Week in Review

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Week in Review

07/23/2022

For the week of 7/18-7/22

[Posted 8:30 PM ET, Friday]

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Edition 1,214

This week was largely about the global heat wave, from China to the U.S. to Europe.

Britain recorded temperatures of more than 40 C. (104 F.) for the first time on Tuesday, with the freakish heat straining fire departments and other public services.  Excessive temperatures were recorded across Europe and huge wildfires erupted on the continent.  Portugal reported more than 1,000 heatwave-related deaths.

But when it comes to Wall Street and the economy, this coming week could be titanic.

The Federal Reserve is going to be raising interest rates, substantially, again, though the markets have been pricing this in for weeks.  That said, any hints on the direction of further Fed action, and the speed of same, will keep the stock and bond markets on edge, global markets as well.

And the week is the most important of the earnings season, with all manner of heavyweights giving their insights on the future direction of economic activity.

And lastly, we get our first look at second-quarter GDP and it could very easily be negative, which would be the second quarter in a row of negative growth, ergo, the technical definition of a recession…two consecutive negative quarters.

But when you have an unemployment rate of 3.6%, that’s not exactly recession.  The National Bureau of Economic Research (NBER) is the official arbiter of business cycles and at some point, should the second quarter be negative, it will weigh in.  [It’s likely to weigh in regardless, down the road.]

But that doesn’t mean politicians, namely Republicans, won’t have a field day if Q2 has a ‘minus’ sign in front of it.  [The Atlanta Fed’s GDPNow barometer puts it today at -1.6%, after -1.6% in Q1.]

The Biden administration can fight back but in terms of the political cycle, and a mid-term election that is fast approaching, this could be deadly. 

The president et al at least can point to rapidly falling gasoline prices at the pump, with the national price down to $4.41 from a high just five weeks ago of $5.01.  That helps.  But the price of diesel is still a way too high $5.45.

A year ago, regular was $3.15, diesel $3.27.  Reminder, diesel is a big key to what we pay at the grocery, drug and department stores.

We did have some potentially good news on the food front with an agreement between Russia and Ukraine on the export of grain, and the price of wheat has been coming down substantially in recent weeks, but I’ll cover that in detail down below.

So, speaking of a topic that is still far and away the most important issue in the world….

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Russia is preparing to annex parts of eastern Ukraine following the same “playbook” it used to illegally seize Crimea in 2014, the White House said Tuesday.

There is “ample evidence” from intelligence sources and the public domain that Vladimir Putin is seeking to make Ukrainian territory part of Russia, said John Kirby, the National Security Council’s coordinator for strategic communications.

“The Russian government is reviewing detailed plans to purportedly annex a number of regions in Ukraine, including Kherson, Zaporizhia, all of Donetsk, and Luhansk oblasts,” Kirby said at a White House briefing.

Kirby said Russia is now taking steps similar to those it took before annexing Crimea in 2014, including installing illegitimate proxy officials in the areas it controls in eastern Europe.  Next, those officials are expected to arrange sham referendums that support joining Russia, which Putin will use to claim ownership of Ukraine’s sovereign territory.

These referendums are expected to happen later this year, perhaps as early as September to coincide with Russia’s regional elections, Kirby said.

Kirby said Russian banks are opening in Ukrainian territory that is controlled by Russia.  In addition, Russian officials are forcing Ukrainian residents to apply for Russian citizenship and issuing Russian passports.

“Annexation by force would be a gross violation of the UN charter and we will not allow it to go unchallenged or unpunished,” Kirby said.  “We’re also going to continue to expose Russian plans so the world knows that any purported annexation is premeditated, illegal, and illegitimate.”

In response, the United States is sending more military aid to Ukraine, including more High Mobility Artillery Rocket Systems, or HIMARS, and more rounds for the multiple rocket launch systems that the Pentagon has already sent Ukraine.

At the same time, in a very rare appearance, Richard Moore, chief of Britain’s Secret Intelligence Service – known as MI6 – spoke at the high-powered Aspen (Colorado) Security Conference on Thursday and proclaimed Russia is “about to run out of steam” in Ukraine.

“Epic fails” is how Moore described the Russian invasion’s three main goals: remove Volodymyr Zelensky, capture Kyiv, and sow disunity within NATO.

While U.S. officials have recently called the Russia-Ukraine war a “stalemate,” Moore argued Ukrainians can still win, especially if they are able to strike as Russia regroups after recent territorial gains.  Moore argued that those advances were only “some incremental progress over recent weeks and months… It’s tiny amounts.”

Yet those advances depleted the Russian army, which now occupies cities it leveled and earth it scorched to push back Ukraine’s Western-armed resistance, he said.

“I think they’re about to run out of steam.  I think our assessment is that the Russians will increasingly find it difficult to supply manpower [and] material over the next few weeks.  They will have to pause in some way and that will give the Ukrainians opportunities to strike back,” Moore said.

A successful counterpunch will also be crucial for Ukrainian morale, he said.

“I also think, to be honest, it will be an important reminder to the rest of Europe, that this is a winnable campaign by the Ukrainians because we are about to go into a pretty tough winter,” he said.  “We’re in for a tough time.”

Both Moore and CIA Director Bill Burns, who was also in attendance at the forum, shot down rumors Putin is in ill health. 

Moore also added he hopes Russian intelligence officers in Europe will consider turning on Putin, as many turned against the Soviet Union in the 1960s. “Our door is always open,” he said.

And so as the war unfolded this week….

--Saturday / Sunday….

President Zelensky sidelined his childhood friend as head of Ukraine’s security service, and another close ally as a top prosecutor, in the biggest internal purge of the war, citing their failure to root out Russian spies.

Internal investigations were to be launched after Ivan Bakanov, the head of Ukraine’s Security Service, or SBU, and Prosecutor General Iryna Venediktova, were dismissed.  Acting heads of the agencies have been appointed.

Zelensky cited hundreds of criminal proceedings (651) into treason and collaboration by people within those departments and other law enforcement agencies.

Zelensky, in his video address late on Sunday, said: “Such an array of crimes against the foundations of the national security of the state…pose very serious questions to the relevant heads [of the two organizations.]

“Each of these questions will receive a proper answer,” the Ukrainian president added.

“Six months into the war, we continue to uncover loads of these people in each of these agencies,” Andriy Smirnov, deputy head of Ukraine’s presidential office, said Monday.

The move is designed to strengthen Zelensky’s control over the army and security agencies, which have been led by people appointed before the Russian invasion began on Feb. 24.

Bakanov is a childhood friend and former business partner of Zelensky, who appointed him to head the SBU.  Bakanov had come under growing criticism since the war began.

Venediktova won international praise for her drive to gather war-crimes evidence against Russian military commanders and officials, including President Putin, over the destruction of Ukrainian cities and the killing of civilians.

Experts believe it is possible Ukraine’s Western partners pointed out the underperformance of the SBU and the prosecutor general’s office to Zelensky.

--Despite Zelensky’s disclosure of Russian penetration of the SBU, U.S. officials said they would continue sharing intelligence that the U.S. says Kyiv uses to respond to Moscow’s attacks.

--Russian Defense Minister Sergei Shoigu ordered generals to prioritize destroying Ukraine’s long-range missile and artillery weapons after strikes on Russian supply lines.

Shoigu ordered offensives “in all directions” across Ukraine, according to state-run media on Saturday, which still maintains that the Russian-backed forces are “de-Nazifying” Ukraine.  The new order means Russia’s “operational pause” is officially over.

But this doesn’t mean there will be a massive increase in ground attacks, but perhaps an offensive to take control of the entirety of Kharkiv oblast to the northeast, though few expect any such move to be successful.

--Russian forces fired missiles and shells at cities and towns across Ukraine on Saturday.  President Zelensky, in his Saturday address, urged Ukrainians not to fall for Russia’s attempts to scare them with warnings of horrendous missile attacks to come, which he said were aimed at dividing Ukrainian society.

“Sometimes, information weapons can do more than regular weapons,” he said in his nightly video address to the nation.

“It’s clear that no Russian missiles or artillery will be able to break our unity or lead us away from out path” toward a democratic, independent Ukraine,” he said.  “And it is also clear that Ukrainian unity cannot be broken by lies or intimidation, fakes or conspiracy theories.”

In the Kharkiv region, at least three civilians were killed Saturday in a pre-dawn Russian strike on the city of Chuhuiv, 75 miles from the Russian border, police said.

--British military intelligence said Russia has used the private military contractor Wagner to reinforce its frontline forces.

--Ukraine said on Sunday that a significant number of Russian warships in the Black Sea were moved from Crimea further east to the port of Novorossiysk.  This comes as Kyiv has received further deliveries of longer-range missile systems from its Western allies.

--Russia’s former president Dmitry Medvedev, now deputy head of the Security Council, warned Ukraine of a “Judgement Day” if it were to attack Crimea.

--Monday / Tuesday….

Russian forces kept up their bombardment of cities across Ukraine, with intense shelling of Sumy in the north, cluster bombs targeting Mykolaiv and a missile strike on Odesa in the south, authorities said Tuesday.

The missile strike on Odesa injured at least four people and burned scores of homes to the ground.

After failing to capture Kyiv, Russia has shifted to a campaign of devastating bombardments to cement and extend its control of Ukraine’s south and east.

Ukraine says Russian forces have intensified long-distance strikes on targets far from the front, killing large numbers of civilians.  Moscow says it is hitting military targets.

President Zelensky says Russia has fired more than 3,000 cruise missiles and uncountable artillery shells during the five-month conflict.

Ukraine said Russian troops tried unsuccessfully to advance towards the city of Avdiyivka, north of Donetsk, and were pushed back after several days of fighting, suffering heavy losses, with some 40 dead.

Ukraine’s top military commander, Gen. Valery Zaluzhny, said U.S.-supplied long-range rocket systems “stabilize the situation” through “major strikes at enemy command points, ammunition and fuel storage warehouses.”

