Week in Review

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Week in Review

04/30/2022

For the week 4/25-4/29

[Posted 8:30 PM ET, Friday]

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Special thanks this week to Scott O.

Edition 1,202

I have been negative on the markets, and the world, basically going back to December, when I started building a short position as Vlad the Impaler began to move nearly 200,000 troops to the border of Ukraine in preparation for the invasion that came Feb. 24, after the Beijing Winter Olympics. 

But for the past month of this awful period, I see zero reason to be positive about anything…anywhere!  [Thank God we have sports as a distraction.]

Putin continues to ratchet up the weapons of mass destruction talk, as he clearly seeks a wider battle with the West.  He is nowhere near being able to bite off more than a third of Ukraine, at best, given his dwindling military resources, but he’s proven he’ll just destroy as much as he can, which obviously could include the Baltics, and little Moldova.

Unfortunately, his wretched army has probably learned some lessons from its losses in the north, as it now picks up incremental gains in the Donbas while continuing to wage a campaign of terror elsewhere through its artillery and missile strikes.

It’s now largely a war of attrition…and that’s sick.  Conservatively, on both sides combined, at least 18,000 soldiers killed already, and thousands, potentially tens of thousands, of civilians dead (depending on the final tally in Mariupol).  Think about that.  In just nine weeks.

This afternoon, Pentagon spokesman John Kirby, a true professional who has been at his job for a long time, suddenly stopped during one of his briefings and choked up talking about the victims in Ukraine, the innocents. 

“There’s not even an attempt by Russia to be precise in their targeting,” Kirby said. “It’s just brutality of the coldest and most depraved sort.”

I choke up almost every time when I see the elderly, lost in their villages, no one to turn to, unable to leave…it’s so cruel.

But the ramifications of Putin’s War go so far beyond Ukraine and neighboring countries.  The longer the war goes on, the longer the severe inflation and supply chain issues go on for the rest of the world.  The longer the war goes on, the worse our looming catastrophic global food crisis is going to become (as the World Bank describes below).

Here in the States, our markets are crapping out (I completed my second round of ‘shorting’ it this week), and as bad as it’s been, Wall Street still hasn’t totally factored in the implications of the Federal Reserve’s new rate regime, of which we’ll learn far more this coming week.  Yes, we’ll have soaring rallies from time to time, and I’ll be initiating a new ‘short’ position when that happens.

Back to Mariupol, just pray for these people.  God help them.  And when as expected Vladimir Putin holds his Victory Day parade on May 9, may someone in the throng send him a signal he’ll never forget.

Peggy Noonan / Wall Street Journal

“Sometimes a thing keeps nagging around your brain and though you’ve said it before you have to say it again.  We factor in but do not sufficiently appreciate the real possibility of nuclear-weapon use by Russia in Ukraine.  This is the key and crucial historic possibility in the drama, and it really could come to pass.

“And once it starts, it doesn’t stop.  Once the taboo that has held since 1945 is broken, it’s broken.  The door has been pushed open and we step through to the new age.  We don’t want to step into that age….

“We aren’t worried enough about Russian nuclear use in part because we imagine such a thing as huge missiles with huge warheads launched from another continent and speeding through space.  We think: That won’t happen!  It has never happened!  But the more likely use would be not of big strategic nuclear weapons but smaller tactical ones on the battlefield.  Such weapons have a shorter range and carry lower-yield warheads.  America and Russia have rough parity in the number of strategic nuclear weapons, but Russia has an estimated 10 times as many tactical nuclear weapons as the U.S. and delivery systems that range from artillery shells to aircraft.

“Why would Vladimir Putin use tactical nuclear weapons?  Why would he make such a madman move?

“To change the story.  To shock and destabilize his adversaries. To scare the people of North Atlantic Treaty Organization countries so they’ll force their leaders to back away.  To remind the world – and Russians – that he does have military power.  To avoid a massive and public military defeat.  To win.

“Mr. Putin talks about nuclear weapons a lot….[Ed. I get into his latest diatribe on the topic below]

“He’s talked like this since the invasion.  It’s a tactic: He’s trying to scare everybody. That doesn’t mean the threat is empty….

“In my experience with American diplomats, they are aware of but don’t always grasp the full implications of their opponents’ histories.  Mr. Putin was a KGB spy who in 1991 saw the Soviet system in which he’d risen crash all around him.  He called the fall of the Soviet Union a catastrophe because it left his country weakened, humiliated and stripped of dominance and hegemony in Eastern Europe.  He is a walking, talking cauldron of resentments, which he deploys for maximum manipulation.  He isn’t secretive about his grievances.  In his 2007 speech to the Munich Security Conference, he accused the U.S. of arrogance, hypocrisy and having created a ‘unipolar world’ with ‘one center of authority, one center of force, one center of decision making,’ headed by ‘one master, one sovereign.’  As for NATO, ‘we have the right to ask: Against whom is this expansion intended?’ ….

“For this man, Russia can’t lose to the West.  Ukraine isn’t the Mideast, a side show; it is the main event.  I read him as someone who will do anything not to lose….

“No one since 1945, in spite of all the wars, has used nuclear weapons.  We are in the habit, no matter what we acknowledge as a hypothetical possibility, of thinking: It still won’t happen, history will proceed as it has in the past.

“But maybe not.  History is full of swerves, of impossibilities that become inevitabilities.

“For the administration’s leaders this should be front of mind every day.  They should return to the admirable terseness of the early days of the invasion.  They should wake up every day thinking: What can we do to lower the odds?

“Think more, talk less.  And when you think, think dark.”

Lastly, President Zelensky told Polish journalists today that there was a big risk peace talks with Moscow would end and blamed public anger over what he said were atrocities by Russian troops, Interfax Ukraine reported.

“People (Ukrainians) want to kill them.  When that kind of attitude exists, it’s hard to talk about things.”

Such sentiments are likely to exist for generations to come.

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How the week unfolded….

--Monday, Secretary of State Antony Blinken declared “Russia is failing.  Ukraine is succeeding,” after he and Defense Secretary Lloyd Austin made a bold visit by train to Kyiv to meet with President Zelensky.

Blinken said Washington approved a $165 million sale of ammunition – non-U.S. ammo, mainly if not entirely for Ukraine’s Soviet-era weapons – and will also provide more than $300 million in financing to buy more supplies.

Sec. Austin went further, saying the U.S. wants to see Ukraine remain a sovereign, democratic country, but also wants “to see Russia weakened to the point where it can’t do things like invade Ukraine.”

“The first step in winning is believing that you can win,” Austin said.  “We believe that they can win if they have the right equipment, the right support, and we’re going to do everything we can…to ensure that gets to them.”

Observers saw this as a distinct shift in U.S. strategic goals since earlier it had been the goal of American military aid to help Ukraine win and to defend Ukraine’s NATO neighbors against Russian threats.

Austin also told Zelensky: “What you’ve done in repelling the Russians in the battle of Kyiv is extraordinary and inspiring quite frankly to the rest of the world.”

“We are here to support you in any way possible,” said Blinken.  “The reason we’re back is because of you, because of the extraordinary courage, leadership and success that you’ve had in pushing back this horrific Russian aggression.

In a response to Austin, Russian Foreign Minister Sergei Lavrov said Russia has “a feeling that the West wants Ukraine to continue to fight and, as it seems to them, wear out, exhaust the Russian army and the Russian military industrial war complex. This is an illusion.”

Weapons supplied by Western countries “will be a legitimate target,” Lavrov said, adding that Russian forces were targeting weapons warehouses in western Ukraine.

Lavrov accused Ukrainian leaders of provoking Russia by asking NATO to become involved in the conflict. NATO has effectively “entered into a war with Russia through proxies and is arming those proxies,” he said.  NATO forces are “pouring oil on the fire,” Lavrov said.

In a Russian television interview, Lavrov said, “Everyone is reciting incantations that in no case we allow World War III.”  He added he would not want to see risks of a nuclear confrontation “artificially inflated now, when the risks are rather significant.”

“The danger is serious,” he said.  “It is real.  It should not be underestimated.”

Ukrainian Foreign Minister Dmytro Kuleba said on Twitter that Lavrov’s comments underscored Ukraine’s need for Western aid: “Russia loses last hope to scare the world off supporting Ukraine.  Thus the talk of a ‘real’ danger of WWIII.  This only means Moscow senses defeat in Ukraine.”

Monday, Russia focused its firepower not just in the Donbas, but struck with missiles and warplanes far behind the front lines to try to thwart Ukrainian supply efforts.

Five railroad stations in central and western Ukraine were hit.  The bombardment include a missile attack near Lviv, the western city that has become a haven for Ukrainians fleeing the war elsewhere.  At least six were killed.

Russian also targeted an oil refinery and fuel depots in central Ukraine.

--Vladimir Putin on Monday accused the West of trying to destroy Russia, demanding prosecutors take a tough line with what he cast as plots hatched by foreign spies to divide the country and discredit its armed forces.

Putin accused the West of inciting Ukraine to plan attacks on Russian journalists, saying the FSB (successor to the Soviet-era KGB) had prevented a murder attempt by a “terrorist group” on a Russian TV journalist.  Incredibly absurd.

Putin said the West had realized that Ukraine could not beat Russia in war so had moved to a different plan – the destruction of Russia itself.

“Another task has come to the fore: to split Russian society and destroy Russia from within,” Putin said.  “It is not working.”

Putin, speaking to prosecutors, said they should react swiftly to fake news and reports that undermined order, without giving any specific examples.

--In Transnistria, a breakaway region of Moldova beside the Ukrainian border, several explosions targeted the territory’s Ministry of State Security.  Transnistria is a strip of land with about 470,000 people, and 1,500 Russian troops based there for peacekeeping. 

Moldova’s Foreign Ministry said “the aim of today’s incident is to create pretexts for straining the security situation in the Transnistrian region.”  The U.S. has said Russia might launch “false-flag” attacks against its own side to create a pretext for invading other nations, i.e., in this case, Moldova.

--But the focus remained on Mariupol, where up to 2,000 Ukrainian troops and perhaps 1,000 civilians (mainly family members of the troops), were taking shelter at the massive Azovstal steel plant.

--Britain said Monday it believed 15,000 Russian troops have been killed in Ukraine since the invasion began.  Defense Secretary Ben Wallace said 25% of the Russian combat units sent to Ukraine “have been rendered not combat effective.”

--The U.S. promised on Monday to reopen its embassy in Kyiv soon, with diplomats first returning to Lviv.

--Tuesday, Secretary of Defense Lloyd Austin urged Ukraine’s allies to “move at the speed of war” to get more and heavier weapons to Kyiv as Russian forces rained fire on eastern and southern Ukraine.

--Russian Foreign Minister Sergei Lavor dismissed Kyiv’s proposal to hold peace talks in the city of Mariupol and said it was too early to talk about who would mediate any negotiations.

But UN Secretary-General Antonio Guterres told Lavrov that he is ready to fully mobilize the organization’s resources to save lives and evacuate people from the besieged city.

“Thousands of civilians are in dire need of lifesaving humanitarian assistance, and many have evacuated,” Guterres told Lavrov in a news conference.

Vladimir Putin then said that Mariupol had been “liberated” and that no military operations were underway there, directly contradicting Kyiv’s version of events.

The Kremlin said Putin told Turkish President Erdogan that Kyiv should “take responsibility” for the people holed up in the Azovstal steel plant and call on fighters there to lay down their arms.

--One of Putin’s closest allies said Tuesday that Ukraine was spiraling towards a collapse into several states because of what he cast as a U.S. attempt to use Kyiv to undermine Russia.

The comments from Nikolai Patrushev, the powerful secretary of Russia’s Security Council, was an attempt to blame the United States for any division of Ukraine that emerges from the conflict.

In an interview with the government newspaper Rossiyskaya Gazeta, Patrushev said the United States had for years been trying to instill hatred for everything Russian in Ukrainians.

