Week in Review

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Week in Review

12/03/2022

For the week 11/28-12/2

[Posted 6:00 PM ET, Friday]

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Edition 1,233

For a brief time on Monday there was talk that the “Axis of Evil,” China, Iran and Russia (which replaced George W. Bush’s original axis of evil…Iran, Iraq and North Korea*), could be cracking. 

*North Korea has to understand, one false move and its dust.  So to me it’s nowhere near the level of the other three.

There were large protests in various Chinese cities over the weekend against China’s zero-Covid strategy, and many were talking of President Xi perhaps being in trouble, and you have the ongoing protests in Iran, and some then drew a line that, well, that had to mean someone was bound to put an ax in Vladimir Putin’s head one night, and…and…

But, you have the beauty of my ‘wait 24 hours’ dictum and by Tuesday, there was a reassessment.  Beijing cracked down on the protests, which while widespread, were hardly ‘massive,’ like hundreds of people, maybe a thousand here, a thousand there…not 50,000 to 100,000 marching in the streets like you get during a real revolution.

And even when you got such a crowd, say like in Iran, what did it lead to?  I see no signs of the regime in Tehran really cracking.

And Vlad the Impaler lives on…bombing innocents indiscriminately.

So, sadly, as Roseanne Roseannadanna would have put it, “Never mind….”

It does really suck.  Yes, for a brief moment I, too, on Monday was thinking, “What if…”

Only one thing to do then…watch sports and go shopping.

Speaking of which, the Thanksgiving / Cyber Monday sales tally was underwhelming.  Adobe Analytics said Black Friday sales rose 2.3% to a “record” $9.12 billion.  And Adobe said Cyber Monday sales were up 5.1%, but these are non-inflation adjusted, so hardly records when inflation is 6% to 8%, depending on your measurement.

As in that’s also the range for the National Retail Federation’s outlook for the holiday season, up 6% to 8%, including online, which could really mean ‘flat.’  So we’ll see what transpires over the coming three weeks. 

Lots more on the economy below.

As for sports, go Team USA tomorrow against the Netherlands in Qatar.  But we already did what we set out to do…make the knockout stage.  Anything further is gravy.  But what a likable group of guys. And get used to seeing Christian Pulisic in about forty different advertisements.

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This week in Ukraine….

Monday, President Volodymyr Zelensky warned Ukrainians to expect another brutal week of cold and darkness ahead, predicting more Russian attacks on infrastructure that would not cease until Moscow ran out of missiles. 

In an overnight video address, Zelensky said he expected new attacks this week that could be as bad as last week’s – the worst yet that left millions of people with no heat, water or power.

“We understand that the terrorists are planning new strikes. We know this for a fact,” Zelensky said.  “And as long as they have missiles, they, unfortunately, will not calm down.”

The UK defense ministry said that Russia is “likely removing the nuclear warheads from aging nuclear cruise missiles and firing the unarmed munitions at Ukraine.”

“Whatever Russia’s intent, this improvisation highlights the level of depletion in Russia’s stock of long-range missiles,” the ministry said in a Twitter threat.

The Kremlin said on Thursday that Kyiv could “end the suffering” of its population by meeting Russia’s demands

National grid operator Ukrenergo said on Monday it had been forced to resume regular emergency blackouts in areas across the country after a setback in its race to repair energy infrastructure.

The United States and NATO allies promised more arms for Kyiv and equipment to help restore Ukrainian power and heat knocked out in Russia’s missile and drone strikes.

NATO Secretary-General Jens Stoltenberg reaffirmed the military alliance’s commitment to Ukraine on Tuesday, saying that the war-torn nation will one day become a member of the world’s largest security organization.

Stoltenberg’s remarks came as U.S. Secretary of State Antony Blinken and his NATO counterparts gathered in Romania to drum up urgently needed support for Ukraine aimed an ensuring that Moscow fails to defeat the country as it bombards energy infrastructure.

“NATO’s door is open,” Stoltenberg said.  “Russia does not have a veto” on countries joining, he said in reference to the recent entry of North Macedonia and Montenegro into the security alliance.  He said that Russian President Putin “will get Finland and Sweden as NATO members” soon.  The Nordic neighbors applied for membership in April, concerned that Russia might target them next.

“We are in the midst of a war and therefore we should do nothing that can undermine the unity of allies to provide military, humanitarian, financial support to Ukraine, because we must prevent President Putin from winning,” Stoltenberg said.

“President Putin has demonstrated a willingness to inflict suffering and to a level of brutality we haven’t seen in Europe since the Second World War,” the secretary-general said, and Putin is trying to use winter in Ukraine as a weapon of war.

NATO powers must take the political decision to send modern battle tanks to Ukraine to give them a military edge against Russia during the winter months, Lithuania’s foreign minister said on Tuesday.

Kyiv has repeatedly asked for NATO’s main arms manufacturers to supply them with state-of-the-art tanks as they look to consolidate gains it has made in counter-offensives in recent months, notably in the embattled eastern Donbas region.

But Western powers have been reluctant to go down that road for fear it could raise the risk of direct conflict with Russia.

In his late-night update, Tuesday, President Zelensky wrote on Telegram: “Despite extremely big Russian losses, the occupiers are still trying to advance in the Donetsk region, gain a foothold in the Luhansk region, move in the Kharkiv region, they are planning something in the south.

“But we are holding out and – most importantly – do not allow the enemy to fulfil their intentions.”

Russian forces shelled 30 settlements in southern Kherson region 258 times in the past week, Zelensky said.  Ukraine’s military said Russia kept up heavy shelling of key targets Bakhmut and Avdiivka in Donetsk, and to the north bombarded Kupiansk and Lyman, both recaptured recently by Kyiv.

“Russian forces have been digging trench lines and concentration areas in eastern Kherson since early October,” which seems to suggest they are “preparing either to defend in depth or to conduct operational or strategic delay operations,” analysts at the Institute for the Study of War wrote in their latest assessment Sunday evening.

The Zaporizhzhia nuclear plant in southern Ukraine is still under Russian control and will remain so, the Kremlin said, after a Ukrainian official suggested Russian forces were preparing to leave.

Elsewhere, the EU will try to set up a court, backed by the UN, to investigate and prosecute war crimes committed by Russia in Ukraine, according to the European Commission’s president, Ursula von der Leyen.

In a video statement, she said: “Russia’s invasion of Ukraine has brought death, devastation and unspeakable suffering. We all remember the horrors of Bucha. It is estimated that more than 20,000 civilians and more than 100,000 Ukrainian military officers have been killed so far. [Ed. more on the conflicting tolls below.]

“Russia must pay for its horrific crimes, including for its crime of aggression against a sovereign state. This is why, while continuing to support the international Criminal Court, we are proposing to set up a specialized court backed by the United Nations to investigate and prosecute Russia’s crime of aggression,” she said.

NATO leaders met for a second day of talks in Romania on Wednesday.  The Pentagon is considering a Boeing proposal to supply Ukraine with cheap, small precision bombs fitted onto abundantly available rockets, allowing Kyiv to strike far behind Russian lines as the West struggles to meet demand for more arms.

Ukraine claims to have killed another 500 Russian soldiers in the last 24 hours, bringing the total who have died in combat since Feb. 24 to about 88,800, by their figures.  Add that to the figure of Ukraine’s losses put out by the EU and you get a sense of the carnage on both sides.

Russia claims its death toll is much lower.  But Russia hasn’t told the truth about anything in years, even prior to this war.

The death toll is all over the place.  A few weeks ago, U.S. Joint Chiefs of Staff Chairman Gen. Mark Milley said both sides probably had about 100,000 casualties, killed and wounded.

Thursday, Ukraine claimed their total was more like 10,000 to 13,000.

Also Thursday, Russian shells crashed down on the power infrastructure in Kherson again, knocking out electrical service that had only recently been restored to the city’s beleaguered residents.

Just the latest setback for the city that Ukrainian forces liberated on Nov. 11.  Russian troops withdrew east across the Dnipro River and have since then fired hundreds of shells at the city from their new positions.

The European Union and the U.S. have started to deliver both transformers and heavy generators, but the head of Ukraine’s committee on energy and housing said this week it would take six months to restore the damaged infrastructure…and that’s only if Russia stopped shelling and firing missiles at it.

Tuesday, Russia said that Washington’s increasing involvement in the conflict carries growing risks, Deputy Foreign Minister Sergei Ryabkov said, according to Russian news agencies.  Moscow has repeatedly complained that Western military support for Ukraine is dragging out the conflict, while risking a possible direct confrontation between Russia and the West.

“We are sending signals to the Americans that their line of escalation and ever deeper involvement in this conflict is fraught with dire consequences. The risks are growing,” the Interfax news agency quoted Ryabkov as saying.

There is zero real contact between Moscow and Washington.  A U.S. official told Reuters on Tuesday that a special “deconfliction” line between the Russian and U.S. militaries has been used once since the start of the war.

Today, Vladimir Putin told German Chancellor Olaf Scholz in a phone call that the German and Western line on Ukraine was “destructive” and urged Berlin to rethink its approach, the Kremlin said.

According to a Kremlin readout: “Attention was drawn to the destructive line of Western states, including Germany, which are pumping the Kyiv regime with weapons and training the Ukrainian military.  All this, as well as comprehensive political and financial support for Ukraine, leads to the fact that Kyiv completely rejects the idea of any negotiations.”

Kyiv says peace talks are possible only if Russia stops attacking Ukrainian territory and withdraws its troops from Ukrainian soil.

