Week in Review

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Week in Review

07/30/2022

For the week 7/25-7/29

[Posted 8:30 PM ET, Friday]

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Edition 1,215

For years now I’ve given you, weekly, the Atlanta Fed’s GDPNow barometer on projected quarterly economic activity as just that, a look forward, and so you’ve known for months now that we were facing the prospect of two quarters in a row of declines in GDP, even as the vast majority of Wall Street economists pooh-poohed the thought, including a consensus of them just the day before the Bureau of Economic Analysis released the figure for Q2, -0.9%, after a 1.6% decline in the first quarter…the traditional requirement for determining if an economy is in recession.

I will say that we are not in recession, yet, as defined by the official arbiters of such things, the National Bureau of Economic Research, when it rules on the business cycle, because the labor picture is still strong.  It just might be that the NBER, months down the road, may say a slowdown commenced in February, or March, and so on....

But we all feel it and the Wall Street Journal’s Greg Ip put it succinctly: “Whether a recession is eventually declared, the message from the latest economic data is just as sobering: The recovery is, effectively, over.

“To be sure, the second-quarter decline in inflation-adjusted gross domestic product was a bit misleading. Inventory destocking explains all of the decline, as it did for the first quarter drop in GDP.  Employment is still growing.

“Even so, key indicators of activity have ground to a halt.  Total spending by households and businesses didn’t grow in the second quarter after averaging 6% annualized growth in the prior six quarters.”

Much more below, including on the Federal Reserve’s latest move on interest rates, but as I’ve been noting for weeks and weeks, the two negative quarters of growth in a row (which, yes, Q2 could be revised upward, but not likely into positive territory), is deadly, politically, for the Democrats.

It’s pretty tough if you’re a donkey running for Congress to start arguing in a campaign speech, “Well, you know, it’s not really a recession.”  I can say that, and I’m probably right, but for Mr. and Mrs. Middle America, they won’t buy it.  These are uneasy times, and for a lot more reasons than economic ones, too.

Speaking of which, we had a great rally in the stock market, Wednesday through Friday, and I was using the opportunity to build up a short position, like I did prior to Russia’s invasion of Ukraine.

Market participants are stupidly missing some massive geopolitical issues, aside from Ukraine, which I discuss below.  Something is going to blow…and bring Wall Street’s bulls back to their senses.

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For three years, Russian President Vladimir Putin wouldn’t even take a phone call from Ukrainian President Volodymyr Zelensky.  In the months before the invasion, Zelensky desperately tried to find a diplomatic solution.  But as Zelensky said in an interview with the Wall Street Journal last weekend:

“(Putin) came here without talking, killed people, displaced 12 million, and now says Ukraine doesn’t want to negotiate.  They just murder people, destroy cities, enter them, and then say: ‘Let’s negotiate.’  With whom can they talk? With rocks?  They are covered in blood, and this blood is impossible to wash off.  We will not let them wash it off.”

After all the tragedies of the past five months, Ukraine’s citizens are in no mood for talks with Russia, Zelensky added.

“The society believes that all the territories must be liberated first, and then we can negotiate about what to do and how we could live in the centuries ahead,” he said.  “Our people are convinced we can do it.  And the faster we do it, the fewer will die.”

“We would prefer to de-occupy in a way that’s not military and to save lives,” he added.  “But we are dealing with who we are dealing with.  Until they get smashed in the face, they won’t understand anything.”

And so as the war unfolded this week….

--Saturday / Sunday….

Just hours after the Friday deal to allow Ukrainian grain to ship out of port cities in the Black Sea, Russian missiles struck actual port facilities in the city of Odesa.  According to Russia’s defense ministry, their cruise missiles hit a Ukrainian warship and a missile stockpile; but that was rubbish, the Brits said, because “There is no indication that such targets were at the location the missiles hit.”

The Ukrainian military said Saturday that Moscow had attacked the port with four cruise missiles, two of which had been shot down.

Oleksiy Honcharenko, a local MP, wrote on Telegram that the city’s port had caught fire after the attack.

“These scumbags sign contracts with one hand and direct missiles with the other,” Mr. Hncharenko wrote.

“So, we need planes and we need to sink the entire Black Sea fleet of the Russian Federation.  This will be the best arrangement for the export of grain.”