--Wednesday, Russia opened a new front in its war by cutting Poland and Bulgaria off from its gas, the two staunchly backing Kyiv, a dramatic escalation in the conflict.

One day after the United States and other Western allies vowed to speed more and better military supplies to Ukraine, the Kremlin upped the ante, using its most essential export as leverage.  European gas prices shot up 20% on the news, which European leaders denounced as “blackmail.”

State-controlled Russian giant Gazprom said it was cutting Poland and Bulgaria off from its natural gas because they refused to pay in Russian rubles, as Putin has demanded.

The gas cuts don’t put either country in dire trouble since they have been working for years on alternative sources and with summer approaching, nat gas is not as essential for households.

Fatih Birol, the executive director of the Paris-based International Energy Agency, called the move a “weaponization of energy supplies” in a tweet.

“Gazprom’s move to completely shut off gas supplies to Poland is yet another sign of Russia’s politicization of existing agreements & will only accelerate European efforts to move away from Russian energy supplies,” he wrote.

EU Commission President Ursula von der Leyen called the move “yet another attempt by Russia to use gas as an instrument of blackmail.”

Poland, a historical rival of Russia, has been a major gateway for the delivery of weapons to Ukraine and confirmed this week that it is sending the country tanks.  It said it was well prepared for Wednesday’s gas cutoff.

Poland also has ample natural gas in storage, while Bulgaria does get over 90% of its gas from Russia, and officials were working to find other sources, such as from Azerbaijan.

--Ukrainian Deputy Defense Minister Hanna Malyar accused Russia on Wednesday of being ready to use the territory of the Moldovan region of Transdniestria as a bridgehead to move on Ukraine or the rest of Moldova.

The Russian foreign ministry was quoted by RIA news agency as saying this week that it wants to avoid a scenario in which Moscow would have to intervene there.

--Vladimir Putin on Wednesday warned that any countries attempting to interfere in Ukraine would be faced with a swift response from Russia and said all decisions on how Moscow would react in that situation have already been taken.

Addressing lawmakers in St. Petersburg, Putin said the West wanted to cut Russia up into different pieces and accused it of pushing Ukraine into conflict with Russia.

“If someone intends to interfere in what is going on from the outside they must know that constitutes an unacceptable strategic threat to Russia.

“They must know that our response to counterstrikes will be lightning fast. Fast.

“We have all the weapons we need for this.  No one else can brag about these weapons, and we won’t brag about them.  But we will use them.”

Putin continued to say the Kremlin “can’t allow an anti-Russia to be created on Russia’s historical territory” and added that Ukraine was “pushed” to attack Crimea and Donbas.

--A U.S. official, Ambassador-at-Large for Global Criminal Justice, Beth Van Schaack, said the U.S. had reliable information that Russian military forces executed Ukrainians who were trying to surrender near Donetsk.  Schaack said the U.S. has credible reports and photos of individuals killed “execution-style” with their hands bound, including bodies showing signs of torture and accounts of sexual violence against women and girls.

--Seth G. Jones, who directs the European Security Program at the Center for Strategic and International Studies in Washington, said on Wednesday that “the risk of a widening war is serious right now.”

“Russian casualties are continuing to mount, and the U.S. is committed to shipping more powerful weapons that are causing those casualties,” Jones said.  Sooner or later, he added, Russia’s military intelligence service might begin to target those weapons shipments inside NATO’s borders.

--Thursday, President Biden asked Congress for $33 billion to provide more military, economic, and humanitarian aid to Ukraine.

The additional money, which includes $20.4 billion for military aid, will ensure that Ukraine can fend off Russian attacks in the months ahead.  The package also “begins to transition to longer-term security assistance that’s going to help Ukraine deter and continue to defend against Russian aggression,” Biden said.

The $33 billion request is more than double what Congress approved in March in its first $13.6 billion military and humanitarian aid package, which the administration exhausted last week when it announced a $800 million delivery of weapons to Kyiv, its third of that size since March 16.

“The cost of this fight is not cheap, but caving to aggression is going to be more costly if we allow it to happen,” Biden said at the White House.

President Zelensky praised Biden’s offer of massive help, which amounts to nearly 10 times the aid Washington has sent so far since the war began.

--German representatives to the European Union announced Thursday they no longer object to a full Russian oil embargo as long as Berlin is given time to secure alternative supplies.  Earlier in the week, the Economy Minister Robert Habeck said the EU’s largest economy could cope with an embargo on Russian oil with other supply.

--Russia’s foreign spy chief accused the U.S. and Poland on Thursday of plotting to gain a sphere of influence in Ukraine, a claim denied by Warsaw as disinformation aimed at sowing distrust among Kyiv’s supporters.

Sergei Naryshkin, the chief of Russia’s Foreign Intelligence Service (SVR), cited unpublished intelligence that he said showed the United States and Poland, NATO allies, were plotting to restore Polish control over part of western Ukraine.

“According to the intelligence received by Russia’s (SVR), Washington and Warsaw are working on plans to establish Poland’s tight military and political control over its historical possessions in Ukraine,” Naryshkin said in a rare statement from the SVR.

Total bullshit from the Kremlin.

--A Russian foreign ministry spokeswoman Maria Zakharova told reporters in Moscow on Thursday that Russia has taken umbrage at statements from Britain that it is legitimate for Ukraine to target Russian logistics.  There have been a number of incidents involving military facilities across the border, such as near Belgorod, around 15 miles from Ukraine, with attacks on ammunition and oil depots.

“I don’t advise you to test our patience further,” she said.

Kremlin spokesman Dmitry Peskov told reporters: “In itself, the tendency to pump weapons, including heavy weapons, to Ukraine and other countries are actions that threaten the security of the continent and provoke instability.”

The defense ministry added that if such attacks continued then Moscow would target decision-making centers in Ukraine, including in Kyiv, i.e., Zelensky himself.

--During a visit to Kyiv by UN Secretary-General Antonio Guterres, Russia launched missiles against Kyiv, with Ukrainian defense minister Oleksiy Reznikov calling it “an attack on the security of the Secretary-General and on world security.”

Guterres met with President Zelensky and called for civilians to be evacuated from Mariupol.  Zelensky condemned Russia’s strike on Kyiv while Guterres was visiting as an attempt to “humiliate the UN and everything that the organization represents,” adding it “requires a strong response.”

Zelensky stressed that it was important that the UN chief visited sites of mass graves in the Kyiv region, to see “with his own eyes what the Russian occupiers had done there.”

--Russia killed a journalist from the U.S.-backed broadcaster Radio Liberty in the missile attack on Kyiv, the broadcaster said on Friday.  Thursday’s attack destroyed the bottom two floors of a residential building producer Vira Hyrych was living in.

“She was going to bed when a Russian ballistic missile hit her apartment in central Kyiv.  Russia’s barbarism is incomprehensible,” a Ukrainian foreign ministry spokesperson said.

Kyiv Mayor Vitali Klitschko said, “Kyiv is still a dangerous place and Kyiv is still the target of Russians, of course. The capital of Ukraine is the goal and they want to occupy it.

--Friday, Ukraine acknowledged it was taking heavy losses in Russia’s assault in the east, but said Russia’s losses were even worse. 

--Russia used a diesel submarine in the Black Sea to strike Ukrainian military targets with Kalibr cruise missiles, the defense ministry said today.

The West cannot continue to allow Putin to use the Black Sea as his private lake!

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--Last Sunday, Pope Francis called for a halt to attacks on Ukraine so aid can reach the exhausted population and urged leaders to “listen to the voice of the people,” who fear an escalation.

Speaking to tens of thousands in St. Peter’s Square, he noted that the day most Eastern Christians, including Orthodox and Catholics in Ukraine and Russia, celebrate Easter coincided with the two month mark of the war.

“Instead of stopping, the war has become more harsh,” he said from the window of the official papal study.  “I renew an appeal for an Easter truce, the minimum and tangible sign of a willingness for peace.  Stop the attacks in order to help the exhausted population.  Stop,” Francis said.

“It is sad that in these days that are the most holy and solemn for all Christians, the deadly sound of weapons is heard more than the sound of bells that announce the resurrection.  And it is sad that weapons are increasingly taking the place of words,” Francis said.  “Please, political leaders, listen to the voice of the people who want peace, not an escalation of the conflict.”

The leader of the Russian Orthodox Church, Patriarch Kirill, at a service last Saturday said he hoped the war would end quickly but did not condemn it.  While speaking of the need for reconciliation, he did not question or criticize the military campaign.

--Russia expects the economy to contract by 8.8% in 2022 in its base case scenario, or by 12.4% under a more conservative scenario, an economy minister document showed on Wednesday, further evidence that sanctions pressure is taking its toll.  Earlier, finance minister Alexei Kudrin said the economy was on track to contract by more than 10% this year in its biggest decline in GDP since 1994.

--Russia’s foreign ministry said on Wednesday it had traded Trevor Reed, a U.S. Marine held in a Russia jail, for Russian citizen Konstantin Yaroshenko, who was serving a 20-year sentence in the United States.

Reed, from Texas, was serving a nine-year sentence in Russia after being convicted in 2019 of endangering the lives of two police officers while drunk on a visit to Moscow, which he denied. The U.S. called his trial a “theater of the absurd.”

Given all the tensions between the two nations, the exchange is pretty extraordinary.

“Today, our prayers have been answered and Trevor is safely on his way back to the United States,” Reed’s family said in a statement.  Reed’s medical condition is said to be not good after living in squalid conditions in a Russian gulag.

Yaroshenko, a Russian pilot, was serving a prison sentence for conspiracy to smuggle cocaine into the United States.

But Paul Whelan and Brittany Griner are still being held by the Russians.

--Russia will fully develop and invest in the Kuril islands, a Russian deputy prime minister was quoted on Monday as saying, in comments sure to further strain relations with Japan which claims the four most southern islands in the chain.  Japan claims the four southern Kuril islands as its Northern Territories in a dispute that dates back to the end of World War II and has prevented the signing of a peace treaty formally ending wartime hostilities between Moscow and Tokyo.

--You can’t help but look at the destruction in Ukraine and wonder about the impact on the nation’s environment.

“We’re facing a huge environmental problem,” said Stefan Smith, program coordinator for disasters and conflict at the United Nations Environment Program.

The war is poisoning the nation’s air, water and soil, with environmental-health experts saying the pollutants released by the continuing assault could take years to clean up while raising the risk of cancer and respiratory ailments as well as developmental delays in children.

Experts are concerned about the health effects of exposure to heavy metals, and to toxic gases and particulates from explosions, fires and building collapses.  The potential health impacts could reach beyond Ukraine’s borders, as the pollutants are carried downwind and downstream.

Some commentary….

Editorial / The Economist

“Humiliation in Ukraine weakens Russia’s last claim to superpower status. The war may yet drag on, and while it does Russia will not be able to mount big operations elsewhere. Equipment, ammunition and manpower are being used up fast.  Restoring Russia’s forces to full strength and training them to avoid the mistakes in Ukraine could take years.  Should sanctions remain because Mr. Putin is still in power, the task will require even longer.  Russian missiles are chock-full of Western components. The flight of talented, outward-looking Russians will weigh on the economy. All the while, the less that Russia can project military power, the less it will be able to disrupt the rest of the world….

“Ultimately, weakness may lead Russia to the last arena where it is still indisputably a superpower: chemical, biological and nuclear weapons. From the start of this war, Mr. Putin and his government have repeatedly brandished the threat of weapons of mass destruction.  Mr. Putin is rational, in that he wants his regime to survive, so the chances of their use probably remains slim. But as Russia’s armed forces run out of conventional options, the temptation to escalate will surely grow.

“The message for the wider world is that Mr. Putin’s military opportunism in Ukraine must be seen to fail by his own officers and strategists, who may then temper his next headstrong scheme.  A stalemate in Donbas would merely set up the next fight and it could be even more threatening than today’s.