Thursday, as President Biden met in Washington with French President Emmanuel Macron, Biden said he was willing to talk to Putin if the Kremlin chief demonstrated he was interested in ending the war.  The Kremlin said earlier on Friday that it wanted a diplomatic solution and Putin had always been open to talks, but this was complicated by Washington’s refusal to recognize the Russian annexation of Ukrainian territories.

There are lots of choice expletives and crude expressions I would like to insert here, but it’s the holiday season so I’ll hold off.

The official joint statement from the U.S. and French presidents pledged “continued support for Ukraine’s defense of its sovereignty and territorial integrity,” stepping up delivery of air defense systems and plans for an international conference on Ukraine in Paris on Dec. 13.

Macron added when alongside Biden that “we will never urge the Ukrainians to make a compromise that will not be acceptable for them.”

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--Jailed Belarusian protest leader Maria Kolesnikova has been taken to the intensive care unit of a hospital in the city of Gomel, jailed opposition politician Viktor Babriko’s Telegram account said on Tuesday.  The Telegram channel said the politician was taken to the hospital on Monday for unknown reasons.  Kolesnikova, one of the leaders of mass street protests against Belarusian President Alexander Lukashenko in 2020, is serving an 11-year sentence for what she said were trumped up allegations of involvement in mass unrest.

Belarus’ long-time foreign minister Vladimir Makei, “passed away suddenly,” state media reported, without giving further detail.

--Kyiv Mayor Vitali Klitschko and President Zelensky have been sniping at each other recently, Zelensky complaining that too many Kyiv residents were still without power and that insufficient centers had been set up across the city for residents of the capital to stock up on food, water, battery power and other essentials.

Klitschko wrote on Instagram: “Today, when everyone must work together, some political dances begin.”

You can see that if the war ever ends, there will be some big fights among the politicos.

--Sweden and Finland have made progress toward winning Turkey’s approval for them to join NATO but they have to go further, Turkish Foreign Minister Mevlut Cavusoglu said this week.

“There are still some issues, they made some progress and some steps were taken but at this moment it’s not sufficient enough,” Cavusoglu told Bloomberg on Tuesday.

The Turks are being a royal pain in the ass, saying Sweden and Finland need to do more to fight terrorism, specifically activities by supporters of separatist Kurdish militants.

--Moscow hit out at comments from the Pope that some minority groups of soldiers have behaved worse than others in the invasion of Ukraine.

The “cruelest” troops are generally Chechens and Buryats, Pope Francis told a U.S. Jesuit magazine.

He also labeled the Holodomor famine caused by the Kremlin in Ukraine in the 1930s a genocide.

Russia called the remarks a “perversion,” and said national groups were “one family.”

Chechens are mostly Muslim.  Buryata are a Mongol ethnic group indigenous to eastern Siberia and traditionally follow Buddhist and shamanic belief systems.

--Last weekend, Vladimir Putin told a group of mothers of Russian soldiers who have been fighting – and some of whom have been killed – in Ukraine, “We share your pain.”

“Nothing can replace the loss of a son,” he said in remarks shown on Russian state media.

It was very touching, sneered your editor.  Several of the mothers are members of pro-Kremlin movements, with critics saying they were carefully chosen for the meeting.

Across the country, groups of mothers of serving soldiers have been openly complaining that their sons are being sent into battle poorly trained and without adequate weapons and clothing, especially as the bitter winter sets in.

Putin told one mother her son had “achieved his goal” and “didn’t die in vain.”

--The Institute for the Study of War said Russian officials are continuing efforts to “stimulate demographic change” in illegally annexed areas by forcibly deporting Ukrainians, including children, and importing Russians to replace them.

--Several Ukrainian embassies abroad have received “bloody packages” containing animal eyes, the foreign ministry said on Friday, after a series of letter bombs were sent to addresses in Spain including Ukraine’s embassy in Madrid.  The packages, soaked in a liquid with a distinctive color and smell, were sent to embassies in Hungary, the Netherlands, Poland, Croatia and Italy.

--Kyiv plans to put up Christmas trees, without lights, throughout the battered capital in a defiant display of holiday spirit as the area’s millions of residents suffer through blackouts, officials said.

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Wall Street and the Economy

Federal Reserve Chair Jerome Powell, in a presentation Wednesday at the Brookings Institution, reiterated the Fed will push rates higher than previously expected and keep them there for an extended period.

He also signaled as market watchers all figured out by this week that when the Fed’s Open Market Committee meets Dec. 13-14, it will hike rates 50, not 75 basis points, after four straight ¾-point hikes.  But Powell stressed that the smaller hike shouldn’t be taken as a sign the Fed will let up on its inflation fight anytime soon.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”

But, in remarks emphasizing the work left to be done in controlling inflation, Powell said that issue was “far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”

“It is likely that restoring price stability will require holding interest rates at a restrictive level for some time,” Powell added.  “History cautions strongly against prematurely loosening policy.”

Powell acknowledged there has been some good news, and there was a bit more Thursday, with the cost of goods such as cars, furniture and appliances in retreat.  He also said that rents and other housing costs – which make up about a third of the consumer price index – were likely to decline next year.

But the cost of services, which includes dining out, travelling and healthcare, are still rising at a fast clip and will likely be much harder to rein in, he said.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said.

I’ve noted for a while that one of the prime issues is rising wages.  It’s great wages are going up, as they need to, to deal with rising prices, but it’s a vicious circle.  I saw a story on the automaker Stellantis in France Thursday and the unions looking for a 7.5% to 8.3% wage increase and that’s just an example of the issues.  New union contracts in the U.S. recently have generally had wage increases in the 5%+ range, at least short term.  That isn’t 2%, boys and girls.

Or as Chair Powell put it: “Wage growth remains well above levels that would be consistent with 2% inflation over time.”

The labor shortage, due in part to a jump in early retirements, isn’t helping matters.

Lastly, Powell said curing inflation “will require holding policy at a restrictive level for some time… We will stay the course until the job is done.”

Which is what I’ve been saying in interpreting the Fed’s comments.  It’s not real hard.  I mean I’m a high school graduate, after all.

But here’s the bottom line.  As you’ll see below, the Fed’s core inflation barometer is still at 6%, by one measure.  Not exactly 4%, let alone the target of 2%.

So when does the Fed pause?  The second meeting of the FOMC in 2023 is March 21-22.  I’m guessing 25 basis points then (as the market is also forecasting), but then the following meeting is May 2-3.  That’s a lifetime as these things go.  I’m expecting energy prices to reaccelerate, like $95+ oil (West Texas Intermediate), and prices at the pump will be rising, and you get it.

Well, today we had a hot jobs report for November, with nonfarm payrolls at a better than expected 263,000, while October was revised up to 284,000.  Hardly recessionary type figures. The unemployment rate was unchanged at 3.7%, and the U6 underemployment rate was 6.7%, tying a record best.

But the big news, speaking of wages, was that average hourly earnings in the month rose a whopping 0.6%, double forecasts, with the year-over-year figure at 5.1%, vs. 4.7% last month.

So the labor market and wages remain strong, meaning the Fed is not ‘pivoting’ any time soon as the markets continue to refute the idea that Chair Powell and Co. could be ‘pausing’ a long, long time.  I just have to laugh at the idiocy.

At the same time, no doubt, the service sector is up, while manufacturing is down.  We had the Chicago PMI for November on Wednesday and it was at a godawful 37.2 (50 the dividing line between growth and contraction), the worst for this index since early in the pandemic.

And then on Thursday, we had the national ISM figure on manufacturing and it was 49.0, the lowest since May 2020.

On the positive side Thursday, the November reading on personal income was a better than expected 0.7%, while consumption came in at a strong 0.8%, as forecast.

But the personal consumption expenditures index, a critical barometer for the Fed, was better than expected, just 0.3%, and 0.2% ex-food and energy.  For the last year, the core was at 6.0% vs. 6.3% prior. 

But 6% is still…six percent…not two.  Again, if you’re thinking the Federal Reserve is going to be pivoting come May, you’re nuts.

The Case-Shiller S&P CoreLogic home price index for September came in at 10.4% on the 20-city index year-over-year, continuing to decline, and down from 13.1% prior.  [-1.5% M/M]

Speaking of housing, Freddie Mac’s 30-year fixed-rate mortgage fell to 6.49% this week, down from a 7.08% peak three weeks ago, but still compared to 3.11% a year ago.

The Atlanta Fed’s GDPNow barometer for fourth-quarter growth, by the way, is down to 2.8% from last week’s 4.3%.  We had a second look at third-quarter growth this week and it was 2.9% vs. the initial 2.6%.  Gee, 2.9, 2.8…very Trumplike. 

And the price of gasoline at the pump continues to fall…$3.44 for regular nationwide vs. $3.37 a year ago.  Diesel is also finally falling some, to $5.13, but it was $3.63 at this time last year and remains a major issue at your local supermarket, for one.

Lastly, the Senate voted to intervene to prevent a nationwide strike by railroad workers while rejecting a proposal to give them expanded sick leave, with lawmakers saying they reluctantly heeded President Biden’s call to resolve the long-running labor dispute, after Biden had supposedly solved the issue a few months ago.

In an 80-15 vote, lawmakers agreed to force unions to adopt an earlier labor agreement mediated by the administration.  Biden then signed it today.