Moscow claims to have full control of Luhansk, but regional officials insist that parts of the area are still disputed, and Ukraine’s army says it has stopped Russia’s slow advance thanks largely to the delivery of long-range and highly accurate weapons from western allies.

Kyiv hopes the war is at a turning point, with Moscow having exhausted its offensive capabilities in seizing a few small cities in the east, while Ukraine now fields long-range Western weapons that can strike behind Russian lines.

Kyiv cited a string of successful strikes on 30 Russian logistics and ammunition hubs, which it says are crippling Russia’s artillery-dominated forces that need to transport thousands of shells to the front each day.

--European Union foreign ministers on Monday agreed to provide Ukraine with another 500 million euros (essentially $500 million, these days, given parity between the euro and dollar) in funds for arms, raising the bloc’s support to 2.5 billion since Moscow invaded on Feb. 24.

--The British military in its latest update on Tuesday said Russia is using “what are nominally six separate armies” to invade and occupy eastern Ukraine’s Donbas region.  However, Russia still seems to be “struggling to sustain effective offensive combat power since the start of the invasion and this problem is likely becoming increasingly acute,” the Brits said.

Presently, “Russian planners face a dilemma between deploying reserves to the Donbas or defending against Ukrainian counterattacks in the southwestern Kherson sector,” and that would seem to suggest that the Russian invaders’ “operational tempo and rate of advance is likely to be very slow without a significant operational pause for reorganization and refit.”

--The United Nations reiterated the blockade on 20 million tons of Ukrainian grain is exacerbating the rise in global food prices and hunger in parts of Africa and Asia.  A report from five UN agencies on July 6th said that close to 10 percent of the world’s population are undernourished, and 57.9 percent of the population of Africa suffer from food insecurity.

--Vladimir Putin met with the leaders of Turkey and Iran in Tehran, his first trip outside states of the former Soviet Union since launching the invasion.  Nominally, the talks with Turkey’s President Erdogan and Iran’s President Raisi were focused on peace talks in the war in Syria, but the conversation was overshadowed by the crisis in Ukraine.  Putin used the trip to shore up friendly relations with both countries, and to push back on the international isolation imposed on him by the U.S. and Western allies.

Putin did talk to Erdogan about a UN-backed proposal to ease the Black Sea blockade, amid reports that the EU may ease some sanctions on Russian banks to facilitate the arrangement.

And Putin and Raisi agreed to deepen cooperation on energy.

Putin’s trip came days after President Biden’s visit to the region last week in which he sought to rally Middle East nations against China, Russia and Iran.

--Wednesday thru Friday….

--The European Commission said Wednesday it did not expect Russia’s Gazprom to restart gas supplies through the Nord Stream 1 pipeline as scheduled on Thursday. The pipeline was closed last week for maintenance, though some suspect Russia is wielding it as a political tool in retaliation for EU sanctions.  Gazprom earlier declared force majeure to European buyers, warning that it could not fulfill its supply obligations.

Putin then told reporters Wednesday that Gazprom will restart gas supplies to Europe via the Nord Stream pipeline – but at a drastically reduced capacity.

So the EU then proposed the bloc cut its natural gas consumption by 15 percent over the next eight months in a plan that would affect all households, power producers and industry.

The goal is embedded in regulation accompanying demand-reduction guidelines for governments amid growing concern that Russia will cut gas exports to the region.  The measure put forward by the European Commission includes a mandatory trigger if the situation worsens and voluntary curbs are insufficient.

“The European Union faces the risk of further gas-supply cuts from Russia due to the Kremlin’s weaponization of gas exports, with almost half of our member states already affected by reduced deliveries,” the commission said on Wednesday in a statement.  “Taking action now can reduce both the risk and the costs for Europe in case of further or full disruption.”

The EU’s biggest challenge this winter is to ensure sufficient gas supplies to fuel furnaces and power generators.

EC President Ursula von der Leyen said a Europe-wide cut-off was a “likely scenario.”

“Russia is blackmailing us.  Russia is using energy as a weapon,” she said. “Therefore, in any event, whether it’s a partial, major cut-off of Russian gas or a total cut-off of Russian gas, Europe needs to be ready.”

The measure will need approval from member states, which the EU’s executive arm may seek as soon as next week during an emergency meeting of energy ministers.   A large group of countries, however, oppose mandatory cuts, arguing that national governments already have emergency plans and will reduce demand regardless of whether they are obliged to by the EU.

Russia supplied Europe with 40% of its natural gas last year, with Germany the continent’s largest importer in 2020, followed by Italy.

Flows then did resume on Thursday, but 40% of capacity, so some relief for the continent that’s racing to store fuel before the winter, and at least in the short run eases fears about massive economic damage to the European Union.

--President Zelensky claimed his country has the potential to inflict major losses on Russia and make gains on the battlefield.

Speaking Thursday night after meeting senior military commanders, Zelensky said the group discussed the supply of modern weapons.

“We discussed the current situation on the frontline, around Ukraine. We defined tasks in some tactical areas to strengthen our positions.  And we also thoroughly worked out the issue of providing the troops with the modern weapons – the intensity of attacks on the enemy still needs to be increased,” he said.

“The participants of the staff meeting agreed that we have a significant potential for the advance of our forces on the front and for the infliction of significant new losses on the occupiers.”

Zelensky added: “Every one of these Russian attacks is an argument for Ukraine to receive more HIMARS and other modern and effective weapons.  Every one of these attacks only strengthen our desire to defeat the invaders and that will certainly happen.”

--Ukraine’s first lady, Olena Zelenska, delivered a message to the U.S. Congress on Wednesday, a stark and graphic picture of civilian bloodshed.  Zelenska said her country needs more Western weapons.  President Zelensky sent his wife to Washington to appeal directly for air defense systems.

The same day, Russian Foreign Minister Sergey Lavrov emphasized that Moscow not only claims the Donbas, but also the Kherson region and part of Zaporizhzhia and will “continuously and persistently” expand its gains elsewhere.

Lavrov told state news agency RIA Novosti that Moscow’s objectives will expand further if the West keeps supplying Kyiv with long-range weapons such as the HIMARS.

“That means the geographical tasks will extend still further from the current line,” he said.

--CIA director William Burns said Wednesday that the United States estimates Russian casualties in Ukraine so far have reached around 15,000 killed and perhaps 45,000 wounded.

--Friday, UN Secretary-General Antonio Guterres and Turkish President Erdogan helped oversee the signing of a key agreement that would allow Ukraine to resume its shipment of grain from the Black Sea to world markets and Russia to export grain and fertilizers – ending a standoff that has threatened world food security.

Russia and Ukraine signed separate agreements with the UN, but not each other.

“Today, there is a beacon on the Black Sea,” Guterres said. “A beacon of hope, a beacon of possibility, a beacon of relief in a world that needs it more than ever.”

The unblocking of the grain stockpiles, a reported 20-22 million tons stuck in Ukraine’s Black Sea ports, will help ease a food crisis.

The deal foresees the establishment of a control center in Istanbul, to be staffed by UN, Turkish, Russian and Ukrainian officials, which would run and coordinate the grain exports, officials have said. Ships would be inspected to ensure that they are carrying grains and fertilizer and not weapons.  It also makes provision for the safe passage of the ships.

Separately, the price of wheat has fallen from a post-invasion high of almost $13 a bushel to the $7.55 range and part of this is because of the story that shipments of food out of Russian-occupied Crimea were 50 times normal for this time of year, signaling that stolen Ukraine supplies are moving on to importing countries.

Sliding wheat prices have given some hope for relief from the worst food inflation in four decades, with estimates for Russia’s own grain crop climbing and U.S. farmers harvesting.

That said, about a third of the U.S. corn-growing region is affected by drought, with surges of heat expected in the western growing belt, according to the Department of Agriculture, while severe heat in France this week no doubt hurt the crop there.

--At the same time, Russia is looting $600 million worth of steel from plants and ports in Ukraine, according to the boss of Ukraine’s largest steel firm Metinvest.

The firm owns the Azovstal plant that became the last holdout of Ukrainian soldiers and civilians during the devastation of the city of Mariupol.

CEO Yurity Ryzhenkov said steel was being transferred to Russia and sold on, some of which had been bound for customers in the UK.

Metinvest is headquartered in Mariupol, a center for trade and manufacturing, which after three months of relentless assault, fell to Russia in May.

Ryzhenkov said 300 employees and 200 employees’ relatives were killed in the assault on the Azovstal plant, which together with a sister plant Ilyich accounted for 40% of all Ukraine steel production.

He said the company was documenting as much of the theft as possible and was preparing to take future legal action.

“At some point in time, the Russians will be facing not only the international courts, but also the criminal courts.  And we will be going after them with anything we have.”

Some commentary….

David Ignatius / Washington Post

“As the Ukraine war grinds towards its sixth month, many analysts forecast a continuing bloody stalemate into winter.  But several unpredictable military, political and diplomatic factors have emerged in this brutal war of attrition.

“Wars are shaped by the most basic variables: weapons systems and their capabilities; leadership and its effect on national unity; alliances that can provide economic and diplomatic support for combatants. These are all at play in Russia’s war in Ukraine, and recent weeks have seen subtle but important shifts in each that could help determine the outcome.

“One new factor is the battlefield success of the U.S. rocket known as HIMARS… After weeks of retreat in Donbas, Ukrainian forces are newly emboldened.  Ukrainian generals complain that HIMARS are so effective they should have been delivered months ago, according to one European official….

“Through this summer and fall, NATO’s priority will be delivering more of these missiles to Ukraine to reinforce the recent success.  U.S. and European officials are mobilizing defense companies to speed weapons production, the European official said.  And there’s a race to expand training of Ukrainian forces.  Britain plans to train 10,000 soldiers every 120 days – a number that will be multiplied by other countries….