“Yet, even if Mr. Putin is defeated, he will remain dangerous. The message for NATO is that it needs to update its tripwire defense.  This rests on the idea that a Russian attempt to take a bite out of, say, the Baltic states may succeed at first, but would trigger a wider war which NATO would eventually win. That defense involves the risk of miscalculation and escalation, which are more fraught than ever if Russia’s conventional forces are weak.  Better to have a large forward force that Russia would find hard to defeat from the very start.  The best way to be safe from Mr. Putin and his rotten army is to deter him from fighting at all.”

Editorial / Wall Street Journal

“An attack on one NATO ally is an attack on all, and that’s how Europe and the U.S. should treat Russia’s decision this week to stop supplying natural gas to Poland and Bulgaria. With enough allied coordination, this could boomerang on Vladimir Putin.

“The Kremlin is extorting Europe by demanding that ‘unfriendly’ countries pay for gas in rubles rather than euros or dollars as required under their Gazprom contracts. European companies have been ordered to set up two accounts at Gazprombank to enable the currency conversion.  Countries that refuse, as Bulgaria and Poland have, risk a gas cutoff.

“ ‘The request from the Russian side to pay in rubles is a unilateral decision and not according to the contracts,’ says European Commission President Ursula von der Leyen.  ‘Companies with such contracts should not accede to the Russian demands. This would be a breach of the Russian sanctions.’  Mr. Putin hopes to erode Western sanctions, boost the ruble and divide Europe.

“This may be a tactical blunder.  Europe can’t replace the 40% or so of its gas that it imports from Russia overnight. But Mr. Putin’s extortion should harden Europe’s resolve to reduce its dependence on Russian fuel.  Poland shows it can be done sooner than many think.

“The Poles saw how Mr. Putin had repeatedly weaponized natural gas against Ukraine and prepared by building a large liquefied natural gas import terminal on the Black Sea.  Next week Poland plans to open a pipeline linked to Lithuania’s LNG terminal.  Another pipeline delivering gas from Norway to Poland is expected to be completed this fall….

“Mr. Putin continues to underestimate European solidarity and resolve. He may think his threats will erode sanctions, but the opposite may be happening.  Bloomberg reported Wednesday that German officials were prepared to support a gradual ban on Russian oil imports to the European Union.

“The Biden Administration could support the Europeans by imposing secondary sanctions on businesses that help finance Russia’s oil trade so Mr. Putin can’t easily off-load his crude to China and India.  It should also be moving heaven and earth to ramp up U.S. oil and gas production and exports to Europe.

“Mr. Biden is doing the opposite.  Last week the Administration reaffirmed support for a leasing ban on public land and imposed new permitting rules that will make it much harder to build pipelines and LNG export terminals.  This week it reversed a Trump plan to open up the National Petroleum Reserve-Alaska to more drilling.  Mr. Putin must be smiling.

“Russia’s war on Ukraine has awakened Europeans from their energy illusions, but Mr. Biden is still snoozing.  Time to wake up, sir.”

Biden Agenda

--Thursday, President Biden offered an update on his administration’s next steps with student loans, and he said:

“I am not considering $50,000 debt reduction (as Senate Majority Leader Chuck Schumer is calling for), but I’m in the process of taking a hard look at whether or not there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”

Forgiving up to $50,000 in student debt per borrower would cost $904 billion and would forgive the full balance for 79% of the 37.9 million federal borrowers, according to estimates from the New York Federal Reserve.

Adding a household income limit of $75,000 would cut the total cost of a $50,000 forgiveness policy to $507 billion, and having that same income limit but forgiving a max of $10,000 per borrower would cost $182 billion.

--Even though there is bipartisan support for Ukraine aid packages, that doesn’t mean this latest $33 billion proposal will sail through.  Senate Democrats are planning to link the new round of money to an international Covid-19 assistance package, which Republicans have previously rejected.

If Ukraine money is linked to Covid aid, Republican senators are then expected to push for an amendment vote that would keep in place Title 42, the immigration provision that has allowed officers to turn away asylum seekers over public health concerns that the administration is attempting to lift next month. 

But being able to offer amendments on the Senate floor requires negotiations and it takes time that Ukraine does not have. 

There is also very little legislative time until the Memorial Day break.

--And there is very little time for Joe Biden and the Democrats in general to get some kind of positive message across.

Four months after Biden’s Build Back Better bill stalled in Congress, the administration has yet to submit a trimmed down proposal, which everyone thought made sense, including some Republicans.

Ahead of the midterms, it’s not going to be enough for Biden to talk about passage of the infrastructure bill or the $1.9 trillion American Rescue Plan.  That’s old history.  It’s what have you done for me lately?

Sen. Elizabeth Warren (D-Mass.), in a New York Times op-ed, argued Democrats should use “every single one of the next 200 days” to pursue promises Biden and Democrats campaigned on.  She said Democrats win elections when they show “we understand the painful economic realities facing American families” and deliver on change.  Warren highlighted the student debt issue as an example.

“To put it bluntly,” Warren said, “if we fail to use the months remaining before the elections to deliver on more of our agenda, Democrats are headed toward big losses in the midterms.”

It’s going to be a slaughter

Wall Street and the Economy

Stocks suffered through a godawful week, and April, as described in detail below, but now it’s all about next week’s Federal Reserve Open Market Committee meeting and an expected hike in the benchmark funds rate of 50 basis points, as well as further guidance on the reduction in the balance sheet, which is another way of raising rates. 

Separately, the World Bank warned the war in Ukraine is set to cause the “largest commodity shock” since the 1970s. 

In a new forecast, it said disruption caused by the conflict would contribute to huge price rises for goods ranging from natural gas to wheat and cotton.

The increase in prices “is starting to have very large economic and humanitarian effects,” Peter Nagle, a co-author of the report, told the BBC.

He said, “households across the world are feeling the cost-of-living crisis.”

“We’re particularly worried about the poorest households since they spend a larger share of income on food and energy, so they’re particularly vulnerable to this price spike,” the senior economist at the World Bank added.

Energy prices are set to increase more than 50%, the World Bank says.  The biggest rise will be in the price of natural gas in Europe, which is set to more than double in cost.

Oil prices are expected to remain elevated into 2024, something which will lead to widespread inflation.

Russia produces about 11% of the world’s oil, but the report said “disruptions resulting from the war are expected to have a lasting negative effect” as sanctions mean that foreign companies leave and access to technology is reduced.

The World Bank commodity outlook also warned many foods are set to see steep rises in their costs.  The UN food prices index already shows they are at their highest since records began 60 years ago.

Wheat is forecast to increase 42.7% and reach new record highs in dollar terms.  Soybeans 20%, 30% for oils and 42% for chicken.  These increases reflect the fact that exports from Ukraine and Russia have fallen drastically.

Before the war, the two accounted for 29% of global wheat exports, according to JPMorgan, and 60% of global sunflower supplies – a key ingredient in many processed foods, according to S&P Global.

So with all of the above in mind, as we approached the release of the first look at GDP for the first quarter, the Atlanta Fed’s last look for its GDPNow barometer pegged Q1 growth at 0.4%, lower than the consensus of 1.1%.  And then the Bureau of Economic Analysis released the official data and it was a surprise…down 1.4 percent annualized in the first three months, vs. 6.9% for the fourth quarter of 2021 (and 5.7% for the entire year, the fastest annual clip since 1984). 

So this fueled concerns about a recession by 2023, or early next year, amid all the dire inflation news above and uncertainty over the war in Ukraine.

However, consumption, while not as robust as expected, did rise 2.7%, which isn’t recessionary, business spending was up, and the employment situation is still very strong.

But the weakness was in a reduction in retailers’ inventory purchases and a growing trade gap between export and imports.

Many businesses bought less inventory than they normally would in early 2022 because they had leftover merchandise from late last year, when they stocked up on extra goods to guard against supply chain shortages and delays.

But the reality is, the Fed is now in rate hiking phase and rising prices have consequences.

For Democrats, the negative number on GDP is not good heading into the midterm elections…as if they didn’t already have enough problems.

“Runaway inflation is crushing working American families on Democrats’ watch,” Senate Minority Leader Mitch McConnell (R-KY) said on the Senate floor Thursday.  “No longer are Democrats just presiding over a disappointing recovery; now they’ve thrown the recovery into reverse, and they’re going backwards.”

We did have other important data this week.

March durable goods came in at 0.8%, ex-transportation 1.1%.

March new home sales were light at 763,000 annualized, way down from the prior month.

The February S&P CoreLogic Case-Shiller home price data came in at 19.8%, year-over-year, vs. 19.1% in January…up 1.5% for the 20-city index month-over-month.  Obviously still very robust, but this was February, and mortgage rates have skyrocketed since.

The average home price in Phoenix is up 32.9%, the 33rd straight month that market has led the way.

March personal income rose 0.5%, while consumption was up a solid 1.1%, both better than expected, but the Fed’s preferred inflation barometer, the core personal consumption expenditures index (PCE) rose 5.2% year-over-year vs. a revised 5.3% in February (the PCE rising by 6.6% on headline, the fastest pace since Jan. 1982), and this gives the Fed yet another excuse to hike its funds rate at least one-half percent (50 basis points) next week.

Lastly, the Chicago Purchasing Managers index for April was a downer, 56.4 vs. 62.9 prior, though still in expansion mode.

Europe and Asia

On the data front across the pond, we had preliminary flash readings on inflation and GDP, courtesy of Eurostat, ahead of next week’s important PMI data.

The flash reading for GDP in the first quarter of 2022 came in up 0.2% over the previous quarter, +5.0% from the first quarter of 2021.

Germany +3.7% from a year ago; France 5.3%; Italy 5.8%, Spain 6.4%.

But these figures will be rolling out in succeeding quarters and we’re soon going to see year-over-year comparisons more like 2% to 3%.

For example, today, Germany’s government slashed its growth forecast for the year from 3.6% in January to 2.2%, mainly because of the war in Ukraine.  It forecasts inflation rates to be on average 6.1% this year, much higher than forecast only a few months ago.

The government now sees growth of 2.5% in 2023, but that all depends on developments in the war.  The Bundesbank, Germany’s central bank, warned recently that the German economy may shrink nearly 2% this year if the war escalates and the European Union decides to impose an embargo on imports of Russian energy.

Euro area inflation for April was estimated to be up 7.5%, a tick higher than March’s final 7.4%.  Ex-food and energy, the figure was a robust 3.9%, up from 3.2% in March and 0.8% a year ago.

France: President Emmanuel Macron won a second five-year term, much to the delight of his fellow European Union leaders (at least most of them), with a 58% to 42% drubbing of Marine Le Pen in the run-off last Sunday.  The margin was a little greater than expected.

The centrist leader told jubilant supporters at the foot of the Eifel Tower that now the election was over he would be a “president for all.”

Despite her loss, Le Pen pointed to the fact her far-right party captured the highest vote total in its history, bur far-right rival Eric Zemmour countered that she had ultimately failed, just like her father who preceded her: “It’s the eighth time the Le Pen name has been hit by defeat.”

But more than one in three voters did not vote for either candidate, and turnout, at under 72%, was the lowest in a presidential run-off since 1969.  There is a lot of voter dissatisfaction in France these days.  Voters who said they were casting blank ballots told reporters they wanted to punish the sitting president.  The issue was they couldn’t then turn and vote for the extremist alternative.

Far-left leader Lean-Luc Melenchon, who was narrowly defeated by Le Pen in the first round of voting, was scathing about both candidates.

While it was good news France had refused to place its trust in Le Pen, Melenchon claimed that Macron had been elected with a worse result than any other president.  “He floats in an ocean of abstentions, and blank and spoiled ballots.”

