Week in Review

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Week in Review

12/21/2024

For the week 12/16-12/20

[Posted 4:30 PM ET, Friday]

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Edition 1,339

After this past week’s chaos in Washington, with the House voting tonight to avoid a government shutdown (which the Senate would then approve), many are calling Elon Musk “President Musk,” as he unduly influences debate and votes on rather important measures, such as on efforts to avoid the shutdown.

But I have written how Musk is the king of disinformation, as proven with his thousands of tweets, retweets of debunked theories and flat-out mistruths, and I just wonder, do a majority of Americans really want this influence on the incoming Trump administration?

To wit...did you see what he tweeted today about Germany’s far-right AfD (Alternative for Germany) party?  I get into the AfD and the political crisis in that country below, but Musk declared to his 208 million followers on X, formerly Twitter, which he owns, “Only the AfD can save Germany.”

Dr. Beatrix von Storch, AfD’s deputy leader, told The Telegraph: “Anyone who previously doubted whether Musk, the richest man in the world, is also the smartest – well, now it’s clear.”

The AfD is polling between 17% and 20% in Germany.  Some of its members have expressed Nazi sympathies.

One member claimed Nazi SS members were “not all criminals” while another has used the Nazi SS slogan “alles fur Deutschland.”  And this is just for starters.

Many of its members have attended meetings with neo-Nazis and other extremists.  The party is even considered too extreme for other European hard-right figures such as Marine Le Pen in France and Giorgia Meloni in Italy, who have distanced themselves from the group.

But there is Elon, supporting them.  I wouldn’t call him President Musk, rather, he’s beginning to resemble Rasputin.

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The Biden administration intends to send more than a billion dollars in military aid to Ukraine by the end of the year, officials said Tuesday. 

But there’s also $5.6 billion in weapons, vehicles, and other equipment the president could authorize to go to Ukraine, a U.S. defense official said in a call with reporters Tuesday.  However, that “$5.6 billion is a substantial amount of authority,” the official said.  “So I would certainly anticipate that there could be remaining authority that would transition and be available for the next administration to use.” [Defense One]

But the incoming Trump administration has threatened to pull the aid!

Every step of the way in the Ukraine War, President Biden’s actions have been too little, too late.

Separately, the Wall Street Journal had an extensive piece on how Biden’s closest aides and advisers “managed the limitations of the oldest president in U.S. history during his four years in office.”

No surprise to me.  I wrote as a yearend prediction in 2022, that I didn’t think Biden would make it through 2023, physically, and I was right.  He wasn’t physically able to do the job!  I then said last Christmas, 2023, that it was up to Jill Biden to convince stubborn old Joe to announce he was not running for reelection.  We then saw the result of the president and his family, let alone close advisers, not getting him to see the light.  The Democratic Party, writ large, paid the price.

I’ll wait another few weeks before a final comment on the president.  I won’t be kind. 

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Yaroslav Trofimov, chief foreign affairs correspondent for the Wall Street Journal, had an extensive essay last weekend titled “Has World War III Already Begun?”

Despite Russia’s setback in Syria, leaders in the West “broadly agree with (the) view that the world is increasingly split into two rival camps.  With Russia’s war on Ukraine nearly three years old, the Middle East ablaze on multiple fronts and tensions building up in East Asia, conflicts once thought to be disconnected have merged into what could be the opening shots of a third world war.”

Czech Foreign Minister Jan Lipavsky said: “The violence happening right now in the world proves one thing: We don’t have anymore the conflicts that are separated from each other and that could be handled separately.  There is one common effort to destroy the international order, and we have to do everything to prevent that.”  The recent arrival of North Korean troops to fight for Russia in Ukraine, he added, has made this linkage clear.

As Trofimov notes, the real question is “Is the U.S. Prepared?”

“That is no longer the case.  As China builds up its military might [Ed. see below], the U.S. is already hard-pressed to keep supplying weapons to its partners in Ukraine and the Middle East.  Orders for Taiwan are getting delayed.  Though U.S. military output increased after the 2022 invasion of Ukraine, the growth lagged far behind the rapid expenditure of munitions and concentrated on particular products such as 155mm artillery shells.

“ ‘We are in no way prepared, from an industrial standpoint, to compete effectively absent radical change,’ said Robert Greenway, director of the Allison Center for National Security at the Heritage Foundation and a former senior official in the Trump White House.  ‘We have to look at industrial capacity and output as a function of national security, first and foremost.’

“In a report released in July, the congressionally mandated Commission on the National Defense Strategy found that China is outpacing the U.S. when it comes to military production and that America’s defense-industrial base is unable to meet the needs of the U.S. and allies.  ‘The U.S. military lacks both the capabilities and the capacity required to be confident it can deter and prevail in combat,’ the report warned.”

When it comes to the four revisionist autocracies – Russia, China, North Korea and Iran....

“ ‘There is a certain transactional symbiosis among them, where each fulfills the needs of the other,’ said U.S. Navy Adm. Samuel Papara, the commander of the Indo-Pacific command.  ‘To think that we will be able to drive a wedge between them is a fantasy.’

“The U.S. military, he said, has already been forced to rethink its strategy because it expects Russia to provide China with submarine technology that could erode American undersea dominance and to supply North Korea with missile and submarine technology that would allow Pyongyang to threaten American territory.

“ ‘This is an axis of evil that is working together and for a long time now,’ said Ukraine’s deputy minister of defense, Sergiy Boyev.  ‘This global alliance is currently furthering the aggression against Ukraine.  But it also has many additional targets.’”

Who wants a beer....

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Syria....

--Going back to last weekend, images of the Hmeimim air base showed transport planes prepared for loading and Russian equipment apparently being packed up nearby.  Videos showed at least one convoy of Russian military vehicles on the move.

It’s not clear whether Moscow plans to abandon Syria altogether.  Russia has used Hmeimim to project power across the Middle East and Africa; in 2017, it signed a 49-year lease on the facility.  The Russian naval base at Tartus, built during the Soviet era, supports ships in the eastern Mediterranean.

Experts say that given the volume of materiel in the country, it would take a full pullout of Hmeimim, and Tartus, some time.  Some ships departed Tartus two weeks ago to loiter several miles offshore.

“It’s clear that withdrawal is now underway,” said Dara Massicot, senior fellow at the Carnegie Endowment for International Peace.  But “it’s unclear if they will fully evacuate or partially draw down at present.”

Russian forces, she said, appeared to have been given “safe passage to consolidate at their bases.”  Moscow said it’s in negotiations with HTS and has no plans to quit the country.  HTS hasn’t commented on the future of the Russian sites.

U.S. officials believe that, for now, Russia is scaling back its presence at the two bases, but it is not withdrawing from Syria entirely.  It definitely wants to retain access to the two strategic sites.

--Israel continued to strike multiple Syrian weapons depots and air defenses overnight Saturday and into Sunday, according to the Syrian Observatory for Human Rights (SOHR), with the number of strikes since the collapse of the Assad regime nearing 500, according to the Observatory, destroying Syria’s navy and dozens of ammunition depots, air bases and other military equipment.

Israel also seized and occupied an expanse of territory in Syria over the de facto border between the two, giving no timeline for its departure apart from saying that it would stay until its security demands are met.

Arab countries and France have called on Israel to withdraw and respect Syria’s sovereignty.

Israeli officials, however, say that the raids are necessary to secure the border and to keep Syria’s weaponry from falling into the hands of extremists while the country remains unstable.

The SOHR said Monday’s strikes on missile warehouses in Syria were the “most violent strikes” since 2012.

--At last Friday’s prayers, the caretaker prime minister delivered a sermon calling on Syrians to build a new state based on freedom, dignity and justice.

But while the celebratory mood persists, the country is still racked by sectarian divisions after a 13-year civil war that killed hundreds of thousands of people.

--Washington’s main ally in Syria, the Kurdish-led Syrian Democratic Forces have been battling rebels backed by Turkey since the fall of Assad.  But the SDF has warned that a power vacuum in the country was leading to attacks on the group by Turkish-backed rebels.

The head of the SDF, Gen. Mazloum Abdi, whose forces control about a third of the country, called on the U.S. to press Turkey to rein in the rebel groups it supports, and help enforce a recently agreed to cease-fire.

Assad’s fall bolstered the influence of Turkey, which opposes the SDF and U.S. support for it, and has long supported the rebels that took Damascus, HTS.  Other rebels backed by Turkey went on the offensive against SDF in the north of the country.

The upshot is that the SDF is no longer going after Islamic State, which the U.S. has relied on for help to prevent ISIS from regaining strength.

The SDF also guards detention centers across the country that hold tens of thousands of Islamic State fighters and their families.  But Turkey considers the group, which has ties to the Kurdistan Workers’ Party, or PKK, terrorists.

The U.S. has 900 troops* operating in northeast and eastern Syria, the mission being to focus on ISIS.

*That is what we have long been told the number is...900.  But then the Pentagon suddenly on Thursday said the figure was 2,000, and the spokesman, Maj. Gen. Pat Ryder, had to admit he was surprised by the number too. 

The 900 troops are deployed for nine to 12 months at a time, he said, as opposed to the 1,100 extra forces who are being surged for a shorter window of 30 to 90 days.

Ryder could only say that the surge concerns the mission against Islamic State.  U.S. officials are also continuing their search for Austin Tice, an American journalist and Marine Corps bet who disappeared 12 years ago near Damascus.

