Week in Review

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Week in Review

07/02/2022

For the week 6/27-7/1

[Posted 8:00 PM ET, Friday]

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Edition 1,211

Well, I’m not traveling this weekend, and my sympathies to those of you who might be dealing with the air traffic situation.

But I wrote over a month ago on how Americans would begin to cut back on their plans as a result of soaring gasoline prices, let alone prices for airfare, hotels, and the like.

And this week the Conference Board’s index of data had the percentage of Americans planning on taking a vacation by car in the next six months dropping to 22.7% in June, the lowest seasonally in over four years, excluding the pandemic summer of 2020.  Around 36% of Americans surveyed this month intend to take a vacation within the next six months, the weakest June reading for any year in data going back over 40 years, excluding 2020.

Yes, “demand destruction” among the “revenge travelers.”

But there is a little good news…the average price at the pump, nationally, is now $4.84 a gallon, down 17-18 cents over the last two weeks. Diesel, though, is still distressingly high at $5.76.

A 30-year fixed mortgage is also down some, to 5.70%, according to Freddie Mac’s weekly index, down from last week’s high of 5.81%, but it was 2.98% a year ago.  The housing market is beginning to suffer for sure as a result.

But is the Federal Reserve’s jawboning working?  Can they pull off a “soft landing” and avoid recession…and perhaps stop raising interest rates sooner than currently forecast?  It’s all about the numbers, and they show we could easily already be in recession.  The only deceiving figure is employment, which remains at near-record levels.

As for stocks, Thursday marked the end of an historically bloody first half.  The S&P 500 was down 20.6% for the first six months, the worst performance for this key benchmark since 1970, while Nasdaq, down 29.5%, and the small-cap Russell 2000, off 23.9%, had their worst first halves ever.

Around the globe the pain was also pronounced, with the MSCI global stock index having its worst-ever opening to a year, down 20.9%.

In other words, you could drown your sorrows in just about any bar or pub around the world this weekend and get a sympathetic ear or two. 

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Russian President Vladimir Putin still wants to capture all of Ukraine, U.S. intelligence agencies believe, even though Moscow’s troops have been so weakened by combat they are only capable of making slow territorial gains. 

Which means, according to Director of National Intelligence Avril Haines, that the war could last for a long time.

Haines told a U.S. Commerce Department conference: “We perceive a disconnect between Putin’s near-term military objectives in this area and his military’s capacity, a kind of mismatch between his ambitions and what the military is able to accomplish.”

Haines, making her first public comments since May on the U.S. intelligence assessment of the war, suggested Russia’s invasion would grind on “for an extended period of time” and that “the picture remains pretty grim.”

Moscow may become more dependent on “asymmetric tools” to target its enemies; including cyber attacks, efforts to control energy resources and even nuclear weapons.

As detailed below, her comments came as NATO leaders pledged to stand behind Ukraine for as long as it takes – boosting their troop presence across Europe and inviting Finland and Sweden to join the group.

Putin accused NATO of escalating tensions.

“If NATO troops and infrastructure are deployed (to Sweden and Finland), [Russia] will be compelled to respond,” Putin said.

A new Wall Street Journal-NORC poll finds that 89% of Ukrainians say it would be unacceptable to reach a peace deal with Moscow by ceding Ukrainian territory that Russian forces have seized in their invasion this year.

The survey, conducted in conjunction with a Ukrainian polling firm, also finds that 78% of Ukrainians approve of President Volodymyr Zelenskiy’s response to the Russian invasion, with only 7% saying he has handled the war poorly.

While 89% of Ukrainians said it would be unacceptable to cede territory that Russia has taken since its invasion began, a similarly large share, 81%, said their leaders shouldn’t negotiate peace by granting Russia parts of Ukraine it had seized earlier.  That territory includes Crimea and parts of the Donbas.

The rejection of any land-for-peace deal is built in large part on Ukrainian optimism about success on the battlefield. Presented with a list of possible outcomes for the war, 66% said their nation’s forces would likely succeed in driving Russia out of territory it has seized this year.

--Saturday/Sunday….

A Russian Defense Ministry spokesman said late Saturday that Russian and Moscow-backed separatist forces now control Severodonetsk and the villages surrounding it, confirmed by Ukrainian authorities.  The goal of totally controlling the entire Donbas region is in Moscow’s sights.

In a late-night video address Saturday, President Zelensky said Ukraine had been hit by 45 Russian missiles and rockets over the previous 24 hours, which he described as a cynical but doomed attempt to break his people’s spirits.

“Therefore all our cities – Severodonetsk, Donetsk, Luhansk – we’ll get them all back,” he said.  “At this stage of the war it’s spiritually difficult, emotionally difficult…we don’t have a sense of how long it will last, how many more blows, losses and efforts will be needed before we see victory is on the horizon,” Zelensky said.

--Officials in Ukraine said the country came under heavy fire from neighboring Belarus in the northern Chernigiv region in “a massive bombardment,” according to Ukraine’s northern military command.

“Today’s strike is directly linked to Kremlin efforts to pull Belarus as a co-belligerent into the war in Ukraine,” the Ukrainian intelligence service said.

The intelligence chief, Kyrylo Budanov, told Reuters that Russia is using its reserve forces in a covert mobilization to replenish its ranks in eastern Ukraine and there is no point in waiting for its offensive potential to simply fizzle out.    The only way Ukraine can achieve victory against Russia is through military force.

Budanov said Ukraine was carrying out “a tactical regrouping” by pulling its forces out of Severodonetsk.  “Russia is using the tactic…it used in Mariupol: wiping the city from the face of the earth,” he said.

--Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors.

For months, Russia found paths around the penalties imposed, but at the end of the day on Sunday, the grace period on about $100 million of snared interest payments due May 27 expired, a deadline considered an event of default if missed.

--Monday….

The Pentagon blasted President Putin’s assertions that he would provide nuclear-capable missiles to neighboring Belarus – an act of saber-rattling at a time Moscow seeks new advantages in the increasingly bloody conflict.

“I can’t think of a more irresponsible thing for a senior leader to say than talk about the employment of nuclear weapons in this case,” a senior defense official told reporters from the Pentagon on Monday.

Putin’s statements were “cavalier” and concerning, the official said, particularly with regard to Russia’s ongoing invasion.

Putin on Saturday following a meeting with Belarusian President Alexander Lukashenko stated that the Kremlin would dispatch Iskander-M missiles, which are capable of launching nuclear warheads – and would upgrade its fighter jets to be able to carry tactical nuclear weapons, as well.

In making the announcement, Putin added that the missiles systems “are known to use both ballistic and cruise missiles, both conventional and nuclear.”

In comments to the G-7 summit taking place in Bavaria, President Zelensky said he wants the war to be over by the end of the year. 

--A Russian missile strike on a mall in the central Ukraine city of Kremenchuk left at least 18 dead and dozens missing and injured.  Zelensky condemned the attack as a “terrorist” act, calling it “unimaginable,” citing reports 1,000 civilians were inside at the time.

“Russia continues to take out its impotence on ordinary civilians. It is useless to hope for decency and humanity on its part,” Zelensky added.

--Russia also fired numerous missiles at other Ukrainian cities over the weekend and Monday, including Kyiv, as well as the key southern port of Odesa.  Shelling in Kharkiv, the ‘second city,’ killed four.

--Group of Seven countries pledged to continue supporting Ukraine “for as long as it takes.” The group was working on banning imports of Russian gold as part of efforts to tighten the sanctions squeeze on Moscow. 

Russian gold exports were worth $15.45 billion last year, and the ban is aimed at wealthy Russians who have been buying safe-haven bullion to reduce the financial impact of Western sanctions.  “The measures we have announced today will directly hit Russian oligarchs and strike at the heart of Putin’s war machine,” British Prime Minister Boris Johnson said.

--Lithuanian state and private websites were targeted on Monday by Russian hackers who claimed the attack was retaliation for Vilnius’ decision to cease the transit of some goods under EU sanctions to Russia’s Kaliningrad exclave. 

Lithuania’s tax authority said in a statement it had halted all activities due to an unusually large number of attempts to connect to its systems, although all data was safe.  The deputy Defense Minister said “The main targets are state institutions, transport institutions, media websites.”

--A prominent Russian opposition politician Ilya Yashin was detained in Moscow on Monday, a lawyer for opposition figures and a Russian journalist said on their social media accounts.  Irina Babloyan, a journalist and a host at the now defunct Ekho Moskvy radio station, said Yashin was detained while the two were walking together.

“I was walking with my friend, Ilya Yashin, in the park. …The police came and took Ilya away,” Babloyan said on Telegram.

Yashin has been an outspoken critic of the war.  Back on March 7 he tweeted: “I am staying in Russia.  I have said before and I keep repeating: Russians and Ukrainians should not be killing each other.  If I am destined to end up in prison for anti-war speeches, I will accept it with dignity.”

--Tuesday….

President Zelensky accused Vladimir Putin of becoming “a terrorist” leading a “terrorist state” and urged Russia’s expulsion from the United Nations.

In a virtual address to the UN Security Council, Zelensky urged the UN to establish an international tribunal to investigate “the actions of Russian occupiers on Ukrainian soil” and to hold the country accountable.

He said urgent action was needed “to make Russia stop the killing spree,” warning that otherwise Russia’s “terrorist activity” will spread to other countries, singling out the Baltic states and Poland.

Zelensky also called for the UN to visit the site of the missile strike on the shopping mall  in Kremenchuk.

The Russian army claimed Tuesday it had hit a nearby weapons depot with the explosion sparking the blaze at the shopping center, which according to Moscow was “not operational” at the time.  Video evidence showed otherwise.

--We had a major positive announcement as the NATO summit opened.  Turkey agreed to lift its opposition to Sweden and Finland joining the alliance. 

Turkey hailed Tuesday’s agreement as a triumph, saying the Nordic nations had agreed to crack down on groups that Ankara deems national security threats, including the Kurdistan Workers’ Party, or PKK, and its Syrian extension.  It said they also agreed “not to impose embargo restrictions in the field of defense industry” on Turkey and to take “concrete steps on the extradition of terrorist criminals.”

--Russia-installed officials in Kherson region said their security forces had detained Kherson city mayor Ihor Kolykhayev after he refused to follow Moscow’s orders, while a Kherson local official said the mayor was abducted.

Kherson, a port city on the Black Sea, sits just northwest of the Russian-annexed Crimean peninsula.  It was occupied during the first week of Russia’s invasion, and a large part of the local population has left the region.

A Moscow-installed official told Russian state RIA news agency on Monday that Kolykhayev did “much damage” to Russia’s “denazification process” in Ukraine.  “Finally, he was neutralized.”

--The British army’s Chief of the General Staff Patrick Sanders said Tuesday in a speech:

“While Russia’s conventional capability will be much reduced for a time at least, Putin’s declared intent recently to restore the lands of historic Russia makes any respite temporary and the threat will become even more acute.