But now we have June’s parliamentary elections, which define the make-up of the government Macron must rely on to see through reform plans that would mark an unprecedented shake-up of France’s welfare state.

Newly elected presidents usually gain a majority in parliament whenever legislative elections directly follow the presidential vote because of the generally low turnout among supporters of the defeated candidates, say French experts.  Le Pen, in her concession speech, though, sounded defiant, promising a strong opposition bloc.  Melenchon wants to become prime minister.

But the initial polls have Macron’s camp winning 326 to 366 seats, which would be an outright majority in the 577-seat National Assembly.  The far-right is seen winning between 117 and 147 seats, and the left-leaning parties together would reach between 73 and 93 seats.  But this was taken the day after Sunday’s vote.

Brexit: The UK has delayed imposing its full post-Brexit import controls on goods from the EU again, pushing it back until the end of next year, saying it did not want to add more fuel to fast-rising inflation.  Britain left the EU’s single market in Jan. 2021 and has delayed full implementation of border controls on several occasions due to worries about port disruption and Covid-19, and now the risk of adding to the cost-of-living crisis.

So the facilities created for border checks are now white elephants. And what’s even more absurd is that UK exports to the EU face restrictions, but not imports.

Boy, your editor said way back in 2016 Brexit was incredibly idiotic.  Score one for moi.

Turning to Asia…no economic data from China, but the Shanghai Composite stock index was down 5.2% on Monday as Covid restrictions in the likes of Shanghai represented the largest threat to the economy.

But U.S.-listed Chinese tech stocks rallied Friday as Beijing scheduled a meeting with the country’s Big Tech firms on the heels of a Politburo meeting today, raising hopes that the government will stop its sweeping regulatory clampdown on the tech sector and give internet platforms larger roles to help prop up the ailing economy.

The symposium has been set for after the Labour Day holiday, which lasts from Saturday to Wednesday, to assure business executives that regulators will no longer demand rectifications or impose surprise fines, sources told the South China Morning Post.

Shares in e-commerce giant Alibaba Group Holdings soared about 10% on the news.

In Japan, March retail sales rose 0.9% year-over-year, better than expected, while March industrial production was only 0.3% Y/Y, less than forecast.

Again, next week is all about the PMI data and impacts from the war.

Street Bytes

--April was a brutal month, the worst for Nasdaq since October 2008, down 13.3%, while the S&P 500 and Dow Jones had their worst month since March 2020 with losses of 8.8% and 4.9%, respectively.  Further, the start to the year for the S&P, -13.3%, is the worst opening four months since 1939, according to Dow Jones Market Data.

For the week, the Dow lost 2.5%, the S&P 3.3% and Nasdaq 3.9%.  Nasdaq’s last four weeks have gone… -3.9%, -2.6%, -3.8%, -3.9%.

While 80 percent of the companies reporting earnings thus far are beating expectations, it’s the disappointing guidance in many cases that is tanking the market.

One measure of the market volatility this year…the S&P 500 has gained or lost 2% or more in a day some 33 times so far in 2022, compared to 24 such days in all of 2021.

--U.S. Treasury Yields

6-mo. 1.40%  2-yr. 2.72%  10-yr. 2.93%  30-yr. 2.99%

Yields continued to climb, the 10-year at its highest weekly close since 11/30/18, and that’s not good for mortgage rates.

Separately, Federal Reserve Governor Lael Brainard received enough votes in the Senate on Tuesday to win confirmation as the central bank’s next vice chair; Chairman Jerome Powell expected to be confirmed soon for another term.

--Crude oil rose to $104.13 on West Texas Intermediate, up about $2.50 on the week, as the tug of war between tight global supplies and demand issues from China continued.

Oil also rallied on reports that Germany is no longer opposed to an embargo on Russian oil, which could further tighten supplies in the already stressed energy market.

--Exxon Mobil reported $5.48 billion in net income during the first quarter as oil and gas prices rose steadily, doubling its profits compared to a year ago.

But the oil giant took a huge hit as it abandoned its Russian operations due to the war, writing down $3.4 billion, the company said today.

Revenue at the Irving, Texas, oil giant was $90.5 billion, far exceeding the $59.15 in revenue during the same quarter in 2021.

Exxon’s production fell to 3.7 million barrels per day of oil-equivalent, down 4% from the fourth quarter due to weather-related unscheduled downtime, planned maintenance and divestments, the company said.

--Chevron Corp.’s first-quarter profit leapt from the same period a year ago to its highest in 10 years, benefiting from the surge in oil and gas prices in the aftermath of Russia’s invasion of Ukraine.  The second-largest U.S. oil producer on Friday posted adjusted earnings of $6.5 billion or $3.36 per share, from $1.7 billion, or 90 cents per share in the same quarter last year.

Nevertheless, the result fell short of the EPS estimate from analysts, and the shares declined 3%.  [Exxon Mobil’s shares fell 2.2%.]

Chevron’s oil and gas production rose by 10% from the year-ago period.  In the first quarter, Chevron pumped a record 692,000 barrels of oil and gas per day in the Permian, the top U.S. conventional basin, and boosted full-year guidance to a range of 700,000 to 750,000 bpd.

“Chevron is doing its part to grow domestic supply,” CEO Mike Wirth said in an earnings release.

Chevron’s revenue rose 70% to $54.4 billion in Q1, above expectations.

The revenues from higher prices could be used to return cash to shareholders, expand Chevron’s low-carbon business and pay down debt, CFO Pierre Breber said in an interview.  “First is the dividend.  Second is investing in the business.  Third is maintaining a strong balance sheet.  And then the fourth is returning excess cash to shareholders.”

--Elon Musk won his brief battle with Twitter Inc. as the board accepted his offer to buy the company for $44 billion, or $54.20 a share.  Once the deal closes later this year, Twitter will become privately held.

The price is a 38% premium to the closing stock price on April 1, the last trading day before Musk unveiled his stake of about 9%.

Musk has lined up $25.5 billion of fully committed debt and margin loan financing and will provide a $21 billion equity commitment, the company said.

“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk tweeted to his 84 million followers.  “I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”

Musk says he’s a “free speech absolutist” and has expressed concerns about Twitter straying from its roots as “the free speech wing of the free speech party.”

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote.

Musk pledged to adopt a more hands-off approach to speech on Twitter, but a warning Tuesday from a top European regulator shows it may not be as simple as shelling out $44bn for the social-media platform and taking it private.

The internet market commissioner at the European Union cautioned Musk a day after he struck a deal to buy Twitter that he would need to follow the bloc’s new rules on content moderation, which will also impact the likes of Google and Facebook and the EU’s efforts to curb the spread of illegal content, hate speech and disinformation.

Twitter claims 217 million so-called monetizable daily users compared with 1.9 billion daily users for Meta Platforms Inc.’s core Facebook platform and a billion-plus monthly users for TikTok.  But Twitter users include media personalities, politicians, activists and tech aficionados who help shape social discourse.

Twitter co-founder Jack Dorsey said that the only solution he trusts for the platform is Elon Musk and that taking the company private was the “correct” first step.

“Twitter as a company has always been my sole issue and my biggest regret,” Dorsey wrote in a thread.  “Solving for the problem of it being a company however, Elon is the singular solution I trust,” he said.

Editorial / New York Daily News

“Over the years, Twitter has done a rubbish job on consistent standards.  For years, Louis Farrakhan was allowed to keep tweeting despite virulent anti-Semitism that violated its terms.  Endless are the reports of accounts being punished or suspended for hard-to-understand reasons, and of some especially nasty speech being ignored. We cheered the suspension of @realdonaldtrump after he incited the Capitol riot, but it is hard to justify his continued Twitter exile, what with the leaders of Iran and Afghanistan freely tweeting.

“As for disinformation, while Twitter is right to privilege the relatively free flow of ideas over the impossibility of fact-checking everything, it has an obligation to try to stop the spread of life-or-death lies.  Here, too, it’s been all over the map.

“Rather than aiming to see that Twitter’s standards get smarter and are more uniformly applied, ‘free-speech absolutist’ Musk would surely give more people more freedom to irresponsibly smear others, as Musk did in the summer of 2018 by calling a rival a ‘pedo’; harass each other; manipulate markets, Musk-style; spit bigoted hate speech; and lie, including to undermine U.S. elections.

“Social media platforms aren’t public squares; they’re private companies with a right to enforce rules that serve the vast majority of their users. Under Musk, Twitter wouldn’t be a boring company, but it would almost surely not be the ‘maximally trusted, and broadly inclusive’ place he claims to want to make it.”

Meanwhile, Twitter posted quarterly earnings of $513 million, not that it will matter anymore.  Revenue rose 16% to $1.2 billion vs. the same period last year.

Twitter reported an average of 229 million daily active users in the quarter, which was about 14 million more than a revised 214.7 million daily users in the previous quarter.

The company said in lieu of a conference call with executives and analysts:

“Given the pending acquisition of Twitter by Elon Musk, we will not be providing any forward looking guidance, and are withdrawing all previously provided goals and outlook.”

Shares in Tesla were on a rollercoaster Thursday after filings showed Musk sold 4.4 million shares on April 26 and 27, after analysts and investors suspected he’d have to do so to cover the $21 billion equity portion of the Twitter transaction.

Musk tweeted shortly after the filings were made public that he has “no further Tesla sales planned after today.”

But Twitter shares, at $49, are well below the $54.20 offer as there remain doubts whether this whole thing will yet go through.

--Apple Inc. on Thursday forecast bigger problems as Covid-19 lockdowns snarl production and demand in China, the war in Ukraine dents sales and growth slows in services, which the iPhone maker sees as its engine for expansion.  Shares fell about 3% after executives laid out their glum outlook on a conference call.

The news outweighed strong results, including record profit and sales, for Apple’s fiscal second quarter, which ended in March.

CFO Luca Maestri warned in an interview that the war in Ukraine, which led Apple to stop sales in Russia, would leave a bigger dent on sales in the fiscal third quarter. He told analysts that supply-chain issues would hurt sales in the quarter by $4 billion to $8 billion, “substantially larger” than the hit in the second quarter.

Meanwhile, for the past quarter, Apple’s revenue was $97.3 billion, up 8.6% from last year and higher than expected. Worldwide phone sales revenue was $50.6 billion, a 5.5% increase from a year ago, and service sales rose 17% to $19.8 billion, both ahead of analysts’ average forecasts.

Apple said iPad sales fell 2% to $7.65 billion due to supply-chain constraints, while revenue from Mac computers, also facing supply-chain issues, rose 14.7% to $10.4 billion.  Sales of wearables, home speakers and accessories rose 12% to $8.8 billion

Apple said it now has 825 million paying subscribers across its subscription offerings, up by 40 million from 785 million last quarter.

Total profit was $25 billion, or $1.52 per share, easily topping expectations.  Apple also raised its dividend 5% to $0.23 per share and the board approved a buyback for an added $90 billion in shares.

CEO Tim Cook shrugged off an analyst question on inflation and consumers.  “We’re monitoring that closely.  But right now, our main focus, frankly speaking, is on the supply side,” he said.

--Shares in Amazon.com cratered 14% after the company reported a loss of $3.84 billion for the first three months of the year, or $7.56 a share.  A year ago, it reported a profit of $8.1 billion, or $15.79 a share.  Analysts expected a profit of $8.35 a share in the latest quarter.

The ocean of red ink in Amazon’s report came from the company’s accounting for a $7.6 billion loss in value of its stock investment in Rivian Automotive (which also impacted Ford, see below).

Still the slowdown in online spending is real and broad-based.  While in-store sales rose, March was the first month to show a decline in online sales since the pandemic began, according to Mastercard SpendingPulse.

Amazon prospered during the pandemic as homebound people eager to limit human contact turned online to purchase what they need.  But growth has slowed amidst the reopening.

