Week in Review

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Week in Review

06/03/2023

For the week 5/29-6/2

[Posted 5:30 PM ET, Friday]

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Edition 1,259

I subscribe to Smithsonian Magazine, a terrific publication, and just watched a video mentioned in the June issue on D-Day, archival footage, that is terrific.  Share it with your children.  They need to appreciate the sacrifices of The Greatest Generation, the 79th anniversary of the invasion this coming Tuesday.

Smithsonianmag.com/dday

Debt Ceiling Agreement

Congratulations to House Speaker Kevin McCarthy and President Joe Biden for negotiating a debt ceiling deal that passed the House 314-117 Wednesday night.  It then went to the Senate, which passed it 63-36 late Thursday (31 Republicans and 5 liberal Democrats, including Bernie Sanders and Elizabeth Warren, voting ‘nay.’)

President Biden is probably signing it tomorrow, as Congress beats the Monday deadline when the federal government was expected to run out of money to pay its bills.

Tonight, after I go to post, Biden is doing a victory lap from the Oval Office, his first such address from this historic site.  I will comment on it next time.

Seventy-one hardline Republicans voted against the legislation in the House (and 46 Democrats), but 165 Democrats backed the measure and pushed it through, Republicans controlling the House by a narrow 222-213 majority.

The bill suspends – temporarily removes – the federal government’s borrowing limit through Jan. 1, 2025, thus taking the issue off the table for the 2024 presidential election.

The deal will lower non-defense discretionary spending by 1% to fiscal 2022 levels and then cap annual increases in that spending category to 1%, effectively reducing spending because inflation is higher.  It also speeds up the permitting process for certain energy projects, claws back unused Covid-19 funds and expands work requirements for food aid programs to additional recipients.

[Specifically, the bill creates an $886 billion cap on security spending – including defense – and a $704 billion cap on non-security domestic spending during the 2024 federal fiscal year, starting Oct. 1.  Those would rise to $895 billion and $711 billion respectively in 2025.  Defense spending would rise next year by 3.3%, as Biden requested in his proposed budget, which is below the inflation rate, so it doesn’t meet Republican defense hawks’ aspirations for a military build-up.  But it is a break from the 2011 debt-limit deal, in which spending caps were equitably applied to defense and non-defense spending.]

There are no more student loan payment extensions.  Federal borrowers have not had to pay down their student loans since then-President Trump suspended payments in March 2020, amid the economic fallout brought on by the Covid-19 pandemic.

Republicans also picked up a win in shifting some funding away from the Internal Revenue Service.

But hardline Republicans wanted deeper spending cuts and more stringent reforms.

“At best, we have a two-year spending freeze that’s full of loopholes and gimmicks,” said Rep. Chip Roy, a prominent member of the hardline House Freedom Caucus. 

Progressive Democrats – who along with Biden had resisted negotiating over the debt ceiling – opposed the bill for a number of reasons, including the new work requirements from some federal anti-poverty programs.

On Tuesday, the Congressional Budget Office said the legislation would result in $1.5 trillion in savings over a decade.  That is below the $4.8 trillion in savings that Republicans aimed for in a bill they passed through the House in April, and also below the $3 trillion in deficit reduction that Biden’s proposed budget would have produced over that time through new taxes.

Bottom line, as Greg Ip of the Wall Street Journal put it:

“Republicans in Congress used the threat of a catastrophic default on Treasury securities if President Biden didn’t agree to cut spending.  In the end, Republican negotiators agreed to raise the debt ceiling, removing the threat of default, in return for cuts that make only the slightest change to the trajectory of deficits and debt.

“There are two key lessons from this episode.  First, as politics have become more polarized, both parties, though Republicans more so, have reached for financial tactics once seen as off limits to achieve their goals.  Yet even as the tactics become more extreme, the goals have drifted further from controlling deficits and debt….

“And in the end, discretionary spending will actually rise slightly next year, after inflation, according to Goldman Sachs. The Congressional Budget Office estimates the deal will reduce deficits by $1.5 trillion over a decade.  That sounds like a lot, but it simply means the federal debt, now 97% of gross domestic product, will rise to around 115% in a decade instead of 119%.  And that’s assuming former President Donald Trump’s tax cuts expire after 2025 and a future Congress doesn’t jack up discretionary spending.

“So what was the point? Asked Tuesday what comes after the deal, McCarthy said that when the new spending caps are translated into specific program cuts during the appropriations process, ‘you’re able to eliminate the wokeism.’  The target, in other words, wasn’t spending per se; but the political values reflected in that spending.”

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This Week in Ukraine….

--Saturday, Ukrainian National Security and Defense Council chief Oleksiy Danilov announced on Telegram, “The time has come to take back what is ours,” a seeming reference to the start of the long anticipated spring counteroffensive.  Danilov told the BBC Saturday that his troops are “ready” and that an offensive could begin “tomorrow, the day after tomorrow or in a week.”

Certainly, the Ukrainian military has been ‘preparing’ the battlefield for months.

Separately, Moscow’s ambassador to the UK, Andrei Kelin, told the BBC Saturday that Russia’s war on Ukraine may take on “a new dimension,” and that it is “idealistic” to think Ukraine will win the conflict, which has yet to reveal Russia’s true strength.

“Russia is 16 times bigger than Ukraine,” Kelin said.  “We have enormous resources, and we haven’t just started yet to act very seriously.”

“Sooner or later, this escalation might have a new dimension that we do not need and we do not want. We can make peace tomorrow,” he said.

Curiously, Ukraine’s defense ministry said Russia was planning to simulate a major accident at a nuclear power station controlled by pro-Moscow forces to try to thwart the counteroffensive.

The Zaporizhzhia plant, which lies in an area of Russian-occupied southern Ukraine, is Europe’s biggest nuclear power station and the area has been repeatedly hit by shelling that both sides blame each other for.

The defense ministry’s intelligence directorate said Russian forces would soon shell the plant and then announce a radiation leak. This would force an investigation by international authorities, during which all hostilities would be stopped.

The directorate’s statement was posted on Telegram and did not provide any proof.

The Vienna-based International Atomic Energy Agency has made no mention of any new disruptions at the plant, even as Russia has disrupted the planned rotation of inspectors from the IAEA, who are based at the plant.

Last week, witnesses said Russian military forces had been enhancing defensive positions in and around the plant ahead of the counteroffensive.

--Monday, the European Union’s top diplomat, Josep Borrell, said he believed Russia will not be willing to negotiate while it is still trying to win the war in Ukraine, adding that he was “not optimistic” about what could happen in the conflict this summer.

“I see a concentration of troops on both sides, the clear will of Russia to try to win the war,” Borrell told an event in Barcelona.  “(Russia) will not go to a negotiation until it has tried to win the war.”  He added that Russia has repeatedly signaled it would not cease the campaign until its military goals have been achieved.

“I’m afraid that between now and the summer, the war is going to continue. Putin has amassed over 300,000 men there, twice as many as he had when he launched the invasion,” Borrell told reporters after the event.  Russia’s military presence in Ukraine was “enormous” and it was still bombing Ukraine daily and destroying civilian infrastructure, he added. “I’m afraid that they don’t do that without a plan. We have to be prepared, which means continuing to help Ukraine, because if we don’t help it, Ukraine cannot defend itself,” Borrell said.

--Also Monday, and in line with the above, a top aide to Ukrainian President Volodymyr Zelensky said Kyiv’s peace plan is the only way to end the war and the time for mediation efforts has passed.  Chief diplomatic adviser Ihor Zhovkva told Reuters that Ukraine has no interest in a ceasefire that locks in Russian territorial gains, and wanted the implementation of its peace plan, which envisages the full withdrawal of Russian troops.  He pushed back on a flurry of peace initiatives from China, Brazil, the Vatican and South Africa in recent months.