The move ends a standoff between Union Pacific Corp., CSX Corp. and other freight railroads and more than 115,000 workers.  Under the Railway Labor Act, Congress can make both sides accept an agreement to prevent harm to the economy.

Editorial / Wall Street Journal

“Brokered by the Biden Administration, the deal includes an extra paid day off, along with a 24% pay raise through 2024. Eight of the 12 rail unions ratified it, but four voted it down.

“After President Biden called on Congress to impose the agreement [on the other four unions], the House voted to do so on Wednesday.  But progressives also insisted on passing a second measure to rewrite the deal and add seven paid sick days. That failed in the Senate, 52-43. [Ed. needing 60 votes to pass.]

“Six Republicans voted yes, including Sen. Marco Rubio, who was elected as a free-market Tea Partier, but who long ago replaced his tricorn hat with a red Trump cap. Three of the six – Mr. Rubio, Ted Cruz and Josh Hawley – have designs on the White House. After Mr. Cruz voted yes, Bernie Sanders quipped: ‘I always knew you were a socialist.’

“Some estimates say a rail strike could have cost the economy up to $2 billion a day. Based on an economic study, Mr. Biden said 765,000 people might have been thrown out of work within two weeks.  He also warned that Americans ‘could lose access to chemicals necessary to ensure clean drinking water.’

“Congress simply can’t allow one-third of the unions in one industry to hold hostage the economy and public safety.  The Senate also rejected, 25-70, a proposal by Sen. Dan Sullivan to delay a strike for 60 days so the parties could keep negotiating. But at this point the rail talks have already gone on for three years.  How would another two months have improved on the deal brokered by the Presidential Emergency Board? The priority was to keep the trains running.

“Give credit to Mr. Biden for going against political type.  He promised to be ‘the most pro-union president you’ve ever seen,’ and his wife belongs to a teachers union, the National Education Association, that does lifetime harm to millions of American students.

“Railroad employees who wanted more will no doubt shout that they have been betrayed.  But they had ample opportunity to exercise their right to collectively bargain, and the deal offers the generous raise, plus a freeze on healthcare co-pays and deductibles.  Name another industry where the latter is true.

“Mr. Biden had a choice: Side with the special interests of four recalcitrant rail unions, or do what’s best for millions of American workers and consumers in the broader economy.

“He chose right. This isn’t a prediction, but if Mr. Biden wants it to be, this could be the start of his long-delayed turn toward the center….

“OK, that won’t happen, but we can still dream, can’t we?

“The consequences of a railroad strike were damaging enough to break through the ideology, but if Mr. Biden wants to help his sagging approval rating, the same principle applies elsewhere.”

Europe and Asia

Eurostat released flash estimates for November inflation in the eurozone, 10.0% overall, down from 10.6% in October, and the first decline in quite a while. Ex-food and energy, however, the figure rose to 6.6% from 6.4%.

Germany 11.3%, France 7.1%, Italy 12.5%, Spain 6.6%, Netherlands 11.2%, Ireland 9.0%.

So now all eyes will be on the European Central Bank when it next convenes Dec. 15.  The head of the ECB, Christine Lagarde, warned prior to this report that she did not believe inflation had reached a peak, and made clear that the bank would continue to raise interest rates as part of its efforts to bring down prices.

The ECB raised its key rate 3/4s of a point in both October and November, but, like the Fed, could ease back to fifty in less than two weeks.

We also had the manufacturing PMIs in the EA19 for November, 47.1, a 2-mo. high, but ongoing contraction. [S&P Global]

Germany 46.2, France 48.3, Italy 48.4, Spain 45.7, Netherlands 46.0 (29-mo. low), Ireland 48.7 (30-mo. low), Greece 48.4.

U.K. 46.5.

I’ll have further commentary next week after the service sector readings are released.

The Euro area unemployment rate for October was 6.5%, down from 6.6% in September and 7.3% in Oct. 2021. [Eurostat]

Germany 3.0%, France 7.1%, Italy 7.8%, Spain 12.5%, Netherlands 3.7%, Ireland 4.4%, Greece 11.6%.

Finally, Eurostat released a report on industrial producer prices for October, down 2.9% in the euro area, a first in ages, though still up 30.8% from a year earlier.  Tumbling energy prices were the prime reason for the decline.

Turning to Asia…in China, the official November manufacturing PMI was 48.0 vs. 49.2 in October; services 46.7 vs. 48.7.  Not good, as noted by the National Bureau of Statistics.

The private Caixin manufacturing figure was 49.4 vs. 49.2 prior.

Japan’s November manufacturing PMI was 49.0, lowest since October 2020. [The service reading comes next week.]

Separately, October retail sales were 4.3% year-over-year, with industrial production for the month up 3.7% Y/Y, both below forecasts.  The October unemployment rate was 2.6%, unchanged.

Taiwan’s manufacturing PMI for last month was a godawful 41.6, with a very downbeat outlook for the next 12 months, while South Korea’s PMI was 48.2.

So notice…all over the globe, crappy PMIs…all in contraction mode.

Street Bytes

--Stocks finished up on the week, though the Dow Jones added just 0.2% in the end to finish at 34429.  The S&P 500 gained 1.1% and Nasdaq 2.1%.  Frankly, I just read some market wrap-ups as I prepare to post (this being the last bit I plug in each week), and one goes “investors were encouraged by data showing consumer spending increased as inflation eased in October, while the November jobs report showed stronger-than-expected growth.”

Only one problem with this lazy reporter’s comment.  The Dow Jones fell 194 points on the day the spending (consumption) figure came out, ditto the inflation component, the PCE, and stocks were flat Friday with the jobs report.

Beats the heck out of me why stocks were up this week. 

But after Wednesday’s big 737-point rally, another stupid response to Chair Powell’s talk, the Dow Jones had risen more than 20% since Sept. 30, its low point of the year, which puts it back into a bull market, which is defined as an increase of 20% or more from a recent low.  But the S&P and Nasdaq remain in bear markets.

The gain since Sept. 30 also marked the Dow’s largest two-month* percentage gain since July 1938, according to Dow Jones Market Data.

*Calendar months.

--The International Energy Agency expects Russian crude production to be curtailed by some 2 million barrels of oil per day by the end of the first quarter next year, according to the IEA’s chief, Fatih Birol.

The European Union will ban Russian crude imports from Dec. 5 and Russian oil products from Feb. 5, depriving Russia of oil revenues and forcing one of the world’s top oil producers and exporters to seek alternative markets.

The European Commission, the EU’s executive body, has asked the bloc’s 27 member states to approve a price cap on Russian oil of $60 a barrel.  All 27 member states need to approve the level of the price cap. [Poland then did agree to the $60, allowing the bloc to move forward formally approving the deal over the weekend.]

The EU is also debating a price cap on Russia seaborne oil for the provision of shipping and insurance.  When asked about the impact of the EU measures, Birol said: “We expect towards the end of the first quarter 2023 that there may be a loss of 2 million barrels per day of Russian oil and there is a need to replace that oil.”

“But there are other factors in place, such as demand, which is very much of a function of a global economy, especially (the) Chinese economy, as well as the decisions that OPEC+ countries are going to have in a few days.”

OPEC+, which includes Russia, will hold a meeting in Vienna on Dec. 4.

As in heading into the weekend, the oil market was in a total state of flux, with no one really sure what the picture is going to be by end of next week.

--U.S. Treasury Yields

6-mo. 4.64%  2-yr. 4.28%  10-yr. 3.49%*  30-yr. 3.54%

Further declines in rates across the board on a misinterpretation of the Fed’s comments and direction.

Next Friday, new data on producer prices.

*I always report the last quote I see, which most of the time could be an hour or so after the official close, which this week is more like 3.54%, just to be accurate.

--Turmoil at Apple’s key manufacturing hub of Zhengzhou, China, is likely to result in a production shortfall of close to 6 million iPhone Pro units this year.

The situation remains fluid at the plant and the estimate of lost production could change, and much will depend on how quickly Foxconn Technology Group, the Taiwanese company that operates the facility, can get people back to assembly lines after the violent protests against Covid-19 restrictions.

The Zhengzhou campus has been racked by lockdowns and worker unrest for weeks after Covid infections left Foxconn and the local government struggling to contain the outbreak.

--Walt Disney Co. CEO Robert Iger told employees in a companywide town hall meeting that he will empower Disney’s creative teams and emphasize profitability over growing subscriber numbers at the company’s streaming service.

Iger is facing a number of challenges in returning to Disney, including employee morale.  Creative professionals in the company’s studio and streaming divisions, the so-called cast members that work in the parks and the engineers that develop and build the park attractions, have expressed being upset at various times over the past year as to how prior CEO Bob Chapek was running Disney.

Iger said, referring to a song from the musical “Hamilton,” “The status quo is gone, a lot has changed, but the sun is still shining and our world, our Disney world, is still spinning.”

Iger said that in streaming, Disney would give priority to making money over adding subscribers, signaling a strategic shift that many investors have been calling for since early this year.

“We have to start chasing profitability,” Iger said.  “It will be demanded of us.”

Iger said he didn’t have any plans to alter a hiring freeze that Chapek had put in place earlier in November, and he added that he is taking cost-cutting measures very seriously.  Iger told employees that travel and other expenses would be scrutinized carefully.  He didn’t speak about the possibility of layoffs, which Chapek had also warned about.

Asked about potential transactions, Iger said he didn’t see any on the immediate horizon.

