Week in Review

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Week in Review

07/09/2022

For the week 7/4-7/8

[Posted 8:00 PM ET, Friday]

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Edition 1,212

What a last two days of the week we had.

Thursday, British Prime Minister Boris Johnson, after 53 ministers quit his government in the space of about 24 hours, announced he was stepping down, his popularity in the country down to about 30%.  Here’s what Johnson did right.  He led a Conservative Party rout in the 2019 elections, he had a successful Covid vaccine rollout, and he was correctly steadfast in his support of Ukraine at this critical moment in world history.

But as I detail below, his failures were many and virtually all self-inflicted.

I called Johnson a liar as he was leading the Brexit campaign, and he hasn’t stopped lying since, a man with a total lack of integrity.  In his resignation speech, at no point did he apologize or acknowledge his serious mistakes and misjudgments.

The prime minister has gone up in flames, taking his party with him and leaving a nation in chaos and uncertainty.

But he is staying on, for now, and could still be prime minister for months due to his party’s rules on selecting a new leader.  He cannot stay in office.  He has to go.

Conservative lawmaker Andrew Bridgen said: “It was a short and bizarre resignation speech which didn’t mention the word resign or resignation once. There was no apology, no contrition.

“There was no apology for the crisis his actions have put our country in.”

Johnson is toxic and his own party members want him out.  But get this, one of the reasons being given for his wanting to hang on is so he can have a formal wedding ceremony at his Checkers residence.  That would be so like Boris.

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Then this morning, I turned on the TV at 4:00 a.m., as I do during the week, and learned of the startling assassination of former Japanese prime minister Shinzo Abe, who was shot at a political campaign event in the southern city of Nara.

Security officials at the scene tackled the gunman, and the 41-year-old suspect, who used a handmade gun of some kind, was in police custody.  A search of the gunman’s home uncovered what police believed were explosives.

Speaking before Abe’s death was announced (he never regained consciousness once he got to the hospital and doctors detected no vital signs after two bullets to the neck area), Prime Minister Fumio Kishida condemned the attack, saying: “It is barbaric and malicious and it cannot be tolerated.

“This attack is an act of brutality that happened during the elections – the very foundation of our democracy – and is absolutely unforgivable.”

Abe had a security detail, but gun violence is virtually non-existent in Japan, which has the strictest gun laws in the world.*  The assassin was able to get to about 10 feet from Abe.

*Tokyo had zero cases of gun-related incidents last year.

The suspect, Tetsuya Yamagami, is a former member of Japan’s Maritime Self-Defense Force, Japan’s equivalent of a navy.  Initial media reports said Yamagami told police he was “dissatisfied with former prime minister Abe and aimed to kill him.”  He is also reported to have told officers he did not hold a “grudge against the former prime minister’s political beliefs.”

Abe was Japan’s longest-serving prime minister and he had a major impact on his nation’s defense posture, which was long beholden to the post-war Constitution and Article 9, which forbid Japan from having a military.  In the decades since World War II, the force Japan maintained was largely for humanitarian response, such as earthquakes and tsunamis.

Abe, recognizing the modern dangers, particularly from China, as well as North Korea, began to shift how the Article 9 language was interpreted, a new interpretation, a “proactive contribution to peace.”

Not everyone in Japan liked this, especially initially, but more and more of the Japanese people are recognizing the wisdom in Abe’s vision and in 2020, the last year Abe was in office, 40 percent of respondents to an NHK survey said Japan should have the capability to “directly attack enemy bases.”  By 2022, 55 percent said that they should maintain a “counterattack capability,” or long-range strike, to destroy enemy missile sites.

Abe, who would still be prime minister had he not had to step down for health reasons, led Japan and the people eventually followed.  The Japanese, and all Americans who understand the dangers in today’s world, owe him a debt of gratitude.  Japan will be with us in any conflict in the Pacific. That wasn’t the case in the days before Shinzo Abe.

This was a good man…a real leader.  Rest in peace.  Our condolences to the people he served.

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I get into the U.S. economy below, but the deal is we may technically be in recession, two consecutive negative quarters in GDP, though at the same time the labor picture is strong and many key indicators remain in positive, not negative, territory.  We’ll learn in about three weeks’ time, Thurs. July 28, when the government reports out its initial look at second-quarter growth, or lack thereof, but that will just be part of the story.  Politically, however, it could be a killer for the Democrats.

There was some good news, aside from a strong jobs report.  The average price at the gas pump is now $4.72 nationwide, down from a high of $5.01 just a few weeks ago.  My own gas station down the road has gone from $5.45 to $4.89 in that time.

But the price of diesel is still way too high at $5.67, which is impacting the price of virtually every consumer good.

A year ago, regular gas was at $3.14 and diesel $3.25.

On the mortgage front, Freddie Mac’s weekly readout of a 30-year fixed rate mortgage came in at 5.30%, down from the prior week’s 5.70%, the biggest weekly decline since Dec. 2008.  But the yield on the key benchmark 10-year Treasury skyrocketed anew at week’s end, from an intraday low of about 2.76% to 3.08% at the close today…ergo, that 30-year fixed rate won’t be 5.30% next week, sports fans.

Lots more below, but I can’t help but muse that when it comes time for the fall, I’m guessing we will see a wave of teachers strikes because their contracts have them falling farther and farther behind on the wage front vs. inflation.  You heard it here first.

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Finally, on Putin’s War in Ukraine, I am not optimistic, and have to concede I just don’t see this ending well for Ukraine.  Russia has taken one of the two regions comprising the eastern Donbas and could potentially take the remainder in the next week or two, though not without another bloody fight, but then it would be about going after Odesa.

One thing we do know.  As Ukrainian President Volodymyr Zalensky put it this week, when Russian forces take a town or city, they are nothing more than “occupiers of rubble.”

But since last time….

--Saturday/Sunday….

Russian defense minister Sergei Shoigu told his president, Vladimir Putin, that their country’s troops had “established full control over the city of Lysychansk,” which he said signified “the liberation of the Luhansk People’s Republic” – a militia-run pseudo-state that Russia recognized as independent before its full invasion of Ukraine in February.

In his Sunday night video message, President Volodymyr Zelensky vowed to regain lost territory with the help of long-range Western weapons.

“We will rebuild the walls, we will take back the land, and people must be protected above all else,” he said.

Saturday, Zelensky said it would be a “very difficult path” to victory but Ukrainians must maintain their resolve and inflict losses on the “aggressor…so that every Russian remembers that Ukraine cannot be broken.”

--Russia accused Ukraine of targeting its border city of Belgorod with cluster munitions after officials said four people were killed when an apartment building was hit.

--A Russian scientist who was arrested in Siberia last week on suspicion of state treason and flown to Moscow despite suffering from advanced pancreatic cancer has died, lawyers and a family member said on Sunday.

Physicist Dmity Kolker, 54, had been taken from his hospital bed, where he was being fed through a tube, and bundled onto a flight of more than four hours to Moscow, where he was taken to Lefortovo prison and later died in a nearby hospital.  What bastards.

His cousin told Reuters that the accusation against the laser specialist – that he had betrayed state secrets to China – was preposterous.

“He was a scientist, he loved his country, he was working in his country despite many invitations from leading universities and labs to go work abroad.  He wanted to work in Russia, he wanted to teach students there,” Anton Dianov said.  “These charges are absolutely ridiculous and extremely cruel and unusual to be levied on such a sick man.  They knew he was on his deathbed and they chose to arrest him.”

The family and lawyers said the treason charges were based on lectures Kolker had delivered in China, even though the content had been approved by the FSB (successor to the KGB).

Critics of the Kremlin say the arrests of such figures often stem from unfounded paranoia.

--Monday….

With Russia claiming the Luhansk region, the Russian assault will now switch its focus to the rest of the Donbas industrial heartland, but Kyiv will find it easier to defend fortified positions in Donetsk region and the battles that will shape the war’s course still lie ahead, military analysts say.

The Battle of Luhansk claimed thousands of dead and wounded on each side and was one of Europe’s bloodiest in generations.

Neil Melvin, a London-based RUSI think tank analyst, commented: “I think it’s a tactical victory for Russia but at an enormous cost within the context of redefined military goals.”

Vladimir Putin congratulated his troops on Monday for “liberating” Luhansk, promising medals for heroism and saying that soldiers should “take some rest and beef up their combat capability.” 

Russia says it wants to wrest the Donbas from Ukraine on behalf of Moscow-backed separatists in two self-proclaimed people’s republics whose independence it recognized on the eve of the war.

The Battle for the Donbas began around mid-April and it has taken since then for Russia to drive Ukraine from just Luhansk, a large chunk of which was already held by the separatist proxies before the Feb. 24 invasion.

“This (the capture of Luhansk) is a redefined objective and a very small objective in a way. And Russia has put its full military force into achieving this goal and still it has taken nearly 60 days,” Melvin said.

Russia has switched its battlefield tactics, using long-range shelling to force Ukrainian forces from positions before sending in ground forces, making slow, grinding progress reminiscent of World War One, analysts say.  Industrialized cities such as Severodonetsk and Lysychansk were razed to a wasteland by the relentless bombardment.

“This isn’t a way to build momentum; they’re taking relatively small amount of territory each day and in the context of modern warfare, this is very slow progress.  The Russians are burning through their advanced equipment and personnel, so they are paying a price for this,” said Melvin.