Zelensky made a major push to court the Global South this month, in response to peace moves from some of its members, attending the Arab League summit, and then flying to Japan where he met the leaders of India and Indonesia – important voices in the Global South – a term denoting Latin America, Africa and much of Asia – where Russia has invested diplomatic energy for years.  Moscow, for instance, has been selling more of its energy to India and China.

--Russia hit an airbase in western Ukraine, damaging five aircraft and the runway on Saturday.  The same day, Russia claims to have intercepted two long-range Storm Shadow cruise missiles supplied to Ukraine by Britain.

--Residents in both Moscow and Kyiv came under attack from lethal drones on Tuesday, capping one of the busiest months for air defense systems protecting Ukraine’s capital from dozens of cruise missiles and Iranian-made exploding drones.  Russia launched nearly 80 drones and cruise missiles across Ukraine overnight Sunday.  At least 37 were cruise missiles, Ukraine saying it shot down nearly all of the objects.  The day before, Ukraine’s Air Force said it downed 52 out of 54 Russia-launched drones, one man dying from falling debris in Kyiv.

The Russians launched more missiles and drones during the day Monday, a rarity to do so in the daytime.  And then more overnight Tuesday.  In Tuesday night’s attack, at least 20 Shahed drones were destroyed by air defense forces in Kyiv’s airspace. One person died in this one, and a high-rise building caught fire after being hit by debris either from drones being hit or interceptor missiles.  Debris from an interceptor fell on two highways in Kyiv.

Three major attacks in 24 hours.  At least 17 attacks on Kyiv in May. 

More than 41,000 people took shelter in subway stations when air raid sirens sounded around 11 a.m. Monday, officials said.  Parents raced to protect their children, and hospital workers huddled in shelters.

Ukrainian officials say that Moscow is adjusting its tactics to try to inflict maximum damage.  So far, Ukrainian air defenses, reinforced by Western weapons, have largely thwarted the aerial attacks on Kyiv.

Gen. Kyrylo Budanov, head of Ukraine’s military intelligence, warned of a swift response to the series of strikes.

“All those who tried to intimidate us, dreaming that it would have some effect, you will regret it very soon,” Budanov said in a statement. “Our answer will not be long.”

--And so…Russian air defenses then stopped eight drones converging on Moscow, officials said Tuesday, in an attack that authorities blamed on Ukraine, while Russia continued a relentless wave of daylight and nighttime bombardment of Kyiv.

The Russian defense ministry said five drones were shot down and the systems of three others were jammed, causing them to veer off course.  It called the incident a “terrorist attack” by the “Kyiv regime.”

The attack caused “insignificant damage” to several buildings, Moscow Mayor Sergei Sobyanin said.  Two people received medical attention for unspecified injuries but did not need hospitalization, he said in a Telegram post.  Residents of two high-rise buildings damaged in the attack were evacuated.

Andrei Vorobyov, governor of the wider Moscow region, said some of the drones were “shot down on the approach to Moscow.”

It was the second reported attack on Moscow, the other being when two drones targeted the Kremlin last month in what I thought was a false flag attack, but the U.S. has said its intel agencies believe it was carried out by Ukrainian agents, perhaps without President Zelensky’s knowledge.

Ukrainian drones have been flying deep into Russia on several occasions.

The White House said it was still gathering information on reports of drones striking Moscow, but reiterated that Washington does not support attacks inside Russia and is focused on helping Ukraine retake its territory.

--Tuesday, Russia’s Interior Ministry put Ukraine’s top general Valeriy Zaluzhnyi on a “wanted list,” the state-run RIA news agency said.  RIA later reported that Colonel General Oleksandr Syrskyi, the commander of Ukraine’s ground forces, has also been added to the list.

--Wednesday, Ukrainian shelling killed five people in a village in the Luhansk region of eastern Ukraine, Moscow-installed officials said, while a drone attack caused a fire at an oil refinery in southern Russia.

Ukrainian artillery also hit a Russian town close to the border for the third time in a week, damaging buildings and injuring four people, Russian officials said.

--Yevgeny Prigozhin said on Wednesday that he had asked prosecutors to investigate “crimes” committed by senior Russian defense officials before and during Moscow’s military campaign in Ukraine.  Prigozhin has for months openly feuded with Russian Defense Minister Sergei Shoigu and other top officials, who he has accused of sabotaging Russia’s military via incompetence.

--Overnight Thursday, Russia launched another attack on Kyiv, killing three people in the eastern district.  One of the three victims was a child.  Attack No. 18 on the capital in one month.

Ukrainian air defenses shot down all 10 cruise and ballistic missiles, but falling debris again caused the damage and casualties on the ground, 16 wounded aside from the fatalities.

--Overnight Friday, Russia attacked Kyiv yet again, with Ukrainian authorities saying they downed more than 30 missiles and drones.  There does not appear to have been any casualties from falling debris this time.

Russia shelled a village in the Zaporizhzhia region, killing two people today, hitting a residential building.

--Friday, Vladimir Putin said certain “ill-wishers” were stepping up efforts to destabilize Russia and urged members of his cabinet not to allow this “under any circumstances.”  He said Russia’s Security Council would discuss ensuring security in the context of what he said were “extremely important” issues concerning relations between the vast country’s 190 ethnic groups.

Since sending tens of thousands of troops into Ukraine, Russia has intensified its crackdown on dissenting voices and pushed the remainder of its beleaguered liberal opposition abroad.  Putin has repeatedly called on Russia to unite in the face of “existential threats” from the West, but has occasionally faced animosity from ethnic groups who feel particularly targeted by Moscow’s mobilization drive.

This is troubling.

--Equally troubling, as if you needed more evidence of what a farce China’s “peace plan” for the Ukraine war is, today, China’s Russian invasion envoy said he insists nations around the world “stop sending weapons to the battlefield” in Ukraine.  “China believes that if we really want to put an end to war, to save lives and realize peace, it is important for us to stop sending weapons to the battlefield, or else the tensions will only spiral up,” Li Hui told reporters in Beijing.

Li doesn’t mention any of the Chinese firms that have been selling drone parts to Russia.  “China’s goal is promoting peace talks and a cessation of hostilities,” Li said.

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--Russia said on Monday that the Black Sea grain deal would no longer be operational unless a UN agreement with Moscow to overcome obstacles to Russian grain and fertilizer exports was fulfilled.  “If everything remains as it is, and apparently it will, then it will be necessary to proceed from the fact that it [the deal] is no longer functioning,” Russian Foreign Minister Sergei Lavrov said during a visit to Nairobi.  [As part of the wooing of the Global South, as noted above, Lavrov was in Nairobi to nail down a trade pact with Kenya.]

Lavrov said last July’s agreement was not being fulfilled “at all.”  The UN-Russia agreement was reached at the same time as a deal allowing the safe Black Sea export of food and fertilizer from Ukraine following the invasion.

The other week, Moscow reluctantly agreed to extend the Black Sea grain deal for a further two months, until July 17, but said more progress had to be made to advance its own interests.  Lavrov said that less than 3% of the grain exported under the deal had reached the world’s poorest countries.

--Little Denmark, with a population of less than 6 million, plans to increase its spending on military aid to Ukraine by $2.6 billion over this year and next, Prime Minister Mette Frederiksen said on Monday, winning thanks from President Zelensky.

--Russia issued an arrest warrant for Sen. Lindsey Graham. After the Republican senator from South Carolina met last Friday in Kyiv with President Zelensky, the Ukrainian president’s office released an edited video in which Graham calls for more military aid to the beleaguered country, notes that “the Russians are dying,” and describes the U.S. military assistance to the country as “the best money we’ve ever spent.”

Monday, Russia’s Interior Ministry issued the warrant for Graham’s arrest. He was already among more than 200 U.S. members of Congress banned from entering Russia, AP noted.  Graham responded on Twitter, writing, “I will wear the arrest warrant issued by Putin’s corrupt and immoral government as a Badge of Honor.”

