Week in Review

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Week in Review

05/06/2023

For the week 5/1-5/5

[Posted 5:30 PM ET, Friday]

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Edition 1,255

To start off, some good news…the World Health Organization said today that Covid-19 is no longer a global health emergency.  WHO Director-General Tedros Adhanom Ghebreyesus and the WHO’s Emergency Committee concurred that the public health emergency of international concern declaration should end.

The organization declared the coronavirus outbreak to be a public health emergency of international concern in January 2020, about six weeks before characterizing it as a pandemic.

The United States is set to let its Covid-19 public health emergency end on May 11.

Dr. Mike Ryan, executive director of WHO’s Health Emergencies Program, said: “There’s still a public health threat out there, and we all see that every day in terms of the evolution of the virus….

“So, we fully expect that this virus will continue to transmit, but this is the history of pandemics.  In most cases, pandemics truly end when the next pandemic begins.  I know that’s a terrible thought but that is the history of pandemics.”

Nearly 7 million people have died worldwide.

“One of the greatest tragedies of Covid-19 is that it didn’t have to be this way,” Tedros said. “We have the tools and technologies to prepare for pandemics better, detect them earlier, respond to them faster, and communicate their impacts.  But globally, a lack of coordination, a lack of equity, and lack of solidarity meant that those tools were not used as effectively as they could have been.  We must promise ourselves and our children and grandchildren that we will never make those mistakes again.”

But we will.

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And now, potentially, the bad news.  Tuesday, May 9, is Victory Day in Russia, a holiday that commemorates the Soviet victory over Nazi Germany.  Normally there is a big military parade on Red Square, but due to the war, this year’s celebration will likely be scaled down rather significantly.

But the drone incident over the Kremlin this week, which Russia first blamed Ukraine for, and then the United States, was clearly a false flag operation and, occurring so near Victory Day, there are real fears that Vladimir Putin wants to do something spectacular…spectacularly evil.

Ukraine’s counteroffensive has already begun, in some phases, such as getting a few forces on the other side of the Dnipro River from Kherson, and Russia has to be concerned what is about to hit their troops in the Donbas, with advanced Western equipment pouring in the past few months.

Putin, however, through the alleged drone ‘attack,’ has his excuse to attempt to decapitate the regime in Kyiv.  That’s just one potentiality.  Or something against the West, writ large.

Tom Nichols / The Atlantic…on the ‘false flag’ theory….

“There are several reasons this makes more sense than other explanations.

“First, an attack on the Kremlin would give Putin the rationalization he’s been seeking for some kind of dramatic and murderous action that might not make much military sense, but that would destabilize Ukraine and unsettle the world on the eve of a major Ukrainian counteroffensive.  The Russians, I believe, are dreading this coming operation, and want to change the narrative at home and abroad.  I have no idea what Putin has up his sleeve, but even on his better days, he is prone to strategically idiotic moves.  He might try to drag Belarus into the war, he could make more nuclear threats, or he could even order redoubled efforts to kill Zelensky.”

Nichols goes on to point out, as I did way back when, remember “The series of apartment bombings in Russia in 1999, for example, that became the pretext for escalation in Chechnya, were almost certainly orchestrated by the secret services (a possibility so disturbing that I and other Russia experts were loath to accept it – but which is now, in my view, undeniable).”

We’ll see.  Brace yourselves.  Much more below….

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President Biden ordered 1,500 active duty troops to the border with Mexico in anticipation of a surge in migrants looking to enter the U.S. after pandemic-related restrictions known as Title 42 loosen in days – when the public health emergency formally expires on May 11.

There are already 2,500 U.S. troops deployed along the border with Mexico, which is a legacy operation the White House inherited from the Trump administration and hasn’t yet redeployed.  Biden’s new order spans 90 days, after which reserve units or contractors could be called up to assist, if needed.

The incoming forces will not act as law enforcement and round up migrants, but instead are expected to “fill critical capability gaps such as ground-based detection and monitoring, data entry and warehouse support until [Customs and Border Protection personnel] can address these needs through contracted support,” Pentagon spokesman Air Force Big. Gen. Pat Ryder said Tuesday. 

Mexico has agreed to accept migrants the U.S. has deported who are not from Mexico, which is a first in terms of the large numbers expected. And according to the Mexican government’s announcement of this deal, “the U.S. apparently agreed to take 100,000 people through the new Honduran, Salvadoran and Guatemalan family reunification parole program announced last week,” Aaron Reichlin-Melnick, policy director at the American Immigration Council tweeted.

The White House’s decision was a ‘can’t-win’ solution, politically, as both Democrat and Republican lawmakers lampooned the administration for taking action.  The top Democrat on the Senate Foreign Relations Committee, Bob Menendez of New Jersey, called the announcement an “unacceptable…militarization of the border” in his statement.  “There is already a humanitarian crisis in the Western Hemisphere, and deploying military personnel only signals that migrants are a threat that require our nation’s troops to contain.  Nothing could be further from the truth,” he added.

Arkansas Republican Sen. Tom Cotton dismissed it as a “publicity stunt.”  Fellow Armed Services Committee colleague, Roger Wicker of Mississippi, criticized Biden for “waiting until virtually the last minute to request Department of Defense support,” and said the announcement “will have negative impacts on readiness.”  Pennsylvania GOP Rep. Guy Reschenthaler said, “Biden could have finished the wall…Now, active-duty troops head to the border to clean up his mess.”

Texas Democrat Rep. Veronica Escobar, who represents the state’s 16th district in El Paso, pointed out that, “Last Congress, Republicans voted AGAINST: $47.2 billion for Border Patrol operations; $65 million for 300 new Border Patrol agents; $3.4 billion to modernize infrastructure at ports of entry; $60 million for CBP personnel at ports; [and] $230 million for between-the-ports technology.”  And “just last week the [House Republicans] voted in favor of their Default on America Act, a REDUCTION in CBP frontline law enforcement staffing levels of up to 2,400 agents and officers…So next time you watch a Republican using their performative, divisive rhetoric at a hearing or a tv show remember how they vote,” she said.

The Department of Homeland Security said in a statement Monday reviewing how it’s preparing for an end to Title 42 policies and procedures: “There is broad agreement that the United States is operating under a fundamentally outdated and broken immigration system, with the last comprehensive immigration reform enacted in 1986.  These problems are only exacerbated by global increases in migration. The United States needs to confront the challenges at our border by addressing our broken immigration system.  A long-term solution can only come from legislation.”

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This Week in Ukraine….

--President Volodymyr Zelensky said on Wednesday Ukraine would launch a counteroffensive against Russian forces soon, and he was sure the West would supply Kyiv with modern warplanes afterwards.

Speaking at a news conference in Finland, NATO’s newest member, Zelensky said that one of the reasons he had traveled to Helsinki was that Kyiv wanted to become a fully-fledged member of the military alliance.

Zelensky held bilateral talks in Helsinki with the prime ministers of Sweden, Norway, Denmark and Iceland.

Russian Foreign Ministry spokeswoman Maria Zakharova said in a briefing Wednesday: “As we observe NATO’s plans for Finland, we confirm that Russia will be forced to retaliate, both militarily and otherwise, in order to curb threats to our national security.”

--Also Wednesday, Russia accused Ukraine of attacking the Kremlin with drones overnight in a failed bid to kill Vladimir Putin.

The Kremlin said two drones had been used in the alleged attack on Putin’s residence in the walled Kremlin citadel, but had been disabled by electronic defenses.  It said Russia reserved the right to retaliate – a comment that suggested that Moscow might use the alleged incident to justify a further escalation in the war.

RIA news agency said Putin had not been in the Kremlin at the time and was working at a residence outside Moscow.

According to one of President Zelensky’s top advisors, Mykhailo Podolyak, “Russia is clearly preparing a large-scale terrorist attack,” he speculated on Twitter, and suggested “guerilla activities of local resistance forces” are to blame.  After all, he insisted, the apparent attack on the Kremlin “does not solve any military issue. But it gives [Russian forces] grounds to justify its attacks on civilians.”

Russia then said Thursday that the United States was behind the alleged drone attack, which the U.S. dismissed as lies.

“Obviously it’s a ludicrous claim,” White House national security spokesman John Kirby said hours after Russia blamed the U.S.  “The United States has nothing to do with it. We don’t even know exactly what happened here, but I can assure you the United States does not encourage or enable Ukraine to strike outside its borders and does not endorse attacks on individual leaders.”

Ukraine denied launching any drones on the Kremlin.

Putin’s spokesman Dmitry Peskov said the United States was “undoubtedly” behind the alleged attack, without providing any evidence. 

“Peskov is just lying there, pure and simple,” Kirby said.

Friday, Russian Foreign Minister Sergey Lavrov said Wednesday’s drone incident was a “hostile act” and Russia would respond with “concrete actions.”

“It was clearly a hostile act, it is clear that the Kyiv terrorists could not have committed it without the knowledge of their masters (the U.S.),” Lavrov told a press conference in India.

The European Union’s top foreign policy official warned Russia against using the alleged drone attack to escalate the Kremlin’s war in Ukraine.  “This is what worries us: this can be used to justify more conscription of people, more soldiers, more attacks on Ukraine,” said Josep Borrell.

