Week in Review

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Week in Review

12/31/2022

For the week 12/26-12/30

[Posted 6:00 PM ET, Friday]

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Edition 1,237

We bid adieu to ’22…and what an ugly year it was, unless your favorite sports team won a championship.

For 2022 in the stock market….

Dow Jones… -8.8%
S&P 500…  -19.4%
Nasdaq…  -33.1%

Stoxx Europe 600… -12.9%
Tokyo Nikkei… -9.4%

It was the fourth-worst year for the S&P since 1945, and for both this benchmark index and Nasdaq, the worst since 2008.

I get into my personal market predictions down in the “Street Bytes” section, and I have some good bond market tidbits there as well.

But for 2023, inflation will prove to be sticky, current earnings estimates are way too high, and while we may not have a recession as classically defined, two negative quarters of growth in a row (which we did have Q1 and Q2 this year), much of 2023 will feel like a recession with rising unemployment rates and a new surge in energy prices.

The bottom line, as I’ve written for months at this point, is that the Federal Reserve will stay higher for longer.

Geopolitically, it will be one tense year.  I say some of the following not for shock value, it’s just how I feel.

The war in Ukraine will spread, at least briefly, into a NATO country.  A desperate Putin will continue to ratchet up the nuclear rhetoric.

President Zelensky will meet an untimely end.  Vitali Klitschko, currently mayor of Kyiv and a former heavyweight boxing champion, has the gravitas to take over.  The people will rally around him.

Understand, there are so many Russian spies in Ukraine, even to this day (just as there are tons of North Korean spies in Seoul), that something tragic is inevitable.

Speaking of North Korea, they will at some point in 2023 cross the line and will pay a very heavy price.  There will be immensely tense moments between Washington and Beijing to keep China out of it.

So China will lash out at Taiwan.

All the above could happen in a very short period of time.  Needless to say, the markets will be roiled.

To paraphrase David Byrne of the Talking Heads in “Once in A Lifetime,” and you may ask yourself, is the editor right?  Is he wrong?

For the record, here is what I wrote last 1/1/22 concerning some of 2022’s stories.

“This coming year will see much better news on the coronavirus front after a chaotic January, but Russia will have us on pins and needles early on, while lord knows how China is going to handle the Winter Olympics, after which they will ceaselessly harass Taiwan.

“Assuming Vladimir Putin wants to make some noise, and that he doesn’t want to do anything until the Beijing Games are over, he’ll have a short window while the ground is still frozen in eastern Ukraine.”

Not that bad.

Meanwhile, back to today, China is about as transparent as George Santos, totally incapable of telling its people, and the world, the truth on the Covid surge, post-reopening.  I’ve been noting the upcoming Lunar New Year holiday and hundreds of millions hitting the road in crowded buses and trains.  Yikes.

I have a ton on China and its new policies below and maybe some of the projections on the death toll, that may seem outrageous, really aren’t.

If the economy isn’t recovering as hoped as a result, President Xi Jinping, under increasing pressure, will need a distraction and it’s only about 100 miles away.

Lastly, two items on the domestic front.  This isn’t a prediction, it’s just stating the obvious, but when the new Congress is sworn in on Tuesday, what is going to happen with Kevin McCarthy?  It’s a 222-213 House and he can lose just four votes from his fellow Republicans to be seated as speaker.  Will Rep. Andy Biggs (Ariz.) stand down?

As for President Joe Biden…he won’t make it through the year.  [Think a ‘fall,’ and head injury.]

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This week in Ukraine….

--Saturday, Ukrainian President Volodymyr Zelensky, back from his trip to the White House and an address to Congress, urged his people to persevere in the face of Russian attacks as the country celebrated Christmas.

In a defiant speech, he said: “Freedom comes at a high price. But slavery has an even higher price.”

“We endured at the beginning of the war – we withstood attacks, threats, nuclear blackmail, terror, missile strikes. We will endure this winter because we know what we are fighting for,” he said.

“Even in complete darkness, we will find each other to hug each other tightly. And if there is no heat, we will embrace each other for a long time to warm one another,” Zelensky said.  “We will smile and be happy, as always. There is one difference – we will not wait for a miracle, since we are creating it ourselves.”

Earlier Saturday, Russian missile and drone attacks killed 10 people in southern Kherson city.  Another 68 were injured.

Describing Russia as a “terrorist country,” Zelensky accused Russian troops of “killing for the sake of intimidation and pleasure.”

In a social media post, the president showed pictures of streets strewn with bodies and burning cars, saying “the world must see and understand what absolute evil we are fighting against.”

Most Ukrainians are Orthodox Christians, and mark Christmas Eve – the main day of the festive season in the country – on January 6.

But this year, many worshippers celebrated the day on Dec. 24, in line with the majority of Christians around the world.

--Monday, President Zelensky said that power shortages were persisting, with nearly nine million people remaining without electricity.  In his nightly address, he said power workers had reconnected many people over Christmas but problems remained.

--Sunday, Vladimir Putin said Moscow was open to negotiations and blamed Kyiv and its Western backers for a lack of talks, which Washington has dismissed as posturing amid persistent Russian attacks.

So then Russian Foreign Minister Sergei Lavrov said Ukraine must surrender or face continued war, even as Moscow’s troops have been forced to retreat in a series of humiliating defeats.

Tuesday, in an interview with state-run Tass, Lavrov said Ukraine must cede sovereignty over territories annexed by Russia (Donetsk, Luhansk, Kherson and Zaporizhzhia) since Putin’s Feb. 24 invasion.  He reiterated unfounded claims that Russia’s aim in starting the war was “the de-Nazification and de-militarization of Ukraine.”

The Kremlin’s goals “are well-known to the enemy,” Lavrov said.  “Fulfill them for your own good.  Otherwise, the issue will be decided by the Russian army.”

Putin conceded last week that the situation was “extremely difficult” in the four partly-occupied regions of east and southern Ukraine, where Ukrainian forces have reclaimed some territory.  In November, Ukraine took back the southern city of Kherson, the only regional capital that Russia had seized during the invasion.

But Putin has said Russia has “no limitations on military spending for the war in Ukraine,” i.e., he wants results.

Ukrainian Foreign Minister Dmytro Kuleba said in an interview with the Associated Press that his country wants to hold a peace summit in February, but he doesn’t anticipate Russia taking part.  Kyiv has said it is ready to hold talks with Moscow, but only after Russia faces a war-crimes tribunal.

Ukraine has also ruled out conceding any land to Russia in return for peace, and publicly demands Russian relinquish all territory.

Monday, three Russian servicemen were killed during a Ukrainian drone attack at a military air base in southern Russia that hosts strategic bombers, the Defense Ministry in Moscow said.

The military personnel died from falling wreckage when Russian air defenses shot down the drone, state-run Tass reported, citing the ministry.

It was the second time the Engels base in the Saratov region had been hit this month after an attack Dec. 5 that damaged two Tu-95 bombers, at the same time as a strike on an airfield in the Ryazan area.  Ukraine hasn’t publicly confirmed responsibility for any of the incidents at least 500 km (310 miles) from the border between the two countries.

But you get statements like the following: “If Russians thought that war won’t touch them in their deep rear, they were deeply wrong,” Ukrainian air defense spokesman Yuriy Ihnat said on Ukrainian television.

Russia in early December retaliated by firing a barrage of air- and sea-launched missiles against energy and communications infrastructure in Ukraine

--So back to Kherson, Russian forces fired 33 rockets at civilian targets in the city in the 24 hours to early Wednesday, Ukraine’s military said, as fighting intensified with Russia deploying more tanks and armored vehicles on front lines.

Russian troops abandoned Kherson in November, and now they just shell the place, including the maternity wing of a hospital in the latest strikes.  No one was hurt.

Ukraine said Wednesday that Russian forces were attacking populated areas on the right bank of the Dnipro river near Kherson with mortars and artillery.

But the heaviest fighting remains around the eastern city of Bakhmut, which Russia has been trying to take for months at a staggering cost in lives.

In Bakhmut, which had been home to 70,000 people before the war and now lies in ruins, Russian efforts to encircle the town have been unsuccessful, according to Ukrainian officials.

In a late night address on Tuesday, Zelensky said a meeting of the military command had “established the steps to be taken in the near future.”

“We will continue preparing the armed forces and Ukraine’s security for next year.  This will be a decisive year. We understand the risks of winter.  We understand what needs to be done in the spring,” he said.

--Tuesday, Putin delivered Russia’s long-awaited response to a Western price cap on Russian oil exports, signing a decree that bans the supply of oil and oil products to nations participating in the cap from Feb. 1 for five months.

The Group of Seven, the European Union and Australia agreed this month to a $60-per-barrel price cap on Russian seaborne crude oil effective from Dec. 5.

The Kremlin’s decree stated: “This…comes into force on Feb. 1, 2023, and applies until July 1, 2023.”