“But the real impact of the new weapons and training could come next spring, after an expected winter lull in fighting.  Ukraine will be better positioned to repel new Russian attacks and perhaps retake some territory, the European officials said.

“Human leadership is the X-factor in any conflict. In this one, both Ukraine and Russia are benefiting from strong, unifying leadership from their presidents [Zelensky and Putin]… Predictions that these leaders would buckle under internal dissent have proved wrong….

“In Ukraine, a poll released in May by the International Republican Institute registered 94 percent support for Zelensky…. In Russia, a June poll by the Levada Center – whose numbers are viewed as broadly accurate – showed 83 percent approval of Putin, up 14 points from January, before the Russian invasion.

“Zelensky governs what remains a fragmented country where corrupt oligarchs hold considerable power. He resisted prewar American urging to form a unity government, but until now, he has avoided any major internal blowups or witch-hunts.

“Then came Sunday’s abrupt removal of Iryna Venediktova and Ivan Bakanov, the country’s prosecutor general and leader of its internal security service, respectively.  Zelensky said they hadn’t been aggressive enough in pursuing pro-Russia sympathizers and suggested there were many more Ukrainians who were also disloyal.  These moves were a jarring reminder of underlying tensions.  But sources close to Ukrainian politicians say that, so far, Zelensky has managed to keep the broad mass of the country with him – and thereby tame the oligarchs.

“If Zelensky makes more impulsive changes in his administration, he could jeopardize the unity that is his most precious asset. Rick Atkinson, author of a celebrated trilogy about World War II in Europe, offers a caution for any wartime leader.  ‘Turnover in senior national leadership positions during wartime typically suggests stress fractures at the top, perhaps from colliding egos or the need for scapegoats when things are going badly.’ That warning applies equally to Putin.

“On the matter of alliances, Putin’s dreams of remaking the global order seemed to crumble after his plan for a quick decapitation of Zelensky’s regime failed.  Rather than shattering NATO, Putin has galvanized it, drawing Sweden and Finland into the pact and putting new pressure on Russia’s northern flank.  But the ever-wily Putin this week tried to reinforce his diplomatic position along the southern tier, traveling to Iran to meet with Ayatollah Ali Khamenei and Turkish President Tayyip Erdogan.

“Putin’s trip to Tehran is a creative attempt to gain political leverage by a leader who knows that brute Russian force of arms, alone, could dig Russia into a conflict from which it might not escape for decades.  It’s also a reminder of the diplomatic and military wild cards that might alter the current gloomy forecast that both sides will slaughter their way to a deadlock – and that the ultimate outcome of this terrible war remains uncertain.”

Tatiana Stanovaya / New York Times…Ms. Stanovaya with the Carnegie Endowment for International Peace.

“We are used to thinking that Mr. Putin sees the West as a hostile force that aims to destroy Russia. But I believe that for Mr. Putin there are two Wests: a bad one and a good one. The ‘bad West’ is represented by the traditional political elites that currently rule Western countries: Mr. Putin appears to see them as narrow-minded slaves of their electorates who overlook genuine national interests and are incapable of strategic thinking.  The ‘good West’ consists of ordinary Europeans and Americans who, he believes, want to have normal relations with Russia, and businesses who are eager to profit from close cooperation with their Russian counterparts.

“In Mr. Putin’s thinking, apparently, the bad West is declining and doomed while the good West is slowly challenging the status quo with a raft of nationally oriented leaders, such as Viktor Orban in Hungary, Marine Le Pen in France and even Donald Trump in the United States, ready to break with the old order and fashion a new one.  Mr. Putin believes that the war against Ukraine and all its consequences, such as high inflation and soaring energy prices, will nourish the good West and help people rise up against the traditional political establishment.

“Mr. Putin’s wager appears to be that the fundamental political shifts in Western countries will in time bring about a transformed, friendly West.  Russia will then be able to return to all the security demands it set out in its December ultimatum to the United States and NATO.  This may seem wishful to the point of impossible.  But that doesn’t stop it from being what Mr. Putin expects to happen.

“There is some good news. The very fact that the plan seems realistic to him should, in the short term, prevent any nuclear escalation.  But the bad news is that sooner or later, Mr. Putin will face reality.  It is in that moment, when his plans are stymied and his disappointment high, that he is likely to be the most dangerous.  If the West seeks to avoid a catastrophic clash, it needs to truly understand what it’s really dealing with when it comes to Mr. Putin.”

Editorial / The Economist…on the potential natural gas crisis in Europe in the fall/winter.

“Consumers, who use gas directly for heating and cooking, as well as indirectly as electricity, have little idea of what may hit them. At the moment, many are protected by price caps, subsidies and long-term contracts.  The typical German pays at least 70% less than the market price for gas.  Industrial users such as chemicals and glassmaking firms are in trouble, as well as a broad list of businesses, including many German champions.  Across the euro zone a halt to Russian gas flows could lower GDP growth by 3.4 percentage points and raise inflation by 2.7 percentage points, according to UBS.  In Germany the hit would be still worse.

“You may think a recession and inflation would be tolerable – after all, in 2020 Europe’s Covid-hit GDP fell by 6%.  But the energy threat is more insidious.  Shortages could trigger beggar-thy-neighbor behavior as states hoard gas, stopping it from flowing on to the next country. Britain has threatened as much. Gaps in the wholesale price of gas in different EU countries suggest that firms fear a breakdown in the single market.  Governments’ debts are higher than ever.  A stagflationary shock could raise fears of defaults or even of an Italian debt crisis that would threaten the entire euro zone.  A popular backlash over energy prices could also erode popular support across the continent for standing up to Mr. Putin.

“For all these reasons, European governments must rouse themselves to face the energy shock now.  As with vaccines, they need to transcend national divisions….

“The prize for Europe is not just getting through the coming months.  Europe will forever free itself from Russian energy intimidation.  It will also have created a coherent continent-wide energy-security mechanism that will help accelerate the shift to cleaner energy.  Europe has a habit of coming together during crises. It is time to do so again.  If you are reading this in Paris or Madrid with the air-conditioning on, turn it down a notch.”

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Biden Agenda

--In a new Quinnipiac University national poll of adults, President Biden’s approval rating hit yet another new low (which I list down below with the other such ratings).

Americans were asked about Biden’s handling of….

Response to the coronavirus: 50% approve, 43% disapprove.
Response to Russia’s invasion of Ukraine: 40% approve, 52% disapprove.
Foreign policy: 36% approve, 55% disapprove.
Gun violence: 32% approve, 61% disapprove.
The economy: 28% approve, 66% disapprove.

Roughly 7 in 10 Americans (71%) say they would not like to see Joe Biden run for president in 2024, while 24% say they would like to see him seek a second term.  Among Democrats, 54% say they would not like to see Biden run, while 40% say they would.

Asked to choose the most urgent issue facing the country today, inflation (34%) ranks first followed by gun violence (12%).  No other issue reached double digits.

Among Republicans, inflation (48%) ranks first followed by immigration (16%), with no other issue reaching double digits.

Among Democrats, gun violence (22%) ranks first followed by abortion (14%), inflation (14%), election laws (12%), and climate change (11%).

Among independents, inflation (41%) ranks first with no other issue reaching double digits.

Two-thirds of Americans (67%) say the country is worse off today than it was a year ago, while 26% say the country is better off.

--A new CNN poll has Biden’s approval ratings for handling the economy at 30%, and 25% on inflation.

Only 18% of Americans describe the nation’s economy as in good shape, while 82% say economic conditions are poor. 

--According to a new Des Moines Register/Mediacom Iowa Poll, 23% of Iowans say they hope President Biden runs for president again, while 67% say they hope he does not.  Nine percent are not sure.  [Only 32% of Iowans think Trump should run again.]

Even among Democrats, just 37% say Biden should run again.  And more Iowans say the nation is headed in the wrong direction today than at the peak of the Great Recession in 2008.  And Biden’s job approval, at 27%, is now the second-lowest rating of any president measured by the Iowa Poll.

--President Biden said he considered the environmental risks created by climate change to be “an emergency” and signaled plans to use his presidential powers “to turn these words into a formal, official government action.”

“Let me be clear: Climate change is an emergency,” adding he plans to announce formal actions in the “coming weeks.”

Visiting a former coal-fired power plant that will soon support the offshore wind energy in Somerset, Mass., Biden said he was prepared to act unilaterally after Sen. Joe Manchin (D-W.Va.) withdrew support from a climate funding bill last week, sidelining Biden’s legislative push on climate change in the evenly divided Senate.

The president gave zero details on any actions he might take.  As in, environmentalists were once again disappointed.

--The House passed a bill protecting the right to same-sex and interracial marriages.  All 220 House Democrats voted in favor, as did 47 Republicans.  But Republican opposition in the Senate means that the bill is not expected to pass.  While overturning the right to abortion last month, Justice Clarence Thomas had argued that the right to gay marriage should also be reconsidered.

--Karen Elliott House / Wall Street Journal

“Meetings between leaders of important nations are usually worthwhile even if they yield no immediate results.  But there are exceptions.  One was Neville Chamberlain’s 1938 Munich meeting with Hitler. Another: President Biden’s sit-down with Saudi Crown Prince Mohammed bin Salman last week.

“The president’s 24 hours in Jeddah were dominated by photos of his fist bump with the de facto leader of a kingdom Mr. Biden had labeled a pariah.  Things went downhill from there.  Mr. Biden insisted that, in front of the entire U.S. and Saudi delegations, he had labeled the crown prince the killer of Jamal Khashoggi. Saudi Minister of State Adel al-Jubeir was quick to say he didn’t recall hearing that.  When Mr. Biden was asked if the foreign minister was telling the truth, he said no – implying that a key Saudi official was a liar.  Even the New York Times questioned if Mr. Biden’s account was accurate, noting that he has a history of describing events other meeting participants don’t recall.