--Russia fired two dozen combat drones at Ukraine, in response to the drone ‘attack,’ hitting a university campus in Odesa, with no apparent injuries.  But Russian shelling killed 23 people in and near the southern city of Kherson, hitting a hypermarket, a railway station and residential buildings, the regional governor said.

--NATO’s intelligence chief warned on Wednesday that Russia may sabotage undersea cables to punish Western nations for supporting Ukraine, as the alliance boosts efforts to protect undersea infrastructure following the Nord Stream attacks in September.  John Kirby said, “We’re watching this very, very closely.”

--Yevgeny Prigozhin threatened to withdraw the Wagner Group from Bakhmut if he didn’t get ammunition.

“Shoigu!  Gerasimov! Where is the…ammunition? …They came here as volunteers and die for you to fatten yourselves in your mahogany offices.”

Prigozhin’s statement came after he posted a video on social media of him walking among dead fighters’ bodies, asking defense officials for more supplies.

Defense Minster Shoigu and Chief of the General Staff Valery Gerasimov have often been the focus for Prigozhin’s anger.

But Prigozhin is a publicity seeker, and his influence is waning.

Some believe Russia’s defense ministry is rationing ammunition ahead of Ukraine’s long anticipated counteroffensive. 

So today, Friday, in a written withdrawal announcement addressed to the head of general staff, the defense ministry, and Vladimir Putin, Prigozhin said he was withdrawing his forces from Bakhmut.  “My lads will not suffer useless and unjustified losses in Bakhmut without ammunition,” he said in a video accompanying the statement of withdrawal.

But Ukraine said this was a smokescreen…that Russia was bringing more mercenary fighters from along the front line to Bakhmut so as to capture it by Victory Day, Deputy Defense Minister Hanna Maliar said on Ukrainian television.  The Kremlin declined to comment on Prigozhin’s statement.

--Speaking at The Hague, President Zelensky said Vladimir Putin must be brought to justice for his war in Ukraine, calling for the creation of a war crimes tribunal separate to the International Criminal Court.

--The White House’s National Security Council estimated that more than 20,000 Russian soldiers have been killed in fighting in Ukraine since December, with another 80,000 wounded, a staggering total, NSC spokesman John Kirby said citing newly declassified intelligence.

Half of the dead are from the Wagner Group, heavily involved in the fighting in Bakhmut.

Moscow holds most of the city, but Ukrainian troops are still in control of a small portion, with the fierce battle taking on huge symbolic importance for both sides.

Ukrainian officials have said they are using the battle to kill as many of Russia’s troops as possible and wear down its reserves.

“Russia’s attempt at an offensive in the Donbas [region] largely through Bakhmut has failed,” Kirby told reporters.  “Russia has been unable to seize any real strategic and significant territory.”

Kirby added he was not giving estimates of Ukrainian casualties because “they are the victims here.  Russia is the aggressor.”

--Staying on the topic of Bakhmut, Ukraine claimed that counterattacks early in the week had ousted Russian forces from some positions, but the situation remains “difficult,” a top Ukrainian general, Col. Gen. Oleksandr Syrskyi said Monday on Telegram.

Gen. Syrskyi said paratroopers and fighters from the Wagner Group were being “constantly thrown into battle” despite taking heavy losses.

“But the enemy is unable to take control of the city,” Gen. Syrskyi said.

--Another fuel depot was on fire Wednesday near a crucial bridge linking Russia’s mainland with Crime, Russia said.  This comes days after Moscow blamed Ukraine for an attack that set fire to an oil depot in Sevastopol.

Russia’s state-owned TASS news agency reported the fire at an oil facility was caused by “the fall of a drone.”

The blaze broke out in the village of Volna. The hamlet is close to the Crimean bridge over the Kerch Strait, a major artery for Russian forces.

The blaze at the Russian fuel storage facility in the Crimean port of Sevastopol on Saturday was a massive one.  A wave of Ukrainian Mugin-5 drones were apparently used. A Ukrainian intelligence official claimed the attack destroyed 10 oil tanks, fuel that was intended for use in the Black Sea Fleet, according to the Institute for the Study of War.

Andriy Yusov, a Ukainian military official, did not say Ukraine carried out the attack.  Instead he told RBC Ukraine the blast was “God’s punishment” for a Russian strike on the Ukrainian city of Uman last Friday that killed 23 people.

President Zelensky said in an evening video address that Kyiv would do all it could to ensure that those responsible for the attack on Uman be held accountable as soon as possible.

“You are all terrorists and murderers and you must all be punished,” he said.

Over the weekend, Kyiv’s military said undermining Russia’s logistics formed part of preparations for the long-expected counteroffensive, aided by fresh deliveries of more powerful Western weapons.

Blasts derailed a train on Monday in Russia’s region of Bryansk bordering Ukraine, the second such incident in two days.  Russian officials say pro-Ukrainian sabotage groups have made attacks there since the start of hostilities.

--An attack on a supermarket in Kherson killed at least three people and wounded five.  Kyiv authorities said Russia launched a third nightly round of attacks on the city in six days but that air defense systems had destroyed all its drones, Tuesday night/early Wednesday.

--Russian bomber planes attacked Ukraine with 18 cruise missiles early Tuesday, injuring nearly three dozen people and damaging homes around the eastern city of Pavlohrad.  According to a local official, “19 high-rise buildings, 25 private houses, 6 schools and pre-school education institutions, and 5 shops were mutilated” in the early morning strikes.

Fifteen of the missiles were allegedly shot down by Ukrainian air defenses, including around Kyiv.  Russian aircraft fired from the relative safety of the Caspian Sea and the Murmansk region, closer to Finland, according to Ukraine’s military.

Russia says some of its recent strikes are designed to hamper Kyiv’s counteroffensive, but this hardly applies to hitting apartment buildings, schools and supermarkets.

--Russia’s defense minister, Sergei Shoigu, called on Tuesday for quickly doubling Russian production of guided missiles and speeding up the replenishment of other weapons and military equipment needed for the war.

Shoigu’s remarks are the latest in a series of statements by senior officials, including Wagner Group chief Yevgeny Prigozhin and Vladimir Putin, that suggest Russia’s arms industry is struggling to keep pace with demand.

Shoigu singled out the arms manufacturers as crucial to the success of the “special military operation” in Ukraine.

“The actions of Russian units conducting the special military operation largely depend on the timely replenishment of stocks and weapons, military equipment and means of destruction,” Shoigu said in remarks broadcast on state television, at an online meeting of the leadership of the Russian Armed Forces.

The defense minister also singled out the need to double the output of high-precision missiles “in the shortest possible time.”

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--Russian ships able to perform underwater operations were present near to where explosions later took place on the Nord Stream pipelines, according to an investigative documentary.

The vessels were reportedly located using intercepted Russian navy communications.

Underwater explosions last September knocked the two Nord Steam pipelines – built to carry gas from Russia to Europe – out of action.

The cause of the blasts is unclear.

In the immediate aftermath, some in the West pointed the finger at Russia, while Moscow blamed Western countries, including the UK.

More recently, there were reports that intelligence pointed towards pro-Ukrainian operatives, although not the Ukrainian government itself.

Formal investigations are still taking place in countries close to the blast site.

The documentary series by Denmark’s DR, Norway’s NRK, Sweden’s SVT, and Finland’s Yle broadcasters revealed last month that Russian vessels appeared to be mapping out wind farms in the North Sea, including off the UK coast.

Now, the latest episode focuses on what they say are suspicious ship movements in the run-up to the blasts.

--President Putin approved a law imposing a life sentence for treason, while stiffening penalties for a raft of crimes that the Kremlin has used to crush dissent and antiwar sentiment in the country.

The law introduces a life sentence for high treason, from a 20-year sentence under the current law, and raises the maximum penalty for terrorist attacks to 20 years, from 15, according to TASS.

The Kremlin has been turning to treason and espionage laws with increasing frequency to smother criticism inside Russia, mostly by widening the scope of existing legislation to demonstratively crack down on critics who haven’t fled the country.

And the Kremlin is showing increasing zeal about heretofore minor offenses. Such as the case of a father composing social-media posts critical of the war who was sentenced to two years in prison.  His 13-year-old daughter, who drew an antiwar sketch at school, was sent to a correctional facility.  What bastards.

So we’ll see how all the above impacts Wall Street Journal reporter Evan Gershkovich, who is being detained on espionage charges.

Sergey Radchenko, a professor at Johns Hopkins School of Advanced International Studies, told the Wall Street Journal that the stiffening of the criminal penalties is creating a security structure more oppressive than in many periods of the Soviet Union.

“We do not yet have a massive system of gulag prisoners, but things are moving in that direction,” he said.  “We have hundreds of political prisoners, not yet thousands or hundreds of thousands.”

--Pope Francis on Wednesday spoke to a top member of the Russian Orthodox Church (ROC) days after Francis made a puzzling comment about the Vatican being involved in a mission to try to end the war in Ukraine.  Metropolitan (bishop) Anthony, the ROC’s number two, was given pride of place at Francis’s general audience in St. Peter’s Square and then was the first taken to greet the pope at the end. 