The deal included security assurances for both Ukraine and Russia, who agreed not to “undertake any attacks against merchant vessels and other civilian vessels and port facilities” tied to the initiative.

Ukraine’s ambassador to Turkey said the attack showed the deal with Russia wasn’t “even worth the signed paper,” while a Ukrainian foreign ministry official called it a “spit in the face” of the UN chief and Turkish President Erdogan.

“It took less than 24 hours for Russia to launch a missile attack on Odesa’s port,” Oleg Nikolenko, a Ukrainian foreign ministry spokesman, said on Saturday.  “In case of nonfulfillment, Russia will bear full responsibility for global food crisis.”

Ukraine could export 60 million tons of grain in eight to nine months if its ports were not blockaded, but Russia’s strike on the port of Odesa showed it will not be easy.

Ukraine could earn $10 billion by selling 20 million tons of grain in silos and around 40 million tons from its new harvest.

--In an interview with the Wall Street Journal, President Zelensky said recent shipments of U.S. and allied weapons, like the HIMARS and 155 mm howitzers, have helped blunt Russia’s offensive in Donbas and stabilize the situation there.  The Russians used to fire 12,000 artillery shells daily against 1,000 to 2,000 by Ukraine, he said.  Now, Zelensky added, Ukraine can fire some 6,000 shells a day while Russia is beginning to feel a shortage of ammunition and troops.

The change in the balance of firepower has stemmed Ukrainian casualties, Zelensky said. At the peak of the fighting in May and June, Ukraine was losing between 100 and 200 troops a day; now, it is down to some 30 fatalities a day.

Zelensky said the Russian losses, in both materiel and personnel, have drawn him further and further away from interest in any concessions to the Kremlin, he told the Journal.

“They just murder people, destroy cities, enter them, and then say: ‘Let’s negotiate.’  With whom can they talk?  With rocks? …We would prefer to de-occupy in a way that’s not military and to save lives.  But we are dealing with who we are dealing with.”

--Speaking of the HIMARS, Kyiv’s Defense Minister Oleksiy Raznikov, speaking on national television, said the U.S.-supplied weapons system had destroyed at least 50 ammo depots for Russian forces, up from an alleged tally of 30 the previous week.

--Monday / Tuesday….

On Monday, Russian energy giant Gazprom, citing instructions from an industry watchdog, said gas flows to Germany through the Nord Stream 1 pipeline would fall to 33 million cubic meters per day from Wednesday.

That was half of the current flow, which is already only 40% of normal capacity.  Prior to the war, Europe imported about 40% of its gas and 30% of its oil from Russia.

Wholesale European gas prices jumped 12% Monday and have more than doubled so far this year, and are expected to keep rising as winter approaches.

European officials say Putin is weaponizing gas deliveries.  President Zelensky said Russia’s move was simply “gas blackmail.”

“The gas blackmail of Europe, which only gets worse every month, is needed by a terrorist state to make the life of every European worse,” Zelensky said in his nightly address.

So Tuesday, energy ministers for the 27 European Union nations struck an agreement in Brussels on how to jointly cope with potential shortages as Russia tightens the gas supply to Germany and a series of eastern and central EU states.

The European Commission warned member states that a potential total cut of Russian gas supplies was possible at any moment.

“Winter is coming and we don’t know how cold it will be, but what we know for sure is Putin will continue to play his dirty games in misusing and blackmailing by gas supplies,” Czech industry and trade minister Jozef Sikela told journalists.

“This is something we have to prepare our households and economies for and we have to protect them,” he added.  “We have to reduce the dependence on Russian supplies as soon as possible.”

The goal is to reduce gas use by 15 percent, though member states pushed for a range of opt-outs to cater for their national circumstances.

Nevertheless, EC President Ursula von der Leyen welcomed the move, calling it “a decisive step to face down the threat of a full gas disruption.”

--Russian jets hits Odesa with cruise missiles again on Tuesday.  The strikes also included further attacks on other coastal villages and even more port facilities (in Mykolaiv, etc.).

And Russia’s military lied again about what it’s targeting with its missiles in Ukraine, the British military says.

“Russia almost certainly perceives anti-ship missiles as a key threat, which is limiting the effectiveness of their Black Sea Fleet,” said the U.K. Defense Ministry in an update Tuesday.  The alleged handicap of the Kremlin’s Black Sea Fleet “has significantly undermined the overall invasion plan, as Russia cannot realistically attempt an amphibious assault to seize Odesa,” according to the Brits.