“Nothing is forever, but I’m very comfortable with the set of assets that we have.  I think they can serve our company,” he said, adding “don’t expect any headlines soon about deals.”  Of the rumor that Apple could buy Disney, Iger said, “what you’ve read is pure speculation not rooted in any fact.”

Regarding Disney’s public spat with Florida Gov. Ron DeSantis earlier this year, Iger said the company’s LGBT employees are very important and that the company cares deeply about them.

“We’re not going to make everybody happy all the time, and we’re not going to try to,” he said.  “It’s complicated. There’s a balance.  We do what we believe is right.  Some might criticize and say who are you to say what’s right.  When you’re in a job like mine, you need to have a sense of what’s right.”

--Back in September, airlines and hotels were very optimistic about the return of business travel, with predictions that domestic business travel would rebound by this fall to about two-thirds of the 2019 level.

But now, with the slowing economy, corporate travel managers have told industry analysts that even in just the last few weeks, companies have started to ban nonessential biz travel and increased the number of executives needed to approve employee trips.  So now experts are predicting corporate travel will soften into the first quarter of 2023.

Just one month ago, Delta Air Lines was projecting 90 percent of its corporate accounts “expect their travel to stay the same or increase” in the fourth quarter.  United Airlines, too, said its strong third-quarter results suggested “durable trends for air travel demand that are more than fully offsetting any economic headwinds.”

On the hotel front, some cities still reflect a lower return-to-office rate, which reduces the ability to have in-person business meetings.

Some travel experts, however, are still bullish on group travel, trips for meetings, and association events.

But short business meetings could easily go back to being online. And hotels are still having trouble staffing up, ditto airports, though the airlines appear to have ramped up fairly well. 

--TSA checkpoint numbers vs. 2019

12/1…90 percent of 2019 levels
11/30…92
11/29…85
11/28…93
11/27…89*
11/26…86
11/25…101
11/24…88

*Sunday after Thanksgiving is the busiest day of the year and we hit a post-Covid daily high of 2,560,623.  But this is against 2,882,915 on the day after in 2019.

Interesting the numbers are now consistently below 2019.  The biz travel figures are clearly having an impact, and incumbent recession fears.

--Elon Musk went after Apple Inc., the latter having the ability to greatly influence Twitter’s potential success, as the iPhone maker is a major advertiser and tightly controls the software on its App Store.

In a string of tweets accusing Apple of staunching free speech and claiming that the tech giant had threatened to kick the Twitter app off the iPhone, Mr. Musk introduced a new wrinkle in Apple’s efforts to maintain control over software distribution, acting as a megaphone for critics who say the company holds too much power through its App Store.

Developers have waged a yearslong fight against Apple and its fees, and Musk is bringing new focus to the company on this front.

Apple didn’t respond.

Musk said he is losing $4 million a day and facing an advertiser revolt by big brands worried about Twitters’ content moderation.

Apple stands to collect as much as 30% of revenue from Twitter subscriptions that Musk has said are set to become a new focal point for the company.  The company charges as much as 30% of app purchases or subscriptions placed through the App Store. Apple’s cut of subscriptions falls to 15% after the first year of use.

In Apple’s App Store review guidelines, one of the earliest warnings the company makes is that apps “should not include content that is offensive, insensitive, upsetting, intended to disgust, in exceptionally poor taste, or just plain creepy.”

But then Musk met with Apple’s Tim Cook on Wednesday, with Musk posting a video of Apple’s campus and thanking Cook for showing him around.  He said Cook made it clear Apple never  considered removing the app.

Separately, Twitter again suspended Kanye West’s account after the scumbag posted a swastika in a tweet that Elon Musk said violated its rules.

Asked on Twitter by a user to “fix Kanye please,” Musk replied: “I tried my best. Despite that, he again violated our rule against incitement to violence. Account will be suspended.”

Yesterday, Kanye appeared on Alex Jones’ Infowars show. 

--Lawyers for BlockFi, the first direct casualty of crypto exchange FTX’s collapse, made their initial appearance in U.S. bankruptcy court on Tuesday, emphasizing that the U.S. cryptocurrency lender was “the antithesis of FTX.”

BlockFi attorney Joshua Sussberg told the court in Trenton, New Jersey, that unlike FTX – which entered bankruptcy earlier this month and told of efforts to find missing assets and pointed to a complete failure of corporate controls – BlockFi had mature and consistent leadership, hired the right experts, and implemented the right procedures and protocols.

FTX had extended a $400 million lifeline to BlockFi in July, but the Bahamas-based exchange spectacularly imploded just days after BlockFi asked it for additional financing on Nov. 8.  Earlier in November, BlockFi paused withdrawals from its platform amid uncertainty about FTX’s stability.

In a court filing on Monday, BlockFi said it owes money to more than 100,000 creditors.  It listed FTX as its second-largest creditor, with $275 million owed on a loan issued earlier this year.  BlockFi’s largest creditor is Ankura Trust, which is owed $729 million. It also owes $30 million to the U.S. Securities and Exchange Commission after agreeing to a record $100 million penalty earlier this year.  Valar Ventures, a Peter Thiel-linked venture capital fund, owns 19% of BlockFi’s equity shares.

Two of BlockFi’s largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing extreme market conditions that had resulted in losses at both companies.

I love that Peter Thiel stands to get taken down a peg or two.  Thiel has long touted crypto’s benefits and in April, at the Bitcoin 2022 conference in Miami, he took the stage to lash out at Warren Buffett, Jamie Dimon and Larry Fink for their stances on crypto, calling the financiers “enemies” of bitcoin.  He told the crowd that bitcoin represented a “revolutionary youth movement.”

I’ve told you countless times, Peter Thiel is an enemy of America.

--Meanwhile, Sam Bankman-Fried attempted to distance himself from suggestions of fraud in his first public appearance since his company’s collapse stunned investors and left creditors facing losses totaling billions of dollars.

Speaking via video link at the New York Times’ Dealbook Summit with Andrew Ross Sorkin on Wednesday, SBF said he did not knowingly commingle customer funds on FTX with funds at his proprietary trading firm, Alameda Research.

And he said no person was in charge of position risk at FTX, describing the lack of oversight as a mistake.

“I didn’t ever try to commit fraud,” Bankman-Fried said, adding that he doesn’t personally think he has any criminal liability.  He also denied knowing the full scale of Alameda’s position on FTX, claiming that it caught him by surprise.

SBF previously told Reuters in November the company did not “secretly transfer” but rather misread its “confusing internal labeling.”

Oh puh-leeze…what a lyin’ piece of shit. 

--Blackstone has limited withdrawals from its $125 billion real estate investment fund following a surge in redemption requests, as investors clamor to get their hands on cash and concerns grow about the long-term health of the commercial property market.  Shares in Blackstone fell as much as 8 percent.

The withdrawal limit underscores the risks wealthy individuals have taken by investing in Blackstone’s mammoth private real estate fund, which – after accounting for debt – owns $69 billion in net assets, spanning logistics facilities, apartment buildings, casinos and medical office parks.

About 70 percent of redemption requests have come from Asia, according to people familiar with the matter, an outsized share considering non-U.S. investors account for only about 20 percent of Blackstone Real Estate Income Trust’s total assets.

--Austan Goolsbee, who served as a top economic adviser to former President Barack Obama, will become the next president and chief executive of the Federal Reserve Bank of Chicago, the bank said Thursday.

Goolsbee, 53, is a professor of economics at the University of Chicago.  He will have a vote on the Fed’s interest-rate-setting committee next year.

Goolsbee succeeds Charles Evans, who hits a mandatory retirement age in January and has served as the bank’s president since 2007.

--Kroger raised its annual same-store sales and profit forecasts on Thursday, boosted by steady demand for groceries and household essentials, and its strategy to keep product prices relatively lower than rivals.

Kroger, like Walmart Inc., has been successful in using its scale and large store network to negotiate lower prices with suppliers, helping it pull in more inflation-weary customers to its stores and take market share away from smaller independent and specialty grocers.

But when inflation in food prices eases, which Kroger CEO Rodney McMullen expects will happen next year, investors fear the company could lose its edge over rivals and that sales growth could stall.

“Even with the moderation of inflation, there’s still going to be a lag for the customer,” McMullen said in an interview.  Historically, he said, it has taken time for consumers to get comfortable with shifting their purchasing habits as they assess whether price changes are permanent, he added.

The company forecast fiscal 2022 adjusted same-store sales growth of 5.1% to 5.3%, compared with a 4% to 4.5% rise previously.  It lifted its annual earnings per share forecast to between $4.05 and $4.15 from $3.95 to $4.05.  Its same-store sales, excluding fuel, climbed 6.9% in the third quarter ended Nov. 5.

Kroger’s blowout quarterly results and forecast are not expected to add to anti-competition concerns regulators have regarding the company’s planned $25 billion acquisition of smaller rival Albertsons Cos. Inc.

--H&M (Hennes & Mauritz AB) said it would cut around 1,500 jobs from its global workforce as retailers around the world face pressure from high inflation and weakening consumer demand.  The layoffs represent about 1% of its 155,000 global head count as of the end of last year.

--Mexican President Andres Manuel Lopez Obrador announced a 2023 hike in the minimum wage of 20%.  Since taking office in late 2018, Lopez Obrador has vowed to prioritize the poor and tackle Mexico’s vast wealth disparity to ease a decades-long decline in purchasing power for workers.  His administration raised the minimum wage by 16% in 2019, 20% in 2020, 15% in 2021, and 22% in 2022.  Last year’s hike brought Mexico’s minimum wage to $8.95 per day.