Ukraine’s governor for Luhansk region told Reuters its capture after Ukraine withdrew from Lysychansk city was a “painful” loss, but that it had saved soldiers from being completely surrounded and pounded by artillery.

“In terms of the military, it is bad to leave positions, but there is nothing critical. We need to win the war, not the battle for Lysychansk,” Governor Sergiy Gaidai said.  He predicted Donetsk’s city of Sloviansk and town of Bakhmut would be the targets of Russia’s next offensive.

Ukraine desperately needs more heavy weapons from the West.

Some experts believe the Battle for the Donbas is not the key battle for Ukraine, but rather battles in the south, like for Kherson, which they say is of far greater strategic importance.

But if Russia takes the Donbas, it frees up its forces to grab even more land and dictate the terms of any peace agreement. 

If Ukraine, on the other hand, manages to pin the Russians down for a protracted period, it could build up the resources for a counteroffensive.  It needs the heavy weaponry to pin the Russian forces down, however.

--Tuesday….

President Zelensky has warned the task of rebuilding the country would be “colossal,” and that Russia’s indiscriminate shelling was an attempt not just to destroy Ukraine but also the vision of democracy and Europe, he said by video link, making the war “not just ours, not just a local one.”

“This is Russia’s attack on everything that is of value to you and me,” he added. “Therefore, the reconstruction of Ukraine is not a local project, not a project of one nation, but a joint task of the entire democratic world.”

Nearly five months of war has damaged critical infrastructure – factories, airports, railway stations – and obliterated residential buildings, schools, hospitals, churches and shopping malls.  And the bombs fall every day.  Ukraine’s prime minister, Denys Shmyhai told a group of international leaders Tuesday in the Swiss town of Lugano that the cost of rebuilding was estimated at $750 billion.

But Western nations face a public that is suffering from war fatigue amid spiraling inflation and food and gas prices.  When you look at past examples, it is easy to be pessimistic when it comes to the aid that could flow Ukraine’s way.

For example, earlier this year, donor pledges for Afghanistan and Yemen fell way short of targets set by the United Nations.  In Afghanistan, the UN said $4.4 billion was needed this year for humanitarian aid alone (and this was before the recent catastrophic earthquake in the east), but $2.4 billion was raised.  Yemen needed $4.3 billion, and received $1.3 billion.

The $750bn figure for Ukraine seems totally realistic for anyone who has followed the war and seen the destruction since day one.  But there you have Britain, one of the more generous nations, talking about providing $1 billion for World Bank loans and fiscal support for a further half-billion dollars.  $1.5 billion, $700bn+ to go…once the shelling stops, whenever that is.

Think about the cost just to clear Ukraine of landmines so that much of the infrastructure work can proceed.

--Wednesday….

The governor of Donetsk province, Pavlo Krylenko, still partly under Ukraine’s control, urged his more than 350,000 residents to flee as Russia escalated its offensive.  Krylenko said getting people out of Donetsk is necessary to save lives and to enable the Ukrainian army to better defend towns from the Russian advance.

“The destiny of the whole country will be decided by the Donetsk region,” Krylenko told reporters in Kramatorsk, the province’s administrative center and home to the Ukrainian military’s regional headquarters.

It’s unclear whether people will be willing and safely able to flee.  According to the UN, more than 7.1 Ukrainians are estimated to be displaced within Ukraine, with another 4.8 million having left the country.

--Shares of Japanese trading firms Mitsui and Mitsubishi dropped more than 4% on Wednesday after former Russian president Dmitry Medvedev made comments threatening the loss of oil and gas supply to Japan.

Commenting on a reported proposal by Japanese Prime Kishida at the weekend to cap the price of Russian oil at around half its current level, Medvedev said on social media that Japan “would have neither oil nor gas from Russia, as well as no participation in the Sakhalin-2 LNG project” as a result.  Mitsui and Mitsubishi hold stakes of 12.5% and 10%, respectively, in Sakhalin-2.

--Thursday/Friday….

Ukrainian forces raised their national flag on recaptured Snake Island in the Black Sea in a defiant act against Moscow, but Kyiv lost a strong supporter when Prime Minister Boris Johnson announced he was stepping down.

Moscow did not conceal its delight at the political demise of Johnson.

“The moral of the story is: do not seek to destroy Russia,” Russian Foreign Ministry spokeswoman Maria Zakharova said.  “Russia cannot be destroyed.  You can break your teeth on it – and then choke on them.”

Johnson said Britain’s support for Ukraine would continue regardless but his resignation comes at a time of domestic turmoil in some other European countries that support Kyiv amid doubts about their staying power for what has become a protracted conflict.

Back to Snake Island, Russia said its aircraft launched a strike on it when Ukrainian soldiers arrived, and Odesa’s regional administration said the dock suffered significant damage.

Meanwhile, Russian forces in eastern Ukraine kept up pressure on Ukrainian troops trying to hold the line along the northern borders of the Donetsk region, in preparation for an anticipated wider offensive against it.

--A looming hunger catastrophe is set to explode over the next two years, creating the risk of unprecedented global political pressure, the director of the UN World Food Program has warned.

Calling for short- and long-term reforms – including an urgent lifting of the blockade on 25 million tons of Ukrainian grain trapped by a Russia blockade – David Beasley  said the current food affordability crisis is likely to turn into an even more dangerous crisis next year unless solutions are found.

The number of people classed as “acutely food insecure” by the UN before the Covid crisis was 130 million, but after Covid this number rose to 276 million.

That number “has increased to 345 million due to the Ukraine crisis.  And a staggering 50 million people in 45 countries are now just one step from famine,” Beasley wrote in a report.

“The international community must act to stop this looming hunger catastrophe in its tracks – or these numbers will explode.”

Beasley warned of “multiple famines” over the next 12-24 months.

Former British prime minister Tony Blair said the food crisis now hitting poor countries in Africa, Middle East and Asia “is absolutely likely to cause serious unrest in the same way as it did before the Arab Spring.”

Upheaval in the worldwide fuel and fertilizer markets is exacerbating the situation.

--U.S. basketball player Brittney Griner pleaded guilty in a Russian court on Thursday to drug charges that could see her face 10 years in prison.  President Biden met with Griner’s wife and sent a letter to Griner expressing the administration’s support.

By pleading guilty, Griner is hoping to receive a minimal sentence as the alleged amount of the cannabis vape cartridges was small. A guilty plea also speeds up the process.

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Biden Agenda

--Editorial / Wall Street Journal

“Business leaders have chalked up President Biden’s attacks on oil companies to political cynicism, but maybe they’re too generous.  His tweet over the weekend ordering gas stations to lower prices betrayed a willful ignorance about the private economy.

“ ‘My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril,’ Mr. Biden tweeted Saturday.  ‘Bring down the price you are charging at the pump to reflect the cost you’re paying for the product.  And do it now.’  Had Donald Trump issued such a command as President, the left would have cried ‘authoritarian.’

“It’s embarrassing for the leader of the free world to sound like he’s channeling Hugo Chavez. A Chinese state media flack praised Mr. Biden’s tweet: ‘Now US President finally realized that capitalism is all about exploitation.  He didn’t believe this before.’  Or maybe he did, and nobody wanted to believe it.

“You’d think that the President’s Ivy League-educated economic advisers would have informed him that large refiners own fewer than 5% of all gas stations in America.  More than 60% are operated by an individual or family that owns a single store, and the rest are independently owned chains or grocery stores that sell fuel.  Many license brands from refiners.

“Refiners largely exited the retail business in the 2000s because of thin profit margins.  The Energy Information Administration says distribution and marketing made up about 5% of the price of gasoline in May, or about 22 cents a gallon. This covers the cost of freight, labor, utilities, real estate and credit-card fees (which can average more than 10 cents a gallon).

“Most gas stations make a few cents a gallon in profit and stay in business mainly by selling food and cigarettes.  The National Association of Convenience Stores says its members are struggling amid high gas prices because customers are making fewer stops and buying less.

“More than a quarter of gas stations have closed since the 1990s because they couldn’t make the economics work.  If retailers were to sell fuel at cost, most would go out of business.  Perhaps those owned by large refiners would survive, but they’d be accused of predatory pricing by Mr. Biden’s antitrust cops.

“The President’s economic ignorance isn’t a one-off.  In recent months he has accused oil and gas companies of price gouging and demanded that they increase production even while his Administration threatens to put them out of business.  Mr. Biden doesn’t understand that businesses make long-term decisions based on demand expectations and policy signals.  Jeff Bezos called the President’s weekend tweet ‘either straight ahead misdirection or a deep understanding of basic market dynamics.’  They aren’t mutually exclusive.

“Asked about the tweet on Fox News Sunday, National Security Council spokesman John Kirby said that ‘anybody that knows President Biden knows he’s plainspoken and he tells exactly what he’s thinking in terms that everybody can understand,’ adding that ‘we obviously take great exception to the idea that this is somehow misdirection.’

“That isn’t reassuring.”

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Bezos also tweeted in response to Biden’s message:

“Ouch.  Inflation is far too important a problem for the White House to keep making statements like this.”