In the days ahead, it is expected Russia will put much more effort into destroying Ukraine’s anti-ship capability – the British say.

--Russia has expanded its detention of Ukrainians in “filtration centers” across eastern Ukraine and western Russia, the New York Times reported Monday from a recently declassified U.S. intelligence assessment.  The U.S. believes there are 18 such centers, which the Organization for Security and Cooperation in Europe warned about in a recent report.

For the record, “The Russian Ministry of Defense has framed the deportation of millions of Ukrainians as part of a humanitarian relief effort,” the Times reported, and notes that, “According to figures released this week by the ministry, 2,795,965 Ukrainians have been ‘evacuated’ to Russia, including 444,018 children.”

--Britain’s Ministry of Defense said Russia is struggling to extract and repair combat vehicles damaged in the war.

The ministry said in an intelligence update Monday that a Russian army facility six miles from the Ukrainian border was created to refit and refurbish broken combat vehicles.  Close to 300 damaged vehicles, including armored personnel carriers and battle tanks, were identified at the lot.

Aside from other “well-documented personnel problems” – such as reportedly using private mercenaries to reinforce its depleted frontline – the Defense Intelligence went on to say, Russia continues to struggle to repair the thousands of broken military vehicles that have been damaged in the Kremlin’s war in Ukraine.

According to Ukraine’s Ministry of Defense, Russia has lost close to 9,000 combat vehicles, including 3,950 armored protected vehicles and 1,730 tanks.  The Russian Ministry of Defense has provided little data on the topic, while the Kremlin’s preliminary published data, just 50 APVs have been damaged.

In comparison, Oryx, an open source investigation that relies on photographic evidence to calculate losses, stated that Russia had lost over 2,000 vehicles including 885 tanks and 965 infantry fighting vehicles.  Some of have remained operational and have been captured by Ukrainian forces.

The steep losses of combat vehicles leaves the Russian infantry exposed to counterattacks.

--Speaking of personnel issues, Russia is allegedly sending prisoners to join its invading forces in Ukraine, according to reports, including from the Wall Street Journal.  The prisoners include at least 300 from one facility alone, and they’ve been sent to fight alongside the Wagner mercenaries, according to I-Stores, citing human rights researchers from an organization called Russia Behind Bars.

--Russia announced on Tuesday that it will withdraw from the International Space Station (ISS) project after 2024, signaling an end of an era in one of the last remaining areas of cooperation between Russia and the United States.

Russia’s newly appointed head of space agency Roscosmos announced the decision in a meeting with President Putin, saying that the agency will instead focus on building its own orbital station.

“We will fulfill all our obligations in our partners, but the decision to leave this station after 2024 has been made,” the space agency chief Yuri Borisov said.

Russian officials have discussed leaving the project since at least 2021.  The countries involved agreed to use the ISS until 2024 and NASA plans to use it until 2030.

But the pullout seems to have accelerated in terms of tensions with the new head of Roscosmos.

The two sections of the station run by NASA and Roscosmos are interdependent, and it is unclear whether the IS can be sustained with one side quitting the project.

NASA has gone to great lengths to keep the cooperation afloat and has attempted to keep the war from affecting the ISS partnership.

Just July 15, NASA and Roscosmos announced they’d reached an agreement to launch one another’s space travelers to the station, with Americans riding aboard Russian rockets and Russian cosmonauts traveling aboard SpaceX vehicles.  The SpaceX launch was announced for sometime after Sept. 29.

--Wednesday thru Friday….

--In their latest analysis of the war, the Institute for the Study of War writes that Russian officials want to capture all of Ukraine’s eastern Donetsk region by the end of August, well ahead of September 11, “which is the unified voting day in the Russian Federation.”  But that may be tough, because “Russian forces remain unlikely to occupy significant additional territory in Ukraine before the early autumn annexation timeline,” ISW warns.

--Polish officials say they know about more locations of alleged Russian-run prisons and “filtration camps” where Putin’s invading forces rout hundreds of thousands of uprooted and detained Ukrainians.  Warsaw is specific – including exact locations of alleged “Russian torture chambers used against Ukrainians.”