On his return from a trip to Hungary on Sunday night, Francis was asked by a reporter whether Hungarian Prime Minister Viktor Orban and ROC officials could accelerate a Ukraine peace process and arrange a meeting between the pope and Vladimir Putin.

“There is a mission in course now but it is not yet public.  When it is public, I will reveal it,” the pope responded.

Francis has said previously that he wants to visit Kyiv but also Moscow on a peace mission.

Recall, the supreme head of the ROC, Patriarch Kirill, is a close ally of Putin and fully backs the Russian invasion as a bulwark against a West he describes as decadent.

Ukrainian Prime Minister Denys Shmyhal met the pope at the Vatican last week and said he had discussed a “peace formula” put forward by President Zelensky.

This is all rather ludicrous.  There is no peace plan unless Russia agrees to go back to the old borders, pre-2014, in the Donbas.  If you want to separate Crimea, however, maybe there’s something to negotiate over, but that’s clearly a long way down the road.

Opinion….

Tom Nichols / The Atlantic

“(Any) outcome short of a Ukrainian victory would endanger the rest of the world.  There is a reason that so many nations, movements, and individuals are waiting to see what happens:

“If a Ukraine that believes in the rule of law and human rights can achieve victory against a much larger, much more autocratic society, and if it can do so while preserving its own freedoms, then similarly open societies and movements around the world can hope for success too… Not everyone in the world cares about this war, but for anyone trying to defeat a dictator, it has profound significance.

“This is why the world is waiting for the Ukrainian counteroffensive.  Americans can find it easy to forget the war raging across the sea, but Ukraine is approaching a battle for its ultimate fate – as are all of us living in the free world.”

Bret Stephens / New York Times

“One of the stranger features of the politics of the war in Ukraine is that the most vocal opposition to it tends to come from the hard-right.  In some ways, that right sounds like the hard left it used to oppose so fiercely….

“Some of the Tuckerite [Ed. Tucker Carlson’s followers] conservatives who accuse Zelensky of illiberal policies in Kyiv – such as banning pro-Russian political parties that could be expected to serve as Vladimir Putin’s puppets in the event of a Russian military victory – go out of their way to celebrate the illiberal policies of the government in Budapest.

“Some of the historical revisionists who embrace Putin’s pretext for invasion – that he was provoked by the West into coming to the defense of ethnic Russians who were ‘stranded’ in a ‘Nazi’ Ukraine after the breakup of the Soviet Union – would never accept those arguments in any other context: They’re the people who believe in the absolute inviolability of America’s southern border when it comes to the ‘invasion’ of Latin American immigrants.

“Much of this incoherence is partly explained via the George Costanza school of modern conservatism: If a Democrat is for it, they’re against it.

“But something darker is also at work.  In Putin’s cult of machismo, his suppression of political opposition, his ‘almost sublime contempt for truth’ (Joseph Conrad’s memorable line about Russian officialdom), his opportunistic embrace of religious orthodoxy, his loathing of ‘decadent’ Western culture, his sneering indifference to international law and, above all, his contempt for democratic and liberal principles, he represents a form of politics the Tuckerites glimpsed but never quite got in the presidency of Donald Trump.

“It isn’t new. In the 1930s, there was Ezra Pound and Charles Lindbergh and Diana and Oswald Mosley.  The hard right’s reverence for the principles of raw strength and unblinking obedience runs deep.

“This is not true of every conservative. The Senate minority leader, Mitch McConnell, remains firmly on Ukraine’s side, as do the editorialists at The Wall Street Journal and National Review and even conservative firebrands like Mark Levin.  A narrow plurality of Republican-leaning voters feel the same way. To tar the entire American right as pro-Putin is a slur, much as old right-wing allegations about liberal softness on Communism used to be.  But there’s also more than a nugget of truth to it.

“Certain conservative readers of this column will no doubt feel insulted and claim that it should be possible to oppose U.S. support for the war on strategic grounds without being labeled pro-Putin.

“It’s worth reminding them what George Orwell wrote in 1942 about the politics of Western pacifists vis-à-vis Nazi Germany: ‘Pacifism is objectively pro-fascist.  This is elementary common sense. If you hamper the war effort of one side, you automatically help that of the other.’”

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Wall Street and the Economy

The Federal Reserve raised its target range for the benchmark federal funds rate to 5 to 5 ¼ percent on Wednesday, as expected, with the vote among the members of the Open Market Committee being unanimous.

“Economic activity expanded at a modest pace in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low.  Inflation remains elevated.

“The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.  The extent of these effects remain uncertain. The Committee remains highly attentive to inflation risks.”

As to the potential for future rate increases, the Fed’s statement said: “In determining the extent to which additional policy firming may be appropriate* to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

* ‘Determining the extent’ replaced ‘some additional’ rate hikes might be needed from the last statement.

Did the Fed signal that it might pause?  I said last week that “there is no way Chair Powell is going to signal when they’ll pause, like at the June 13-14 meeting, because the data that they follow…remain(s) well above 4%, let alone the Fed’s target of 2%.”

And he didn’t, even as some market analysts said he was indeed signaling a pause.  Could the Fed pause in June?  Sure.  I’d say they will.  But he reiterated, for the umpteenth time, that the Fed’s “assessment will be an ongoing one…It will take months.”

Importantly, he said the Fed “is not looking to get to 3% and drop our tools.  We want 2%.  This will go on for a while.”

Here’s the bottom line.  When the Fed pauses, maybe in June, they are staying there for months, higher for longer, and are not about to lower rates, as the market continues to insist, perhaps in September, or sooner.  Powell once again said the Fed did not discuss ‘cutting’ rates.

And that’s been my point all year. Whenever the Fed does pause, they’ll be sitting at that level for a long time and the equity market has been way too sanguine over such a scenario.  Dumb, dumb, dumb.  Part of the dumbing down of America, you might say.

Once more, Powell said, “We want 2%.”  Using core CPI and core PCE (or the Fed’s third preferred benchmark, ‘non-housing services’), we are above 4% today.  That’s all you need to know.

Next week, we have the April numbers for consumer and producer prices.

On the economic data front, the April ISM manufacturing figure was 47.1, basically in line with expectations (50 the dividing line between growth and contraction), with services at 51.9.

Which led up to Friday’s jobs report for April, a robust 253,000 vs. consensus of 180,000.  But the prior two months were revised down about 150,000 from their previous reported numbers.  The unemployment rate was 3.4%, matching January’s low, and lowest since the 1960s.

Average hourly earnings, however, were higher than forecast, 0.5%, and 4.4% from a year ago, up from March’s revised 4.3% pace.

The Atlanta Fed’s GDPNow barometer for the second quarter starts out at 2.7%.

Freddie Mac’s 30-year fixed-rate mortgage is at 6.39%.

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Treasury Secretary Janet Yellen said on Monday that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, putting pressure on lawmakers and the president to get cracking in order to avoid a default.

President Biden has called congressional leaders from both parties to get together at the White House next Tuesday, and House Speaker Kevin McCarthy agreed, so I’m not going to spend much time this week on the topic (I covered it last week).

Most in Congress say, ‘Don’t worry…we’ve had this issue before and it always gets solved at the last minute. Maybe the parks are closed for a day or two, and some folks won’t get a check, briefly, but it all gets worked out.’

This time, this attitude seems more than a bit too cocky, but let’s see what the mood is among the major players next week.  The markets are certainly beginning to take notice, once we knew tax revenues weren’t going to come in as strongly as once thought and thus the deadline is sooner than originally expected.

Europe and Asia

We had a slew of economic data from the eurozone this week.

Starting off…the PMIs for the eurozone in April.  The composite was at 54.1, but manufacturing was 45.8 (35-month low), services 56.2 (12-mo. high). [S&P Global / Hamburg Commercial Bank]

Germany: 44.5 mfg., services 56.0
France: 45.6, 54.6
Italy: 46.8, 57.6
Spain: 49.0, 57.9
Ireland: 48.6, 58.4
Netherlands: 44.9 mfg.
Greece: 52.4 mfg.

UK: 47.8 mfg., services 55.9

Well, you see the pattern.

Dr. Cyrus de la Rubia, Chief Economist / HCOB…I miss Chris Williamson…

“Italy and Spain are currently the main driving forces behind service sector growth in the eurozone. This is shown by the HCOB PMI indices in April, which also signal expansion in Germany and France, but show particular strength in the two southern European countries.  Here, the greater importance of tourism in these states is probably making itself felt, helping them benefit from the generally observed travel boom.

“The services sector is in robust shape across the eurozone, which is also reflected in the fact that companies are able to pass on at least some of the inflation in intermediate inputs to customers….

“Services firms’ confidence is reflected not only in the solid index reading for business expectations, but also in the fact that firms increased their staffing levels more than the previous month, according to the PMI survey.  This is also matched by the fact that new business increased at an accelerated pace, across all four major euro countries.

“One fly in the ointment that cannot be entirely ignored, however, is that the eurozone order backlog grew at a weaker pace, nearly stagnating in Germany and falling slightly in Italy.  Across all HCOB PMI indicators, however, everything suggests that growth in the eurozone services sector will continue in the months ahead.”

Manufacturing is a different story.