Crude oil exports will be banned from Feb. 1, but the date for the oil products ban will be determined by the Russian government and could be after Feb. 1.

--Thursday, Russia launched another massive missile attack across multiple regions, the biggest wave of strikes in weeks targeting power stations and other critical infrastructure yet again.

Mykhailo Podolyak, an adviser to President Zelensky, said Russia launched over 120 missiles.

Russia dispatched explosive drones to selected regions overnight before broadening the barrage with “air and sea-based crise missiles launched from strategic aircraft and ships” in the morning, the Ukrainian air force reported.

About 90% of Lviv was without electricity, according to the mayor.

Podolyak said that Russia was aiming to “destroy critical infrastructure and kill civilians en masse.”

Kherson officials urged residents to evacuate as Russian forces have escalated their attacks.

“We’re waiting for further proposals from ‘peacekeepers’ about ‘peaceful settlement,’ ‘security guarantees for RF’ and undesirability of provocations,” Podolyak wrote on Twitter, a sarcastic reference to statements from some in the West who urged Ukraine to seek a political settlement of the conflict. [RF stands for Russian Federation.]

Ukraine’s military said in a statement: “(Russia had) saved one of the most massive missile attacks since the beginning of the full-scale invasion for the last days of the year. They dream that Ukrainians will celebrate the New Year in darkness and cold. But they cannot defeat the Ukrainian people.”

Ukrainian Foreign Minister Dmytro Kuleba called the latest attacks “senseless barbarism… there can be no ‘neutrality’ in the face of such mass war crimes.  Pretending to be ‘neutral’ equals taking Russia’s side.”

Russian Foreign Minister Lavrov, in another interview published on Thursday with the state-run news service RIA Novosti, said Moscow won’t enter into negotiations with Ukraine to end the war.  Lavrov said the Kremlin won’t discuss Ukraine’s demands that it withdraw from occupied lands and pay reparations. 

--President Zelensky declared his country a “global leader” in a speech to parliament on Wednesday, telling lawmakers to remain united in the face of Russia’s invasion and praising Ukrainians for helping the West “find itself again.”

Zelensky, in an annual speech held behind closed doors because of the war, said Ukraine’s military resistance against the Kremlin had reinvigorated a belief in values across the world.

“Thanks to our unity we achieved that which almost no one in the world believed.  Almost no one, except us,” he told lawmakers, his cabinet and top military officials.  “Our national colors are today an international symbol of courage and indomitability of the whole world.”

“Ukraine became one of the global leaders,” Zelensky said.  “Over 10 months of this year, we helped everyone. We helped the West find itself again, to return to the global arena and feel how much the West prevails. No one in the West fears nor will they fear Russia.”

--Friday, Putin and Chinese President Xi Jinping hailed deepening ties between their countries in a video call, despite signs of Beijing’s impatience over the wider political and economic impact of Russia’s war.

Russia-China ties are the “best in history” and their strategic partnership is a “stabilizing factor” amid rising geopolitical tensions, Putin said in the call.  Russia would seek to strengthen military cooperation with China, he added.

Xi thanked Putin for sending a message of congratulations after a congress of China’s ruling Communist Party in October that handed him a precedent-defying third term in power.  China stood ready to expand the “strategic partnership,” Xi said.

This was their first call since the two met in September in Uzbekistan, and underscores Moscow’s deepening dependence on Beijing.  Putin called Xi “dear friend” during a portion of the meeting that was televised, and Xi responded similarly.

It was back in February on the eve of the Winter Olympics in Beijing, that the two declared a “no limits” partnership, but Putin’s invasion of Ukraine weeks later prompted China to clarify that there was indeed a “bottom line” to the relationship.

Beijing has refused to publicly condemn the war, instead accusing the United States of provoking Russia by pushing to expand NATO.

But with the war at a stalemate, Xi has taken steps to distance himself from Putin. China signed off on a communique at last month’s Group of 20 summit in Bali that said “most members strongly condemned the war in Ukraine.”

--Also Friday, Ukraine’s air force said that Russia launched 16 “kamikaze” drones overnight and that Ukrainian air defenses destroyed all of them.

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--Belarus’ defense ministry said its air defenses had downed a Ukrainian S-300 missile in a field on Thursday morning, during one of Russia’s largest missile attacks against Ukraine since the start of the war.  The military commissar of the Brest region, Oleg Konovalov, played down the incident in a video message posted on social media by the state-run BelTA news agency, saying that local residents had “absolutely nothing to worry about.  Unfortunately, these things happen.”

A mature response and encouraging.  While Belarus allows Moscow to use its territory as a launchpad for the invasion, and there has been a flurry of Russian and Belarusian military activity in recent months, Minsk has been adamant it is not participating in the war.

--Pope Francis on Saturday, Christmas Eve, said in an apparent reference to the war in Ukraine and other conflicts that the level of greed and hunger for power was such that some wanted to “consume even their neighbors.”

“How many wars have we seen!  And in how many places, even today, are human dignity and freedom treated with contempt!”

The pontiff continued: “As always, the principal victims of this human greed are the weak and the vulnerable,” denouncing “a world ravenous for money, power and pleasure… I think above all of the children devoured by war, poverty and injustice.”

--A Russian sausage tycoon, Pavel Anton, was found dead at an Indian hotel, two days after a friend died during the same trip.

They were visiting the eastern state of Odisha and the millionaire, who was also a local politician, had just celebrated his birthday at the hotel.

Antov was a well known figure in the city of Vladimir, east of Moscow.

Last summer he denied criticizing Russia’s war in Ukraine after a message appeared on his WhatsApp account.

Antov’s death was the latest in a series of unexplained deaths involving Russian tycoons since the start of the invasion, many of whom had openly criticized the war.

Antov reportedly fell from a window at the hotel.  Another member of his four-strong Russia group, Vladimir Budanov, died at the hotel on Friday.

The Russian consul in the region told Tass that police did not see a “criminal element in these tragic events.”

Forbes said Antov, who founded the Vladimir Standard meat processing plant, was worth an estimated $140 million.

In September, the head of Russia’s oil giant Lukoil, Ravil Maganov, apparently fell from a hospital window in Moscow.

The ‘joke’ is the story is always the same…Comrade X went out on his balcony for a cigarette and fell.

But wait…there’s more!  Vladimir Nesterov, one of Russia’s military and scientific elites who designed the Russian Angara rocket, suddenly died this week at the age of 74, no explanation given that I’ve seen.

Nesterov’s rocket designs will be responsible for Russia’s first manned mission to the moon, eventually.

But he was accused of massive embezzlement in a case going back to 2014.

Opinion….

Editorial / The Economist

“As 2022 draws to a close, Ukraine is still an independent state – something few may have predicted when Russia invaded it in February.  Three broad scenarios now seem plausible for next year.  The first, and worst, assumes that Russia stabilizes the front lines and rebuilds its battalions.  Supplies and arms from America and Europe could dwindle. Western countries might then lobby Ukraine to accept a ceasefire.

“The second, and far more likely, is a stalemate.  Russia might mobilize enough young men to fill trenches and man fortifications, without training them to be the effective fighters needed for victory.  Unwilling to concede, President Vladimir Putin might simply try to exhaust Ukraine and its allies.

“The third is the most encouraging, and possibly the most dangerous.  Ukraine, maintaining its current momentum, could bring its forces to the cusp of Crimea.  Mr. Putin might then issue an ultimatum: stop or risk the use of nuclear weapons. The world will hold its breath.”

Editorial / Washington Post

“War is chaotic, inexplicable and devastating to children caught up in it.  But war is not an excuse to abduct children from parents and their nation, as Russia is now doing in Ukraine. This is specifically prohibited by the 1948 United Nations Convention on the Prevention and Punishment of the Crime of Genocide.  The transfer of Ukrainian children to Russia – and attempts to brainwash them, removing their language and culture – is a genocidal crime that calls for prosecution….

“President Vladimir Putin issued a decree in May making it easy for Russians to adopt Ukrainian children, and the policy is being ‘vigorously pursued’ by the Russian children’s rights commissioner, Maria Lvova-Belova, who ‘openly advocates stripping children of their Ukrainian identities and teaching them to love Russia,’ [the Post has reported].  Ukrainian children taken to Russia would, at first, insult the Russian leader by singing the Ukrainian national anthem, Ms. Lvova-Belova told journalists, ‘but then it transforms into love for Russia.’  The Kremlin has boasted of the removals, evidenced by the number of photos and videos appearing on its website and on state television.

“While the number of children taken is not clear, Daria Herasymchuk, Ukraine’s top children’s rights official, has estimated that nearly 11,000 Ukrainian children have been taken by Russia without their parents….

“The facts Ms. Lvova-Belova and Mr. Putin have acknowledged about assimilating the Ukrainian children into Russia and eradicating their culture provide evidence of intent to commit genocide as defined by the (the UN Convention).