--Thursday, Russia’s Federal Security Service (FSB) said it had uncovered an American espionage operation that compromised thousands of iPhones using sophisticated surveillance software.  Moscow-based Kaspersky Lab said several of its senior employees’ devices were compromised in the operation. 

The FSB (successor to the KGB) said in a statement that several thousand Apple devices had been infected, including those of domestic Russian subscribers as well as foreign diplomats based in Russia and the former Soviet Union.

“The FSB has uncovered an intelligence action of the American special services using Apple mobile devices,” the FSB said in its statement.  The FSB said the plot showed “close cooperation” between Apple and the National Security Agency, the agency responsible for cryptographic and communications intelligence and security.

Kaspersky said the oldest traces of infection it discovered dated back to 2019.  “As of the time of writing in June 2023, the attack is ongoing,” the company said.  It added that while its staff was hit, “we are quite confident that Kaspersky was not the main target of this cyberattack.”

Neither the NSA, Apple nor the White House has yet to comment.  Neither Russian officials nor Kaspersky has put forward evidence that Apple knew about the alleged spying, much less cooperated with it. 

Opinion….

Walter Russell Mead / Wall Street Journal

“American policy conversations about Ukraine often assume that Ukraine is a problem. For some, it represents a distraction from China.  Others fear Russian escalation and retaliation.  Still others worry about the financial cost of supporting Ukraine’s army and propping up its war-blighted economy.

“These concerns are real and have their place, but they miss the main point. Vladimir Putin’s ill-judged, ill-planned and ill-prosecuted war has ignited a national awakening in Ukraine.  The country emerging from Putin’s War will be a formidable new force in Europe whose interests and outlook place it firmly in alignment with the U.S.

“On a visit to Kyiv last week, I spoke with Ukrainians including business executives, software wizards, survivors of the Russian occupation in Bucha and veterans of the bitter fighting in Mariupol. There was griping in plenty. The country is under martial law. Corruption remains widespread. Inflation is making life difficult, and with refugees huddled into makeshift shelters where 60 people sometimes share a communal kitchen, daily life can be full of hardship. Russian missiles streak across the sky and every home has been touched by the war’s human toll.  But I didn’t hear from one person who believed Ukraine should trade Crimea or the Donbas for peace.

“Ukrainians were clear-eyed about their situation. They expect a long war and a hard peace.  ‘My grandfather fought the Russians,’ said one veteran of the fighting in Mariupol, ‘and I think my children and grandchildren will have to fight them too.’  Those words were echoed by soldiers and civilians across the city.

“To understand today’s Ukraine, think of Israel. After centuries of oppression culminating in the unspeakable violence of the 20th century, Israelis are determined to take their fate into their own hands and are willing to make the economic and personal sacrifices necessary to defend their independence.

“Ukrainians seem to have reached a similar place.  The two world wars, the Russian Civil War and Stalin’s genocidal cruelty subjected Ukraine to unspeakable suffering during the 20th century.  Now, as Mr. Putin and the yapping propagandists of Moscow’s bloodthirsty media threaten the country with a new dark age, Ukrainians have, quite simply, had enough.   They don’t know how this will end, and they don’t know how long and how far the West will be willing to support them, but they are ready to do what it takes.

“The Ukraine that emerges from this baptism by fire will be a formidable country with a battle-tested army, and it is going to transform the strategic landscape. It will join Poland, the Baltic republics and the Scandinavian countries in a defense-minded bloc against Russian expansion.  While danger persists, that bloc will be committed to the trans-Atlantic alliance and see the U.S. as an essential partner in its defense. It will use its weight in the North Atlantic Treaty Organization and the European Union against any attempts by weaker-willed Europeans to triangulate between Washington and its opponents.

“Any end to the war widely perceived as a defeat for Mr. Putin will do more than create a powerful new ally for the U.S.  It will also underline the value of an American alliance….

“Helping Ukraine is not a charity project to be undertaken out of sentiment. Nor is it a strategic distraction that weakens our hand in the Indo-Pacific.  In his blindness and folly, Vladimir Putin has handed the U.S. a golden opportunity. We should seize it with both hands.”

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Wall Street and the Economy

As we approach the quiet period ahead of the Federal Reserve’s Open Market Committee meeting June 13-14, two Fed officials, Philadelphia Fed President Patrick Harker (a voting member this year), and Fed governor Philip Jefferson (a permanent voting member) signaled a preference to hold interest rates steady at the next confab before preparing to raise them again later this summer, so this becomes the new stance for the market as it eagerly awaits the decision in less than two weeks.

Such a pause allows the Fed to consider the impact of its previous 10 consecutive rate increases since March 2022, including its May 3 hike to a range of between 5% and 5.25% on the benchmark funds rate, a 16-year high.

Gov. Jefferson cautioned that holding the rate constant in June “should not be interpreted to mean that we have reached the peak rate for this cycle.”

The next Fed meeting after this coming one is July 25-26.

As for this week’s economic data, we had the jobs report for May today and it was far stronger than expected, 339,000 on the nonfarm payroll front, vs. consensus of 190,000.  April was revised upward to 294,000 from 253,000, and March to 217,000 from 165,000.

The unemployment rate rose to 3.7% from 3.4% in April, the result of more folks entering the labor force, as well as a decline in household employment, while average hourly earnings were up just 0.3%, a tick lower than forecast, and 4.3% year-over-year. 

Actually, the report is confusing when you dig through the numbers and some folks are saying it is far weaker than it looks.

We had an ISM reading on manufacturing, a weak 46.9 (50 the dividing line between growth and contraction), while the Chicago PMI was a putrid 40.4, well below the 47 forecast.

The Case-Shiller National Home Price index rose by 0.5% in March after seasonal adjustment, month-over-month for the 20-city index, better than expected, while year-over-year the 20-city index fell 1.1%, also better than forecast.

So that’s two months in a row of accelerating prices following declines that began in June 2022.  But interest rates have been rising again and economic weakness present headwinds for housing prices for at least the next several months, you’d think.

Speaking of mortgage rates, Freddie Mac’s 30-year fixed-rate mortgage rose to 6.79% this week, from 6.57%, though the yield on the key 10-year has fallen back this week.

The Atlanta Fed’s GDPNow barometer for second-quarter growth is at 2.0%.

Europe and Asia

May manufacturing PMIs for the EA20 were released by S&P Global/HCOB, and the figure fell from 45.8 in April to 44.8 in May, a second successive monthly contraction in output.

Germany 43.2 (36-mo. low), France 45.7, Italy 45.9 (36-mo. low), Spain 48.4, Netherlands 44.2 (36-mo. low), Ireland 47.5 (36-mo. low), Austria 39.7 (37-mo. low), Greece 51.5.

UK mfg. 47.1.

Dr. Cyrus de la Rubia, Chief Economist, Hamburg Commercial Bank:

“The decline in new orders from home and abroad signals that the weakness in output is likely to persist for several more months.  Data from the EU Commission show that basically all product categories are under pressure, with the important exception of capital goods…

“In the labor market, the downturn has not yet taken hold.  On balance, the companies surveyed are still hiring more people or are reluctant to cut staff despite the poorer order situation for fear of not being able to fill the position again when the next upturn comes.  This is evidence of a certain optimism.”

We had a flash estimate for euro area inflation for May, down to 6.1% from 7.0% in April, and versus expectations of 6.3%, so this is encouraging.  But the core rate, ex-food and energy, is still 6.9% vs. April’s 7.3%.

ECB chief Christine Lagarde said the bank will continue to raise interest rates.

May estimates, headline number….

Germany 6.3% (down from 7.6% in April), France 6.0%, Italy 8.1%, Spain 2.9%, Netherlands 6.8% (up from 4.5% two months earlier), Ireland 5.4%. [Eurostat]

The unemployment rate in the eurozone for April was 6.5%, down from 6.6% in March 2023 and from 6.7% in April 2022.