CENTCOM then announced that the U.S. military killed an ISIS leader in a precision airstrike in eastern Syria on Thursday, “in an area formerly controlled by the Syrian regime and Russians.”

CENTCOM commander Army Gen. Michael Erik Kurilla said in a statement that “ISIS has the intent to break out of detention the over 8,000 ISIS operatives currently being held in facilities in Syria,” and promised, “We will aggressively target these leaders and operatives, including those trying to conduct operations external to Syria.”

--Back to HTS, with its longstanding relations with Turkey, it has promised to protect all minorities in Syria, the SDF has its doubts.

Senior U.S. officials said Tuesday that Turkey and its militia allies are building up forces along the border with Syria, raising alarm that Ankara is preparing for a large-scale incursion into territory held by American-backed Kurds.

The forces are concentrated near Kobani, a Kurdish-majority city in Syria on the northern border with Turkey, the officials said.

Ilham Ahmed, an official in the Syrian Kurds’ civilian administration, told President-elect Donald Trump on Monday that a Turkish military operation appeared likely, urging him to press Turkish President Recep Tayyip Erdogan not to send troops across the border.

But battles between Kurdish and Turkish-backed fighters in northern Syria escalated further on Wednesday and threatened an already shaky cease-fire agreement and stymie American attempts to contain the violence.

The Kurdish commander of the SDF, Gen. Abdi, said, “Activity by Daesh (IS) has increased significantly, and the danger of a resurgence had doubled.”  Abdi added, “They now have more capabilities and more opportunities,” noting IS militants have seized some arms and ammunition left behind by Syrian regime troops.

And, Abdi warns, as CENTCOM did, that there is a “real threat” that the militants will try to break into SDF-run prisons that are holding IS fighters.

--Rebel leader Abu Mohammed al-Jawlani wore a suit on Monday, positioning himself as a statesman who can unite Syria, and be a responsible neighbor, as he met with foreign journalists.  Jawlani talked of overhauling the country’s constitution and institutions.  But he cautioned it would take time.

“People have big ambitions, but today we must think realistically, because Syria has many problems, and they won’t be solved with a magic wand,” Jawlani said. “It needs patience.”

Syria isn’t ready for elections yet, because it remains mired in turmoil and millions remain displaced, he said.

Jawlani, by the way, is beginning to use his real name, Ahmed al-Sharaa.  He criticized the terror group labels on him and HTS, arguing that atrocities committed by Assad’s regime should also be considered acts of terror.  The terrorism designation is an obstacle to international engagement with the new government in Damascus when it is at the center of a geopolitical maelstrom.

At week’s end, al-Sharaa said in an interview with the BBC that the country is exhausted by war and is not a threat to its neighbors or to the West.

“Now, after all that has happened, sanctions must be lifted because they were targeted at the old regime.  The victim and the oppressor should not be treated in the same way,” he said.

Sharaa denied that he wanted to turn Syria into a version of Afghanistan.  He also said he believed in education for women.

“We’ve had universities in Idlib for more than eight years,” Sharaa said, referring to the province that has been held by rebels since 2011.

“I think the percentage of women in universities is more than 60%.”

Sharaa was relaxed throughout the interview, wearing civilian clothes, and tried to offer reassurance to all those who believe his group has not broken with its extremist past.

Many Syrians do not believe him. All about the future actions taken.

--Bashar Assad finally spoke up Monday with a statement on his Facebook page, presumed to be coming from him, wherein he said he had no plans to leave the country after the fall of Damascus, but the Russian military evacuated him after their base in western Syria came under attack.

Assad said he left Damascus on the morning of Dec. 8, hours after insurgents stormed the capital. He said he left in coordination with Russian allies to the Russian base in the coastal province of Latakia, where he planned to keep fighting.

Assad said that after the Russian base came under attack by drones, the Russians decided to move him on the night of Dec. 8 to Russia.  “I did not leave the country as part of a plan as it was reported earlier,” Assad said.

“At no point during these events did I consider stepping down or seeking refuge nor was such proposal made by any individual or party,” Assad said in the English text of his statement. “The only course of action was to continue fighting against the terrorist onslaught.”

--A mass grave containing the bodies of at least 100,000 people tortured and killed under Assad’s brutal dictatorship was identified, according to the head of a U.S.-based Syrian advocacy group – who said the corpses were squished by bulldozers to “fit them in.”

Mouaz Moustafa, the executive director of the Syrian Emergency Task Force (SETF), said the regime’s victims were found in al-Qutayfah, about 25 miles north of the capital.

“One hundred thousand is the most conservative estimate,” Moustafa told Reuters of the amount of bodies he believed were dumped at the chilling site.  “It’s a very, very extremely, almost unfairly conservative estimate.”

Moustafa also warned that it was just one of eight mass graves created by Assad’s fallen government.

The mass grave identified at al-Qutayfah is littered with multiple trenches estimated to be about 19 to 23 feet deep and more than 10 feet wide

--Many members of Bashar Assad’s inner circle are nowhere to be found, and members of his dreaded intelligence and security services appear to have melted away.  Activists say some have managed to flee the country while others went to hide in their hometowns.

According to Lebanese security officials, some 8,000 Syrian citizens have entered Lebanon through the Masnaa border crossing recently, and about 5,000 have left the neighboring country through Beirut’s international airport.  Most of those are presumed to be ordinary people and Lebanon’s interior minister said no Syrian official entered Lebanon through a legal border crossing.  But the head of the Syrian Observatory for Human Rights said several senior officers have made it to Lebanon using travel documents with fake names.

--Israeli Prime Minister Benjamin Netanyahu said on Tuesday that Israeli forces will stay in a buffer zone on the Syrian border, and specifically on the summit of Mount Hermon, “until another arrangement is found that will ensure Israel’s security.”

Netanyahu made the comments from the mountain’s summit – the highest peak in the area – which is inside Syria, about 10 kilometers (6 miles) from the border with the Israel-held Golan Heights.

This was apparently the first time that a sitting Israeli leader had entered Syrian territory.

--British, French and German diplomats are in Damascus meeting with Syria’s new leadership. 

British Foreign Secretary David Lammy said in a statement: “We want to see a responsible government, an inclusive government.  We want to see chemical weapons stockpiles secured, and not used, and we want to ensure that there is not continuing violence. For all of those reasons, using all the channels that we have available, and those are diplomatic and of course intelligence-led channels, we seek to deal with HTS where we have to.”

For the first time in nearly 13 years, France raised its flag at the embassy in Damascus on Tuesday.  However, according to Reuters, “French diplomats say they want to see how [the Islamist group Hayat Tahrir al-Sham] approaches the transition before making big decisions such as on sanctions, the lifting of the designation of HTS as a terrorist group and ultimately providing financial support for Syria.”

Berlin’s foreign ministry said it wants “to create stability...support reconstruction and enable the safe return of refugees.”

The European Union also announced an extra 1 billion euro to Turkey to support its efforts to host Syrian refugees.

The U.S. has been in touch with Syria’s new leaders, but as the following offers, that isn’t nearly enough....

....Josh Rogin / Washington Post

“Since Assad’s fall, many in Washington have downplayed the chances for the emergence of a free, stable and democratic nation, often by lumping Syria with failed post-dictatorship states like Libya, Iraq and Afghanistan. This ignored a crucial distinction: Unlike the situations in those countries, Syria’s uprising was a homegrown movement.  Syrians rose up to fight for their own rights and, after more than a decade of struggle, toppled Assad.

“As Ahmad al-Dalati, a senior leader in the Hayat Tahrir al-Sham-led joint military operations administration and deputy commander in chief of the Ahrar al-Sham faction, told me, Syrians have suffered too much to waste this moment by repeating the mistakes made in those other countries.

“ ‘Our message to United States is to look at what’s happened as a genuine opportunity to end lots of the problems that were created by the Assad regime, that we deserve to receive the support to restore stability and restore the important geopolitical role of Syria, for which we have paid a very high price with the blood of our free people,’ he told me.

“Yet, in Washington, the prevailing sentiment remains dismissive.  New Hampshire Sen. Jeanne Shaheen, the incoming top Democrat on the Senate Foreign Relations Committee, said this week ‘there aren’t any good guys in Syria.’  Such statements are not just inaccurate; they are deeply insulting to the Syrians who risked everything to reclaim their country.

“The facts on the ground tell a different story.  In the past week alone, Abu Mohammed al-Jolani (Jawlani), the ‘terrorist’ leader of HTS handed over political power to a civilian transitional government.  Recognizing the need for continuity, that interim government has engaged with remnants of Assad’s administration to ensure basic services remain functional.  The government’s outreach to minorities, including Alawites who were once a core support base for Assad, underscores a determination to build an inclusive country.  ‘We look at them as partners in building a new Syria,’ al-Dalati said, emphasizing the rejection of sectarianism that Assad cynically weaponized for decades.

“HTS has stuck agreements with Kurdish groups to navigate the complexities of Syria’s northeast, where Turkish-backed forces and the U.S.-allied Kurdish Syrian Democratic Forces are still clashing. Al-Dalati said that all foreign countries that have troops in Syria can negotiate with the new government to keep their presence there – or leave.

“These developments defy the grim predictions of many in Washington.  Syria is not descending into chaos akin to post-Gaddafi Libya or post-Hussein Iraq. The opposition’s 14 years of preparation – including establishing semiprofessional governance structures and a unified military command – are paying dividends.  This is a moment that demands direct U.S. engagement.

