as the recovery effort just begins in the resort city of Lahaina.  A tragic confluence of events, a hurricane 800 miles away to the south nonetheless interacting with a high pressure system to the north leading to 80-mph winds, a severe drought on parts of the island, and the use of non-native grasses on many ranches and plantations that don’t retain the moisture like native grasses do, and it was a formula for the disaster we’ve seen, particularly as it struck at night, residents given zero warning, many fleeing into the ocean.

“We just had the worst disaster I’ve ever seen.  All of Lahaina is burnt to a crisp.  It’s like an apocalypse,” said Lahaina resident Mason Jarvi, who escaped from the city.

For much of the western side of Maui, there is no electricity and no water, and no communication with the outside world, cellphone towers being among the first victims of the conflagration.

We pray for these good people.  They’ll need everything.

---

President Biden escalated his confrontation with China on Wednesday by signing an executive order banning new American investment in key technology industries that could be used to enhance Beijing’s military capabilities.

Biden declared the move “a national emergency to deal with the threat of advancement by countries of concern in sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities of such countries.”

The order will prohibit venture capital and private equity firms from pumping more money into Chinese efforts to develop semiconductors and other microelectronics, quantum computers and certain artificial intelligence applications.  The White House stressed the move was tailored to guard national security, but China sees it as part of a wider campaign to contain its rise.

“The Biden administration is committed to keeping America safe and defending America’s national security through appropriately protecting technologies that are critical to the next generation of military innovation,” the Treasury Department said in a statement.  The statement emphasized that the executive order was a “narrowly targeted action” complementing existing export controls and that the administration maintained its “longstanding commitment to open investment.”

This is serious.  China at first declared that it was “very disappointed” by the order, which it said was designed to “politicize and weaponize trade,” and it hinted at retaliation.

“The latest investment restrictions will seriously undermine the interests of Chinese and American companies and investors, hinder the normal business cooperation between the two countries and lower the confidence of the international community in the U.S. business environment,” Liu Pengyu, a spokesman for the Chinese embassy, said in a statement.

Administration officials said the president’s order is part of their effort to “de-risk” the relationship with China but not to “decouple” from it.  Wednesday’s announcement, though, takes that effort to a new level.  While export bans and concerns about Chinese investment in the United States have a long history, the United States has never before attempted such limits on the flow of investment into China.

The administration has planned a 45-day period of consultation, seeking input from domestic stakeholders and allied countries, to refine and clarify the rules that will be put in place to fulfil the objectives of the order.

Biden then labeled China’s economic problems as a “ticking time bomb” at a political fundraiser in Utah on Thursday, referring to Communist Party leaders as “bad folks,” in yet another barb against President Xi Jinping’s government.

As Bloomberg described, however, Biden’s comments included several major inaccuracies about the world’s second-largest economy.  Biden said that China was in “trouble” because its growth has slowed and it had the “highest unemployment rate going.”*  He also blasted Xi’s signature Belt and Road initiative as the “debt and noose,” because of the high levels of lending to developing economies associated with the global investment program.

*China’s unemployment rate is 5.2%, hardly the “highest rate going.”  The president was obviously thinking of China’s youth unemployment rate, over 21%.

Biden:

“China was growing at 8% a year to main growth, now close to 2% a year,” he told donors, misstating China’s rate of expansion.  [China reported annualized growth of 6.3% in the second quarter, up from 4.5% in Q1, but analysts are in agreement it will have a hard time reaching its 5% target for all of 2023.  That’s not 2%.]

Biden also stupidly said: “It’s in a position where the number of people who are of retirement age is larger than the number of people of working age,” a statement that was not only incorrect but also off by hundreds of millions of people.

And Joe Biden is going to be the Democrats’ nominee in 2024?  This is a nightmare for the country.

---

Speaking of nightmares, Donald Trump won’t shut up, even though his attorneys prefer that he does just that.  Everything he says on Truth Social, and in rallies, can and will be used against him in the myriad of cases piling up.

But, he likes to say, “They’re not taking away my First Amendment right!” as he talks non-stop about 2020 being a stolen election.

It’s also sickening how for years, Republican “leaders,” including many in the current field of presidential candidates, have been sowing distrust in our institutions, including the military.

As Defense One wrote the other month: “Halfway through the Trump administration, Americans’ regard for and trust in the military began to nose-dive. The share of respondents who told a Reagan Forum poll they had ‘a great deal of confidence’ in the military plunged from 70% in 2018 to 63% the following year, and 56% in early 2021.  (It bottomed out at 45% during the Biden administration’s first winter, and rose in the most recent poll to 48%.)”

Much more on Trump below.

But what’s this?  Attorney General Merrick Garland just announced that prosecutor David Weiss has been elevated to Special Counsel for the Hunter Biden case, after it took Weiss five years to come up with a plea deal that a federal judge then struck down?

Oh brother.

Looking forward to 2024?

---

Walter Russell Mead / Wall Street Journal

“Record high temperatures in the ocean around Florida, wildfires and heat waves across Southern Europe and flash floods and freak storms elsewhere have stirred fears of catastrophic climate change.

“But another kind of climate change is also at work. The global political climate is heating up, and the rising geopolitical temperature is likely to hit faster and could wreak more havoc than anything Greenpeace is worried about.  Geopolitical climate denialism is a more urgent danger to national security than melting glaciers in Greenland….

“Team Biden came into office knowing that the geopolitical world was getting hotter, but believing that the root cause was Donald Trump’s bull-in-a-China-shop approach to foreign policy.  Put the smart people back in charge, restore some nuance and diplomatic finesse to the system, repair the trans-Atlantic relationship, and all would be well.  ‘Park’ Russia by reaching an understanding with Vladimir Putin, park Iran by re-entering the nuclear deal, and then firmly but carefully clip China’s wings while inviting Beijing to cooperate on real issues of the day, like global governance and climate change.

“It was an elegant, almost Obamiam strategy, awash in subtlety and finesse. It had one flaw. It could work only if America’s adversaries went along.

“They didn’t.  Instead of rolling tamely into the parking lot, Russia invaded Ukraine and doubled down on its efforts to build a sphere of influence in Africa.  Iran turned up its nose at Mr. Biden’s offer to relaunch the nuclear deal and intensified its drive toward regional hegemony and nuclear weapons.  And China responded to American pressure by deepening its ties to Russia and Iran while stepping up the pressure on Taiwan….

“To give credit where it is due, the administration has taken some smart steps as it gradually grasped the gravity of the situation.  It walked back the foolish policy of alienating Saudi Arabia and began to rethink its posture in the Middle East.  It embraced Indian Prime Minister Narendra Modi.  It is engaging in the Sahel.  It continues to support Ukraine even if moving too slowly on weapons like F-16s.

“But there is one vital thing it is still failing to do. While the Biden administration has discovered that the world is a more dangerous place than it thought back in January 2021, too many Americans still think we are living in Barbie’s world, not Oppenheimer’s.  Mr. Biden, backed by responsible leaders in both parties, needs to alert the country to the very real dangers we face around the world.

“A united and vigilant America can still deter our adversaries from pressing their challenge to a point of no return.  New wars that would dwarf the Ukraine conflict, engage Americans in direct combat, and potentially engulf the entire planet in the most destructive conflict ever waged are not, yet, inevitable.

“Mr. Biden’s greatest challenge is geopolitical, not meteorological.  His most important job is to prepare the American people to face the rapidly intensifying global crisis.

“And he needs to move quickly.

“The global temperature continues to rise.”

This Week in Ukraine….

--Ukrainian forces struck another Russian vessel in the Black Sea over the weekend, Moscow said. Russian officials on Telegram said the oil tanker Sig was hit just after midnight Saturday morning by a Ukrainian sea drone boat similar to the one that struck a Russian amphibious landing ship, Olenegorsky Gornyak, early Friday.  The Sig tanker was among several vessels sanctioned by the U.S. back in 2019 for providing jet fuel to Russian forces in Syria.

No oil was spilled and no one hurt, but the blast “created a hole in the vessel’s engine room at the waterline on the starboard side, forcing the 11-strong crew to fight the water intake,” according to CNN, citing Russian officials.

As the Washington-based Institute for the Study of War put it, however, “The nature and location on the ship of the attack suggest that Ukrainian forces intended to disable the ship without generating significant ecological consequences.”

Former Russian President Dmitry Medvedev suggested Moscow would launch more strikes against Ukrainian ports in response to the attacks on Russian ships in the Black Sea.

“If the Kyiv scum want to create an ecological disaster in the Black Sea, they should get one on the part of that territory that will soon fall to Poland and that will stink for centuries after that,” he said.  “That will be the final judgement for them on the grain deal.”