Germany 2.9%, France 7.0%, Italy 7.8%, Spain 12.7%, Netherlands 3.4%, Ireland 3.9%. [Eurostat]

Turning to Asia…China reported its PMI readings for May and manufacturing was at a 5-month low, 48.8 vs. 49.2 prior, services at 54.5 vs. 56.4, further proving the recovery from three years of pandemic lockdowns is uneven.

The private Caixin PMI for manufacturing in May was a better than expected 50.9, up from 49.5 in April.  These are small- and medium-sized companies, as opposed to the government’s survey, from the National Bureau of Statistics, of largely state-owned enterprises.

Japan’s May manufacturing PMI came in at 50.6 vs. 49.5 prior.

April industrial production fell 0.3% year-over-year, while retail sales for the month were up 5% Y/Y, vs. 6.9% prior.

The April unemployment rate fell to 2.6%.

On a different issue, Japan reported today that its birth rate declined for the seventh consecutive year in 2022 to a record low, the health ministry said, underscoring the sense of crisis gripping the country as the population shrinks and ages rapidly.

The fertility rate, or the average number of children born to a woman in her lifetime, was 1.2565.  That compares with the previous low of 1.2601 posted in 2005 and is far below the rate of 2.07 considered necessary to maintain a stable population.

Taiwan’s May manufacturing PMI was 44.3, down from 47.1, as the sharp deterioration in orders continues.

South Korea’s manufacturing PMI for May was 48.4, up from 48.1 but still contraction territory.

Street Bytes

--Wall Street loved the strong jobs report, as well as the Senate’s vote to pass the bill the House initiated to suspend the debt ceiling to beyond the 2024 presidential election.  Lots of ‘soft landing’ talk as opposed to looming recession, which has been ‘looming’ for seemingly a year.

On the week the Dow Jones rose 2.0% to 33762, due to today’s 700-point rally, 2.1%, while the S&P 500 is now comfortably over the key 4200 barrier, 4282, after a 1.8% rally, and Nasdaq surged another 2%...up 26.5% for the year.

--U.S. Treasury Yields

6-mo. 5.45%  2-yr. 4.50%  10-yr. 3.69%  30-yr. 3.88%

Yields fell sharply early in the week but rebounded some today on the strong labor report.  Overall, the yield on the 10-year fell from last Friday’s 3.80% to 3.69%.

Euro bond yields fell on the better-than-expected inflation data for the EA20, though the ECB will keep hiking.

--OPEC+ meets Saturday and Sunday in Vienna and there are conflicting reports on whether it is going to institute further supply cuts amidst the decline in the oil price to $72.00 (West Texas Intermediate).  The price got down to about $68.50 earlier in the week.

A surprise cut on the part of some OPEC members in April drove WTI to the $82 level, but crude quickly retreated back to $70 on concerns over global economic growth and demand.

--JPMorgan Chase & Co. CEO Jamie Dimon on Wednesday warned “uncertainty” caused by the Chinese government could hurt investor confidence at home and abroad, and said the U.S. and China need “real engagement” on security and trade issues.

Dimon is on his first visit to China since the beginning of the Covid-19 pandemic and his first since he joked in 2021 that JPMorgan will outlast China’s Communist Party, sparking outrage in China and prompting him to express regret.

“If you have more uncertainty, somewhat caused by the Chinese government, it’s going to not just change foreign direct investment. It’s going to change the people here, their own confidence to invest,” Dimon said in an interview with Bloomberg TV.

Dimon, who has in recent years boosted JPMorgan’s China presence, also said that he favors East-West “derisking” rather than decoupling.  “Let’s not try to decouple.  Let’s not try to hurt China, the Chinese people,” he said at the three-day JPMorgan Global China Summit in Shanghai.

The CEO of the biggest U.S. bank said the countries’ disputes over security and free and fair trade issues are all “resolvable.”  “You’re not going to fix these things if you are just sitting across the Pacific yelling at each other.  So I’m hoping we have real engagement,” Dimon said.

Pretty startling Dimon blamed the Chinese government for the “uncertainty” today.

And Beijing won’t like that Dimon went to Taiwan on his way home.

--Nvidia on Sunday unveiled a new class of large-memory Artificial Intelligence supercomputer that it said will enable the development of “giant, next-generation models” for generative AI language applications, recommender systems and data analytics workloads.

The Nvidia DGX GH200’s “massive” shared memory space is almost 500 times more than in the previous generation product, which was introduced in 2020, the company said.

“Generative AI, large language models and recommender systems are the digital engines of the modern economy,” CEO Jensen Huang said.  “DGX GH200 AI supercomputers integrate Nvidia’s most advanced accelerated computing and networking technologies to expand the frontier of AI.”

When the market opened Tuesday, Nvidia quickly joined an elite club of U.S. companies sporting a $1 trillion market value*, climbing above the magic $404 per share level ($404.86, specifically) up to $419, before selling off as those fortunate enough to have been in on a spectacular ride, at the peak about 240% since October, took their profits.  The selloff continued Wednesday and the shares finished the week below the $1 trillion level at $393.

*The other four with valuations of $1 trillion+ are Apple, Alphabet, Microsoft and Amazon.com.

--Speaking of AI, a group of industry leaders warned on Tuesday that artificial intelligence technology they were building might one day pose an existential threat to humanity and should be considered a societal risk on a par with pandemics and nuclear wars.

“Mitigating the risk of extinction from A.I. should be a global priority alongside other societal-scale risks, such as pandemics and nuclear war,” reads a one-sentence statement released by the Center for AI Safety, a nonprofit organization.  The open letter was signed by more than 350 executives, researchers and engineers working in A.I.

The signatories included top executives from three of the leading A.I. companies: Sam Altman, chief executive of OpenAI; Demis Hassabis, chief executive of Google DeepMind; and Dario Amodei, chief executive of Anthropic.

Geoffrey Hinton and Yoshua Bengio, often considered “godfathers” of the modern A.I. movement, signed the statement as well.

In Senate testimony a few weeks ago, Altman warned that the risks of advanced A.I. systems were serious enough to warrant government intervention and called for regulation of A.I. for its potential harms.

Kevin Roose of the New York Times observed: “Some skeptics argue that A.I. technology is still too immature to pose an existential threat. When it comes to today’s A.I. systems, they worry more about short-term problems, such as biased and incorrect responses, than longer-term dangers.

“But others have argued that A.I. is improving so rapidly that it has already surpassed human-level performance in some areas, and that it will soon surpass it in others.  They say the technology has shown signs of advanced abilities and understanding, giving rise to fears that ‘artificial general intelligence,’ or A.G.I., a type of artificial intelligence that can match or exceed human-level performance at a wide variety of tasks, may not be far off.

Altman has called for cooperation among the leading A.I. makers, more technical research into large language models and the formation of an international A.I. safety organization, similar to the International Atomic Energy Agency, which seeks to control the use of nuclear weapons.

--American Airlines Group said Wednesday it now expects Q2 adjusted earnings of $1.45 to $1.65 per share, above its prior guidance of $1.20 to $1.40.

The carrier in an SEC filing said that the increase is based on expectations of strengthening demand and lower jet fuel prices.

--Southwest Airlines Co. CEO Bob Jordan said on Thursday that an industry-wide shortage of pilots is expected to last for three years due to the challenges carriers face in training new aviators.  Jordan, speaking at a conference, said Southwest has about 40 planes that it currently cannot fly because of pilot constraints.

“The constraint is really the ability to put them through the training center because it’s full,” he said. Analysts at Jefferies estimate the United States is 10,000 pilots short.  American Airlines said it has as much as 50 underused mainline jets and about 150 regional aircraft grounded as the company does not have enough trained pilots.

--Europe’s discount behemoth Ryanair flew 17 million passengers last month, 10 percent more than the 15.4 million it carried in May 2022, figures show. 

The 17 million figure far exceeded the 13.5 million passengers who traveled with Ryanair during the same month in 2019, the year before Covid hit.  The airline also sold 94 percent of the seats available on its aircraft.