“The provision in the genocide treaty was adopted in the shadow of Nazi atrocities, including a scheme directed by Heinrich Himmler to snatch children from Poland and place them in German orphanages or with German families to be raised as Germans.  The first convictions at the Nazi war crimes trials were for child abductions.  Prosecutor Harold Neely declared that ‘it is no defense for a kidnapper to say he treated his victim well,’ noting that ‘these innocent children were abducted for the very purpose of being indoctrinated with Nazi ideology and brought up as ‘good’ Germans. This serves to aggravate, not mitigate, the crime.”

‘Russia, successor to the Soviet Union, is a party to the genocide convention. But Mr. Putin has shown little regard for international laws or norms of any kind in his war to wipe out Ukraine’s democracy and its people.  He and the other Russian officials complicit in genocidal crimes against children should be held to account.”

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Wall Street and the Economy

It was a slow week on the data front, with the S&P CoreLogic Case-Shiller home price index for October revealing the adjusted 20-city monthly rate fell 0.5% in October, after a decline of 1.3% the prior month, better than expected, while the unadjusted annual rate of gains was 8.6% vs. a prior 10.4%, so this latter figure continues to come down from the peak.

November pending home sales were down 4.0% month-on-month, far worse than expected and the sixth straight monthly decline.

Freddie Mac’s 30-year fixed-rate mortgage finished the year at 6.42%, up from last week’s 6.27%, and vs. 3.11% a year ago.  This was the largest increase in any calendar year, a consequence of the Fed’s aggressive moves to calm inflation.

This has a massive impact.  When mortgage rates were around 3%, a borrower who bought a $500,000 home with a 20% down payment could expect to pay $207,000 in interest on the loan over 30 years, according to a Bankrate.com mortgage calculator.  With a mortgage rate of 6.42%, the borrower could expect to pay nearly $503,000 in interest over that period

The December Chicago PMI came in today at 44.9, better than expected (though 50 is the dividing line between growth and contraction), an important first look at the manufacturing sector for the month before we get next week’s ISM and employment data.  The 44.9 also compares to November’s 37.2, which was the lowest since 2008-09.

The Atlanta Fed’s GDPNow barometer for the fourth-quarter remained at 3.7%.

As for the holiday season shopping sales figures, Mastercard SpendingPulse reports that for the period Nov. 1-Dec. 24, retail sales rose 7.6%, non-inflation adjusted, and below 2021’s 8.5%.

Mastercard said online sales grew by 10.6%, and in-store sales by 6.8%.

By category, clothing rose 4.4%, while jewelry and electronics dipped roughly 5%.

The National Retail Federation considers the holiday shopping season to be Nov. 1-Dec. 31, so we’ll get that figure early next week, I assume.  After November, the NRF was looking at 6% to 8% for the two months.

Personally, I’ll be heading to the Mall this coming week to see what the inventory situation is and if I can get more dress shirts for 60% off.

Gasoline prices rose this week, back to $3.17 for regular, though diesel ticked down to $4.68.

A year ago, regular was at $3.28, nationally; diesel $3.57. 

Big Picture stuff…According to the Centre for Economics and Business Research, the world faces a recession in 2023 as higher borrowing costs aimed at tackling inflation cause a number of economies to contract.

The British consultancy said the economy will stall in 2023 as policy makers continue their fight against rising prices.

The CEBR takes its base data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.

China is now not set to overtake the U.S. as the world’s largest economy until 2036 at the earliest – six years later than expected.  That’s a result of the zero-Covid policy and rising trade tensions with the West, which have slowed its expansion. The cross-over point could be even later if Beijing tries to take control of Taiwan, according to the CEBR.

Europe and Asia

No data from the eurozone this week, but we will be inundated the next two weeks, led off by PMI figures for December.

Turning to Asia…China reports PMI data later tonight.

Japan reported disappointing November retail sales, -1.1% month-on-month, and +2.6% year-over-year vs. a prior 4.4%.

November industrial production fell 1.3% Y/Y.

Street Bytes

--For the holiday-shortened week, the major indices were off just a smidge in light trading.  The Dow Jones lost 0.2% to 33147, the S&P 500 was off 0.1% and Nasdaq 0.3%.

It was an awful year for some longtime market leaders, with Apple, Alphabet, Microsoft, Nvidia, Amazon.com and Tesla all falling between 26% and 66% for the year.

For 2022, I said the Dow and S&P would be unchanged, with Nasdaq -5%.  “Though with wild swings in between, the markets convulsed by both geopolitics and the Federal Reserve at various times.”

Well that last part was good…I just didn’t gauge the magnitude.  But I sure didn’t call for gains, like virtually everyone did going into the year.

For 2023, ditto…investors will be shaken to their core by more than one or two geopolitical items, as I alluded to above.

I’ll say the Dow and S&P are down 8%, Nasdaq -18% for the year.

Granted, rarely does the S&P fall two consecutive years, just four times since 1928*, but I’m saying 2023 is the fifth.

*The Great Depression, World War II, the 1970s oil crisis and the bursting of the dot-com bubble.

--U.S. Treasury Yields

12/31/21

6-mo. 0.18%  2-yr. 0.73%  10-yr. 1.51%  30-yr. 1.90%

12/31/22

6-mo. 4.75%  2-yr. 4.43%  10-yr. 3.87%  30-yr. 3.96%

Quite a year in the bond pits, eh?  An absolute debacle for bond funds and fixed-income investors.

By the way, I said the 10-year yield would finish 2022 at 2.45%, but at least this was vs. consensus of 2.00%-2.10%.

I’ll say 4.50% for 12/31/23, as I believe core inflation will stabilize at about 4%, which isn’t good enough for the Fed.

And it was a crazy year across the pond.  The yield on the German 10-year climbed from -0.19% on 12/31/21 to 2.56%, while the Italian 10-year went from 1.17% to 4.68% over the course of ’22.

--Oil, as measured by West Texas Intermediate, finished the year at $80.50 vs. last year’s close of $75.45. But boy did we have some volatility in between.

--Southwest Airlines has been accounting for 70%+ of all flight cancellations during the week in a true travel nightmare for Americans. We’ve all seen the pictures of the long lines at airports, the stories of people/families being stuck for days on end in an airport, the lost baggage debacle, all due to Southwest.  To say hundreds of thousands of passengers are pissed would be a gross understatement.  And the timing could not have been worse, including this being the first opportunity since the pandemic for many families to truly reunite.  Yes, the weather was an issue, but really not as severely as first thought.

The airline said Monday the situation was “unacceptable” as operational conditions forced it to make daily changes to its flight schedule, but the tools it uses are “operating at capacity.”  Southwest then said it would reduce its operations by flying one-third of its schedule for the next several days.

CEO Bob Jordan told the Wall Street Journal late Monday that the revised schedule could be extended.

“We’re working with Safety at the forefront to urgently address wide-scale disruption by rebalancing the airline and repositioning crews and our fleet ultimately to best serve all who plan to travel with.  This safety-first work is intentional, ongoing, and necessary to return to normal reliability, one that minimizes last-minute inconveniences.”

The Dallas-based airline was undone by a combination of factors including an antiquated crew-scheduling system and a network design that allows cancellations in one region to cascade throughout the country rapidly.  Those weaknesses aren’t new.  They were responsible for a similar failure by Southwest in October 2021.

Leaders of Southwest’s labor unions have warned for years that the airline’s crew-scheduling system, which dates to the 1990s, was inadequate and the CEO acknowledged this week that the technology needs to be upgraded.

Additionally, the other large U.S. airlines use “hub and spoke” networks in which flights radiate our from a few major or hub airports. That helps limit the reach of disruptions caused by bad weather in one part of the country.

Southwest, however, has a “point to point” network in which planes crisscross the country during the day.  This can increase the utilization and efficiency of each plane, but problems in one place can ripple across the country and leave crews trapped out of position.

But then you also had stranded travelers having zero ability to reach the airline on the phone and the lack of help with hotels and meals.

Southwest said Tuesday that the airline was working on processing refunds after the company canceled thousands of flights.  CEO Bob Jordan said in a video: “Our plan for the next few days is to fly a reduced schedule and reposition our people and planes, and we’re making headway and we’re optimistic to be back on track before next week.”

On its website, the company said that it will honor “reasonable requests” for meal, hotel and transportation reimbursements for those affected by flight cancellations or significant delays between Dec. 24 and Jan. 2.

Southwest canceled 2,909 flights Monday, 2,694 Tuesday; 2,509 Wednesday; and 2,362 on Thursday.

To take Wednesday’s 2,509 figure, by comparison, United canceled 25 that day, Delta 15 and American 28.

Southwest then returned to ‘normal operations’ today, Friday, canceling just 43 flights, but it’s not like those stranded magically appeared at their intended destinations…let alone their bags.

The Department of Transportation has heavily criticized the airline over its failure to bounce back from the weather disruptions after the Christmas weekend as its peers had.  The DOT said it plans to review whether the cancellations were within the company’s control and whether it is in compliance with its customer service plan.