A flash estimate of Euro area inflation for April from Eurostat came in at 7.0%, up from 6.9% in March. The core rate, ex-food and energy, was 7.3%, down from 7.5%.  The core rate in the U.S. is 5.0%.

Flash ‘headline’ numbers:

Germany 7.6%, France 6.9%, Italy 8.8%, Spain 3.8%, Netherlands 5.9%, Ireland 6.3%.

Encouragingly, producer prices continue to fall in the EA20, down 1.6% in March over February, and up 5.9% vs. March 2022.  Months earlier this figure was in excess of 15%. [Eurostat]

Eurostat released data on euro area unemployment for March, 6.5%, down from 6.8% March 2022.

Germany 2.8%, France 6.9%, Italy 7.8%, Spain 12.8%, Netherlands 3.5%, Ireland 4.3%.

Retail trade in the eurozone was down by 1.2% in March compared with February; and off 3.8% from a year ago. [Eurostat]

Meanwhile, the European Central Bank raised its interest rates by 0.25 percent on Thursday as it continues to try to bring eurozone inflation under control.

The widely anticipated rate increase takes the key ECB rate to 3.25 percent.  It comes on the back of six previous rate increases.

Making the announcement, the board of the ECB said the inflation outlook “continues to be too high for too long,” and that “underlying price pressures remain strong.”

ECB President Christine Lagarde also made it clear more rate increases were likely.  “We have more ground to cover and we are not pausing,” she told a news conference.  “That’s extremely clear.”

France: The top constitutional body rejected on Wednesday a last-ditch effort by opposition lawmakers to undo President Emmanuel Macron’s law to raise the retirement age to 64, deeming that a proposed bill doesn’t meet the needed criteria.

It was the second time that the Constitutional Council has rejected the plan to restore the retirement age to 62, notably via a possible referendum or new bill.  Had it passed muster, the process called for would be long and wouldn’t stop Macron’s law from taking effect.  [We’re talking a process that would have taken at least a year-and-a-half, by my analysis.]

We saw mass protests across France on May Day over the pension reform, with hundreds arrested, and the country’s main labor unions on Tuesday called for another round of nationwide demonstrations and strikes on June 6.

The unions are looking to disrupt the French Open tennis tournament and have talked of blocking construction sites for next year’s Paris Olympics. That’s not good.

The French Open is May 22 – June 11, with main play commencing May 28.

The Olympics will be staged July 26 – Aug. 11, 2024. Personally, I wouldn’t go.  The Associated Press had a story this week that there are large numbers of Parisians who are signing up to be volunteers…but bad ones.

Huh?  They call themselves “un-volunteers,” anti-Macron folks – who are looking to gum up the Olympic machine by refusing to then turn up for work.

Britain: With the coronation of King Charles III looming, Prime Minister Rishi Sunak’s Conservatives suffered steep losses in Friday’s local elections, undermining his attempts to revive their fortunes and emboldening the opposition Labour Party before a national vote expected next year.

With a majority of the vote in as I go to post, the Conservatives had a net loss of 943 seats, while Labour added 486 and the Liberal Democrats gained 353.

The council results in England are the largest, and possibly last, test of voter sentiment before the next national election due by January 2025.

Turning to Asia…China’s National Bureau of Statistics reported out its PMIs for April, with manufacturing at a surprisingly low 49.2 vs. 51.9 prior, while the non-manufacturing figure was 56.4 vs. 58.2 in March.

Caixin’s private sector (small/midsize companies) manufacturing index was 49.5, with services at 56.4, mirroring the official government reading.

The five-day “Golden Week” holiday did see domestic tourism revenue exceeding 2019 levels for the first time since the start of the pandemic, 101 percent of pre-pandemic levels, though analysts warned the explosion of pent-up demand might not be sustainable, with the next leg of the economic recovery set to be more arduous.

Around 274 million traveled over the Labour Day or May Day holiday, with the figure reaching 119 percent of pre-pandemic levels in 2019, according to the Ministry of Culture and Tourism.

Japan’s manufacturing PMI for April was 49.5, the sixth month of contraction in a row. The service sector reading is this weekend.

South Korea’s manufacturing PMI in April was 48.1, the 12th straight month of contraction, but up over March.  South Korean exports fell for a seventh straight month in April, down 14.2% year-over-year.

Taiwan’s manufacturing PMI for April was 47.1, eleven straight months of contraction.

Street Bytes

--Volatility returned, but by week’s end, the major indexes were mixed, as the strong jobs report quashed any recession talk, at least for a week, and regional bank shares rallied after nearly taking a 10-count earlier.

The Dow Jones finished down 1.2% to 33674, the S&P 500 lost 0.8%, but Nasdaq eked out a gain of 0.1%.

--U.S. Treasury Yields

6-mo. 5.06%  2-yr. 3.91%  10-yr. 3.43%  30-yr. 3.74%

Treasuries were all over the place this week, the yield on the 2-year plummeting, while the 10-year finished unchanged by week’s end.  Let’s see if next week’s inflation data provides more clarity on future Fed actions…as in higher for longer.  And we’ll see if regional banks continue to stabilize.

--Oil giant BP reported strong profits for the first quarter, $5 billion, although this was down from $6.2 billion last year with oil prices having fallen from the peak seen after Russia’s invasion of Ukraine.

In the UK, big profits renew calls for the companies to pay higher taxes, with the Labour Party and Liberal Democrats calling for changes to the windfall profits tax in the country.

Liberal Democrat leader Ed Davey said: “These eye-watering profits are a kick in the teeth for all those struggling to pay their energy bills.”

--Almost half of U.S. adults say they’re worried about the safety of their deposits in banks and other financial institutions – levels of concern as high or higher than during the 2008 financial crisis.

A Gallup poll released Wednesday shows 48% of Americans are very or moderately worried about their money following the worst spate of bank failures in 15 years.  Only 20% say they’re not worried at all.

--We were waiting to see what would happen over the weekend and early Monday, JPMorgan Chase announced it was buying First Republic Bank, which was both good and bad for the Federal Reserve prior to its interest rate decision.

It was a relief in that it offered hope the crisis of confidence in First Republic wouldn’t spread to other regional lenders and it potentially headed off a fresh banking crisis.

But a worry in that First Republic’s failure is merely the latest symptom of the pressure caused by the Fed’s interest-rate increases.  The move from a near-zero policy to restrictive has taken place at breakneck speed, and the economy’s only just beginning to see an impact.

And so the Fed raised rates Wed. afternoon, and hours later, PacWest was in trouble.

Over the weekend, Berkshire Hathaway’s Charlie Munger pointed out that banks are loaded with bad loans on commercial property, whose value has fallen as rates have risen (see Vornado Realty below).

But back to JPMorgan, after regulators seized First Republic and struck a deal to sell the bulk of its operations to JPM, JPM said it will assume all of First Republic’s $92 billion in deposits – insured and uninsured.  It is also buying most of the bank’s assets, including about $173 billion in loans and $30 billion in securities.

As part of the agreement, the FDIC will share losses with JPMorgan on First Republic’s loans.  The agency estimated that its insurance fund would take a hit of $13 billion in the deal.  JPM also said it would receive $50 billion in financing from the FDIC.

San Francisco-based First Republic is the second-largest bank to fail in U.S. history, losing $100 billion in deposits in a March run following the collapse of fellow Bay Area lender Silicon Valley Bank.  After a $30 billion bailout from America’s largest banks failed to stem the outflows, it failed.  The $30 billon will be repaid after the deal closes, JPMorgan said.

So, three of the four largest-ever U.S. bank failures have occurred in the past two months.  First Republic, with some $233 billion in assets at the end of the first quarter, ranks just behind the 2008 collapse of Washington Mutual Inc.  The other two were Silicon Valley and Signature Bank.

JPM said it got about $50 billion in new deposits from panicky customers looking to move their money to a too-big-to-fail bank following March’s failures.  The company is expected to generate more than $500 million of incremental net income per year.  JPM will take over First Republic’s 84 offices, but you could expect most of these to eventually close since they are generally within a mile of a Chase branch.

“This part of the crisis is over,” CEO Jamie Dimon said Monday.  “Everyone should just take a deep breath.”

Well, it wasn’t over, we learned.  All kinds of rumors around regionals such as PacWest and Western Alliance roiled their share prices.

--Advanced Micro Devices shares fell sharply, more than 9% Wednesday, after the company reported its first-quarter results declined from last year as the semiconductor’s client division and gaming revenue tumbled.

Adjusted per-share earnings plunged to $0.60 during the three months ended April 1 from $1.13 a year earlier, but came in higher than consensus of $0.56.  Revenue fell 9% to $5.35 billion, though it topped the Street’s $5.31 billion view.

The client division’s sales slumped 65% to $739 million as processor shipments were “significantly below consumption to reduce downstream inventory,” according to an investor presentation. Gaming declined 6% to $1.76 billion.

Data-center revenue was almost flat as double-digit cloud growth was offset by lower enterprise server processor sales.

The shares declined because not only was the earnings report rather unexciting, but AMD expects second-quarter revenue of about $5.3 billion, plus or minus $300 million, which would reflect an annual decline of 19%.  The consensus is for $5.5 billion.

--Sony Group Corp.’s shares fell nearly 5% on Monday after the Japanese electronics and entertainment conglomerate’s annual profit outlook fell short of expectations.