According to Polish intelligence, the way this Nazi-like program seems to work is thusly: “The process of filtering and verifying detained Ukrainians lasts from several hours to several days.  During this time, interrogations by the FSB [Russian intelligence officials] take place, the analysis of confiscated items, including data carriers, and even social media activity is carried out.”

Compliant Ukrainians “are generally deported to Russia,” but some “are forcibly conscripted into the Russian army and then sent to the front,” the Polish say.  Meanwhile, “People who raise doubts are brutally repressed.  They are tortured, they are forced to testify or make statements against Ukraine, or they are brought to court as part of propaganda, [or] show political trials.”

--Ukraine’s military is striking bridges with rockets to make them virtually impossible for Russia to use for convoy, transit, etc.

--Thursday, Russian forces launched massive missile strikes on Ukraine’s Kyiv and Chernihiv regions, areas that haven’t been targeted in weeks, while Ukrainian officials announced an operation to liberate an occupied region in the country’s south.

Kyiv regional governor Oleksiy Kuleba told Ukrainian television, “Russia, with the help of missiles, is mounting revenge for the widespread popular resistance, which the Ukrainians were able to organize precisely because of their statehood.  Ukraine has already broken Russia’s plans and will continue to defend itself.”

Russian troops withdrew from the Kyiv and Chernihiv regions months ago after failing to capture either.

Meanwhile, Ukrainian forces counterattacked in the occupied southern region of Kherson, but the secretary of Ukraine’s National Security and Defense Council, Aleksiy Danilov, said in televised remarks, “the enemy is now concentrating the maximum number (of forces) precisely in the Kherson direction.”

The British military estimated Thursday that Ukraine’s counteroffensive in Kherson is “gathering momentum.”

You can see a big battle looms here. 

--At least 40 Ukrainian prisoners of war captured during the fighting for Mariupol have been killed by Ukrainian shelling, Russia-backed separatists in eastern Ukraine said.

Daniil Bezsonov, a spokesman for the Russia-backed separatists in the Donetsk region, said that at least 40 Ukrainian prisoners of war were killed and 130 were injured Friday when Ukrainian shelling hit a prison in the town of Olenivka.

The Ukrainian troops were taken prisoner after the fierce fighting for Ukraine’s Azov Sea port of Mariupol, where they holed up at the giant Azovstal steel mill for months.

Ukraine then said the Russians shelled the prison.  The death toll has risen to at least 53.

--Secretary of State Antony Blinken said Wednesday that the U.S. has offered a deal to Russia aimed at bringing home WNBA star Brittney Griner and another jailed American, Paul Whelan.

In a sharp reversal of previous policy, Blinken also said he expects to speak with his Kremlin counterpart, Sergei Lavrov, for the first time since before Russia invaded Ukraine.

It is believed the U.S. is willing to exchange Russian arms dealer Viktor Bout, once labeled the “Merchant of Death,” who was sentenced to 25 years in prison in 2012, for Griner and Whelan.

Russia is now reportedly asking for a second individual, a convicted assassin.  Why that’s so Putin!

--Liz Sly / Washington Post

“Russian advances in Ukraine have slowed almost to a standstill as newly delivered Western weapons help Ukrainian forces reclaim much of the advantage they had lost in recent months, opening a window of opportunity to turn the tide of the war in their favor again.

“Russian troops have made no significant territorial gains since the Ukrainian retreat on July 2 from the eastern city of Lysychansk under withering artillery fire.  The retreat gave Russia full control over Luhansk, one of the two oblasts, or regions, that make up the broader eastern Donbas area, and it marked Russia’s only meaningful strategic success since its retreat from territory around Kyiv in April.”

“(George Barros, a geospatial and Russia analyst with the Institute for the Study of War) and many Western officials and analysts suspect that the Russians are close to exhausting their capacity to make further territorial gains as their depleted army confronts Ukrainian forces with newly acquired capabilities.  Already forced to abandon their hopes of capturing the capital, Russian forces may soon have to reckon with their inability to conquer the entirety of the Donbas region – the only publicly declared goal of the initial invasion and the focus of current offensive ambitions….

“ ‘Right now, the Russians are losing the initiative, and the Ukrainians either have it or are about to have it,’ Barros said.  ‘The HIMARS are key to that.’”