The White House fired back at Bezos: “Oil prices have dropped by about $15 [a barrel] over the past month, but prices at the pump have barely come down. That’s not ‘basic market dynamics.’  It’s a market that is failing the American consumer,” press secretary Karine Jean-Pierre tweeted.

“But I guess it’s not surprising that you think oil and gas companies using market power to reap record profits at the expense of the American people is the way our economy is supposed to work,” she added.

Memo to Ms. Jean-Pierre: You are an idiot.

The administration better pray there are no big hurricanes in the Gulf the next few months, or you’ll see prices at the pump that will make $5 look cheap.

The U.S. Oil & Gas Association, responding to Biden’s Saturday tweet, said, “Working on it Mr. President.  In the meantime – have a Happy 4th and please make sure the WH intern who posted this tweet registers for Econ 101 for the fall semester.”

--Rich Lowry / New York Post

“For Joe Biden, the buck stops with small independent business owners trying to make ends meet.

“Over the holiday weekend, the president slammed gas stations for the purported sin of not passing along declining oil prices to motorists….

“Yes, sir, whatever you say, Mr. President!....

“Biden has hit the gas stations before on the same grounds.  It’s hard to know where the economic illiteracy ends and the shameless demagoguery begins.  Regardless, it’s another indication that the president’s approach on inflation is to cast about for scapegoats and villains, no matter how implausible.

“So-called jaw boning, or stern rhetoric directed at industries to get them to bend to the presidential will, is nothing new.  The most famous example is from John F. Kennedy, who blasted U.S. Steel for raising prices in the early 1960s.  JFK’s tack was questionable, but at least he was targeting an enormously influential industry that had breached an agreement to hold the line on prices brokered by the administration.

“Biden, by contrast, is going after proverbial Liberty Gas Station and Uni-mart down on Route 134 started by an immigrant couple hoping to send their children to college for the first time.  These small-time entrepreneurs have done nothing wrong except remain in business at a time when the president’s anti-oil-and-gas policy has backfired spectacularly….

“Given that there are more than 100,000 gas stations in the United States, many clustered at the same busy intersections in direct competition with one another, a proprietor hardly has monopoly power to determine prices….

“Biden maintains that the stations should reduce gas prices since it’s a time of ‘war and global peril.’   This appeal might make sense if Biden were browbeating gas stations located in Ukraine or Russia. But the United States is not at war, and business owners are under no obligation to sell their product at cost or below because Russian President Vladimir Putin is trying to dismember Ukraine….

“Although the president considers them worthy of a good kicking, gas stations aren’t a growth proposition.  The number of stations has markedly declined in recent decades, and the rise of electric cars is putting more pressure on the business model.

“At least they are actually doing their job in difficult circumstances.  The same can’t be said of President Biden.”

--According to a Harvard CAPS-Harris survey, 71% of Americans do not want to see Biden run in 2024, while just 29% said he should, The Hill reported.

Among the contingent of those against a second run, the reasons were varied, with 45% saying it was because he was a bad president.  One in three said the president was too old to keep going and 25% said they just wanted to see a change.

“President Biden may want to run again but the voters say ‘no’ to the idea of a second term, panning the job he is doing as president.  Only 30 percent of Democrats would even vote for him in a Democratic presidential primary,” Mark Penn, co-director of the Harvard CAPS-Harris Poll said in a statement.

Sixty percent of Americans would consider a third-party candidate if the 2024 candidates were Biden and Trump.  Sixty-one percent of respondents say Trump should not run in 2024.

--Editorial / New York Post

“President Joe Biden has let more illegal migrants into the United States than there are people in his home state of Delaware – a shocking 1.049 million, per the administration’s own disclosures.

“And that’s just the adults they caught and released; if you add in got-aways and unaccompanied minors, that figure approaches 2 million (closer to a West Virginia or an Idaho).

“Never mind the horror stories like the one about the 53 migrants who died in a truck in San Antonio, Texas, last week; a population increase of that size will have an enormous impact on the U.S. itself.  Especially so given the more than 11 million people here illegally at the start of 2022, according to estimates from the Center for Immigration Studies – a massive uptick over the previous year’s figure, courtesy of Let-‘Em-In Joe….

“Don’t think the nation can absorb this massive influx without major changes – and pain.  Just look at the town of Eagle Pass in Texas. Video taken there showed hundreds of suspected illegal migrants gathered by a roadside, in a town of 30,000 that’s seen 1,000 illegal migrants apprehended and processed there per day.

“The town’s mayor, Rolando Salinas Jr. (a Democrat), says his police and fire services are stretched thin and expresses deep frustration: The U.S. needs to let the world know ‘there are rules, there’s laws you have to follow.  If you come to the U.S., you’re not going to get all these resources because that’s what they think.’

“Yet that’s just what the Biden administration has encouraged them to.  Indeed, human traffickers allegedly call his policy ‘La Invitacion.’….

“Secure borders are better for U.S. citizens and would-be migrants. Biden and other open-border enthusiasts can keep up their ‘humanitarian’ charade and do huge collateral damage along the way.

“But all the evidence we need of how deadly wrong they are can be found in Eagle Pass, San Antonio and dozens of other towns and cities.”

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Wall Street and the Economy

We received the minutes from the Federal Reserve’s June 14-15 meeting and officials agreed they would have to raise interest rates faster and to levels high enough to slow economic growth with the worsening inflation picture.

So as we look to the July 26-27 meeting, there is a good shot at another 75-basis-point rate hike, equaling June’s, which was the largest increase since 1994.

“They recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes said.

The minutes also revealed that Fed officials saw risks that inflation would stay higher for longer than they had previously anticipated.

“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee to adjust the stance of policy as warranted,” the minutes said.

The minutes were then echoed this week by St. Louis Fed Bank President James Bullard, that already high inflation expectations could accelerate even further.

“U.S. inflation expectations could become unmoored without credible Fed action, possibly leading to a new regime of high inflation and volatile real economic performance,” Bullard said in remarks in Little Rock.

While actual inflation has begun to flatten its pace of growth, albeit at extremely elevated levels, it remains well above inflation expectations, a divergence that “will have to be resolved, possibly resulting in still higher inflation expectations,” Bullard added.

At the same time, labor markets remain “robust,” he said, a comment borne out by Friday’s jobs data.

Fed Governor Christopher Waller said yesterday that the Open Market Committee should deliver another 75-basis-point rate hike this month, and then 50 bps in September.

“I am definitely in support of doing another 75 in July,” Waller said in a discussion with the National Association for Business Economics.  “Probably 50 in September, and then after that we can debate whether to go back down to 25s or if inflation just doesn’t seem to be going down, we have to do more.”

On the economic data front, the June ISM reading on the service sector came in at 55.3 (50 the dividing line between growth and contraction), a little better than expected but down from 55.9 the previous month and the lowest level since May 2020.

May factory orders were better than forecast at 1.6%.

And then we had today’s jobs report for June, with the economy adding 372,000 jobs, about 100,000 higher than consensus, with May revised down just 6,000 to 384,000.  The unemployment rate was unchanged at 3.6%.  U6, the underemployment rate, fell to 6.7%, a new post-Covid low, which is good.

Average hourly earnings, though, were a slight disappointment, up 0.3% for the month, 5.1% year-over-year, which obviously isn’t keeping pace with inflation, a reading on which we will receive next week.

The Atlanta Fed’s GDPNow barometer for the second quarter is at -1.2%, up from -2.1% last week.  So, as I alluded to above, we could easily see two negative quarters in a row, technically a recession, though the NBER, which down the road gives a definitive answer as to whether the economy was actually in recession or not, will look at the strong jobs numbers and say otherwise.  But the political damage will have been done when it comes to the messaging of Republican candidates for November.

Europe and Asia

--In the eurozone, we had readings on the service sector for June, 53.0 vs. 56.1 in May, a 5-month low.

Germany 52.4, France 53.9, Italy 51.6, Spain 54.0, Ireland 55.6 (down from 60.2).

UK 54.3.

Chris Williamson / S&P Global

“The sharp deterioration in the rate of growth of eurozone business activity raises the risk of the region slipping into economic decline in the third quarter.  The June PMI reading is indicative of quarterly GDP growth moderating to just 0.2%, with forward-looking indicators such as the survey’s new orders and business expectations gauges pointing to falling output in coming months.

“The manufacturing sector is already in decline, for the first time in two years, and the service sector has suffered a marked loss of growth momentum amid the cost of living crisis.  Household spending on non-essential goods and services has come under particular pressure due to soaring prices but business spending and investment is also waning in response to the gloomier outlook and tightening financial conditions.”

--Elsewhere, the volume of retail trade in the EA19 increased by 0.2% in May over April; also 0.2% year-over-year.

--But industrial producer prices rose 0.7% in the month for the euro area, up a staggering 36.3% vs. May 2021.

The euro slid to a 20-year low against the dollar this week as natural-gas prices continue to rise in response to the Russia-Ukraine war and as traders worry over the European Central Bank’s efforts to fight inflation.

Natural-gas prices are back at their highest levels since Russia’s invasion in late February, and supplies of gas to Europe from Russia are at seasonal lows because flows to the Dutch trader GasTerra and the renewable-energy company Orsted have been cut in response to their refusal to pay for gas in rubles.

It’s going to be a long winter for residents and businesses in Europe as Moscow plays the war card and tightens, or cuts off, the supply of energy.