The company posted a record operating profit for the year ended March 2023, driven by a robust performance at its music and microchip units.

But it projected a a 3.2% profit decline for the current year, missing current consensus, as it expects a slow recovery in profitability in the videogame unit.

--Qualcomm Inc.’s shares fell more than 5% Thursday after the chip designer signaled it would take longer for its crucial smartphone market to rebound from a post-pandemic slump. The company, which supplies top handset makers Apple and Samsung, underwhelmed Wall Street just like AMD had.

“While we believe investors were expecting a miss, this was admittedly a somewhat sobering report,” said Bernstein analysts, as their brethren scurried to lower price targets on Qualcomm’s stock.

The company blamed the weakness on the timing of purchases by a customer that only buys its cellular modems and China, where an expected post-Covid recovery was yet to materialize.  Qualcomm did not name the modem customer, but analysts pointed to Apple. And according to QCOM, there hasn’t been any evidence of a recovery in demand in China, even though expectations are for a rebound there in 2H23.

Qualcomm is also facing increasing competition in high-end smartphone chips from Taiwan’s MediaTek.

Overall, revenue fell by nearly 17% from a year ago to $9.3 billion.  Rather than indicating that a stabilization is in sight, QCOM’s downside guidance for the current quarter shows that a recovery is not on the near-term horizon.

Specifically, CEO Cristiano Amon stated that demand has deteriorated more than anticipated, especially in handsets, due to the macroeconomic environment. Worse yet, Amon said that QCOM is operating under the assumption that the inventory drawdown situation will likely persist for at least the next couple of quarters.  A general assumption among market participants was that the inventory issue would begin to clear up during this current quarter.

--So with the above in mind, after the market closed Thursday, Apple released its earnings and they came in better than expected.

For the fiscal second quarter, Apple reported earnings of $1.52 a share, on revenue of $94.8 billion, both above expectations, but the latter fell 2.5% from a year earlier.  Profit was flat.

Most of the revenue beat was driven by stronger than expected sales in the iPhone unit, which generated revenue of $51.33 billion in the quarter, up 1.5% from a year ago.  The Street expected $48.66 billion.

Services revenue fell below consensus at $20.91 billion.  Mac revenue of $7.17bn was below estimates (and down more than 30%), while iPad revenue was in line at $6.67 billion.  Wearables was slightly above at $8.76 billion.

“We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high,” CEO Tim Cook said in the earnings release. “We continue to invest for the long term and lead with our values, including making major progress toward building carbon neutral products and supply chains by 2030.”

Whatever.

The Big Tech earnings season is over and Microsoft, Alphabet and Meta, along with Apple, reported fairly positive results, but only vs. expectations.  It’s not like they were blowout quarters by any stretch of the imagination.

That said, with Friday’s market rally, Apple shares rose over 4%.

--IBM CEO Arvind Krishna expects about 30% of its 26,000 back-office staff to be replaced by AI in five years.  But Citadel’s chief was more positive on the prospect for workers.  He expects automation and AI to free them for innovative pursuits, rather than replace them.  Samsung banned ChatGPT, while U.S. edtech firm Chegg tanked after warning the chatbot threatens its growth.

These are just a few of the headlines.

Chegg’s CEO Dan Rosensweig said: “Since March we saw a significant spike in student interest in ChatGPT.  We now believe it’s having an impact on our new customer growth rate.”

--A man widely seen as the godfather of artificial intelligence has quit his job, warning about the growing dangers from developments in the field.

Geoffrey Hinton, 75, announced his resignation from Google in a statement to the New York Times, saying he now regretted his work.

He told the BBC some of the dangers of AI chatbots were “quite scary.”

“Right now, they’re not more intelligent than us, as far as I can tell.  But I think they soon may be.”

Dr. Hinton’s pioneering research on neural networks and deep learning has paved the way for current AI systems like ChatGPT.

The British-Canadian cognitive psychologist and computer scientist told the BBC the chatbot could soon overtake the level of information that a human brain holds.

“Right now, what we’re seeing is things like GPT-4 eclipses a person in the amount of general knowledge it has and it eclipses them by a long way.  In terms of reasoning, it’s not as good, but it does already do simple reasoning,” he said.

“And given the rate of progress, we expect things to get better quite fast.  So we need to worry about that.”

--India’s domestic air traffic hit a record high, with 456,082 passengers flying on a single day, a milestone reached April 30, as 2,978 flights took off across the country.

“The skyrocketing domestic passenger traffic post Covid is a reflection of India’s high growth,” aviation minister Jyotiraditya Scindia tweeted.

More than 37.5 million passengers were carried by domestic airlines in just the first three months of 2023.  This marked 51.7% growth compared to a year ago.  Just a lot of pent-up demand and first time travelers.

--Pilots at American Airlines Group Inc. overwhelmingly voted in favor of a measure authorizing union leaders to call for a strike, though the airline said negotiations are still progressing.

The vote results announced Monday don’t mean a walk-off is imminent or inevitable.  Federal law makes it difficult for airline unions to go on strike.

The Allied Pilots Association, which represents some 15,000 American Airlines pilots, said 99% of votes were in favor of authorizing a strike, with 96% of its members voting.

A spokeswoman for American said, “The finish line is in sight. We understand that a strike authorization vote is one of the important ways pilots express their desire to get a deal done and we respect the message of voting results.”

American has already pledged to match pay increases outlined in a deal that Delta Air Lines Inc. struck with its own pilots earlier this year.

Pilots at Southwest Airlines are set to begin voting on a similar strike authorization measure this month.

The deal reached by pilots at Delta earlier this year set a new high-water mark.  It included raises of at least 34% over its four-year term.

American CEO Robert Isom quickly responded, telling American’s pilots in a video message in March that the airline is prepared to match Delta’s pay rates and use the same profit-sharing formula as Delta’s pilots.

A narrow-body jet captain at the top of the scale would make $475,000 a year by the fourth year of a proposed deal (after pay increases of up to 40%), and a wide-body captain could earn as much as $590,000.

--TSA checkpoint numbers vs. 2019

5/4…98 percent of 2019 levels
5/3…95
5/2…95
5/1…98
4/30…100
4/29…99
4/28…98
4/27…101

--Ford Motor Co. made $1.76 billion last quarter, swinging into the black from a $3.1 billion net loss for the same period a year ago.

Ex-items, Ford made 44 cents per share. That beat Street estimates of 42 cents.

Revenue rose 20% to $41.74 billion, soundly beating the Street’s consensus of $39.25 billion.

Ford reaffirmed its earlier profit guidance for the full year of $9 billion to $11 billion.

The automaker lost $722 million before taxes on its electric vehicles, but it made $2.62 billion on internal combustion vehicles.  The company’s commercial vehicle unit added $1.37 billion to the pretax profits.

Ford sold just under 472,000 vehicles from January through March, up 9.9% from the previous year.  The company continued to get strong prices for its vehicles during the quarter, driven by loaded up trucks and big SUVs. The average sale price was $56,534, according to Edmunds.

The first-quarter loss last year was due mainly to a drop in valuation of Ford’s investment in electric vehicle startup Rivian, which saw its stock slide.

Earlier Tuesday, Ford cut prices on its Mustang Mach E electric SUV by $3,000 to $4,000 depending on the version, or by as much as 7.8%, the same day Tesla raised prices slightly ($290) on the Model Y, the Mach E’s main competitor.

Ford also said it is reopening the order book on Wednesday for the Mach E after upgrading a factory in Mexico to increase output.

--Vornado Realty Trust is looking to sell office buildings at depressed prices in an effort to raise cash and prop up its faltering stock price.

“We are not a distressed seller,” CEO Steven Roth insisted on a conference call Tuesday.  “We are not a weak seller.”

But circumstances are forcing the developer’s hand.

Occupancy rates and cash flows are falling while borrowing costs march higher along with interest rates. 

“You have to be realistic,” Vornado’s president and CFO, Michael Franco, said on the call.  “We may not love the price of some assets today relative to where they were a few years ago, but relative to our stock price, we do like that pricing.”

Vornado’s 20 million-square foot portfolio includes several large Midtown, New York, office towers, especially in the area around Penn Station.

This is happening all over the country.  Commercial real estate is a huge problem.  Roth said on the call, “I’m not calling a bottom.” [Crain’s New York Business]

--Morgan Stanley is preparing a fresh round of job cuts amid a renewed focus on expenses as recession fears delay a rebound in dealmaking.

The reported plan is to eliminate about 3,000 jobs from the global workforce by the end of this quarter.  That amounts to roughly 5% of staff excluding financial advisers and personnel supporting them within the wealth management division.

The banking and trading group are likely to shoulder many of the reductions.

The cuts come months after the firm trimmed its workforce about 2%.

CEO James Gorman said last month underwriting and mergers activity has been subdued and that he doesn’t expect a rebound before the second half of this year or 2024.

--Canada’s economy gained a net 41,400 jobs in April, entirely in part-time work, Statistics Canada data showed on Friday.  The jobless rate was unchanged at 5.0%.

--Eli Lilly said Wednesday that its donanemab drug candidate for early Alzheimer’s disease met the primary endpoint under a phase 3 study, showing it can significantly slow cognitive and functional decline in patients.