--TSA checkpoint numbers vs. 2019

6/1…94 percent of 2019 levels
5/31…95
5/30…104
5/29…103
5/28…88
5/27…104
5/26…107
5/25…107

Memorial Day weekend air travel in the U.S. exceeded pre-pandemic levels, the Transportation Security Administration said Tuesday in a Twitter post.

The agency said it screened nearly 9.8 million people at U.S. airports from Friday through Monday, about 300,000 higher than the same holiday weekend in 2019.

Friday’s final volume reached 2.74 million, the agency’s highest post-pandemic record for a single day, TSA said.

--Salesforce late Wednesday reported stronger-than-expected fiscal first-quarter results, buoyed by subscription and support revenue growth, while the software maker boosted its full-year earnings outlook.

Adjusted per-share earnings rose to $1.69 during the three months ended April 30 from $0.98 a year earlier, compared with consensus for $1.61.  Revenue gained 11% to $8.25 billion, above the Street’s $8.17bn view.

Subscription and support revenue gained 11% to $7.64 billion.

Salesforce expects fiscal 2024 adjusted EPS of $7.41 to $7.43, compared with a prior outlook of $7.12 to $7.14.  The company maintained its revenue guidance from $34.5 billion to $34.7 billion. The consensus is for normalized EPS of $7.17 on sales of $34.65 billion.

But the shares fell 6% because the 11% rise in quarterly revenue was the company’s slowest pace of growth in 13 years, as companies dialed back spending on cloud-based software offerings in an uncertain economy.  The shares had surged by more than two-thirds so far this year and rose to their highest in about 16 months prior to the earnings release Wednesday.

--Various reports have Amazon.com Inc. talking with wireless carriers about offering low-cost or possibly free nationwide mobile phone service to Prime subscribers.  But the companies Amazon is reportedly talking to, like Verizon and T-Mobile, said they were not in discussions.  Amazon then said it was not “at this time” considering such a move.  The mobile phone company stocks fell hard on the news.

Separately, we learned that tens of thousands of Amazon employees once could listen to voice recordings of Alexa users, according to U.S. regulators, as part of a settlement with the Federal Trade Commission for $25 million.  The FTC’s tally of employees with access to Alexa recordings covers the period between August 2018 and September 2019, and it’s not clear how many personnel have such access today.

In addition, the FTC seeks a $5.8 million fine for Amazon over claims employees and contractors at Ring – a home surveillance company Amazon bought in 2018 – had full access to customers’ videos.

Amazon is also accused of not taking its security protections seriously, as hackers were able to break into two-way video streams to sexually proposition people, call children racial slurs and physically threaten families for ransom.

--British engine maker Rolls-Royce is working on a “transformation” of several areas of the business that could result in 3,000 job cuts, or 10 percent of its non-manufacturing work force.

--Ford Motor said Friday its total U.S. sales for the month of May were 170,933, up 11% from May 2022.  Sales of internal combustion vehicles were 154,774, also up 11%.  Electric vehicle sales fell 13% to 5,444.  Hybrid sales rose more than 20% to 10,715.

Now discuss amongst yourselves.

--A big winner in the debt ceiling agreement is Equitrans Midstream, a small energy company that owns the largest stake in a natural gas pipeline that runs through Virginia and West Virginia.

Equitrans shares rocketed 36% higher on Tuesday, as the so-called MVP Pipeline is now more likely to win approval because of language in the agreement that would limit judicial review and speed up federal permits.

“I am proud to have fought for this critical project and to have secured the bipartisan support necessary to get it across the finish line,” said Sen. Joe Manchin (D-WV).

Manchin has been fighting for the pipeline for years, along with advocating for a broader set of permitting changes that he says would make energy costs go down.

--Franklin Resources has agreed to buy rival money manager Putnam Investments.  Franklin said it would pay Putnam’s owner, Great-West Lifeco, a Canadian insurance and retirement-services company controlled by Power Corp. of Canada, as much as $1.3 billion in stock and cash.

Putnam managed about $136 billion in assets as of April.

It’s been decades since my involvement in the mutual fund industry, but this is a big deal, and will involve job losses, as traditional asset managers are under pressure to slash expenses, gain scale and expand into so-called alternative-investing businesses that command higher fees.

Franklin has emerged as one of the industry’s most active acquirers, snapping up Legg Mason, private-equity manager Lexington Partners and Alcentra, a European credit investor.  Upon completion of the Putnam deal, it would manage more than $1.5 trillion.

Putnam, founded in 1937, was one of the Boston investment firms that helped popularize mutual funds.  But as investors flocked to funds that track stock indexes, $trillions of dollars flowed out of those managed by traditional stock-and-bond pickers like Putnam, and into the coffers of BlackRock and Fidelity Investments.

--India’s economy grew 6.1% in the fiscal fourth quarter compared with the year-earlier period, as domestic demand for goods and services picked up and consumer confidence continued to strengthen, post-pandemic.

--Macy’s reported fiscal Q1 adjusted earnings Thursday of $0.56 per share, down from $1.08 a year earlier.  Consensus was at $0.46.

Net sales for the quarter ended April 29 were $4.98 billion, compared with $5.35 billion a year earlier, and analysts’ estimates for $5.07bn.

Comparable sales were down 7.9% during the quarter, but analysts were expecting a 5.3% decrease.

But Macy’s guided lower than forecasts for the fiscal 2023 year, with net sales of $22.80 billion to $23.20 billion, vs. prior guidance of $23.70bn to $24.20bn.  Adjusted earnings are now forecast to be between $2.70 and $3.20 per share, vs. previously expected EPS of $3.67 to $4.11, significant downward adjustments.

--Nordstrom beat first-quarter earnings and sales expectations, sending the shares slightly higher.  The department store posted adjusted earnings of 7 cents a share, better than analysts’ estimates for a loss of 10 cents. Revenue of $3.2 billion topped projections for $3.1 billion, but was down from the year-ago quarter’s $3.6 billion, partly the result of the company’s decision to wind down its Canadian operations.

Nordstrom shares were boosted by the company’s reaffirmation of its financial outlook for fiscal 2023.  It continues to expect revenue to fall between 4% and 6%, with earnings per share in a range of $1.80 to $2.20, in line with Wall Street’s estimates for $1.87 a share.

High-end shoppers have been largely insulated from economic challenges that have battered customers with tighter budgets. That’s changed in recent quarters, analysts say, as consumers across all income levels have started to pull back on discretionary spending.

--Lululemon Athletica Inc. raised its annual sales and profit forecasts on Thursday, betting on strong demand for its activewear from affluent shoppers and a recovery in China, sending its shares soaring 16%, before backing off some.

The pandemic-era appetite for comfortable clothing and activewear has turned into a habit for most Americans, helping companies such as LULU and Nordstrom avoid an inflation-driven slump in wider discretionary spending.  Activewear was Nordstrom’s best-performing category in the quarter.

Lululemon is also banking on new launches and more full-price selling to drive revenues and offset any impact from promotions taken to clear excess product stocks.  Its inventories at the end of the first quarter were up 24%, lower than the 30% to 35% increase that the company had estimated in March.

Vancouver, Canada-based Lululemon now expects full-year 2023 revenue between $9.44 billion and $9.51 billion, compared with its prior estimate of $9.30 billion to $9.41bn.  Consensus was at $9.37bn.  The company also projected full-year 2023 profit between $11.74 and $11.94, compared with prior estimates of $11.50 to $11.72 per share.

Net revenue rose to $2.00bn in the first quarter from $1.61 billion a year earlier, with a 17% jump in North America.  That compared to Wall Street estimates of $1.93 billion.

--New York City employees will be able to start working remotely up to two days per week as part of a deal stemming from their new contract, Mayor Eric Adams announced Thursday.

New York’s tens of thousands of municipal workers have mostly been forced to commute to their offices five days a week since September 2021. Critics have said the strict policy exacerbated the city’s worker shortage by lowering morale and deterring potential applicants.