“Unfortunately, the Biden administration has so far focused on regional players like Jordan and Turkey while largely avoiding direct engagement with Syria’s leadership even as most other countries, including Russia, proactively seek relationships with the new government. Meanwhile, President-elect Donald Trump’s statement that the United States ‘should have nothing to do with’ Syria ignores the significant U.S. interests there.  A peaceful and stable Syria can address numerous challenges, from the refugee crisis to the regional drug trade fueled by Assad’s regime. The toppling of Assad – a linchpin in Iran’s network of proxies – has already weakened Tehran’s influence in the region.  Moreover, the presence of U.S. troops in Syria’s northeast to combat the Islamic State underscores the stakes for American security.

“Critics will argue that Syria’s path to democracy is fraught with challenges – and they are right.  But the early actions of the interim government demonstrate a commitment to inclusivity and stability that deserves support.  Washington’s dismissive approach risks alienating a potential partner and leaving a vacuum for adversaries like Russia and China to exploit....

“For too long, the United States treated Syria’s revolution as an afterthought.  Now, as Syrians embark on the difficult journey of rebuilding, America has a chance to be on the right side of history.”

At week’s end, U.S. diplomats finally made it to Damascus where they were to meet representatives of HTS.

--Austria’s conservative-led government said last weekend it was offering Syrian refugees a “return bonus” of 1,000 euros ($1,050) to move back to their home country after the fall of Assad. [$1,000 is not enough even for airfare.]

Conservative Chancellor Karl Nehammer said that the security situation in Suria should be reassessed so as to allow deportation of Syrian refugees.

Deporting people against their will is not possible until it becomes clearer what direction Syria is taking.

Like many conservatives in Europe, Nehammer is under pressure from the far right, with the two groups often seeming to try to outbid each other on tough-sounding immigration policies.  Syrians are the biggest group of asylum-seekers in Austria.

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Russia-Ukraine....

--Ukrainian drone strikes on southern Russia set fire to a major oil terminal in the Oryol region, Ukraine’s General Staff reported on Saturday.  Photos published on Russian Telegram news channels showed huge plumes of smoke engulfing the facility.

Russia’s Defense Ministry on Saturday claimed its forces shot down 37 Ukrainian drones over the country’s south and west the previous night.

The Ukrainian strikes came a day after Russia fired 93 cruise and ballistic missiles and almost 200 drones at its neighbor, further battering Ukraine’s energy infrastructure, around half of which has been destroyed during the war.  President Volodymyr Zelensky said last Friday that Moscow is “terrorizing millions of people” with such assaults.

According to Ukraine’s air force, Russia kept up its drone attacks on Saturday, launching 132 across Ukrainian territory.  Fifty-eight drones were shot down and a further 72 veered off course, likely due to electronic jamming, it said.

The Russian Defense Ministry said its forces targeted “critically important fuel and energy facilities in Ukraine that ensure the functioning of the military industrial complex.”

Russia has sought to overwhelm Western-supplied air defense systems with combined strikes involving large numbers of missiles and drones called “swarms.”

--Ukraine special operations troops say they killed more than four dozen North Korean soldiers over a three-day period inside occupied Kursk, Russia.  Another 47 were allegedly injured in the attacks, which hit “two armored vehicles, two cars and one enemy ATV,” according to Ukraine, writing Tuesday on Telegram.

White House National Security Communications Advisor John Kirby told reporters Monday: “I don’t know that we have an exact number, but we do believe that they [North Korea] have suffered some significant losses, killed and wounded.  Certainly in the realm of dozens, several dozens, and we’re just now starting to see this movement from them from the second line to the front line.  So it’s a fairly new development.”

President Zelensky said “There is not a single reason for North Koreans to die in this war. The only reason is Putin’s madness, which has consumed Russia and fuels this war.”

Later in the week, a South Korean MP said at least 100 North Korean soldiers had been killed in the fighting.  Lee Sung-kwon addressed reporters after parliament was briefed by the country’s National Intelligence Service, which said another 1,000 had been injured.

He said the casualties included high-ranking officials and could be explained by the troops lack of familiarity with the terrain, and with drone warfare.

Ukrainian officials have said they have witnessed waves of North Koreans crossing open fields and for the Ukrainian military, it was a shooting gallery, including with their drones.

--Donald Trump said Monday that he will push Ukraine to negotiate with Russia for a ceasefire after he takes office next month.

Trump was asked at a press conference if he would ask Ukraine to give up territory Russia invaded and occupies as part of that ceasefire.  “I’m going to let you know that after I have my first meeting,” he said in a meandering reply.  “But a lot of that territory, when you look at what’s happened to those – I mean, there are cities that there’s not a building standing.  It’s a demolition site. There’s not a building standing, so people can’t go back to those cities. There’s nothing there. It’s just rubble.”

Yeah, but it’s Ukraine’s land...not Russia’s!

According to a Ukrainian lawmaker, “I cannot imagine a person in the parliament voting for giving up any other territories, because it’s not about territories.  This is people,” Oleksandra Ustinova, a member of Ukraine’s parliament, told reporters in Washington recently.  “And this stuff [Ed. military aid] has been promised.  This stuff needs to be delivered. If it’s not delivered, and we do not come back with a stronger position, it’s going to be very difficult,” Ustinova said.

“The unoccupied part has to be a part of NATO,” she said, citing the various times Putin had agreed to halt aggression toward Ukraine just to re-arm for another extended assault, while violating the agreements.  “We have already been through all of these agreements in 2015 with Crimea, with the Minsk Agreement when we had basically to give up Crimea.”

Trump has opposed NATO ascension for Ukraine.  But according to reports he is open to European countries such as France and the United Kingdom sending their troops to monitor a ceasefire deal.

Ukrainian officials have said their country has received less than half of the total military aid that the United States has promised, Defense One’s Patrick Tucker reports.  Getting that aid, especially long-range missiles, would allow cross-border strikes that could ward off Russian attacks.

But ceasefire or not, Russia is likely to remain aggressive toward Ukraine and other Eastern European countries until handed battlefield defeat, Ustinova said Friday.  “The only thing for them to stop the war is to start losing operations.  A great example of that would be Kursk,” she said.

--Vladimir Putin on Monday accused the West of pushing Russia to its “red lines” – situations it has publicly made clear it will not tolerate – and said Moscow had been forced to respond.

Putin told a meeting of defense officials that Russia was watching the U.S. development and potential deployment of short- and medium-range missiles with concern.

He said Russia would lift all of its own voluntary restrictions on the deployment of its own missiles if the U.S. went ahead and deployed such missiles.

--Moscow intensified its attacks on Ukrainian forces battling to hold an enclave in Kursk and increased pressure in Ukraine’s eastern Donetsk region, Ukraine’s top commander said on Tuesday.

“For the third day the enemy is conducting intensive assaults in the Kursk region,” Oleksandr Syrskyi told government and regional officials in an online speech.  He added that Russia was “actively” using North Korean troops who were taking significant losses.

Ukraine’s military said in a late evening report that its forces had repelled 42 Russian attacks in Kursk.  An earlier report said the number of combat clashes had risen to 68 over 24 hours, up from a daily tally of around 40 last week.

Ukraine launched an incursion into Kursk region in August, but has since lost more than 40% of the territory it controlled.

Analysts say the incursion has extended an already long front line, adding more strain on Ukrainian troops.

Syrskyi said fighting was also escalating in eastern Donetsk where Russian forces were advancing at their fastest pace this year.  Russian troops continue to focus their assaults on the logistical centers of Pokrovsk and Kurakhove. 

--An explosive device near an apartment building in Moscow on Tuesday killed the head of Russia’s nuclear and chemical forces, officials said.

Russia’s Investigative Committee said the bomb was triggered remotely and had the power equivalent to roughly 300g of TNT, Russian state news agency Tass reported, killing Lt. General Igor Kirilov and his assistant.

Kirilov, who was named the head of Russia’s nuclear defense forces in April 2017, was under sanctions from several countries including the UK and Canada for his role in Ukraine.

Ukraine’s Security Services, the SBU, charged Kirilov the day before, Monday, with the use of banned chemical weapons during Russia’s military operation in Ukraine.

Tuesday’s attack was not the first to target a Russian official.  Last week I wrote of an explosive device placed underneath a car in the Russian-occupied city of Donetsk that reportedly targeted Sergei Yevsyukov, the head of a prison where dozens of Ukrainian POWs died in a missile strike in July 2022.

Ukraine almost immediately claimed responsibility for the assassination of Kirilov. It’s a huge embarrassment for the Kremlin, Putin vowing revenge.

Kirilov, aside from overseeing the use of chemical weapons on the battlefield in Ukraine, was notorious for outlandish briefings at the Russian defense ministry which prompted the UK Foreign Office to label him as a “significant mouthpiece for Kremlin disinformation.” 

Among his most outrageous claims was one that the U.S. had been building biological weapons laboratories in Ukraine. It was used in an attempt to justify the full-scale invasion of its smaller neighbor in 2022.

Kirilov’s notorious allegations against Ukraine continued into this year.  Last month he claimed that “one of the priority aims” of Ukraine’s counter-offensive into the border region of Kursk was to seize the Kursk nuclear power plant.