Britain: Prime Minister Boris Johnson resigned, as discussed above, and while he won an 87-seat majority in the last election as he was able to unite the Conservative (Tory) Party’s two factions, the MPs found out he was for both protectionism and free-trade agreements; he wanted a ton of red tape as he punished energy firms for high prices; he planned huge government spending but promised sweeping tax cuts.

It ended up all being pure fantasy, traceable back to Brexit.  In the campaign to leave the European Union, Johnson promised voters they could have everything they wanted – greater wealth, less Europe; more freedom, less regulation; more dynamism, less immigration – and that the EU would be knocking on Britain’s door desperate for a deal.

In the end, Johnson leaves a Britain facing grave social and economic problems, including the highest inflation in the G7 and slow growth.  And industrial action is spreading from the rail unions to lawyers and doctors.

Editorial / The Economist

“Boris Johnson’s government has collapsed at last.  For months Britain’s prime minister wriggled out of one scandal after another. Now, irretrievably rejected by his own MPs, he has accepted that his premiership is over.  He has asked to stay until the autumn, but he should go immediately.

“Mr. Johnson was brought down by his own dishonesty, so some may conclude that a simple change of leadership will be enough to get Britain back on course.  If only.  Although Mr. Johnson’s fingerprints are all over today’s mess, the problems run deeper than one man.  Unless the ruling Conservative Party musters the fortitude to face that fact, Britain’s many social and economic difficulties will only worsen.

“Right up until the end Mr. Johnson clung desperately to power, arguing that he had a direct mandate from the people.  That was always nonsense: his legitimacy derived from Parliament.  Like America’s former president, Donald Trump. The more he hung on the more he disqualified himself from office.  In his departure, as in government, Mr. Johnson demonstrated a wanton disregard for the interests of his party and the nation.

“Although the denouement took almost two excruciating days, his fate was sealed on July 5th when two cabinet ministers resigned.  The catalyst was the behavior of his own party’s deputy chief whip, accused by two men of a drunken sexual assault.  Downing Street lied about what the prime minister had known of the whip’s record of abuse, and sent out ministers to repeat its falsehoods – just as it had months earlier over illegal parties in the pandemic.  Despairing of yet another scandal, over 50 ministers, aides and envoys joined an executive exodus so overwhelming that the BBC featured a ticker with a running total to keep up.  In the end the government had so many vacancies that it could no longer function – one reason Mr. Johnson should not stay on as caretaker.

“The party will hope that its agony is now drawing to a close.  But that depends on it taking the right lessons from Mr. Johnson’s failure.  One is about character in politics.  Mr. Johnson rejected the notion that to govern is to choose.  He lacked the moral fiber to take hard decisions for the national good if that threatened his own popularity.  He also lacked the constancy and the grasp of detail to see policies through.  And he reveled in trampling rules and conventions.  At the root of his style was an unshakable faith in his ability to get out of scrapes by spinning words.  In a corner, Mr. Johnson would charm, temporize, prevaricate and lie outright.  Occasionally, he even apologized.

“As a result, the bright spots in his record, such as the procurement of vaccines against Covid-19 and support for Ukraine, were overwhelmed by scandal elsewhere.  Behind the unfolding drama was a void where there should have been a vision.  Crises were not a distraction from the business of government: they became the business of government.  All the scandals mounted, so did the lies.  Eventually, nothing much else was left.”

Peggy Noonan / Wall Street Journal

“On Boris Johnson, a bad man met a bad end.  He was shallow, frivolous, insincere even for a politician, almost purely cynical, believed in little but himself.  Because of this the things he got right had the shadow of the merely performative.  He led a Tory Party that no longer seems to believe in anything, that doesn’t know what it’s about. It is not certain he was taken down by better men and women.  I see nothing sad in his leaving but that he was very entertaining and had one of the best political acts – shambolic upper-class boyo, utterly lost in his personal sphere – in modern British history.

“But he was unserious.  To have a really great act, you have to be a serious man.  Almost oddly, that’s not something you can fake.  People can see….

“It is disquieting that the originating events of his fall were, in the scheme of things, so trivial – office parties, a minister’s sexual missteps.  But the trivial only fatally mugs you when it seems an expression of something larger, in this case the carelessness and insincerity.”

--It was interesting that President Biden, in a statement, said he looked forward to further close cooperation with the British government without mentioning Johnson.

“The United Kingdom and the United States are the closest of friends and Allies, and the special relationship between our people remains strong and enduring.

“I look forward to continuing our close cooperation with the government of the United Kingdom, as well as our Allies and partners around the world, on a range of important priorities,” Biden said, that includes “maintaining a strong and united approach to supporting the people of Ukraine.”

Former British prime minister John Major said Boris Johnson should not remain in Downing Street until a successor is found “for the overall wellbeing of the country.”

Major, prime minister from 1990 to 1997 and from Johnson’s Conservative Party, said deputy PM Dominic Raab could take over until a new leader is found.

“The proposal for the prime minister to remain in office – for up to three months – having lost the support of his cabinet, his government and his parliamentary party is unwise, and may be unsustainable,” Major said in a public letter.

A snap YouGov poll found that defense minister Ben Wallace was the favorite among Conservative Party members to replace Johnson.

Turning to Asia…China’s service sector reading for June, as reported by Caixin, was a solid 54.5 vs. 41.4 in May.

Japan’s June service sector PMI was 54.0, fastest pace since 2013.  But household spending in May fell -1.9% over April, and -0.5% year-over-year.

Street Bytes

--Stocks rose in the holiday-shortened week, the Dow Jones up 0.8% to 31338, the S&P 500 rising 1.9% and Nasdaq 4.6%, as investors believed, for one week at least, that the big tech stocks had been beaten up enough and if nothing else, it was time to stick a toe in the water, nibble here, nibble there…just be careful of sharks prowling the shores.

The Fed is obviously not finished tightening.  And next week, earnings season starts, with critical inflation numbers on both consumer and producer prices.

--U.S. Treasury Yields

6-mo. 2.61%  2-yr. 3.11%  10-yr. 3.08%  30-yr. 3.25%

Crazy volatility in the Treasury market.  The weekly close on the 10-year has gone from 3.13% to 2.88% to 3.08%.  You just don’t see moves like this.  Picture trying to close on a 30-year mortgage in this environment.

Also, the 2- and 10-year inverted, a traditional recession warning.

--The Secretary-General for OPEC since 2016, Nigeria’s Mohammad Barkindo, 63, died Tuesday, a cause not given.

Barkindo saw OPEC through some of its most turbulent times including the pandemic when oil prices plummeted, and it can be said he guided the cartel ably, working to keep the positions of its various members unified, while adding Russia for OPEC+.

As for the price action this week, it was all about perceived slowing demand and recession fears, continuing a big turnaround from the soaring levels of March into early June, when on a weekly close basis, oil peaked at $120 on West Texas Intermediate in back-to-back weeks.

The growth outlook has been darkening as central banks work to get inflation under control by cooling economic activity, pulling down traders’ forecasts for oil demand.

On the other hand, China was beginning to reopen from its severe lockdowns in Shanghai and other key cities, but now there are increasing cases there all over again. So China remains murky when it comes to demand.

At the same time the overall collapse in commodities of all kinds adds to the negative sentiment when it comes to oil.

Bottom line, some of us are beginning to lick our chops, knowing this could be a brutal winter, particularly on the nat gas front.  Make that ‘will’ be…because if Vladimir Putin is still in power, he is going to create chaos in Europe.

On the week, crude prices had plummeted, partly due to the washing out of speculative longs and trend-following fast money as oil fell from $120 to below $100, but on Thursday, reality hit, as in oil supplies remain tight, ditto inventories, and so we finished the week back over $100 at $104 on WTI.

Separately, the International Energy Agency revised down its forecast for global gas demand growth between 2021 and 2025 due to weaker economic activity and less switching from coal or oil to gas.

The IEA expects global gas consumption to contract slightly in 2022 and grow slowly over the next three years. The slowdown in demand can be attributed to high prices and supply disruptions following Russia’s invasion of Ukraine, which also cast doubt on natural gas’ prospects, the IEA said.

Record-high gas prices are depressing demand and causing some gas users to switch to coal and oil, while sharp cuts in Russian gas flows to Europe are sparking worries over supplies ahead of winter, the agency noted. These developments are damaging natural gas’ reputation as a reliable and affordable energy source.

You have to separate plunging natural gas prices in the U.S. to prices being paid in Europe.

--With a decline in oil prices, the airlines are catching a break on the fuel cost front, but don’t look for them to immediately reduce air fares as a result. What would do that is falling demand for air travel and that will come.

But the story really is Europe and as I warned now months ago, chaos has hit the continent.

Scandinavian Airline SAS filed for bankruptcy protection in the U.S., saying a move by about 1,000 of its pilots to go on strike would worsen its already fraught finances as the carrier becomes one of the first casualties of a difficult recovery in air travel.

The company said Tuesday that it would continue to operate during the voluntary restructuring process, but the staff walkout would lead it to cancel roughly 80% of its flights daily.

SAS has been pursuing a restructuring plan for months to shore up its finances after racking up large amounts of debt and a plunging revenue line during the pandemic.  The airline said its decision to file bankruptcy will speed up the transformation.