“We don’t know how the war in Ukraine will end. But in most scenarios Russia will be an even greater threat to European security after Ukraine than it was before.”

--Wednesday….

NATO leaders gathered in Madrid with Secretary-General Jens Stoltenberg saying the meeting was “in the midst of the most serious security crisis we have faced since the Second World War.”

But NATO allies are showing signs of strain as the cost of energy and other essential goods has skyrocketed amid the war and tough Western sanctions on Russia.  There also are tensions over how the war will end and what, if any, concessions Ukraine should make to stop the fighting.

Money is another sensitive issue as just nine of NATO’s 30 members currently meet the organization’s target of spending 2% of GDP on defense.

Allies did agree at the summit to increase the strength of the alliance’s rapid reaction force nearly eightfold, from 40,000 to 300,000 troops by next year.  The troops will be based in their home nations, but dedicated to specific countries on NATO’s eastern flank, where the alliance plans to build up stocks of equipment and ammunition.

President Biden said the U.S. would beef up its military presence in Europe, with more troops in the east and two more Navy destroyers based in Rota, Spain.

Stoltenberg said NATO was undertaking “the biggest overhaul of our collective defense since the end of the Cold War.”

For the first time, the leaders of Japan, Australia, South Korea and New Zealand are attending the summit as guests, a reflection of the growing importance of the Indo-Pacific region.

Stoltenberg said China was not NATO’s adversary, but posed “challenges to our values, to our interests and to our security.”

China was not happy with the Indo-Pacific presence at the summit.

--Russia responded to NATO’s moves by pressing its offensive in eastern Ukraine.  At least three people were killed by a Russian missile strike on a residential building in the southern city of Mykolaiv.  The mayor there said eight missiles hit the city and urged residents to evacuate.

At the same time, the military-civilian administration in Kherson today announced it had begun preparations for a referendum on joining Russia.

--Thursday/Friday….

Russian forces announced they had abandoned the strategic Black Sea outpost of Snake Island, in a major victory for Ukraine that could loosen the grip of Russia’s grain export blockade.

Russia’s defense ministry described the decision to withdraw as a “gesture of goodwill” that showed Moscow was not obstructing United Nations efforts to open a humanitarian corridor allowing grains to be shipped from Ukraine’s ports.

--Friday, in retaliation for Snake Island, Russia launched missile attacks on residential buildings in the Odesa region, killing at least 21 people, authorities reported.

Ukrainian news reports said the target of the missile attack was a multi-story apartment building and a recreational area.

--Greece is willing to provide ships to help export grain from Ukraine’s Black Sea ports that have been blocked by Russia, NATO Sec.-Gen Stoltenberg said on Thursday.  We’ll see.

--The White House will be announcing it has approved an additional $800 million in security to Ukraine in the next few days, President Biden said at the conclusion of the NATO summit on Thursday.

The administration has sent $7 billion in military, economic, and humanitarian aid to Ukraine since the president took office in January 2021.  The latest aid will “include new advanced Western air-defense systems for Ukraine, more artillery and ammunition, counter battery radars, additional ammunition for the HIMARS multiple launch rocket systems we’ve already given Ukraine, and more HIMARS coming from other countries as well,” Biden said during a press conference.

--Vlad the Impaler raised the stakes in an economic war with the West by signaling a decree to seize full control of the Sakhalin-2 gas and oil project in Russia’s far east, a move that could force out Shell and Japanese investors.  The decree, signed on Thursday, creates a new firm to take over all rights and obligations of Sakhalin Energy Investment Co., in which Shell and two Japanese trading companies Mitsui and Mitsubishi hold just under 50%.

State-run Gazprom already has a 50% plus one share stake in Sakhalin-2, which accounts for about 4% of the world’s liquefied natural gas (LNG).

Japanese Prime Minister Fumio Kishida said on Friday that Russia’s decision would not immediately stop LNG imports from the development.  Japan imports around 10% of its LNG each year from Russia, mostly under long-term contract from Sakhalin-2.

Some commentary….

Yaroslav Trofimov / Wall Street Journal…June 25

“To some European leaders, this discourse means that a potential cease-fire leaving Russia with a large chunk of Ukraine and a capacity to regroup, to rebuild its depleted military and to prepare for new offensives would end up putting other European nations in Mr. Putin’s crosshairs.

“ ‘He is also after the Baltic countries if he succeeds in Ukraine, and this is why we have to do everything so that he doesn’t succeed in Ukraine, because otherwise his appetite will only grow,’ Estonia’s prime minister, Kaja Kallas, said in an interview.  ‘If he gets away with this, nobody can feel safe.’

“While Estonia and the two other Baltic states are theoretically protected by their membership in NATO, the small military forces that the alliance currently deploys in the region and in other parts of Eastern Europe wouldn’t be sufficient to militarily repel a full-blown Russian invasion.  Not even Poland, the biggest nation in Eastern Europe, has a military as strong and battle-hardened as Ukraine’s.

“Russian forces would be able to take over Estonia’s capital Tallinn within as little as one day, some Western military experts say.  Poland’s military would be completely defeated by Russia in five days, a 2021 Polish defense ministry war game concluded.

“America’s nuclear arsenal would not necessarily deter a rapid Russian advance on a NATO ally. The U.S. has long maintained a strategy of deliberate ambiguity about the circumstances under which it would use nuclear weapons to stop a conventional attack.  According to America’s latest nuclear posture policy, Washington would only consider deploying nuclear weapons ‘in extreme circumstances’ and would first try to end the conflict ‘at the lowest level of damage possible.’

“That is one reason why Russia’s neighbors are now pushing for large and permanent NATO bases on their soil.”

And that’s what they are receiving, after the moves at the summit this week.

“Even a weak Russian military can do an awful lot of damage if it wants to,” said Ivo Daalder, president of the Chicago Council on Global Affairs think tank and a former U.S. ambassador to NATO.  “We should take Putin at his word.  Even if we assess that he doesn’t really have the military capacity to act upon his grandiose vision, the reality is that he has the intention and the will, and there is so far domestically no opposition sufficient to change that.”

David Ignatius / Washington Post

“The biggest challenge is the battlefield itself.  U.S. and British intelligence analysts are forecasting a slow, statis campaign in the Donbas region, with the Ukrainians able to contain Russian breakouts with newly arriving multiple-launch rocket systems (MLRS), additional artillery ammunition and more ground-to-air missiles.

“But what if the weapons pipeline is slow or inadequate?  The Pentagon has been limiting its deliveries of the MLRS – wanting a ‘proof of concept’ – and has provided only a fraction of what the Ukrainians say they need.  Deliveries of some other weapons have been slow, too, sources say – with far fewer on the battlefield than the Ukrainians want.

“An example is the small but lethal Switchblade drone, which can attack Russian tanks, ships or command centers.  The drone comes in two models, with flight times ranges of 15 to 40 minutes. Back in March, the Biden administration announced plans to send Ukraine the first of what would be 400 of the smaller drones, according to a source familiar with the weapons system. But the source said the Pentagon sent just 10 of the larger models. The Ukrainians have requested several thousand more of each version, but there has been no U.S. response, according to this source.  The drones are made by AeroVironment.

“Political fatigue is another problem for the United States and its NATO allies. The war in Ukraine is relatively popular now, but complaints will surely grow as U.S. gasoline prices remain high, natural gas supplies dwindle in Europe during a cold winter and voters ask why money isn’t being spent on domestic needs….

“NATO is right to avoid direct attacks on Russia that might lead to catastrophic nuclear escalation. But that doesn’t mean Ukraine shouldn’t fight back against missiles fired from inside Russia.  If Putin uses his territory as a sanctuary for launching rockets in an unprovoked, illegal war, the protection of his border dissolves.

“If Ukraine can stop Russia on the battlefield, it will have to decide eventually what kind of settlement it wants – since an unconditional surrender by a nuclear-armed Russia is unlikely.  But that diplomatic moment is probably a long way off.

“This is Ukraine’s war to fight.  But NATO needs to plan its strategy as if the alliance’s own credibility and survival were at stake.”

Editorial / The Economist

“Ukraine’s turnaround begins on the battlefield, by stopping and reversing the Russian advance.  Mr. Putin’s generals will continue to have more weapons, but the sophisticated NATO systems now arriving have longer range and greater accuracy.  By adopting tactics devised in the Cold War, when NATO too was outnumbered by the Red Army, Ukraine should be able to destroy Russian command posts and supply depots.  Ukraine scored a success on June 30th, when it used NATO weapons to drive Russian forces off Snake Island, a strategic prize in the Black Sea.  It should aim to impose a 'hurting stalemate,' in which it takes back similarly symbolically important territory, such as the city of Kherson, imposing a heavy price on Russia.

“If Russia starts to lose ground on the battlefield, dissent and infighting may spread in the Kremlin.  Western intelligence services believe that Mr. Putin is being kept in the dark by his subordinates.  He has a habit of replacing his commanders – reportedly including General Alexander Dvornikov, brought in after the invasion’s first chaotic weeks.  The West can raise the cost to Russia of a long war by continuing to press sanctions, which threaten lasting harm to Russia’s economy. It can split Russia’s elites from Mr. Putin by welcoming dissenters from business and politics, and encouraging them to see that their country should not throw away its future on a pointless and costly campaign….

“Yet Ukraine is a heavy burden.  Western defense industries are formidable, but struggle to produce large volumes, especially of ammunition.  Ukraine’s government has a monthly deficit of $5bn and the country will need rebuilding after the war.  Public support for Ukraine in the West will be buffeted by a host of pressures, from inflation to elections – including, as soon as 2023, campaigning in America that may involve a presidential bid by that Ukrainophobic Putin admirer, Donald Trump….

“You can see where Mr. Putin is heading.  He will take as much of Ukraine as he can, declare victory and then call on Western nations to impose his terms on Ukraine.  In exchange, he will spare the rest of the world from ruin, hunger, cold and the threat of nuclear Armageddon.

“To accept that deal would be a grave miscalculation.  Ukraine would face permanent Russian aggression. The more Mr. Putin believes he has succeeded in Ukraine, the more belligerent he will become.  He set out his ambitions in a speech this month, smirking as he talked about how Peter the Great seized parts of Sweden.  He will fight tomorrow with whatever weapons work for him today.  That means resorting to war crimes and nuclear threat, starving the world and freezing Europe.

“The best way to prevent the next war is to defeat him in this one.  Leaders need to explain to their people that they are not only defending an abstract principle in Ukraine, but also their most fundamental interest; their own security….

“In the long war ordinary Russians will suffer and Ukrainians endure unspeakable pain for Mr. Putin’s vanity.  To prevail means marshalling resources and shoring up Ukraine as a viable, sovereign, Western-leaning country – an outcome that its defiant people crave.  Ukraine and its backers have the men, money and materiel to overcome Mr. Putin. Do they all have the will?”