Wednesday, Russia’s security service said a 29-year-old man from Uzbekistan had been detained over the killing of Kirilov and his assistant.  The suspect was recruited by Ukrainian intelligence, according to state media agencies.

--Ukraine’s capital raced a Russian missile attack for the first time in almost a month, Friday, a day after Vladimir Putin offered to hold talks with President-elect Trump.

The strikes targeting Kyiv killed one person and injured at least nine others, Mayor Vitali Klitschko said on his Telegram channel.  Buildings in four residential areas of the city as well as a warehouse and business center were damaged by falling debris, Kyiv city’s military administration said.

Air defenses downed all five ballistic missiles fired at Kyiv as well as 40 drones targeting other regions of the country, Ukraine’s Air Force command said on Telegram.

The Defense Ministry in Moscow said on Telegram that the attack was in retaliation for a Ukrainian strike in Russia’s Rostov region on Wednesday involving ATACMS long-range missiles and Storm Shadow cruise missiles supplied by Kyiv’s Western allies.

At his annual news conference in Moscow on Thursday, Putin said he’s willing to meet with Trump, even before he returns to the White House on Jan. 20. President Zelensky said Thursday he’d welcome the prospect of Trump initiating an effort to end Russia’s war, but cautioned against a ceasefire agreement that could easily unravel.

--On a totally different topic, two Russian oil tankers with 29 crew members on board were heavily damaged in the Black Sea, triggering an oil spill, according to authorities in Russia.  Footage showed one of the tankers broken in half and sinking amid a heavy storm, with streaks of oil visible in the water.

At least one crew member was killed. The second ship was said to have drifted after sustaining damage.

The incident took place in the Kerch Strait, which separates Russia from Crimea – the Ukrainian peninsula illegally annexed by Moscow in 2014.

The oil tankers are able to carry about 4,200 tons of oil each, but the full extent of the oil spill and exact fate of both ships was unclear.

Russian oil imports have been heavily sanctioned by allies of Ukraine since the full-scale invasion in February 2022, and Russia has been accused of using a so-called ghost fleet of tankers, which are often poorly maintained and lack proper insurance, to move oil and circumvent sanctions.

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Wall Street and the Economy

It was all about the Federal Reserve’s year-end Open Market Committee meeting this week and the Fed capped the year with a third-straight interest rate cut, a ¼-point, taking the funds rate to 4.25%-4.50%, but with an accompanying statement, and then comments from Chair Jerome Powell in his press conference, that inflation concerns are back.

Chair Powell put it succinctly: The central bank’s year-end inflation projection has “kind of fallen apart.”

“We have lowered our policy rate by a full percentage point from its peak and our policy stance is now significantly less restrictive,” Powell said in his presser.  “We can therefore be more cautious as we consider further adjustments.”

Officials now see it taking much longer for inflation to reach the target of 2%, and as a result, they dialed back expectations for rate cuts next year, and Powell made clear that any adjustments will hinge on further progress in cooling price increases.

The shift in tone was in marked contrast to last September, when officials saw labor market softening as the greater risk.  But recent data have reignited concerns about inflation stalling above the Fed’s 2% goal – let alone the potential policy implications from President-elect Trump’s proposals.

“As we think about further cuts we’re going to be looking for progress on inflation,” Powell said.  “We have been moving sideways on 12-month inflation.”

In the Fed’s accompany Summary of Economic Projections (SEP), the board now sees a median of just two rate cuts in 2025, down from the previous forecast of four, and the markets reacted swiftly and rather violently to the new projected path, with Treasury bonds tanking, yields surging higher, and stocks cratering, while the U.S. dollar rallied to the strongest level in more than two years.

Of the 19 Fed officials weighing in on the SEP, 15 of the 19 now see a higher risk inflation will exceed their expectations rather than undershoot them, a massive shift from the three who felt the same back in September.  And 14 officials said they see higher uncertainty around their inflation forecast.

Many economists have said Trump’s plans for tax cuts, tariffs and mass deportations run the risk of stoking inflation.  Powell said some people did start to incorporate the proposed policies into their forecasts at the December meeting.

“It’s kind of common-sense thinking that when the path is uncertain you go a little bit slower,” he said.  “It’s not unlike driving on a foggy night or walking into a dark room full of furniture.  You just slow down.”

Powell also acknowledged: “People are still feeling high prices.  The best we can do for them, and that’s who we work for, is to get inflation back down to its target.”

Bottom line is that it’s still all about the data and the Fed then got a report on their preferred inflation benchmark on Friday, the personal consumption expenditures index for November, and all the numbers were down a tick vs. expectations...0.1% on headline, 2.4% year-over-year; 0.1% on core (ex-food and energy), and up 2.8% from a year ago.  Chair Powell had hinted in his press conference that these numbers might be a little better than consensus.

No negative surprises and bonds rallied a bit after the midweek bloodbath.

Personal income for the month was a tick light vs. forecasts, 0.3%, ditto consumption, 0.4%.

In other economic data for the week, November retail sales were better than expected, up 0.7%, but less than forecast ex-autos, up 0.2%.  November industrial production fell 0.1%.

We also had our final look at third-quarter GDP and it came in better than expected, 3.1%, best since Q4 2023.

November housing starts were at the lowest annualized level since mid-2020, 1.289 million.  But November existing home sales were better than forecast, 4.15 million, up 4.8% from the prior month, and up 6.1% from a year ago, the best pace since mid-2021.  The median existing-home price was $406,100, up 4.7% year-over-year, according to the National Association of Realtors.

The Atlanta Fed’s GDPNow barometer for fourth-quarter growth is 3.1%.

Freddie Mac’s 30-year fixed-rate mortgage surged to 6.72%.

No market-moving economic data next week.

But we do have the aforementioned mess in Washington.  Republicans on Wednesday scrapped House Speaker Mike Johnson’s bipartisan plan to avert a government shutdown, as President-elect Trump and Elon Musk teamed up and joined a large group of GOP House members to condemn a compromise bill full of Democratic policy priorities that would have funded the government through March 14.

“Your elected representatives have heard you and now the terrible bill is dead,” Musk boasted on X, after he spent the day blasting the legislation.  “The voice of the people has triumphed!”

Earlier, Rep. Chip Roy (R-Texas), a Freedom Caucus member, said of the plan: “We get this negotiated crap, and we’re forced to eat this crap sandwich.  Why? Because freaking Christmas is right around the corner. It’s the same dang thing ever year.  Legislate by crisis, legislate by calendar.  Not legislate because it’s the right thing to do.”

There was no backup plan.

Trump has asked to keep certain measures Johnson supports, such as aid for farmers and natural disaster survivors, but also demanded the House ditch items that Democrats negotiated, except Johnson needs their votes.  And then Trump requested the Republicans extend the suspension of the debt ceiling for two years, a limit on how much the U.S. government can borrow, which is set to expire early in his new term, but this was never part of the negotiations on the spending bill.

The debt ceiling proposal was at odds with the stated position that many GOP lawmakers have held for years – that they would never back an increase in the government’s borrowing limit without spending cuts to slow the growth of the national debt.

Tuesday evening, Johnson had introduced legislation to extend federal funding until March 14, send $110.4 billion to natural disaster survivors and codify a number of unrelated policy changes.  An additional $10 billion of aid for farmers was added at the last minute – which opened the door to a slew of unrelated demands by Democrats to ensure the bill could pass the House and Democratic-led Senate.  These included a provision for transferring control of the District’s RFK Stadium to Washington, D.C., federal funds to rebuild Baltimore’s collapsed Francis Scott Key bridge, and a pay raise for members of Congress.

After all this, Republicans revolted and Democrats were outraged at the collapse of their deal.

“House Republicans have now unilaterally decided to break a bipartisan agreement that they made,” Minority Leader Hakeem Jeffries (D-New York) said.  “House Republicans will now own any harm that is visited upon the American people that results from a government shutdown, or worse. An agreement is an agreement.”

Thursday, the House then rejected a new Republican proposal, Plan B, to avert a shutdown, 235 to 174, 38 Republicans voting no.

The aforementioned Rep. Roy addressed his GOP colleagues on the House floor Thursday: “You never have any ounce of self-respect.  To take this bill and congratulate yourself because it’s shorter in pages, but increases the debt by $5 trillion, is asinine.” 

He added that he was “absolutely sickened by a party that campaigns on fiscal responsibility” but was prepared to support legislation that would pave the way for so much more debt.

Friday morning, Speaker Johnson said he had a Plan C and that is what’s soon to be voted on as I go to post.

Europe and Asia

We had the flash December PMI readings for the eurozone, courtesy of S&P Global / Hamburg Commercial Bank, with the composite at 49.5, a 2-month high, but below the 50 dividing line between growth and contraction.  Manufacturing was 44.5 (a 12-month low), while the service sector reading was 51.4.

Germany: mfg. 41.7, services 51.0
France: mfg. 39.6 (55-mo. low), services 48.2

UK: mfg. 45.7, services 51.4

Dr. Cyrus de la Rubia / Hamburg Commercial Bank:

“The end of the year is somewhat more conciliatory than was generally expected.  Service sector activity returned to growth territory and is showing a noticeable, if not exuberant, pace of expansion, similar to that seen in September and October.  While manufacturing is still deep in recession, the rebound in services output is a welcome boost for the overall economy. 

“At their December 12 meeting, the ECB mentioned they are closely watching service sector inflation, which remains well above general inflation.  The PMI price indicators are not giving any reassurance here – input costs rose at a faster pace for the third month in a row, and selling prices followed suit....