It wasn’t clear what kind of ecological disaster Medvedev was referring to.  As for the Poland reference, top Russian security officials have suggested, without providing evidence, that Poland aims to take parts of western Ukraine.

--Ukraine said Russia bombed a blood transfusion center near the front line, Kupiansk in eastern Kharkiv region, killing at least two and wounding four, President Zelensky said on his Telegram channel, in a wave of air strikes overnight Sunday, while Moscow reported that it had shot down a drone heading to the capital in the third such attack in a week.

Addressing the hit on the blood transfusion center, Zelensky said: “This war crime alone says everything about Russian aggression.  Defeating terrorists is a matter of honor for everyone who values life.”

--The Moscow-appointed head of Crimea said the Chonhar bridge to the peninsula had been damaged by a missile strike. Another of the three road links between Crimea and Russian-occupied parts of mainland Ukraine, was shelled.  Traffic was halted on a third bridge, linking Russia to Crimea, after the above-mentioned attack on the Russian tanker.

The attacks are making it increasingly hard to get on and off the Black Sea peninsula, which is of military importance to Moscow as well as a popular tourist destination for Russians.

--President Zelensky’s chief of staff said on Monday that talks about the Ukraine war in Saudi Arabia at the weekend dealt a “huge blow” to Russia, and that the participants agreed to hold another meeting of political advisers within about six weeks.

Andriy Yermak told a briefing in Kyiv that no other peace initiatives were discussed at the meeting in Jeddah apart from Ukraine’s, and that all countries present at the talks had fully supported Ukrainian independence and territorial integrity.

Separately, China’s Foreign Minister Wang Yi told his Russian counterpart Sergei Lavrov in a phone conversation on Monday that China would uphold an independent and impartial position on Ukraine as it strives to find a political settlement to the issue.

Wang’s comments to Lavrov were announced in a Foreign Ministry statement that said China would be an “objective and rational voice” at any international multilateral forums and “actively promote peace talks.”

But the statement came after the Foreign Ministry earlier said on Monday that the talks in Saudi Arabia had helped “to consolidate international consensus.”

China was one of 40 countries, including India, the U.S. and European countries, but not Russia, to take part.

Beijing has refused to condemn Moscow for the invasion of Ukraine and has offered its own worthless peace plan.

--President Zelensky conceded Ukraine’s counteroffensive is proceeding more slowly than some observers may prefer, but he also said he knows patience is required to fend off an increasingly exhausted enemy like the Russian military. After all, he said in an interview with Argentina’s La Nacion, “Russia, unlike us, can end this war faster, without unnecessary casualties.”

--A woman was arrested for providing targeting information to Russia during a visit by President Zelensky to Mykolaiv last weekend, one of scores of assassination attempts on him, but curiously this one was made public when others that were thwarted were not.

--Russia’s Defense Ministry on Tuesday said Russian forces had hit a Ukrainian command post in the eastern Ukrainian region of Pokrovsk (Donetsk region that is partially occupied by Russia), the Interfax news agency reported.  Ukrainian officials said Russian missiles had struck the city of Pokrovsk twice on Monday night, destroying a popular hotel and apartments, killing at least seven people including rescuers, and wounding at least 67.

President Zelensky accused Moscow of trying to leave nothing but “broken and scorched stones” in eastern Ukraine.

--At least two people were killed and seven injured in a missile attack on a residential area in the city of Zaporizhzhia on Wednesday, Ukrainian officials said.

The next day, Thursday, Russia hit Zaporizhzhia again, striking a hotel used by foreign aid groups, including the UN, leaving one dead and 16 injured.

--Today, President Zelensky announced that the heads of Ukraine’s regional military recruitment centers were being dismissed from their jobs amid concerns about corruption.

“This system should be run by people who know exactly what war is and why cynicism and bribery during war is treason,” he said in a statement on Telegram.  He said top general Valery Zaluzhny would be responsible for implementing the decision.

--Ukraine says its demining troops have removed more than 100,000 explosive objects left behind by Russia’s invading forces, including 1,500 “removed and neutralized” this week.

But you can see how this process slows the counteroffensive.

--Poland will send up to 10,000 additional troops to its frontier with Belarus, the deputy interior minister told state-run news agency PAP on Wednesday, far more than the number requested by the Border Guard, to stem illegal crossings and maintain stability.

Poland has worried increasingly about the border area since hundreds* of battle-hardened Wagner mercenaries arrived in Belarus last month at the invitation of President Lukashenko.

*Other reports say there are thousands of Wagner forces now in the area.

Belarus started military exercises near the border this week, and Lukashenko said several times that he is restraining Wagner fighters who want to attack Poland.

Poland has also seen an increase in the number of mainly Middle Eastern and African migrants trying to cross the border in recent months.  For the past two years it has accused Belarus of recruiting migrants in poor countries and sending them across illegally to foment instability.

--Russia’s IKAR agriculture consultancy raised its forecasts for Russia’s grain crop this year to 137.0 million metric tons from 134.5 million previously, including 88.0 million tons of wheat, up from 86.5 million, IKAR said on Monday.  This is almost cruel, as Ukraine sees its supplies obliterated in warehouses by Russian missile strikes.

--German prosecutors arrested an officer of the military procurement agency on suspicion of passing secret information to Russian intelligence, the federal prosecutor’s office said.

Germany, one of the largest providers of military hardware to Ukraine, is a major target of Russian spying operations, which have grown in scale since the 2022 invasion, authorities have been warning.

---

Wall Street and the Economy

While the U.S. economy is doing alright, with the first two quarters annualized growth at 2.0% and 2.4%, the rest of the globe is not well.  That’s just a fact, and as discussed above, many investors and traders are ignoring some risks.

One risk increasingly on the radar, though, is the virtual 100 percent certainty of a strike by the United Auto Workers against the Detroit Three (Ford, GM and Stellantis).  That’s Sept. 14, just around the corner, and that won’t be good for Wall Street because it could be a lengthy one.

And there is growing talk of a government shutdown come Sept. 30, as the two sides are far apart on budget negotiations.

But for now, this week it was all about the consumer price index for July, released on Thursday, and it came in generally right as expected, up 0.2%, and 0.2% ex-food and energy; 3.2% and 4.7% on core, respectively, year-over-year.

The 0.2% change in headline CPI was the same as June, while core was also unchanged.

The year-over-year figure of 3.2% was up from June’s 3.0%, but as expected, as we were rolling off June 2022’s high rate and incorporating July 2022’s slower pace in a 12-month comparison.

Producer prices for July came in a tick hotter than expected on both headline and core today.  The PPI was up 0.3%, ditto ex-food and energy, with year-over-year figures of 0.8% headline, 2.4% core.

So we’ve now had three of the six key data points that the Federal Reserve will be examining before their next Open Market Committee meeting Sept. 19-20; personal consumption expenditures index, July jobs report and July CPI, and before the next Fed gathering, we will have all three again (Aug. 31, Sept. 1 and Sept. 13).

So to those Fed governors, including voting members John Williams and Patrick Harker this week, who put out missives that were somewhat dovish and hinted at a Fed pause for Sept., I would instead agree with San Francisco Fed President Mary Daly who said Thursday it was “Premature” to project appropriate policy for the Sept. confab, though she is a non-voting member this year.  Fed Governor Michelle Bowman (voter) repeated her recent comments that inflation remains well above the 2% target and she expects further increases in the funds rate, though as to timing of any further rate increases, yes, it’s about the data of which more is coming.

That said, right now I’d agree the Fed will pause.

But just a word on food and gasoline prices.  These are the two items that most Americans most immediately feel, and food prices are not coming down, and now we’ve seen gasoline prices rising.

Everyone has a food item they kind of use as a benchmark.  I don’t buy eggs, so my item is Stouffer’s Frozen Pizza.  Pre-pandemic it was always $3.49, and a big deal when from time to time the grocery store would have a 2 for $5.00 sale.

But post-pandemic, it’s been stuck at $4.99 (occasionally $4.69 at one of the three supermarkets I go to), and never on sale.

As for gasoline, I was speaking to a youth group in Newark on Tuesday (which I do most summers, part of a terrific foundation a high school classmate, Pastor Michael W. and his wife, put together decades ago), and of the 28 or so kids, grades 10 thru 12 this fall, half were totally disinterested, as is often the case.  I talk to them about everything…from the ’24-hour rule,’ to track and field (having been tipped off a number of the audience were on their high school teams), Niger, which I forced on them, politics, you name it.  But when I asked how many could drive and like seven hands went up, I asked them, ‘When it comes to inflation, I bet the single thing you feel most is rising gas prices.’  They got all worked up on that one.  [It’s funny, I learn so much about life in the inner city when I do this.]

The Atlanta Fed’s very early GDPNow barometer for the third quarter is at 4.1%.