While SAS is only Western Europe’s 14th-largest airline by capacity, the carrier is critical to Scandinavia’s connectivity, operating the highest capacity in and out of the region.

Thursday, hundreds of SAS flights were canceled as the airline wrestled with a pilots strike.

--British Airways is scrapping another 10,300 flights from its summer schedule due to the resurgence in travel demand that has overwhelmed operators.

Including the 10,300 announced on Wednesday, the carrier has now reduced its flying schedule by about 30,000 flights, representing some 13% of its originally planned capacity.

Big airports such as London Gatwick and Amsterdam Schiphol have asked airlines to curtail traffic as they cope with a flood of passengers they haven’t been able to accommodate.  Last week I brought up the huge shortfall across Europe in baggage handlers as but one example of the severe issues faced at the airports.

--U.S. air travelers caught a relative break over the Fourth of July weekend when compared with Memorial Day, with flight cancellations and delays for U.S.-based carriers both down compared with the prior holiday weekend, according to FlightAware.

Even so, airlines canceled 1,800 flights within, into or out of the U.S. from July 1 to 4. More than 22,000 flights were delayed.  The weather was pretty good in most parts and that always plays a huge factor.

--Speaking of the capacity issue, Spirit Airlines is receiving 16 runway slots at Newark Liberty International Airport after federal officials reassigned the slots vacated by Southwest Airlines and intended to provide low cost options and improve competition for flyers using Newark Airport, Department of Transportation officials said in a statement.

But critics questioned whether the new assignments will help ease the travel problems seen at the airport.

Also, a June 2022 federal report ranked Spirit as having the highest number of canceled flights and third worst on-time arrival rate in April.

Teresa Murray, head of a consumer watchdog group, commented: “For the last couple of years, Spirit has been plagued with high numbers of cancellations and complaints.  How do you reward that by giving the airline more takeoff and landing times at one of the busiest and most important airports in the country?”

--American Airlines said it would pay pilots triple their normal wages to work flights that were mistakenly dropped because of a computer glitch, the union that represents American’s pilots said.

A mistake on the airline scheduling platform over the weekend mistakenly allowed pilots to drop thousands of future trips early Saturday morning, leaving as many as 12,075 July flights without a captain or first officer, or both, the union said.

--Airbus secured a bulk order for 292 of its A320 single-aisle aircraft from four Chinese airlines, as deteriorating U.S.-China relations tipped the balance for aviation sales in the European manufacturer’s favor, dealing a blow to rival Boeing.

China Southern Airlines, Air China, China Eastern Airlines and Shenzhen Airlines are the four carriers buying the aircraft, Xinhua News Agency said.

The bulk order was close on the heels of China Southern’s decision in May to scrap more than 100 of Boeing’s 737 MAX aircraft – the direct competitor to the A320 – from its fleet plan, as the nation’s largest carrier cited “uncertainty over deliveries.”

China Southern was the very first to ground the 737 MAX in 2019 after back-to-back fatal crashes over five months by other carriers in Indonesia and Ethiopia.  It will now reduce deliveries from Boeing to 78 planes through 2024, from 181 during a March forecast.

The A320 can carry between 150 and 180 passengers depending on the configuration and is listed at $101 million each, though bulk purchases are entitled to steep discounts. The aviation industry’s rule of thumb halves the total list price for an estimate of the order’s value.

--TSA checkpoint travel numbers vs. 2019

7/7…86 percent of 2019 levels
7/6…84
7/5…87
7/4…76
7/3…75
7/2…92
7/1…114 (Friday)
6/30…117

Yes, all over the place.  July 1st had the highest post-pandemic single figure of 2,490,490.  But way down since.

--Tesla had a huge month of deliveries in China in June, bouncing back from production slowdowns caused by Covid-19.

China Passenger Car Association reported that Tesla delivered 78,000 vehicles from its Shanghai plant in June. That’s a preliminary number, but if the final number is close, it would be a record for Tesla.

Tesla doesn’t break out Chinese sales numbers and instead investors look for CPCA data, the final numbers released around the 10th of the month.  Before June, Tesla’s monthly delivery record from Shanghai was about 71,000 units sold in December 2021.

But overall, Tesla reported a disappointing quarter of deliveries and the company announced it will halt most production on its Model Y assembly line in Shanghai for the first two weeks of July, then stop the Model 3 line for a 20-day stretch starting July 18.  Upgrade work at the factory to boost output of both vehicles is expected to be completed by early August.

Monday, Tesla also said its plant near Berlin will take a two-week break in mid-July.  Also to upgrade the facility we are told.  The EV maker didn’t mention all these plans in its July 2 production and deliveries statement.

Tesla offered an upbeat line – it made more vehicles in June than any month in its history – while disclosing 254,695 deliveries for the quarter, short of analysts’ estimates, and down from 310,000 in the first quarter.  It was the first quarterly decline in deliveries since the beginning of 2020, when the pandemic hit.

But deliveries were up roughly 27% from last year’s second quarter, when Tesla handed over 201,304 vehicles.

When Tesla reports earnings on July 20, the bottom line is expected to be dented by a roughly $475 million bitcoin-related impairment.  Tesla bought $1.5 billion worth of bitcoin in early 2021, when it was trading above $28,000.  [Bitcoin is trading at about $21,800 as I go to post, but was below $20,000 on June 30.]

--Chinese automaker BYD, which is backed by Warren Buffett, surpassed Tesla as the world’s leading electric vehicle seller.  BYD sold 638,157 electric or plug-in hybrid passenger vehicles in the first six months of 2022, according to company filings published on July 3.  The figure represents a nearly 325% year-on-year increase from the same period last year.

In June alone, BYD sold 133,762 electric of plug-in hybrid passenger vehicles.  The split between the two models is about 50/50.

Tesla, on the other hand, delivered a total of 564,743 vehicles in the first six months.

Tesla noted in its reports that it had to contend with supply chain challenges and factory shutdowns.

BYD’s shares have risen 36% since January and the company was able to avoid the lockdown-spurred factory closures.

--After General Motors issued downside Q2 net income and adjusted earnings last Friday, Ford Motor provided a discouraging update of its own Tuesday.  Specifically, total June U.S. vehicle sales fell slightly from May, coming in at 152,262 vehicles, the lowest total since February, when Ford posted sales of 129,273 units, but up from 115,789 units last year.

Truck sales advanced 26% to 79,823 units, while the company sold 67,788 SUVs versus the 49,792 in June 2021.

Year-to-date, however, the company’s total sales declined by 8.1% to 915,820 vehicles.

Ford’s market share improved to 12.9%.

Like GM and many other automakers, Ford continues to contend with supply chain issues, including ongoing semiconductor shortages.

The average transaction price climbed by about $1,900 per vehicle on a month/month basis, primarily due to strong sales of higher-priced F-Series, Explorer, and Navigator models.  An important component of Ford’s strategy is to focus its sales efforts on its most profitable vehicles.  The June sales report shows that the company is succeeding in that mission, which should help to curb inflationary pressures.

Demand for Ford’s electric vehicles remains very healthy with sales surging by 77% in June.  Sparked by its popular F-150 Lightning and Mustang Mach-E models, Ford says that it was second only to Tesla in U.S. EV sales in June, 4,353 units.

--More chaos in the crypto market.  Cryptocurrency broker and lender Voyager Digital Ltd. filed for chapter 11 bankruptcy protection late Tuesday, becoming the latest victim of a contagion ripping through the industry.

Voyager operates a U.S. cryptocurrency platform and said in a court filing it faced a “run on the bank” as it was flooded with withdrawal requests by customers while some of its own investments fell or froze.

Voyager said its problems stem from above all the more than $650 million it lent hedge fund Three Arrows Capital Ltd. – a debt Voyager recently said Three Arrows was unable to repay.  Three Arrows was ordered to liquidate after it suffered heavy losses from the collapse of Luna and other cryptocurrencies. And the story just goes on and on…

Voyager said in the filing it hoped to restructure and return some of their customers’ money while giving them ownership in the reorganized company.

Just weeks ago, Voyager assured its customers of its own stability.

Many of Voyager’s investments were in the form of loans to other crypto companies, adding significant risk compared with loans by a standard bank.

Crypto lender Celsius Network LLC was similar in its operation to Voyager and it recently froze customer assets and is in bankruptcy proceedings.

--Another cryptocurrency lender backed by Peter Thiel and Coinbase Global Inc, Vauld, suspended withdrawals, trading and deposits on its platform, citing volatile market conditions and financial difficulties.

Vauld said it froze operations after users pulled almost $200 million over the last three weeks.

The Singapore-based outfit said it was exploring all possible options, including potential restructuring.  In June, Vauld said it would lay off 30% of its staff.

--The world’s largest contract electronics maker, Taiwan’s Foxconn, raised its full-year business outlook on Monday, thanks to strong sales of smartphones and servers despite concerns of slowing demand due to rising inflation.

Like other global manufacturers, Foxconn has grappled with a severe shortage of chips, which has hurt smartphone production including for its major client Apple, partly due to Covid-19 lockdowns in China.

But the company said in a statement late Monday that June sales jumped 31% from a year ago to a record high for the month, thanks to appropriate supply chain management and rising sales of consumer electronics.  Smartphones makes up the bulk of its revenue. 