Like many others, Amazon is dealing with pressure from inflation, supply-chain issues and labor shortages.  Last quarter, the company hiked its annual Prime membership fee by $20, a first since 2018.  To offset rising fuel costs and inflation, it has also added a 5% surcharge to fees it charges third-party sellers who use its fulfillment services.

Revenue rose 7% to $116.44 billion, compared with $108.52 billion in the first quarter 2021.  Analysts were expecting $116.5 billion.

But Amazon then said it expects sales for the current quarter to between $116 billion and $121 billion.  That’s lower than the average expectation among industry analysts of $125.33 billion.

The results come as the company faces a growing unionization push from inside its workforce.

--Microsoft shares rose 5% after the company beat on both earnings and sales in the first quarter.  Revenue was $49.36 billion, up from $41.71 billion a year earlier. Profit rose 8% to $16.7 billion.

Microsoft enjoyed a surge in revenue during the pandemic, but unlike Netflix and others, the growth has continued.

Revenue for Microsoft’s cloud offerings for commercial customers, which include its flagship Azure cloud computing platform and Office 365 subscriptions, increased 32% to $23.4 billion.  Azure grew 46%.

Microsoft’s personal computing business grew 11% to $14.5 billion, with an 11% increase in sales of its Windows operating system that comes installed on new computers, a sign that inflation has not hurt purchasing, particularly by corporate customers.  Sales of Xbox gaming consoles rose 14%.

The company still expects its $70 billion deal to acquire Activision, the video game maker, to close by July 2023.

--Alphabet, the parent of Google, is expecting tough comparisons from a year earlier in the current period after first-quarter earnings missed expectations, with slower revenue growth in video-streaming unit YouTube weighing on results.

Retail and a continued recovery in travel boosted Google Search and other advertising revenue by 24% annually to $39.6 billion, CFO Ruth Porat told analysts on a call late Tuesday.  YouTube revenue rose 14% to $6.9 billion, but that pace was slower than the 25% jump year-on-year in the fourth quarter. The company said the war in Ukraine hurt sales in this channel.

Alphabet’s total revenue rose 23% to $68.01 billion in the first quarter, slightly beating consensus, but profit dropped 8% from a year earlier to $16.4 billion, or $24.62 a share, which  lagged estimates of $25.78.  Operating expenses climbed 24% in the quarter to $18.3 billion, with headcount driving much of the cost.

The growth rate of 23% for revenue was the first time since 2020 that the company has reported a year-over-year revenue gain of less than 30%.

Concerns about slowing growth have become an even bigger worry amid rising interest rates aimed at tamping down the highest inflation rates in more than 40 years.

Comparisons with last year were bound to be difficult for Google and a wide range of other tech companies.  Their digital services and gadgets were in hot demand during a pandemic that forced most people to spend far more time at home.

Alphabet shares, which closed Monday at $2465 and then fell nearly 4% Wednesday on the earnings news, finished the week at about $2,290.

--Shares of Facebook parent Meta soared 15% after the social network reported first-quarter profits that beat Wall Street expectations, while Facebook daily active users were 1.96 billion, up 4%, and up slightly from December, reversing a small decline in the prior quarter.

Facebook’s daily user base in the U.S. and Canada grew to 196 million, from 195 million at the end of the previous quarter.

Revenue, though, came in lower than expected, and guidance for the June quarter fell well below Street estimates, but a very low bar had been set, the shares having fallen to $175 from a 52-week high of $384.

For the March quarter, Meta posted revenue of $27.9 billion, up 7% from a year ago, and the slowest revenue growth since going public a decade ago.   Profits in the quarter were $2.72 a share, above the consensus of $2.56 a share. Net income fell 21% to $7.47 billion, slightly ahead of estimates as well.

For the June quarter, Meta sees revenue ranging from $28 billion to $30 billion, falling short of the Street consensus of $30.7 billion.

The company said it expects monthly average users in the June quarter to be flat to down from Q1, due to the loss of subscribers in Russia, where service has been suspended.

Meta’s advertising revenue for the first quarter was $27.9 billion, up 6.6% compared with a year prior.  Analysts had expected this to rise to $28.3 billion.

Discussing the Metaverse, Zuckerberg said the company believes in the long run the company expects to be “meaningfully better than others” at monetizing services in the metaverse, but he also said that a return on investments in the Metaverse will be years away.  He said the company is “laying the groundwork for a very exciting 2030.”  Whatever, I’ll be dead by then.

--Chipmaker Intel Corp. forecast second-quarter revenue and profit below Wall Street expectations on Thursday on worries of weak demand in its largest end market, PCs, and increased supply-chain uncertainty due to Covid-19 lockdowns in China.  The company’s shares fell nearly 4% in response.

Rising inflation, the resurgence of Covid in China and uncertainties around the war in Ukraine have shifted consumer spending away from gadgets, hurting Intel.  More than half of its revenue last year came from the segment selling processors for PCs. 

“We are expecting that Shanghai does open up fairly soon, but that does moderate our outlook a little bit on Q2,” CEO Pat Gelsinger said.  “It doesn’t change any perspective on the year, which we think as we go into the second half, you have more PC demand.”

Revenue at Intel’s Client Computing Group, which supplies PC makers and is the largest contributor to the company’s revenue, fell 13% to $9.3 billion in the first quarter.    The company expects current quarter adjusted profit of 70 cents per share on revenue of about $18 billion, below analysts’ average estimate of sales of $18.38 billion.

Intel is also facing increasing competition in the data center space from Nvidia Corp. and Advanced Micro Devices, as they ramp up their chip production to cater to the booming market amid growth in the metaverse, AI applications and cloud computing.

Revenue from Intel’s higher-margin data center and AI business rose 22% to $6 billion, well short of analysts’ estimates.

--Shares in Boeing fell nearly 8% following a putrid earnings report.  The company said it lost $1.2 billion in the first quarter as it took large write-downs and lost money in both its commercial-airplane and defense businesses.

The loss was bigger than the Street had forecast and revenue also fell short of expectations.

Boeing said it has submitted plans to resume deliveries of its 787 airliner and it increased production and deliveries of the 737 MAX passenger jet during the quarter.

But the company pushed back the expected first delivery of the 777-9, a new variant of Boeing’s long-range, twin-aisle passenger jet, until 2025.

Boeing took a $660 million charge for its program to build new presidential Air Force One jets, which it blamed on higher supplier costs, final technical requirements and schedule delays. It also took $367 million in charges on a military training jet.

Boeing said it submitted plans to the FAA to resume deliveries of the 787 passenger jet.  Those deliveries have been halted for more than a year by production issues which Boeing previously said would add about $2 billion in costs, of which $312 million was recorded in the first quarter.

Boeing expects to boost production of the 737 MAX to 31 planes a month in the current quarter, which runs through June.  That plane was grounded worldwide for nearly two years after two deadly crashes.

And Boeing took $212 million in pretax charges related to Russia’s invasion of Ukraine, though the company didn’t explain the write-down.

Boeing’s commercial-airplanes division lost $859 million, hobbled by the inability to deliver 787 jets while Boeing tries to fix production flaws.

The defense business, long a bulwark against volatility in aircraft sales to airlines, lost $929 million as revenue fell 24%.

Boeing burned through $3.6 billion in cash during the quarter.  Wall Street was looking for a cash burn of about $3 billion.

Over the past 12 quarters, stretching back to just after the second MAX crash, Boeing has lost about $24 billion, and burned through nearly $34 billion in cash flow.

You get the picture.  There were some good reasons why the stock fell hard on the news.

--Southwest Airlines lost $278 million in the first quarter, but it echoed other airlines with surging sales in March and it said on Thursday that it expects to be profitable for the remainder of the year.

Southwest said it faces challenges from higher jet fuel prices and the need to add employees.  Southwest said its work force grew by 3,300 people in the quarter.

The nation’s four largest airlines – American, United, Delta and Southwest – lost more than $4.2 billion combined in the first quarter, but all expressed high hopes for a booming summer season and full airplanes.

“Based on current plans and expected continued strong bookings, we continue to expect to be solidly profitable for the remaining three quarters of this year, and for full year 2022,” said new CEO Robert Jordan.

Revenue was $4.69 billion, more than double a year ago and 91% of revenue in the same quarter of 2019, before the pandemic…which lines up nicely with the TSA check-in numbers I’ve been showing below.

Southwest shares rose a bit on the news.

--I never knew that pay for flight attendants starts when all the passengers are seated and the plane’s doors close.  Actually, I never really thought about how they’re paid, but Delta Air Lines, which has fought off several attempts to unionize its flight attendants, announced it will begin paying cabin crews during boarding, a first for a major airline that is expected to increase their wages by several thousand dollars a year.

The rate of pay during boarding is 50% of regular pay rates.

--According to travel website Hopper, the average cost of airfare for U.S. travelers in April rose 40% from prices in early January, an average $330 for a single domestic round-trip ticket.  International travel has returned to pre-pandemic prices of about $810 per round trip. 

Prices are projected to increase a further 10% by the end of May.

--I’ve been writing of the mess travelers are going to see this summer, both here and abroad.  A lot of it has to do with the airlines, and just as importantly, the airports, being short of staff at a time crowds are returning to pre-pandemic levels.

Last Saturday, Amsterdam’s giant Schiphol airport urged travelers to stay away as a strike by ground personnel at the start of a school holiday caused chaos at Europe’s third-busiest hub.

“The terminal is too full at the moment…Schiphol is calling on travelers to not come to the airport anymore,” airport authorities said in a statement issued at noon.

Get this. Lines at ‘departure’ gates stretched out of the airport buildings.

Well, Thursday, officials at Schiphol asked airlines to cancel flights over the weekend to avoid more chaos due to overcrowding and lack of staff.  Having been to this airport many times, which is a nice one, I’m picturing the lines for the restaurants, bars, and restrooms….eegads.

--TSA checkpoint travel numbers vs. 2019

4/28…90 percent of 2019 levels
4/27…88
4/26…89
4/25…90
4/24…92
4/23…92
4/22…91
4/21…90

--General Motors shares rose a bit on Wednesday after the auto giant posted its ninth-straight double-digit earnings beat in the first quarter, though it missed analysts’ revenue expectations for a third consecutive quarter.

GM reiterated its goal to produce 25-30% more vehicles in fiscal 2022 than last year.  The company has had to suspend production at various plants due to semiconductor shortages and other supply constraints over the past month, but GM CEO Mary Barra said the availability of computer chips improved in the first quarter relative to the last half of 2021.  She said GM still expects gradual easing of the shortage and reiterated the company’s target from earlier in the year of boosting vehicle deliveries by 25% to 30% this year over last. 

But although sales improved by 10.8% year-over-year to $35.98 billion, a nice reversal from the last quarter’s decline of over 10%, GM still missed estimates of $37.11bn.   Net income of $1.99 billion exceeded estimates.

GM maintained its ambitious target to produce 400,000 electric vehicles in North American throughout FY22 and FY23 and to reach $90 billion in EV revenue by 2030.  It also anticipates building 1.0 million EVs in North America by 2025.  The relatively less expensive Equinox EV is slated to launch after the Blazer EV.  Cadillac will be GM’s first all-EV lineup.

--Ford Motor reported first-quarter earnings that modestly beat Wall Street estimates.  Per-share earnings of 38 cents and an operating profit of $2.3 billion from $34.5 billion in sales, when Wall Street was looking for about 37 cents, $2.1 billion, and $34.5bn in sales, which was above analysts’ estimate of $31.7 billion.

Ford sold 966,000 vehicles in the quarter, down 9% from a year earlier.

“Clearly the demand for our new products is very strong,” CFO John Lawler said on an earnings call, “yet we continue to have issues with supply of chips, which constrained us, and in particular here in North America, it hit us disproportionately on our large vehicle.”

Ford executives said they also faced inflationary pressure from suppliers, but have been able to recover that in higher vehicle prices.