Freddie Mac’s 30-year fixed-rate mortgage is at 6.96% this week, as the 10-year Treasury gyrates in the 3.95% to 4.20% range.

And we had a look at the budget deficit for fiscal 2023, the report on July’s finances, and it wasn’t pretty boys and girls, which is why Fitch issued their ratings downgrade last week; one of the many reasons.  People bitched about the timing of Fitch’s move, especially Democrats, but as I wrote last time, the downgrade/warning was totally warranted.  Yes, the economy is growing, great, and the unemployment rate is 3.5%, great, but in July, despite this good news, the budget deficit was freakin’ $220.78bn, after $227.77bn in June, and is $1.613 trillion for the first ten months of the fiscal year, much larger than the $726.12 billion gap in the same period a year earlier due to smaller receipts and larger outlays.

Editorial / Wall Street Journal

“Congratulations, of a perverse sort, to President Biden and his Congressional comrades. The latest budget figures show that they are breaking peacetime, non-crisis records for spending and deficits.  And there’s no respite in sight….

“What’s astounding is that this Beltway blowout is happening when the economy is growing, the Covid crisis is past, and there are no domestic emergencies to address.  This is when deficits are supposed to decline, as they did during the economic expansions of the 1980s, 1990s and 2000s.  Deficits also fell under President Obama after Republicans regained control of the House in 2010….

“The biggest increase in outlays so far this year has been net interest on the soaring federal debt: a rise of $146 billion to $572 billion, or 34%.  That interest total is nearly double all corporate tax revenue so far this year of $319 billion.

“Interest on the debt this fiscal year has climbed to 15.5% of all federal revenue, and most of the 10 months through July were well before interest rates hit their current levels.  Interest payments will keep soaring as Treasury is scheduled to issue $1 trillion in new debt at higher rates in the current fiscal quarter.  Much more debt will be needed to finance the Biden spending binge that has only begun for the Inflation Reduction Act, the Chips Act and the infrastructure bill.

“This is a dreadful fiscal show by any measure, or any country for that matter. The next time the U.S. Treasury lectures the Greeks or Italians about their fiscal woes, the southern Europeans should laugh out loud.

“This is all the more dismaying because the booming deficit will make it that much harder to raise spending on national defense in a world of growing threats. Student-loan write-offs won’t stop a Chinese invasion of Taiwan or a North Korean missile aimed at Seattle.”

Europe and Asia

After last week’s avalanche of data for the eurozone, nothing of importance this week.

But in Italy, the rightwing coalition surprised markets with the announcement of a 40 precent “windfall” tax on banks, which sent shares in the country’s lenders sharply downwards.

Prime Minister Giorgia Meloni’s government has been critical of banks for failing to raise deposit rates to help small savers, even as it raises lending rates in tandem with European Central Bank rate rises.

Sound familiar?

The tax was approved in a cabinet meeting, late Monday, and announced by Matteo Salvini, deputy prime minister, in a press conference, but it will still require parliamentary approval.

Salvini said the tax would be limited to 2023, and that the funds would be used to help families and businesses hit by rising interest rates, especially those in the process of purchasing their first homes.

Italy’s top five banks reported aggregate profits of $11.5 billion in the first half of 2023, up 64 percent year-over-year, according to DBS Morningstar.  Same as in the U.S., higher net interest margins are the key, and various fees.

Britain: The country eked out unexpected growth in the second quarter, laying the ground for more interest rate hikes from the Bank of England, but it remained the only big advanced economy yet to regain its pre-Covid, late-2019 level.  Official data showed the economy grew 0.2% in the second quarter.

Turning to Asia…China reported that July exports fell 14.5% year-over-year, imports down 12.4% Y/Y.

The export figure was the steepest drop since Feb. 2020 amid slowing global demand. Exports to the U.S. fell 23.1% Y/Y, as U.S. companies accelerate efforts to reduce their dependence upon Chinese suppliers, amid the rising tension between Washington and Beijing.

Exports to the EU fell 20.6%, but were up 52% to Russia, after expanding 90.9% in June.

And then we had China tip into deflationary territory for the first time in two years, as consumer prices fell 0.3% year-over-year in July, producer prices (factory gate) continuing their downward trend, -4.4% Y/Y.

The pressure is on Beijing to act more aggressively to avoid a deepening economic malaise.

Instead of experiencing a surge in prices after the lifting of Covid-19 curbs late last year, China is suffering an unusual bout of falling prices for a range of goods, from commodities such as steel and coal to daily essentials and consumer products, vegetables and home appliances, for example.

Japan reported June household spending (a key metric here) fell 4.2% year-over-year.

Producer prices in July rose 3.6% Y/Y, but this continues a downward trend from double-digits earlier in the year.

Street Bytes

--Stocks finished mixed, with the Dow Jones adding 0.6% to 35281, while the S&P 500 fell 0.3% and Nasdaq had its second straight poor week, down 1.9%, though still up 30.4% for the year.

Next week it’s all about the retailers, led by Walmart and Home Depot, and their earnings reports.

One more…shares in AI-darling Nvidia hit $480 on July 14 and are now down to $408.  Earnings come Aug. 23.

--U.S. Treasury Yields

6-mo. 5.47%  2-yr. 4.89%  10-yr. 4.16%  30-yr. 4.27%

Crazy week, with the yield on the 10-year trading between 3.96% Thursday and 4.19% today before closing at 4.16%.

--The International Energy Agency (IEA) on Friday said in its monthly oil market report that  OPEC+ supply cuts could erode inventories the rest of this year, potentially driving prices even higher, before economic headwinds limit global demand growth in 2024.

Tighter supply driven by OPEC+ oil output cuts on rising global demand has underpinned the rally in prices, with Brent crude trading over $88 a barrel on Thursday, the highest since January, before closing the week at $86.70.  West Texas Intermediate finished at $83.13, up a seventh straight week.

The IEA said if OPEC+ current targets are maintained, oil inventories could draw by 2.2 million barrels per day in the third quarter and 1.2 million bpd in the fourth, “with a risk of driving prices still higher.”

--Saudi state oil giant Aramco reported a $30.07 billion net profit for the second quarter, a drop of nearly 40% from the $48.4 billion recorded in the same period last year amid a decline in hydrocarbon prices.  But this was above analysts’ estimate of $29.8bn.

The company also announced it was paying out a dividend of $29.4 billion, including a performance-based portion which goes back to 2022’s record earnings.  This is what the Saudi government largely lives off.

--Moody’s Investors Service lowered credit ratings for 10 small and midsize U.S. banks and said it may downgrade major lenders including U.S. Bancorp, Bank of New York Mellon Corp., State Street Corp., and Truist Financial Corp. as part of a sweeping look at mounting pressures on the industry.  The move, Monday evening, shook up the market some on Tuesday before a late-rally cut its losses, as bank shares struggled in response.

Higher funding costs, potential regulatory capital weaknesses and rising risks tied to commercial real estate loans amid weakening demand for office space are among strains prompting the review, Moody’s said in a spree of notes late Monday.

“Collectively, these three developments have lowered the credit profile of a number of U.S. banks, though not all banks equally,” it wrote in some of the assessments.

Firms that had their ratings cut included M&T Bank Corp. and Pinnacle Financial Partners.

Moody’s adopted a “negative” outlook for 11 lenders including PNC Financial Services Group, Capital One Financial Corp., Citizens Financial Group, Fifth Third Bancorp, Regions Financial Corp., Ally Financial, and Huntington Bancshares.

--ESPN on Tuesday announced a 10-year deal with Penn Entertainment, a casino company, to create an online sports betting brand called ESPN Bet, catapulting the sports entertainment network into the lucrative world of online gambling.

Penn will operate the online sports book and pay ESPN $1.5 billion in cash for the use of ESPN’s name, marketing, “access to ESPN talent” and other promotional tools, Penn said in a news release.  Penn will also give ESPN options to buy $500 million in Penn stock.

Jimmy Pitaro, the chairman of ESPN, said in a news release that he believed ESPN’s strong brand, combined with Penn’s technology and experience running a sports book, provided a “tremendous opportunity to serve the ever-growing number of consumers interested in betting.”

As part of the transaction, Penn is selling Barstool Sports, a sports media company, back to its founder, David Portnoy.  Penn bought full control of the company from Portnoy this year, after acquiring a partial stake in 2020.  And the Barstool Sportsbook brand was the name of Penn’s online sports book, which struggled to compete with DraftKings and FanDuel.  ESPN Bet will now replace that branding.

Portnoy celebrated the news that he was back in control of the company he founded in 2003.

“For us, for Barstool, for the first time in forever, we don’t have to watch what we say, how we talk, what we do,” he said.  “It’s back to the pirate ship.”