“The manufacturing sector’s situation is still pretty dire.  Output fell at a quicker pace in December than at any other time this year, and incoming orders were down too....

“Germany and France, the eurozone’s two biggest economies, are currently in politically uncertain waters.  This is preventing the necessary reforms from being implemented in the short term to boost growth again and is contributing to the ongoing weakness in both countries.”

We also had a reading on inflation for November in the eurozone, 2.2%, up from 2.0% in October, and 2.4% a year earlier.  Ex-food and energy, the core rate was 2.7%, unchanged from October, and versus 4.2% year-over-year. 

The European Central Bank, like our Federal Reserve (and the Bank of Japan), has a 2% target.

Headline inflation:

Germany 2.4%, France 1.7%, Italy 1.5%, Spain 2.4%, Netherlands 3.8%, Ireland 0.5%.

The UK reported November inflation was 2.6%, an 8-month high, but the rise in services prices – watched closely by the Bank of England as an underlying measure of inflationary pressures – held steady.

The BOE then left its key interest rate unchanged on Thursday, signaling fewer cuts in the year ahead, although a third of policy makers favored lowering borrowing costs.

Germany: Monday, Chancellor Olaf Scholz essentially asked the Bundestag to kick him out of a job, and in a confidence vote he knew he’d lose, Parliament complied, by a vote of 394 to 207, with 116 abstaining.  So the existing government has been dissolved, collapsing just nine months before elections had been scheduled, which was an extraordinary moment.  A snap election will be held in February, just the fourth in the 75 years since the modern state was founded, ushering in a new era of fractious and unstable politics in a country long known for durable coalitions built on plodding consensus.

The confidence vote, in the same month that the French government fell, deepens the crisis of leadership in Europe at a time of mounting economic and security challenges, with the war in Ukraine now reaching a pivotal moment, and President-elect Donald Trump set to take office in Washington.  And now, Europe’s largest economy has a caretaker government.

Scholz’s three-party coalition splintered in November and he had no choice but to call for the confidence vote after he lost his parliamentary majority, and the ability to pass laws or a budget.

The elections are slated to be held on Feb. 23, but even if his party doesn’t finish first, as expected, Scholz would remain in place as a caretaker chancellor until weeks after that.  He would step down only after a new coalition forms, which wouldn’t happen until April or May.

Seven parties have a realistic chance of gaining seats, including some on the right who are poised for strong showings.

Germany, France, other EU nations are looking warily at Russia, which amid the war in Ukraine has escalated threats about nuclear weapons, and there is the issue of China, a formidable competitor that hasn’t become the booming consumer market for European products that leaders long envisioned.

And there is Donald Trump and his threat of tariffs and a trade war, as well as concerns over his commitment to NATO.

Polls put conservative candidate Friedrich Merz in prime position to become the new chancellor.  Hs conservative Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), are poised for the strongest finish, with 32 percent of the vote, according to the latest polls.

The far-right Alternative for Germany (AfD) is polling second, with 18 percent.  But there is no meaningful chance of the party’s chancellor candidate, Alice Weidel, leading a government coalition, as other parties have ruled out working with the far right.

Scholz will continue to lead his Social Democratic Party (SPD), and experts, today, think a Grand Coalition with the CDU/CSU and SPD is possible, with another possibility being a coalition between the conservatives and the Greens.

Canada (yes, not Europe, but fitting it in here): Finance Minister Chrystia Freeland resigned from Prime Minister Justin Trudeau’s cabinet because of differences over how to prepare for the Trump administration, a political earthquake that shakes Canada’s government to its core.

Freeland has been the most powerful person serving under Trudeau, in various positions, for years.  After Donald Trump won the election, the prime minister appointed her to lead a cabinet group developing a strategy on how to respond to U.S. policies.

She announced her exit on social media Monday morning, saying in a letter to the prime minister that the two are “at odds about the best path forward for Canada.”  She released her statement just as she was about to update parliament on the fiscal and economic outlook.

“This is a serious moment,” said Conservative Leader Pierre Poilievre said.  “It’s time for the government’s mandate to come to an end.  This cannot go on,” as he called for an election.

Freeland leaving was a staggering blow for Trudeau.  In her resignation letter she talked about Trump’s “aggressive economic nationalism,” including his threat to impose 25% tariffs against goods from Canada and Mexico – a move that would be extremely harmful to Canada’s economy.

“Our country today faces a grave challenge,” Freeland wrote.  “We need to take that threat extremely seriously.  That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war.  That means eschewing costly political gimmicks, which was can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”

Freeland, in mentioning “political gimmicks,” was likely referring to the plan to implement a two-month sales-tax holiday on certain items, such as toys and Christmas trees, and send C$250 checks to millions of Canadians.  [The ‘checks’ portion of the plan hasn’t passed parliament, last I saw.]

Late word has Trudeau’s government possibly falling on Monday as his coalition crumbles.

Turning to Asia...China’s National Bureau of Statistics reported on November industrial production, up 5.4% year-on-year, while retail sales in the month were up only 3% Y/Y vs. 4.8% prior, and less than expected despite signs of improvement in the housing market, highlighting the urgency for Beijing to further encourage residents to spend.

Fixed asset investment year-to-date is up just 3.3%.  The November unemployment rate was 5%.

Japan’s flash PMIs for December were released, with manufacturing at 49.5, services 51.4.

November exports rose 3.8% year-over-year, above consensus, while imports fell a like amount.

We then had November inflation readings in Japan, 2.9% vs. 2.3% prior, but ex-food and energy the figure was 2.4% vs. 2.3% in October.  There wasn’t any reaction in the bond market to the headline figure, which was due to rising food prices.

Street Bytes

--The week started off with the Dow Jones extending its losing streak to ten, longest since 1974, after Wednesday’s Fed-induced drubbing...1,123 points on the Dow, 2.6%.  The S&P 500 fell nearly 3% that day, with Nasdaq losing 3.6%.

But stocks staged a big rally on Friday, thanks in no small to Chicago Fed President Austan Goolsbee’s dovish remarks, offering hope for more rate cuts in 2025, Goolsbee a voting member next year, and that helped cut the losses on the week...the Dow Jones losing 2.2% to 42840, the S&P 2.0%, and Nasdaq 1.8%.  Nasdaq on Monday hit a new all-time high of 20173.

--U.S. Treasury Yields

6-mo. 4.29%  2-yr. 4.31%  10-yr. 4.52%  30-yr. 4.71%

It was a crazy week in the Treasury market.  Prior to the Fed’s announcement Wednesday afternoon, the yield on the 2-year was at 4.22%, and 4.38% on the 10-year.  But after the market saw only two cuts projected for 2025, along with Chair Powell’s words of caution, yields spiked in minutes to 4.35% and 4.49%, respectively.

The 10-year yield then hit 4.59% at one point on Thursday, but the relatively tame PCE data today, and Austan Goolsbee’s comments, led to a little rally and it ended the week at 4.52%.

--TikTok faces a U.S. ban next month after an appeals court declined to pause the measure, which takes effect Jan. 19 if the popular video-sharing app isn’t sold by its China-based parent ByteDance Ltd.

The federal appeals court panel in Washington upheld a law that bans the social media platform in the U.S. unless ByteDance divests itself of the app by the date which is right before Donald Trump’s inauguration.

So TikTok said it planned to take its case to the U.S. Supreme Court.  “The voices of over 170 million Americans here in the U.S. and around the world will be silenced on January 19th, 2025, unless the TikTok ban is halted,” the company posted on X after the appeals court panel denied its request.

But then on Wednesday, the Supreme Court agreed to hear TikTok’s challenge, putting the case on an exceptionally fast track, culminating in oral arguments at a special session on Jan. 10, in case you were wondering what lawyers for both sides will be doing Christmas and New Year’s.

In setting aside two hours for the argument, the justices signaled that they viewed the case as presenting questions of exceptional importance.

It was last spring that lawmakers, with wide bipartisan support, said the app’s ownership represented a risk because the Chinese government’s oversight of private companies would allow it to retrieve sensitive information about Americans or to spread propaganda, though they have not publicly shared evidence that this has occurred.  They have also noted that Facebook and YouTube are among the platforms banned in China, and that TikTok itself is not allowed in the country.

--SoftBank Group CEO Masayoshi Son, standing alongside Donald Trump at Mar-a-Lago on Monday, announced a commitment to invest $100 billion in the U.S. over the next four years – and create 100,000 jobs.  The investments will be concentrated in AI.

“My confidence level to the economy of the United States has tremendously increased with his victory,” Son said at the news conference.

SoftBank is an investment holding company with a range of technology investments all over the world, especially in the U.S.  At the end of September, the value of its investments was $136 billion, so this is a substantial investment.

Maybe he raises the $100 billion, but the commitment to create 100,000 jobs is rather absurd, seeing as he says his focus is on AI companies.  These companies don’t have a lot of people overall, they just spend a lot on salaries.

OpenAI, which has raised $18 billion and has a private market value of $157 billion, has 1,372 employees.  So Son, as the Wall Street Journal pointed out, is talking about creating 73 AI companies on the scale of OpenAI.

Another example is Anthropic, which has raised almost $12 billion, but has only 425 employees.