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Biden Agenda…Roe et al…

--A new poll finds a growing percentage of Americans calling out abortion or women’s rights as priorities for the government in the wake of the Supreme Court’s decision to overturn Roe v. Wade, especially among Democrats and those who support abortion access.

With midterm elections looming, Democrats hope to capitalize on that shift.

Twenty-two percent of U.S. adults name abortion or women’s rights in an open-ended question as one of up to five problems they want the government to work on, according to a poll from the Associated Press-NORC Center for Public Affairs Research. That’s more than doubled from December.  But the poll shows abortion is named as priority about equally by adults with hardline opinions on both sides of the issue.

Editorial / Wall Street Journal

“Can America still settle its political conflicts democratically and peacefully? We’re about to find out after the Supreme Court Friday overturned Roe v. Wade and returned the profound moral issue of abortion to the states and democratic assent, where it has always belonged.

“Critics say the Court’s 6-3 decision in Dobbs v. Jackson Women’s Health Organization is rule by unelected judges.  But Roe was the real ‘exercise of raw judicial power,’ as Justice Byron White put it in dissent in 1973.  That’s when seven Justices claimed to find a constitutional right to abortion that is nowhere mentioned in the Constitution and had no history in American common law. The Court on Friday finally corrected its mistake, which has damaged the legitimacy of the Court and inflamed our politics for 49 years….

“The debate will not shift from courts to the political branches, which should be healthy for the judiciary. Democrats made clear on Friday that they will make abortion rights a major campaign theme in the midterm elections, and President Biden declared that ‘this is not over.’

“Fair enough. Both sides of the abortion debate will now have to achieve their policy goal the old-fashioned way – through persuasion, not judicial fiat.  Some in the pro-life movement want Congress to ban abortion nationwide. But that will strike many Americans as hypocritical after decades of Republican claims that repealing Roe would return the issue to the states.

“A national ban may also be an unconstitutional intrusion on state police powers and federalism.  Imposing the abortion values of Mississippi or Texas on all 50 states could prove to be as unpopular as New York or California trying to do the same for abortion rights.

“One tragedy of Roe is that it pre-empted an abortion debate that was moving in the states a half century ago. That debate can now resume. Some states will ban it in most cases, while others like California may seek to pay for the abortions of women from other states.

“It will take awhile, and more than one election, but we hope that eventually the public through its legislators will find a tolerable consensus, if not exactly common ground.  That’s the best we can ask for in our imperfect republic, if we can keep it.”

So far, the protests have been more peaceful than some of us feared.  Pray it stays that way.

At the same time, as New York Gov. Kathy Hochul told a group of Democratic governors on a virtual call with President Biden today, “just a handful of states” are going to have to take care of the health of women across the country.

“There is such stress out there.  It is a matter of life and death for American women.”

--Of equal concern when it comes to the midterm elections should be an Associated Press-NORC survey that finds an overwhelming and growing majority of Americans say the U.S. is headed in the wrong direction, including nearly 8 in 10 Democrats (78%).

Eighty-five percent of U.S. adults say the country is on the wrong track, and 79% describe the economy as poor. These are deadly figures for the donkeys.

With inflation a focal point, even 67% of Democrats call economic conditions poor.

The number who say things are going in the right direction, 14%, is down from 29% in April.  Through the first half of 2021, about half of Americans said the country was headed in the right direction.

While the lone bright spot for Biden is that 53% say they approve of his handling of the pandemic, only 36% approve of his handling of gun policy; 62% disapprove.

--The Supreme Court, in a 6-3 ruling, hamstrings the Environmental Protection Agency’s ability to regulate planet-warming emissions from power plants.  Climate advocates called it a devastating blow, eliminating the most effective tool the agency had for shifting power plants off of fossil fuels.

This was a substantial victory for conservatives who have worked for decades to curtail or dismantle modern-style government regulation of the economy.

In striking down an EPA plan to reduce carbon emissions from power plants, the court issued a decision whose implications go beyond hobbling the Biden administration’s ability to fight climate change.  Many other types of regulations might now be harder to defend.

“Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible ‘solution to the crisis of the day,’” Chief Justice John Roberts wrote in the majority opinion.  “But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme.”

In dissent, writing for the three liberal judges, Justice Elena Kagan said the majority opinion “deprives EPA of the power needed – and the power granted – to curb the emission of greenhouse gases.”

The ruling opens an attack on a government structure that became the way American society imposes rules on businesses through agencies set up by Congress to deal with issues such as air quality and water safety, as well as agencies dealing with food, drugs, auto safety, etc.

But for decades conservatives, and Big Business, have been trying to hobble what became known as the administrative state.

--The Supreme Court by a 5-4 margin gave President Biden a victory, and the green light to end the controversial “Remain in Mexico” immigration policy that originated under the Trump administration.

The ruling states that immigration law gives the federal government the discretion to end the program, formally known as Migrant Protection Protocols.  A hold on Biden’s bid to end the program remains in place, but Thursday’s ruling suggested that the order should be lifted shortly.

Writing for the majority, Chief Justice Roberts said that the relevant immigration statute “plainly confers a discretionary authority to return aliens to Mexico during the pendency of their immigration proceedings.”

“The use of the word ‘may’” in the law in question, Roberts wrote, “makes clear that contiguous-territory return is a tool that the (DHS) Secretary ‘has the authority, but not the duty,’ to use.”

The Biden administration argued that the public benefit of releasing some migrants was preserving beds in immigration lockups for noncitizens considered a particular security risk, such as those with criminal records.

Remain in Mexico drew immediate controversy when announced but was largely sidelined during the pandemic. The Trump administration relied on other authorities to deny admission to migrants, particularly public-health orders under a provision known as Title 42, a pandemic-era border policy that prevents migrants at the U.S.-Mexico border from asking for asylum.

The Biden administration continued that practice but has encountered opposition, including from key Democrats, over plans to end Title 42 exclusions while waves of Central Americans seek to cross the border.

The Trump administration argued Remain in Mexico was necessary because it reduced incentives to migrate, as those making asylum claims wouldn’t be allowed to live and work in the U.S. while they wait for their cases to be resolved, a process that routinely took years.

Several of the red states that challenged the termination of Migrant Protection Protocols have also brought lawsuits challenging other attempts by Biden to pivot away from his predecessor’s aggressive approach and those cases are still working their way through lower courts.

--In another decision, and on the heels of a landmark ruling by the Supreme Court on expanding individual gun rights, the Supremes threw out several lower court rulings against gun restrictions, including bans on assault-style rifles in Maryland and large-capacity ammunition magazines in New Jersey and California.  The actions by the justices sent these cases back to lower courts to reconsider in light of their June 23 ruling that declared for the first time a constitutional right to carry a handgun in public for self-defense.

--Biden on Thursday said he would see Saudi Arabia’s king and crown prince during an upcoming visit to the country but that the purpose of his trip was not to press them to increase oil output. 

Asked at a press conference in Madrid if he would ask the Saudi leaders to increase oil production, Biden said, “No.”  He said he had indicated that all the Gulf states should be increasing oil production generically, not Saudi Arabia particularly.  He said he hoped the countries would conclude that it was in their own interest to do so.

But only the Saudis and UAE have any real spare capacity.

--Talk about a massive failure of leadership from the Biden administration, it’s the failure to pass the “America Competes Act,” the pathbreaking $52 billion effort to supercharge the U.S. semiconductor industry and preserve America’s technological edge against China.

The Senate approved what is called the Chips Act in June 2021 by a 68-32 margin.  Shortly after the bipartisan infrastructure bill passed the Senate.

But the House dithered on the Chips Act for eight months.  Then it passed its own version in February, which was substantially different from the Senate’s bill, so a 107-member conference committee was appointed to reconcile the two bills, and it didn’t meet until May.

That month, Biden, in a visit to Ohio, where Intel had said it would expand a planned fabricating plant to $100 billion with congressional support, told the House and Senate to “Pass the damn bill and send it to me.”

Then, when members realized how popular the bill was, they started attaching pet projects, akin to what happens with defense authorization bills.  Neither House Speaker Nancy Pelosi nor Biden stopped the process.

As David Ignatius writes in the Washington Post:

“What makes this story truly disturbing is that while Congress has been dithering, other countries are racing to pass their own industrial policies to invest in chipmaking.  India told one chipmaker that if a $10 billion incentive wasn’t enough, it should just name the amount.  The European Union began working on its own semiconductor plan last year, a year after the U.S. legislative effort began. Industry executives tell me it’s ready to go.

“That’s the takeaway; The European Union, supposedly a bureaucratic morass, got started a year after the United States in building this essential pathway to the future.  It is now comfortably ahead.

“Come on, Mr. President: Get it done.  Crack some heads.  You can’t fix everything in our messed-up country. But you can deliver on your promise to create good high-tech jobs in the semiconductor industry and compete with China for the strategic high ground.”

--Justice Stephen Breyer retired on Thursday, the Supreme Court’s term over, and Judge Ketanji Brown Jackson took the prescribed oaths to begin her service as the 116th member of the court, and the first black female justice.

---

Wall Street and the Economy

Federal Reserve Chairman Jerome Powell said he was more concerned about the risk of failing to stamp out high inflation than about the possibility of raising interest rates too high and pushing the economy into a recession.

“Is there a risk we would go too far?  Certainly there’s a risk,” Powell said Wednesday.  “The bigger mistake to make – let’s put it this way – would be to fail to restore price stability.”

Powell said the central bank had to raise rates rapidly, even if that raises the risk of recession, to avoid a worse danger for the economy – of higher inflation becoming entrenched.  He said the Fed didn’t have the luxury of moving rates up gradually because of concern that the recent period of high inflation may lead consumers and price setters to expect elevated prices to persist.”

“There’s a clock running here,” Powell said during a moderated discussion at the European Central Bank’s annual economic policy conference in Portugal.  “The risk is that because of the multiplicity of shocks, you start to transition into a higher-inflation regime.  Our job is literally to prevent that from happening, and we will prevent that from happening.”

Ergo, 75 basis points at the July 26-27 meeting seems a certainty, but with the economy slowing as rapidly as it appears to be, will the Fed be able to slow down the rest of the year (comprised of meetings in September, November and December)?

One meeting at a time.

Europe’s central bank is behind the Fed but said it will raise rates in July for the first time in 11 years and again in September to target inflation running at a record 8.1% in the 19 countries using the euro.  [A June flash estimate released Friday pegged it at 8.6%!]  In a speech opening the forum Tuesday, ECB President Christine Lagarde said the central bank would go gradually with increases but keep its options open to “stamp out” inflation if it surges faster than expected.

On the economic data front, the Case-Shiller National Home Price index rose by 2.1% in April, following a 2.6% gain in March.

National home prices were up 20.4% year-over-year, down from 20.6% in March.