The study also showed 36% slowing of decline over 18 months compared to a placebo in 1,182 people diagnosed with early-stage disease based on scans showing brain deposits of amyloid protein and intermediate levels of tau protein, the company said.  About 72% of the drug’s patients completed their course of treatment by 18 months for achieving plaque clearance, and the participants showed 40% less decline in ability to perform daily activities.  Additionally, participants on donanemab showed 39% lower risk of progressing to a more severe stage of Alzheimer’s compared to placebo.  All these results are statistically significant, according to Lilly.

“There are risks in medicine, but I think when you look at these results in the context of a fatal life-threatening disease, (they) are quite meaningful,” said Lilly Neuroscience executive Anne White in an interview.

Lilly said it expects to make a submission to the Food and Drug Administration in Q2 for approval.

Lilly’s drug is likely to become the third in its class on the market following U.S. approval of two similar medicines developed by partners Eisai and Biogen – Leqembi and Aduhelm, which failed to gain traction with doctors or insurers after showing little evidence that they slowed cognitive decline.  Both were approved under the FDA’s accelerated review program, based on their ability to remove amyloid plaques.

Lilly, calling this a gamechanger, saw its shares rise 6%.

--The Food and Drug Administration approved a vaccine against respiratory syncytial virus (RSV) – an illness that kills thousands of Americans each year.

The vaccine still needs approval from the Centers for Disease Control and Prevention before it can be rolled out to the public.

Officials say the vaccine, named Arexvy by the manufacturer GSK, is a major breakthrough that will save lives.

It could be available to people over 60 within months, officials say.

RSV is a respiratory illness that typically results in cold-like symptoms for adults, but can be dangerous for young children, the elderly, and those with underlying health conditions.

On average, it kills 100-300 children under the age of 5 in the U.S. every year, according to the CDC.

It also kills about 6,000 to 10,000 adults over 65 annually, and causes between 60,000 to 120,000 hospital admissions.

--Yum Brands Inc. missed Wall Street estimates for first-quarter profit on Wednesday, as the Taco Bell parent doubled down on promotions to attract inflation-wary consumers while also facing lingering commodities and labor cost pressures.  Shares of the KFC and Pizza Hut owner tumbled 3% after the company also warned of a $10 million to $20 million hit to current-quarter operating profit.

Yum has banked on aggressive promotional offers – including Taco Bell’s $2 burritos and KFC’s $5 Mac & Cheese – to attract more low-income customers, helping total same-store sales jump 8% in the March quarter, handily beating estimates of a 5.5% increase.  However, along with higher food and labor costs, foreign exchange pressures and ramped up investments in automation and digital business, the aggressive promotions largely drove a 25% slump in profits.

Ex-items, the company earned $1.06 per share, missing estimates of $1.13.

--Starbucks said higher prices and more-efficient operations helped drive gains in sales and profit for its most recent quarter, while business in its China market improved.

The coffee giant said that better employee retention has helped keep drinks and customers flowing through its cafes, though the company’s increased spending on wages and rising supply costs curbed some profits at Starbuck’s North American stores.

Starbucks reported $8.72 billion in sales for the three months ended April 2, exceeding expectations of $8.41 billion.  Revenue increased 14% from the year-earlier period.

Same-store U.S. sales were up 12% for the quarter, while global same-store sales increased 11%, and were up 3% in the key China market.  In the prior quarter, China same-store sales declined 29%, prior to China lifting many of its strict Covid policies late last year.

Net income was $908 million, up 35% from a year ago.  Adjusted earnings per share were 74 cents, ahead of the Street’s 65 cent forecast. 

The shares declined on the news as CEO Laxman Narasimhan said that while the company was reaffirming guidance for the fiscal year, the business environment remained challenging.  Investors were looking for the company to raise guidance.

--Nordstrom is closing both of its stores in downtown San Francisco over “the deteriorating situation” in the area, becoming the latest chain business to shutter a location in the crime-ridden metropolis.

Nordstrom stressed in a note to employees the downtown market in the city has “changed dramatically over the past several years, impacting customer foot traffic to our stores and our ability to operate successfully,” KGO-TV reported.

The owner of the Westfield Mall where one of the Nordstrom stores is closing, slammed current conditions in the city, and said retailers are leaving in droves because of unsafe conditions that have dragged on, despite the company pleading to city officials to take action.

City officials are busy battling over issues like reparations instead, I can’t help but muse.

--The Writers Guild of America called on their members to stage Hollywood’s first strike in 15 years at midnight Tuesday.

In a statement, the Alliance of Motion Picture and Television Producers said it offered “generous increases in compensation for writers as well as improvements in streaming residuals.” 

The alliance said primary sticking points included the guild’s demands over mandatory staffing levels and duration of employment.

Writers are seeking a larger slice of the streaming pie that has dramatically transformed the television business.  They voted by a historic margin in favor – 98% to 2% - to grant a strike authorization sought by their leaders if they couldn’t reach a deal on a new film and TV contract on behalf of 11,500 members.

The walkout is expected to last for weeks or months and is expected to halt much of TV and film production nationwide and reverberate across Southern California, where prop houses, caterers, florists and others heavily depend on the entertainment economy.  The previous writers strike in 2007 roiled the industry and lasted 100 days.

One immediate casualty was light-night television and programs like SNL.

Streaming is the big issue, upending how writers are compensated.

The median weekly pay for writer-producers declined 23% over the last decade when adjusted for inflation, according to a WGA survey.  Screenwriter pay declined 14% in the last five years, the report said.

--NJ.com had a story on the desperate search for nurses in my state and across the country.  New Jersey ranks among the 10 states with the most unfilled registered nurse positions with 13,404, according to Adzuna, a job listing site.  And it cannot simply recruit candidates from nearby states because neighbors Connecticut, New York and Pennsylvania are having even more trouble.

All about the pandemic, which exacerbated a problem that existed for decades; hospitals understaffing to maximize profits, according to the nurses.  And then the last three years, healthcare workers have migrated out of bedside nursing due to untenable working conditions.

A new survey from AMN Healthcare, one of the U.S.’s largest health care staffing companies, found 85% of nurses working in hospitals plan to change jobs, leave the profession entirely or return to school.

--Speaking of the medical industry, stock in Johnson & Johnson’s spinoff Kenvue jumped 17% in its IPO on Thursday, a rather strong debut, that was the largest IPO since 2021.

Kenvue and JNJ offered 173 million shares of Kenvue, with a greenshoe for another 26 million.

Johnson & Johnson will own nearly 91% of Kenvue, shares that will eventually be distributed to its own shareholders (within 180 days, I believe).

The new company, symbol KVUE, sells some of the most recognizable consumer-health brands in the world, including Tylenol, Motrin, Benadryl, Band-Aid, Zyrtec and Neutrogena.

Locally, Kenvue/JNJ announced this week that the new company’s headquarters will be none other than here, in my home town of Summit, literally at the other end of my block (a few miles away).

To all the new Kenvue employees and homeowners, don’t stupidly leave your key fob in your car. 

--The Dylan Mulvaney controversy continues to hurt Bud Light.

Beer Business Daily reported Sunday that Bud Light’s off-premises sales volume – the amount of beer sold outside of restaurants and bars – was down 26.1% from a year earlier in the week ended April 22, based on scan data. Volumes were down 21.1% in the prior week, while so far this year, Bud Light volumes are down 8%.

The figures include sales at grocery stores, convenience stores, and liquor stores.

Beer Business Daily wrote on its website: “We’ve never seen such a dramatic shift in national sales in such a short period of time.”

Bud Light has been dealing with the fallout from a social media promotion for its Bud Light beer featuring Mulvaney, a transgender influencer.  The promotion prompted a backlash from conservatives on social media and hurt sales of Bud Light, particularly in red states.

Coors Light, the beer choice of moi, saw its volume rise 13% in the third week of April, while Miller Lite volume was up 13.6%.

Anheuser-Busch Inbev nonetheless reported solid earnings on Thursday that beat the Street, while the company reiterated its full-year core profit growth outlook.

The brewing giant, which is more than Bud Light, saw revenue climb to $14.21 billion from $13.24bn, ahead of the Street’s view for $14.05 billion.

Sales of the company’s global brands advanced outside of their respective home markets, led by an 18% jump for Budweiser, which saw consumer demand in China return.  The Stella Artois and Corona brands rose 13% and 12%, respectively.

On the issue of Bud Light, CEO Michel Doukeris downplayed the impact of the backlash, saying the brand’s U.S. sales declines in the first three weeks of April represented only 1% of InBev’s global volumes.

“We believe we have the experience, the resources and the partners to manage this,” Doukeris said during a conference call with investors Thursday.

While Doukeris didn’t want to discuss the Bud Light fiasco much, he decried misinformation about the promotion. Cans featuring Mulvaney weren’t made to be sold to the general public, for example.

“This was one can, one influencer, one post and not a campaign,” he said.

Doukeris said InBev is providing financial support to delivery drivers, sales representatives, wholesalers and others who are struggling with Bud Light’s sales declines. He didn’t quantify the level of support.

Expect a big ad blitz this summer, with a focus on sports and music festivals, Doukeris said.  He noted that Bud Light was a sponsor of the recent NFL Draft.