“So much for rebuilding U.S.-Saudi cooperation, which was Mr. Biden’s goal.  This trip was worse than a missed opportunity.  It damaged U.S. security interests in the Middle East by highlighting to the world that neither Saudi Arabia nor other Gulf states trust the U.S. enough to make any sacrifices to renew badly frayed relations.  In a speech to Arab leaders, the president proclaimed: ‘We will not walk away and leave a vacuum to be filled by China, Russia or Iran.’

“That fell on doubting ears from a man they watched walk away from Afghanistan.  The United Arab Emirates promptly announced its effort to return an ambassador to Tehran and resolve differences diplomatically.  Saudi Foreign Minister Faisal bin Farhan Al-Saud contradicted Mr. Biden’s claims of enhancing Saudi-Israel relations, and reiterated that any increased oil production won’t be a Saudi decision but one by the Organization of the Petroleum Exporting Countries Plus, which includes Russia.  That’s a not-so-subtle way of saying Saudi Arabia will maintain its warming relations with Vladimir Putin regardless of what the U.S. thinks.

“In short, the president walked away with no progress – not only on oil, but on peace in Yemen, confronting Iran and everything else. That failure was compounded by the risible way the White House handled the visit.  The White House staffer who thought a banal buddy-to-buddy fist bump was preferable to a customary formal handshake should be fired.  It had nothing to do with Covid; the president shook hands with other Saudis and also, earlier, with Israelis and Palestinians.  If he thought that forgoing a handshake would appease anti-Saudi critics in his own party, he was wrong.  Rep. Adam Schiff blasted the fist bump as ‘visible proof of the continuing grip oil rich autocrats have on U.S. foreign policy.’”

---

Wall Street and the Economy

Yes, this coming week is all about the Federal Reserve and its next move on interest rates, another expected 0.75 percentage point, 75 basis points, when the Open Market Committee meets on Tuesday and Wednesday.  We then have a first look at second-quarter GDP, as well as some critical earnings reports in terms of the equity market’s momentum.

Economists increasingly expect the Fed, in its efforts to push down inflation, to raise rates enough to trigger a recession, according to a survey by the Wall Street Journal.

Forty-nine percent put the chance of a recession sometime in the next 12 months, up from 18% in January.

Some 46% of economists said they expect the Fed to raise interest rates excessively and cause unnecessary economic weakness.

Inflation in June reached a fresh 40-year high of 9.1%.  We have a long ways to go to the Fed’s 2% target

David Berson, chief economist of Nationwide Insurance, told the Journal: “The big question is: will inflation slow by enough that the Fed doesn’t have to tighten so much that it tips the economy into a recession.  We’re sort of on a knife’s edge there. The inflation numbers haven’t really improved although there are signs that perhaps it will slow.”

On the data front, just two key notes on housing.  June housing starts came in less than expected at a 1.559 million annualized pace, and below May’s revised figure of 1.591m.

Existing-home sales declined for the fifth straight month to a seasonally adjusted annual rate of 5.12 million, lower than the pre-pandemic pace. Sales were down 5.4% from May and 14.2% from one year ago.

The median existing-home sales price climbed 13.4% from one year ago to $416,000, a new record high.

“Falling housing affordability continues to take a toll on potential home buyers,” said National Association of Realtors Chief Economist Lawrence Yun.  “Both mortgage rates and home prices have risen too sharply in a short span of time.”

As noted above, the Atlanta Fed’s GDPNow barometer sits at -1.6% for the second quarter.

Europe and Asia

The European Central Bank increased interest rates across the eurozone as expected Thursday, but what wasn’t expected was that it was by a half-point, not a quarter.  It marked the first hike since 2011.

ECB President Christine Lagarde said the decision to go with a 0.5 percentage point rise was partly due to an acceleration of EA19 inflation, which was running at 8.6 percent last month, and, just as with the Federal Reserve, the ECB’s target is to have inflation of 2 percent over the medium term.

“Economic activity [in the eurozone] is slowing.  Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth.”

She said that while tourism was likely to boost the bloc this summer, high inflation and continued supply chain issues would have “a dampening effect on the economy.”

“We expect inflation to remain undesirably high for some time owing to continued pressure from energy and food prices and pipeline pressures in the pricing chain,” Lagarde said.

“Price pressures are spreading across more and more sectors, in part owing to the indirect impact of high energy costs across the whole economy,” Lagarde told a press conference, adding that the euro’s recent decline against the U.S. dollar, to briefly touch parity for the first time in two decades, is also importing inflation into the euro area.

She added that while the ECB rate hikes should ultimately raise borrowing costs for households and businesses, “the most precious good we can deliver – and we have to deliver – is to bring inflation down to 2 percent in the medium term.”

Lagarde refused to say whether the central bank would continue down the path of rate increases at the next policy meeting in September, saying that decision would be “data driven.”

She also said the ECB governing council took the bold step of agreeing to set up a new program that would allow it to step in and buy the bonds of eurozone countries whose market borrowing costs spiked in an “unwarranted, disorderly” way.

The ECB is also grappling with fears of an economic downturn and political instability in Italy, one of the region’s most indebted countries, where Mario Draghi stepped down as prime minister on Thursday after losing the support of a key party, prompting talk of an early and unwelcome election.

Draghi tendered his resignation to President Sergio Mattarella, who had rejected a similar resignation offer from the premier last week, “took note” of the new one and asked Draghi’s government to remain on in a caretaker fashion.

Draghi’s government of national unity imploded Wednesday after members of his fragile coalition of right, left and populists rebuffed his appeal to band back together to finish the Italian Parliament’s natural term and ensure implementation of a European Union-funded pandemic recovery program.

Instead, the center-right Forza Italian and League parties and the populist 5-Star Movement boycotted a confidence vote in the Senate, a sign they were done as partners in the former ECB chief’s 17-month government.

Italy is probably headed to an early election as soon as late September or early October.  And this will be big.

Italian bonds and stocks dropped after Draghi’s resignation, with the yield on the country’s 10-year note jumping as much as 21 basis points to 3.6%, its highest since June.  The spread over equivalent German bonds, a common gauge of risk, rose to 233 basis points and finished the week at 227 bps.  At yearend 2021, the spread between the two was 136 basis points.

Meanwhile, as alluded to above, the euro area’s annual inflation rate in June was 8.6%, up from 8.1% in May.  A year earlier, the rate was 1.9%, as reported by Eurostat.

Germany 8.2%, France 6.5%, Italy 8.5%, Spain 10.0%, Netherlands 9.9%, Ireland 9.6%.

We also had a release for first-quarter government debt to GDP, 95.6% in the eurozone, vs. 100.0% a year ago.

Germany 68.2%, France 114.4%, Italy 152.6%, Spain 117.7%, Netherlands 50.7%, Ireland 53.1%, Portugal 127.0%, and Greece 189.3%.

Those figures in Italy and Greece are not good, and the prime reason why the ECB is instituting a program to buy bonds in those countries whose yields have spiked uncomfortably above the likes of Germany.

Lastly, we had preliminary PMI readings for the eurozone in July from S&P Global, with the composite reading at 49.4 (50 the dividing line between growth and contraction), a 17-mo. low.  Manufacturing was 46.1, a 26-mo. low, and services 50.6, a 15-mo. low.

Germany: Mfg. 45.4 (26-mo. low), services 49.2.
France: Mfg. 44.0 (26-mo. low), services 52.1.

The UK’s mfg. figure was another 26-mo. low at 49.7, with services at 53.3.

Chris Williamson / S&P Global

“The eurozone economy looks set to contract in the third quarter as business activity slipped into decline in July and forward-looking indicators hint at worse to come in the months ahead.

“Excluding pandemic lockdown months, July’s contraction is the first signaled by the PMI since June 2013, indicative of the economy contracting at a 0.1% quarterly rate.  Although only modest at present, a steep loss of new orders, falling backlogs of work and gloomier business expectations all point to the rate of decline gathering further momentum as the summer progresses.

“Of greatest concern is the plight of manufacturing, where producers are reporting that weaker than expected sales have led to an unprecedented rise in unsold stock.  Production will likely need to be reduced as companies adapt to this weaker demand environment, in turn widely linked to rising prices….

“With the ECB raising interest rates at a time when the demand environment is one that would normally see policy being loosened, higher borrowing costs will inevitably add to recession risks.

“One ray of light was a further marked cooling of inflationary pressures from the survey gauges of both input costs and selling prices, which should feed through to lower consumer price inflation.  However, at present, these inflation gauges remain higher than at any time prior to the pandemic, underscoring the unenviable challenge facing policymakers of taming inflation while avoiding a hard landing for the economy.”

Britain: The Conservative Party whittled down its candidates to lead Britain to a final two, Rishi Sunak, the former chancellor, and Liz Truss, the foreign secretary.   Penny Mordaunt, the third, lost out to Truss, who leapfrogged her by getting a large haul of Kemi Badenoch’s 59 backers.

So now it is a six-week campaign for Sunak and Truss to be grilled by Tory party activists.  Polls of party members, who number 200,000, show Sunak losing to Truss, but he goes in as the clear choice of Tory MPs, of which there were 358.

Ballots are mailed out on August 1st to the 200,000 and many grassroots Tories could return their votes long before the deadline of September 2.

For his part, outgoing prime minister Boris Johnson, in his final “question time,” signed off with “Hasta la vista, Baby,” suggesting he could be back.

Turning to Asia…zero important economic data from China after last week’s onslaught.

In Japan, we had a flash reading for July on the PMI front, with manufacturing at 49.5 vs. 50.7 in June; the service sector at 51.2 vs. 54.0.

June exports came in better than expected, up 19.4% year-over-year, with imports up 46.1% Y/Y (energy an ongoing reason for the high import figures).