Transportation Secretary Pete Buttigieg spoke with Bob Jordan and airline union leaders on Tuesday and Buttigieg reiterated the agency expected Southwest to “meet its obligations to passengers and workers and take steps to prevent a situation like this from happening again.”

“While we all understand that you can’t control the weather, this has clearly crossed the line from what’s an uncontrollable weather situation to something that is the airline’s direct responsibility,” the secretary told “NBC Nightly News.”

One thing with the lost baggage aspect of this fiasco that many travelers have had to relearn is make sure your essentials, including medications, are in your carry on.

--China Eastern Airlines has taken delivery in Shanghai of the very first indigenously developed and produced passenger jet airliner.  The C919 from Commercial Aircraft Corporation of China (Comac) is expected to go into commercial operation in the spring of 2023.

This is big.  First, it marks not only the start of China’s mass production of “home-produced” aircraft, but also the advancing global competitiveness of Chinese industrial enterprises in hi-tech sectors, such as aerospace.

Second, it’s a competition marker for other airline producers, namely Boeing and Airbus, and, third, it indicates the development of China’s own supply chain.

The C919 is still a long ways from being commercially viable around the world as there will be a lengthy certification process, but this is a day the Big Two have long dreaded. And you can see that eventually, China’s massive domestic air travel market could easily be filled by mostly Comac aircraft.  Again, not tomorrow, not 2025, but eventually. [Personally, I’ll be dead and I don’t really care that much.]

TSA checkpoint numbers vs. 2019

12/29…91 percent of 2019 levels
12/28…100 (small passenger numbers, though, for 12/27, 12/28)
12/27…108
12/26…88
12/25…70
12/24…74
12/23…81
12/22…92

--Tesla shares fell 11% on Tuesday after a report that the automaker was planning to run a reduced production schedule in January at its Shanghai plant sparked worries of a drop in demand in the world’s biggest car market.  The stock fell to $109 intraday, Tuesday, its lowest point in more than two years, and down from $352 at yearend 2021, and $381 on April 4.  Staggering.

The shares have lost more than half their value since the start of October as investors worried that Twitter was taking too much of CEO Elon Musk’s time while fretting about his stake sale in the EV maker.

Tesla’s production cuts at the Shanghai plant come amid a rising number of Covid-19 infections in the country.  Earlier this month Tesla reportedly had planned to suspend Model Y production at the plant from Dec. 25 to Jan. 1.

Yes, the easing of zero-Covid policies was welcomed by businesses, but it was heavily disrupting to business operations at least in the short term.  One official told Reuters that workers at Tesla and its suppliers had been falling sick as part of the Covid wave, and that’s obviously going to hinder operations.  It has not been established practice at the Shanghai plant to shut down for a year-end holiday.

Wednesday, Musk told employees that they should not be “bothered by stock market craziness” after the company’s shares fell 70% this year.  In an email sent to staff, Musk said he believes that long-term, Tesla will be the most valuable company on earth.  He also urged employees to make a push to deliver vehicles at the end of this quarter, after the automaker has offered discounts to its vehicles in the United States and China.

“Please go all out for the next few days and volunteer to help deliver if at all possible.  It will make a real difference!” he said in the email.  “Btw, don’t be too bothered by stock market craziness.  As we demonstrate continued excellent performance, the market will recognize that,” he said.

At week’s’ end, the shares had rebounded to $123.

--FTX founder San Bankman-Fried said he and former executive Gary Wang borrowed more than $546 million from Alameda Research to buy a nearly 8% stake in Robinhood Markets Inc., according to court papers.

The pair borrowed the funds earlier this year. The transactions were documented in a series of promissory notes, detailed in an affidavit that surfaced in a dispute in U.S. bankruptcy court in New Jersey on Tuesday.

The Robinhood stake – about 56 million shares in total – is at the center of a multi-jurisdictional ownership fight playing out in Antigua, New Jersey and Delaware.  FTX, bankrupt crypto lender BlockFi Inc. and an individual FTX creditor are all trying to establish claims to the shares in separate legal proceedings .

Alameda’s borrowing from FTX is at the core of the fraud case against SBF unfolding in Manhattan federal court. 

In a transcript of her Dec. 19 plea hearing, Caroline Ellison, former chief executive of Alameda, said she agreed with Bankman-Fried to hide from FTX’s investors, lenders and customers that the hedge fund could borrow unlimited sums from the exchange.

“We prepared certain quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties,” Ellison said in Manhattan federal court, according to the transcript.

Ellison and Gary Wang both pleaded guilty and are cooperating with prosecutors as part of their plea agreements.

SBF is expected to make a plea next week.

--Goldman Sachs Group confirmed reports that a fresh round of job cuts is coming in January, CEO David Solomon said in his year-end message to staff.

“We are conducting a careful review and while discussions are still ongoing, we anticipate our headcount reduction will take place in the first half of January,” Solomon said.  “There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity.  For our leadership team, the focus is on preparing the firm to weather these headwinds.”

The firm may seek to eliminate 8% of its workforce or up to 4,000 jobs, to combat a slump in profit and revenue.

“We need to proceed with caution and manage our resources wisely,” Solomon said in his message.

Some say Solomon himself should be one of the 4,000.

--The National Retail Federation estimates that shoplifting amounted to roughly 1.4% of retail revenue in 2021, or roughly $94.5 billion.  Recently, Walmart CEO Doug McMillon said that if the retail theft issue is not addressed over time, “prices will be higher and/or stores will have to close.”

Retailers told the NRF that Covid-19 worsened the risk of crime, partly because labor shortages have made it difficult to fully staff stores. Supply-chain issues, such as delays during the pandemic, meant more cargo was sitting around, leaving it more vulnerable to theft as well.

Target said shoplifting (“shrink”) reduced its gross profit by more than $400 million in the first three quarters of its fiscal year, compared with the prior year.  Even Dollar Tree and Family Dollar are seeing their already thin profit margins impacted by theft.

--AMC Entertainment Holdings shares are trading at about $4, down from a 52-week high of $34, as CEO Adam Aron said Tuesday he had asked the company’s board to “red circle and freeze” his target cash and stock pay for 2023.

Aron, who has led the movie-theater chain and meme-stock darling since 2016, described his move in a series of tweets as he announced another equity sale and plans for a reverse stock split.

AMC, like GameStop, was a major beneficiary of the meme-stock frenzy in January 2021, which sent the struggling company’s shares skyrocketing.

But now it has cratered since the company announced a $110 million equity capital-raising plan last week and said it was seeking a 1-for-10 reverse split of its common stock.

--Meanwhile, Walt Disney’s “Avatar: the Way of Water,” had been in theaters for ten days as of last weekend, and even with box-office performance merely meeting expectations, analysts do feel the film will benefit Disney and its streaming platform moving forward.

As of Tuesday, the movie had earned $1.03 billion globally, standing as the number-two release of 2022, the numbers not as strong as some expected due to the length of the film (meaning fewer showings) and then the weather that kept people away from theaters.

But, it is nonetheless the sixth title ever to reach this milestone within the first two weeks of its release.

--New York City subway ridership hit one billion in 2022 on Tuesday, the first time it has hit that milestone since 2019 and a 240 million rider increase over last year, the MTA announced.

A bright spot in a difficult year, with the finances at the Metropolitan Transportation Authority a total mess.

Foreign Affairs, Part II

China: Authorities stopped releasing daily Covid-19 caseloads on Sunday, after the figures failed to deliver the full picture of an Omicron tsunami sweeping through the nation, straining the public health system in many cities.

The National Health Commission gave no reason for the change.  The NHC had released daily figures on Covid infections since January 21, 2020 – during China’s first outbreak in the central city of Wuhan.

As Covid sweeps through China, there are fears that a new variant of concern could emerge.

China then announced it would reopen borders and abandon quarantine after it downgrades its treatment of Covid on January 8.

The downgrade from the top category A infectious disease to category B management from January 8 means Covid only requires “necessary treatment and measures to curb the spread.”

Category A empowered local governments to impose strong measures such as lockdowns, isolation and quarantine.

Authorities will also no longer refer to Covid-19 as a form of pneumonia.

According to Chen Xi, a global health expert at Yale University, the major Covid outbreak ripping through China could have unpredictable effects on the virus.

“The world’s most populous country has a large immunity trap and includes a large number of immunocompromised population, who can harbor the virus for months – that may produce variants of concern,” Chen said.

But he said the risk of new variants emerging from the outbreak could be “a bit less than it seems.”

China had stuck with its zero-Covid strategy for so long that people’s immune systems remained trained almost exclusively on the original versions of the coronavirus, he said, making it easier for the currently circulating strains to spread.

“It’s possible that there will be less pressure for the virus to evolve to evade immunity further,” Chen added.

China has denied under-reporting Covid-19 deaths and said an evaluation of the true scale of its wave of infections is under way.