Ford’s operating profit margin in its North American division came in at 7.1%, which isn’t bad given rising costs and supply-chain issues.

A year ago, the auto maker reported EPS of 89 cents and operating profit of $4.8 billion from $36.2 billion in sales.  That quarter included gains on Ford’s stake in Rivian Automotive.

Ford marks its stake to market every quarter, so Ford had to recognize a loss of $5.4 billion related to Rivian based on the EV maker’s value at the end of March.  Rivian shares closed the year at about $104 and ended Q1 at about $50.  Ford owns around 102 million Rivian shares.

Ford’s full-year 2022 guidance wasn’t changed in its earnings release.

With a shortage of semiconductors continuing to constrain global auto production, Ford delivered about 432,000 vehicles in the U.S. during the first quarter of 2022.  A year ago, that number was about 531,000.

However, when it comes to the F-150 Lightning electric pickup truck, Ford announced a sharp acceleration of the Lightning’s assembly system at the company’s Rouge Electric Vehicle Center in Dearborn, Michigan, where it aims to build 150,000 Lightning trucks a year at the new part of its historic Rouge manufacturing complex, while it builds a much larger EV production complex in Tennessee.

Ford had planned to build just 40,000 F-150 Lightning vehicles annually, but surging demand has prompted it to increase planned production twice since last August.

About 200,000 customers made reservations for the Lightning before Ford cut off taking preliminary orders in December.

The Lightning will hit showrooms behind startup Rivian’s electric R1T pickup, but ahead of GM’s electric Silverado and Stellantis NV’s promised electric Ram truck and Tesla’s Cybertruck.

--Raytheon Technologies’ CEO Greg Hayes said it will be years before the company can build new Stinger shoulder-fired missiles due to a dwindling supply of weapon parts.

The U.S. has shipped Stingers to Ukraine’s military, which has used them to shoot down Russian aircraft.  But there’s only a finite supply as Raytheon has not made Stinger missiles for the U.S. military in nearly two decades.  Hayes said Raytheon would have to redesign some of the electronics and that will take time.

The company has “a very limited stock of material for Stinger production,” Hayes said, as it’s currently building a missile for a sole international customer.

In March, Ukraine said it needed 500 Stingers and Javelin anti-tank missiles per day.  Raytheon and Lockheed Martin jointly make the Javelin.

--United Parcel Service reported first-quarter results that beat expectations, lifted by pricing gains even as volumes declined, while the package delivery company reaffirmed its 2022 financial outlook.

Adjusted earnings rose to $3.05 per a share from $2.77 a year earlier.  Revenue advanced nearly 6.5% to $24.38 billion.

Revenue from its U.S. segment grew 8% to $15.12 billion while the international unit posted a nearly 6% gain to $4.88 billion, driven by higher average revenue per piece for both divisions.

The Omicron variant of the coronavirus pressured volumes in January while record inflation, Covid-19 lockdowns in Asia and geopolitical uncertainty hit volume growth late in the first quarter.

UPS reiterated expectations of $102 billion in revenue this year, in line with the Street’s view.

--General Electric Co. on Tuesday said fresh Covid-19 pandemic-related lockdowns in China as well as the war in Ukraine have exacerbated supply chain disruptions and inflationary pressure, putting its full-year profit outlook at risk and prompting a sell-off in its shares.

The company retained the outlook issued in January, but said the current trends suggest it would hit the lower end of its earnings forecast.  To mitigate the impact, the company has raised prices for its products and is invoking price escalation clauses in its service contracts.

GE is also trying to find alternative sources for parts and to improve productivity to reduce cost.

CEO Larry Culp said the situation in China had improved in recent days as GE has been able to bring workers back to its facilities in Shanghai.  The company suspended its operations in Russia, which accounts for less than 2% of its overall sales.

Revenue for the quarter came in at $17.04 billion, topping the Street’s estimates.  The company burned through $880 million in cash in the first quarter.

--Caterpillar Inc. reported a better-than-expected first-quarter profit on Thursday, as a boom in construction and mining activities drove demand for its heavy machinery across industrial sectors.

The company, a proxy for global economic activity, has benefited from increased construction demand in North America, while a rise in oil and commodity prices has led to more orders for equipment used to facilitate production and transport.

Sales at its construction industries business, its largest unit, rose 12% to $6.12 billion.  Adjusted profit for the quarter was $2.88 per share ($1.54 billion), beating estimates of $2.60.  Overall revenue rose about 14% to $13.59 billion.

The company has also managed to dodge the impact of supply-chain challenges and higher input costs by announcing a series of price hikes.  Caterpillar said it continues to anticipate further price increases to offset manufacturing costs in 2022 that will help improve its margins in the second half of the year.

But the company’s guidance for the rest of the year (see the potential for falling home sales/construction), including on margins, wasn’t great and the shares fell 5%.

--Shares in Qualcomm rose over 5% after the company reported fiscal second-quarter earnings of $3.21 per share, up from $1.90 a year earlier and well above forecasts.

Revenue for the quarter ended March 27 was $11.16 billion, up from $7.93 billion a year earlier.

The mobile phone chipmaker also guided higher for the current fiscal Q3.

--Samsung Electronics Co. Ltd. reported a 51% rise in quarterly profit on Thursday, buoyed by robust data center demand for high-margin memory chips, but cautioned that component shortages will likely continue in the second half.

Samsung said demand for server chips is expected to be solid in the second half, but the pace at which component shortages are resolved will need constant monitoring.

Operating profit at the world’s top memory chip and smartphone maker rose to 14.1 trillion won ($11.1 billion) for the quarter ended March 31.  That was its highest first-quarter profit since 2018.  Overall revenue rose 19%.

--McDonald’s Corp. beat estimates for quarterly sales and profit on Thursday as the world’s largest fast-food chain benefited from price increases in the U.S. and the launch of a new loyalty program. The stock rose slightly in response.

Rising wages due to a tight labor market and soaring costs of ingredients such as chicken and beef have forced U.S. restaurant chains to hike prices, which have seen little resistance from consumers so far.

McDonald’s investments in delivery services, digital restaurant kiosks and drive-thru lanes have also given it an edge over smaller fast-food chains, which have been forced to cut down on operating hours due to staff shortages.

First-quarter comparable sales in the U.S. increased 3.5%, a little above expectations.  Global comp sales rose 11.8%, as Covid restrictions were eased in some overseas markets.  China reported negative same-stores sales as it struggles with a Covid resurgence.

The company lost $100 million due to the likely disposal of inventory in its supply chain after it decided in early March to shutter restaurants in Russia and Ukraine.

McDonald’s, one of the first major Western brands to enter Russia after the fall of the Soviet Union, previously said the closure of restaurants in the region would cost $50 million a month, including lost revenue and wages payments.

Total revenue increased 11% to $5.67 billion, beating expectations for $5.59 billion. Adjusted earnings, including taking into account the costs for Russia and Ukraine, came in at $2.28 per share, beating estimates of $2.17.

--PepsiCo on Tuesday reported higher fiscal first-quarter results that topped analyst estimates as the beverages and snacks company raised its revenue forecast for 2022 but trimmed its earnings guidance in anticipation of a negative foreign currency impact.

Revenue rose to $16.2 billion from $14.82 billion a year before, ahead of the Street’s consensus view for $15.54 billion.

In North America, the company’s Frito-Lay snack business saw an organic (ex-acquisitions) revenue rise of 14%.  Quaker Foods’ organic revenue rose 11%.

The company said that it took a $241 million charge in the quarter due to the Russia-Ukraine conflict.

--Coca-Cola reported higher first-quarter results that topped analysts’ estimates as it outlined the impact it expects from the suspension of its Russian business on full-year 2022 profit.

The company on Monday posted comparable earnings to $0.64 per share (net income of $2.78 billion), including an 8-point currency tailwind impact, up from $0.55 a year earlier.

Comparable operating revenue for the quarter jumped to $10.5 billion from $9.02 billion, ahead of the Street’s consensus.

“After a promising start to the year, the operational environment soon changed with very significant geopolitical conflict, a resurgence of Covid in various places, record-high inflation and continued challenges on the supply chain front,” CEO James Quincey said in an earnings call.

Coca-Cola’s unit case volume grew 8% in Q1, mainly driven by “strong recovery in away-from-home channels and continued growth in our home channels,” according to Quincey.  Sparkling soft drinks volume was up 7%, while nutrition, juice, dairy and plant-based drinks climbed 12%.  Volume for hydration, sports, coffee and tea rose 10%.

The suspension of business in Russia will impact full-year EPS by $0.04, net revenue by 1% to 2%.

“The recent increases in commodity costs are having an incremental effect,” said CFO John Murphy.  “…Additionally, we see incremental cost pressure coming from areas like wages and transportation.”

--Domino’s Pizza Inc. missed quarterly sales estimates on Thursday and warned staffing shortages and inflation would pressure its business further into the year, sending the fast-food chain’s shares down about 4%.

U.S. restaurants have struggled to keep their workers from leaving for higher-paying jobs, and “2022 is shaping up to be a challenging year,” CEO Richard Allison said during an earnings call.

But industry analysts say restaurant staffing issues are abating and expect a stronger second half.

Credit Suisse said pizza sales increased 9.5% to over $45 billion last year, with Domino’s making up roughly a fifth of that.  Domino’s said U.S. same-store sales in the first quarter ended March 27, however, decreased 3.6%, worse than expected, as were earnings.

--Often viewed as a gauge for the health of the global economy, industrial conglomerate 3M easily surpassed first-quarter earnings estimates on revenue that was essentially in line with expectations at $8.8 billion.  At first glance, the headline numbers looked  solid, but MMM’s earnings outperformance was mainly a case of the company hurdling a very low bar.

That bar was reset lower in mid-February when the company warned that disposable respirator demand was slowing, resulting in a $0.45/share negative impact to its FY22 EPS guidance.  Since then, mask mandates have been widely removed in many states, perhaps persuading some analysts to cut their EPS estimates even more aggressively.  MMM’s respirator sales totaled $1.5 billion in 2021.

MMM also has significant exposure to the auto manufacturing industry and a weak quarter for the likes of Ford and General Motors due to chip shortages and disarray in the supply chain are still wreaking havoc.

Many of MMM’s products are manufactured with various compounds, chemicals, by-products of oil and gas, and other natural resources.  While the company has implemented price increases to offset rising costs, it’s struggling to keep pace with inflationary pressures.

--Shares in Netflix continued to plunge and now its star employees could be exiting.  The plunging share price, from $700 last November to under $200 ($190 today), has shaken confidence in the company’s long-term trajectory, and it’s erased the value of many employees’ options!  People who were sitting on tens or hundreds of thousands of dollars are left with nothing.

Those who aren’t leaving are asking leadership to issue new stock grants to make them whole for the losses this past week, according to various reports.

Netflix grew from about 2,000 employees at the end of 2013 to more than 11,000 at the end of last year.  The challenge will only get harder now that the company is in cost-cutting mode.

--Last Friday, I wrote of a breaking news story right before I posted…top palm-oil exporter Indonesia banning exports.

Palm oil is the world’s most widely used vegetable oil used in cooking and a wide range of consumer products.

So palm oil and competing soybean oil prices jumped on the news of the ban.

Indonesia accounts for about half of the world’s supply of palm oil, the world’s most widely used vegetable oil.  Palm oil is used in everything from cooking to the production of thousands of consumer products, including biscuits, detergents, and lipsticks.

Indonesian President Joko Widodo said the move was designed to bring down domestic palm-oil prices and ensure domestic food availability in the wake of global food inflation.

Benchmark palm-oil futures are up over 40% year-to-date.  Benchmark Chicago soybean oil prices hit their highest levels since 2008, in response.

--Shares in Eli Lilly and Co. surged as the company announced its potential blockbuster obesity drug achieved a goal of helping patients lose more than 20% of their weight in a late-stage clinical trial.  The U.S. drugmaker also reported first-quarter earnings that topped Wall Street estimates.