June inflation was 2.4% over a year ago, but this was down a tick.  Ex-food and energy, inflation in Japan was 1.0%.

Street Bytes

--Since the mid-June lows (specifically 3666 on the S&P 500 June 16), stocks have been in an up, down, up, down, up pattern, with the Dow Jones finishing up this week 1.9% to 31899, the S&P 2.5% to 3961(up 8% off the lows), and Nasdaq 3.3%.  Earnings were generally OK.

But next week, aside from the Fed, it’s all about Alphabet, Amazon.com, Apple, Facebook-parent Meta, and Microsoft.

--U.S. Treasury Yields

6-mo.  2.91%  2-yr. 2.97%  10-yr. 2.75%  30-yr. 2.97%

The bond market volatility continued, with the yield on the 10-year down from 3.08% to 2.75% in just two weeks.  From May 27 to June 10, the yield rose from 2.74% to 3.16%.  You just don’t have these moves and we’re now getting them regularly.

This coming week we know the Fed will hike the funds rate 75 basis points, but as always, it’s going to be about the language after, including in Chair Powell’s press conference.

--International Energy Agency Executive Director Fatih Birol said Europe must fill gas storage to adequate levels before winter, and the first immediate step is to reduce gas consumption and put the saved gas into storage, and significant additional reductions are crucial.

“In my conversations with European leaders…I have been urging them to do all they can right now to prepare for a long, hard winter,” Birol said.  “It will require strong resolve and determination to see it through.”

Meanwhile, the price of natural gas in the U.S. has surged nearly 50% this month – including 10% on Wednesday – to $8.00 per million thermal units as the hot weather enveloped the country.

--Goldman Sachs’ second-quarter results surpassed Wall Street’s expectations as declines in investment banking and asset management revenue weren’t as bad as analysts predicted, though its chief executive projected increased market volatility amid rising interest rates.

Earnings fell to $7.73 per share from $15.02 a year earlier, compared with the consensus of $6.69.  Revenue slid 23% to $11.86 billion, but came in higher than the Street’s $10.7 billion view.

“There’s no question that the market environment has gotten more complicated and a combination of macroeconomic conditions and geopolitics is having a material impact on asset prices, market activity and confidence,” CEO David Solomon said on a call with analysts.

Investment banking revenue plunged 41% to $2.14 billion, reflecting a pullback in equity and debt underwriting. Financial advisory sales fell due to a lower number of merger and acquisition deals.  Asset management slid 79% to $1.08 billion due to losses in equity investments.

Global markets business advanced 32% to $6.47 billion as the fixed income, currency and commodities group posted a 55% jump to $3.61 billion.

Operating expenses fell 11% to $7.65 billion.

“We see inflation deeply entrenched in the economy,” Solomon told analysts, forecasting more volatility and uncertainty as the Federal Reserve continues to tighten its monetary policy.  Given the “challenging” operating environment, the bank has decided to slow hiring and cut down on certain professional fees as part of measures to improve efficiency.

--Bank of America reported lower second-quarter earnings that missed analysts’ estimates as investment banking fees plunged 47% amid “weaker industry-wide underwriting activity” in the year.

The banking giant on Monday posted earnings of $0.73 per share, down from $1.03 a year earlier, and below the consensus of $0.75.  Revenue for the quarter ended June 30 advanced 6% to $22.69 billion, but was just shy of the Street’s view for $22.79 billion.

“Our U.S. consumer clients remained resilient with continued strong deposit balances and spending levels,” CEO Brian Moynihan said in a statement.  “Loan growth continued across our franchise and our markets teams helped clients navigate significant volatility reflecting economic uncertainty.”

Consumer banking revenue increased 12% to $9.14 billion due to higher net interest income.

Global markets revenue slipped 5% to $4.5 billion.

Bank of America recorded $523 million in provisions for credit losses, compared with a benefit of $1.62 billion in the 2021 period.

--I forgot to note BlackRock Inc.’s earnings report last Friday, with second-quarter profit falling 22% amid the bruising stock market downturn.  Net income of $1.08 billion was down from $1.38 billion in the same period a year earlier.

Revenue dipped 6% to $4.53 billion.

But what was particularly newsworthy is that the world’s largest asset manager saw its assets decrease to $8.5 trillion, down from $9.6 trillion in the first quarter. The firm ended 2021 with $10.01 trillion in assets, the first time any money manager surpassed that milestone.

So $10t to $8.5t is significant.

The year is off to “the worst start in 50 years for both stocks and bonds, with global equity markets down 20% and the aggregate bond index down about 10%,” BlackRock CEO Larry Fink said on an earnings’ call last Friday.

But as Marc Rubinstein of Bloomberg wrote this Wednesday, “At the end of June, only about a quarter of (BlackRock’s) assets were actively managed to beat a benchmark – rather than track it seamlessly as passive strategies are designed to do. That’s down from a third when BlackRock acquired Barclays Global Investors in 2009 to become the leading player in exchange-traded funds.”

Around $21 billion has flowed out of active equity in the past decade, with $730 billion flowing into indexed equity.  The firm’s passive equity holdings are now 10 times larger than its active business.

But the collapse in bond markets this year has shaken money out of active fixed-income funds.  BlackRock saw clients pull more than $20 billion during the first half of the year in a rout that has seen over $200 billion leave the industry.  Some of that is rolling into passive funds, in particular ETFs, where BlackRock is picking up more than its fair share.

“This is the early days of a major transformation of how people invest in fixed income,” said Fink last week.  “We expect the bond ETF industry will nearly triple and reach $5 trillion in AUM (assets under management) at the end of the decade.”

As Marc Rubinstein concludes, though: “By then, BlackRock could be a lot larger but its fortunes will remain firmly tied to the markets.”

--United Airlines said Wednesday that it earned $329 million in the second quarter as summer vacationers packed planes, but the results fell far short of Wall Street expectations due largely to soaring fuel prices.

United said strong revenue trends have carried over into the third quarter, with figures indicating higher average fares.

The airline said it is trimming its schedule in the final six months of the year to avoid the delays and cancellations that have plagued the industry this spring and summer.

Shares of UAL fell about 7% on the news, despite United’s first profit without federal pandemic aid in the Covid-19 age.

“It’s nice to return to profitability, but we must confront three risks that could grow over the next 6-18 months,” CEO Scott Kirby said in a statement.  He warned about factors causing delays and cancellations, high fuel prices, and the increasing possibility of a global recession.

The second-quarter income reversed a $434 million loss a year earlier, but fell far short of the $1.05 billion profit in the second quarter of 2019.

Adjusted earnings were $1.43 per share vs. analysts’ expectations of $1.85.

Revenue was $12.11 billion, United’s best ever in a second quarter, and 6% higher than in 2019, even though United did nearly 15% less flying.

The average United flight was 87% full in the April-June quarter, and for trips within the United States, it was just under 90%.

The airline is continuing to cut passenger-carrying capacity by 11% in the third quarter and 10% in the fourth in an effort to avoid delays and cancellations.

The airline paid an average of $4.18 per gallon for fuel, higher than the $4.02 it had predicted.  But since the quarter ended, spot prices have dropped about 10%.

--American Airlines earned $476 million in the second quarter on record revenue from summer travelers and said Thursday that it expects to remain profitable in the third quarter.

Like with United, it was American’s first quarterly profit without government pandemic aid in the Covid era.

While revenue from leisure travelers is soaring, so are costs, especially for fuel.  That kept quarterly profit 28% below the same period in 2019.

American has been more aggressive than its closest rivals in rebuilding its schedule to nearly pre-pandemic levels.  It has struggled at times to run that big an operation.

American canceled 4,900 flights in June, more than any other U.S. airline, and scrubbed the highest percentage of its schedule among major U.S. carriers, according to figures from FlightAware.  Only Southwest Airlines had more flight delays.

A major issue of course is staff shortages and CEO Robert Isom said American has hired 20,000 people to cover attrition and added new positions.  The only staffing shortage, he said, concerns pilots at regional affiliates, which fly smaller planes under the American Eagle brand.

“We are sizing the airline for the resources we have available and the operating conditions we face,” Isom said on a call with analysts.

American joined United in calling out London’s Heathrow Airport for its poor handling of huge crowds.

An American official said Heathrow officials told the airline “on extremely short notice” last week to cancel departing flights to help the airport manage overcrowding.  American’s Nate Gatten said that left the airline with few options to reroute passengers.  Heathrow is expected to keep some type of constraints in place until mid-September, although airlines don’t know exactly what the rules will be, he said.

American also noted that corporate travel remains down 20% to 25% from 2019 levels.

American had revenue of $13.42 billion in the second quarter, up 12% from the same period in 2019, despite nearly 9% less flying.  Adjusted earnings per share came in at $0.76, from a loss of $1.69 a year earlier.

--Delta Air Lines said Tuesday that it is exercising rights to purchase 12 new Airbus A220-300 aircraft.   Financial terms were not disclosed.

The airline said the new planes, which are slated for delivery beginning in 2026, will serve passengers traveling domestically and to its coastal hubs.

But earlier, in a signing ceremony at the Farnborough International Airshow in the UK, Delta said it was ordering 100 Boeing 737-10 jets, with options for an additional 30 airplanes, in an effort to modernize its single-aisle fleet with the highly efficient 737 MAX to meet demand.

“The Boeing 737-10 (the largest member of the MAX family) will be an important addition to Delta’s fleet as we shape a more sustainable future for air travel, with an elevated customer experience, improved fuel efficiency and best-in-class performance,” said Delta CEO Ed Bastian.

The 737-10 can cover 99% of single-aisle routes around the world, seating up to 230 passengers, while reducing fuel use and emissions by 20-30 percent compared to the airplanes it replaces.

Delta operates a fleet of more than 850 mainline aircraft, including more than 450 Boeing planes.

--Boeing said Monday that All Nippon Airways’ parent company, ANA Holdings, has finalized an order for 20 of its 737-8 airplanes.