Portnoy was referring to underestimating “just how tough it is for myself and Barstool to operate in a regulated world,” i.e., gambling regulators and stories on his alleged misogynistic behavior and sexual misconduct.

ESPN is of course owned by Disney, and while the sports network is still profitable, costs have been soaring, and cable cord-cutting has hurt revenue as the network tries to adjust to the streaming era.  Recently, ESPN laid off a bunch of high-profile broadcasters, and Disney CEO Bob Iger said he is considering selling a minority stake in the company.

So Disney then reported earnings after the close on Wednesday, reporting operating income of about $1.9 billion for its linear networks for its fiscal third quarter, which marked a 23% decline from the same metric this time last year.  Meanwhile, its streaming venture lost $512 million, though that was half the $1.1 billion in negative operating income it posted a year earlier.

Disney attributed linear TV’s shrinking profitability for a variety of factors including lower viewership and advertising revenue at ABC; higher costs for sports programming on cable, especially for motor sports and the NBA; and a downturn in its international channel income.

CEO Bob Iger said the company is considering options for strategic partners for ESPN to help it transition to a direct-to-consumer model.  Iger has also indicated his willingness to weigh options for its TV networks business, including a spinoff of ABC.

The improvement in streaming was thanks to shrinking losses by Disney+, the flagship platform, as well as lower losses at ESPN+ and higher operating income at Hulu.  Disney reported that its direct-to-consumer revenue for the third quarter grew 9% to $5.5 billion.

The firm previously promised investors that it would turn its streaming businesses profitable by the end of fiscal 2024, and to that end, Disney is raising the price of its ad-free version of Disney+ from $10.99 a month to $13.99 a month later this year.  Its ad-supported tier will remain $7.99 a month.

“Core” Disney+ subscriptions (which do not include the Indian service) increased 800,000 to reach 105.7 million during the quarter.

Iger said the company now expects to exceed the $5.5 billion in savings it had previously promised Wall Street.  The firm has gone through several rounds of layoffs, cutting about 7,000 positions.

Disney’s parks, experiences and products segment, which includes Disneyland, saw its operating income increase 11% to $2.4 billion, but that was thanks to post-pandemic changes at the company’s international parks, especially ones in Shanghai and Hong Kong.

Domestic parks were lower, which Disney attributed in part to a decrease at Walt Disney World Resort due to higher costs, and lower attendance.

The earnings report comes during the Hollywood strike.

SAG-AFTRA, the labor union for actors, and the Writers Guild of America are both currently out, both unions motivated by frustration with how residuals in the streaming industry are structured, as well as concerns about the rising role of artificial intelligence in Hollywood.

“Nothing is more important to this company than its relationships with the creative community,” Iger said during a call with analysts.  “I have deep respect and appreciation for all those who are vital to the extraordinary creative engine that drives this company and our industry,” he said.

A lot more conciliatory than his earlier comments with CNBC’s David Faber.

--United Parcel Service cut its full-year revenue and profitability targets on Tuesday on the back of a slump in shipments, as the world’s largest package deliverer faced labor-related turmoil in its U.S. business.

UPS reached a five-year deal for some 340,000 U.S. employees represented by the Teamsters union shortly before the July 31 expiration of their contract. As the union threatened to strike, customers diverted more shipments than expected to rivals, UPS CEO Carol Tome said on a call with analysts.  Customers shifted about 1 million packages per day to other providers, resulting in about $200 million of lost sales.

Data suggests the U.S. Postal Service, FedEx and regional rivals each picked up about one-third of that business, Tome said.

“It’s all hands on deck to get back the volume that was diverted as a result of the negotiations,” she said.  Voting by employees on whether to ratify the handshake labor agreement wraps up on Aug. 22.

UPS forecast annual consolidated revenue to be about $93 billion in 2023, compared with a prior view of about $97 billion and said it expected adjusted operating margin this year of around 11.8%, compared with an earlier forecast of about 12.8%.

UPS said it would detail labor costs from the deal after it is ratified by employees, but the wage increases are substantial, as previously reported.  The average full-time driver would earn about $170,000 annually, including healthcare and other benefits, by the end of the five-year contract.  Up from $145,000 today.

The company reported adjusted profit of about $2.54 per share, beating the Street by 4 cents.  Revenue fell 11% and missed estimates of $23.1 billion.

--TSA checkpoint numbers vs. 2019

8/10…102 percent of 2019 levels
8/9…100
8/8…103
8/7…101
8/6…103
8/5…105
8/4…99
8/3…98

Amazingly consistent last few weeks.

--A U.S. judge on Friday revoked Sam Bankman-Fried’s bail, after finding probable cause that the indicted founder of the bankrupt FTX cryptocurrency exchange tampered with witnesses at least twice.

U.S District Judge Lewis Kaplan announced the decision at a hearing in federal court in Manhattan, less than two months before the scheduled October fraud trial, and Bankman-Fried was led out of the courtroom by members of the U.S. Marshals Service.

--Berkshire Hathaway, the conglomerate led by Warren Buffett, posted its highest ever quarterly operating profit on Saturday, nearly $36 billion.

Rising interest rates and dividend payouts, as well as a rebound in performance at the Geico car insurer, helped Berkshire’s insurance businesses generate more money, with profit up 38 percent from the second quarter of 2022.  Berkshire cited rising premiums and a reduction in advertising as among the reasons for Geico’s positive results.

And it’s true, anecdotally, you see far more Progressive ads than Geico these days.

Gains in the insurance business helped offset declines at other businesses including BNSF railroad, where lower shipments of consumer goods and increased price competition from the trucking industry contributed to a 24 percent drop in overall profit for this unit.

Berkshire’s cash stake is up to $147.4 billion as of June 30 from $130.6 billion three months earlier.

Warren Buffett turns 93 on Aug. 30.

--Speaking of insurance, waves of severe thunderstorms in the U.S. during the first half of the year led to $34 billion in insured losses, an unprecedented level of financial damage in such a short time, according to Swiss Re Group, as climate change contributes to the frequency and severity of violent meteorological events.

Damages from convective storms in the U.S. – those that can come with hail, lightning, heavy rain and high winds – accounted for nearly 70% of the $50 billion in global catastrophic damages so far this year, the reinsurer said Wednesday.  Those global figures include earthquakes in Turkey and Syria.

The storms in the U.S. were so severe that 10 of them resulted in damages of $1 billion or more, almost double the average recorded over the last decade, with Texas the state most severely affected.

And then we had Hawaii’s disaster.

--The weight loss drug Wegovy was shown to reduce the risk of heart attack, stroke or heart disease-related death by 20% in a major clinical trial in people with cardiovascular disease, the first to show a weight loss drug alone can have such protective effects.

Novo Nordisk studied Wegovy against placebo in addition to standard of care for prevention of major adverse cardiac events in 17,604 adults with heart disease and obesity or who were overweight, but who didn’t have diabetes.  It called the five-year trial “Select.”

The finding of a 20% reduction in heart risk is higher than many experts had anticipated.  A similar trial for the type 2 diabetes drug Ozempic, which uses the same ingredient, semaglutide, previously showed it could reduce cardiovascular risk by 26% - but no trial had yet shown a risk reduction in people without diabetes.

“Select is a landmark trial and has demonstrated that semaglutide 2.4mg has the potential to change how obesity is regarded and treated,” said Martin Holst Lange, Novo Nordisk’s executive vice president for development.

The findings have not yet been peer-reviewed or published in a medical journal, but it will certainly encourage more people to use the wildly popular weight loss drug, and could potentially help improve insurance coverage.

Wegovy costs $1,349 a month before insurance, and coverage has been difficult for many patients in the U.S.

Novo Nordisk said it will submit applications with regulators to add the cardiovascular benefits to the drug’s prescribing information, a key step to securing better coverage.  The company’s shares surged 12% on the news.

--GM plans to build an all-electric Cadillac Escalade with an eye-popping price target of $130,000.  If you build it, they will come?  I’ll pass.

--Tyson Foods shares fell 6% Monday after the company missed third-quarter revenue and profit expectations, hurt by falling chicken and pork prices as well as slowing demand for its beef products.

The company said it is closing four more U.S. chicken plants in a bid to reduce costs (North Little Rock; Corydon, Ind; Dexter, Mo.; and Noel, Mo). 

Some consumers have been turning more cautious pulling back on meat purchases as inflation and higher interest rates squeeze household budgets, hurting sales at multinationals like Tyson and Hormel Foods.

Tyson has struggled to predict sales and previously said reduced demand for beef made it difficult to pass on higher costs to consumers. 

Net quarterly sales fell 3% to $13.14 billion, below analysts’ forecasts of $13.59bn.  The company’s average sales prices fell 16.4% for pork and 5.5% for chicken, while rising 5.2% for beef.