Editorial / Wall Street Journal

“Donald Trump’s economic priorities are often a contradiction. Take the President-elect’s exaltation of Japan’s SoftBank Group CEO Masayoshi Son on Monday for pledging to invest $100 billion in the U.S.  But then why is Mr. Trump snubbing Nippon Steel’s $14.9 billion acquisition of U.S. Steel?....

“Mr. Son’s (enthusiasm regarding the state of the economy of the United States) isn’t alone, judging by the surge in equity prices and in small business confidence on the National Federation of Independent Business survey since the election.  Businesses are especially optimistic that more deals will get done, which would buoy investments in startups, including perhaps some SoftBank portfolio companies.

“But Mr. Trump will dampen this optimism if he rejects foreign investment and blocks deals like Nippon’s purchase of U.S. Steel to curry favor with union chiefs.  Nippon has promised to honor existing collective-bargaining agreements, invest $2.7 billion in rehabilitating U.S. Steel’s aging facilities, and pay $5,000 bonuses to each worker if the deal is closed.

“U.S. Steel has warned it might have to close a plant in Mon Valley, Pa., if the deal falls through, which is one reason rank-and-file steelworkers support the deal. The local United Steelworkers union that represents the Mon Valley plant is lobbying the Biden Administration to clear the deal and says 95% of its members favor the acquisition.  So do local politicians....

“So why is Mr. Trump rejecting this gift?  Because United Steelworkers president David McCall opposes Nippon’s acquisition and favors a merger with Cleveland-Cliffs, which would create a U.S. steel-making cartel.  Mr. Trump seems to have a soft spot for labor bosses even though their interests often run counter to those of American workers.

“Blocking the deal would also snub Japan, whose help Mr. Trump needs to counter China.  ‘We consider Japan very important,’ Mr. Trump said Monday.  If so, then why not pledge to approve the deal regardless of whether President Biden tries to block it?  Mr. Trump could then take credit for saving steelworker jobs and helping make U.S. Steel great again.”

As I’ve said many a time regarding this topic, both Presidents Biden and Trump are total idiots to block the merger. 

--Japanese carmakers Honda and Nissan said they were exploring a merger following business troubles at Nissan in the U.S. and China.

Confirming a report in the Nikkei newspaper, the two companies said Wednesday they were in talks over a merger or other future collaboration. They said no final decision has been made and didn’t offer details.

The two companies, longtime rivals, have been collaborating on electric technologies, seeking to share the high development costs.

Both are struggling in China after being caught flat-footed by the Chinese market’s rapid shift to electric vehicles and plug-in hybrid vehicles.  Nissan has also been struggling in the U.S.

But Nissan and Honda have different cultures and partly overlapping vehicle lineups.

Nissan has never fully recovered from the arrest of its then-chairman, Carlos Ghosn, in November 2018, which followed tension over Nissan’s alliance with Renault of France.

Nissan was long the more profitable of the two partners, and finally won its independence last year when Renault reduced its stake to 15%, from 43%.

This year, operating income for the half-year ending Sept. 30 was down 90% from the previous year.

Then...Foxconn, the Taiwanese contract manufacturing giant best known for assembling Apple products, said it has been discussing acquiring Nissan as part of plans to expand its nascent electric-vehicle business, according to various reports.

A former Nissan executive who now leads Foxconn’s EV business has played a pivotal role in forging communication channels between the two companies.

--TSA checkpoint numbers vs. 2023

12/19...100 percent of 2023 levels
12/18...91
12/17...93
12/16...102
12/15...104
12/14...95
12/13...101
12/12...103

AAA has forecast a record 119.3 million will travel 50 miles or more during the holiday season between Dec. 21 and New Year’s Day. This would break a record set in 2019.  Forty million will go through the nation’s airports.

--China will now offer 10 days of visa-free transit for international travelers, the National Immigration Administration announced on Tuesday.

Passport holders from 54 nations, including Australia, Japan, the United States and countries throughout Europe, can now stay up to 10 days in certain areas of mainland China when transiting via one of the country’s 60 international ports, the NIA said.

Chinese border authorities will look for proof of an already-purchased airline ticket for a departing flight upon arrival.  Passengers will also be asked to fill out an application for access at the airport.  And of course you’ll need your passport.

I wish this was in place in my various trips to China.  I had to go to the consulate in Manhattan to get a visa each time, and it wasn’t a great place.

--FedEx announced the much-anticipated spinoff of its freight trucking division after the close on Thursday and the shares rose some, as the company restructures its operations to focus on its core delivery business.

FedEx Freight is the largest U.S. provider of less-than-truckload services, which involve carrying multiple shipments from different customers on a single truck; the shipments are then routed through a network of service centers where they get transferred to other trucks with similar destinations. It generated revenue of almost $2.2 billion during the fiscal second quarter ended Nov. 30.

The rally in FedEx shares came despite a warning from the company that it expects 2025 revenue to be held back by a stubbornly challenging environment where demand for its fastest and most lucrative deliveries remains weak.

The company lowered its profit outlook for the full year ending May 2025, calling for adjusted profit of $19 to $20 per share, below its September forecast of between $20 and $21.  Second-quarter adjusted profit fell to $0.99 billion, or $4.05 per share, which topped consensus of $3.90 per share.

--Shares in Nike fell after the footwear brand posted adjusted fiscal second quarter earnings of $0.78 per share compared to estimates of $0.63, but under last year’s $1.03.  Revenue of $12.35 billion bested expectations of $12.13 billion, though also down from last year’s $13.39 billion.

New CEO Elliott Hill said in the earnings release: “Our clear priority is to return sport to the center of everything we do.  We’re taking immediate action to reposition our business so we can get back to driving long-term shareholder value.”

Nike shares had fallen 36% in the last year, as the company lost focus on its products and relationships with distribution partners and now has to contend with the rise of On Holding, Skechers and Hoka sneakers.

The shares fell despite earnings and revenue beating expectations because the company did not provide an outlook with its release, amid the transition to new CEO Hill, and in its last report, it said it expects its men’s and women’s lifestyle, Jordan brand and Nike Digital businesses to all decline in double digits for fiscal 2025.

A half dozen analysts also cut their price targets on the stock Friday morning (after the earnings were reported after the close Thursday).

--Thousands of Amazon.com workers went on strike Thursday over contract negotiations and the company’s refusal to recognize the Teamsters labor union. But the strike wasn’t expected to affect operations, the company said, branding the action as an illegal public relations ploy.

And a union representing about 11,000 baristas at Starbucks called on its members to stop their daily grind today to demand better pay and conditions, but it seems only a few cafes were impacted.

--Elon Musk and his rocket company, SpaceX, have repeatedly failed to comply with federal reporting protocols aimed at protecting state secrets, including by not providing some details of his meetings with foreign leaders, according to the New York Times and people with knowledge of the company and internal documents.

“Concerns about the reporting practices – and particularly about Mr. Musk, who is SpaceX’s chief executive – have triggered at least three federal reviews, eight people with knowledge of the efforts said.  The Defense Department’s Office of Inspector General opened a review of the matter this year, and the Air Force and the Pentagon’s Office of the Under Secretary of Defense for Intelligence and Security separately initiated reviews last month.

“The Air Force also recently denied Mr. Musk a high-level security access, citing potential security risks associated with the billionaire.  Several allied nations, including Israel, have also expressed concerns that he could share sensitive data with others, according to defense officials.”

This is not the first time this topic has come up and I have expressed my own personal opinion.  I support everything Musk is doing in terms of his space ambitions, and landing a man on Mars, but I do not trust him with national secrets.

As the Times notes:

“Some SpaceX workers have become concerned about Mr. Musk’s ability to handle sensitive information, especially as he posts openly on X about everything from video games to diplomatic meetings, the people said. The fears have been compounded because Mr. Musk has a top secret security clearance at SpaceX, which makes him privy to classified material such as advanced U.S. military technology.”

Musk simply hasn’t been providing the Defense Department, under security clearance rules and what’s known as “continuous vetting,” information about his private life and foreign travel, details on meetings with foreign leaders, all part of the process that allows the government to evaluate whether someone with a high-level security clearance should continue handling sensitive information.

--Micron Technology shares fell 4% after the company provided disappointing guidance for its current quarter Wednesday afternoon. 

The semiconductor company reported fiscal first-quarter adjusted earnings per share of $1.79, compared to Wall Street’s consensus estimate of $1.76.  Revenue was in line with expectations at $8.7 billion.

Micron’s outlook was weak, though, guiding current quarter to $7.9 billion in sales, at the midpoint of its range, versus an $8.9 billion estimate from analysts, a big difference.

Micron is a leader in the markets for DRAM (dynamic random-access memory), which is used in desktop computers and servers, and for flash memory, which is found in smartphones and solid-state hard drives.  It has also become a key supplier of HBM (high-bandwidth memory) for artificial intelligence servers.  The company expects to generate “multiple billions” of HBM revenue in fiscal 2025.

Demand for smartphones has remained weak and shipments for them are likely to increase in the second half of Micron’s fiscal year ending August 2025, CEO Sanjay Mehrotra said in a conference call with investors.

Sluggish global demand for PCs also continued to impact Micron’s earnings.

--General Mills shares fell Wednesday after the company beat quarterly sales and profit estimates, boosted by its efforts to reduce prices on some products and improve demand.  But the company lowered its annual adjusted profit forecast, citing increased investments, and now expects it to fall in the range of 1% to 3%, compared with the prior range of down 1% to up 1%.