Tampa had the fastest home-price growth in the country, at 35.8%, followed by Miami, at 33.3%.

May durable goods (big-ticket items) were better than expected, up 0.7%, ditto ex-transportation, also 0.7%, but everything else this week kind of sucked.

May personal income was as expected, 0.5%, but consumption (consumer spending) was worse than forecast, 0.2%, and adjusted for inflation, -0.4%.  Not good at all.

The core personal consumption expenditures index, the Fed’s preferred inflation barometer, was 4.7%, down from 4.9%, a small positive.

But then we had manufacturing PMI readings for the ISM in June, below estimates at 53.0, which was versus 56.1 prior (50 the dividing line between growth and contraction), and for the Chicago area, 56.0, which also while showing ‘growth,’ was well off forecasts for 58.4, and 60.3 in the prior month.

May construction spending was down 0.1% when a positive reading was predicted.

Finally, and importantly, we had a final look at first-quarter GDP, -1.6%, with the consumption reading revised downward from 3.1% to 1.8%.

And we all now know the second quarter isn’t looking much better.  At the end of the week, the Atlanta Fed’s GDPNow barometer sits at -2.1% for Q2!

As in if it comes in negative, that’s two quarters in a row…your classic definition of recession and far sooner than economists were forecasting.  In fact, last week I made fun of a few experts calling for recession in 12 or more months, as I’ve been pointing out for a while that we could already be there. 

By end of July, we’ll get our first official look at Q2.  It could have a major political impact should the figure contain a ‘minus’ sign.

As an aside I just have to note late last week the International Monetary Fund cut its GDP forecast for the U.S. in 2022 to 2.9%, down from its most recent forecast of 3.7% in April.  For 2023, the IMF cuts its growth forecast to 1.7% from 2.3%, and it now expects growth to trough at 0.8% in 2024.

We’ll be lucky to achieve 1.5% growth for all of this year at the rate we’re going.

Red Jahncke / Wall Street Journal

“The Federal Reserve’s policies of increasing interest rates and quantitative tightening – reducing its $8.9 trillion balance sheet – will increase the volume and cost of federal government borrowing, slamming the federal budget and exposing the consequences of decades of deficit spending.

“The impact will be felt even without a recession, but if the economy does contract, the government will have limited capacity to spur a recovery with fiscal stimulus.

“Since February 2020, publicly held U.S. Treasury debt has exploded, growing from about $17 trillion to $24 trillion.  Almost half of the increase has wound up at the Fed, whose Treasury holdings have ballooned from $2.5 trillion in February 2020 to $5.8 trillion….

“The Fed can reduce its balance sheet, but that doesn’t mean the federal government can reduce its balance of outstanding debt.

“Given the extraordinarily low interest rates on new federal debt issued during the recent economic shutdown, federal interest costs barely increased despite the $7 trillion increase in Treasury debt.  Over the last three federal fiscal years ending on Sept. 30, 2021, total gross interest cost was $573 billion, $523 billion and $562 billion….

“That is changing.”

So some of you recognize this is a topic near and dear to my heart.  But, admittedly, I was the boy crying wolf…way too soon.  I didn’t think the Fed would keep interest rates at zero for so long, and obviously didn’t foresee a pandemic that would keep them there.

But as the Fed hikes interest rates now, yes, the cost of servicing the debt will skyrocket and that has to come at the expense of some of your favorite programs no doubt.

Jahncke:

“Under current Fed policy, the federal government’s annual gross interest expense could reach $1 trillion, causing federal borrowing to continue to grow rapidly.  As rates rise and federal borrowing increases, a vicious circle will produce ever more interest expense and ever more borrowing.

“This dire outlook has been long coming. The current debate about inflation and whether the Fed’s monetary moves have been too late or too aggressive misses the point.  The U.S. has been on an unsustainable fiscal and financial path for a long time.  We are beginning to see the inevitable result.”

Europe and Asia

We had June PMI figures on manufacturing for the EA19 from S&P Global, 52.1 vs. May’s 54.6 and a 22-month low.

Germany 52.0 (23-mo. low), France 51.4 (18-mo. low), Italy 50.9 (24-mo. low), Spain 52.6 (17-mo. low), Netherlands 55.9 (19-mo. low), Greece 51.1, Ireland 53.1.

UK 52.8, a two-year low.

Chris Williamson / S&P Global

“Eurozone manufacturing has moved into decline in June, with production dropping for the first time for two years amid a steepening downturn in demand.  Orders for goods have fallen at an accelerating rate over the past two months, dropping in June in every country surveyed with the exception of the Netherlands, and even here the rate of growth has weakened markedly in recent months.

“Demand is now weakening as firms report customers to be growing more cautious in relation to spending due to rising prices and the uncertain economic outlook.

“The downturn looks set to gain momentum in coming months. Inventories of both raw materials and unsold stock are rising due to lower-than-expected production and unsold stock are rising due to lower than expected production and sales volumes respectively, hinting that an inventory correction will act as an additional drag on the sector in coming months.  Backlogs of work are meanwhile falling, which is often a prelude to firms reducing operating capacity, and business confidence in the outlook has fallen to the gloomiest for just over two years….

“One upside to the recent weakening of demand is an alleviation of some supply chain constraints, which has in turn helped cool inflationary pressures for industrial goods.  With the survey data indicating an increasing likelihood of the manufacturing sector slipping into a recession, these price pressures should ease further in the third quarter.”

As alluded to above, a flash estimate for June inflation in the eurozone came in at another record, 8.6% vs. May’s 8.1%.  Ex-food and energy it’s 4.6%, vs. May’s 4.4%.

The euro area unemployment rate was 6.6% in May, down from 6.7% in April and down from 8.1% in May 2021, per Eurostat.

Germany 2.8%, France 7.2%, Italy 8.1%, Spain 13.1%, Netherlands 3.3%, Ireland 4.7%.

Germany helped buoy the markets some on Wednesday when it reported lower inflation than expected for June, 8.2% compared with 8.7% in May, and a forecast of 8.8%.  But the reading won’t keep the European Central Bank from finally lifting interest rates for the first time in more than a decade later this month.  Inflation pressure remains tense in the EA19, as Spain earlier in the day reported a surprise jump to an all-time high of 10%.  Some of the countries in the Baltic region have inflation of 20%.

Britain: Scotland’s first minister, Nicola Sturgeon, outlined a plan for a second referendum on Scottish independence, to be held in 2023, though she needs the consent of the British government, which is not likely to make it binding.  Scots rejected independence in 2014 by 55% to 45%.  Now they would vote against divorce by 51% to 49% (excluding “don’t knows”) according to a poll taken for The Economist.

Assuming both the prime minister and the UK Supreme Court say no to a poll, Sturgeon has said she’ll fight the 2024 general election on a single issue: independence.

Turning to Asia…China released its PMI readings for June, per the National Bureau of Statistics, and the manufacturing figure was 50.2, with the service sector reading at 54.7, up from 47.8 as severe Covid restrictions were lessened in many parts of the country.

The Caixin private-sector manufacturing figure was 51.7 vs. 48.1 in May.

Japan’s June PMI for manufacturing came in at 52.7.  May retail sales rose 3.6% year-over-year, but industrial production in the month fell 2.8% Y/Y.

The May unemployment rate ticked up to 2.6%.

The Bank of Japan’s monetary policy will remain accommodative as the economy has not been affected much by the global inflationary trend, its governor Haruhiko Kuroda was quoted as saying in a video recording for a seminar.  Japan’s 15-year experience of deflation has made firms very cautious of raising prices and wages, Kuroda said.

--South Korea’s June manufacturing PMI was 51.3, while Taiwan’s fell to 49.8 from 50.0, as the island was hurt by China’s Covid issues.

Street Bytes

--After a nice rally, stocks resumed their selloff this week with the Dow Jones falling 1.3% to 31097.  The S&P 500 dropped 2.2% and Nasdaq 4.1%.

Aside from the first half data up top, in June, the S&P lost 8.4% and Nasdaq 8.7%.  For the second quarter, the S&P lost 16.4%.

Earnings season is on the way, and it is going to be a fascinating one.  But for next week, after hot dogs, beer and fireworks, we have another important jobs report on Friday.

--U.S. Treasury Yields

6-mo. 2.44%  2-yr. 2.83%  10-yr. 2.88%  30-yr. 3.10%

Recession fears continue to dominate, both here and abroad, as the 10-year has now fallen from an intraday high of 3.49% a little over two weeks ago to 2.88%.  At least this is helping mortgage rates.

Overseas, the yield on the German 10-year has cratered from 1.65% to 1.23% in two weeks.  Italy’s 10-year from 3.57% to 3.07%.

--OPEC decided Thursday to boost production of crude by an amount of oil likely to do little to relieve high gasoline prices…an increase of 648,000 barrels per day in August.  Before this, OPEC+, including Russia, had been adding about 432,000 barrels per day monthly to put oil back on the market after cutting production drastically during the height of the pandemic.

But with sanctions on Russian oil, which had about 60% of the surplus production capacity, and with the European Union, a key importer of Russian energy, having approved a ban on 90% of Russian imports by year’s end, the Biden administration, for one, is looking to the Saudis et al to ramp up output further.

What has been having an impact on prices at the pump recently are fears of a global recession and thus reduced demand.

But oil rallied today on supply outages in Libya and expected shutdowns in Norway, so by the end of the week we were up over last Friday at $108.43 on WTI.

--Corporate America has been responding after the Supreme Court struck down Roe v. Wade last Friday, with many companies reacting with vows of support for employees who may soon find themselves affected by the decision to shut off access to abortions in large swaths of the U.S.

Outgoing Meta (Facebook) COO Sheryl Sandberg slammed the Court’s 6-3 decision, calling it a “huge setback” for the United States.

In a lengthy Instagram post, Sandberg said in part:

“I never thought my mom’s past would become my daughters’ future. I cannot believe that I’m going to send my three daughters to college with fewer rights than I had.”

“It threatens to undo the progress women have made in the workplace and to strip women of economic power,” Sandberg said. “It will make it harder for women to achieve their dreams. And it will disproportionately impact women with the fewest resources.”

The longtime Facebook executive added that the ruling “jeopardizes the health and the lives of millions of girls and women across the country.”

--JetBlue Airways Corp. isn’t backing down in its fight to buy Spirit Airlines Inc.  JetBlue on Monday sweetened the deal further, and in response, Spirit once again delayed a shareholder vote on a merger with Frontier Airlines that was scheduled for June 30, as Spirit’s board continues negotiations with both JetBlue and Frontier. 

Spirit clearly doesn’t have the votes to merge with preferred partner Frontier, yet, but to repeat ad nauseam, a merger with JetBlue will not pass regulatory muster.

--Thousands more flights were canceled in the U.S. this week as the airline industry geared up for the holiday weekend, ditto ongoing major issues in Europe.