Tyson lost $417 million in the quarter, compared to net income of $750 million a year earlier.

Tyson has eliminated jobs and already shut two chicken processing plants in a bid to reduce costs, with the loss of 1,660 jobs at facilities in Glen Allen, Va., and Van Buren, Ark., a killer for local economies.

--The New York Times Co. on Tuesday forecast stronger-than-expected advertising revenue for the current quarter after second-quarter sales beat estimates, sending the shares about 5% higher initially.  The company has been bundling access to news reports and articles with a diverse portfolio of products from podcasts and games to product recommendations as it looks to boost engagement and retain users.

Demand for advertisement spots is on a rebound after economic uncertainty forced companies to trim ad spending.  NYT expects total advertising revenue to be flat in the third quarter, while analysts estimate a drop of 4.1%.

A rebound in marketing spending helped NYT’s digital advertising revenue grow 6.5% in the April-June period.

The company posted revenue of $590.0 million for the second quarter, compared with the Street’s forecast of $580.5m.  NYT added 180,000 digital-only subscribers in the second quarter, compared with 190,000 in the first quarter.  It has a goal of 15 million subscribers by 2027.

--Fox Corp. said it remains bullish on the value of the traditional pay-television bundle for its sports and entertainment content, despite continued subscriber losses due to cord-cutting and an industrywide shift to streaming.

The cable-television paywall “drives value of Fox Sports and will for a long time to come,” said CEO Lachlan Murdoch on a call with analysts Tuesday.

Fox has deals to carry the NFL and baseball, as well as college football and the World Cup soccer tournament.  It also owns the cable channel Fox Sports 1 and is a partner in the Big Ten Network.

Murdoch’s comments are in sharp contrast to Disney’s ESPN, which is in deep discussions about offering a direct-to-consumer streaming version of the sports network, which would bypass the traditional cable bundle.

Murdoch said the company will put its content wherever it can reach consumers, “provided we get full value for those rights to brands.”

But in the quarter, Fox experienced an 8% decline in net subscribers due to cord-cutting.

The company’s revenue remained flat in the quarter ended June 30, as the soft advertising market weighed on growth (see reduced Geico ads).

Fox posted quarterly earnings of $375 million, or 74 cents a share, compared with a profit of $306 million, or 55 cents, a year earlier.  The shares finished up 5%.

--Paramount Global reported Q2 adjusted earnings of $0.10 per share, down from $0.64 a year earlier, though analysts expected a loss of $0.02.

Revenue for the quarter was $7.62 billion, compared with $7.78 billion a year earlier, though ahead of consensus of $7.45bn.

Separately, the company said it signed an all-cash deal with KKR under which the latter will buy its publishing company Simon & Schuster for $1.62 billion.  Simon & Schuster will become a standalone private company following deal completion and will continue to be led by its CEO Jonathan Karp as well as the CFO and COO Dennis Eulau.

--I guess President Biden read Michael Bloomberg’s editorial in the Washington Post that I cited last WIR, the former mayor criticizing Biden for not sticking to his 2022 State of the Union pledge that “the vast majority of federal workers will once again work in person.”  A year and a half later, that was hardly the case.

So, finally, Biden set a deadline – next month – for federal workers to return to the office.

But as the Washington Post editorialized:

“Meanwhile, there are other questions to deal with. The federal government owns or leases one-third of D.C.’s office space.  In addition to bringing workers back, Mr. Biden needs to lean on the General Services Administration to figure out which buildings should be put up for sale or transferred to the city and repurposed for a strong future.  No one – including federal taxpayers – benefits from offices sitting unused.”

--Related to the above, WeWork said there’s “substantial doubt” about its ability to continue operating, citing sustained losses and canceled memberships to its office spaces.

The co-working company will focus over the next 12 months on reducing rental costs, negotiating more favorable leases, increasing revenue and raising capital.

The company made the announcement Tuesday, after the close of regular trading, and fell 14% in the aftermarket.

The warning came months after WeWork struck a deal with some of its biggest creditors and Softbank to cut its debt load by about $1.5 billion and extend other maturities.  Its bonds trade at deeply distressed levels.

--Meanwhile, rents across New York City reached record highs once again last month.  The median Manhattan rent was $4,400 in July, up 2.3% from June and 6% from July 2022, according to the latest report from Douglas Elliman and Miller Samuel.

--Yellow Corp. officially filed for bankruptcy and will remain shuttered after the trucking firm’s long-running financial woes were compounded by a dispute with its labor force.

The shutdown leaves Yellow’s roughly 30,000 employees jobless.

--Campbell Soup has agreed to acquire Sovos Brands, the parent company of food brands including Rao’s pasta sauces and Noosa yogurt, in a deal valued at $2.7 billion.

Campbell said the acquisition adds a market-leading portfolio of brands to its meals and beverages division.  The Rao’s line of sauces, Sovos’ flagship brand, saw organic sales grow by more than a third in fiscal 2022.

Campbell has targeted growing its pasta-sauce business, which includes the mainstay Prego, to $1 billion in annual sales.

Well, despite the heavy publicity Rao’s gets in my area for its flagship Gotham restaurant, I have never purchased Rao’s pasta sauce because it is $8.99 or more, and never on sale for below $7.99.  I can get Classico for $3.99, or less, and it’s a damn good sauce.  Plus I always add my own ingredients (mushrooms, cheese, spices) to kick it up a notch, as my man, Emeril, would say.

And that’s the latest in our irregular feature, “Pasta Sauce Weekly.”

--I saw a little blurb on how McDonald’s is facing pushback from franchisees as the likes of Mickey D’s and Burger King are asking them to increase spending on the interior of their restaurants to encourage more dine-in customers, but the fact is, post-pandemic, less than 10% of visits in most U.S. McDonald’s restaurants, according to the franchisees, actually dine-in.

Overall, for all fast-food chains, the figure is 14% in the first five months of the year, according to market-research firm Circana.  It was 14% in June as well, compared with 22% in 2015, Circana said.

--Bud Light sales continued to tank in the wake of the Dylan Mulvaney controversy – while the tarnished brand’s rivals keep picking up market share, according to data from NielsenIQ and Bump Williams Consulting.

Bud Light has been dethroned as the nation’s top-selling beer for the past three months after Mulvaney’s shout-out led to a nationwide boycott.

Modelo Especial is expected to vault into the No. 1 spot for the entire year by the end of the month, Dave Williams told the New York Post.

Bud Light controls an 8.4% market share compared with Modelo’s 8.2% share, according to NielsenIQ.

The Constellation-owned brand posted a 14.8% increase in sales last week, but isn’t the only beneficiary of Bud Light’s demise, with Coors Light (20.7%), Miller Lite (19.5%), and Yuengling Lager (22.5%) enjoying double-digit spikes, the most recent data show.

While Coors Light is the official beer of StocksandNews, Yuengling is highly underrated.

--“Barbie” sales crossed the $1 billion mark globally last weekend, according to ComScore…$459.4 million in cumulative North American box office receipts, including an estimated $53 million on the weekend, and $572.1 million in global ticket sales, $74 million of which was last weekend.

“Oppenheimer” is up to $552.9 million cumulatively worldwide.  Still haven’t carved out time to see it.  Gotta do it, sports fans.

Foreign Affairs

China: A combined Russian and Chinese naval force patrolled near the coast of Alaska last week in what U.S. experts said appeared to be the largest such flotilla to approach American shores.

Eleven Russian and Chinese ships steamed close to the Aleutian Islands, according to U.S. officials. The ships apparently never entered U.S. territorial waters.

“It is a historical first,” said Brent Sadler, a senior research fellow at the Heritage Foundation and a retired Navy captain.  “Given the context of the war in Ukraine and tensions around Taiwan, this move is highly provocative.”

Four U.S. destroyers, the USS John S. McCain, the USS Benfold, the USS John Finn and the USS Chung-Hoon responded to the flotilla, tracking its movement, along with reconnaissance aircraft.

“The scale and complexity of this Russian and Chinese naval deployment is unprecedented,” Sen. Roger Wicker (R-Miss.), said in a statement Monday.  “While I am glad the U.S. Navy deployed four destroyers and a P-8 aircraft to monitor the fleet, the exercise serves as a stark signal that generational investments in U.S. shipbuilding and ship maintenance to maintain deterrence are more necessary than ever.”

Editorial / Wall Street Journal

“A spokesman for U.S. Northern Command said the Sino-Russian patrol wasn’t perceived as a threat, but one day soon it could be. In the new era of great power competition, Russia, China and Iran are building an axis to challenge U.S. power. The naval patrol is best understood as a warning that U.S. territory isn’t safe, as well as a test of how the U.S. will respond.