On an adjusted basis, the company reported a profit of $1.40 per share for the quarter ended Nov. 24, beating analysts’ estimates’ of $1.22 per share.  Fiscal second-quarter sales of $5.24 billion, surpassing the Street’s estimates of $5.14bn.

With shoppers purchasing fewer items at the supermarket after years of price increases squeezed budgets, General Mills CEO Jeff Harmening said the company made investments “to bring consumers greater value,” even as it also lowered the company’s profit outlook.

--Darden Restaurants Inc. surged 14% Thursday in premarket trading after the Olive Garden-owner’s raised full-year sales outlook topped estimates.

Darden now expects fiscal 2025 sales of $12.1 billion, above consensus of $11.9bn.  Fiscal second-quarter revenue of $2.89 billion was in line with expectations, while comparable sales of 2.4% topped forecasts.

It seems some folks are returning to restaurants.

--A Gallup poll of U.S. adults found that Americans’ views of the quality of healthcare in the U.S. is now at its lowest point in Gallup’s trend dating back to 2001.  A mere 44% view the nation’s healthcare as excellent or good, down by 10 percentage points since 2020.

But Americans’ rating of the quality of their own healthcare is higher, at 71%, illustrating a disconnect between their personal experiences and perceptions of national conditions.

Few Americans are satisfied with the total cost of healthcare in the U.S., with this year’s 19% on the low end of what Gallup has measured since 2001.

Meanwhile, Luigi Mangione was charged with first-degree murder in the killing of healthcare CEO Brian Thompson, the New York district attorney said on Tuesday.

Mangione faces various charges, including first-degree murder, and two counts of second-degree murder, one of which describes the killing as an act of “terrorism,” New York District Attorney Alvin Bragg said.

“The intent was to sow terror,” Bragg said, calling the shooting a “frightening, well-planned and targeted murder.”

Thursday, Mangione agreed to be extradited to New York.  He was also hit with new federal murder and stalking charges, which could place him in line for the death penalty.  The federal case will proceed in parallel with the New York case in which he’s facing 11-counts at the state level.

--Uh oh, candy lovers.  Cocoa futures reached a new all-time high this week, $12,000 a ton, more than tripling this year, forcing candy makers like Hershey Co. to boost prices.

Prices have soared as weak harvests in West Africa – the top producing region – plunged the world into a third straight supply deficit.  After cooling, the rally recently regained momentum as adverse weather further threatens farms there, limiting the chance to rebuild already low global stockpiles.

--Longtime Fox News anchor Neil Cavuto is leaving the network after 28 years after he declined a contract offer.  One of the good ones.

Foreign Affairs, Part II

South Korea: Parliament voted Saturday to impeach President Yoon Suk Yeol over his short-lived martial law decree, a historic rebuke that was cheered by jubilant crowds who described the outcome as another defiant moment in the nation’s resilient democratic journey.

The National Assembly passed the motion 204-85 in a floor vote.  Yoon’s presidential powers and duties will be suspended and Prime Minister Han Duck-soo, the country’s No. 2 official, will take over his authority once copies of a document on the impeachment are delivered to Yoon and to the Constitutional Court.

The court has up to 180 days to determine whether to dismiss Yoon as president or restore his powers.  If he’s thrown out of office, a national election to choose his successor must be held within 60 days.

Yoon had survived the first impeachment vote a week before after most ruling party lawmakers boycotted the floor vote.  But as public protests against Yoon intensified, some ruling People Power Party lawmakers signaled their intentions to vote for Yoon’s impeachment in the second vote.

National Assembly Speaker Woo Won Shik said Yoon’s impeachment was an outcome driven by “the people’s ardent desire for democracy, courage and dedication.”

Hundreds of thousands of people gathered near the parliament roared in jubilation.  Another huge crowd of Yoon supporters gathered at a central Seoul plaza but that became subdued with the announcement the president was impeached.

Yoon issued a statement saying he would “never give up” and calling for officials to maintain stability in government functions during what he described as a “temporary” pause of his president.

The impeachment motion alleged that Yoon “committed rebellion that hurts peace in the Republic of Korea by staging a series of riots.”  It said Yoon’s mobilization of military and police forces threatened the National Assembly and the public and that his martial law decree was aimed at disturbing the Constitution.

Yoon rejected the rebellion charges, calling his order an act of governance.

Democratic Party leader Lee Jae-myung called Yoon’s speech a “mad declaration of war” against his own people. 

A survey released last Friday put Yoon’s approval rating at 11%...11%.  According to Gallup, 75% of South Koreans supported the impeachment vote.

There is a complication with the Constitutional Court, though.  It is meant to have nine members.  In principle, at least seven judges on the court must convene to consider an impeachment motion, with a minimum of six required to approve it.  But with vacancies, the court currently has just six members.  Parliament needs to fill the remaining three seats.

China: We had the release of the latest annual China Power report from the U.S. military, and China is rapidly advancing in missiles, nuclear weapons, and influence operations, but endemic corruption is to some degree undermining its military ambitions.  As presented by Michael Chase, the deputy assistant secretary of defense for China, at the Center for Strategic International Studies on Wednesday, China’s military is also increasing the “diversity and capabilities” of its “precision-strike-capable missiles with lower-yield nuclear warheads.”

China’s stockpile of operational nuclear warheads passed 600 in mid-2024, up from the 500-plus noted in last year’s report, and is projected to surpass 1,000 by 2030, as reported by Defense One’s Patrick Tucker.

China’s goal is to develop “more rungs on the escalation ladder in terms of how they could conduct nuclear operations,” Ely Ratner, the assistant secretary of defense for Indo-Pacific security affairs, said Wednesday.

Israel: Airstrikes on Gaza continued, while Israeli forces raided a school building in Wafa and forced displaced families sheltering there to evacuate in unsafe conditions, killing and wounding several amid bombardment and gunfire.  Israel’s military did not directly address the report but said it had struck dozens of terrorists from the air and ground, and seized additional terrorists.

A cameraman who worked for Al Jazeera and other media outlets, was killed in an Israeli strike on Sunday.  Five members of the Palestinian Civil Defense were reportedly killed in the strike as well on the Nuseirat refugee camp, according to Al Jazeera.

The IDF said its air force had “conducted a precise strike on Hamas and Islamic Jihad terrorists who were operating in a command and control center embedded in the offices of the ‘Civil Defense’ organization in Nuseirat.” It said that the center had been used to “plan and carry out an imminent terror attack” against Israeli troops, and that “numerous steps” had been taken to mitigate harm to civilian harms.

The Gaza Health Ministry said the death toll from the 14-month war had reached 45,028 people.  The health ministry does not distinguish between civilians and combatants.  It said more than half of the fatalities were women and children.  The Israeli military says it has killed more than 17,000 militants, without providing evidence.

--The Palestinian government has been carrying out a rare and lethal sweep against militants in the flashpoint West Bank city of Jenin, saying it was needed to foil an imminent car-bombing and other attacks.

The operation by the Palestinian Authority, targeting Hamas and Islamic Jihad militants, was launched on Dec. 5, but only announced last weekend as clashes escalated.  Three Palestinians – at least two of them gunmen – have been killed and several PA security men wounded.

“The security forces managed to prevent potential disasters for our people,” the PA military spokesman, Brig.-Gen. Anwar Rajab said, accusing local gunmen of “ISIS-like practices and behavior.”

The operation comes as the PA is attempting to bolster its credibility as an organization capable of strong governance, amid ongoing Israeli raids and Donald Trump’s return to the White House.  The PA is hoping the outside world will see it as capable of governing a post-war Gaza, which Israel rejects.

Israel is instead beefing up its troop deployments in the West Bank, especially around Jewish settlements.  Last week, Israeli Defense Minister Israel Katz predicted possible attacks by “radical Islamist terrorists who have been inspired by the rebel assault in Syria.”

--Monday, Hamas said “serious and positive talks” were taking place to reach a deal with Israel to end the war in Gaza and free the remaining hostages held there.  Officials from countries involved in the diplomacy said the sides might be nearing a truce.

Mediators are discussing a cease-fire that would begin with a 60-day truce in which Hamas would release some of the 100 or so hostages still held in Gaza – some of whom have died – in exchange for Palestinians jailed in Israel.  The hope is the initial truce would continue into a permanent cease-fire.

Georgia: The country faces a constitutional crisis.  On Saturday an electoral college, dominated by the ruling party, Georgian Dream, and boycotted by the opposition, voted for Mikheil Kavelashvili, a far-right former footballer, to become president at the end of the month.  He would replace Salome Zourabichvili, the last pro-Western figure in high office, who is refusing to step aside.  If she is forced out, anti-government protests could intensify.  But Georgian Dream is preparing for a fight, passing tough anti-protests laws – and is planning to roll out more.

Kavelashvili, a former striker for Manchester City of the Premier League, was the sole candidate for the post.  He is to assume office in about another week, and the departing president, Zourabichvili, who has sided with the opposition, vowed to stay in office until new elections are held.

Kavelashvili was the first president to be chosen by the electoral college, which replaced direct presidential elections seven years ago.  He has claimed several times this year that Western intelligence agencies were conspiring to push Georgia into conflict with Moscow, which ruled Georgia as part of the Russian Empire and later the Soviet Union, until 1991.

Russia, which fought a five-day war with Georgia in 2008, still seeks influence over the strategically located Black Sea country.

Random Musings

--Presidential approval ratings....