--SAS and pilots unions reached a wage deal on Monday, ending a strike over a new collective bargaining agreement that has grounded hundreds of flights and thrown the airline’s future into doubt.

A majority of SAS pilots in Sweden, Denmark and Norway walked out on July 4 triggering a strike that SAS has said cost it between $10 million to $13 million per day.

--Ryanair said Thursday it has signed five-year agreements with Spanish and French pilot unions.  The agreements provide accelerated pay restoration and future improvements to pay in each year up to March 2027.

--TSA checkpoint travel numbers vs. 2019

7/21…90 percent of 2019 levels
7/20…87
7/19…85
7/18…89
7/17…90
7/16…91
7/15…87
7/14…88

--Tesla shares rose sharply after reporting impressive second-quarter earnings, particularly given the difficult operating environment.

Tesla reported adjusted Q2 earnings per share of $2.27 from $16.9 billion in sales.  Analysts were projecting $1.83 from $16.9bn.  Tesla had reported EPS of $3.22 from sales of $18.8 billion in the first quarter of 2022.

The sequential decline in earnings was expected because of China’s lockdowns to fight Covid-19, which constrained production.  Tesla delivered about 255,000 EVs in the second quarter, down from 310,000 in the first quarter.

Operating income came in at $2.5 billion, down from a record $3.6bn reported in the first quarter. It was the company’s third best quarterly operating profit ever.  [Net profit was $2.26 billion, vs. $3.32bn in the first quarter.]

But most investors were ready for a Bitcoin write down. Coming into the quarter, Tesla held roughly 42,000 coins it had purchased for about $30,000 apiece, on average.

Bitcoin ended the quarter at just under $19,000, giving Tesla a loss of more than $11,000 for every coin it held. But…the automaker had already sold most of its Bitcoin at a higher price during the quarter.

The precise amount of the charge wasn’t included in the company’s news release, though Tesla said it sold about 75% of its holdings, adding almost $1 billion in cash to its balance sheet.

Bottom line, it seemed Tesla sold about 31,500 Bitcoins for about $29,700 on average, which had investors in TSLA breathing a huge sigh of relief.  So the estimated charge in the quarter was closer to $120 million, a far cry from $460 million.

--Speaking of Bitcoin, it traded around $23,900 on Wednesday, continuing a rally of almost 25% in the past week, but then fell back to close today, as I go to post, Bitcoin never actually ‘closing,’ at $22,700.

Bitcoin’s peak was back in November at $69,000 before it collapsed.

--Twitter Inc. won its first legal fight against Elon Musk on Tuesday when a Delaware judge granted the company’s request to fast-track its lawsuit seeking to compel Musk to complete his $44 billion purchase of the social-media site.

The Delaware Chancery Court ordered a five-day trial in October, over Musk’s objections, with Judge McCormick saying the case should be resolved quickly, agreeing with Twitter’s claim that it could be harmed by uncertainty about its future as a public company.

Twitter initially asked for a September trial, while Musk’s lawyers were asking for a February date.

Separately, Twitter reported a quarterly loss Friday and declining revenue caught Wall Street off guard with the number of people using the platform on the rise.

The earnings figures offered a glimpse into how the company has performed during the months-long negotiation with Elon Musk, and it was worse than industry analysts had counted on.

The company lost $270 million in Q2, or 8 cents per share, when the Street was expecting a per-share profit of 14 cents.

Inflation has crimped ad spending and that was a huge drag on Twitter’s quarterly revenue, which slid 1% to $1.18 billion.  The company also cited “uncertainty” over the acquisition by Musk.

There was some good news.  The number of daily active users rose 16.6% to 237.8 million compared with the same period a year before.  I know in my own case, Twitter is doing a much better job in directing tweets I’m interested in to my inbox.

The stock held up much better than the following story, but that’s because the fight with Musk overshadows almost everything at this point.

--Shares in Snap Inc. cratered a sickening 38% on Friday after the company posted its weakest-ever quarterly sales growth as a public company, amid the upheaval in the digital-ad market that is suffering from the economy.

Revenue for the April through June period was $1.11 billion, but the 13% year-over-year sales growth was even lower than what the company registered early in the pandemic, when it slipped to 17%, and Snap said sales in the current period so far were roughly flat from a year ago.

The parent company of the popular photo-sharing social-media app Snapchat posted a $422 million net loss for the second quarter and said it would “substantially” reduce its rate of hiring, joining other tech companies in tightening their belts.

The company said macroeconomic factors are causing companies to pull back on ad spending and it is seeing “increasing competition for advertising dollars that are now growing more slowly.”

Shares in Facebook parent Meta Platforms fell 7% in sympathy, with its earnings now even more highly anticipated for next week.

--Ford Motor plans to cut up to 8,000 workers, from its traditional internal combustion engine, or ICE, business, according to Bloomberg.  The cuts were intended to help fund the electric vehicle business.

Cutting costs in the ICE portion of Ford’s business could boost profit margins and cash flow.

The company is building new plants and battery capacity.  It plans to be selling 2 million EVs a year around the globe by 2026.

Back in February, CEO Jim Farley said at a conference, “We have too many people. We have too much investment.  We have too much complexity.”

--Netflix shed almost 1 million subscribers during the spring amid tougher competition and soaring inflation that’s squeezing household budgets, heightening the urgency behind the video streaming service’s efforts to launch a cheaper option with commercial interruptions.

The April-June contraction of 970,000 accounts, announced Tuesday as part of Netflix’s second-quarter earnings report, is by far the largest quarterly subscriber loss in the company’s 25-year history, but Netflix management released an April forecast calling for a loss of 2 million subscribers during the period, thus investors liked the news.

And the company called for a return to growth in the July-September period, which helped the share price as well.

Netflix’s Q2 regression follows a loss of 200,000 subscribers during the first quarter, which rocked the market then, and it is the first time Netflix’s subscriber totals had shrunk in consecutive quarters since the company’s transformation from DVD-by-mail rentals to video streaming 15 years ago.

The loss of nearly 1.2 million subscribers during first half of this year also provides a stark contrast to the pandemic-driven growth that Netflix enjoyed during the first half of 2020 when its streaming service picked up nearly 26 million subscribers.

Despite the downturn, Netflix still earned $1.4 billion, or $3.20 per share during the quarter, a 6% increase from the same time last year.  Revenue rose 9% from Q2 2021 last year to nearly $8 billion.

Netflix ended June with 220.7 million worldwide subscribers, far more than any of its new competitors such as Walt Disney Co. and Apple.  And in a hopeful sign, Netflix management predicted its service will add about 1 million subscribers during the July-September period, signaling the worst of its slump may be over.

[Netflix was probably spared from deeper losses by the ongoing popularity of “Stranger Things,” its science fiction/horror series that debuted in 2016.]

Without providing further specifics, Netflix said Tuesday that both the ad-supported plan and the crackdown on password sharing will begin early next year.  The company didn’t say how much the streaming option with commercials will cost.

Netflix’s stock finished the week at $219, still down from an all-time high of $700, and $602 on Dec. 31.

--Shares in IBM fell sharply even after the company reported better-than-expected quarterly results. For the second quarter, IBM posted revenue of $15.5 billion, up 9% from a year ago, 16% adjusted for currency.  That beat the Street’s consensus forecast of $15.2 billion.  Profits on an adjusted basis were $2.31 a share, three cents ahead of analysts’ forecast.

IBM continues to see positive results from its recent restructuring, which has focused the company on software and services tied to artificial intelligence and hybrid cloud computing.  The company is also at the start of a new product cycle for its mainframe hardware business.

IBM reiterated its forecast for full-year revenue at the high-end of its revenue target of mid-single-digit growth.

Software revenue in the quarter was up 6%, or 12% in constant currency.  Consulting revenue was up 10%, or 18% on constant currency, while IBM’s infrastructure segment grew 19%, or 25% in constant currency.

The company said hybrid cloud revenue was up 16% to $21.7 billion over the last 12 months.

But despite the positive tone, the stock fell, as investors were disappointed the company didn’t revise its forecast higher.  It’s just a fragile tech investor these days.

--Nokia Corp. said it was on track to hit the higher end of its 2022 sales forecast, as sales of its telecommunications equipment rose in North America and its efforts to rebound from the missteps of recent years show signs of success.

One of Nokia’s two main North American facilities is in the old Bell Labs, Murray Hill, NJ, site where our Dr. Bortrum worked for decades.  I drive by once a week or so and the parking lot is slowly filling up again.

The Finnish maker of 5G cellular antennas and other telecom infrastructure Thursday reported an 11% increase in second-quarter sales to 5.9 billion euros, or about $6 billion, compared with a year earlier.  Profit rose 31% to 460 million euros.

Sales in North America grew 35%, as both Swedish rival Ericsson AB and Nokia have benefited from the U.S. government’s four-year-old campaign to get allied countries to ban its huge Chinese competitor, Huawei Technologies Co., over spying concerns that Huawei maintains are unfounded.

--American Express shares rose 2% today, but were up far more earlier after the company raised its full-year revenue growth outlook after posting better-than-expected second-quarter results.

The card payments company said it now expects revenue to grow 23% to 25% for the year, compared with the previous guidance of an 18% to 20% increase.

Card member spending was up 30% year-on-year, which is certainly a sign the consumer is spending, but AXP cautioned that the same folks may have problems paying off their cards down the road if we tip into recession.

--Casinos in the gambling hub of Macau will be allowed to reopen Saturday after a nearly two-week shutdown amid a Covid outbreak, according to the government.

Casino operators in Macau have been dealing with a longer-than-expected recovery there.  Las Vegas Sands Corp., which operated several casinos in Macau, on Wednesday reported a net loss of $414 million in the three-month period ended June 30.  The company’s net revenue in Macau was $374 million for the quarter, down nearly 60% from $855 million last year.