--European lawmakers approved two sweeping new pieces of digital regulation, paving the way for clashes between regulators and tech giants like Google/Alphabet, Facebook/Meta and Apple.

One of the laws is focused on anticompetitive behavior, the other on content deemed illegal in Europe.

The laws are backed by the threat of noncompliance fines in some extreme cases of as much as 20% of a company’s annual world-wide revenue and are the most far-reaching Western efforts to rein in tech companies in a generation. The EU is expanding its effort to be the global tech regulator…and perhaps provide a road map for digital legislation in the U.S. and elsewhere.

The Digital Markets Act is expected to enter into force in the coming months, but it probably won’t be until 2024 before the large tech companies have to comply.

--Shares in Twitter continue to flounder as one leading analyst, Wedbush’s Daniel Ives, has lowered his target price to $43 from the $54 Elon Musk had said he would offer to purchase the company.

The Washington Post reported that Musk’s team has decided Twitter’s spam figures aren’t reliable and that he doesn’t have enough information to evaluate the company as a business.

If Musk withdraws his offer, the terms of the agreement said he would need to pay a $1 billion breakup fee.

Other sources told the Post that Twitter might force Musk to go through with the purchase if his reason for changing his mind isn’t based on the company’s fundamental business.

Twitter officials maintained Thursday that spam accounts make up less than 5% of the company’s daily monetizable users, which Twitter defines as daily users who are logged in and authenticated by Twitter.

But then around 5:30 p.m. ET tonight…we learned that Musk sent a letter to Twitter’s board saying he is terminating the acquisition!

In a letter to the Securities and Exchange Commission, Musk said Twitter has “not complied with its contractual obligations” surrounding the deal, namely giving Musk enough information to “make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.”

But Musk had agreed to buy Twitter for $54.20 per share, and he sold roughly $8.5 billion worth of Tesla shares to help fund the purchase.

As I go to post, Twitter’s board said it will sue Musk to complete the merger.

This is what we describe in the ‘burbs as a true asshole.  [And worse.  Cue Jeff Spicoli.]

--The Food and Drug Administration and Juul agreed Wednesday to put their court fight on hold while the government conducts more reviews of the company’s electronic cigarettes.

Juul can continue selling its e-cigarettes in the meantime, according to a federal court filing.

The FDA ordered Juul to pull its products from the market on June 23. A day later, a federal appeals court temporarily blocked the government ban at Juul’s request.

To stay on the market, companies must show that their e-cigarettes benefit public health. In practice, that means proving that adult smokers who use them are likely to quit or reduce their smoking, while teens are unlikely to get hooked on them.

--Norwegian Cruise Line is dropping a requirement that passengers test negative for Covid-19 before sailing unless it is required by local rules.

The company said it will drop the testing requirement Aug. 1 except on ships sailing from places with local testing rules, including in the United States, Canada, Bermuda and Greece.

Norwegian requires vaccinated passengers in the U.S. to show a negative antigen test for Covid within two days of their trip or a negative PCR test within three days of sailing.  Unvaccinated children under 12 are subject to more testing when they board and leave the ship.

Shares in the cruise operators, from Norwegian to Carnival Cruise Lines to Royal Caribbean have been plummeting amid recession fears.

--So I went to Bed Bath & Beyond on the Fourth of July, ostensibly to buy some outdoor folding chairs, the cheapest I could find.  And there were no outdoor chairs of any kind.  Two weeks earlier on my last visit there were lots of chairs.  So much for that strategy, referring to management, not mine.

But BBBY shares soared 25% on Thursday on word that interim CEO Sue Gove had purchased 50,000 more shares, bringing her stake to 105,000, and that was enough to get the meme crowd (what’s left of it, that is) excited.  I have to admit that when I saw the news, I was prepared to buy some for a one-day trade myself, but it moved too fast at the opening to suit my taste and I lost out.

The stock then cratered over 14% from Thursday’s high to Friday’s close.

--Chick-fil-A maintained its position as America’s favorite restaurant for eight years in a row, according to the American Customer Satisfaction Index.

Following it in the fast-food category was sandwich chain Jimmy John’s, and then Domino’s and KFC.

The fast-food chain with the lowest score was McDonald’s.  Good gawd. 

--Universal Pictures’ “Minions: The Rise of Gru” rose above every other Fourth of July weekend opening with its record-breaking $125 million domestic box office haul this weekend.

According to Comscore, the latest installment of Illumination’s animated “Despicable Me” franchise passed the previous record-holder, “Transformers: Darkness of the Moon.” The third film of the live-action “Transformer” franchise collected $115.9 million during its four-day holiday opening in 2011.

“The Rise of Gru” was originally slated for a July 2020 release but was delayed due to the pandemic. The fifth movie in the popular cartoon saga – which launched in 2010 with “Despicable Me” – received OK rating reviews.

Still in second place is Paramount Pictures’ “Top Gun: Maverick,” which made $33 million in its sixth weekend for a North American cumulative gross of $571 million.

Warner Bros.’ “Elvis” added $23.5 million in its sophomore weekend for a North American cumulative gross of $71.8 million.  Universal Pictures’ “Jurassic World Dominion” devoured $19.7 million in its fourth weekend for a North American cumulative gross of $335.9 million.

This weekend it’s about the opening of Disney and Marvel’s “Thor: Love and Thunder.”

The Pandemic

--Because public testing sites run by state and local governments have been closing, with the average number of new confirmed Covid cases per day hardly budging for weeks in the United States, we have a foggier look at the state of the virus.

Let’s face it, if you take a test at home, you probably aren’t going through the trouble of reporting it to your local health agency and lab based P.C.R. testing capacity in July will be only half of what it was in March.

--Editorial / Washington Post

“The pandemic is a relentless race against Mother Nature.  Waves of infection took millions of lives, and only highly effective vaccines prevented even more deaths.  Now, the coronavirus is speeding up once again, mutating, evading immunity and still on the march. The arrival of subvariant BA.5 should be a reminder that the finish line in this race is nowhere to be seen.

“What’s BA.5?  This is the latest subvariant of Omicron, which stormed the planet late last year and caused a huge wave of infection. As of now, BA.5 and a closely related variant, BA.4, account for about 70 percent of all infections in the United States, according to estimates by the Centers for Disease Control and Prevention, based in part on modeling. These two newcomers are easing out an earlier variant, BA.2.

“The obscure names should not hide the punch of BA.5. Eric Topol, professor of molecular medicine at Scripps Research, says that BA.5 ‘is the worst version of the virus that we’ve seen.’  He adds, ‘It takes immune escape, already extensive, to the next level, and, as a function of that, enhanced transmissibility,’ well beyond earlier versions of Omicron.  There has not been a marked increase in hospitalizations and deaths, he reports, because there is so much immunity built up from the winter Omicron wave. But there are aspects of this new variant very much worth keeping an eye on as the United States remains stuck at an uncomfortably high plateau of pandemic misery.  And the new variants are driving a case surge in Europe.”

--Speaking of Europe, Michael Ryan, executive director at the World Health Organization, said, “We are seeing a much more intense wave of the disease passing through Europe again. And we will see it happen elsewhere – we are already seeing it in southeast Asia and in the eastern Mediterranean region as well.”

Last week, Britain reported a 32 percent rise in infections and said that hospital admissions are climbing, with intensive-care cases spreading among older age groups.  The rise in hospitalizations, though, is still far below previous waves, and widespread vaccination has made the pandemic far less deadly.

French officials have “invited” or “recommended” people to go back to using face masks as tourism booms again there.

--Los Angeles County’s coronavirus case rate hit its highest point in nearly five months over the Fourth of July weekend, not a good sign.  Hospitalizations are creeping up, but hospitals are in good shape.  It’s just that experts worry what the next few weeks will bring.

--Macau has seen a big spike and locked down the famous Grand Lisboa hotel (where years ago I had perhaps the best meal of my life), after more than a dozen Covid cases were found there on Tuesday, with infections spreading rapidly in the world’s biggest gambling hub.  At least 16 other buildings were locked down and more than 13,000 people placed under quarantine.

--Today, the CDC put New York City’s five boroughs back on “high alert” for Covid, which means masks are ‘recommended’ again when indoors.  As that esteemed epidemiologist Yogi Berra said, “It ain’t over ‘til it’s over.”

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

World…6,370,655
USA…1,045,212
Brazil…673,339
India…525,343
Russia…381,499
Mexico…325,976
Peru…213,623
UK…180,718
Italy…168,969
Indonesia…156,781
France…150,017

Canada…42,200

[Source: worldometers.info]

U.S. daily death tolls…Due to holiday, just Tues. 172; Wed. 347; Thurs. 320; Fri. 132.

Foreign Affairs, part II

China/Taiwan: Beijing has demanded the U.S. cease military “collusion” with Taiwan during a virtual meeting between the joint chiefs of staff from the two countries whose relationship has grown increasingly fractious.

Gen. Li Zuocheng told Gen. Mark Milley on Thursday that China had “no room for compromise” on issues affecting its “core interests,” which include self-governing Taiwan, which Beijing claims as its own territory to be annexed by force if necessary.

“China demands the U.S. …cease reversing history, cease U.S.-Taiwan military collusion and avoid impacting China-U.S. ties and stability in the Taiwan Strait,” Li said.