--Canada’s November jobless rate edged down to 5.1% today, better than expected, as the economy added a net 10,100 jobs, according to Statistics Canada up in the Great White North, where all the ‘domestic’ beer is ‘premium.’

--Researchers released new details from a study of a closely watched drug for Alzheimer’s disease on Tuesday, shedding more light on the drug’s risks and benefits as U.S. health regulators weigh approving it.

Eisai Co. and Biogen Inc.’s drug, lecanemab, slowed cognitive decline by 27% compared with a placebo over 18 months in a study of more than 1,700 people with early-stage Alzheimer’s researchers reported in the New England Journal of Medicine on Tuesday.

“The drug’s effect was moderate and was associated with swelling and bleeding in the brain,” the researchers said.  They recommended further, longer study of the drug.

Lecanemab attacks the sticky gunge – called beta amyloid – that builds up in the brains of people with Alzheimer’s.

Some 17.3% of patients taking lecanemab had signs of brain bleeding, compared with 9% in the placebo group.  Brain swelling occurred in12.6% of people getting the drug, versus 1.7% who got placebo.

The data is good, but is it good enough to outweigh its potential harms for real-world use?

“No one yet knows whether the benefit will be clinically meaningful.  This may take years to determine, and the debate is likely to continue,” said Samuel Gandy, professor of neurology and psychiatry at New York’s Mount Sinai told the Wall Street Journal.

Dr. Gandy and other doctors also raised concerns about recent reports of patients who died taking lecanemab as part of ongoing testing.

Last year the FDA approved another Alzheimer’s drug from Biogen and Eisai, but many doctors raised questions about its effectiveness, and Medicare and other health insurers balked at paying for it.  In May, Biogen said it would effectively stop marketing the drug, called Aduhelm.

Michael Greicius, medical director of Stanford University’s Center for Memory Disorders, said, “It’s not a benign therapy.”  Even if the results withstand statistical analysis correcting for potential bias, “we’re still stuck with weighing this pretty borderline difference over 18 months with a drug that causes brain swelling in 12% of patients,” he said.

Meanwhile, Alzheimer’s Research UK said the findings were “momentous.”

--Over 50 million birds have died amid a record-breaking outbreak of avian flu in the United States, according to the Department of Agriculture.

The 52.3 million total for the year – including chickens and turkeys – has surpassed a previous high set in 2015.

Flocks in over 40 states have been affected, more than double the number of states in the previous outbreak.

Iowa has had the most birds killed during the outbreak, 15.5 million, while Nebraska is second at 6.8 million.

--But despite the bird flu issues, prices for chicken breasts in the U.S. have plunged about 70% since the first week of June.  Wings and tenders have gotten cheaper, too, as poultry companies have increased production while demand from restaurants and supermarkets has remained flat, chicken industry analysts say.

Chicken’s rapid price drop has brought relief to restaurant chains as crispy chicken sandwiches and wings have been key to restaurants’ efforts to generate buzz and draw diners.

--Whole Foods has stopped selling lobsters at hundreds of its stores after two sustainability organizations took away their endorsements of the U.S. lobster fishing industry.

The organizations, Marine Stewardship Council and Seafood Watch, both cited concerns about risks to rare North Atlantic right whales from fishing gear.  Entanglement in gear is one of the biggest threats to the whales.

According to researchers, there are fewer than 340 North Atlantic right whales in existence, with the species heading towards extinction.

But Whole Foods’ decision to stop selling lobster drew immediate criticism in Maine, which is home to the U.S.’s largest lobster fishing industry.

But then the White House found itself in the middle of the firestorm when it flew in 200 Maine lobsters for the state dinner with French President Macron.

“The lobster on the White House menu comes from a fisher with well-documented risks to the remaining 340 critically endangered North Atlantic right whales that are often entangled in fishing gear,” Gib Brogan, a campaign manger at conservation advocacy group Oceana, said on Wednesday.

“Smarter choices would include a menu with wild Gulf shrimp or Atlantic scallops from U.S. fishers that have tackled endangered species problems head-on and developed effective ways to minimize risk.”

But Maine Governor Janet Mills tweeted that she urged the Biden administration “to recognize that all Maine lobstermen want is the opportunity to continue providing this product for people to enjoy without the federal government crushing them under the weight of burdensome, scientifically-questionable regulations.”

All I have to say is, “Why wasn’t I invited to the dinner! I love lobster!”

For those of you in the Summit / Madison, N.J. area, you can get a great lobster roll at Seymour’s food truck on Main Street in Madison.

--PNC’s 39th annual Christmas Price Index revealed that the cost of buying all the gifts from “The Twelve Days of Christmas” rose 10.5% this year.

The combined cost for the dozen gifts featured in the final verse of the famed Christmas carol totals $45,523, or $4,317 higher than last year’s price tag.

--CNN employees are learning this week whether they still have a job as the news network’s chief, Chris Licht, told staff the latest round of layoffs is underway.

CNN is looking for cost reductions across the company as it tries to bring down debt. At the same time the network is looking at a future with slowed growth in pay-TV subscription revenue and a softening advertising market.

On-air contributors will be among the first to learn whether they are being let go.  These are not employees but are under contract to serve as talking heads or experts appearing exclusively on the network.  Most are kept on an annual retainer and are paid in the low six figures, though bigger names can earn as much as $500,000 a year.

The cuts are likely to focus on employees in New York and Atlanta.

Foreign Affairs, Part II

China: Thursday, China reported 34,980 new Covid-19 infections, of which 4,278 were symptomatic, the National Health Commission reported.  Which is down from a peak a few days earlier of over 40,000, the record high.  It’s conveniently come down the last five days after last weekend’s violent protests as the government works on a new strategy and “story.”

At week’s end, several Chinese cities have rolled back PCR testing, a cornerstone of China’s zero-Covid response, and called for the use of rapid antigen tests in a sign that virus control rules are being further relaxed in the country.

Beijing authorities asked hospitals not to turn patients away if they don’t have negative PCR tests for the previous 48 hours. Instead, they can have a quick antigen test and be admitted to different zones depending on the results.

Nearly three years into a pandemic that has killed more than 6.6 million people worldwide, the official death toll in mainland China is just 5,233, which just doesn’t seem real.

Of the protests, the ruling Communist Party vowed to “resolutely crack down on infiltration and sabotage activities by hostile forces,” following the largest street demonstrations in decades staged by citizens fed up with strict Covid restrictions.

Hundreds of SUVs, vans and armored vehicles with flashing lights were parked along major city streets on Wednesday while police and paramilitary forces conducted random ID checks and searched people’s mobile phones for photos, banned apps or other potential evidence that they had taken part in the weekend’s demonstrations, that were silenced on Monday, and then re-erupted in the manufacturing hub of Guangzhou and other cities on Tuesday.

Tuesday, Chinese universities sent students home and police fanned out in Beijing and Shanghai to prevent more protests, the universities a hot spot for them.  Authorities said they were protecting students from Covid by sending them home.  Cough cough.  Classes and final exams would be conducted online.

Editorial / The Economist

“China invented Covid-19 lockdowns. During the first weeks of the pandemic, the government of Xi Jinping corralled tens of millions of people to stop the disease spreading out of Wuhan.  Almost three years later, lockdowns have become China’s undoing.  A combination of protests and rising cases means that Mr. Xi will have to navigate between mass lockdowns and mass infection – and possibly end up with both. The coming months will pose the biggest threat to his rule since he came to power in 2012 and the biggest threat to the authority of the Communist Party since the protests around Tiananmen Square in 1989.

“Sporadic local pickets are common in China. But demonstrations erupted across the country after at least ten people died in a fire in Urumqi, capital of Xinjiang, where residents were allegedly sealed in a building because of Covid.  Last weekend in Beijing protesters called for ‘freedom’; in Shanghai they demanded that Mr. Xi step down.  The crowds were small, but in a place as heavily policed as China it is remarkable they ever formed.

“If demonstrators were the only opposition, the security forces could restore order. But Mr. Xi also faces an implacable virus. To grasp the political and economic turmoil that lies ahead, you need first to understand how China’s epidemic has gone wrong.

“One problem is hubris.  The zero-Covid policy started as a stunning success, by sparing millions of Chinese lives.  At first, less disease also meant less economic harm.  For the past three years, most Chinese have got on with things. Month after month, state media trumpeted that this proves Mr. Xi and the party are competent and humane, unlike decadent Western politicians presiding over mass death.

“These words have now turned to ash. Mr. Xi’s policies have left China ill-protected against an endemic virus that is becoming harder to control.  Almost 90% of the population has had two jabs.  But our modeling, based on predictions of the rate at which people become infected and recover or die, suggests that, if the virus spread unencumbered, infections would peak at 45m a day.  Around 680,000 people would die, even if vaccines remained potent and all of them received care.  In reality vaccines wane and many would go untreated.  The need for intensive-care beds would reach 410,000, almost seven times China’s capacity.

“Many of these fatalities would be the result of Mr. Xi’s policy. Only 40% of the over-80s have had three Covid shots, needed to prevent serious disease and death.*  Because a healthy 80-year-old is over 100 times more likely to die from Covid than a healthy 20-year-old, that is a catastrophic mistake. The party is willing to lock down millions for weeks on end, but it has failed to deal with vaccine skepticism among the elderly. The government initially licensed vaccines for the under-60s only. It cast doubt on the safety of foreign vaccines while promoting traditional medicine.  And it failed to incentivize local officials to put jabs first.