--Foreign visitors to Japan fell in June from the previous month, even after the country began taking steps to reopen its borders to tourists for the first time in more than two years.

The number of foreign arrivals totaled 120,400 compared with 147,000 in May, according to the Japan National Tourism Organization.  Japan has a daily limit of 20,000 visitors.  Tourists are still limited to group tours with strict controls – including mandatory mask-wearing, temperature checks and limited free movement.

The Pandemic

--President Biden was diagnosed with Covid-19 Thursday morning, doctors saying they expect him to cope well with the infection, befitting his fully vaccinated and boosted status.

His doctor, Kevin O’Connor, wrote in a letter early Thursday that the president has a runny nose, an occasional dry cough and is fatigued.

O’Connor quickly prescribed Paxlovid, an antiviral that is known to reduce the risk of severe disease.  Biden has to isolate in the White House for five days but is capable of carrying out his duties.

Of course, the president is 79, and there are all kinds of long-range concerns, but he is going to announce next January that he is not running for reelection (at least says moi), and most of us will be praying for the nation in the remaining days of his term.

Because he is on Paxlovid, the president is going off other medications – in Biden’s case, a cholesterol drug and a blood thinner – and will resume these when his Paxlovid course ends in five days.

White House officials sought to use the moment to reiterate their message on the importance of getting vaccinated and urged those over 50 who have not gotten a booster shot this year to do so.

--Biden’s infection comes as the BA.5 subvariant rips across the country and there is indeed a ton of virus around.  BA.5 has shown a remarkable ability to escape the immunity conferred by vaccinations and previous coronavirus infections.

In the most recent week, ending Wednesday, 29 states reported more cases than the week before, a USA TODAY analysis of Johns Hopkins University data shows.  Twenty states had more deaths than a week earlier.

--Beijing announced a citywide ban on hotels hosting weddings as well as other events such as group banquets amid a small surge in Covid-19 cases in other parts of the country.

The Chinese capital has only seen a handful of cases in recent weeks, but authorities issued their new directive anyway.

--Officials in Australia urged businesses to let people work from home and recommended mask-wearing indoors amid a major outbreak of Covid.  About 50,000 cases were reported on Tuesday, the highest tally in two months.

New Zealand, which has a population of 5.1 million, has almost 69,000 currently infected with the virus, with 765 hospitalized.

In Japan, new Covid cases have surged to levels not seen since early this year.  South Korea is seeing a similar rise in new daily cases.

But none of the above are talking about lockdowns.  As Australia’s health minister put it, “We’ve moved beyond that…”

Covid-19 death tolls, as of early tonight…

World…6,400,566
USA…1,051,764
Brazil…676,826
India…525,930
Russia…382,080
Mexico…326,879
Peru…213,918
UK…182,727
Italy…170,682
Indonesia…156,893
France…151,350

Canada…43,583

[Source: worldometers.info]

U.S. daily death tolls…Mon. 152; Tues. 360; Wed. 433; Thurs. 286; Fri. 249.

Foreign Affairs, part II

China: President Biden said on Wednesday, before he got Covid, he is likely to talk with Chinese President Xi Jinping within the next week and a half and expressed some doubt about whether House Speaker Nancy Pelosi would visit Taiwan*.

*The Financial Times reported that Pelosi planned to visit the island, which led to China’s government warning it would take “forceful measures” if she did so.  Pelosi was noncommittal on the topic on Thursday.  She had planned to go earlier before she contracted Covid.  Pelosi would be the most senior American lawmaker to visit Taiwan since Newt Gingrich traveled to the island as speaker in 1997.

Xi and Biden last had a virtual summit in March, and this would be the second direct meeting between the two since Russia’s invasion of Ukraine and the first since their defense chiefs escalated rhetoric aimed at each other at the Shangri-La Dialogue in Singapore.

Biden’s claim in May that the U.S. would intervene militarily if Beijing attempted to reunify Taiwan with the mainland by force set the scene for that forum, where Chinese Defense Minister General Wei Fenghe dismissed “the so-called Taiwan Relations Act.”

Taiwan has loomed larger recently, as Beijing has accused Washington of changing its stance on the issue through greater engagement with officials in Taipei.

In response, the mainland’s military has stepped up incursions into Taiwan’s air defense identification zone.

Tensions flared again recently on reports that Pelosi planned to visit the island.  Wednesday, though, Biden, when asked about the possibility of her visit, said: “I think that the military thinks it’s not a good idea right now, but I don’t know what the status of it is.”

Biden sidestepped when asked whether he planned to discuss the removal of punitive tariffs slapped on Chinese imports by Donald Trump four years ago.

China appears determined to use force in Taiwan, and appearing at the Aspen Security Forum, CIA director Bill Burns said that Beijing had likely seen in Ukraine that “you don’t achieve quick, decisive victories with underwhelming force.”

Burns played down speculation that President Xi could move on the island after a key Communist Party meeting later this year but said the risks “become higher, it seems to us, the further into this decade that you get.”

“I wouldn’t underestimate President Xi’s determination to assert China’s control” over the self-ruling island, he said.

Burns said that Beijing was “unsettled” when it looked at Russia’s five-month-old war in Ukraine, which he characterized as a “strategic failure” for Vladimir Putin as he had hoped to topple the Kyiv government within a week.

“Our sense is that it probably affects less the question of whether the Chinese leadership might choose some years down the road to use force to control Taiwan, but how and when they would do it,” Burns said.

“I suspect the lesson that the Chinese leadership and military are drawing is that you’ve got to amass overwhelming force if you’re going to contemplate that in the future,” he said.

Beijing has also likely learned that it has to “control the information space” and “do everything you can to shore up your economy against the potential for sanctions,” Burns said.

The CIA director added that while Beijing has stepped up purchases of Russian energy, it appeared careful about not incurring Western sanctions.

Lastly, the aforementioned MI6 director, Richard Moore, called out China’s ambassador to the United States, Qin Gang, who brought a well-known suite of Communist Party talking points to the Aspen Security forum.  China, Moore said, is clearly “beating the Russian drum and selling the Russian narrative around Ukraine.  And doing it without any sense of irony.  This is a country that spends a lot of time banging on about sovereignty and territorial integrity.  Here is the most egregious example,” he said, “and the Chinese keep on selling their snake oil all around the world.”

“Let’s not overplay the power and attractiveness of the Chinese model,” Moore said.  He said MI6 is seeing evidence that debt and data traps of China’s Belt & Road initiative are starting to wear on countries, like Sri Lanka.

On Iran, Moore said, “I continue to believe that for all of the limitations” of the 2015 nuclear accord, “if we can get a deal, it’s probably the best means still available to constrain the Iranian nuclear program.  I’m not convinced we’re gonna get there.”

He added, “I don’t think the Supreme Leader of Iran wants to cut a deal.  Iran won’t want to end the talks either.”

Random Musings

--Presidential approval ratings….

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

Rasmussen: 37% approve of Biden’s performance, 61% disapprove (July 22).

In the aforementioned Quinnipiac University national poll of adults, Biden’s approval rating was 31%, 60% disapproval.  Among registered voters it is 33-59.

Americans give Republicans in Congress a negative 23 – 68 percent job approval rating.

Americans give Democrats in Congress a negative 30 – 63 percent job approval.

Americans give the Supreme Court a negative 37 – 56 job approval.

On the key issue of who they want to see win control of the United States Senate, 45 percent say the Democratic Party, 45 percent the Republican Party, and 10 percent not offering an opinion.  This compares to a May 18, 2022, Quinnipiac poll when 48 percent of registered voters said the Republican Party, 44 percent the Democratic Party.

A new CNN / SSRS national poll found Biden’s approval rating stands at 38%, with 62% disapproving.

--Maryland Republican Gov. Larry Hogan is a rarity, a Republican in a state where President Biden won 65% of the vote two years ago.

But Hogan can’t run for re-election due to term limits and Donald Trump’s chosen candidate, Maryland state Delegate Dan Cox, won the GOP nomination for governor Tuesday, beating Hogan’s pick Kelly Schulz, 56% to 40%, last I saw.

As in, many will be shocked if Cox now wins the general election.

--Wisconsin’s Republican house speaker said Tuesday that Donald Trump called him “within the last week” seeking to overturn the 2020 presidential election.

State Assembly Speaker Robin Vos told WISN in Milwaukee that he received a call from Trump after the state Supreme Court ruled on July 8 that most absentee ballot drop boxes in Wisconsin are illegal.  The ruling addresses future elections, not the one Trump lost in 2020 by more than 20,000 votes in Wisconsin. 

“It’s very consistent.  He makes his case, which I respect,” Vos said to WISN.  “He would like us to do something different in Wisconsin. I explained that it’s not allowed under the constitution. He has a different opinion.”

Vos said Trump then posted about him on social media. In a July 13 Truth Social post, Trump repeated his baseless claims of election fraud and falsely accused the speaker of letting Democrats “get away with ‘murder.’”

“What a waste of a brilliant and courageous decision by Wisconsin’s Highest Court,” Trump wrote.

--The Secret Service determined it has no new texts to provide Congress relevant to its Jan. 6 investigation, and that any other texts its agents exchanged around the time of the 2021 attack on the Capitol were purged.

Also, the National Archives on Tuesday sought more information on “the potential unauthorized deletion” of agency text messages.

Many of the agents’ cellphone texts were permanently purged starting in mid-January 2021 and Secret Service officials said it was the result of an agencywide reset of staff telephones and replacement that it began planning months earlier.   

Secret Service agents were instructed to upload any old text messages involving government business to an internal agency drive before the reset, but many agents appear not to have done so.

The result is that potentially valuable evidence – the real-time communications and reactions of agents who interacted directly with then-President Trump or helped coordinate his plans before and during Jan. 6 – is unlikely to ever be recovered.