--Russian casualties and wounded have exceeded 75,000, Biden administration officials told Congress in a classified briefing, CNN reported on Wednesday.

“We were briefed that over 75,000 Russians have either been killed or wounded, which is huge.  You’ve got incredible amounts of investment in their land forces, over 80% of their land forces are bogged down, and they’re tired.  But they’re still the Russian military,” Democratic Rep. Elissa Slotkin of Michigan told CNN.

The Ukrainian military claimed in a Thursday morning update there are around 40,230 Russian military casualties since the war began.

Last week, a senior U.S. defense official said that the Pentagon believes that Russian forces are suffering hundreds of casualties daily in the war, including thousands of lieutenants and captains.

Newsweek reported Thursday that roughly half of the Russian forces sent into the country have been killed or wounded.

Some commentary….

Peter Pomerantsev (Johns Hopkins University’s Agora Institute) / NY Times

“Mr. Putin recently declared that there are only two types of countries: ‘Either a country is sovereign, or it is a colony,’ he said.  This is the logic of humiliation projected onto geopolitics.  For those who are chronically humiliated and humiliate others in turn, the idea that countries large and small alike could have rights is impossible: ‘The world is split into those who dominate and those who are dominated.

“Mr. Putin is not just trying to break Ukraine, he is using energy dependency to get Europeans to kneel to Russia’s demands and up until recently was holding more than 22 million tons of grain that the world needs hostage in Ukrainian ports.

“In the face of such threats, it can be tempting to try and placate Russia.  The editorial board of The New York Times has said that Ukraine will likely have to accept territorial compromises.  Mr. Macron has said that the West should avoid humiliating Russia.  Such proposals are fundamentally misguided: Russia’s sense of humiliation is internal, not imposed upon it.  To coddle the Putin regime is merely to participate in the cycle.  If you yearn for sustainable security and freedom, abusive partners and predators cannot be indulged.  The only option is to limit the sources of dependency.

“For Ukraine, that means defending its sovereignty on the battlefield and, when negotiations come, making sure it is in a position of strength.  The United States and other allies must keep arming Ukraine to do this.  To stop doing so or to let up the pace is just an invitation for more violence and abuse.

“For Europe it means breaking free of energy dependence. Though this may be expensive in the short term, in the longer term it will mean true economic security.

“For the rest of the world, it means ensuring that we are no longer quite so reliant on Russian food supplies, and that Ukraine is able to export its own grains and fertilizers again. The deal the two countries agreed on for Ukraine to resume grain exports is a welcome development, but it demonstrated the frailty of the world’s dependence on Russia’s good will, especially after Russian missile strikes hit the southern port of Odesa a day after the agreement was struck.

“Residual dependency is to always be vulnerable to Russia’s cycle of humiliation and aggression.  ‘We want you to be with us,’ the Russian soldier told Valentyna*.  But we know what ‘with us’ really means.”

*Valentyna is a Ukrainian pensioner in a village in northern Ukraine ransacked by the Russians.  One day a Russian soldier came to use her bathroom. She asked what the Russians were doing in Ukraine.  “We want you to be with us,” he told her. “For you to with Russia.”

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Biden Agenda

--The House on Thursday passed a $280-billion package (the “Chips and Science Act”) to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the United States and help it better compete with international rivals, namely China.  [And protect against a potential Chinese invasion of chip heavyweight Taiwan.]

The House approved the bill by a solid margin of 243-187, sending the measure to President Biden to be signed into law and providing the White House with a major domestic policy victory.  Twenty-four Republicans voted for the legislation.  [The Senate had passed the bill Wednesday, 64-33.]

“Today, the House passed a bill that will make cars cheaper, appliances cheaper and computers cheaper,” Biden said.  “It will lower the costs of everyday goods. And it will create high-paying manufacturing jobs across the country and strengthen U.S. leadership in the industries of the future at the same time.”

Some Republicans argued that the government should not spend billions to subsidize the semiconductor industry, and GOP leadership in the House recommended a vote against the bill, telling members the plan would provide enormous subsidies and tax credits “to a specific industry that does not need additional government handouts.”

--And you have West Virginia Democrat, Joe Manchin, suddenly announcing Wednesday night (after the Chips and Science Act had been passed by the Senate) that he was backing a greatly slimmed down Build Back Better, now dubbed the Inflation Reduction Act.