“The world is getting more dangerous, and a complacent U.S. political class isn’t educating the public about the growing threats.”

Separately, Chinese military scientists have announced a major breakthrough in laser weapon technology, claiming they have developed a new cooling system that allows high-energy lasers to operate “infinitely” without any build-up of waste heat.

According to scientists at the National University of Defense Technology, the new cooling system completely eliminates the harmful heat that is generated during the operation of high-energy lasers.  

With the new technology, weapons can now generate laser beams for as long as they want, without any interruption or degradation in performance, “a huge breakthrough in improving the performance of high-energy laser systems,” said the team in a paper published on Aug. 4 in a Chinese-language peer-reviewed journal, Acta Optica Sinica.  [South China Morning Post]

Just a lovely development, I think you’d agree.

North Korea: Kim Jong Un ordered his military to sharpen its war plans and signed off on expanding combat operations of frontline units, state media said Thursday, as the United States and South Korea prepare for a large-scale combined military exercise.

Expect further high-profile missile launches soon from Pyongyang.

Niger: West African heads of state discussed their response to last month’s military takeover in Niger at closed-door talks in Nigeria on Thursday after the junta defied their earlier threat to use force to restore democracy.

Niger’s coup leaders named a new government Thursday as well.  Three leaders of the military takeover were named ministers of defense, interior and sports, among 21 ministers overall.

The previous government had 43 ministers and none were military officers.

Since the July 26 power grab, the junta has rebuffed diplomatic overtures and ignored an Aug. 6 deadline from the Economic Community of West African States (ECOWAS) to reinstate ousted president Mahmoud Bazoum.

ECOWAS then said later Thursday that it had ordered the activation of a standby force for possible use against the junta.  The bloc pledged to enforce sanctions, travel bans and asset freezes on those preventing the return to power of Bazoum.

Any escalation would further destabilize West Africa’s Sahel region, one of the world’s poorest, where a long-running Islamist insurgency that spread from Mali has displaced millions over the past decade and stoked a hunger crisis.

Niger had become an increasingly important Western ally for fighting insurgents after juntas seized power in neighboring Mali and Burkina Faso between 2020 and 2022 and cut ties with traditional partners.

Mali and Burkina Faso have vowed to defend Niger.

Iran: Five Americans were moved out of prison and into house arrest (one of the five already under such detention) and will be allowed to leave after $6 billion of Iranian funds in South Korea are unfrozen, a deal reached between Tehran and Washington, via Switzerland, including jailed Iranians who will be released.

Iran confirmed the prisoner exchange deal.

But nothing is finalized, as yet, and the five Americans won’t be free until the plane leaves Iranian airspace at some point.

The Wall Street Journal is reporting as I go to post that “Iran has significantly slowed the pace at which it is accumulating near-weapons-grade enriched uranium and has diluted some of its stockpile, people briefed on the matter said Friday, moves that could help ease tensions with the U.S. and allow the resumption of broader talks over its controversial nuclear program.”

“For the Biden administration, the hope is to avoid any major crisis with Tehran in the lead-up to next year’s presidential election.  Critics in Washington and elsewhere say the U.S. is preparing to reward Iran for taking U.S. citizens hostage and for a minor pause in its nuclear work while Tehran ramps up regional threats and supplies military assistance to Russia for its war against Ukraine.”

Pakistan: Former Prime Minister Imran Khan was barred from politics for five years on Tuesday by the country’s election commission after his conviction on graft charges.

Khan was sentenced to three years in prison on Saturday, and the government indicated that elections due this year would be postponed.

The former cricketer-turned-politician, 70, was elected in 2018, but was ousted in a no-confidence vote last year after falling out with Pakistan’s powerful military.

Khan faces more than 100 cases brought against him since his removal – charges he says are politically motivated.

Saturday’s verdict centered on charges he incorrectly declared details of presents from foreign dignitaries and proceeds from their alleged sale.

Ecuador: Presidential candidate Fernando Villavicencio was assassinated Wednesday night, less than two weeks before an election, Aug. 20, sending shockwaves through the South American country, and bringing the issue of rising violence to the foreground.

Villavicencio, a vocal critic of corruption and organized crime, was killed leaving an evening campaign event at an educational facility in northern Quito.  A suspect in the crime later died of injuries sustained in a shoot-out and six others have so far been arrested, the attorney general’s office said.

Nine people, including a candidate for the legislature and two police officers, were injured.

President Guillermo Lasso said the crime was clearly an attempt to sabotage the election, but that voting would go ahead as planned, albeit amid a 60-day national state of emergency, with the military mobilized to guarantee security.

Violence in Ecuador has surged in recent years, especially in cities along drug-trafficking routes, where citizens say they live in fear.

The ‘super’ in my building, Luis, just got back Sunday from visiting his family in Ecuador.  Luis lives on my floor, we’ve known each other now for 14 years, I consider him a close friend, he’s long known what I do and he loves talking politics.

I had a chance to talk to him Thursday and he was visibly upset, telling me for the first time how the drug gangs have shaken him down back in Ecuador.  Picture, Luis is here in America making good money, by Ecuadorean standards, and so locals know he’s taking care of the family.  So the drug gangs tell him, we know where all your family members live, and we’ll protect them.  It’s sickening.  Luis told me yesterday, “Ecuador is the next Venezuela.”

I then read Thursday night some reactions from leaders in the area, and many are indeed saying “Ecuador has become a failed state.”

Current President Lasso, who called the elections early amid an impeachment bid against him, has been criticized for failing to tamp down violence, despite using emergency powers to authorize soldiers to patrol the streets and use their weapons against criminals.  His government blames bloodshed on the streets and in prisons on criminal infighting to control drug trafficking routes used by Mexican cartels, the Albanian mafia and others.

The six arrested were later identified as Colombian, police said.

Lasso called for the FBI to help in the investigation.

Editorial / Wall Street Journal

“Political upheaval in Latin America may seem distant from U.S. shores, but Wednesday’s assassination of Ecuadorean presidential candidate Fernando Villavicencio is a sign of growing world disorder and may be fallout from American demand for drugs….

“Before running for Congress, Villavicencio made his reputation as a journalist digging up evidence of government corruption. Some of his most effective work was international.  His book ‘Ecuador Made in China’ exposed crooked deals between Beijing and Quito during the 10-year presidency of Rafael Correa.

“Villavicencio had to go into hiding more than once. When Mr. Correa was sentenced in absentia to eight years in prison for bribery, Villavicencio was widely credited for bringing the former president to justice.  In Congress he continued his battle against government graft.

“The U.S. has offered help in trying to solve the crime, and Villavicencio deserves no less.  Americans who feed the drug trade with their appetites and cultural signals of approval are also feeding murder and mayhem throughout the Americas.”

Israel: According to Benjamin Netanyahu in an interview with Bloomberg, Israel and Saudi Arabia will deepen economic and business ties even if they don’t formally recognize each other.

The Israeli prime minister told Bloomberg he’s confident he can strike a deal with the Saudis under which the countries have official diplomatic relations.  Without one, the two can still build an “economic corridor” running from the Arabian Peninsula to Europe that encompasses energy, transport and communications technology, he said.

President Biden is keen for Saudi Arabia to recognize Israel.  National Security Adviser Jake Sullivan was in the kingdom last month, partly to discuss the issue with Crown Prince Mohammed bin Salman.

But the Saudis are apparently asking for firm defense guarantees from the U.S., access to top-notch American weaponry and for the White House to allow it to enrich uranium domestically as part of a plan to build nuclear power plants.

Random Musings

--Presidential approval ratings….

Gallup: 40% approve of President Biden’s job performance, 55% disapprove; 38% of independents approve (July 3-27).

Rasmussen: 44% approve, 55% disapprove (Aug. 10)

--Trump World

Prosecutors last Friday night called a judge’s attention to another social media post from Trump in which they say Trump appeared to declare that he’s “coming after” those he sees as responsible for his legal challenges, raising the specter that he might use evidence to target witnesses.

“IF YOU GO AFTER ME, I’M COMING AFTER YOU!”

Trump on Saturday lashed out at Mike Pence, calling him “delusional” and “not a very good person.”

“WOW, it’s finally happened!  Liddle’ Mike Pence, a man who was about to be ousted as Governor Indiana until I came along and made him V.P., has gone to the Dark Side,” Trump said on Truth Social.

“I never told a newly emboldened (not based on his 2% poll numbers!) Pence to put me above the Constitution, or that Mike was ‘too honest,’” Trump added.  “He’s delusional, and now he wants to show he’s a tough guy.”

Trump on Sunday targeted the federal judge assigned to the case charging him with seeking to overturn the 2020 presidential election, as his lawyer argued that actions Trump took after his loss were just “asks.”