--Related to the above, the impact of work-from-home on New York’s business districts is obvious…shuttered storefronts, empty subway platforms.

But a new study by WFH Research, a group of economists who have conducted regular surveys on changing work arrangements since early in the pandemic, put a dollar figure on the economic impact: $4,661 per worker, per year…$4,661 less on meals, shopping and entertainment near their workplace, the researchers found.

That amounts to at least $12.4 billion a year in losses for the city, according to a data analysis from Bloomberg.  An estimated 2.7 million people worked in Manhattan in 2019.

It’s not just the once-busy retail businesses that line blocks in Midtown Manhattan and the Financial District.  City leaders see empty offices fueling lower property tax payments, which is a major long-term threat to Gotham’s coffers.

--Bud Light sales suffered their worst week ever, falling 25.7%, according to the latest data from Bump Williams Consulting and NielsonIQ.

The plunge follows a 24.6% decline from the previous week and the sixth straight week sales have been hit since trans influencer Dylan Mulvaney promoted Bud Light on April 1.

The drop has narrowed the gap in sales between Bud Light and nearest rival Modelo Especial, which saw its sales surge 9.2% for the week ending May 20.  Modelo is now outselling Bud Light on a national basis, according to Bump Williams.

Anheuser-Busch InBev owns both brands, but it does not control Modelo in the U.S., where it is owned by New York-based conglomerate Constellation Brands.

For the week ending May 20, Budweiser plunged 11.2%, Michelob Ultra fell 6.5%, Busch Light was off 5.2% and Natural Light was down 4.9%, according to the data.

Yuengling, which bills itself as “America’s Oldest Brewery,” has seen sales of Yuengling Light soar by a whopping 47.6% for the four-week period ended May 20.

--“The Little Mermaid” scored big over the Memorial Day weekend.  Disney’s live-action remake of its 1989 animated classic brought in an estimated $117.5 million for the four days, the fifth biggest Memorial Day weekend opening ever.

--We note the passing of former chairman of the Securities and Exchange Commission, Harvey Pitt, who died Tuesday at the age of 78.

Pitt, born in Brooklyn, N.Y., ran the SEC from 2001 to 2003 under President George W. Bush, leading the agency’s response to market disruption from the 9/11 attacks and its rule making in the wake of the accounting scandal at energy company Enron.

In private practice prior to serving as the SEC’s chairman, Pitt was a longtime partner at Fried, Frank, Harris, Shriver & Jacobson from 1978 to 2001.  He represented several well-known clients, including Ivan Boesky, the insider trader who agreed to pay a record $100 million in 1986 to settle an SEC civil suit and pleaded guilty to a criminal charge.

--Finally, billionaire hedge fund king, James (Jim) Simons, founder of Renaissance Technologies, and his wife, Marilyn, donated $500 million to his former employer – Stony Brook University out of Long Island, New York, Marilyn an alum.  It is believed to be the largest unrestricted donation to a college in U.S. history.

Simons was Chair of Stony Brook’s math department back in the 1960s, before going off on his own, using his math skills to create, and succeed massively, with Renaissance.

“Marilyn and I are proud to support this outstanding public university that has given us so much.”

Good for you, Mr. Simons.

Note to Stony Brook…you should spend it all on building a top-flight football program.

Foreign Affairs, Part II

China: While there has been a flurry of meetings between U.S. and Chinese officials in a seeming attempt to reduce tensions, Beijing has struck an even tougher posture.

China has questioned Washington’s sincerity, pushing back on U.S. tech export controls by imposing its own restrictions, like a ban on U.S.-made chips.

Beijing also rejected an invitation for its defense minister, Li Shangfu, to meet with Defense Secretary Lloyd Austin in Singapore this weekend, the Pentagon said, calling the action an example of Beijing’s “concerning” unwillingness to engage on military issues.

Li, who was appointed to his position in March, has been under U.S. sanctions since 2018 over the purchase of military equipment from Russia.  Beijing demanded that sanctions against him be lifted to “create favorable conditions for dialogue.”

So at the Shangri-La Dialogue in Singapore, General Li told his Singaporean counterpart the People’s Liberation Army will “absolutely not” renounce the use of force on Taiwan, in what experts said was a warning not only to Washington but also to regional powers.

Li said Beijing would not tolerate the self-ruled island’s Democratic Progressive Party seeking support from other countries for Taiwanese independence, according to a Chinese defense ministry spokesman.

Taiwan is preparing for presidential elections in January.

The U.S. and Taiwan formally inked a trade deal Friday, further irking China.  The deal will “cut red tape at customs and reduce waiting times for U.S. businesses bringing products to Taiwan,” according to the AP.

Separately, health authorities in China have reported a rise in Covid cases since April, especially from newer subvariants that are spreading across the world.  One prominent doctor estimated that by late June as many as 65 million people a week could become infected across the country.

North Korea: North Korea attempted to put the country’s first spy satellite into space and it failed Wednesday, in a setback to leader Kim Jong Un’s push to boost his military capabilities as tensions with the United States and South Korea rise.

The launch ended in failure after the rocket’s second stage malfunctioned, sending the booster and payload plunging into the sea, North Korean state media reported. The flight was the state’s sixth satellite launch attempt, and the first since 2016.

After an unusually quick admission of failure, North Korea vowed to conduct a second launch after learning what went wrong with its rocket liftoff.

A satellite launch by North Korea is a violation of UN Security Council resolutions that ban the country from conducting any launch based on ballistic technology.  Observers say North Korea’s previous satellite launches helped improve its long-range missile technology.

When North Korea launched its rocket, it triggered evacuation alerts in South Korea (and Japan) that were followed shortly after by a new wave of messages saying the earlier notice was a “false alarm.”

For half an hour, confusion and panic swept across Seoul.  Then that anxiety turned into anger and exasperation.

While the launch was described by Pyongyang as a failure, for South Koreans, who have grown used to the North’s frequent provocations, their government’s reaction was a disturbing sign that it was unprepared to handle a real emergency.

Officials were investigating why an alert was issued for an island near the northwestern border with the North, Baekryeongdo, probably appropriately, but then extended to Seoul, even though the rocket flew hundreds of kilometers west of the city.  The mayor of Seoul later issued a public apology.

Turkey: As expected, President Recep Tayyip Erdogan won his presidential run-off over challenger Kemal Kilicdaroglu, 52.1% to 47.9%, a couple points closer than I thought it would be.  But it was enough to give Erdogan, who has already ruled Turkey for 20 years, first as prime minister and then as president, another five years, and maybe more.

Speaking to supporters from the top of a campaign bus in Istanbul, Erdogan briefly spoke of unity, before reverting to form. “The only winner today is Turkey,” he proclaimed.  Minutes later, he called the opposition LGBT sympathizers.  “For us, family is holy,” he said.

Turkey’s opposition had the best shot in a generation of unseating Erdogan. Six opposition parties had settled on a comprehensive reform program, and on a presidential candidate.  The economy has been, and continues to be, ravaged by inflation that topped 86% last year, largely the result of a bizarre monetary policy that saw low interest rates as a way to bring down consumer prices.  The February earthquakes, which covered an area the size of Bulgaria with rubble, exposed shoddy building methods, corruption and a lack of preparedness.

But Turkey’s strongman won the election as he always has, by fanning the flames of Turkey’s culture wars and depicting the opposition as a threat to Turkish culture and national security.  Erdogan aired fake campaign videos, admittedly so.

As for the media, he controls it.  Virtually all private news channels are run by businessmen beholden to the president.  State media has become an arm of the government, and it offered Erdogan limitless air time, refusing to challenge his unfounded claims when he was in front of the cameras and regurgitating them when he was not.

Kilicdaroglu was limited mostly to social media, and a handful of channels close to the opposition.