Senate Democrats pushed through the Chips and Science Act, even as Minority Leader Mitch McConnell threatened to hold it hostage if a large economic package was pending – and then got a $433 billion economic package anyway.

Sen. Machin and Majority Leader Chuck Schumer had a behind-the-scenes negotiation, after the talks’ latest collapse, and reached agreement over lowering prescription drug prices and extending Affordable Care Act subsidies, while reaching a deal over tax and climate policy.

The tax provision is a 15 percent minimum levy on big corporations, the closure, finally, of the carried interest loophole and funding for the Internal Revenue Service to bolster enforcement.

Democrats wanted much more, such as raising the top bracket or capital gains rate.

Republicans are saying the proposal will worsen inflation.

As for the energy and climate spending provisions, there are tax credits for clean energy, designed to boost U.S. manufacturing of solar panels, wind turbines, batteries and more.

But you only get Manchin’s support if you also have goodies for the fossil fuels industry, namely coal in his home state.

However, passage of this bill is far from certain in a 50-50 Senate, with support needed from every Democrat to overcome unanimous Republican opposition and Sen. Kyrsten Sinema (D-Ariz.) has declined to reveal her stance by week’s end.

Build Back Better, by the way, you’ll recall started out as a $3.5 trillion behemoth, that was whittled down to a House-passed $2.2 trillion bill.  Now it’s $433 billion.  But for now, a strategic win for Schumer, as well as Joe Biden.

--Tonight, the House passed an assault weapons ban, but by just a 217-213 margin.  Five Democrats voted with Republicans against the bill, while two Republicans voted in favor.

This will die in the Senate.

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Wall Street and the Economy

Aside from the putrid data on second-quarter GDP, we had a slew of other important items.

The Case-Shiller May home price index rose 1.3% month-over-month, and 20.5% year-over-year, less than expected, on the 20-city index.  It doesn’t look like it, but the housing market is slowing, as the Case-Shiller figures will show further in June and July.

June new home sales came in far worse than expected, a 590,000 annualized pace when the expectation was for 664,000, and 696,000 in May.

June durable goods orders were better than expected, 1.9%, 0.3% ex-transportation.

Personal income for June was 0.6%, a tick above estimates, while consumption was 1.1%, a little better than forecast.

But these reports include the key personal consumption expenditures index, up 1.0%, and 6.8% year-over-year, the highest since 1982.

The core readings, which the Federal Reserve focuses on, came in at 0.6%, and 4.8% from a year ago.  And that’s vs. the Fed’s 2% preferred benchmark, so a long ways to go.

One more…today we had a preview of July manufacturing activity and the Chicago Purchasing Managers’ report came in at 52.1 (50 the dividing line between growth and contraction), well below the 56.0 forecast and the lowest since Aug. 2020.

For the record, the final reading on second-quarter GDP from the Atlanta Fed’s barometer was -1.2%, not far off the -0.9% print, and far, far better than Wall Street’s consensus for a +0.5% to +0.6% figure.

Back to the Fed, on Wednesday it once again hiked its benchmark lending rate by 75 basis points for a second straight month in a bid to combat red-hot inflation.

The central bank’s Federal Open Market Committee voted unanimously to lift the funds rate to a range of 2.25% to 2.50%, the highest level since December 2018.  The latest rate hike comes two weeks after June inflation data showed that prices soared 9.1%, the highest since November 1981.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the FOMC said in a statement.

The Fed said recent spending and production indicators have “softened” and the unemployment rate has remained low while job gains have been “robust in recent months.”  It continued to cite Russia’s war against Ukraine as a key reason behind the elevated inflation levels globally.

The FOMC expects that ongoing increases in its funds rate in the target range will be “appropriate” as it seeks to bring inflation down to its 2% objective. The committee also said it will continue reducing its holdings of treasury securities and agency debt and agency mortgage-backed securities.

Stocks, having anticipated the 75-basis point move, then rallied strongly after Chair Jerome Powell’s news conference.

Powell said it was too soon to say whether the Fed would dial down the size of its rate increases to a half-percentage point or a quarter-point at its next meeting, Sept. 20-21, as there will be a ton of data to assess in the interim.  But he added it would be appropriate to slow the pace of rate increases to assess their cumulative impact on the economy.