Germany announced it would allow the entry of foreign workers to fill staff shortages at its airports as a temporary solution. Airport operators across Europe have been struggling with shortages, some 2-3,000 short in Germany.  Most of the emergency workers there would come from Turkey, according to newspaper Bild am Sonntag.

Back in the States, Delta Air Lines CEO Ed Bastian apologized for recent flight cancellations and delays, as U.S. lawmakers raised questions about ongoing industry-wide disruptions.  Persistent staffing shortages and booming demand have led to frequent flight cancellations, Delta having canceled over 400 from Monday thru Thursday.

“If you’ve encountered delays and cancellations recently, I apologize,” Bastian said in a LinkedIn post and email to customers.  He said the airline is working to speed up hiring, but now he has pilots picketing at selected airports for more pay, while complaining that understaffing is causing them to work too many flights and risk fatigue.

American Airlines said Thursday it is offering pilots raises of nearly 17% by the end of 2024, a sign of the leverage that pilots enjoy as airlines struggle with their labor shortage.  American said it was basically matching a tentative agreement United Airlines reached with its pilots.

--As if the flight cancellations aren’t enough of a nightmare, piles of luggage beside baggage belts in airports from North America to Europe are driving further demand for ground handlers, another area where airlines are scrambling to bring back workers lost during the pandemic.

Air Canada said late Wednesday it would cut flights in July and August to reduce passenger flows to a level that the air transport system can accommodate.  A union representing ground handlers, including baggage and cargo handlers for Air Canada and other carriers, said some Canadian workers are being offered raises and double pay to work beyond eight-hour shifts.

A trade group, the Airport Services Association, estimated that in 2019 there were roughly 220,000 to 240,000 people in ground handling in Europe.  Around 2020, there were fewer than 100,000, as ground handlers sought more stable jobs in other industries with better pay and working conditions.

--TSA checkpoint travel numbers vs. 2019

6/30…117 percent of 2019 levels…an anomaly due to 2019 weather, best I can ascertain
6/29…87
6/28…91
6/27…96
6/26…94
6/25…92
6/24…90
6/23…90

First week with so many 90+ figures.

--Meta Platforms CEO Mark Zuckerberg said that the company had cut its target for hiring engineers this year to about 6,000-7,000 compared with an initial plan of around 10,000.

Zuckerberg warned Meta employees in a Q&A to prepare for a deep economic downturn.  “If I had to bet, I’d say that this might be one of the worst downturns that we’ve seen in recent history,” Zuckerberg said.

--Tesla closed its satellite office in San Mateo, California, and laid off 200 employees in its autopilot unit.

The news followed Elon Musk’s warning early this month that he would be reducing the electric carmaker’s workforce by 10%.

Tesla is slated to report Q2 and June deliveries Saturday.

--General Motors Co. surpassed Toyota Motor Corp. in second-quarter U.S. sales, the two revealed Friday, even as persistent chip shortages and supply-chain disruptions crimped automakers’ ability to meet pent-up demand.

GM, which lost its crown as the U.S. sales leader last year for the first time since 1931 to Toyota, said it sold 582,401 vehicles in the quarter through June, 15% lower than a year earlier.

Toyota, which has been one of the worst hit automakers this year from supply chain disruptions and China’s Covid lockdowns, sold 531,105 vehicles, down 22%.

The U.S. auto industry is struggling to keep up with pent-up consumer demand for new cars.  This was again evident today when GM said it had nearly 100,000 vehicles waiting for more parts, which forced it to offer a weak second-quarter profit guidance.

But GM kept its full-year profit guidance, as it expects to sell those vehicles to dealers before the year-end.

GM sold over 7,300 electric vehicles in the quarter, including the GMC Hummer pickup truck.

South Korea’s Hyundai Motor Co. reported quarterly sales of 184,191 vehicles, down 23%.

Ford Motor reports Tuesday.

--Micron Technology Inc. projected fourth-quarter revenue and profit below market estimates on Thursday, a sign that geopolitical turmoil and weakness in consumer spending would weigh on demand for its memory chips.

The weak outlook could raise broader concerns the chip market is heading into a down cycle after a recent shortage.

Micron forecast adjusted revenue for the current quarter at $7.2 billion, plus or minus $400 million.  Analysts on average expected a figure of $9.05 billion.

For the fiscal third quarter ended June 2, Micron posted revenue of $8.64 billion, roughly in line with the company’s forecast of $8.7 billion.

But as CEO Sanjay Mehrotra said in a statement; “Recently, the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023.”

Mehrotra called out a softening outlook for both PCs and smartphones, and said the company now sees calendar 2022 PC unit sales to be off nearly 10% from 2021.  Micron had previously expected unit sales to be flat.

The shares fell 5% on the news and are down from $98 in January to $53.50 at the close of the week.

--Pharmaceutical giant Novartis said Tuesday it will lay off more than 7% of its workforce just a few months after the CEO announced a plan to simplify the organizational chart.

Novartis will chop as many as 8,000 positions out of the total of 108,000 at the company, with the biggest impact being at the company’s Switzerland headquarters, where as many as 1,4000 could lose their jobs.

The aim is to achieve $1 billion in annual savings by 2024, the company said.

--Shares in drugstore chain Walgreens Boots Alliance Inc. fell after the company posted a 76% fall in quarterly profit on Thursday, hurt by its opioid settlement with Florida and a decrease in U.S. pharmacy sales on waning demand for Covid-19 vaccinations. 

Walgreens booked a $683 million charge from the settlement pertaining to its dispensing of prescription opioids.

Walgreens had been relying on gains from administering Covid-19 vaccines to tide over losses from low prescription volumes and over-the-counter sales of health and wellness products in recent quarters due to the pandemic.  However, after an Omicron-led surge in Covid-19 cases helped boost demand for vaccines and testing, demand has tapered off since January.

In the third quarter, it administered about 4.7 million doses of vaccines and sold 6.6 million tests in the preceding quarter.

Earlier in the week the company announced it had decided to keep its Boots business, based in the UK and Ireland, which it had acquired several years ago in a push to gain global clout. Back in January, CEO Rosalind Brewer said Walgreens was exploring strategic options for Boots so it could focus more on the U.S.

--Shares in Kohl’s plunged nearly 20% on news that takeover talks with Franchise Group ended without a deal.

The original Franchise bid was for $60, later lowered to $53, and now the stock sits at $28.68.

Kohl’s management royally blew this one and the shareholders got f’ed.

--Crain’s New York Business had a piece on how crippling labor shortages at a Lincoln, Nebraska, manufacturing plant and supply-chain issues have delayed hundreds of new train cars for the New York City subway and Long Island Rail Road – pushing back their delivery by at least 17 months.

The Metropolitan Transportation Authority has ordered a combined 737 new cars to replace subway and LIRR trains that are up to 50 years old.  But high turnover each month at Kawasaki’s plant – roughly 10% of its 430 staff – has plagued production with stops and starts, according to the MTA.

I mean think about it, a constant learning curve for such a large number of workers.  Ten percent a month.  It’s the classic example of before and after.  Pre-pandemic, these were no doubt lifetime jobs, good benefits.  Not today.

For subway riders, new cars mean signal upgrades on some of the lines.

--I love Bed Bath & Beyond…a favorite store of mine, probably my favorite, though I’ve noted the product line shrunk and they didn’t have the gadgets I so loved, like NY Jets bottle openers I would send to out of town friends.

But Wednesday, the company reported an adjusted fiscal first-quarter loss of $2.83 per share, compared with earnings of $0.05 a year earlier and a huge miss from the consensus of a loss of $1.39.

Net sales for the quarter ended May 28 were $1.46 billion, down from $1.95 billion a year ago, a major drop.

The company said it was optimistic things would turn around in the second half of the fiscal year.

But, BBBY also said Mark Tritton had stepped down as CEO and president and that Sue Gove has been named as his successor on an interim basis.  She is currently an independent director on the board.

The shares fell over 23% on the news to essentially $5, from a June 30, 2021, high of $39, BBBY being a meme stock, finishing the week at $4.65.

There was a Bank of America analyst report that BBBY was cutting off the air-conditioning in its stores to save money, so I’ll have to go to the nearby store Saturday to see if that’s the case, and use my 20% off coupon on something.

--RH (formerly Restoration Hardware) is a luxury furniture store basically found in elite malls, like the one near me, and when I was there last week, I saw zero customers in it.  Wednesday, the company revised its guidance for fiscal 2022 due to the deteriorating macroeconomic environment.

The company now expects fiscal 2022 net revenue to drop 2% to 5%, with shrinking net margins.

“With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175-basis point increase to the Fed funds rate by year end, our expectation is that demand will continue to slow throughout the year,” RH CEO Gary Friedman said. 

The stock cratered 11% on the news, before recovering some on Friday.

--Regarding the upcoming holiday shopping season, a survey by Salesforce found that consumers are likely to start their shopping earlier this year to avoid future price hikes.  Forty-two percent of consumers will begin shopping earlier than they did in 2021.

Salesforce also forecasts that half of shoppers globally will switch brands this year due to pricing.

Physical stores will be an asset for retailers this year.

--BASF, one of the world’s largest chemicals companies, built its business model around cheap and plentiful Russian natural gas, for generating power and as feedstock for products.

But dwindling Russian gas supplies are proving a threat to the company’s manufacturing hub in Germany, specifically at Ludwigshafen, site of the world’s largest integrated chemical complex spanning some 200 plants.

Now, with Russia throttling back its supply of gas to Germany and other European countries, BASF has to consider potentially shutting down the complex if gas supplies fall further.

The consequences though are not just for BASF and its 39,000 employees in Germany, but disruptions to industrial supply chains would reverberate across Europe at a time of high inflation and slowing growth.

Some 60% of the gas BASF consumes in Europe is used for power and steam generation. The other 40% is used as a feedstock, or raw material for its products.

--Nike Inc. forecast first-quarter revenue below estimates as it expects to discount more and wrestles with pandemic-related disruptions in China, its most profitable market.  The company’s shares fell 3% on the news and further on the week to $101, from a 52-week high of $179.

Analysts are mixed about Nike’s prospects in China this year even as strict Covid-19 lockdowns have been lifted in several of the country’s major cities, as people cut down on spending and a penchant for home-grown brands such as Li Ning and Anta remains firm.  Nike’s sales in Greater China fell 19%.

“We are taking a cautious approach to Greater China, given uncertainty around additional Covid disruptions,” Nike CFO Matthew Friend said. The company expects first-quarter revenue to be flat to slightly up, below estimates of a 5.1% increase.

Nike said its gross margins would be under pressure this year due to higher freight and product costs, and as it discounts more to sell seasonal inventories that arrived late due to supply snarls.  The company’s inventories rose 23% to $8.4 billion at the end of May as more of its products remain in transit due to supply disruptions.