The Chinese Centre for Disease Control and Prevention (China CDC) reported 14 deaths from Covid from December 1-29 on Friday, bringing the national death toll from the virus to 5,247 since the start of the pandemic.

The numbers are in stark contrast to social media accounts of overwhelmed morgues and long queues at crematoriums since China abandoned its zero-Covid policy.

As I noted last week, a leaked document from the National Health Commission that circulated on Chinese social media, estimated that more than 248 million people were infected in the first 20 days of December.

British-based health data firm Airfinity has forecast 9,000 daily deaths, peaking at 25,000 a day on January 8.  Its study, released on Thursday, used data from China’s provinces combined with the growth rates in cases reported by other places as they lifted restrictions, such as Hong Kong and Japan.

Airfinity estimated that China’s total death toll from the start of the surge in December to January 8 would reach 584,000, and climb to 1.7 million across the country by the end of April 2023.

Just a wee bit different from 5,247.

The study did suggest cases in Beijing are likely to have peaked, while deaths will peak there in the next two weeks.

As back up to the British study, you have two Chinese cities that have reported daily Covid cases far surpassing the official national tally,

The city of Dongguan in the southern province of Guangdong has 250,000 to 300,000 people being infected on a daily basis, the city’s health commission said on its WeChat account last weekend.  The manufacturing hub has a population of about 10.5 million as of 2021.

Qingdao city in the eastern province of Shandong is seeing 490,000 to 530,000 daily cases based on data projections, a local newspaper reported last Friday. This city has a population of about 10.3 million.

Last weekend, Shanghai authorities urged residents to stay at home over Christmas.  While the holiday is not traditionally celebrated in China, it is common for young couples and some families to spend the holiday together.

So, the U.S. on Wednesday announced it would require travelers from China to submit a negative Covid-19 test beginning Jan. 5.

Officials in Washington say China has provided limited surveillance data regarding the surge and they have declined U.S. offers to provide additional vaccines.  Japan and Malaysia were among those also imposing restrictions on travelers from China, in the former’s case Covid tests on arrival for travelers from the mainland.

Starting at midnight on Jan. 5, travelers 2 years old and older flying to the U.S. from mainland China, Hong Kong and Macau will be required to get tested no more than two days before departure.  Passengers must present negative test results from either a PCR or rapid antigen test, officials said.

Italy on Thursday urged the rest of the European Union to follow its lead and test travelers from China for Covid, but others said they saw no need to do so for now or were waiting for a common stance across the largely border-less bloc.  The EU’s health officials could not agree on one course of action when they held talks in the morning but said they would continue later.

This was not the first time the EU was split on Covid policies.  At the start of the pandemic, there was much debate on what to do, and heated competition to buy safety equipment before member states pulled together and successfully placed – and shared – joint vaccine orders.

Italy “expects and hopes” that the EU will impose mandatory Covid tests for all passengers flying in from China like Rome did, Prime Minister Giorgia Meloni told a news conference.

Thus far, in the EU, only Italy has ordered Covid-19 antigen swabs for all travelers coming from China.  Which means the policy won’t be effective unless others do the same thing.  The main airport in the Italian city of Milan started testing passengers arriving from Beijing and Shanghai on Dec. 26 and found that almost half of them were infected.

A French official in charge of the health risk assessment committee, COVARS, said: “From a scientific point of view, there is no reason at this stage to bring back controls at the borders.”   Brigitte Autran, who advises the government on epidemiological risks, told Radio Classique that for now the situation was under control and that there were no signs of worrying new Covid variants in China.  Germany also said they saw no need for new travel restrictions.

The European Commission, the bloc’s executive arm, said that the BF.7 Omicron variant, prevalent in China, was already present in Europe.

According to a global consortium that’s tracking coronavirus mutations, no novel Covid-19 variants have emerged in China, potentially easing concerns the country’s record wave of infections would give rise to new strains that could circulate around the world.

National, provincial and private health-care authorities in the country have provided nearly 1,000 genetic sequences from infected patients to GISAID in the past five days, said CEO Peter Bogner.  So far, all the samples continue to be Omicron, though subvariants that have hit other parts of the world – including XBB.1 and BQ.1.1 – have emerged, he said.

“The variants continue to circulate without any significant changes that raise any specter of concern,” Bogner said.  “You do not have any kind of data that suggest anything but business as usual.” [South China Morning Post]

---

Meanwhile, the U.S. military announced Thursday that a Chinese military plane came within 10 feet (10 feet from the wing, 20 feet from the nose) of a U.S. air force aircraft in the South China Sea last week and forced it to take evasive measures to avoid a collision in international airspace.

The close encounter followed what the United States has called a recent trend of increasingly dangerous behavior by Chinese military aircraft.

The incident involved a Chinese Navy J-11 fighter jet and a U.S. air force RC-135 aircraft, the U.S. said in a statement.

At the same time, more than 70 People’s Liberation Army warplanes carried out operations near Taiwan in the 24 hours until 6am on Monday, with more than half crossing the de facto border between the self-ruled island and mainland China.

It is the highest number of PLA aircraft recorded in one day since the island’s defense ministry began making information on daily fly-bys public in 2020.

Seventy-one warplanes and seven warships were detected around Taiwan in the period and 47 crossed the median line, the unofficial border in the Taiwan Strait.

The fly-bys came after President Biden signed the National Defense Authorization Act late last week. The defense spending bill includes the Taiwan Enhanced Resilience Act to increase military and security cooperation between the two sides.

An Eastern Theatre Command of the PLA spokesman, Colonel Shi Yi, said the fly-bys were “a resolute response to the escalating collusion and provocation by the United States and Taiwan. The command’s troops will take all necessary measures to firmly defend national sovereignty and territorial integrity.”

Separately, Taiwan extended mandatory military service from four months to one year, President Tsai Ing-wen said on Tuesday at a press conference, in a move to bolster Taiwan’s defense in the event of an attack from Beijing.

“Peace will not drop from the sky… Taiwan is on the frontline of authoritarian expansion,” she said.

Tsai said conscripts will undergo more intense training, borrowing some elements from the U.S. and other advanced militaries.  She added that the island’s current defense system was inadequate to cope with aggression from China, which has one of the world’s largest and most advanced militaries.

“China’s military aggression has become increasingly obvious after its war game in August,” which followed the visit to the island by Speaker Nancy Pelosi.

Rich Lowry / New York Post

“China sent 71 aircraft and seven ships toward Taiwan in a 24-hour period this past weekend, while Russia shelled the Kherson region more than 70 times.

“These acts of aggression – occurring 5,000 miles apart, one in a grinding war of attrition, the other as part of an ongoing political and diplomatic struggle that may well result in open hostilities – are related.

“It’s no accident that the two most dangerous powers in the world, China and Russia, are aggrieved empires seeking to right what they consider the wrongs that resulted in their humiliation and diminishment in the 19th and 20th centuries.

“Whereas in the 2000s the most pressing problem of the international system seemed to be malicious subnational groups operating in the ungoverned spaces, now it’s malicious would-be supranational entities seeking to take over spaces governed by others.

“In his masterly book ‘Diplomacy,’ Henry Kissinger observed, ‘Empires have no interest in operating within an international system; they aspire to be the international system.’

“Both China and Russia experienced failures in the past two centuries.

“China and Russia are trying to reclaim their imperial pasts.

“The fall of the Roman Empire was a social and economic catastrophe for the West, but it’s been a blessing that no such overawing behemoth ever rose in its place.

“Russia and China, in contrast, never lost their imperial DNA and have chips on their shoulders….

“Xi views Taiwan much the same way as Putin views Ukraine – it rightfully belongs to China, and retaking it will help salve the geopolitical and psychological wounds of imperial China’s spectacular descent into disaster and powerlessness.  ‘We cannot lose even one inch of the territory left behind by our ancestors,’ Xi informed a U.S. official in 2018.

“The war in Ukraine shows that when an autocrat ruling a once-great empire speaks in such terms, it is time to arm the targeted state to the teeth and dispense with all illusions.”

North Korea: Leader Kim Jong Un presented new plans to further bolster his military power next year at a meeting of top political officials, state media reported Wednesday, in an indication he’ll continue his provocative run of weapons displays.

Animosities with South Korea rose sharply this week with Seoul accusing the North of flying drones across the border for the first time in five years.

Some observers say the new goals could be related to Kim’s drive to expand his nuclear arsenal and acquire high-tech weapons systems such as multi-warhead missiles, a spy satellite and advanced drones.  They say Kim wants to boost his nuclear power to force his rivals to accept the North as a legitimate nuclear state, which he thinks would lead to sanctions being lifted.

But on Monday, South Korea’s military fired warning shots and launched fighter jets and helicopters, after detecting what it called five North Korean drones that violated the South’s airspace.  South Korea also flew three drones across the border in response.

The military apologized for failing to shoot down the drones and President Yoon Suk Yeol called for stronger air defenses and high-tech stealth drones to better monitor North Korea.

The North Korean drones flew over several South Korean cities, including Seoul, for about five hours, which is disconcerting.