--So speaking of the Jan. 6 committee, in a prime time hearing on Thursday night, we learned that former president Donald Trump not only sat watching television in the White House dining room during the attack on the Capitol, but he did not contact police, the military or other authorities to try to stop the violence.

We also heard that members of former vice president Mike Pence’s security detail were fearful for their lives as they protected him that day and contacted their families to say goodbye.

Out-takes from a video recorded by the president on the day after the attack, Jan. 7, showed that he did not want to say publicly that the 2020 presidential election was over.

The committee accused Trump of a “complete dereliction of duty” and “supreme violation of his oath of office” by failing to stop the attack by supporters who were hoping to obstruct the formal certification of Joe Biden as the winner of the 2020 election.

While he was watching Fox News Channel during the attack, Trump’s aides, family members and allies urged him to try to stop it.  At the same time, Trump was continuing to call U.S. senators trying to persuade them to hold up the certification process.

Former White House deputy press secretary Sarah Matthews testified that she was told that Mr. Trump “did not want to include any sort of mention of peace” in a tweet aides urged him to send in a bid to quell the violence on the afternoon of Jan. 6.

She said that an earlier tweet sent by Trump attacking Mike Pence for “not having the courage” to refuse to certify the election results amounted to “pouring gasoline on the fire.”

Matthews and former deputy national security advisor Matthew Pottinger said this tweet had prompted both to resign.  Matthews added the tweet was effectively a “green light” to those who were attacking the Capitol.

She said: “I’ve seen the impact that his words have on his supporters. They truly latch on to every word and every tweet that he says.”

On Jan. 7, the committee showed Trump recording a video and changing his mind about the text.  Trump was recorded as saying initially: “But this election is over – Congress has certified the results….”

He then stopped reading from the teleprompter.

“I don’t want to say the election is over, I just want to say Congress has certified the results without saying the election is over, OK?”

And the committee heard evidence backing up the claims of former White House aide, Cassidy Hutchinson, who testified weeks ago that Trump had been furious that he was not permitted by his security personnel to go to the Capitol with his supporters following the rally on Jan. 6.

Former police officer Mark Robinson said he had received information that the president was upset and was adamant about going to the Capitol.

Meanwhile, I flipped for a moment at the beginning of the 8:00 p.m. and 9:00 p.m. hours to see how Tucker Carlson and Sean Hannity were leading off their programs as all the other top television networks covered Thursday’s hearing, and Tucker led off with of Biden’s case of Covid and how vaccines might not work, while Hannity denounced the “show trial” even as he was featured in it.

Hannity aired a soundless snippet of committee members entering the hearing room as part of a lengthy monologue condemning the proceedings.

That was all Fox News Channel viewers saw of the hearing.

“It’s really just a cheap, selectively edited political ad,” Hannity told his viewers.

Hannity brought on guests like GOP Rep. Jim Banks of Indiana, who said the hearings have “exonerated President Trump and the people supporting him.”

While Hannity was on the air, the Jan. 6 committee showed tweets that Hannity and other Fox News personalities had sent to Trump administration officials, warning that the Capitol riot was making the president look bad.

Editorial / Washington Post

“The new details shared Thursday are damning on their own, but they’re more damning still read alongside everything else the committee has laid out these past several weeks.  Mr. Trump’s campaign manager, his top campaign lawyer, his lead data analyst and even his attorney general told him he had lost the election.  Instead of abating his efforts to overturn the results, he escalated them.  He not only pressured officials to “find” votes for him, or to submit rogue slates of electors, but he also rendered the explosion of Jan. 6 all but inevitable by summoning his followers to Washington and directing them to the Capitol, knowing they would go to extremes for him.

“That all this culminated in violence was no surprise, and no accident. Mr. Trump had the power to start what occurred on Jan. 6, and he had the power to stop it.  Having exercised the former, he withheld the latter.  This was indeed a violation of his oath of office – one that began the moment he realized he had lost the election, and one that continued until the disaster he invited had finally struck.  Now the country must figure out what to do about it.”

Donald Trump, responding on his Truth Social platform, said after Thursday’s hearing, among other things:

“I had an election Rigged and Stolen from me, and our Country.  The USA is going to Hell.  Am I supposed to be happy?”

Trump lashed out at Mitch McConnell, calling him a “disloyal sleaze bag.”

“Is this the same Mitch McConnell who was losing big in Kentucky, and came to the White House to BEG me for an Endorsement and help?” Trump wrote.  “Without me he would have lost in a landslide.”

I hardly think so, Mr. President.

In the above noted Quinnipiac survey, when asked how closely they are following news about the work of the Jan. 6 investigation, 28 percent of Americans say very closely, 33 percent say somewhat closely, 16 percent say not so closely, and 21 percent say not closely at all.

More than half of Americans (55 percent) think it is very important for Congress to hold hearings so that the public can learn what led to the attack on the Capitol, an increase from a June 22, 2022 poll that put it at 49 percent.

--Steve Bannon, aka “Sloppy Steve,” a longtime ally of Donald Trump, was convicted today on contempt charges for defying a congressional subpoena from the Jan. 6 committee.

Bannon was convicted in federal court in Washington on two counts and faces up to two years in federal prison when he’s sentenced on Oct. 21.  Each count carries a minimum sentence of 30 days in jail.  He’ll appeal, but he’ll lose.

--Jerusalem Demsas / The Atlantic

“In the parts of the world where monkeypox is newly spreading, like the United States and Europe, the people currently most at risk of getting the disease are gay and bisexual men.  A recent update from the World Health Organization noted that cases in newly afflicted countries have mainly been among ‘men who have had recent sexual contact with a new or multiple male partners.’  In Europe, just 0.2 percent of the men who have gotten the disease identify as heterosexual.  Reports from the center of the U.S. outbreak – New York City – show that ‘the number of monkeypox cases has nearly tripled in the last week, nearly all of them among men who have sex with men….

“And yet, despite this barrage of data, an American following the public-health messaging on monkeypox might come away with the idea that all populations are similarly at risk of contracting the disease….

“Yesterday, the New York Times reported on a battle within New York City’s health department. The story revealed a widespread discomfort within the agency with acknowledging and highlighting the primary route of monkeypox transmission: sex between men….

“Why is risk considered stigmatizing, and harm not?  This heuristic is putting people at risk, and the leaders who are indulging it ought to at least attempt to justify it before allowing it to continue quietly impacting policy making.”

--The most exhaustive report yet on the May 24 mass shooting inside a Uvalde, Tex., elementary school spread blame across every law enforcement agency responding to the attack, faulting local police for mistakes and more experienced agencies for failing to take charge.

Nearly 400 local, state and federal law enforcement officers were at the scene that day, including 91 state troopers – none of whom moved to lead the response.  The school district police chief, “Pete” Arredondo, wrote its active-shooter response plan and assigned himself as incident commander but did not follow the protocol he had set up, the report said.

--Aside from record temps in the UK this week, you had the likes of Brussels, Belgium, hitting 104 on Tuesday.  Wildfires raged out of control in Spain and France, Portugal and the Balkans.

Before Tuesday, the highest temperature recorded in Britain was 38.7 C (101.7 F), set in 2019.  By later that day, 29 places in the country had broken the record.

The London Fire Brigade faced a real crisis amid a “huge surge” in fires because of the heat, London Mayor Sadiq Khan said.  Half of the fires were brush fires.

Sales of fans at one retailer, ASDA, increased by 130%.

The UK issued its first “red” warning for Tuesday’s extreme heat, meaning there is danger of death even for healthy people.  At least six people were reported to have drowned across Britain while trying to cool off in rivers, lakes and reservoirs. 

In Paris, the thermometer topped 104 F for just the third time since records have been kept there – 1873.  The 104.9 F measured by Meteo-France was the station’s second-highest reading ever, topped only by a blistering 108.7 in July 2019.

Portugal, which reported over 1,000 heat-related deaths, reported 117 F in the center of the country in the district of Vizeu.  Saturday alone, there were 360 heat-related deaths in Spain.

Prior to the latest heatwave in Portugal, 96% of the country was already suffering severe or extreme drought.

For two weeks, computer models pointed to the possibility of widespread readings of 40 C, and then the model forecasts proved correct.

It was in 2020 that the UK’s Met Office issued projections suggesting that the type of heat seen in Britain on Tuesday might occur somewhat routinely by 2050.  But to see it happen in 2022 struck scientists as both premature and an ominous preview of what is to come.

Now experts in the UK warn that if greenhouse gas emissions are not curbed, temps in Britain could reach this hot every three years.

Also, consider this…London’s 104 is more remarkable when you consider the city is farther north than any location in the Lower 48 states and sits at a latitude just north of Calgary.

For the record, last year’s heatwave in the Pacific Northwest saw Seattle and Portland hit 108 and 116 degrees, respectively, setting high-temperature records by massive margins.  [A new heat wave is hitting this region next week.]

--Lastly, recent satellite images from NASA show the dramatic water loss that has occurred over the last 22 years at drought-stricken Lake Mead, the nation’s largest reservoir and a lifeline for California, neighboring states and Mexico.

Water levels at Lake Mead – formed by the Hoover Dam – are at their lowest levels since 1937, when the reservoir was being filled.  As of July 18, the lake was at 27% capacity, according to the U.S. Bureau of Reclamation.

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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 $1725
Oil $95.17

Returns for the week 7/18-7/22

Dow Jones  +1.9%  [31899]
S&P 500  +2.5%  [3961]
S&P MidCap  +4.0%
Russell 2000  +3.6%
Nasdaq  +3.3%  [11834]

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

Dow Jones  -12.2%
S&P 500  -16.9%
S&P MidCap  -15.7%
Russell 2000  -19.5%
Nasdaq  -24.4%

Bulls 35.2
Bears 35.2

Hang in there.  Stay cool.  Make sure your pets are hydrated, too.

Brian Trumbore

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