For the fiscal fourth quarter, the company reported revenue of $12.23 billion, beating estimates of $12.06 billion, helped by higher sales in Europe, Middle East and Africa (up 9%).  Nike recorded a $150 million charge related to its decision to exit Russia and transitions in its business model in South America.

Fiscal Q4 net income was $1.44 billion on revenue of $12.23 billion in the period, and $6.05 billion for the year on sales of $46.71 billion.

--Hundreds of auditors at accounting giant Ernst & Young cheated on ethics tests they were required to take to get or maintain their professional licenses, and the company withheld evidence of the misconduct from federal authorities investigating the matter, according to the Securities and Exchange Commission.

In response, the SEC is imposing a $100 million fine on the company, the largest ever on an audit firm.

“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation’s public companies,” Gurbir Grewall, SEC enforcement director, said in a statement.  “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.”

The agency found that beginning in 2017, 49 Ernst & Young professionals shared or received answers to ethics exams they needed to pass to get licensed as certified public accountants.  Hundreds more cheated on courses they needed to take to maintain their standing with state oversight boards, while others who didn’t participate themselves helped facilitate the behavior, the SEC said.

--Constellation Brands Inc.s’ quarterly sales grew by almost 17%, helped by strong beer sales from the likes of Modelo, Pacifico and Corona, up 21% in the fiscal first quarter ended May 31.  Modelo has been advertising rather heavily in my area. 

Constellation, whose shares rose 5% on the news, has been working to transform itself over the past decade amid shifting consumer tastes from a boxed-wine seller to a beverage giant brewing Corona and craft beers.

Earlier this year, Constellation struck a deal with Coca-Cola Co. to launch canned cocktails under the Fresca soda brand.

Overall for the quarter, Constellation posted net income of $389.5 million, beating expectations, ditto sales of nearly $2.4 billion.

--After I posted last time, a federal appeals court temporarily blocked a government ban on Juul, which can continue to sell its electronic cigarettes, at least for now.  Just wanted to update that situation.

--California is sending 2 million residents “inflation relief” checks of up to $1,050 this fall to help ease the financial burden that the highest inflation in 40 years has placed on Americans.

“California’s budget addresses the state’s most pressing needs,” Gov. Gavin Newsom said in a joint statement with lawmakers, “and prioritizes getting dollars back into the pockets of millions of Californians who are grappling with global inflation and rising prices of everything from gas to groceries.”

The size of the payments depends on income and the number of dependents.  The inflation relief package also suspends the state sales tax on diesel fuel to help combat pain at the pump.

--Disney’s embattled CEO Bob Chapek had his contract renewed for three years by the board.  Chairman Susan Arnold said in a statement that while the company was “dealt a tough hand by the pandemic,” Mr. Chapek “not only weathered the storm but emerged in a position of strength.”

Chapek’s renewal was closely watched after a high-profile dust-up earlier this year with Florida Gov. Ron DeSantis, when the company, employing 70,000 in the state, took a public stand against the Parental Rights in Education bill, a piece of legislation that curbed classroom instruction on sexual identity and gender in elementary schools.

In addition, Disney’s share price has fallen about 40% as Wall Street’s enthusiasm for streaming video businesses has cooled.

--Paramount Pictures’ “Top Gun: Maverick” and Warner Bros.’ “Elvis” achieved a rare feat last weekend by tying for first place at the domestic box office, with both collecting $30.5 million, though it was the first for Elvis and the fifth for Top Gun, bringing the latter’s North American cumulative total to $521.7 million, according to Comscore.

Universal Pictures’ “Jurassic World Dominion” added $26.4 million in its third weekend for a North American cumulative of $302.7 million, while Disney’s “Lightyear,” which did $17.7 million in its second weekend, has a North American cumulative of $88.8 million.

The Pandemic

--China halved its mandatory quarantine period for inbound travelers from 14 days to seven, the biggest shift yet in the country’s Covid-19 policy.  On Monday both Beijing and Shanghai recorded no new locally transmitted Covid cases for the first time since February.

--U.S. health regulators have directed vaccine manufacturers to modify their Covid-19 shots to better target the recently circulating offshoots of the Omicron variant, to be rolled out for a fall booster campaign.

The Food and Drug Administration said Thursday it advised companies including Pfizer and Moderna to make new vaccines that target the ancestral strain of the coronavirus, plus the Omicron subvariants BA.4 and BA.5.

The subvariants have been spreading rapidly around the U.S. and have been able to partly elude even shots modified to target the original Omicron subvariants that the drugmakers have been working on.

Regarding BA.5 specifically, Dr. Eric Topol, the founder of Scripps Research Translational Institute, recently said this is the one to worry about: “The worst version of the virus that we’ve seen.  To our immune system, the distance from BA.1 to heavily mutated BA.4 and BA.5 is “far greater,” Topol writes, than the distance from the original BA.1 virus to previous blockbuster variants such as Alpha and Delta – which makes them harder to recognize and respond to.

So now we have a frantic race to develop the shots specified, but they probably wouldn’t be available until October.

Ergo, what to do in the meantime.  I had my second booster shot in April.  Should I get another one, say, in August, or wait until October?

We are receiving zero local data these days and yet the other day, my next door neighbor was still wearing her mask.  Before I could ask, she told me her daughter’s family, which lives a few blocks away, all had it, including a newborn baby…four of them.  Probably the subvariant BA.4.

Everyone over the age of 70 is definitely wearing masks at grocery and drug stores once again in my area.

--North Korea claimed on Friday the country’s first Covid outbreak began with patients touching “alien things” near the border with South Korea, apparently shifting blame to the neighbor for the wave of infections that hit the isolated country.

Announcing its probe results, the North ordered its people to “vigilantly deal with alien things coming by wind and other climate phenomena and balloons in the areas along the demarcation line and borders.”

These same aliens, from Mars and elsewhere, I’m musing, are looking down on North Korea and thinking, ‘How come there are no lights on there at night?’

The North has claimed the Covid wave has shown signs of subsiding, though experts suspect underreporting in the figures released through government-controlled media.

Pyongyang has been daily announcing the number of “fever” patients without specifying them as Covid patients, apparently due to a lack of testing kits.

--A recent paper published in the Lancet estimated that Covid-19 vaccines prevented around 19 million deaths in the first year of their roll-out.  But more could have been done.  The researchers’ mathematical model suggests that roughly one in five deaths due to Covid in low-income countries might have been avoided if the World Health Organization’s vaccination targets had been met.

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

World…6,359,423
USA…1,042,988
Brazil…671,700
India…525,139
Russia…381,165
Mexico…325,716
Peru…213,497
UK…180,417
Italy…168,425
Indonesia…156,740
France…149,585

Canada…42,010

U.S. daily death tolls…Mon. 118; Tues. 375; Wed. 402; Thurs. 277; Fri. 212.

Foreign Affairs

China/Taiwan/Hong Kong: President Xi Jinping visited Hong Kong in his first trip outside of mainland China in more than two years to mark the 25th anniversary of Hong Kong’s handover to China.

British Prime Minister Boris Johnson said Britain would do all it could to hold Beijing to its commitments on democratic rights made 25 years ago.  Johnson said China had failed to comply with its commitment to respect a ‘One Country, Two Systems’ arrangement agreed to under the deal that ended British colonial rule in 1997.

Britain has been especially critical of the national security law imposed in 2020 and electoral changes that it says erode the freedoms and autonomy of Hong Kong.

“On the 25th anniversary of the handover, we simply cannot avoid the fact that, for some time now, Beijing has been failing to comply with its obligations,” Johnson said in a video post.  “It’s a state of affairs that threatens both the rights and freedoms of Hong Kongers and the continued progress and prosperity of their home.”

Chinese officials have previously rebutted British criticism, saying it should keep out of the affairs of Hong Kong and accusing it of retaining a colonial mindset despite the handover.

Johnson said: “We’re not giving up on Hong Kong.  Twenty-five years ago, we made a promise to the territory and its people, and we intend to keep it.”  He added that Britain would “do all we can to hold China to its commitments, so that Hong Kong is once again run by the people of Hong Kong, for the people of Hong Kong.”

Too late, Boris.

Friday, Xi attended the inauguration of Hong Kong’s new administration, giving reassurances on the long-term continuity of the “one country, two systems” governing principle, as well as setting out a demanding to-do list for John Lee Ka-chiu’s team.

In his opening remarks, Xi made clear that the one country, two systems formula must be adhered to in the long-run.

“It has been repeatedly tested.  It conforms to the fundamental interests of the nation, as well as the fundamental interests of Hong Kong,” he said.

“It has won the support of more than 1.4 billion people of the motherland, the unanimous support of the residents of Hong Kong…and the general approval of the international community. There is no reason to change such a good system.”

Xi said the city was administered by patriots that need to find the right balance between Beijing’s comprehensive authority and the city’s high degree of autonomy, and safeguard Hong Kong’s unique strengths.

On “patriots” administering Hong Kong, Xi said it was a universal principle that political power must be in the hands of patriots.

“No country or people would allow unpatriotic, or even traitorous and treasonous forces or people, to hold political power,” he said.

“To ensure Hong Kong’s long-term prosperity and stability, the city’s administering power must be firmly held by patriots.  This must not be swayed.”

Last year, Beijing imposed a sweeping electoral overhaul to ensure the city’s political institutions, such as the Election Committee and Legislative Council, were firmly dominated by those deemed “patriotic.”

Xi gave Hong Kong’s new chief executive, John Lee, a long checklist, which included improving government efficiency and boosting economic momentum.

Xi also highlighted the importance of social harmony.  In a reference to the 2019 social unrest, the president said: “A harmonious family will always prosper.  Having gone through ups and downs, people have learned the  hard way that Hong Kong must not be destabilized and cannot afford any chaos.”

Here’s the bottom line.  Hong Kong is a police state, with basically all opposition leaders having been arrested.  It’s a disgrace, a tragedy.  A beautiful, dynamic, one-of-a-kind center of global commerce is rapidly deteriorating.

And sitting back observing all of this is Taiwan, which knows that Beijing lies when it talks about adhering to “one country, two systems.”

Benedict Rogers / Wall Street Journal

“If the regime in Beijing and its quislings in Hong Kong are allowed to get away with their brutality, mendacity and criminality, it will embolden them to be even more repressive at home and aggressive abroad. Freedom-loving allies should coordinate measures to ensure maximum effect. Failure to impose punitive measures now may lead to greater danger for Taiwan and the South China Sea.

“On the grim occasion of this 25th anniversary, let us not settle for retrospective hand-wringing.  That may make the West feel better but will achieve nothing.  Instead, welcome Hong Kongers who wish to begin a new life in freedom into our societies and hold to account those who destroyed the ‘Pearl of the Orient.’”

One last bit…President Biden on Monday signed a national security memorandum to fight illegal fishing, part of pledged efforts to help countries combat alleged violations by fishing fleets, especially those of China.