“Everything we do should be about beer and should promote beer.  It is an essential part of life’s meaningful moments, whether in sports, music or celebrations,” he said.

He said the company needs to better understand the social media landscape and how big brands that want to reach a lot of different kinds of customers might face situations like this one.

“We will always be at the table when important topics are debated, but the beer itself should not be the focus of the debate,” he said.

Foreign Affairs, Part II

China / Taiwan: The United States urged China last weekend to stop harassing Philippine vessels in the South China Sea, pledging to stand with the Philippines after another maritime confrontation between the two countries.

The Philippines accused China’s coast guard of “aggressive tactics” following an incident during a Philippine coast guard patrol close to the Philippines-held Second Thomas Shoal, a flashpoint for previous altercations located 105 miles off its coast.

A Chinese foreign ministry spokesperson said in a statement: “The U.S., as a country outside of the region, must not interfere with the South China Sea matter or use the South China Sea matter to sow discord among regional countries.”

These seemingly little matters are rapidly adding up…an accident waiting to happen.

Separately, China is increasingly barring people from leaving the country, including foreign executives, a jarring message as the authorities say the country is open for business after three years of tight Covid-19 restrictions.

Scores of Chinese and foreigners have been ensnared by exit bans, according to a report by the rights groups Safeguard Defenders, while a Reuters analysis finds an apparent surge of court cases involving such bans in recent years, and foreign business lobbies are voicing concern about the trend.

“Since Xi Jinping took power in 2012, China has expanded the legal landscape for exit bans and increasingly used them, sometimes outside the legal justification,” the Safeguard Defenders report reads.

This contrasts with China’s message that it is opening up to overseas investment and travel, emerging from the isolation of some of the world’s tightest Covid curbs.

An example of the bans, Reuters reported, is a Singaporean executive at the U.S. due diligence firm Mintz Group, who is prohibited from leaving China this year, according to people familiar with the matter.

The other week, police in Shanghai visited Bain & Co.’s office in the city and questioned staff, the U.S. management consultancy said last week.

So what do you do if you’re a foreign business and the vague wording of the counter-espionage legislation, which says exit bans can be imposed on those who cause “harm to the national security or significant damage to national interests.”

“The uncertainty is huge,” said Jorg Wuttke, head of the European Union Chamber of Commerce in China.  “Can you do due diligence?  Clarity has to come.”

Xiang Li, a rights activist who escaped China in 2017 and later received asylum in the U.S., was denied exit for two years before her escape.  “They can find any reason to stop you from leaving the country.  China doesn’t have the rule of law,” she told Reuters.  “The law is used to serve the purposes of the Chinese Communist Party.  It’s very effective.”

Taiwan pledged to strengthen ties with its sole South American ally Paraguay after the country’s pro-Taipei ruling party candidate was elected president, suggesting formal relations between the two sides would remain intact.

Results of the Paraguayan presidential election on Monday showed that voters there chose the ruling conservative Colorado Party’s candidate Santiago Pena as their new leader.

Pena, who had pledged to maintain Paraguay’s long-standing relations with Taipei, won 43 percent of the vote, a 15-point margin over his center-left challenger Efrain Alegre, who had opted for switching official recognition to Beijing if elected.

There were protests in Paraguay over the election results, but by supporters of the third-place candidate who received 23 percent of the vote.

The Organization of American States (OAS) said there was no reason to contest the results.

Sudan: The United Nations said on Wednesday it was seeking assurances from Sudan’s warring factions on the safe delivery of aid after six trucks of humanitarian supplies were looted and air strikes in Khartoum undermined a new ceasefire.

Air strikes were heard in Khartoum on Wednesday even as warring factions agreed to a new seven-day ceasefire from Thursday, weakening chances for a lasting truce.

The conflict has created a huge humanitarian crisis, with about 100,000 people forced to flee with little food or water to neighboring countries, the United Nations said. Aid deliveries have been held up in a nation of 46 million people where about one-third had already relied on humanitarian assistance.  A broader disaster could be in the making as Sudan’s impoverished neighbors grapple with the influx of refugees.

The situation with medical care and the hospitals can only be described as a disaster.  Hospitals have come under fire, doctors are leaving, supplies aren’t getting in.  As the Red Cross describes, many health facilities are simply not working.

Sudan’s Health Ministry said on Tuesday 550 people have died, with over 4,900 wounded, though this is a gross undercount.  Foreign governments have been winding down their evacuation operations that sent thousands of their citizens’ home.

Thursday, the Director of National Intelligence, Avril Haines, told the Senate Armed Service Committee the conflict in Sudan between the military and the paramilitary Rapid Support Forces is “likely to be protracted” because both sides believe they can prevail militarily and have few incentives to negotiate.  The ongoing violence is worsening “already dire humanitarian conditions.”

Iran: Iranian forces seized a Panama-flagged oil tanker on Wednesday in the Strait of Hormuz, the U.S. Navy said, marking the second time in less than a week that Iran has captured a commercial ship in the region.

A dozen small Iranian navy boats swarmed the 360-yard-long Niovi after it left Dubai, bound for the UAE, and forced it to reverse course and head towards Iran’s coast.

The first ship six days earlier was a Greek-owned oil tanker bound for Texas.

Wednesday, Iranian President Ebrahim Raisi landed in Syria in an effort to bolster ties between the two close allies and project Tehran’s influence in the Middle East amid a broader geopolitical realignment in the region.

Raisi’s trip to Syria was the first public visit by an Iranian president since the civil war broke out in the country in 2011.

Separately, Turkish President Erdogan said last Sunday that Turkish intelligence forces killed Islamic State leader Abu Hussein al-Qurashi in Syria.

“This individual was neutralized as part of an operation by the Turkish national intelligence organization in Syria yesterday,” Erdogan said on Turkish television.  He said the intel organization had pursued Qurashi for a long time.

Lastly, Iranian Supreme Leader Ayatollah Ali Khamenei told visiting Iraqi President Abdul Latif Rashid on Saturday.

“Americans are not friends of Iraq. Americans are not friends with anyone and are not even loyal to their European friends,” state media quoted Khamenei as saying.

“Even the presence of one American in Iraq is too much,” Khamenei told Rashid, who was in Tehran with a delegation to boost ties between the two neighbors.

The U.S. has some 2,500 troops in Iraq to help advise and assist local troops combating Islamic State, which in 2014 seized territory in the country.

Israel: The government is making “every effort” to resolve the argument over its proposed overhaul of Israel’s judicial system through dialogue, Prime Minister Benjamin Netanyahu said ahead of the weekly cabinet meeting on Sunday morning.

“With goodwill by both sides, I am convinced that it is possible to reach agreement – and I give this my full backing,” Netanyahu said.

But other members of Netanyahu’s Likud party said they will not be able to reach agreements with the opposition, Yesh Atid, which is insisting on including the issue of a haredi conscription law in the talks.

Brazil: Brazilian police on Wednesday raided former President Jair Bolsonaro’s home and arrested two personal aides as part of an investigation into falsified Covid-19 vaccination records.  The investigation may answer questions about how Bolsonaro, a strident Covid skeptic who vowed never to get the vaccine, was registered as vaccinated in health records made public in February.

The vaccine probe is one of many putting the former far-right leader under pressure, including investigations into alleged voter suppression, attacks on the legitimacy of Brazilian elections and embezzlement of foreign gifts. Bolsonaro has denied any wrongdoing.

Serbia: Late Thursday, Serbian police arrested a man suspected of killing at least eight people and wounding 13 in the Balkan country’s second mass killing in two days, state television said.

The attacker shot randomly at people in three villages south of Belgrade.

Serbian interior minster Bratislav Gasic called it “a terrorist act.”

The shooting came less than 48 hours after a 13-year-old boy shot dead nine and injured seven at a school in Belgrade before turning himself in.

Needless to say, this country has been rocked to the core. And in response, Serbia’s president, Aleksandar Vucic, pledged “an almost complete disarming” of the country, in announcing a host of new strict weapons control measures, including more frequent background checks on gun owners.

Random Musings

--Presidential approval ratings….

Gallup: 37% approve of Biden’s job performance, 59% disapprove; 31% of independents approve (Apr. 3-25).

Rasmussen: 48% approve, 50% disapprove (May 5).

--Republican Virginia Gov. Glenn Youngkin announced Monday that he won’t be throwing his hat into the ring for the 2024 presidential race – at least for now.

Asked at an event in Los Angeles if he would be mounting a campaign for the White House later this year, Youngkin responded, “No.”

“I’m going to be working in Virginia this year,” focusing on legislative elections in his state.

--Former President Trump agreed to participate in a CNN presidential town hall event in New Hampshire that will be moderated by anchor Kaitlan Collins, the network revealed in a surprise announcement Monday.  Trump has boycotted the network for years.

The event will be held at St. Anselm College May 10.

--West Virginia Republican Gov. Jim Justice jumped into the 2024 Senate race, a crucial recruit for Senate Republican leaders.  Another Republican, Rep. Alex Mooney, has also entered the field with the backing of some prominent conservatives, setting up what is expected to be a hard-fought primary.

So what will incumbent Democrat Joe Manchin do?