*The BBC puts the figure of those over-80 with three shots at just 20%, compared with 80% in the U.K. (and that’s with five shots).

“Unless China changes course, its resilience to Covid will fade.  The latest subvariants are more infectious than Omicron, which is more infectious than Delta.  Protection from serious disease and death decays much faster in those who have only been vaccinated than it does in those who have been infected as well.  Regardless, China has not yet staged a campaign for a fourth shot.  If booster coverage were 90% and 90% of cases had the best antiviral treatment, our model says that deaths would fall to 68,000, even if the virus were free to spread.

“In a world with plenty of vaccines and antivirals, the benefits of Mr. Xi’s zero-Covid policy are no longer accruing, even as the economic and social costs continue to mount.  The number of domestic flights in China is down by 45% year on year, road freight is 33% lower and traffic on city metros has fallen by 32%.  Urban youth unemployment is almost 18%, nearly double what it was in 2018.  In contrast with the last peak of infections in the spring, restrictions are currently in place in all the big cities.  Some places have been locked down on and off for months.  Little wonder people have taken to the streets.

“And so Mr. Xi faces a dilemma: to keep the disease in check has become socially and economically costly, but to lighten the burden risks causing an epidemic. Worse, the stable middle ground between runaway disease and intolerable lockdowns appears to be shrinking, if it exists at all….

“This test of Mr. Xi’s leadership comes at a bad time.  Winter is when respiratory diseases like Covid spread more easily. As Chinese viewers of the World Cup noticed before the censors got to work, they are locked down when other countries are free and maskless. As the world looks on, the failure of zero-Covid is not only a lie-threatening error, but also an embarrassment….

“Nobody knows how much Chinese people blame (Xi) and the central government for what has gone wrong, or whether the system of surveillance and control that the party has labored to create is able to withstand mass dissent.

“And nobody can be sure how much China’s increasing nationalism ensures loyalty towards the Communist Party.  During his first ten years in power Mr. Xi exerted increasing control over politics and the economy without paying a price.  Covid throws all of that into doubt.”

---

On a different topic, former president Jiang Zemin died at the age of 96 in his home city of Shanghai on Wednesday of leukemia and multiple organ failure, the Chinese media reported, with the newspapers turning their front pages black on Thursday, flags flying at half-staff in mourning for this critical figure.  I haven’t seen a date for the funeral, which will be an important one in terms of Xi and the optics, Xi largely owing his career to Jiang.

The front page of the ruling Communist Party’s official People’s Daily devoted its whole front page to Jiang, and carried a large picture of him wearing his trademark “toad” glasses.  “Beloved comrade Jiang Zemin will never be forgotten,” it said in its headline, above a story republishing the official announcement of his death.

The official Xinhua news agency said foreign governments and “friendly personages” will not be invited to send delegations or representatives to China to attend the mourning activities.

At one of the largest foreign banks in China, Reuters reported that employees have been asked to wear black in meetings with regulators, senior staff have been asked not to be photographed at parties and the bank has put marketing activities on hold for 10 days, a senior executive told Reuters, speaking on the condition of anonymity.

Jiang’s death comes at an obviously tumultuous time, including the increasingly tense stand-off with the United States and its allies over everything from Chinese threats to democratically-governed Taiwan to trade and human rights issues.

While Jiang could have a fierce temper, his jocular side, where he would sometimes burst out in song for foreign dignitaries and joke around with them, stood in stark contrast to his stiffer successor Hu Jintao and now Xi.

Back in 1997, Jiang gave a speech at Harvard University in English, reminiscing about an era when China and the West were on better terms.

Jiang is one of the major figures of Chinese history, as he presided over a time where China opened up on a vast scale and saw high-speed growth.

Jiang rose to power after the bloody 1989 crackdown on protesters in and around Beijing’s Tiananmen Square, which led to China being ostracized internationally.

The event sparked a bitter power struggle at the top of the Communist Party between hardline reactionaries and reformers.

It led to Jiang, who had originally been seen as a plodding bureaucrat, being elevated to high office.  He was chosen as a compromise leader, in the hope he would unify hardliners and more liberal elements.

Under his stewardship, a formidable economy was forged, the Communists tightened their grip on power, and China took its place at the top table of world powers.

He oversaw the peaceful handover of Hong Kong in 1997, and China’s entry into the World Trade Organization in 2001, which intertwined the country with the global economy.

But political reforms were also put to one side, and he crushed internal dissent while pursuing a hardline stance on Taiwan. And there was his heavy-handed crackdown on religious group Falun Gong, which I wrote a lot about in the early days of this column.

Lastly, the Pentagon released an annual congressionally mandated report on the global risk picture and it assessed China’s military and security strategy, amid U.S.-China tensions over Taiwan and efforts by the U.S. to engage Russia and China in nuclear arms control talks. The report concluded that China’s goal of expanding its nuclear arsenal and its military pursuit of control of Taiwan hadn’t been hampered over the past year.

The report predicted that China would field a stockpile of about 1,500 warheads by 2035, roughly triple the number today.

China has long rejected arms-control talks with the U.S., saying the U.S. should reduce its stockpiles before any talks.

Earlier in November, Russia postponed arms-control talks that could have led to the resumption of inspections under the New START treaty, which cuts long-range U.S. and Russian nuclear forces.

According to the Stockholm International Peace Research Institute, Russia has 5,977 nuclear warheads, the United States has 5,428 and China at least 350.

As Beijing focuses on countering the U.S. along China’s periphery and over Taiwan, the Pentagon report concluded it is also transforming its military into a global force.

It’s not talked about, but the Pentagon said China conducted 135 ballistic missile tests in 2021.

Taiwan: President Tsai Ing-wen resigned as head of the ruling Democratic Progressive Party (DPP) on Saturday after her strategy to frame local elections as showing defiance to China’s rising bellicosity failed to pay off and win public support.

The elections for mayors, county chiefs and local councilors are ostensibly about domestic issues such as the pandemic and crime, and those elected will not have a direct say on China policy.  But Tsai had recast the election as being more than that, saying the world is watching how Taiwan defends its democracy amid military tensions with China.

It would be like President Biden framing the midterms as a vote about Ukraine and foreign policy, when it was about the economy, abortion, crime and extremism.

The main opposition party, the Kuomintang, or KMT, claimed victory in 13 of the 21 city, mayor and county chief seats up for grabs, including the capital Taipei, compared to the DPP’s five, which was similar to results in the last local elections in 2018.

Tsai told reporters, “It’s not like the DPP has never failed before.” She continues as president until 2024.

China’s Taiwan Affairs Office said the result showed that mainstream Taiwanese public opinion was for peace, stability and “a good life,” and that Beijing would keep working with Taiwan’s people to promote peaceful relations and to oppose Taiwan independence and foreign interference.

North Korea: Just sitting around waiting for the nuclear test…been waiting for like four months.

Last weekend, Kim Jong Un said his country’s ultimate goal is to possess the world’s most powerful nuclear force, as he promoted dozens of military officers involved in the recent launch of North Korea’s largest ballistic missile, state media reported on Sunday.

Kim said in the order promoting the officers that the Hwasong-17 is the “world’s strongest strategic weapon” and said it demonstrated North Korea’s resolve and ability to eventually build the world’s strongest army.

President Xi Jinping said on Saturday that he valued his relationship with North Korea.  “I attach great importance to China-DPRK relations,” he was cited as saying by the official Korean Central News Agency.

Iran:  Many around the world are curious to see what happens to the Iranian football team members and their families after Iran lost to the United States in the World Cup.

The Iranian team has supported the protests for over two months now, since 22-year-old Mahsa Amini reportedly died in police custody after being arrested for improperly wearing her hijab.  Before their game against England, the football/soccer team stood silently for their home country’s national anthem, declining to sing along.

“Conditions in our country are not right, and our people are not happy,” Iranian team captain Ehsan Hajsafi told reporters after the game.  Hajsafi further said that the victims’ families “should know that we are with them, we support them and we sympathize with them.”

But CNN reported that families of the Iranian team “have been threatened with imprisonment and torture” if the players fail to “behave” in the lead-up to last Tuesday’s game against the U.S.

The Iranian team then sang the national anthem, but lost the game.

Supposedly, the Iranian team was forced to meet with the Iranian Revolutionary Guards Corp after their demonstration before the game against England.

Fingers crossed for the players and their families.

Meanwhile, Supreme Leader Ayatollah Khamenei’s niece, a well-known rights activist, called on foreign governments to cut ties with Tehran over the violent crackdown.

A video of a statement by Fariden Moradkhani, an engineer whose late father was a prominent opposition figure married to Khamenei’s sister, was widely shared online after what activist news agency HRANA  said was her arrest on Nov. 23.

“O free people, be with us and tell your governments to stop supporting this murderous and child-killing regime,” Moradkhani said in the video. “This regime is not loyal to any of its religious principles and does not know any rules except force and maintaining power.”

HRANA said 450 protesters had been killed as of last weekend, including 63 minors.  Sixty members of the securities forces had been killed, and 18,173 protesters detained.

Presidential approval ratings….

Gallup: 40% approve of President Biden’s job performance, 56% disapprove; 39% of independents approve (Oct. 3-20). Time for an update.

Rasmussen: 44% approve of Biden’s performance, 55% disapprove (Dec. 2).