The White House said in a statement that it would launch an alliance with Canada and the United Kingdom to “take urgent action” to improve monitoring, control and surveillance in the fight against illegal, unreported and unregulated (IUU) fishing.

The U.S. Coast Guard has said illegal fishing has outpaced piracy as the top global maritime security threat, and risks heightening tensions among countries vying for overexploited fishing stocks, particularly in the Indo-Pacific.

North Korea: The nosedive in cryptocurrency markets has wiped out millions of dollars in funds stolen by North Korean hackers, four digital investigators say, threatening a key source of funding for the sanctions-stricken country and its weapons programs.

North Korea has poured resources into stealing cryptocurrencies in recent years, making it a potent hacking threat and leading to one of the largest cryptocurrency heists on record in March, in which almost $615 million was stolen, according to the U.S. Treasury.

According to the Korea Institute for Defense Analyses in Seoul, North Korea’s record number of missile tests cost as much as $620 million so far this year.  Pyongyang is also still presumed to be resuming nuclear tests any day now.

After obtaining cryptocurrency in a heist, North Korea sometimes converts it to Bitcoin, then finds brokers who will buy it at a discount in exchange for cash, which is often held outside the country.

Iran: The European Union said on Thursday it was worried it may not be possible to strike an agreement to revive the 2015 Iran nuclear deal after indirect talks between the United States and Iran ended this week with no progress.

“I am concerned that we might not make it over the finishing line.  My message is: Seize this opportunity to conclude the deal, based on the text that is on the table.  The time to overcome the last outstanding issues, conclude the deal, and fully restore the (agreement) is now,” EU Ambassador to the United Nations Olof Skoog told the UN Security Council.

The U.S. countered that “Iran has yet to demonstrate any real urgency to conclude a deal, end the current nuclear crisis and achieve important sanctions lifting,” deputy U.S. Ambassador Richard Mills told the meeting.

So Iran continues to ramp up its nuclear program, there is rising political opposition to restoring the deal in Washington, and Tehran has restricted the oversight of the UN atomic energy of its nuclear work.

Earlier this month Iran decided to switch off UN International Atomic Energy Agency cameras monitoring its activities, prompting IAEA chief Rafael Grossi to warn that the agency’s ability to assure nuclear deal participants that Iran’s nuclear activities were peaceful would evaporate within a few weeks.

For its part, Israel’s Naftali Bennett warned on Tuesday that Iran should think twice about interfering with Israel’s cyber-infrastructure.

Bennett stated, “We can get stuff done hitting your enemy through cyber.  Before we needed to send 50-100 commandos behind enemy lines with huge risks.

“Now we get a bunch of smart folks together sitting at a keyboard and achieve the same effect… It is inevitable that cyber is going to become one, if not the most, prominent dimension of future warfare,” he said.

Israel: Lawmakers voted Thursday to dissolve parliament following the collapse of Prime Minister Bennett’s ruling coalition, opening the way for a Nov. 1 election that will be Israel’s fifth in less than four years.

Bennett is being replaced by Foreign Minister Yair Lapid, his coalition partner, who will lead the government during what is expected to be a bitter election battle with opposition leader Benjamin Netanyahu.

Bennett will not run in the election.  He’s friends with Lapid and it was a classy changeover in leadership.

But with a razor-thin majority and deep differences on questions from religion to the Palestinian issue, Bennett proved unable to keep his unlikely alliance together after several lawmakers walked out.  Bennett and Lapid deserved better.

Israel once again faces months of political uncertainty as economic and regional security problems mount. And there is Netanyahu, seeking one more term despite the corruption charges against him.

“Prices are rising because of this terrible government. We will bring it down and we will bring the prices down.  That is my first mission,” Bibi said.

It’s just that easy!

An early poll on Israel’s Channel 12 TV on Wednesday has Netanyahu winning 58 of 120 seats – still short of a majority.  Lapid and the current coalition would win 56.

Sri Lanka:  How bad are things here now amidst an economic collapse of historic proportions?  The government shut schools and will only fuel supplies to services deemed essential like health, trains and buses for two weeks starting Tuesday, a minister said, in a desperate attempt to deal with a severe shortage.

The island of 22 million is struggling to pay for essential imports of food, medicine and, most critically, fuel.  Industries like garments, a big dollar earner in the Indian Ocean nation, are left with fuel for only about a week to 10 days.

Picture…people can’t work and earn money to feed their families.  It’s that simple.  The government’s foreign reserves are also at a record low.

Random Musings

--Presidential approval ratings….

Gallup: 41% approve of President Biden’s job performance, 57% disapprove; 36% of independents approve (June 1-20).

Rasmussen: 41% approve of Biden’s performance, 58% disapprove (July 1).

The aforementioned AP-NORC survey gave Biden a 39% approval rating, 60% disapproving.

--In New York’s Republican gubernatorial primary on Tuesday, it was Lee Zeldin coming out on top after an acrimonious campaign against a field of challengers that included Rudy Giuliani’s son, Andrew.

Zeldin will go up against Gov. Kathy Hochul, who sailed to victory in the Democratic primary.

New York hasn’t elected a Republican governor since George Pataki won reelection in 2002.

--On Tuesday, Cassidy Hutchinson, a former White House aide, the principal aide to former White House Chief of Staff Mark Meadows. testified before the House Jan. 6 Committee, describing how former president Donald Trump demanded to be driven to the Capitol on Jan. 6 and asked that security measures be lifted even though he knew some of his supporters were armed.

Hutchinson’s account of Trump lunging for the steering wheel of his armored vehicle was the most vivid revelation in her testimony, but then a day after, Tony Ornato, a long-time Secret Service agent who was working at the time as a deputy chief of staff to Trump, told people that Hutchinson’s account isn’t consistent with his own understanding of the incident.

Ornato and Bobby Engel, a Secret Service agent who at the time headed Trump’s security detail and was in the vehicle, are willing to testify under oath that the description the committee heard isn’t correct.  So do it!

Ornato and Engel have said, however, that Trump was indeed upset by the decision that he couldn’t go to the Capitol for safety reasons.

More importantly, Hutchinson’s testimony that Trump knew the crowd attending his rally was armed and directed them go to the Capitol anyway was probably the most damaging.

The House committee said Wednesday that it has subpoenaed White House counsel Pat Cipollone.  Cipollone had warned White House officials that they could be in legal trouble if they allowed Trump to go to the Capitol on Jan. 6.  “Please make sure we don’t go up to the Capitol,” Cipollone told Hutchinson on the morning of Jan. 6.  “We’re going to get charged with every crime imaginable if we make that movement happen.”

Hutchinson said Cipollone pressed Meadows to persuade Trump to make a statement to try to end the riot early that afternoon.

“Mark, something needs to be done or people are going to die and the blood is going to be on your effing hands,” Hutchinson said Cipollone told her boss.  She said Meadows told Cipollone that Trump wasn’t concerned when he was informed that rioters were chanting ‘Hang Mike Pence.’  Meadows has declined to cooperate with subpoenas the committee issued to him.

What emerged throughout Hutchinson’s testimony was how totally disengaged Mark Meadows was throughout.

On the evening of Jan. 2, after Trump lawyer Rudy Giuliani met with Meadows at the White House, he told Hutchinson: “We’re going to the Capitol. It’s going to be great.  The president’s going to be there, he’s going to be powerful…talk to the chief about it, he knows about it.”

Hutchinson said she followed up with Meadows, who told her “things might get real, real bad on Jan. 6.”

On Jan. 6, at about 2 p.m. that day, as rioters swarmed the Capitol, Hutchinson said she went into Meadows’ office, where he was on his cellphone. She asked him whether he’d talked to the president about what was happening.

“He said, ‘No, [Trump] wants to be alone right now,’” she testified.

A few minutes later, Cipollone went to Meadows’ office and said they needed to see the president immediately. Meadows told him, ‘He doesn’t want to do anything.’

Cipollone said: “Something needs to be done or people are going to die and the blood’s going to be on your (effing) hands.”

It got worse.  Trump later tweeted that Pence didn’t have the “courage to do what needed to be done.”

“I remember feeling frustrated, disappointed… I was really sad,” Hutchinson said.  “As an American, I was disgusted. It was unpatriotic.”

In typical Trump fashion, he responded on Truth Social, his fledgling social media network that is under investigation by the SEC, in the middle of Hutchinson’s testimony.

“I hardly know who this person, Cassidy Hutchinson, is, other than I heard very negative things about her (a total phony and ‘leaker’), and when she requested to go with certain others of the team to Florida after my having served a full term in office, I personally turned her request down,” Trump posted.

“Why did she want to go with us if she felt we were so terrible? I understand that she was very upset and angry that I didn’t want her to go or be a member of the team.  She is bad news!” Trump added.

In an interview with Newsmax, Trump derided Hutchinson as a “social climber,” claiming she was “living in a fantasy land.”  He also called her a “whack job.”

Trump insisted that he “didn’t want other people to get hurt” but added the Jan. 6 crowd was “one of the biggest groups I’ve ever spoken to before.”

Because it’s always all about the crowd, when it comes to The Donald.  Truly pathetic.

Editorial / Washington Examiner…a rather conservative publication

“Former White House aide Cassidy Hutchinson’s Tuesday testimony ought to ring the death knell for former President Donald Trump’s political career. Trump is unfit to be anywhere near power ever again.

“Hutchinson’s resume alone should establish her credibility.  The 26-year-old had already worked at the highest levels of conservative Republican politics, including in the offices of Sen. Ted Cruz (TX) and House Minority Whip Steve Scalise (LA), before becoming a top aide for former Trump chief of staff Mark Meadows.

“In short, Hutchinson was a conservative Trumpist true believer and a tremendously credible one at that.  She did not overstate things, did not seem to be seeking attention, and was very precise about how and why she knew what she related and about which testimony was firsthand and which was secondhand but able to be corroborated.

“What Hutchinson relayed was disturbing.  She gave believable accounts of White House awareness that the planned Jan. 6 rally could turn violent.  She repeated testimony that Trump not only knew that then-Vice President Mike Pence’s life had been credibly threatened that day but also that he was somewhere between uncaring and actually approving of Pence’s danger.

“She also told, in detail, that Trump repeatedly insisted that he himself should join his supporters at the Capitol – even after being informed the crowd contained armed elements and that it was breaching the perimeter against an undermanned U.S. Capitol Police force.

“Also distressing to hear were Hutchinson’s accounts of Trump’s repeated fits of rage, including dining table contents overturned and ketchup dishes thrown violently across the room.  The worst by far, though, was that people immediately returning from being with Trump in the presidential vehicle told of the president trying to grab the wheel of the car to force it to be driven to the Capitol and then violently reaching for the neck of Secret Service agent Bobby Engel, who headed the president’s protective detail.