“The incident showed a substantial lack of our military’s preparedness and training for the past several years, and clearly confirmed the need for more intense readiness and training,” Yoon told a cabinet meaning.

Iran: Iranian authorities rerouted a flight bound for Dubai on Monday and prevented the wife and daughter of former national soccer team captain Ali Daei, who has supported anti-government protests, from leaving the country, state media reported.  Amid a concerted clampdown, Tehran also said the arrests in Iran of citizens linked to Britain reflected its ‘destructive role’ in the more than three months of unrest.

A service that could help Iranians circumvent internet restrictions is Starlink, a satellite-based broadband service operated by Elon Musk’s SpaceX.  Musk said on Monday that the company was getting close to having 100 active Starlink satellite receivers inside Iran.

Meanwhile, Daei’s wife was banned from traveling abroad, Iran’s judiciary said, after authorities ordered the Mahan Air plane she had been a passenger in to land on Iran’s Kish Island in the Gulf.

Iran has accused Western countries, Israel and Saudi Arabia of fomenting the unrest.  Seven linked to Britain were arrested on Sunday.

Rights group HRANA says about 18,500 people have been arrested during the unrest.  Government officials say most have been released.  HRANA also said as of Dec. 25, 507 protesters had been killed, including 69 minors, as well as 66 members of the security forces.

Israel: Benjamin Netanyahu’s latest comeback has been sealed as he became prime minister again on Thursday as his hard-right cabinet was sworn in with promises to expand Jewish settlements in the occupied West Bank and to pursue other policies criticized both at home and abroad.

Netanyahu, 73, and on trial for graft charges he denies, has sought to calm concerns about the fate of civil rights and diplomacy since his bloc of nationalist and religious parties secured a parliamentary majority in a Nov. 1 election.

His allies include the Religious Zionism and Jewish Power parties, which oppose Palestinian statehood and whose leaders – both West Bank settlers – have in the past agitated against Israel’s justice system, its Arab minority and LGBT rights.

Netanyahu has pledged to promote tolerance and pursue peace.  He told parliament that “ending the Israeli-Arab conflict” was his top priority, along with thwarting Iran’s nuclear program and building up Israel’s military capacity.

Opponents say Netanyahu had to make costly deals to secure the coalition after centrist parties boycotted him over his legal woes.

Palestinians, to say the least, have zero cause for optimism.  Put me in the anti-settlement expansion camp.

Afghanistan: Three big international aid agencies including Save the Children said on Sunday they were suspending their humanitarian programs in Afghanistan in response to the Taliban-run administration’s order to stop female employees from working.  The administration on Saturday ordered all local and foreign non-governmental organizations (NGOs) to send female staff home until further notice.  It said the move, which was condemned globally, was justified because some women had not adhered to the Taliban’s interpretation of Islamic dresscode for women.

Three NGOs – Save the Children, Norwegian Refugee Council and CARE International – said in a joint statement that they were suspending their programs as they awaited clarity on the administration’s order.

“We cannot effectively reach children, women and men in desperate need in Afghanistan without our female staff,” the statement said.

The suspension of some aid programs that millions of Afghans access comes at a time when more than half the population relies on humanitarian aid, according to aid agencies, and during the nation’s coldest season.

A spokesman for the Taliban, Zabihullah Mujahid, hit back at the criticism, saying all institutions wanting to operate in Afghanistan are obliged to comply with the rules of the country.  “We do not allow anyone to talk rubbish or make threats regarding the decisions of our leaders under the title of humanitarian aid,” Mujahid said in a post on Twitter, referring to a statement by the head of U.S. Mission to Afghanistan.  Charge d’Affaires Karen Decker had posted on Twitter questioning how the Taliban planned to prevent hunger amongst women and children following the ban.  She pointed out that the United States was the largest humanitarian aid donor to the country.

The above comes after the Taliban’s decision to prohibit women from attending universities, on top of earlier decrees banning girls from middle school and high school.  “They destroyed the only bridge that could connect me with my future,” a Kabul University student told the BBC.

Editorial / Washington Post

“Returning to power in August 2021 after the chaotic U.S. withdrawal, the Taliban promised to take a more moderate stance in running the country. It has not. Right after the announcement, young women saw university gates slammed shut and Taliban guards blocking the way.  Many educated Afghans who had remained after the withdrawal and hoped for change are now likely to flee.  The decision might lead to the proliferation of secret and forbidden study groups for women.  The minister of higher education, Nida Mohammad Nadim, claimed the ban was necessary to prevent the mixing of genders in universities and because he believes some subjects being taught violated the principles of Islam. This is balderdash.  What really happened is that the hard-liners among the Taliban, those with the harshest Pashtun village mores, have triumphed over more moderate voices and factions….

“The university ban feels like a point of no return.  A university lecturer and Afghan activist, Homeira Qaderi, told the BBC, ‘Afghanistan is not a country for women but instead a cage for women.’ And the Taliban decision drew condemnation from majority-Muslim Turkey and Saudi Arabia.  Turkish Foreign Minister Mevlut Cavusoglu said it was ‘neither Islamic nor humane,’ and added, ‘What harm is there in women’s education? …Our religion, Islam, is not against education; on the contrary, it encourages education and science.’

“On Saturday, the Taliban took another step to restrict women, banning them from working in nongovernmental organizations, both domestic and foreign.”

Serbia: Belgrade placed its security troops on the border with Kosovo on “the full state of combat readiness,” ignoring NATO’s calls for calm between the two wartime Balkan foes.

Serbia’s interior minister said he “ordered the full combat readiness” of police and other security units, and that they be placed under the command of the army chief of staff according to “their operational plan.”

Serbian President Aleksandar Vucic has said all measure should be taken to protect the Serbian people in Kosovo.

But Serbian troops have been on alert for a while on the border with Kosovo.  Officials claim alleged harassment of Kosovo Serbs by ethnic Albanians who are a majority in the breakaway province that declared its independence in 2008.

The Kremlin said it supported Serbia’s attempts to protect ethnic Serbs in northern Kosovo but denied accusations that Russia was somehow stoking tensions in an attempt to sow chaos across the Balkans.

Around 50,000 Serbs live in the northern part of Kosovo and refuse to recognize the Pristina government or the state. They see Belgrade as their capital.  The Kremlin said it supported Belgrade.

But Thursday, Kosovo re-opened its biggest border crossing with Serbia, hours after protesting Serbs in its north promised to remove roadblocks, easing the surge in tensions.

Random Musings

--Presidential approval ratings….

Gallup: 40% approve of Biden’s job performance, 55% disapprove; 37% of independents approve (Nov. 9-Dec. 2).

Rasmussen: 47% approve, 51% disapprove (Dec. 30).

Trump World

Editorial / Wall Street Journal

“The final House Jan. 6 committee report – at 845 pages – contains no surprises, and we’ve already assessed its lack of evidence to prove criminal behavior by former President Trump. The committee’s demonstration of his moral and political culpability – and shameful refusal to act immediately to stop the riot – is damning enough.

“But the report shouldn’t pass into history without noting what the evidence reveals that the media largely ignores.  To wit, the failure of Mr. Trump’s attempt to overturn the 2020 election shows that U.S. democratic institutions, and their checks and balances, held up well. Despite today’s polarization, Mr. Trump’s effort had no chance to succeed because it was opposed by nearly all Republicans in positions of authority.

“Mr. Trump’s allies in his effort included relatively few White House staff, some second-raters at the Justice Department, crony-cranks like Roger Stone (who took the Fifth Amendment before the committee), a few Members of Congress without influence, some backbench state legislators, and dubious legal advisers like John Eastman and Rudy Giuliani. Talk about a crew of banana Republicans.

“Now consider those who opposed the Trump effort, or examined his claims of election fraud and rejected them. They included: His own White House counsel and legal staff; Attorney General William Barr and other leaders at the Justice Department; his entire Cabinet; senior military officials; most GOP state legislators; GOP governors and secretaries of state; all but a handful of GOP senators; federal judges appointed by Mr. Trump; and, most famously, his own Vice President Mike Pence.

“The Jan. 6 committee acknowledges this GOP opposition in its effort to show that Mr. Trump knew his fraud claims about the election were false.  But the committee suggests that the President’s attempt to overturn the election was a close-run thing. It wasn’t. The opposition by Members of Mr. Trump’s own Administration, and his own party, was too broad and deep to have had any chance.

“Even if Mr. Pence had tried to delay or reject the electoral votes, he could not have succeeded.  There wasn’t enough support in the contested state legislatures to overturn the popular vote count.  And even if enough states had done so to deny Joe Biden 270 electoral votes, Speaker Nancy Pelosi would not have reconvened the Congress to count them. The Supreme Court would have eventually intervened, and our guess is that it would have ruled 9-0 against Mr. Trump.