The Chinese military would “resolutely safeguard national sovereignty and territorial integrity,” he said.  “If anyone creates a wanton provocation, they will be met with the firm counterattack from the Chinese people.”

Granted such threats are commonplace for China on this topic, but they echoed fiery comments made by Chinese Defense Minister Wei Fenghe at a regional security conference last month that was attended by Secretary of Defense Lloyd Austin.

Wei accused the United States of trying to “hijack” the support of countries in the Asia-Pacific region to turn them against Beijing.

At the same meeting in Singapore, Austin said China was causing instability with its claim to Taiwan and its increased military activity in the area.

This weekend, Secretary of State Antony Blinken and his Chinese counterpart, Wang Yi, meet at a gathering of foreign minister from the G20 bloc of industrialized nations in Indonesia that is expected to be overshadowed by disagreements over Russia’s invasion of Ukraine.

Gen. Milley told the BBC this week said a  Chinese attack on Taiwan is not imminent, but the U.S. is watching “very closely.”

Whether China, which has been developing a capability to take the island, actually attacks Taiwan is a “political choice, it’s a policy choice, that will be based off of how the Chinese view the cost risk benefit at the time.”

Separately, top U.S. and British law enforcement officials met with private business and academic leaders Wednesday to call attention to what they said is the serious security and economic threat posed by China, which is seeking to steal their intellectual property and influence politics in western countries.

FBI Director Christopher Wray and MI5 Director General Ken McCallum held the event in London to highlight the joint work by the two security agencies to thwart what they said was the most serious challenge from espionage and hacking by the Chinese government. 

Beyond the stealing of technology, China now is also making moves to shield its economy from any future sanctions should it try to take over Taiwan by force, drawing lessons from western efforts to punish Russia for its invasion of Ukraine, Wray said.

“We’ve seen China looking for ways to insulate their economy against potential sanctions, trying to cushion themselves from harm if they do anything to draw the ire of the international community,” Wray said.  “In our world, we call that kind of behavior a clue.”

McCallum said: “The widespread Western assumption that growing prosperity within China and increasing connectivity with the West would automatically lead to greater political freedom has been shown to be plain wrong.”

McCallum also said the challenge posed by the Chinese Communist Party was “game-changing,” while Wray called it “immense” and “breath-taking.”

Wray told the business leaders in the audience that the Chinese government was “set on stealing your technology” using a range of tools

He said it posed “an even more serious threat to western businesses than even many sophisticated businesspeople realized.”  He cited cases in which people linked to Chinese companies out in rural America had been digging up genetically modified seeds which would have cost them billions of dollars and nearly a decade to develop themselves.

He also said China deployed cyber espionage to “cheat and steal on a massive scale.”

Iran: The U.S. accused Iran of “backtracking” in negotiations to revive the 2015 nuclear accord, blaming Tehran for the lack of progress made at recent talks in Doha.

Washington’s special envoy to Iran, Robert Malley, said in an interview on Tuesday that Iran had rejected the latest proposal, backed by the European Union, to revive the deal.  U.S. State Department spokesman Ned Price later said Iran was making “extraneous demands” that showed it wasn’t serious.

Iranian officials haven’t responded to the comments and have been pressing ahead with efforts to build their ties with neighboring countries, particularly in Central Asia and the Caucasus where they’re trying to establish new trade routes and export markets.

Separately, in a speech in Australia, Rafael Grossi, head of the International Atomic Energy Agency, warned that “we are reaching a defining moment for global nuclear proliferation,” in which the risks of the spread of nuclear weapons “pose a problem for everyone.”

Grossi warned that Iran’s actions – which include the production of highly-enriched uranium – could persuade the country’s neighbors to ramp up nuclear programs.

“We are now in a situation where Iran’s neighbors could start to fear the worst and plan accordingly,” he said.  “There are countries in the region today looking very carefully at what is happening with Iran, and tensions in the region are rising.”  He added that some political leaders have on occasion “openly stated they would actively seek nuclear weapons if Iran were to pose a nuclear threat.”

Saudi Arabia is the most obvious pick to react quickly if Iran were to test a nuke and is subject to only the lightest international oversight, which is all they’ll allow.

Back to Robert Malley, he said Iran has enough highly enriched uranium on hand to make a bomb and could do so in a matter of weeks. The issue remains how quickly can they weaponize it.

Israel: Al Jazeera journalist Shireen Abu Akleh was likely to have been killed by gunfire from Israeli positions but it was probably unintentional, the U.S. State Department said on Monday.

Independent investigators could not reach a definitive conclusion about the origin of the bullet that struck her, it said.

Abu Akleh, a Palestinian-American, was killed on May 11 during an Israeli raid in the town of Jenin in the occupied West Bank under circumstances that remain bitterly disputed.

Palestinian officials criticized the report and maintain she had been deliberately targeted. Israel denies this.

Random Musings

--Presidential approval ratings….

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

Rasmussen: 37% approve of Biden’s performance, 61% disapprove (July 8).  Down from 41-58 last week.

--Americans are less confident in major U.S. institutions than they were a year ago, with significant declines for 11 of the 16 institutions tested and no improvements for any.  The largest declines in confidence are 11 percentage points for the Supreme Court – as reported in late June before the court issued controversial rulings on gun laws and abortion – and 15 points for the presidency, matching the 15-point drop in President Joe Biden’s job approval rating since the last confidence survey in June 2021.

Gallup first measured confidence in institutions in 1973 and has done so annually since 1993.  This year’s survey was conducted June 1-20.

Confidence currently ranges from a high of 68% for small business to a low of 7% for Congress.  The military is the only institution besides small business for which a majority of Americans express confidence (64%).  Confidence in the police, at 45%, has fallen below the majority level for only the second time, with the other instance occurring in 2020 in the weeks after the death of George Floyd at the hands of Minneapolis police.

This year’s poll marks new lows in confidence for all three branches of the federal government – the Supreme Court (25%), the presidency (23%) and Congress.  Others at their lowest points in over three decades include the church or organized religion (31%), newspapers (16%), the criminal justice system (145), big business (14%) and the police.

That figure for newspapers is beyond distressing.

--Former president Trump sent a message via his social media platform TruthSocial on July 4th in which he went ALL CAPS and hit out at Liz Cheney.

“Warmongering and despicable human being Liz Cheney, who is hated by the great people of Wyoming (down 35!), keeps saying, over and over again, that HER Fake Unselect Committee may recommend CRIMINAL CHARGES against a President of the United States who got more votes than any sitting President in history. Even the Dems didn’t know what she was talking about! Why doesn’t she press charges instead against those cheated on the Election, or those that didn’t properly protect the Capitol?....

So pathetic.

But the New York Times reported in an extensive piece over the weekend that Trump is likely to announce he is running for the White House…like this month, in “a move designed in part to shield (him) from a stream of damaging revelations emerging from investigations into his attempts to cling to power after losing the 2020 election.”

“Mr. Trump has also watched as some of his preferred candidates have lost recent primary elections, raising hopes among his potential Republican competitors that voters may be drifting from a politician long thought to have an iron grip on the party.”

“Rather than humble Mr. Trump, the developments have emboldened him to try to reassert himself as the head of the party, eclipse damaging headlines and steal attention from potential rivals, including Gov. Ron DeSantis of Florida, a rising favorite of donors and voters.  Republicans close to Mr. Trump have said he believes a formal announcement would bolster his claims that the investigations are politically motivated.”  [Michael C. Bender, Reid J. Epstein and Maggie Haberman]

Well, the bottom line is Trump wants credit for any mid-term election success, which could be considerable, and he wants to force people to choose early.  Are you with me, or with DeSantis, or Youngkin, or Asa Hutchinson (my preferred candidate of the moment).

--Mitt Romney / The Atlantic

“Even as we watch the reservoirs and lakes of the West go dry, we keep watering our lawns, soaking our golf courses, and growing water-thirsty crops.

“As inflation mounts and the national debt balloons, progressive politicians vote for ever more spending.

“As the ice caps melt and record temperatures make the evening news, we figure that buying a Prius and recycling the boxes from our daily Amazon deliveries will suffice.

“When TV news outlets broadcast video after video of people illegally crossing the nation’s southern border, many of us change the channel.

“And when a renowned conservative former federal appellate judge testifies that we are already in a war for our democracy and that January 6, 2021, was a genuine constitutional crisis, MAGA loyalists snicker that he speaks slowly and celebrate that most people weren’t watching.

“What accounts for the blithe dismissal of potentially cataclysmic threats? The left thinks the right is at fault for ignoring climate change and the attacks on our political system. The right thinks the left is the problem for ignoring illegal immigration and the national debt.  But wishful thinking happens across the political spectrum.  More and more, we are a nation in denial….

“A classic example of denial comes from Donald Trump: ‘I won in a landslide.’ Perhaps this is a branch of the same delusion that leads people to feed money into slot machines: Because I really want to win, I believe that I will win.

“Bolstering our natural inclination toward wishful thinking are the carefully constructed, prejudice-confirming arguments from the usual gang of sophists, grifters, and truth-deniers. Watching angry commentators on cable news, I’m reminded of H.L. Mencken’s observation: ‘For every complex problem, there is a solution that is clear, simple, and wrong.’