The first world leader to congratulate Erdogan was Vladimir Putin, not even waiting for the official results and calling Erdogan his “dear friend.”  Trade between Turkey and Russia has increased significantly since the start of the war in Ukraine.

But Presidents Biden and Macron were also quick to congratulate the Turkish leader – because Turkey remains a crucial – albeit difficult – ally of the West and a key member of NATO.

The White House has made no secret of its impatience with Turkey over Erdogan’s refusal to approve Sweden’s NATO membership, but there is hope that Erdogan will now acquiesce with the election over.

Turkey and Hungary are the only NATO countries still blocking Stockholm’s membership.

Serbia/Kosovo: The NATO-led peacekeeping force in Kosovo, KFOR, on Tuesday raised the number of its troops injured in fierce clashes with ethnic Serbs to 30.

The Serbs had tried to take over the offices of one of the municipalities in northern Kosovo where ethnic Albanian mayors took up their posts last week.

A statement said that 11 Italian and 19 Hungarian soldiers “sustained multiple injuries, including fractures and burns from improvised explosive incendiary devices.” It added that three Hungarian soldiers were “wounded by the use of firearms,” but their injuries are not life-threatening.

NATO then announced it was sending 700 more troops to Kosovo, with a further 1,000 put on alert.

As Reuters reported: “Northern Kosovo’s majority Serbs have never accepted Kosovo’s 2008 declaration of independence from Serbia, and consider Belgrade their capital more than two decades after the Kosovo Albanian uprising against repressive Serbian rule.”  Those clashes in 1998 left about 10,000 people dead.

Kosovo already hosts 3,800 NATO troops as part of an enduring peacekeeping mission that began in 1999 after a NATO bombing campaign pushed the repressive Serbian security forces out of Kosovo’s north.

Separately, last Saturday, tens of thousands braved awful weather in Belgrade in an anti-government protest over two mass shootings that killed 18 people, blaming the deaths on a culture of violence that critics say authorities have allowed to permeate society.  That’s true.  It’s the Balkans.

The opposition says the government has failed to rein in media that have promoted violence and to act against criminal elements in society.  Opposition parties and rights watchdogs have long accused President Aleksandar Vucic and his party (SNS) of autocracy, stifling media freedoms, violence against political opponents, corruption and ties with organized crime.

Vucic stepped down as leader of the SNS on Saturday, appointing defense minister Milos Vucevic as his successor. Vucic, a supporter of Vladimir Putin, will remain the head of state.

Uganda: President Yoweri Museveni signed one of the world’s toughest anti-LGBTQ laws, including the death penalty for “aggravated homosexuality,” drawing widespread Western condemnation and risking sanctions from aid donors.

Same-sex relations were already illegal in Uganda, as in more than 30 African countries, but the new law goes further.  It stipulates capital punishment for “serial offenders” against the law and transmission of a terminal illness like HIV-AIDS through gay sex.  It also decrees a 20-year sentence for “promoting homosexuality.”

President Biden called the move “a tragic violation” of human rights and said Washington would evaluate the implications of the law “on all aspects of U.S. engagement with Uganda.”

Random Musings

--Presidential approval ratings….

Gallup: 39% approve of Biden’s job performance, 57% disapprove; 33% of independents approve (May 1-24).

Rasmussen: 45% approve, 54% disapprove (June 2).

--A new Monmouth University Poll of Republican voters – including those who lean toward the GOP – has nearly half (45%) saying Donald Trump is definitely the strongest candidate to beat Joe Biden in 2024, and another 18% think he is probably the strongest candidate.  Just one-third of GOP voters say another Republican would definitely (13%) or probably (19%) be a stronger candidate than Trump.

When without any prompting voters were asked whom they would like to see as the Republican nominee for president, 43% named Trump, similar to his 41% in March.  Ron DeSantis was named by just 19%, a steady decline from 39% in December (including 33% in February and 27% in March).

In a hypothetical head-to-head contest between just the top two contenders, 56% of GOP voters would choose Trump, 35% DeSantis.  Back in February, DeSantis (53%) had more support than Trump (40%).  Interesting…and not good for DeSantis.

On the issue of favorable/unfavorable, Republicans have overwhelmingly positive opinions of both Trump (77% favorable and 17% unfavorable) and DeSantis (73% favorable and 12% unfavorable).  Among other announced candidates – Nikki Haley (47% favorable, 16% unfavorable) and Sen. Tim Scott (44% favorable, 8% unfavorable) – garner solid net positives.

Two others who are well recognized (as opposed to the likes of Asa Hutchinson and Vivek Ramaswamy)…Mike Pence (46% favorable and 35% unfavorable), and Chris Christie (21% favorable, 47% unfavorable).

[The Justice Department today closed its investigation into the possible mishandling of classified documents found at former Vice President Pence’s home and will not bring any charges.]

--You may not think a poll of Republicans from California matters much, given how the state is overwhelmingly Democratic (Joe Biden won the state in 2020 over Donald Trump 64% to 34%), but it’s about the number of delegates California offers for the Republican presidential nomination.

According to the UC Berkeley Institute of Governmental Studies poll, Trump has 44% of California’s likely Republican primary voters, while Ron DeSantis was backed by 26%.  None of the other 12 Republicans tested in the poll garnered more than 4%.

In 2024, California’s presidential primary is to be held in March, with 169 delegates at stake.

--The aforementioned Chris Christie is planning to announce a bid for the 2024 Republican presidential nomination on June 6 in the early nominating state of New Hampshire.  Christie, 60, will launch his campaign at a town hall at Saint Anselm College in New Hampshire on Tuesday.

He’s willing to play pit bull against Donald Trump, and seems determined to take him on, a la George Foreman when he launched his comeback…just keep bulling his way through his opponent, looking for a knockout.

Mike Pence is going to announce June 7 in Iowa.

And North Dakota Governor Doug Burgum is going to launch his candidacy June 7 in Fargo.  He is going to seek to present himself as a traditional conservative who will focus on the economy and national security, according to reports.

Burgum, 66, built a successful software business before selling it to Microsoft Corp.

Meanwhile, Ron DeSantis was in Iowa this week attempting to play the retail politics game…selfies, autographs, wife Casey by his side, talking about how much they like gas station food in Iowa.

--Former Rep. Liz Cheney implored new college graduates to not compromise when it comes to the truth, excoriating her House Republican colleagues for not doing enough to combat former President Trump’s lies that the 2020 election was stolen.

In a commencement speech at Colorado College, the Wyoming Republican repeated her fierce criticisms of Trump but steered clear of talking about his 2024 reelection campaign or her own political future.

“After the 2020 election and the attack of Jan. 6, my fellow Republicans wanted me to lie.  They wanted me to say the 2020 election was stolen, the attack of Jan. 6 wasn’t a big deal, and Donald Trump wasn’t dangerous,” Cheney said Sunday in Colorado Springs.  “I had to choose between lying and losing my position in House leadership.”

Cheney blasted one of the election-denying attorneys who worked for Trump after the 2020 election for recent remarks about college students voting.

“Cleta Mitchell, an election denier and advisor to former President Trump, told a gathering of Republicans recently that it is crucially important to make sure that college students don’t vote,” Cheney said.  “Those who are trying to unravel the foundations of our republic, who are threatening the rule of law and the sanctity of our elections, know they can’t succeed if you vote.”

[In an audio recording of Mitchell’s presentation from a recent Republican National Committee retreat, she warned of polling places on college campuses and the ease of voting as potential problems.]

Cheney has yet to say whether her future plans include a presidential run, but she has an active speaking schedule, fueling speculation.

The audience of students and parents mostly cheered her, though some who objected to Cheney’s  presence booed and turned their chairs around, which is a pathetic move and doesn’t bode well for their futures in the business world.

--According to multiple reports Wednesday evening, federal prosecutors investigating former president Trump’s handling of classified material have a recording of Trump from 2021 discussing a sensitive military document he had kept after leaving the White House.

In the recording, Trump suggested he knew the document was secret and had not declassified it.