Gallup: 37% approve of President Biden’s job approval, 58% disapprove; 32% of independents approve (Nov. 6-20).

Rasmussen: 45% approve, 53% disapprove (Dec. 20).

--President-elect Trump held his first news conference Monday as president-elect and spent nearly an hour jumping from one topic to another.  He said Ukraine should be ready to make a deal, cited debunked data linking vaccines and autism, threatened more lawsuits against media companies and accused the Biden administration of hiding the truth about recent drone sightings.

Trump said he would consider pardoning New York City Mayor Eric Adams and claimed Elon Musk would be able to cut $2 trillion from the federal budget with “no impact on people.”  And he made the above-noted announcement concerning SoftBank’s investment in A.I. projects.

--The House Ethics Committee plans to release an investigative report into the conduct of former Representative Matt Gaetz of Florida, according to numerous reports.  Gaetz had resigned from the House after President-elect Trump named him as his pick for attorney general, but Gaetz ended his candidacy after the weight of allegations of sex trafficking and drug use made it clear he would not be confirmed by the Senate.  He consistently denied the allegations.

Gaetz wrote on X: “My 30’s were an era of working very hard – and playing hard too.  It’s embarrassing, though not criminal, that I probably partied, womanized, drank and smoked more than I should have earlier in life.

“I live a different life now. But at least I didn’t vote for CR’s [Ed. continuing resolutions] that f--- over the country!”

Gaetz also noted: “In my single days, I often sent funds to women I dated – even some I never dated but who asked. I dated several of these women for years.  I NEVER had sexual contact with someone under 18.  Any claim that I have would be destroyed in court – which is why no such claim was ever made in court.”

--ABC News and George Stephanopoulos reached a settlement with Donald Trump in his defamation suit. The network will pay $15 million to a charity and will issue an apology.

The network will also pay $1 million in Trump’s attorneys’ fees.

Trump filed the lawsuit in Florida federal court earlier this year, arguing that Stephanopoulos and ABC News defamed him when the anchor said 10 times during a contentious on-air interview with South Carolina GOP Rep. Nacy Mace in March that a jury found Trump had “raped” E. Jean Carroll.

Carroll alleged that Trump raped her in a department store in the mid-1990s and that he defamed her when he denied her claim.

In 2023, a jury found that Trump sexually abused her, sufficient to hold him liable for battery, though it did not find that Carroll proved he raped her.  The jury awarded Carroll $5 million for battery and defamation.  In January, Carroll was awarded an additional $83.3 million in damages for his defamatory statements disparaging her and denying her rape allegations.

The judge wrote in August 2023 that Trump “raped” Carroll in the broader sense of that word, as people generally understand it, though not as it is narrowly defined by New York state law.

In the lawsuit filed against ABC News in March, Trump claimed that Stephanopoulos’ statements were “false, intentional, malicious and designed to cause harm.”

--A New York judge ruled Monday that Donald Trump’s hush-money conviction this year remains valid, rejecting arguments from the president-elect that it should be dismissed on immunity grounds.

The judge left for another day the question of whether Trump should ever be sentenced for 34 low-level felony counts of falsifying business records.  A jury convicted the former president in May of causing the misleading records to cover up money paid to silence adult-film star Stormy Daniels before the 2016 election.

Justice Juan Merchan, who presided over Trump’s New York trial earlier this year, found that the U.S. Supreme Court’s ruling granting former presidents’ broad immunity didn’t affect Trump’s state conviction, which largely involved conduct that took place before the Republican began his first term in the White House.

--In a huge win for Donald Trump, the Georgia Court of Appeals disqualified the prosecutor in his election racketeering case on Thursday by ruling Fulton County District Attorney Fani Willis carried the appearance of impropriety when she made decisions about who to prosecute and what charges to bring.

The decision throws into question when any trial could be held for the 15 defendants who have not already pleaded guilty.  Trump’s lawyer, Steven Sadow, contends the charges against Trump must be dropped because of his imminent return to the White House.

--House Foreign Affairs Committee chairman Michael McCaul (R-Texas), a man I greatly respect, said Tuesday that he believes that some unidentified drones spotted above New Jersey and New York are “spy drones” from China – after Biden administration officials insisted many of the aircraft are innocent commercial aircraft.

“We want answers but the response I’m getting is we don’t know whose drones these are,” McCaul told reporters.

“We need to identify who is behind these drones,” he said. “My judgment based on my experience is that those that are over our military sites are adversarial and most likely are coming from the People’s Republic of China.”

Well, Thursday, the Federal Aviation Administration issued a temporary ban on drone flights over 22 New Jersey towns until mid-January.

The temporary flight restrictions were issued for “special security reasons,” the FAA said, without elaborating.

--A 15-year-old girl shot and killed a fellow student and a teacher and wounded six other people at a small private Christian school in Madison, Wis., on Monday.

The teen is one of just nine female school shooters in the last 25 years, according to a database maintained by the Washington Post.

--A person in Louisiana has the first severe illness caused by bird flu in the U.S., health officials said Wednesday.

The patient had been in contact with sick and dead birds in backyard flocks, the Centers for Disease Control and Prevention said.

Agency officials didn’t immediately detail the person’s symptoms.

Previous illnesses in the U.S. had been mild and the vast majority had been among farmworkers exposed to sick poultry or dairy cows.

But the acknowledgement of the first severe illness caused California Gov. Gavin Newsom to declare an emergency in the state because of an outbreak of infections among the state’s dairy cattle.

The first herds in the nation infected with the bird flu virus, H5N1, were identified in March.  California identified its first infected herd in late August.

But since then, the state’s agriculture department has found the virus in 645 dairies, about half of them in the past 30 days alone.

California has also recalled raw milk products from two companies after the virus was detected in samples.

The declaration of an emergency gives state and local health authorities additional means to contain the outbreak, including hiring staff and issuing new contracts.

“All these infections in so many species around us is paving a bigger and bigger runway for the virus to potentially evolve to infect humans better and transmit between humans,” said Dr. Nahid Bhadelia, the director of the Boston University Center on Emerging Infectious Diseases.

“That represents an escalation in the situation, even if risk to general population remains low,” she said.

The U.S. has been faulted for its response, as I pointed out a few weeks ago, and this is the fault of the Biden administration, specifically Sec. of Agriculture Tom Vilsack, because nearly all testing of cattle and of people who might have been infected with the virus has been voluntary.

The Agriculture Department earlier this month finally said it would begin testing the nation’s milk supply for H5N1, and that it would require farmers and dairy processors to provide samples of raw milk on request from the government.

--We had a number of natural disasters this week.  A 7.3-magnitude earthquake hit the Pacific islands of Vanuatu, killing at least 14 people. The quake flattened buildings and cut off power and communications. A seven-day state of emergency was declared.  Australia said it was sending rescue teams to help search for survivors.

The death toll was expected to rise sharply.  There is no water in the capital of Port Vila.

Meanwhile, the death toll in the French territory of Mayotte from Cyclone Chido could reach into the thousands.  The Indian Ocean island was pummeled by the intense cyclone on Saturday, causing widespread destruction.

Mayotte is France’s poorest island and the poorest territory in the European Union.

--Two Chinese astronauts aboard the Tiangong space station broke the world record for the longest single spacewalk, set more than two decades ago by the U.S. space program.

Shenzhou-19 crew members Cai Xuzhe and Song Lingdong completed a nine-hour extravehicular activity (EVA) to install space debris protection devices and conducted maintenance tasks outside the T-shaped space station during the EVA, the Chinese space agency said on Wednesday.

--The Washington State Department of Agriculture announced on Wednesday that it had eradicated the infamous “murder hornet” from the U.S., five years after the insects were first spotted in Washington State.

Northern giant hornets – the bugs’ official name – have not been detected in the U.S. for three years.  The invasive insects, which are native to Asia, have a powerful sting which can kill a human.  They can also spit venom, although they are not normally aggressive against humans unless disturbed.

They target honeybees, which pollinate crops, and can destroy an entire bee colony in just a matter of hours.

The hornets were eradicated using traps after sightings were reported by the public in the northwest corner of Washington state.

I forgot about this detail, which is quite amazing.  The first U.S. nest was eradicated in 2020 after a tracking beacon was attached to a wayward hornet. When it returned to its nest, officials followed it and destroyed the entire colony.

In total, four nests were discovered and destroyed.

Don’t ask me how you put a tracking beacon on a hornet, but this is one less thing to worry about during the holiday season.

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

Pray for Ukraine. And the victims of the Magdeburg, Germany, Christmas market attack.

God bless America.

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Gold $2647
Oil $69.55

Bitcoin: $96,704 [4:00 PM ET, Friday]...hit a new high of $108,315 earlier in the week.

Regular Gas: $3.05; Diesel: $3.51 [$3.09 - $4.02 yr. ago]

Returns for the week 12/16-12/20

Dow Jones  -2.2%  [42840]
S&P 500  -2.0%  [5930]
S&P MidCap  -4.7%
Russell 2000  _4.5%
Nasdaq  -1.8%  [19572]

Returns for the period 1/1/24-12/20/24

Dow Jones  +13.7%
S&P 500  +24.3%
S&P MidCap  +12.3%
Russell 2000  +10.5%
Nasdaq  +30.4%

Bulls 59.0
Bears 16.4

Merry Christmas!  Happy Hanukkah! 

Travel safe.

Brian Trumbore

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