“When entire countries fail to confront serious challenges, it doesn’t end well.  During the past half century, we Americans have lived in a very forgiving time, and seeing the world through rose-colored glasses had limited consequences.  The climate was stable, our economy dwarfed the competition, democracy was on the rise, and our military strength made the U.S. the sole global hyperpower.  Today, every one of those things has changed.  If we continue to ignore the real threats we face, America will inevitably suffer serious consequences.

“What clears the scales from the eyes of a nation?  Pearl Harbor did.  9/11 did.  A crisis can shake the public consciousness.  But a crisis may come too late for a course correction that can prevent tragedy.  The only cure for wishful thinking is leadership.  Winston Churchill emboldened a complacent Britain and rallied the world.  Abraham Lincoln held the Union together.  Ronald Reagan shook us from our malaise.  Lech Walesa inaugurated a movement that brought down the Iron Curtain.  Martin Luther King Jr. inspired us to ‘believe that unarmed truth and unconditional love will have the final word in reality.’  And Volodymyr Zelensky’s’ stunning display of courage – ‘I need ammunition, not a ride’ – showed us what real character looks like.

“President Joe Biden is a genuinely good man, but he has yet been unable to break through our national malady of denial, deceit, and distrust.  A return of Donald Trump would feed the sickness, probably rendering it incurable.  Congress is particularly disappointing: Our elected officials put a finger in the wind more frequently than they show backbone against it. Too often, Washington demonstrates the maxim that for evil to thrive only requires good men to do nothing.

“I hope for a president who can rise above the din to unite us behind the truth. Several contenders with experience and smarts stand in the wings; we intently watch to see if they also possess the requisite character and ability to bring the nation together in confronting our common reality.  While we wait, leadership must come from fathers and mothers, teachers and nurses, priests and rabbis, businessmen and businesswomen, journalists and pundits.  That will require us all to rise above ourselves – above our grievances and resentments – and grasp the mantle of leadership our country so badly needs.”

--The man charged with killing seven people at an Independence Day parade in the Chicago suburb of Highland Park, Ill., confessed to police that he unleashed a hail of bullets from a rooftop and then fled to Madison, Wis., where he contemplated shooting up an event there, authorities said.

More than two dozen were wounded in the massacre and the shells of 83 bullets and three ammunition magazines were on the rooftop.

Twenty-one-year-old Robert Crimo III was charged with seven counts of first-degree murder.  If convicted, he would face a maximum sentence of life in prison without the possibility of parole.  Dozens of additional charges will be added over time.

His father will be charged as well at some point.  His behavior is egregious in signing off on his son’s gun purchases.

--Rep. Marjorie Taylor Greene on Wednesday claimed the July 4 mass shooting in Highland Park was part of a liberal plot to push more “gun control” and even suggested gay-rights activists played a role in the convoluted scheme.

Without providing a shred of evidence, the Republican from Georgia tweeted the rampage and an unrelated shooting at a Philadelphia fireworks display were both “designed” to win support for new restrictions on guns.

“Two shootings on July 4: one in a rich, white neighborhood and the other at a fireworks display,” Greene said.  “It almost sounds like they were designed to make Republicans go along with more gun control. I mean, after all, remember, we didn’t see that happen at all the Pride parades in the month of June.

“As soon as we hit MAGA month, as soon as we hit the month that we’re all celebrating, loving our country, we have shootings on July 4th.  I mean, that’s, you know, that would sound like a conspiracy theory, right?  Of course.  But what’s the definition of right-wing conspiracy theory?  Well, by the way, it’s the news that’s just six months early.”

I’m biting my tongue.

--Pope Francis has dismissed reports that he plans to resign in the near future, saying he is on track to visit Canada this month and hopes to be able to go to Moscow and Kyiv as soon as possible after that.

In an interview with Reuters, with no aides present, and in Italian, Francis also denied rumors he had cancer and gave details on his knee condition that has prevented him from carrying out some of his duties.

Francis did repeat his often stated position that he might resign someday if failing health made it impossible for him to run the Church – something that was almost unthinkable before Benedict XVI.

The pope said he did not want an operation on his knee because the general anesthetic in last year’s surgery had had negative side-effects.

--Utah’s Great Salt Lake has hit a record low water level for the second time in less than a year, a troubling sign amid historic drought conditions – made worse by climate change – across the western U.S.

The lake dipped to 4,190.1 feet on Sunday, lower than the last time the water’s surface matched a record low in October 2021, according to U.S. Geological Survey data.

The level is expected to continue to decline through fall or early winter.

--In an extensive piece in the Washington Post on how our summers get hotter and hotter, “The past five summers in the National Weather Services’ western region averaged 2.7 degrees F. warmer than 1971-2000, more than any other region in the contiguous U.S.”

Summer temperatures in Reno, Nev., have risen 10.9 degrees F. on average since 1970, making it the fastest warming city in the nation during the hottest months, according to an analysis by a research group Climate Central.

--The U.S. Drought Monitor shows 97% of California in severe drought, 60% in extreme drought, and 12% in exceptional drought.  On this last category, this is one time you don’t want to be “exceptional.”

--Italy declared a state of emergency in five northern regions surrounding the Po River amid the worst drought there in 70 years.

The drought threatens more than 30% of Italy’s agricultural produce.

At the same time, there was a disaster in the Italian Alps when a rapidly melting glacier broke loose, sending an avalanche of ice, snow and rocks slamming into hikers.  The death toll rose to nine as some of the missing were eventually accounted for.

Much like in the aftermath of 9/11 in my area and commuter parking lots, authorities in Italy were following those cars that remained unclaimed in the hiking area’s lot and then trying to track down occupants through vehicle license plates.

The glacier has been melting for decades, but the record temperatures, like 50-degrees plus on the summit of the mountain in the Dolomites, with operators of rustic shelters along the mountainside reporting temps of 75 F. or more, all of which accelerated the situation and the glacier broke off and thundered down the slope at a speed estimated at nearly 200 mph!

--As I wrote the other week when discussing the water levels of the Po River, the Mediterranean basin, which includes southern European countries like Italy, has been identified by UN experts as a “climate change hot spot.”

--The catastrophic flooding in the Sydney, Australia area is beyond belief.  Relentless rain, 50 inches or more in some spots in four days, or eight months’ worth.  One story I read said a year’s worth in three days to some areas.

Up to 50,000 residents were under evacuation orders…and consider this is the fourth severe flooding situation of the year in these parts.

--The Midwest and the Plains don’t get hurricanes, but they can get derechos, sprawling thunderstorm complexes that can travel hundreds of miles and cover a huge area with the impact of a 100-mph tornado. 

Such was the case on Tuesday as parts of South Dakota and Iowa, as well as Nebraska, Minnesota and Illinois faced a derecho, turning the skies green in some areas.

Winds gusted as high as 96 mph in Huron, S.D., which had faced a derecho with 90 mph winds back in May.  Howard, S.D., reported a gust of 99 mph, with frequent gusts of 70 mph or greater for between 20 and 30 minutes.  Yikes.

The winds downed power lines and trees, with tens of thousands of utility customers losing power.

For a thunderstorm squall line to be classified as a derecho, “Damage must be incurred either continuously or intermittently over a swatch of at least 400 miles and a width of approximately 60 miles or more.”  According to the American Meteorological Society.  The National Weather Service adds wind gusts topping 75 mph must be thrown in as well.

--President Biden bestowed the nation’s highest military honor to four Army soldiers for heroism during the Vietnam War.

Staff Sgt. Edward N. Kaneshiro, Spc. Five Dwight W. Birdwell. Spc. Five Dennis M. Fujii, and retired Maj. John J. Duffy.

“Today, we’re setting the record straight.  We’re upgrading the awards of four soldiers who performed acts of incredible heroism during the Vietnam conflict,” Biden said.

Addressing the three living soldiers and relatives of Kaneshiro, who is deceased, the president said, “I’m proud to finally award our highest military recognition, the Medal of Honor, to each of you.”

Kaneshiro, killed in action by hostile gunfire in Vietnam in 1967, received his honor for a Dec. 1, 1966, raid where his unit came under fire by North Vietnamese troops.  His actions were credited with helping his unit withdraw from the village where they were fighting.

Birdwell was honored for actions helping to head off an assault and evacuate wounded at Tan So Nhut Airbase near Saigon on Jan. 31, 1968, despite injuries to his torso and face, during an opening salvo in the Tet Offensive, an especially bloody phase of the war.

Fujii received his Medal of Honor for actions over four days in February 1971 treating wounded and directing air strikes against enemy positions after his air ambulance was forced to crash land.

Duffy was recognized for leading troops who came under ambush after their commander was killed in action, repelling attackers and evacuating wounded, despite his own injuries.

You have our eternal thanks.

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

Pray for Ukraine.

God bless America.

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Gold $1740…lowest weekly close since April 2021
Oil $104.83

Returns for the week 7/4-7/8

Dow Jones  +0.8%  [31338]
S&P 500  +1.9%  [3899]
S&P MidCap  +1.1%
Russell 2000  +2.4%
Nasdaq  +4.6%  [11635]

Returns for the period 1/1/22-7/8/22

Dow Jones  -13.8%
S&P 500  -18.2%
S&P MidCap  -18.3%
Russell 2000  -21.2%
Nasdaq  -25.6%

Bulls 30.5
Bears 40.3

Hang in there.

Brian Trumbore

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