--House Democrats ushered in a new generation of leaders on Wednesday with Rep. Hakeem Jeffries (NY) elected to be the first Black American to head a major political party in Congress, replacing long-serving Nancy Pelosi and her team of elders.

The 52-year-old Jeffries vowed to “get things done,” even after Republicans won control of the chamber.  The closed-door vote was unanimous, by acclamation.

“It’s a solemn responsibility that we are all inheriting,” Jeffries told reporters on the eve of the party meeting. “And the best thing that we can do as a result of the seriousness and solemnity of the moment is lean in hard and do the best damn job that we can for the people.”

Wednesday’s internal Democratic caucus votes for Jeffries and the other top leaders came without challengers.

The trio led by Jeffries, who becomes Democratic minority leader in the new Congress, includes 59-year-old Rep. Katherine Clark of Massachusetts as the Democratic whip and 43-year-old Rep. Pete Aguilar of California as caucus chairman.  The new team slides into the spots held by 82-year-old Pelosi, 83-year-old Steny Hoyer (Majority Leader) and Democratic Whip James Clyburn, 82. 

Yup, it was time for a change, sports fans.  But Clyburn managed to keep some influence in wrangling the No. 4 leadership slot.

--President Biden asked Democratic leaders to let South Carolina host the first nominating contest for the party’s presidential nomination, in a shake-up that could displace Iowa’s caucus.

Biden endorsed a plan that would have South Carolina’s contest followed by New Hampshire and Nevada one week later, and then by primaries in Georgia and Michigan.

Biden’s decision came as a shock to party officials and state leaders who had been lobbying hard in recent weeks to gain a place in the early calendar.

Iowa would have no early role in the Biden plan.

But while senior party officials approved it today in Washington, it’s complicated, and far from set in stone.

--Meanwhile, the Georgia Senate runoff is Dec. 6 and Democratic Sen. Raphael Warnock has a 3- to 4-point lead in the polls over Herschel Walker.

--Rep. Kevin McCarthy (R-Calif.) is warning far right-wing lawmakers that they could risk giving Democrats a role in the process if they torpedo his bid to lead the House after the GOP’s underwhelming showing in the midterms.

“We have to speak as one voice,” McCarthy said on Monday.  “And if we don’t do this right, the Democrats can take the majority. If we play games on the floor, the Democrats can end up picking who the Speaker is.”

So far, five Republican lawmakers say they won’t vote for McCarthy under any circumstances, accusing him of being too moderate and not sufficiently supportive of former president Trump.

Trump World

A new poll released Thursday from The Economist/YouGov found that the majority of Americans are sick and tired of both President Biden and Donald Trump and don’t want to see either run for president in 2024.  Fifty-six percent responded that they did not want 80-year-old Biden to run again in 2024, while 54% said they didn’t want to see the 76-year-old Trump embark on his third presidential campaign.

Only 22% wanted to see Biden run again, and 31% said they supported Trump seeking the presidency in 2024.

The poll also found Trump and potential 2024 opponent Florida Gov. Ron DeSantis neck and neck, 20% for Trump as their preferred candidate, 18% for DeSantis.

A new Marquette Law School poll released Thursday found DeSantis in a dead heat with Biden in a hypothetical 2024 matchup, with each receiving 42% support from registered voters surveyed.

Separately, a U.S. appeals court yesterday reversed a judge’s appointment of a special master to vet documents seized by the FBI from Trump’s Mar-a-Lago estate in a major blow to the former president.

A three-judge panel of the Atlanta-based 11th Circuit U.S. Court of Appeals ruled in favor of the Justice Department in its challenge to a September ruling by U.S. District Judge Aileen Cannon.

The 11th Circuit overturned Ms. Cannon’s decision to grant Trump’s request for a special master to vet the records to decide if some should be kept from investigators and to bar investigators from accessing most of the records pending the review.

The circuit panel said Cannon lacked the authority to grant Trump’s request for a special master made in a lawsuit he filed two weeks after FBI agents carried out a court-approved August 8th search at Mar-a-Lago.

But then there was Trump’s dinner with Kanye West and Nick Fuentes.

Gerard Baker / Wall Street Journal

“ ‘Dining With Nazis’ sounds like the title of the latest Coen brothers film or a recently unearthed memoir of a favored restaurateur from the Third Reich. When it describes the social life of a declared candidate for president of the United States, we have a right to ask what it might mean.

“News of Donald Trump’s recent soiree at Mar-a-Lago with Nicholas Fuentes, a man whose repugnance stands in inverse relationship to his intellectual capacity, reminds us that the former and perhaps future president’s ability to attain new levels of notoriety remains impressively undimmed. Also at the table was noted musician, philosopher and apparently fellow candidate for the highest office Kanye West, who calls himself Ye. Mr. West has of late added to his repertoire of lyrical achievement the warning that he was about to go ‘death con 3 on Jewish people,’ so it’s not unreasonable to infer some wider significance from this symposium of disordered minds.

“It doesn’t sound like the kind of company that might be conjured when celebrities are asked in a glossy magazine interview to name their ideal dinner-party guests from history. The answer is invariably some combination of Jesus Christ, Julius Caesar, Eleanor Roosevelt and Mozart.  But we would surely be lying if we didn’t acknowledge a desire to have been a fly on the wall at the feast, or perhaps at least to have had access to one of those listening devices that the Federal Bureau of Investigation has presumably installed in all the salt cellars of the fabled mansion.

“Mr. Trump subsequently played innocent about the occasion. He told his tens of millions of followers on Truth Social that Mr. West had asked for the meeting, seeking the former president’s help with some of his difficulties, ‘in particular having to do with his business,’ and had brought along a guest with whom Mr. Trump was wholly unfamiliar.

“ ‘We also discussed, to a lesser extent, politics, where I told him he should definitely not run for President, ‘any voters you may have should vote for TRUMP.’ Anyway, we got along great,’ Mr. Trump said of Mr. West.  ‘He expressed no anti-Semitism…Why wouldn’t I agree to meet?  Also, I don’t know Nick Fuentes.’….

“Other accounts of the gathering, however, differ slightly from the former president’s recollection.  Mr. West said that Mr. Trump had been ‘very impressed’ with Mr. Fuentes, whom the rapper described as a Trump ‘loyalist.’ Someone familiar with the event told Axios that Mr. Trump had listened approvingly as Mr. Fuentes offered advice, notably that the former president should revert to being ‘authentic’ because his supporters liked it when he was unrestrained rather than the scripted candidate who read words off a teleprompter as he had carefully done in the announcement of his presidential intentions earlier this month.

“What are we to make of all this? Despite some predictable media hyperventilation, it doesn’t sound like a re-enactment of the Wannsee Conference.  I for one don’t believe for a second that Mr. Trump is an anti-Semite, though he does seem to entertain other prejudices that presumably meet with Mr. Fuentes’ approval.

“But publicly breaking bread with a white supremacist and a black fantasist has meaning and consequences.

“Part of it presumably just represents Mr. Trump’s limitless capacity for hearing people tell him things he wants to hear – whoever they are.

“Part of it surely is his perceived need for a continuing association with the ugliest elements of the American political spectrum.  There’s some alarm in the fever swamps of the far right that, perhaps chastened by this month’s midterm election setbacks, Mr. Trump may be going a little soft and insufficiently supportive of their conspiracy theories.  Letting it be known how impressed he is with Mr. Fuentes surely helps there.

“But a significant part of it, I suspect, is simply Mr. Trump’s eagerness to push the boundaries of acceptable political behavior. It is central to the man’s unique appeal. He has been doing it since he first announced for president more than seven years ago, saying a succession of unsayable things about Mexicans, John McCain and virtually the entire Republican Party.

“On a vast ocean of falsehoods, Mr. Trump has floated one indestructible truth – his line about being able to shoot someone on Fifth Avenue and not losing any voters.  We are about to discover whether that essential verity still holds, or whether, perhaps, finally people are just starting to tire of the whole unending, enervating circus.”

Republican Gov. Asa Hutchinson of Arkansas, who is clearly running for president and a man that I could easily vote for, said of the Trump-Kanye-Fuentes dinner:

“You could have accidental meetings.  Things like that happen. This was not an accidental meeting.”

Hutchinson added that “it’s not a good idea for a leader that’s setting an example for the country or the party to meet with an avowed racist or antisemite… When you meet with people you empower, and that’s what you have to avoid.  You want to diminish their strength, not empower them. Stay away from them.”

Editorial / Wall Street Journal

“(Mr. Trump) hasn’t admitted his mistake in hosting the men or distanced himself from the odious views of Mr. Fuentes.  Instead Mr. Trump portrays himself as an innocent who was taken advantage of by Mr. West.  This is also all-too-typical of Mr. Trump’s behavior as President. He usually ducked responsibility and never did manage to denounce the Proud Boys, the Oath Keepers, or others who have resorted to divisive racial politics, or even violence as on Jan. 6, 2021.

“Mr. Trump isn’t going to change, and the next two years will inevitably feature many more such damaging episodes.  Republicans who continue to go along for the ride with Mr. Trump are teeing themselves up for disaster in 2024.”

Tom Nichols / The Atlantic

“Trump’s dinner at Mar-a-Lago resembled a lazy Saturday Night Live sketch.  Trump was joined by Kanye West, now known as Ye, and Nick Fuentes, one of the many ambitious young grifters on the right who has figured out that performative idiocy – and, in his case, blistering racism – is a lot more fun than working a straight job.