“None of this absolves Mr. Trump for his actions, but it does underscore the strength of U.S. democracy and the dedication to it by most elected and appointed officials.  It also shows the value of having had men of principle like Messrs. Pence and Barr willing to take on the duty of working in the Trump Administration.

“They were criticized as Trump-enablers when they made decisions the left didn’t like. But those decisions were made based on the policy merits and the law. And when it mattered most, when Mr. Trump sought to overturn an election, the country was lucky to have had these men and others like them in office.  It’s a shame the Jan. 6 committee and the press won’t give them the credit they deserve.”

Peggy Noonan / Wall Street Journal

“There is a sense in which last month’s election can be seen as America trying to return itself to its previous settings. The outcome was inherently moderate, and those who seemed extreme didn’t prosper.

“One way the country could return to normalcy is not to have a repeat of Biden vs. Trump in 2024.  Nobody wants that.  It’s a race that would depress the whole country.  There’s so much hunger to turn the page, begin a new era.  Could we?

“It is certain that Donald Trump will never again be president.  The American people won’t have it.  This was demonstrated in November: Independents and moderate Republicans rejected GOP candidates who supported him, not trusting them to be responsible in power.  It is possible Mr. Trump will get the presidential nomination, but it’s no longer likely.

“His polls continue their downward drift.  He is under intense legal pressures.  This week the Jan. 6 committee put more daggers in: Only the willfully blind see him as guiltless in the Capitol riot.  He will be 78 in 2024 and is surrounded by naifs, suck-ups, grifters and operators.  That was always true but now they are fourth-rate, not second- or third-rate….

“We’re watching the Trump story end before our eyes and can hardly believe it because we thought it was ending before and it wasn’t.  But it is now.

“As for Joe Biden, all indications are he will run for re-election. He likes being president, thinks he’s good at it, and apparently doesn’t think he’s slipping with age.

“But the brilliant move would be to surprise the world and not run again.  Second terms are always worse, fraught and full of pain; even your own party starts jockeying to take your place.  He’s showing age and it will only get worse, and he will become more ridiculous, when he’s deeper into his 80s.

“He’s freezing his party in a way that will likely hurt it.  When Democrats were sure Mr. Trump would get the Republican nomination, it justified a Biden run, no matter how frustrated they were.  He had beaten Mr. Trump before and would do it again.  But a great many Democrats believe that if Mr. Trump isn’t the Republican nominee – and they are starting to think he won’t be – then that nominee will go forward without Mr. Trump’s deficits, and may even be a normal Republican, which will mean he or she will squish the eternally underwater Mr. Biden like a peanut.

“They want him to step aside….

“Could he do this?  Yes.  Should he? Yes. Will he?  Well.  He likes being president.  He likes the whole thing, the house, the salutes, the state dinners, the centrality to all events, the cynosure of all eyes, being taken seriously after a career of being considered a cornball glad-handing pol, a guy who wasn’t that bright but had a huge ego….

“People tend not to leave what they like.  And it’s hard to imagine a Biden intimate telling him his age is a factor and he should leave.  They surely saw that aging in 2019 and 2020.  But they too wanted the White House.  They wanted power, they wanted the glamour and importance.  They thought they could make it work, while saving the party from Bernie Sanders and Elizabeth Warren.

“All signs are Mr. Biden will stay and run again. The coming year will be interesting in part because we’re going to see the central realities of 2024 arrange themselves, the election line itself up.”

--The Supreme Court, by a 5-4 vote, kept pandemic-era border controls in place Tuesday while it considers whether nearly two dozen Republican-led states can intervene in a lawsuit over those restrictions, leaving thousands of asylum-seeking migrants stranded in northern Mexico.

Chief Justice John Roberts had issued a temporary stay back on Dec. 19, two days before so-called Title 42 regulations were to end.  Border officials had started observing an increase in land crossings in the days ahead of the policy’s expected end on Dec. 21, with at least 10,000 additional migrants waiting in Mexican border cities with the expectations that the measure would soon be lifted.

The Biden administration had sought to end the policy, while the Republican states wanted it to remain in place.  The Supreme Court didn’t lay out its reasoning for the order, but ordered an expedited hearing, setting arguments in the case for February or early March.

In dissent, Justice Neil Gorsuch, joined by Justice Ketanji Brown Jackson, said the court shouldn’t be party to a political dispute about immigration policy that no longer relates to the pandemic.

“The current border crisis is not a Covid crisis. And courts should not be in the business of perpetuating administrative edicts designed for one emergency only because elected officials have failed to address a different emergency,” Justice Gorsuch wrote.

A decision probably won’t come until June.  In the meantime, the White House said “we are advancing our preparations to manage the border in a secure, orderly, and humane way.”

--Long Island Rep.-elect George Santos finally came clean in a series of interviews Monday and Tuesday, admitting that he lied on the campaign trail about his education and work experience – but insisting that the controversy won’t deter him from serving out his two-year term in Congress.

“I am not a criminal,” Santos said at one point during an interview with the New York Post.  “This [controversy] will not deter me from having good legislative success.  I will be effective.  I will be good.”

“My sins here are embellishing my resume. I’m sorry,” he said.

Santos confessed he had “never worked directly” for Goldman Sachs and Citigroup, chalking that fib up to a “poor choice of words.”

The 34-year-old now claims instead that a company called Link Bridge, where he worked as a vice president, did business with both of the financial giants.

“I will be clearer about that. It was stated poorly,” Santos said.

At Link Bridge, Santos said, he helped make “capital introductions” between clients and investors, and Goldman Sachs and Citigroup were “LPs, Limited Partnerships” that his company dealt with.

He also admitted that he never graduated from any college, despite previously claiming to have received a degree from Baruch in 2010.

“I didn’t graduate from any institution of higher learning.  I’m embarrassed and sorry for having embellished my resume,” he said.  “I own up to that… We do stupid things in life.”

Santos also now says that he’s “clearly Catholic.”  “I never claimed to be Jewish,” he said.  “I am Catholic. Because I learned my maternal family had a Jewish background I said I was ‘Jew-ish.’”

The first openly gay non-incumbent Republican elected to the House, also faced accusations that he lied about his sexual orientation, and he confirmed on Monday a report first appearing in the Daily Beast that he was married to a woman for about five years, from 2012 until his divorce in 2017, but insisted that he is now a happily married gay man.

Santos also admitted to lying when he claimed that he owned 13 different properties, saying he now resides at his sister’s place in Huntington, L.I., but is looking to purchase his own place.

It just goes on and on….

Editorial / New York Daily News

“The man we know as George Santos, if that is indeed his name, is a work of fiction.

“The character may have been a run-of-the-mill inspiring rags-to-riches story in some low-budget TV drama, where it would have been a tad tedious but ultimately harmless; instead, it manifested in a much more nefarious fashion, having propped up the political campaign of the underlying man and carried him to victory in a congressional district straddling Queens and Nassau County.

“To say politicians lie is no earth-shattering statement, but that belies the sheer extent to which Santos manufactured everything. The New York Times and Forward and others have picked apart almost every aspect of his supposed journey.

“He didn’t go to Baruch or work at Citigroup or Goldman Sachs; his animal charity seems not to exist; there’s no record of the gay politician’s marriage to a man, with reporters instead finding records of a prior marriage to a woman; and the harrowing story of his Jewish grandparents’ escape from Hitler looks like fiction.  In fact, there are questions about whether he’s even Jewish.  His mom was not in the South Tower on 9/11.  Is he really 34 years old? Is he really a Republican.

“What is true?  We know that he’s wanted for check fraud in Brazil.

“He now admits all the lies, so when Santos takes the oath of office on Jan. 3, there’s no reason to think it will be worth anything. After all, the trust of his constituents meant nothing to him.  Not that he should take any such oath; if Santos has any shred of decency, he’ll step aside now that his con has been exposed, even if some of his voters are standing behind him.  We’re not holding our breath.

“If he doesn’t, there doesn’t seem to be much anyone can do.  The lies got him elected, but he has been duly elected.  All that’s left is for his future colleagues to box him out and investigate him themselves, and wait for the error to be corrected by the voters in two years’ time.”

Nassau County District Attorney Anne T. Donnelly (R) announced she is opening an investigation.

In a statement: “The numerous fabrications and inconsistencies associated” with Santos “are nothing short of stunning.”  The residents in the congressional district “must have an honest and accountable representative in Congress” and “if a crime was committed in this county, we will prosecute it.”

But the big issue is where did he get the $705,000 he loaned his campaign?

Peggy Noonan / Wall Street Journal

“When (Santos) ran unsuccessfully in 2020, he disclosed no assets and claimed a salary of $55,000 from a development firm. In the years leading up to 2020 he hadn’t been rising at Goldman; he’d reportedly been working at a call center in Queens.  His 2022 filings, however, showed sudden wealth.  He claimed he made between $3.5 million and $11.5 million at a company he founded in 2021.  He told reporter Kadia Goba of Semafor that he did ‘deal building,’ with ‘high-net-worth individuals.’  If a client wanted to sell a plane or boat, Mr. Santos would go to his extensive Rolodex ‘and be like, ‘Hey, are you looking for a plane?’’ He claimed a network of about 15,000 people and ‘institutions.’  He quickly ‘landed a couple of million-dollar contracts.’  He didn’t respond to Semafor’s request for names of clients.