Trump, in a Truth Social post, said: “THERE IS NO WAY I CAN GET A FAIR TRIAL WITH THE JUDGE ‘ASSIGNED,’” adding that he planned to seek U.S. District Judge Tanya Chutkan’s recusal as well as a change of venue outside of Washington.

Trump then faced a 5:00 p.m. (ET) Monday deadline to respond to the government’s proposed protective order aimed at protecting witnesses and evidence in the case after Chutkan denied his bid for a delay.

Trump’s lawyer, John Lauro, in a round of television interviews on Sunday, defended Trump’s actions in the wake of his 2020 election loss as petitions but not directives, and criticized the protective order.

“Every single thing that President Trump is being prosecuted for involved aspirational asks – asking state legislatures, asking state governors, asking state electoral officials to do the right thing.  In fact, even asking Vice President Pence was protected by free speech,” Lauro told Fox News.

In response, Pence told CNN on Sunday: “President Trump was wrong then and he is wrong now. I had no right to overturn the election result.”

Lauro also refused to back the protective order sought by the Department of Justice, saying it would prevent the public and the media from hearing relevant material as the case proceeds.

Special Counsel Jack Smith on Friday sought the order prohibiting Trump and his lawyers from sharing discovery materials with unauthorized people, citing a Trump social media post that he said raised concerns.

Over the weekend, Smith told the court that Trump’s team was causing unnecessary delays.

Prosecutors on Thursday then asked Judge Chutkan to begin Donald Trump’s trial on charges of trying to overturn the 2020 election on Jan. 2, 2024. That date would have the trial get underway just two weeks before the first votes are cast in the 2024 Republican primary season.

Smith’s office said in Thursday’s court filing that it believes it will take about four to six weeks to forward the bulk of their case against Trump at trial.

Friday, Judge Chutkan ruled that Trump will be allowed to publicly share some non-sensitive evidence that will be used in his trial.  Her ruling goes against the objections of prosecutors, who said they are concerned that Trump could use details of the confidential evidence to intimidate witnesses.

However, Chutkan warned that Trump is nevertheless subject to release conditions which ban him from intimidating witnesses and said she will be watching his statements and “scrutinizing them very carefully.”

“The fact the defendant is engaged in a political campaign is not going to allow him any greater or lesser latitude than any defendant in a criminal case.”

Trump faces a separate criminal trial in Manhattan in March 2024, and another criminal trial from Smith in southern Florida in May 2024.  And it seems that next week we’ll get a new indictment in Georgia.

Trump’s lawyers, and Trump himself, will be doing everything they can to delay all court action until after the election.

Maureen Dowd / New York Times

“Trump is tied with President Biden in a New York Times/Siena College poll, and if he gets back in the Oval, there will be an Oppenheimer-size narcissistic explosion, as he once more worms out of consequences and defiles democracy. His father disdained losers and Trump would rather ruin the country than admit he lost.

“The Trump lawyer John Lauro made it clear they will use the trial to relitigate the 2020 election and their cockamamie claims. Trump wasn’t trying to shred the Constitution, they will posit; he was trying to save it.

“ ‘President Trump wanted to get to the truth,’ Lauro told Newsmax’s Greg Kelly after the arraignment, adding: ‘At the end he asked Mr. Pence to pause the voting for 10 days, allow the state legislatures to weigh in, and then they could make a determination to audit or re-audit or recertify.’

“In trying to debunk Jack Smith’s obstruction charges, Lauro confirmed them. Trying to halt the congressional certification is the crime….

“Pence told Fox News on Wednesday that Trump and his advisers wanted him ‘essentially to overturn the election.’

“ ‘It wasn’t just that they asked for a pause,’ Pence said, at odds with Lauro. ‘The president specifically asked me and his gaggle of crackpot lawyers asked me to literally reject votes.’….

“Kari Lake told House Republicans to stop pursuing a Biden impeachment and just decertify the 2020 election because Biden is not ‘the true president.’  Lake said of Trump: ‘This is a guy who’s already won.  He won in 2016.  He won even bigger in 2020. All that Jan. 6 was, was a staged riot to cover up the fact that they certified a fraudulent election.’

“Before laughing off this absurdity, consider the finding from CNN’s new poll: Sixty-nine percent of Republicans and those leaning Republican believe Biden is an illegitimate president, with over half saying there is ‘solid evidence’ of that.

“While Trump goes for the long con, or the long coup – rap sheet be damned, it’s said that he worries this will hurt his legacy.  He shouldn’t.  His legacy is safe, as the most democracy-destroying, soul-crushing, self-obsessed amadan ever to occupy the Oval. Amadan, that’s Gaelic for a man who grows more foolish every day.”

--Back to Pence, he was asked on CBS’ “Face the Nation” if he would be a witness against Trump if the case goes to trial.  Pence said he had “no plans” to testify, “But people can be confident we’ll obey the law.  We’ll respond to the call of law, if it comes, and we’ll just tell the truth.”

John Lauro said, “Mike Pence will be one of our best witnesses at trial,” he told ABC’s “This Week.”  “I cannot wait until I have the opportunity to cross-examine Mr. Pence, because what he will do is completely eliminate any doubt that Mr. Trump, President Trump, firmly believed that the election irregularities had led to inappropriate results,” Lauro said.

--Ron DeSantis finally stated in an interview with NBC that Donald Trump lost the 2020 election, diverging from the orthodoxy of most Republican voters as Trump’s rivals test out new lines of attack against him.

“Of course he lost,” DeSantis said in the interview which aired Monday.  “Joe Biden’s the president.”

For years, DeSantis dodged direct answers to questions about whether he believed the election was stolen.  During the 2022 midterms, he also campaigned for Republican candidates nationwide who vehemently denied the 2020 results.

In a statement, Steven Cheung, a spokesman for Trump, said that “Ron DeSantis should really stop being Joe Biden’s biggest cheerleader.”

Mike Pence has been saying lately: “The American people deserve to know that President Trump asked me to put him over my oath to the Constitution, but I kept my oath and I always will,” he told CNN.  “And I’m running for president in part because I think anyone who puts themselves over the Constitution should never be president of the United States.”

But neither argument is resonating, to state the obvious.

And DeSantis wormed his way back to telling NBC that he saw problems with how the 2020 election was conducted, citing the widespread use of mail-in ballots, private donations to election administrators from Mark Zuckerberg, and efforts by social media companies to limit the spread of a report about Hunter Biden’s laptop.

Robert Bigelow, a big-money donor who contributed more than $20 million to a super PAC backing DeSantis, told Reuters recently that he would not give more money unless DeSantis adopted a more moderate approach, because “extremism isn’t going to get you elected.”

Tuesday, DeSantis replaced his campaign manager.  Generra Peck, a longtime DeSantis aide who had served as campaign chief since the governor launched his candidacy in May, will be replaced by James Uthmeier, another close adviser.

--Back to Trump…he found time Monday to unload on the U.S. Women’s National Soccer Team.

“The ‘shocking and totally unexpected’ loss by the (USWNT) to Sweden is fully emblematic of what is happening to our once great Nation under Crooked Joe Biden. Many of our players were openly hostile to America – No other country behaved in such a manner, or even close.  WOKE EQUALS FAILURE.  Nice shot, Megan, the USA is going to Hell!!!  MAGA”

Well, to be honest, Team USA did choke, royally, ditto Megan.

President Biden, of course, then had to write a trite statement of his own, tweeting: “You’ve made your country proud.  Congratulations on the incredible run.  This team is something special and I’m looking forward to seeing how you continue to inspire Americans with your grit and determination – on and off the field.”

Ah, Mr. President?  This particular team did not make us proud.  End of story.

--The Republican National Committee announced Wednesday that Fox Business will hold the second debate, making Fox outlets hosts of the party’s first two debates.  Trump has said he plans to skip the first debate Aug. 23 in Milwaukee.  The one in September will be held at the Ronald Reagan Presidential Library in Simi Valley, California on Sept. 27.

A recent Reuters/Ipsos poll showed Donald Trump with 47% of the Republican vote nationally, with Ron DeSantis down to just 13%.  None of the other candidates were in double digits.

Eight have qualified for the first GOP debate stage…Trump, DeSantis, Vivek Ramaswamy, Nikki Haley, Tim Scott, Chris Christie, Doug Burgum and Mike Pence.

The RNC is expected to make the qualifying criteria for the second debate more stringent.

--California Democratic Sen. Dianne Feinstein, 90, fell at her home and was hospitalized briefly, her spokesperson said.  It will be interesting to see if she returns after the August recess.

--Ohio voters rejected a measure Tuesday that would have made it more difficult to amend the state constitution ahead of a November vote to ensure access to abortion.