Democrats see Manchin as their only hope of holding on to the Senate seat, given the state’s rightward shift.

Manchin, in a written statement, said he is “laser focused on doing the job West Virginians elected me to do,” adding he “will win any race” he enters.

Manchin has said he won’t make a decision until near the filing deadline next January, and some have speculated he could decide to run for governor or president instead.  In 2018, he didn’t announce his plans until January of that year and won re-election by three points.

Manchin has served the Mountain State for decades, as secretary of state, then governor, then senator.

I mentioned him last week as a potential third-party candidate, if he doesn’t square off directly against Joe Biden, and if Manchin doesn’t want to go for the other alternatives.

So George Will from his Washington Post perch had a column on a possible third-party through the new No Labels group, refugees from both parties, who want another choice if it’s Biden vs. Trump.  But they are only on the ballot in four states today, and maybe up to 30 by year end.

I’ve known this about the group.  Which is why I used my brain and suggested the Libertarian Party as the solution.  Every one of us at one time or another called themselves Libertarian.  It’s a simple platform, and malleable, with one significant potential issue, that being it promotes non-interventionism.

But these are different times, and I’m sure if it’s Biden vs. Trump, the Libertarian Party would welcome a Joe Manchin or any number of current Senators or Governors with stature to help broaden their overall message.

In 2016, former governors Gary Johnson and Bill Weld ran as the Libertarian ticket and received a record 4.5 million votes, 3.3%.

But my point is the Libertarian Party gets on the ballot in all 50 states. Why waste your time (No Labels folks) trying to get on the ballot when if the opportunity presents itself, you can easily work with the Libertarians?  It’s a freakin’ no-brainer, people.

--Senate Majority Leader Chuck Schumer said he was “hopeful” that fellow Democrat Dianne Feinstein, the chamber’s oldest member who has been absent since February while receiving treatment for shingles, can return next week.  Feinstein, 89, has not cast a vote since mid-February, effectively reducing her party’s narrow majority in the Senate by one to 50-49.  Her absence has complicated the ability of Democrats on the Senate Judiciary Committee to act on President Biden’s judicial nominees.

“I talked to Senator Feinstein a few days ago and we’re hopeful that she can come back next week,” Schumer said at a press conference.

Feinstein continues to face calls from some Democrats to resign, and last month she said she would temporarily step down from the Judiciary Committee.  Republicans have blocked Democratic plans to temporarily replace her on the panel.

--Donald Trump said on Thursday he will “probably” attend an ongoing civil trial in New York in which he is accused of rape and defamation, repeating his denials of the allegations during a visit to his Irish golf resort (Doonbeg).  His legal team had said the day before that Trump would not testify in person and they will not be calling any witnesses.

“I will probably attend and I think it’s a disgrace that it’s allowed to happen, false accusations against a rich guy, or in my case against a famous, rich and political person,” Trump told reporters while he played golf.  “I have to go back for a woman that made a false accusation about me, and I have a judge who is extremely hostile,” he added.

The judge gave Trump until Sunday to decide whether or not he will attend.

The just-released Trump deposition is so pathetic and condemning of the former president, expect to see it multiple times in the Democrats’ 2024 campaign commercials if he is the  Republican nominee.  

--The Arkansas judge overseeing Hunter Biden’s long-running child support battle with his baby mama chastised the first son’s lawyers Monday for being stingy with his financial data.

Judge Holly Meyer rebuked the 53-year-old’s legal team during the two-hour proceedings, saying they wrongly concealed details of filings that had already been submitted to the court as part of the ongoing legal saga.

“The ability to redact is somewhat being abused,” the judge told Hunter’s attorneys before ordering them to refile some of those papers.

Hunter appeared in a Batesville court as he seeks to reduce his monthly payments for the 4-year-old daughter he fathered with ex-stripper Lunden Roberts.

Hunter, who has never met his daughter with Roberts, has alleged he experienced a “substantial material change” in his income.

Just an amazing, despicable, dirtball.

--A jury on Thursday convicted four members of the far-right Proud Boys militia group including its former leader Enrique Tarrio of seditious conspiracy, finding they plotted to attack the U.S. Capitol on Jan. 6, 2021, in a failed bid to block Congress from certifying Joe Biden’s election victory.

The convictions after a trial lasting nearly four months handed another victory to the Justice Department as it pursues criminal charges against more than 1,000 people arising from the Capitol rampage by supporters of Donald Trump.

Several members of another far-right militia group, the Oath Keepers, were convicted in earlier trials.

Seditious conspiracy carries a prison sentence of up to 20 years.

More than 500 people have pleaded guilty to charges brought by the DOJ related to the Capitol riot and about 80 others have been convicted during trials.

--With the latest reports on the extreme lack of ethics involving Supreme Court Justice Clarence “the mute” Thomas, and now wife Ginni, the Wall Street Journal editorial board is looking rather foolish in their extreme defense of the Justice, in my humble opinion.

--Pope Francis had a gutty trip to Hungary, pointedly warning of the dangers of rising nationalism in Europe and told the Budapest government that accepting migrants along with the rest of the continent would be a true sign of Christianity.

In a hard-hitting speech upon his arrival to government leaders including Hungarian Prime Minister Viktor Orban, who has had a bunch of run-ins with the European Union, Francis also urged a rejection of “self-referential forms of populism” and strictly nationalist interests.

Francis called for a return to the “European soul” envisioned by those who laid the groundwork for modern Europe after the second World War, saying nations had to “look beyond national boundaries.”

In his speech in the presidential palace, Francis quoted St. Stephen, the 11th century founder of Christian Hungary.

“Those who profess themselves Christian, in the company of the witnesses of faith, are called to bear witness to and to join forces with everyone in cultivating a humanism inspired by the Gospel and moving along two fundamental tracks: acknowledging ourselves to be beloved children of the Father and loving one another as brothers and sisters,” Francis said.

“In this regard, St. Stephen bequeathed to his son extraordinary words of fraternity when he told him that those who arrive with different languages and customs ‘adorn the country,’” Francis said, quoting the saint’s command to ‘welcome strangers with benevolence and to hold them in esteem.’

But Francis appeared to give comfort to Orban’s rejection of the imposition of what he says are liberal values by outsiders. Francis denounced any form of “ideological colonization” on issues such as “so-called gender theory” or “the right to abortion.”

Later, Francis urged Hungarians to confront “the rapid pace of social change and the crisis of faith affecting our Western culture.”

--Only 13% of eighth graders met proficiency standards for U.S. history, meaning they could explain major themes, periods, events, people, ideas and turning points in the country’s history.  About a fifth of students scored at or above the proficient level in civics.

Yes, the pandemic had something to do with the scores, but high-performing students mainly held steady.

Federal test results released in October revealed the largest drop in math scores ever and a nationwide drop in reading that wiped out three decades of gains.

Peggy Carr, National Center for Education Statistics commissioner, said in a briefing with reporters Tuesday that she was shocked by eighth graders’ U.S. history and civics scores, which she called “woefully low in comparison to other subjects.”

Dr. Carr added: “These data are a national concern. The health of our democracy depends on informed and engaged citizens.”

James Grossman, American Historical Association executive director, said the dropping scores reflect the falling quality of history and civics lessons taught in American schools, which has been fueled by political acrimony.

Fights over what should be taught in classrooms have in recent years played out in school-board elections and state legislatures across the country.  At least 40 states have since 2021 adopted or introduced laws or policies that restrict teaching about “divisive concepts,” such as racism, leading to less-robust lessons than in past years, Dr. Grossman said.

Such “interference has a chilling effect on teachers,” he said. “Imagine a doctor who constantly has people walking into her office telling her how to treat patients,” said Dr. Grossman.  “This is what’s happening with history teachers.”

--For all the record snowfall out West this winter and spring, the water crisis in the region is hardly over, save for California (though parts of it still depend on the Colorado River for a large portion of their water).  The two key reservoirs that feed the Colorado River and many states and Mexico, Lake Powell and Lake Mead, will still probably only be about 40% full this fall in the case of the former, far below what they once held, according to longtime Colorado River expert Brad Udall.

Lake Powell will end the year about 50 feet higher than the end of 2022, while Lake Mead will be about 22 feet higher, so say the experts.  At their lowest, Powell was just 23% full, while Mead dropped to 28%.

But the drought conditions in the Colorado River Basin were two decades in the making, and as Udall said, all the snow “buys a year.  It doesn’t remotely come close to solving the long-term problems.”

--Thank God the Supreme Court temporarily halted the execution of Richard Glossip of Oklahoma today.

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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 $2024
Oil $71.33

Regular Gas: $3.56; Diesel: $4.08 [$4.24 / $5.47 yr. ago]

Returns for the week 5/1-5/5

Dow Jones  -1.2%  [33674]
S&P 500  -0.8%  [4136]
S&P MidCap  -1.2%
Russell 2000  -0.5%
Nasdaq  +0.1%  [12235]

Returns for the period 1/1/23-5/5/23

Dow Jones  +1.6%
S&P 500  +7.7%
S&P MidCap  +1.3%
Russell 2000  -0.1%
Nasdaq  +16.9%

Bulls 45.8
Bears 23.6

Hang in there.

Brian Trumbore

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