“Hutchinson’s testimony confirmed a damning portray of Trump as unstable, unmoored, and absolutely heedless of his sworn duty to effectuate a peaceful transition of presidential power.  Considering the entirety of her testimony, it is unsurprising that Hutchinson said she heard serious discussions of Cabinet members invoking the 25th Amendment that would have at least temporarily evicted Trump from office.

“Trump is a disgrace. Republicans have far better options to lead the party in 2024.  No one should think otherwise, much less support him, ever again.”

Editorial / Wall Street Journal

“Just when it seems as if Donald Trump’s behavior after his 2020 loss couldn’t possibly look worse, a new piece of wild testimony arrives….

“The biggest news is that Mr. Trump was advised, according to Ms. Hutchinson, that some of the people who were awaiting his Jan. 6, 2021, speech had come armed.  He was angry that the crowd wasn’t filling up the ellipse, apparently because some onlookers preferred not to go through the official security check, which included magnetometers, or ‘mags’ for short.

“Ms. Hutchinson: ‘I overheard the President say something to the effect of, ‘I don’t (effing) care that they have weapons.  They’re not here to hurt me.  Take the (effing) mags away. Let my people in. They can march to the Capitol from here.’’  This was shortly before Mr. Trump said in his speech that ‘if you don’t fight like hell, you’re not going to have a country anymore.’

“Mr. Trump told the crowd he would join their march on the Capitol.  Ms. Hutchinson testified that once Mr. Trump was in the presidential limousine, his security detail told him they were returning to the West Wing. She says a deputy chief of staff recounted to her that Mr. Trump was furious and even grabbed at the steering wheel.  Mr. Trump denied the episode on Tuesday and says he barely knew Ms. Hutchinson.

“Back at the White House, as the riot unfolded, Ms. Hutchinson says she heard a conversation between White House counsel Pat Cipollone and Mr. Meadows: ‘I remember Pat saying something to the effect of, ‘Mark, we need to do something more. They’re literally calling for the Vice President to be (effing) hung.’  And Mark had responded something to the effect of, ‘You heard him, Pat, he thinks Mike deserves it.  He doesn’t think they’re doing anything wrong.’’

“The day before the riot, Mr. Trump told Mr. Meadows to call Roger Stone, the political adviser Mr. Trump had pardoned, and Ms. Hutchinson said she was ‘under the impression’ that he did.  She doesn’t know what the two discussed, but Mr. Stone was reportedly photographed on Jan. 5 and 6 with members of the Oath Keepers group that stormed the Capitol building.  Mr. Meadows has refused to testify to the committee.  Ms. Hutchinson says Mr. Meadows sought a presidential pardon after Jan. 6, and she adds Mr. Trump considered publicly floating pardons for the rioters.

“It’s difficult to know how much this story is leaving out, since the committee isn’t releasing full transcripts of its interviews. There’s also no questioning from Republicans who boycotted the committee.  But some of the testimony is firsthand, such as when Ms. Hutchinson said she saw a White House valet cleaning up food and broken dishes that Mr. Trump had thrown in a rage about the election.  Ms. Hutchinson is a former intern for GOP Whip Steve Scalise and Sen. Ted Cruz. She is speaking under oath.

“Democrats want to use the Jan. 6 investigation to paint the entire Republican Party as a gang of insurrectionist nuts.  The committee is steeped in partisanship.  But that doesn’t mean Republicans should look away from the considerable evidence it is producing about Mr. Trump’s behavior that would surely be relevant to voters if he runs in 2024.”

Peggy Noonan / Wall Street Journal

“Only a woman would have done what Cassidy Hutchinson did because only a woman, in a place of such power and prestige, would have registered everything and taken such close notes instead of spending that time swanning around being important….

“(Hutchinson) was steadily promoted in Donald Trump’s White House, rising from intern to primary assistant to chief of staff Mark Meadows. She was by all accounts professional and discreet, a conservative, a Trumpian committed to the higher political mission. The powerful men around her appear to have been undefended in her presence and spoke freely – she’s only a kid, a girl, what can she do?  She helps the steward clean ketchup off the wall after the president has a tantrum and throws his plates and silverware.  In the scheme of things she’s nobody.

“And yet such people can upend empires….

“Now alone, with the administration over but its men still hiding, she came forward, and what she said changed everything.  Her testimony made criminal charges against the former president more likely.”

I watched Sean Hannity on Fox News this week one night, to see his reaction to Hutchinson, and of course he said the ‘media mob’ never shows that on Jan. 6, in his speech, Trump said they are going to march “peacefully and patriotically” to the Capitol.

But as Peggy Noonan quotes David French, writing in the Dispatch, Trump’s earlier admonition to the crowd looks “more like pro forma ass-covering than a genuine plea.  It was a drop of pacifism in an ocean of incitement.”

And not for nothing…this was a great week for Florida Gov. Ron DeSantis.

--About half of Americans believe Donald Trump should be charged with a crime for his role in the attack on the Capitol, according to a new Associated Press-NORC poll that finds that 48% of U.S. adults say the former president should be charged with a crime for his role, while 31% say he should not be charged.  An additional 20% say they don’t know enough to have an opinion.  Fifty-eight percent say Trump bears a great deal or quite a bit of responsibility for what happened that day.

The poll was conducted after five public hearings by the House committee investigating Jan. 6, but prior to Tuesday’s surprise hearing featuring Cassidy Hutchinson.

Predictably, only 10% of Republicans say Trump should be charged with a crime, while 86% of Democrats do.

--In a speech at the Ronald Reagan Library in Simi Valley, California, Liz Cheney urged the Republican Party on Wednesday to rid itself of Trump, calling him a clear and present threat to both the GOP and to American democracy at large.

“We have to choose, because Republicans cannot both be loyal to Donald Trump and loyal to the Constitution,” Cheney said.

While condemning Trump’s seeming encouragement of rioters who attacked the U.S. Capitol, Cheney also chided unnamed Republican leaders “who have made themselves willing hostages to this dangerous and irrational man.”

Cheney also told fellow Republicans that they stand at “the edge of an abyss” and “we must pull back.”

The Wyoming congressman faces a Republican primary challenge in August from Harriet Hageman, a well-funded attorney who has Trump’s backing.

Hageman called Cheney’s speech ironic, saying she “is the last one who should be giving lectures about the future of the Republican Party when she is single-handedly trying to burn it to the ground.”

In her speech, Cheney said Trump is only using the Republican Party for his own gain.

Saying that Trump and his backers appear willing to try and steal future elections, Cheney told fellow Republicans that “we are also confronting a domestic threat that we have never faced before – a former president who is attempting to unravel the foundations of our Constitutional Republic.”

--Only 1 in 4 Americans have “a great deal” or “quite a lot” of confidence in the Supreme Court, according to a new Gallup poll.  That’s a record low and down 11 percentage points from this time last year.

The poll was taken in early June, after a draft Supreme Court opinion that would strike down Roe v. Wade had been leaked and published, but before the actual ruling.

Only 13% of Democrats have confidence in the court, down from 30% last year.

Only 25% of independents have confidence in the court, down from 40% last year, and only 39% of Republicans are pleased, up 2% – despite the conservative tilt after three of former President Trump’s nominees were confirmed.

Gallup has tracked the percentage of confidence that Americans have in the court since 1973.

--Four men, including two Mexican nationals, were arrested in connection with the deaths of 53 migrants smuggled into Texas from Mexico in the back of a sweltering tractor trailer.

The tractor-trailer had passed through an inland U.S. Border Patrol checkpoint with migrants inside earlier in its journey, specifically a checkpoint on Interstate 35 about 25 miles northeast of the border city of Laredo, Texas.  73 people were in the truck when it was discovered in San Antonio.  It was unclear if agents stopped the driver for questioning at the checkpoint or if the truck went through unimpeded.

There are some 110 inland highway checkpoints along the Mexican and Canadian borders, generally within 100 miles of the border.

--Ghislaine Maxwell was sentenced to 20 years in prison on Tuesday for helping the sex offender and globetrotting financier Jeffrey Epstein sexually abuse teenage girls.

--A new Gallup poll on the eve of Fourth of July shows pride in America hitting a record low.

Fewer than 4 in 10 – 38% – of adults said they were “extremely” proud to be American, the lowest ever measure by Gallup, which has been asking the question since 2001.

The 38% of proud Americans is well below the average of 55% since the question has been asked.

While Republicans are still the group most likely to express extreme pride in the country, that number is now down to 58% - a steep drop from the 75% who said the same in 2019.

Among independents, just 34% said they were extremely proud of America today, compared with 41% who said the same in 2019.

Among Democrats, the number rose over the last three years – from 22% to 26%.

The poll was taken June 1-20, after mass shootings in Buffalo, New York, and Uvalde, Texas.  The polling preceded the ruling overturning Roe v. Wade.

But this is in an era of declining trust in institutions – all institutions. 

For example, in 2001, 62% of Americans had favorable impressions of the Supreme Court, according to Gallup.  Today, that number is about 40% - and will no doubt go lower after the Roe ruling.

--The last surviving Medal of Honor recipient from World War II died at the age of 98.

Marine veteran Hershel “Woody” Williams died Wednesday at the Huntington, W. Va., Veterans Affairs hospital named after him, according to a statement from his foundation.

Born in 1923 on a dairy farm in Quiet Dell, West Virginia, Williams was the youngest of 11 children.

Initially disqualified for being too short, Williams enlisted in the Marine Corps in 1943, according to his biography.  The demolition sergeant landed on Iwo Jima on Feb. 21, 1945, with 1st Battalion, 21st Marine Regiment, 3rd Marine Division.

Two days later, on Feb. 23, 1945, he famously destroyed enemy emplacements with a flamethrower, going forward alone into machinegun fire, covered only by four riflemen.

His citation states, “he fought desperately for 4 hours under terrific enemy small-arms fire and repeatedly returned to his own lines to prepare demolition charges and obtain serviced flamethrowers,” before wiping out one enemy position after another.

On one occasion, he “daringly mounted a pillbox to insert the nozzle of his flamethrower through the air vent,” which killed all enemy occupants and silenced its gun.

Williams received the Medal of Honor from President Harry Truman at the White House in October 1945 for “conspicuous gallantry and intrepidity at the risk of his life above and beyond the call of duty.”

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

Pray for Ukraine.

Happy Fourth of July, America!

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Gold $1811
Oil $108.43

Returns for the week 6/27-7/1

Dow Jones  -1.3%  [31097]
S&P 500  -2.2%  [3825]
S&P MidCap  -1.6%
Russell 2000  -2.1%
Nasdaq  -4.1%  [11127]

Returns for the period 1/1/22-7/1/22

Dow Jones  -14.4%
S&P 500  -19.7%
S&P MidCap  -19.2%
Russell 2000  -23.0%
Nasdaq  -28.9%

Bulls 32.9…up from 26.5
Bears 40.0

Hang in there.

Brian Trumbore

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