But the drug, tirzepatide, which is also being studied as a treatment for type-2 diabetes, demonstrated up to 22.5% weight loss in adults with obesity.

Lilly also said it expects to complete initial submission of data on its experimental Alzheimer’s treatment, donanemab, to the Food & Drug Administration in the current quarter as it seeks accelerated approval.

--Finally, Archegos Capital Management founder Bill Hwang and its former chief financial officer, Patrick Halligan, were indicted on securities fraud and racketeering charges Wednesday in what prosecutors said was a massive fraud and manipulation scheme that nearly jeopardized the U.S. financial system.

Archegos collapsed in March 2021, leaving banks with more than $10 billion in losses and sparking calls for more oversight.  More than $100 billion in stock market value vanished in a matter of days.

Prosecutors described the purported scheme as historic in scope, alleging that defendants and their co-conspirators lied to banks to obtain billions of dollars in loans, which they then used to inflate the stock price of publicly traded companies.

“The lies fed the inflation, and the inflation fed more lies,” said Damian Williams, U.S. attorney for the Southern District of New York.  “Last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars evaporated overnight.”

Hwang and Halligan pleaded not guilty, with Hwang released on a $100 million bond and Halligan on a $1 million bond.

Two other former Archegos employees have pleaded guilty for their roles in the alleged scheme and are cooperating with the government.

Prosecutors allege that Hwang avoided publicly disclosing his positions to regulators and market participants by using swaps rather than buying stocks outright as his positions in companies approached 5%, a level above which public disclosure is required.

Hwang’s alleged fraud pumped Archegos’ portfolio from $1.5 billion to $35 billion in one year, ending in March 2021, and inflated its market size from $10 billion to $160 billion during that period including its borrowings from Wall Street firms, according to prosecutors.

Morgan Stanley, which lost more than $900 million in the Archegos collapse, at one point asked the firm to tweak its portfolio by moving out an illiquid Chinese stock and replacing it with the easily tradeable Amazon or Apple, which Archegos was understood to own through another bank.

“The holdings of liquid stocks that Morgan Stanley believed Archegos held through other banks didn’t exist,” prosecutors said.

As Aaron Elstein of Crain’s New York Business noted:

“Chuck Klosterman sagely summed a book about life in college by observing, ‘Everybody vomits sometimes.’ This is true too for Wall Street banks, which upchucked billions in losses after getting schooled by the guys at Archegos Capital Management.”

The Pandemic

--Friday, Shanghai reported that new Covid-19 cases in the low-risk unguarded zones fell to the lowest level since a phased lockdown was imposed one month ago, in a fresh sign that the mainland’s financial capital could soon ease restrictions and ramp up business activity.

About 12 million of the 25 million or so in the city have been allowed to go outside their residential compounds.

New cases reported on Friday numbered 15,000, including 5,487 symptomatic patients, but the actual number of newly added infections was down from Thursday.  The city added 52 new deaths on Thursday, taking the total to 337, which is a lot, considering it’s probably not even close to the true figure.

In Beijing, mass Covid testing took place for most of the population as it races against time to shut down an outbreak of the Omicron variant.

--Moderna on Thursday asked U.S. regulators to authorize low doses of its Covid-19 vaccine for children younger than 6, a long-awaited move toward potentially opening shots for millions of tots by summer.

Moderna submitted data to the Food and Drug Administration that it hopes will prove two low-dose shots can protect babies, toddlers and preschoolers – albeit not as effectively during the Omicron surge as earlier in the pandemic.

“There is an important unmet medical need here with these youngest kids,” Dr. Paul Burton, Moderna’s chief medical officer, told the Associated Press.  Two kid-size shots “will safely protect them.  I think it is likely that over time they will need additional doses.  But we’re working on that.”

Personally, I got my second booster last Saturday, Moderna, and I was a little surprised my sore arm lasted almost two days, for far longer than after the other three doses.  But as I told the nurse administering the shot afterwards, “Time to hit the bars.”  She did find it amusing.

--The situation in Latin America is improving rapidly, and Colombians will soon be going to movie theaters without having to wear face masks. Chile is opening its borders next week for the first time in two years.  Mexico has declared the pandemic is over. And in Rio de Janeiro, tens of thousands attended Carnival parades just two months after they were postponed to prevent a spread of infections.

The region was hit hard by the pandemic, as I’ve noted all along in the figures below, with the likes of Brazil and Peru registering some of the highest death rates.  But in most places in April, cases and deaths fell to lows resembling levels last seen in the first two months of the pandemic.

Some epidemiologists believe vaccination campaigns and months of exposure to different strains of the coronavirus have helped the region’s populations resist new waves of contagion.

About 70 percent of folks on the continent have been vaccinated, which is good.

--Dr. Anthony Fauci gave an upbeat assessment of the current state of the coronavirus in the United States, saying the country is “out of the pandemic phase” when it comes to new infections, hospitalizations and deaths, but that it appears to be making a transition to Covid-19 becoming an endemic disease – occurring regularly in certain areas.

The threat is not over, but the worst phase is.

“Namely, we don’t have 900,000 new infections a day and tens and tens of thousands of hospitalizations and thousands of deaths.  We are at a low level right now,” he said on the PBS “NewsHour” on Tuesday.

--Following the record surge in Covid cases during the Omicron-driven wave, some 58% of the U.S. population overall and more than 75% of younger children have been infected with the coronavirus since the start of the pandemic, according to a U.S. nationwide blood survey released on Tuesday.

The study of blood samples sent to laboratories between December and February – when Omicron cases were raging – showed children, many of whom remain unvaccinated, had the highest rates of infection during that surge, while people 65 and older – a heavily vaccinated population – had the lowest.

In children aged 11 and younger, 75.2% were positive for infection-related antibodies from December to February, up from 44.2% in the prior three-month period.

--Vice President Kamala Harris tested positive for Covid on Tuesday, underscoring the persistence of the highly contagious virus.  Harris is fully vaccinated, two shots, two boosters.  She had no symptoms.

Covid-19 death tolls, as of early tonight….

World…6,258,683
USA…1,020,530
Brazil…663,410
India…523,753
Russia…375,727
Mexico…324,254
Peru…212,798
UK…174,912
Italy…163,377
Indonesia…156,240
France…145,869
Iran…141,072
Colombia…139,793
Germany…135,794
Argentina…128,542
Poland…116,042
Ukraine…108,391
Spain…104,456
South Africa…100,360

Canada…39,230

[Source: worldometers.info]

U.S. daily death tolls…Mon. 186; Tues. 375; Wed. 330; Thurs. 247; Fri. 226.

Foreign Affairs

China: Any talk of mainland China “invading” Taiwan is invalid because the one-China policy states that “Taiwan is part of China,” the foreign ministry in Beijing has said in response to comments by Secretary of State Antony Blinken.

“The United States recognized the People’s Republic of China as the sole legal government of China, and it acknowledged the Chinese nationals’ position that there is but one China, and Taiwan is part of China,” foreign ministry spokesman Wang Wenbin told a regular press briefing on Wednesday.

He was referring to three joint communiques signed by Beijing and Washington in the late 1970s and early 1980s on the Taiwan issue.

Meanwhile, Australia’s home affairs minister said on Wednesday that China is “very likely” to put troops in the Solomon Islands after signing a contentious security deal with the Pacific nation.  Prime Minister Scott Morrison then called a potential military base there a “red line” for his government.

China’s Defense Ministry said talk of China building a naval base on the Solomons was “purely fake news.”

The deal, announced by Beijing about ten days ago, sparked concern it could open the door to a military presence in the South Pacific.

The sharp focus the Solomons has come under due to the pact was underscored last weekend as senior White House official Kurt Campbell arrived in the country after discussing concerns about it with neighboring Fiji and Papua New Guinea.

The U.S. will “respond accordingly” should Beijing’s security pact lead to a permanent Chinese military presence in the Solomons, the White House said in a statement.

Causing particular alarm to the U.S. and its Western allies was a draft leaked last month that showed it would allow China to deploy naval assets to the Pacific nation.

The Solomon Islands Prime Minister Manasseh Sogavare said his government had signed the pact “with our eyes open,” but refused to say when the text of the deal might be published.  He ruled out the prospect of China building a military base in the country.

Friday, addressing parliament, Sogavare lashed out at Australia, saying the Solomon Islands was not given prior warning that Australia had signed up to a security agreement with Britain and the United States in 2021 that involved nuclear submarines.

In September, the countries announced the trilateral defense partnership known as Aukus, which allows the countries to share technology covering cybersecurity, artificial intelligence, underwater systems and long-range strike capabilities.

North Korea: Kim Jong Un pledged to speed up development of his country’s nuclear arsenal while overseeing a huge military parade that displayed intercontinental ballistic missiles (ICBMs), state media reported on Tuesday.

The parade took place on Monday night during celebrations for the 90th anniversary of North Korea’s armed forces, state news agency KCNA said.

Pyongyang has stepped up weapons tests and displays of military power as denuclearization talks with the U.S. have stalled and a new conservative administration takes power in South Korea.

U.S. and South Korean officials believe Kim may be preparing to resume testing nuclear weapons.

“The nuclear forces of our Republic should be fully prepared to fulfill their responsible mission and put their unique deterrent in motion at any time,” Kim told the gathering, according to KCNA.  He said the fundamental mission of the North’s nuclear force was deterrence, but that its use “can never be confined to the single mission.”

“If any forces try to violate the fundamental interests of our state, our nuclear forces will have to decisively accomplish an unexpected second mission,” Kim said.

Kim’s remarks could have been aimed at the incoming government of South Korean president-elect Yoon Suk-yeol, who has warned of possible pre-emptive strikes if an attack from the North is imminent.  Yoon takes office on May 10.  Kim could do something provocative before then.

Iran: Nothing is happening on the negotiating front in terms of the 2015 Iran nuclear accord and reviving it, and it’s not clear whether talks will resume or just end.

The Wall Street Journal opines that a “little-noticed line in a State Department report published last week makes a good case for formally walking away.”

“ ‘The United States has concluded that serious concerns remained outstanding regarding possible undeclared nuclear material and activities in Iran,’ according to State’s annual report on compliance with arms control and nonproliferation agreements.  The document notes that the Islamic Republic has not fully cooperated with the International Atomic Energy Agency (IAEA), which is trying to investigate possible secret nuclear activity at four sites around the country.

“Four years ago Donald Trump left the 2015 accord – which provided Tehran billions in sanctions relief for temporary limits on nuclear activity – and pursued a ‘maximum pressure’ sanctions campaign.  President Biden has eased some sanctions and promised more relief.  Yet now talks reportedly have stalled over whether the U.S. will lift the terrorist designation for the Iranian terrorist group known as the Islamic Revolutionary Guard Corps.

“But Iran’s refusal to cooperate with the IAEA on the suspect sites is the best signal that renewing the deal is misguided.  How can the U.S. negotiate a return to a nuclear deal if it can’t verify all of Iran’s nuclear activity?  The IAEA is trying to resolve its differences with Tehran, but even if it does the country’s long history of nuclear deception foretells the future.  Iran was blocking inspections at military sites even when it was still adhering to the 2015 deal.

“The State Department report also concludes that while ‘Iran is not currently engaged in key activities associated with the design and development of a nuclear weapon,’ it continues ‘to expand its uranium enrichment activities and stocks of enriched uranium, key factors in the amount of time it would require to produce enough fissile material for a nuclear weapons.’….

“Western officials began saying in December that reviving the 2015 deal would become pointless within ‘weeks’ amid Iranian nuclear advances. Weeks have come and gone.  [Ed. what I’ve been saying the last few ‘months.’]  There are many reasons for the White House to walk away from talks with Iran, but the lack of meaningful verification is at the top of the list.”