For more than a century, Ohioans have been able to amend the state constitution with a simple majority. The failed measure would have changed the threshold to 60 percent.

The final tally was about 57 percent voting against, 43 percent supporting it.

Republican state lawmakers decided to try to make it tougher to amend the constitution as reproductive rights advocates gathered signatures of support this spring for a November measure that would guarantee access to abortion.  Thus Tuesday’s election turned into a proxy battle over abortion.

From the start, Republican leaders were clear that they wanted to make the abortion rights measure more difficult to pass, while opponents of changing the rules called the measure anti-democratic, saying the nation is founded on the idea of majority rule.

Since the Supreme Court last year ended a nationwide right to abortion, voters in three states backed state constitutional amendments ensuring access to the procedure: Michigan, Vermont and California.  In addition, voters in two conservative-leaning states, Kansas and Kentucky, rejected referendums that would have changed their constitutions to explicitly say they do not provide a right to abortion.

Editorial / Wall Street Journal

“Antiabortion organizations are fooling themselves if they think this won’t continue, or indulge the excuse that they lost in Ohio merely because they were outspent. The latter won’t change.  On Tuesday a group called Arizona for Abortion Access filed paperwork for an amendment there. Democrats see this as a route to the policy they want, but they also intend to use abortion referendums to juice turnout in 2024 and help candidates up and down the ballot.

“Republicans spent half a century working to overturn Roe, yet they weren’t prepared for the democratic policy debate when that finally happened in Dobbs last year.  Now they’re seeing abortion regimes as loose as Roe, or potentially looser, imposed by voters even in conservative states. This political liability will persist until the GOP finds an abortion message that most voters can accept.

“One happy camper Wednesday was Ohio Democratic Sen. Sherrod Brown, who’s facing a tough re-election campaign in 2024.  He has new evidence that he can capitalize on turnout driven by abortion. But note Mr. Brown’s revealing statement Tuesday night that Ohioans had kept democracy ‘in the hands of voters.’

“That’s exactly what Justice Samuel Alito’s opinion in Dobbs did, empowering voters, when Democrats wanted abortion policy to be set by unelected judges. Mr. Brown won’t admit it, but Justice Alito’s constitutional honesty could help save his Senate seat.”

A recent CNN national poll (conducted July 1-31) had 64% disapproving of Roe being overturned; 36% approved.

--The Supreme Court agreed on Thursday to consider the government’s challenge of a bankruptcy settlement involving Purdue Pharma, putting on pause a deal that would have shielded members of the wealthy Sackler family from civil opioid lawsuits in exchange for payments of up to $6 billion to thousands of plaintiffs.

In doing so, the court sided with the Justice Department, which had requested the court put the settlement plan on hold while it considered reviewing the agreement.  The government has argued that the family behind Purdue Pharma, maker of the prescription painkiller OxyContin, should not be able to take advantage of legal protections meant for debtors in “financial distress.”

But the court’s order adds to the uncertainty around the plan to compensate states, local governments, tribes and individuals harmed by the opioid crisis while offering protection for the Sackler family.  The order specified that the justices would hear arguments in the case in December, which means a decision might not come out until next June.

Which means there is no money distributed in the interim, no funds for treatment programs, etc.

--The World Health Organization on Wednesday classified the EG.5 coronavirus strain circulating in the United States and China as a “variant of interest” but said it did not seem to pose more of a threat to public health than other variants.

I received my sixth Covid shot this week, just because.  Moderna, it was free, and having had Covid before, I’m now loaded up with antibodies, I assume.  Want some? 

--According to a new report from the Centers for Disease Control and Prevention, about 49,500 people took their own lives last year in the U.S., the highest number ever.

--Last week I talked about the World Scout Jamboree in South Korea, and how over 600 had suffered from heat-related ailments.  Thousands of British and American scouts left because of the heat.

But then South Korea decided it needed to evacuate the remainder of the 43,000 strong contingent because of the threat posed by Tropical Storm Khanum.

Starting Tuesday morning, buses began to move 36,000 scouts, according to the Ministry of the Interior and Safety.

The government has come under fire for the site, a treeless area that consists of land reclaimed from the sea.

American scouts were moved to Camp Humphreys, a U.S. military base south of Seoul.  The storm then hit the country Wednesday.

--As Beijing was getting pelted with its heaviest rainfall in 140 years as I wrote last week, 29 inches over a four-day period, it emerged that Lincheng in neighboring Hebei province received more than 39 inches of rain between last Saturday and Monday (a week earlier) – equivalent to two years of rainfall in the region.

As of midweek, the death toll from flooding in Beijing had risen to 33, including five rescuers, and another 18 were missing, officials said Wednesday.  

Days of heavy rain hit areas in Beijing’s mountainous western outskirts especially hard, with the collapse of 59,000 homes, damage to almost 150,000 others and flooding of more than 37,000 acres of cropland, according to the city government.  Just staggering numbers.  More than 100 bridges were damaged.

And more than 2.2 million in neighboring Hebei province were impacted by the flooding.

State media reported that the government has said it will speed up the reconstruction of destroyed homes to ensure residents can return by December, with the Cabinet saying it would quicken efforts to reconstruct schools, nursing homes and other public facilities to ensure students could start their new term in time.

Good luck.

--The National Oceanic and Atmospheric Administration on Thursday increased its forecast for this year’s Atlantic hurricane season to “above normal” from its previous estimate of a “near-normal” season.

This year’s hurricane season, which typically runs from June to the end of November, has been difficult to predict, climate scientists said. The El Nino climate pattern traditionally helps temper the Atlantic hurricane season. This year, that’s counteracted by elevated water temperatures in the Atlantic Ocean that can fuel hurricanes.

NOAA said it now expects 14 to 21 named storms this year, of which six to 11 will become hurricanes.  Two to five storms are expected to be major hurricanes, meaning winds above 111 mph.

In May, NOAA predicted 12 to 17 large storms that get named.

The typical impact of El Nino produces an Atlantic hurricane season with only about nine named storms.

By end of next week, expect things to begin to heat up, says moi.

--As expected, July was Earth’s hottest month on record, surpassing the global monthly average temperature record set in July 2019, according to data from the Copernicus Climate Change Service, a European Union-funded scientific agency.  The heat blanketed parts of North America, Asia and Europe as wildfires blazed in Greece and Canada, hitting economies.  Water shortages and high humidity affected parts of the Middle East.  Residents in China contended with both extreme flooding and a heat wave as the country set a new national temperature record.  All this came on the heels of the world’s hottest June on record.

July was the warmest month on record for states such as Arizona and New Mexico, the National Oceanic and Atmospheric Administration said Tuesday.

July was also the month in which Fort Good Hope, in Canada’s Northwest Territories, and just south of the Arctic Circle, had a high temperature of 99F!...the hottest temperature ever recorded that far north in Canada. 

In the here and now, on Monday, Aug. 7, Portugal saw a temperature of 116F, the hottest of the year so far, recorded in Santarem.  Portugal has been wracked by wild fires like elsewhere in the region.

After the searing heat and fires in the Mediterranean region this summer, for good reason bookings to countries like Denmark, Finland, the Netherlands, Norway and Sweden are on the rise compared to 2022, Mastercard data shows.  Tour operators are now looking north for future offerings.

One tourist, a German living in Denmark, told Reuters she visited Sweden this year instead of her normal vacation in Italy or Spain.  “I would rather walk around in the rain than in an oven.”

Global sea surface temperature also reached a record high in July, following a long period of unusually high sea surface temperatures that began in April, but this is variable.

That said, the full impact from El Nino probably won’t be felt until next year.

--It seems hours after I commented that NASA had lost contact with Voyager 2, they made full contact with the probe months earlier than expected, the space agency said.

Awesome.  Thanks to NASA’s “interstellar shout” – a powerful instruction – its antenna is now back facing Earth.  NASA didn’t expect the spacecraft would reset itself until October.

And so Voyager goes on…34,000 mph…no need for interstellar charging stations.

---

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

Pray for Ukraine.

God bless America.

---

Gold $1945
Oil $83.13…seventh straight up week

Regular Gas: $3.84; Diesel: $4.26 [$3.99 / $5.07 yr. ago]

Returns for the week 8/7-8/11

Dow Jones  +0.6%  [35281]
S&P 500  -0.3%  [4464]
S&P MidCap  -0.8%
Russell 2000  -1.7%
Nasdaq  -1.9%  [13644]

Returns for the period 1/1/23-8/11/23

Dow Jones  +6.4%
S&P 500  +16.3%
S&P MidCap  +9.5%
Russell 2000  +9.3%
Nasdaq  +30.4%

Bulls 52.2…down from 57.1
Bears 19.4

Hang in there.

Brian Trumbore

---