The existence of the recording, assuming the story is true, undermines Trump’s repeated claim that he had already declassified material that remained in his possession after he left office.  Prosecutors are investigating whether Trump obstructed efforts by federal officials to retrieve documents he took with him after leaving office and whether he violated laws governing the handling of classified material.

The recording was from July 2021, during a meeting held at Trump’s country club at Bedminster, N.J.

What makes this even more dicey for Trump is that the document reportedly concerned a plan to attack Iran.

However, these are just reports, I hasten to add.  Special counsel Jack Smith has yet to speak, and attorneys are unable to locate the document referred to in the audiotape.

--Editorial / Wall Street Journal…on Henry Kissinger’s 100th birthday last Saturday:

“We have had policy differences with Mr. Kissinger, not least over détente with the Soviets.  But our point today is not to rehearse those differences or his legacy in office.  We have come to know him during the more than 46 years since he left office as an American patriot who continues to offer wise counsel on our increasingly dangerous world.

“That’s truer today than ever when U.S. leadership and confidence are fading and a new world of great power competition has arrived. This is the kind of world Mr. Kissinger has studied and thought about all his life.

“His most pungent warning concerns America more than the world.  He rightly laments that too many in this country have lost confidence, even belief, in American principles and institutions.  This is especially dangerous when the world is experiencing tremendous technological and strategic change. Restoring that belief, and finding the politicians and statesmen who can lead in that project, is an urgent necessity.  Happy 100th, Mr. Kissinger.”

--Lawmakers in the Texas House voted on Saturday to impeach Ken Paxton, the state’s Republican attorney general, temporarily removing him from office over charges that he had used his elected position to benefit himself and a campaign donor. 

It was the first impeachment of a statewide office holder since 1917.  It comes after a bipartisan House committee, led by Republicans, filed 20 articles of impeachment against Paxton last week, detailing actions that the panel unanimously decided made him unfit for office.

The final vote was 121-23, with two abstaining, well beyond the 75 necessary for a majority.  Republicans hold the House by an 86-64 margin.

Paxton is temporarily removed from office pending a trial on the charges in the State Senate, where some of his closest allies, including his wife (Ken Paxton alleged to having had an affair while they were married), will serve as jurors.

Republicans hold a 19-12 advantage in the state Senate, 2/3s required to remove the AG.  The trial will be held sometime this summer it seems.

The reason why this is a national story is because Paxton is a huge supporter of Donald Trump, Trump railing against Texas Gov. Greg Abbott for not supporting Paxton publicly.

--In South America, Uruguay’s taps are running salt water, a deliberate decision by the affluent but drought-wracked country.  “Uruguay, beset by high temperatures and drought, is running out of freshwater.  Montevideo, the capital, is down to just a few days’ supply,” the Washington Post reported.  With the country’s main reservoir at just 5% capacity, authorities have begun adding brackish water from Rio de la Plata to the country’s water supply.

South America’s Southern Cone is “warming more rapidly than the rest of the world.  Precipitation during the last four months of 2022 fell to half the average, the lowest level in 35 years.  Andean glaciers have lost more than 30 percent of their area since the 1980s, according to the UN World Meteorological Organization,” the Post wrote. “Central Chile is 13 years into its longest drought in at least a millennium.  Argentina’s agricultural exports are expected to fall by 28 percent in 2023.”

--The following is a bit from The Economist that is rather descriptive in part:

Monday, May 29, marked 70 years since Edmund Hillary and Tenzing Norgay first scaled Mount Everest.  “The number of people summiting the world’s largest mountain has surged in recent decades.  During the current climbing season, Nepal issued 478 permits to make the climb, the highest ever, contributing $5 million to the state’s coffers.  Earlier this month, Kami Rita, a 53-year-old Nepali, reached the top for a record 28th time.

“But the rush may soon reach its peak.  This year’s season has been among the deadliest ever; eight climbers died and five are missing. [Ed. the official death toll is now 12.]  Both rubbish and rising temperatures ravage the mountain.  Melting glaciers transport human waste laced with steroids – which straggling climbers consume on their ascent – to the lowlands, polluting the local water supply.  According to a recent study published in Nature, Everest’s glaciers have lost 2,000 years’ build up of ice between 1989 and 2019.  For all its majestic glory, man-made troubles increasingly haunt the climb.”

--Nova Scotia, like parts of Alberta, Canada, has been ravaged by wildfires.  This week’s in the eastern city of Halifax led to mandatory evacuation orders for thousands of homes, and officials and residents will not be allowed to return until advised by municipal authorities.  Halifax Mayor Mike Savage said the evacuations impacted about 18,000 people.  These are mostly suburban communities situated about 15 miles from Halifax.

--New York Times: “Arizona has determined that there is not enough groundwater for all of the housing construction that has already been approved in the Phoenix area, and will stop developers from building some new subdivisions, a sign of looming trouble in the West and other places where overuse, drought and climate change are straining water supplies….

“The state said it would not revoke building permits that have already been issued and is instead counting on new water conservation measures and alternative sources to produce the water necessary for housing developments that have already been approved.”

Good luck.

--Rich Lowry / New York Post

“Joe Biden’s fall at the end of the Air Force Academy graduation ceremony Thursday was a brief event.  He tripped, got helped up and walked off under his own power.

“Sometimes, though, a small thing is fraught with meaning – and with peril.

“Biden’s stumbles are not minor incidents or a laughing matter. We aren’t talking about a manufactured narrative about President Jerry Ford’s alleged clumsiness, played up on ‘Saturday Night Live.’

“Biden is 80 years old, is in decline and has a stiff, shuffling gait that makes you hold your breath when he’s negotiating stairs or any place with potential obstacles. At his age, once the falls start, they usually don’t stop.

“Democrats should be thinking long and hard whether this is the vessel they want to ride into 2024 – and to portray as up for performing the job of president of the United States in a second term extending all the way until January 2029….

“Rather than simply the victim of circumstances out of his control, he’d likely look foolhardy for having taken on, once again, at age 80 or 81, the physically, mentally and emotionally taxing enterprise of a national campaign.

“Moreover, it would make Biden the issue in the campaign when the whole idea is supposed to be that he can repeat his role as the default candidate, making the other guy, especially Donald Trump, the focus of the race….

“The conservative intellectual James Burnham famously said, ‘If there’s no alternative, there’s no problem.’  There may be no good alternative to Biden for Democrats, but having to hold your breath every time he climbs or descends the steps of Air Force One is a big problem and one that isn’t going away from now until Nov. 5, 2024.”

Well, you know my opinion.  I said in my predictions for 2023 that Joe Biden wouldn’t make it through the year.

--As I go to post, the casualty toll keeps rising from India’s catastrophic train crash today involving two passenger trains in the eastern Indian state of Odisha.  At least 80 are dead and 850 injured.

Amidst this staggering tragedy, there is a story that “Hundreds of young people lined up outside a government hospital in Odisha’s Soro to donate blood.” [Reuters]

--Finally, Wednesday, May 31, was former New York Jets quarterback Joe Namath’s 80th birthday.  The pride of Beaver Falls, Pennsylvania, gave us Jets fans our one moment of glory, and lots of thrills along the way.

We love you, Broadway Joe!  Here’s to many more.

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Gold $1964
Oil $72.00

Regular Gas: $3.56; Diesel: $3.94 [$4.71 / $5.55 yr. ago…as we neared record highs.]

Returns for the week 5/29-6/2

Dow Jones  +2.0%  [33762]
S&P 500  +1.8%  [4282]
S&P MidCap  +2.6%
Russell 2000  +3.3%
Nasdaq  +2.0%  [13240]

Returns for the period 1/1/23-6/2/23

Dow Jones  +1.9%
S&P 500  +11.5%
S&P MidCap  +3.1%
Russell 2000  +4.0%
Nasdaq  +26.5%

Bulls 47.9
Bears 23.3

Hang in there.

Brian Trumbore

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