“It is to the credit of Tulsi Gabbard, sitting in for Tucker Carlson on his show Tuesday night, that she didn’t cover the Santos story as another act in the freak show of American politics.

“Grilling him in his first television interview since the accusations surfaced, she drilled straight down into meaning.

“She asked what the word ‘integrity’ means to him.  Mr. Santos replied it was ‘very important’ but suggested his lies were mere ‘embellishments.’  Ms. Gabbard pressed: The meaning of the word integrity ‘actually matters in practice.’  Mr. Santos said integrity ‘means to carry yourself in an honorable way,’ then said, ‘I made a mistake… We all make mistakes.’

“Then his self-pity kicked in: ‘I’m having to admit this on national television for the whole country to see.’ Then pride: ‘I have the courage to do so because I believe that in order to…be an effective member of Congress, I have to face my mistakes.’  Then the self-pity returned: ‘I worked damn hard to work where I got my entire life.  Life wasn’t easy…I come from abject poverty.’

“Ms. Gabbard wasn’t having any of it.  Integrity, she said, includes ‘telling the truth.’ Mr. Santos’ falsehoods weren’t ‘one little lie or one little embellishment, these are blatant lies.  My question is, do you have no shame?’

“Mr. Santos pivoted: He’s no bigger liar than the Democrats.  ‘Look at Joe Biden.  Biden’s been lying to the American people for 49 years….Democrats resoundingly support him.  Do they have no shame?’

“Ms. Gabbard cut him off.  ‘This is not about the Democratic Party, though. This is about your relationships’ with voters who put their faith in him.  She cited specific lies.  He said, ‘Everybody wants to nitpick at me.’

“Ms. Gabbard said his insincerity about policy is ‘called into question when you tell blatant lies.’ One of the biggest concerns is that ‘you don’t really seem to be taking this seriously.’ Blatant lies aren’t ‘an embellishment on a resume…It calls into question how your constituents and the American people can believe anything that you may say when you were standing on the floor of the House of Representatives supposedly fighting for them.’

“Mr. Santos said his accusers can ‘debate my resume.’

“Ms. Gabbard: ‘Is it debatable or is it just false?’

“Then Mr. Santos did make a mistake. His resume, he said, is ‘very debatable…I can sit down and explain to you what you can do in private equity…and we can have this discussion that’s going to go way above the American people’s head.’

“ ‘Wow,’ Ms. Gabbard said.  ‘You’re saying that this discussion will go way above the heads of the American people, basically insulting their intelligence.’  Mr. Santos ended by saying, ‘Everybody just wants to push me and call me a liar.’  Ms. Gabbard wound it up: She’d given him all this time because she felt it was owed to the people of his district: ‘It’s hard to imagine how they could possibly trust your explanations when you’re not really even willing to admit the depth of your deception to them.’

“George Santo should step down, cooperate with all investigations and come clean about his past.  Assuming that won’t happen, his local party should disavow him and call for a special election.  Republicans in the House should end their silence, formally oppose his entry and close their conference to him.

“They have a close margin in the House and believe they can’t afford to lose even one.  But Mr. Santos will be the focus of investigations from day one and will be used to pummel the GOP each day for looking past his fraud.  They can’t afford to keep him. He is a bridge too far.  He is an embarrassment.”

--Karl Rove / Wall Street Journal…on the White House’s end of year rhetorical offensive touting all their ‘gains’ in 2022.

“First, White House aides want their media minions to drop any story line that the midterm elections were determined by lousy GOP candidates, fallout from the overturning of Roe v. Wade, or Democrats distancing themselves from an unpopular Mr. Biden.  Instead, they want all credit to go to a president they’re trying to position as transformational.

“Second, the White House wanted to signal that 2023 will be focused on Mr. Biden’s re-election rather than governing.

“Finally, White House aides wanted to reassure Democrats that Mr. Biden is storming back, bad polls and grim times are behind us, and his re-election will be easy.

“There are problems with the narrative. The first goal is based on a false premise.  The midterms had more to do with Republican missteps than with Biden administration successes.  Many voters rightly see the president’s second goal as harmful for the country.  The third – an easy re-election – is highly unlikely, unless Mr. Biden faces the same opponent he beat last time.  That requires Republicans to select a sure-fire loser.

“May I suggest a New Year’s resolution for White House aides?  Stop trying to portray Mr. Biden as a political colossus.  He’s an 80-year-old with a 43.5% approval rating.  Some two-thirds of Americans think the country is on the wrong track on his watch.  Only 19% want him to run again.  Maybe Team Biden should develop another narrative, one based in reality, and devote next year to doing what the president promised in 2020: uniting the country and restoring a sense of normalcy.”

--An Arizona judge on Saturday rejected defeated Republican gubernatorial candidate Kari Lake’s effort to overturn the results of her election loss in the state’s governor race.

Lake was one of the most high-profile Republican candidates in the midterm elections to embrace former President Trump’s false claims of voter fraud in 2020.  Earlier in the month, she sued Arizona elections officials to challenge the counting and certification of the November electoral contest and ask to be declared the winner despite a lack of evidence of voter fraud.

Lake lost the election to her Democratic opponent, Katie Hobbs.

The order on Saturday confirmed the election of Hobbs and said it did not find any “clear and convincing” evidence of misconduct that impacted the outcome.

--The death toll in the Buffalo, New York area from the historic blizzard of Christmas Eve-Christmas Day is at least 39 as I go to post, some of the victims found either in snowbanks or their cars or having froze to death in their homes after losing electricity.

Fifty inches of snow fell, which was similar to a big storm back in November, but it was 37 straight hours of fierce winds that reduced visibility to zero that spelled the difference between a normal Buffalo heavy snow and disaster.  At one point, over 500 motorists were stranded in their vehicles in Erie County.

Elsewhere in the country, you had massive deadly vehicle pileups, such as in Ohio.  The overall nationwide death toll crossed 60.

At least after record-cold temperatures on Christmas Eve for large parts of the country, it’s warmed up substantially.

--Coronavirus Deaths, worldwide (thru 12/29)

World…6,693,836

USA…1,117,751
Brazil…693,734
India…530,699
Russia…393,604…grossly understated
Mexico…331,009
Peru…218,178
UK…198,937
Italy…183,936
France…161,847
Germany…161,321

Japan…56,974 deaths, is hitting new daily records in the category after reopening.

Source: worldometers.info

--One death dominated this year: that of Queen Elizabeth II in September.

From King Charles’ Christmas message to the nation:

“Christmas is a particularly poignant time for all of us who have lost loved ones.  We feel their absence at every familiar turn of the season and remember them in each cherished tradition.

“In the much loved carol ‘O Little Town of Bethlehem’ we sing of how ‘in thy dark streets shineth the everlasting light.’  My mother’s belief in the power of that light was an essential part of her faith in God, but also her faith in people….

“It is a belief in the extraordinary ability of each person to touch, with goodness and compassion, the lives of others, and to shine a light in the world around them.  This is the essence of our community and the very foundation of our society.”

--From Pope Francis’ traditional Christmas message, “Urbi et Orbi” (Latin for “to the city and to the world”).

Francis lamented that on Christmas, the “path of peace” is blocked by social forces that include “attachment to power and money, pride, hypocrisy, falsehood.

“Indeed, we must acknowledge with sorrow that, even as the Prince of Peace is given to us, the icy winds of war continue to buffet humanity.

“If we want it to be Christmas, the birth of Jesus and of peace, let us look to Bethlehem and contemplate the face of the child who is born for us.  And in that small and innocent face, let us see the faces of all those children who, everywhere in the world, long for peace….

“Let us also see the faces of our Ukrainian brothers and sisters, who are experiencing this Christmas in the dark and cold, far from their homes due to the devastation caused by 10 months of war.”

The pope prayed that God will “enlighten the minds of those who have the power to silence the thunder of weapons and put an immediate end to this senseless war.”

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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 $1830…unchanged for the year!
Oil $80.47…up $5 on the year…

Regular Gas: $3.17; Diesel: $4.68 [$3.28 / $3.57 yr. ago]

Returns for the week 12/26-12/30

Dow Jones  -0.2%  [33147]
S&P 500  -0.1%  [3839]
S&P MidCap  -0.2%
Russell 2000  +0.02%
Nasdaq  -0.3%  [10466]

Returns for 2022

Dow Jones  -8.8%
S&P 500  -19.4%
S&P MidCap  -14.5%
Russell 2000  -21.6%
Nasdaq  -33.1%

Bulls 42.9
Bears 31.4…no update last two weeks over the holidays

Happy New Year!

Travel safe.

Brian Trumbore

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