No one should be surprised to wake one morning to word of an Iranian nuclear test.

Turkey: Senator Bob Menendez (D-NJ), chairman of the Senate Foreign Relations Committee, criticized Secretary of State Antony Blinken on Tuesday for failing to condemn Turkey’s decision to convict philanthropist Osman Kavala to life imprisonment, a verdict seen as symbolic of President Tayyip Erdogan’s crackdown on dissent.

Kavala was jailed for life without parole on Monday after he was convicted of trying to overthrow the government by financing protests, in a case that Europe’s top court and Western powers called politically motivated.

The State Department issued a statement on Monday saying it was “deeply troubled and disappointed” by the conviction and called for Kavala’s release.

Senator Menendez said the statement fell short.  “This is why authoritarian figures like Erdogan – they get away with continuing to do what they’re doing.  We should have condemned the conviction,” Menendez said.

As chairman, Menendez has the right to review arms deals, and Turkey currently is lobbying Congress not to block Ankara’s request to buy new F-16 fighter aircraft from the United States.  But the sale of U.S. weapons to NATO ally Turkey became contentious after Ankara acquired a Russian-made missile defense system, the S-400, triggering U.S. sanctions as well as Turkey’s removal from the F-35 fighter jet program.  Menendez has long opposed the sale of F-16s to Turkey, as long as Ankara kept the S-400s.

Afghanistan: At least 50 were killed in a powerful explosion at a mosque in Kabul today.  The attack came as worshippers at the Sunni mosque gathered after Friday prayers. It was believed to be a suicide bomber.  No claim of responsibility as yet.

Random Musings

--Presidential approval ratings….

Gallup: 41% approve of President Biden’s job performance, 56% disapprove; 35% of independents approve (Apr. 1-19)

Rasmussen: 42% approve of the president’s performance, 55% disapprove (Apr. 29).

--Former President Trump said last weekend his relationship with House Minority Leader Kevin McCarthy remains good, after a recording emerged of McCarthy telling other top GOP lawmakers that he would advise Trump to resign, several days after the Jan. 6, 2021 riot at the Capitol.

In an interview with the Wall Street Journal down in Mar-a-Lago, Trump said he wasn’t pleased to learn of McCarthy’s comments in the House leadership call, but he said McCarthy never ultimately advised him to quit.

“He made a call.  I heard the call.  I didn’t like the call,” said Trump.  “But almost immediately as you know, because he came here and we took a picture right there – you know, the support was very strong.

“I think it’s all a big compliment, frankly,” Trump said of McCarthy and other Republicans who criticized him after Jan. 6 and then said they would still back him.  “They realized they were wrong and supported me.”

Asked whether he still supported McCarthy for speaker, Trump didn’t answer directly.  “Well I don’t know of anybody else that’s running and I think that I’ve had actually a very good relationship with him,” Trump said. “I like him. And other than that brief period of time, I suspect he likes me quite a bit.”

In his interview with the Journal, Trump also denied ever accepting some responsibility for the Jan. 6 assault, contradicting McCarthy’s claim to House GOP members in another call on Jan. 11, 2021.  On that call, McCarthy told House members that he had asked Trump personally that day whether he bore responsibility for what happened.  “He told me does have some responsibility for what happened,” McCarthy can be heard saying.

“No, that’s false.  I never claimed responsibility,” said Trump in the interview.

This past Monday, McCarthy told Fox News that he never told Trump to resign in the aftermath of the attack.

The bottom line on McCarthy is that hours after he said: “The New York Times’ reporting on me is totally false and wrong.  It comes as no surprise that the corporate media is obsessed with doing everything it can to further a liberal agenda…” …the Times produced the audio tape(s).

McCarthy has lied countless times over the years.  Do Republicans really want this guy as speaker?

--Donald Trump said he won’t return to Twitter if Elon Musk lifts the permanent ban against him.

Trump told Fox News that he planned to instead use his own fledgling Truth Social app, which launched in February, because his platform is “much better” than Twitter.

Trump said Twitter “became very boring because conservatives were thrown off or got off the platform when I left.”

Trump told Fox News that he planned to begin posting regularly on Truth Social within a week.

He hasn’t been heard from on the site since an introductory February message that said, ‘Get Ready! Your favorite President will see you soon!”

Well, late Thursday, Trump posted a brief message on Truth Social for the first time.  “I’M BACK! #COVFEFE,” referencing a typo on a Twitter message he sent while president that complained about the press and was widely memed.

--We note the passing of Orrin Hatch, the long-serving Republican U.S. senator from Utah who died on Saturday at the age of 88.

Longtime friend and fellow senator Jim Inhofe (R-OK) said on Twitter: “Orrin was the one who I would go to for wisdom and we had the same love for Jesus and everything we hold dear.”

An enduring conservative voice in Congress, Hatch held a seat in the Senate from 1977 to 2019 and served under eight presidents, starting in the waning days of Gerald Ford’s term and ending with Donald Trump’s first two years in office.  He served in the Senate longer than any other Republican ever.

Hatch fiercely advocated for conservative Supreme Court nominees including Robert Bork – nominated by Ronald Reagan in 1987 but rejected by the Senate – as well as Clarence Thomas, nominated in 1991 by George W. Bush and narrowly confirmed, as well as Brett Kavanaugh, nominated by Trump and also narrowly confirmed by the Senate.

Hatch, a lay minister in the Church of Jesus Christ of Latter-day Saints, a champion of religious liberty and an opponent of abortion rights, represented the state that is home to the Mormon Church and was one of the foremost Mormons in public life in American history.

Hatch ran for his party’s presidential nomination in 2000 but dropped out early in the race.

Hatch was one of the architects of the Patriot Act, passed in the aftermath of the Sept. 11, 2001, attacks on the U.S., with the law expanding the government’s ability to track potential terrorists by, among other steps, expanding its surveillance powers.

Hatch was a driving force behind a Republican package of deep tax cuts that Trump sought and signed in 2017.

And while he was a staunch conservative, Hatch was willing to work with Democrats to get certain bipartisan bills passed, and often did so with close friend Edward Kennedy.  The two partnered in 1997 to create the State Children’s Health Insurance program, which provided healthcare coverage for children in low-income families.

In 1988, Hatch famously had a showdown on the Senate floor with conservative North Carolina Sen. Jesse Helms, who had offered an amendment that would have scuttled Hatch’s bipartisan AIDS-fighting legislation by banning federal funds “to promote or encourage…homosexual activity.”

“I’m not sure I should stand here on the floor of the United States Senate and pass judgment on anybody,” Hatch told Helms.  “Let he who is without sin cast the first stone,” he added.

--The Metropolitan Transportation Authority, responsible for New York City’s subways, buses and commuter rails, has a huge problem with fare evasion.

Riders evading fares on trains and buses, along with drivers dodging tolls on MTA bridges, are estimated to cost the agency $500 million this year.  With ridership still well below pre-pandemic levels – in March fare revenue was $170 million below budget due to the dip in commuters.

The $500 million only accounts for about 3% of the MTA’s annual budget, but CEO Janno Lieber insists that fare evasion is “a threat to the spirit” of New York.

“What hardworking, fare paying New Yorkers tell us, in a word, is that seeing fare evasion makes them feel like suckers,” said Lieber.  “That’s why I am convening a panel of distinguished New Yorkers to take a deep dive into the issue.”

The MTA said only 3.4% of subway riders dodged the fare in 2018.  But that figure was 14% in the period June through September of last year, and 12% in the last three months of 2021.

One in three bus riders are not paying!  And fake or obscured license plates, transit officials say, have bedeviled the agency in collecting tolls at bridges and tunnels.

--Speaking of dirtballs, Rep. Madison Cawthorn (R-NC) was cited for having a loaded 9mm handgun at a TSA checkpoint at Charlotte Douglas International Airport Tuesday morning, according to police.

Authorities cited Cawthorn for possession of a dangerous weapon on city property after TSA agents found the gun in a bag and notified Charlotte-Mecklenburg Police officers who are assigned to the airport.

Police said they released Cawthorn and confiscated the gun.  CMPD called it standard procedure for airport division officers to cite and not arrest a passenger for the misdemeanor charge “unless there are other associated felony charges or extenuating circumstances.”

Cawthorn, at 26 the youngest member of Congress, faces seven Republican challengers in the May 17 primary.  This is the second time he has been caught with a gun at an airport.

--One hundred percent of California is in drought and the water district representing about 6 million Southern Californians has taken an unprecedented decision to reduce outdoor watering to one day a week, which could be followed by even stricter actions in September if conditions don’t improve, including a total ban in some areas.

“If we don’t see cutbacks, or conditions do not get better, the Metropolitan (Water District) board has given me the authority to ban all watering as soon as Sept. 1,” MWD general manager Adel Hagekhalil said Wednesday.  “We know what this means to communities, we know what we are requiring here, but we’re facing a challenge.  We do have the supply to meet the normal demands that we have.”

The latest restrictions for the Southland take effect June 1.  The measures became an inevitability after California’s driest ever January, February and March left snowpacks shrunken and reservoirs drained.

The first three months of the year are typically the heart of the state’s wet season.

--Tropical deforestation drives more than 7% of global carbon dioxide emissions, about the same share as the entire population of India.  A new analysis from the University of Maryland’s 2021 tree-cover loss data published by the World Resources Institute’s Global Forest Watch found that the world lost tropical forest in 2021 at a rate of about 10 soccer pitches a minute.

Last year saw a global loss of 14,286 square miles of tropical forest. That’s a decrease of 11% from 2020, following a 12% rise in 2019, with fire accounting for much of the year-to-year variation.

Deforestation related to agriculture continues to grow.  Brazil, which is home to more rainforest than any other country, lost 40% of the global total and three times more than the Democratic Republic of the Congo, which ranked second.

Scientists have been documenting concerns that the Amazon is approaching a tipping point, when the changing climate will shift the area toward savanna-like ecosystems. 

Indonesia, the country with the third-largest amount of rainforest, extended its streak of reducing forest loss to five years.  So this is a positive.

--But in a separate report, the United Nations said a disaster-weary globe will be hit harder in the coming years by even more catastrophes colliding in an interconnected world.

If current trends continue the world will go from 400 disasters per year in 2015 to an onslaught of about 560 catastrophes a year by 2030, the scientific report by the UN’s Office for Disaster Risk Reduction said.  By comparison from 1970 to 2000, the world suffered just 90 to 100 medium to large scale disasters a year, the report said.

The number of extreme heat waves in 2030 will be three times what it was in 2001 and there will be 30% more droughts, the report predicted.  It’s not just natural disaster amplified by climate change, it’s Covid-19 economic meltdowns and food shortages.  Climate change has a huge footprint in the number of disasters, report authors said.

In 1990, disasters cost the world about $70 billion a year. Now they cost more than $170 billion a year, and that’s after adjusting for inflation, according to the authors.

Disasters are hitting poorer countries harder than richer ones, with recovery costs taking a bigger chunk out of the economy in nations that can’t afford it.

--My state of New Jersey is enacting the nation’s strictest plastic bag law on May 4. No more “single-use” bags at grocery stores, for one, which can’t even issue paper bags.  We’re all scrambling to hoard what we can.

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

Pray for the family of Marine Willy Joseph Cancel, killed in Ukraine.

God bless America.

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Gold $1897
Oil $104.13

Returns for the week 4/25-4/29

Dow Jones  -2.5%  [32977]
S&P 500  -3.3%  [4131]
S&P MidCap  -3.2%
Russell 2000  -3.9%
Nasdaq  -3.9%  [12334]

Returns for the period 1/1/22-4/29/22

Dow Jones  -9.2%
S&P 500  -13.3%
S&P MidCap  -12.0%
Russell 2000  -17.0%
Nasdaq  -21.2%

Bulls 34.2
Bears 32.9

Hang in there.

Brian Trumbore

 

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