“Trump, as he typically does when his overtures to extremists ignite controversy, protested that he had no idea what he had blundered into. The whole business would be laughable were it not a fact that Trump is the de facto boss in the GOP and has long been the front-runner for the Republican nomination in 2024.  Having dinner with a racist agitator is not normally a clever move for an American candidate, but Trump needs new allies, so he’s testing the limits of the public’s tolerance for radical new members of his coalition.  Trump doesn’t understand much about politics, so he may not have internalized what happened to Republicans in the midterms.  He does, however, possess an innate awareness of where he stands with his fans, and he might realize that he’s worn out his less-extreme supporters. He needs replacements.

“The attempt to replenish his base underlies not only Trump’s Early-Bird Racist Dinner but his previous embrace of the QAnon movement.  If reasonably sensible people will no longer support him, he must find unreasonable reserves to make up the difference.  Like Putin dragooning Russians into his army, Trump is net-fishing a new pool of weirdos and extremists to shore up his ongoing attempt to avenge his loss….

“We can be relieved, for the moment, that the right is in disarray. But we should not lose sight of the fact that some of the worst people in national and global politics are reorganizing and retrenching. They will be back.”

Henry Olsen / Washington Post

“To what extent should the Republican Party be the personal vehicle for Trump?

“The new Republican Party breaks down into four rough factions in response to this query, and none has a clear plurality. Instead, the party has three factions of nearly equal size and a fourth tiny one whose votes might be decisive.

“The three lions are Mega MAGA, the Old Guard and the MAGA Adjacent. I estimate each are about 30 percent of the party’s voters and are numerous in virtually every state. The minnow is the Never Trump group, which constitutes about 10 percent of GOP voters. They are strongest in wealthy suburbs and major metropolitan areas such as New York and D.C.

“Mega MAGA is Trump’s base. They want Trump because they love his combative style.  They want to ‘own the libs’ and never tire of his antics.  Indeed, as my colleague Megan McArdle recently observed, they view his high jinks as proof that he is sincere in his opposition to their political enemies.  He captured their hearts over the past six years, and they will remain faithful till death or defeat do them part.

“The Old Guard is composed of traditional Reagan conservatives.  They prefer a less combative style and liked Trump’s presidency mainly when he governed according to their wishes. They want a restoration of the old party in substance and style, with as few deviations to accommodate the Trumpian interlude as possible. These are the people who look longingly at leaders such as former vice president Mike Pence, former U.S. ambassador to the United Nations Nikki Haley, Texas Sen. Ted Cruz and Virginia Gov. Glenn Youngkin.

“The third group, the MAGA Adjacent, is the one that’s hardest for most observers to pin down. That’s because these people like Trump for both his style and substance but are not eternally devoted to him personally. They won’t look first to leaders favored by the Old Guard for that reason, although they might consider one if that person adopts a more aggressive posture. For now, Florida Gov. Ron DeSantis is their man of the hour, and that’s why polls show he is emerging as Trump’s biggest competitor.

“Note how finely these forces are balanced.  If DeSantis sours and some MAGA Adjacent voters go back to Trump, then the final two candidates will be Trump and whichever Old Guard candidate can solidify his or her position.  But if DeSantis stays strong and the Old Guard remains split, then DeSantis will make it to the final round and the Old Guard voters have to decide who the nominee will be.

“This could put the Never Trumpers in the driver’s seat. They might prefer someone such as outgoing Maryland Gov. Larry Hogan or Rep. Liz Cheney (Wyo.), but they should quickly realize their first choice has no hope of winning the nomination.  Will they instead get behind an Old Guarder, propelling that person to the final two even if that means MAGA Adjacent voters might later coalesce around Trump?  Will they back DeSantis as the lesser of two evils to send Trump packing, even if their hearts are elsewhere?  Or will they effectively abstain in the early stages and let the crucial choice of the final two competitors take place without their input?

“One can see from this and that all Republican contenders, even Trump, must perform an intricate dance to prevail. The person who pirouettes to the winners’ platform will have to be skillful indeed.”

--The leader of the far-right militia group, the Oath Keepers, has been found guilty of plotting to keep Donald Trump in power in the United States after Trump lost the 2020 presidential election.

A jury in Washington on Tuesday convicted Stewart Rhodes and one of his subordinates, Kelly Meggs, on the rare charge of seditious conspiracy.  Both could now face a maximum of 20 years in prison.

Three other defendants in the case were found not guilty of seditious conspiracy but convicted of other lesser charges.

Seditious conspiracy – which dates back to the civil war era – is the most serious charge so far brought by the Department of Justice against any of the 900 or so people facing prosecution arising from its sweeping investigation into the attack on the Capitol on January 6, 2021, by supporters of Trump.  It’s a big win for the DOJ.

At the start of the Oath Keepers trial in October, prosecutors contended that following the election, Rhodes and his subordinates “concocted a plan for an armed rebellion to shatter a bed rock of American democracy” – the peaceful transition of power from one administration to the next.

Prosecutors maintained that the Oath Keepers had plotted against Joe Biden taking over the White House from Trump, ignoring the law and the will of the voters, because they hated the result of the election.

Rhodes did not go inside the Capitol building on Jan. 6th but was accused of leading the plot.  Prosecutors showed recordings and encrypted messages in which Rhodes urged his followers to fight to keep Trump in office.

In December 2020, Rhodes posted two open letters to Trump on his website, urging the then president to seize data from voting machines across the country that would purportedly prove the election had been rigged.

Rhodes also urged Trump to invoke the Insurrection Act, a more than two-century-old law that he believed would give the then president the power to call up militias like his own to suppress the “coup” – purportedly led by Biden and his future vice-president Kamala Harris – that was seeking to unseat him.

“If you fail to act while you are still in office,” Rhodes told Trump, “We the people will have to fight a bloody war against these two illegitimate Chinese puppets.”

As part of the plot, prosecutors maintained, Rhodes placed a “quick reaction force” of heavily armed Oath Keepers at a hotel in Arlington, Virginia – ready to rush their weapons into the city if their associates at the Capitol needed them.

In his testimony, Rhodes denied he had been involved in setting up the “quick reaction force.”

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--The Supreme Court on Thursday said the Biden administration program to cancel student loans will remain blocked for now, but the justices agreed to take up the case in late winter, when they will hear arguments in the case in their session that runs from late February to early March.  Meaning no decision until late June.

Biden’s plan promises $10,000 in federal student debt forgiveness to those with incomes of less than $125,000, or households earning less than $250,000.  Pell Grant recipients are eligible for an additional $10,000 in relief.

More than 26 million people already applied for the relief, with 16 million approved, but the Education Department stopped processing applications last month after a federal judge in Texas struck down the plan.

--According to polling from the Ronald Reagan Institute, Americans trust and confidence in the military increased slightly over the past year – but it’s still close to a five-year low, with 48 percent of Americans saying they have trust and confidence in the military, compared to 45 percent last year.

Why the decline from 70 percent in 2018?  Just over 60 percent of those surveyed blamed over-politicization of Pentagon leadership as the top reason driving their lack of confidence; 59 percent also cited “the performance and competence of presidents.”

When it comes to global security threats, 57 percent surveyed said the U.S. “must continue to stand with Ukraine and oppose Russian aggression,” while just a third said that “America has enough problems at home and cannot afford to spend more on the conflict.”  Some 76 percent of those surveyed said they view Ukraine as an ally, up from 49 percent one year ago. And 82 percent view Russia as an enemy, up from 65 percent last year.

--The Senate passed legislation to enshrine federal protection for same-sex marriages with a bipartisan vote that dramatically demonstrates the cultural shift in the U.S. on the issue.

The 61-36 vote on Tuesday was a victory for Democrats who’ve raised concerns that the conservative-leaning Supreme Court could overturn a 2015 ruling that established the right to same-sex marriage.

The bill, named the Respect for Marriage Act, passed with 12 Republicans joining all Democrats present in support.  The bill heads to the House, where it’s expected to pass, because the Senate amended the legislation to provide religious liberty protections to meet demands from Republicans.  The House passed an earlier version on a 267-157 bipartisan vote.

--According to a Washington Post analysis of CDC data, in October, people 85 and older represented 41.4 percent of Covid deaths, those 75 to 84 were 30 percent, and those 65 to 74 were 17.5 percent.  So all told, the 65-plus age group accounted for nearly 90 percent of Covid deaths in the U.S., despite being only 16 percent of the population.

--Felony crimes – including murder, rape and robbery – have surged on the New York City subway system by 40% so far this year compared to 2021, according to newly released NYPD stats.

At least 1,917 felony crimes were reported January through October – up from the 1,367 tallied during the same period last year, the figures prepared for Tuesday’s MTA board committee meetings showed.

The year-to-date uptick in crime slightly outpaced the 38% increase in ridership seen over the same period, as straphangers returned to the system in the aftermath of the pandemic.

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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 $1811
Oil $80.14

Regular Gas: $3.44; Diesel: $5.13 [$3.37-$3.63 yr. ago]

Returns for the week 11/28-12/2

Dow Jones  +0.2%  [34429]
S&P 500  +1.1%  [4071]
S&P MidCap  +0.6%
Russell 2000  +1.3%
Nasdaq  +2.1%  [11461]

Returns for the period 1/1/22-12/2/22

Dow Jones  -5.3%
S&P 500  -14.6%
S&P MidCap  -9.4%
Russell 2000  -15.7%
Nasdaq  -26.7%

Bulls 38.4
Bears 31.5

Hang in there.

Brian Trumbore

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