“These rate hikes have been large, and they’ve come quickly,” Powell said, referring to the Fed’s four consecutive rate increases since March.  “And it’s likely that their full effect has not been felt by the economy, so there’s probably some significant additional tightening in the pipeline.”

The Fed chairman said the slowdown in economic growth during the second quarter had been notable, citing signs of cooling consumer spending, hiring and housing activity.  “Are we seeing the slowdown in economic activity that we think we need?” Powell said.  “There is some evidence we are, at this time.”

There was no update to the Summary of Economic Projections (the “dot-plot”) at this Fed meeting, and Powell, and market watchers, pointed to the June projections showing officials expected to raise rates to about 3.4% this year and 3.8% in 2023, which would be another 100 basis points+ from where we are today…like perhaps 50 bps in September, 25 in both November and December…something like that, and the markets for this week felt that Powell’s comments were dovish.

Powell said he thinks rates might not have to increase all that much further, and markets believe the Fed will begin cutting rates a year from now.

We’ll see…but for now, the data will rule.

One last item…the International Monetary Fund cut its global growth outlook for this year and next, warning that the world economy may soon be on the cusp of an outright recession.

Global economic expansion will likely slow to 3.2% this year, less than the 3.6% forecast by the fund in April and the 4.4% seen in January, the IMF said in its update to its World Economic Outlook released Tuesday.

“The outlook has darkened significantly since April.  The world may soon be teetering on the edge of a recession, only two years after the last one,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said in a statement accompanying the update.

The IMF cut the outlook for the U.S. in 2022 to 2.3% from April’s 3.7%.

Eurozone: 2.6% in 2022 vs. a prior 2.8% projection
Germany: 1.2% vs. 2.1%
U.K.: 3.2% vs. 3.7%
China: 3.3% vs. 4.4%
Japan: 1.7% vs. 2.4%

Global consumer prices are now forecast to rise 8.3% in 2022, the biggest jump since 1996.  The estimate in April was 7.4%.  Remember, the invasion of Ukraine was Feb. 24.

Editorial / Wall Street Journal

“Call it a recession or stagflation or a slowdown or a transitory blip or even Ethel or Fred – however you name it, the U.S. economy described in Thursday’s GDP report for the second quarter is struggling.  That’s distressing for the American families and businesses living through it, and a political liability for the Democrats presiding over it.  No wonder they want to pretend it’s not happening.

“The economy contracted 0.9% in the April-June quarter, following the 1.6% contraction in the first three months of the year.  The retreat is broad-based.  Consumer spending, with an increase of 1% compared to 1.8% the previous quarter, is now at its slowest rate since the pandemic.

“Recent earnings from retailers such as Walmart suggest this is because inflation is eating into household incomes, and Thursday’s data show the problem.  Inflation as measured by the personal consumption expenditure index (the Federal Reserve’s preferred measure) hit 7.1% in each of the first two quarters….

“Falling ‘core’ inflation, of 4.4% compared to 5.2% the previous quarter, is no consolation when the food and fuel excluded from that core measure make it harder for households to afford other things.  Real wages are down, with real disposable income falling 0.5% this quarter, the fifth straight quarterly decline….

“Blame, well, everything.  Falling inventory investment is a sign businesses are bracing for slower demand. Widespread inflation wreaks havoc with business costs and investment plans.  Another culprit is the refusal by the Biden Administration and Congressional Democrats to disavow tax increases or costly regulations.

“International trade was the brightest spot, and the quarterly contraction would have been deeper without export growth of 18%.  But Europe is falling into recession amid an energy crisis, and China’s economic ills and zero-Covid lockdowns will weigh more heavily on America’s foreign markets moving forward.

“Americans lately have been treated to the spectacle of Biden Administration officials and allies pretending the economy is only in recession if the National Bureau of Economic Research says it is (a year or more after the fact), or if employment is falling (maybe only a matter of time as investment and confidence plunge).  The idea is to pretend the bad news isn’t happening, but the political risk is that President Biden looks out of touch, as he did Thursday when he said the negative second quarter showed ‘signs of economic progress.’

“Mr. Biden inherited a growing economy primed to roar back from the pandemic, and in barely a year and a half he has dragged America back to the 1970s.  The best word for what we have now is stagflation, the ugly combination of slow growth and rapidly rising prices.  This is what the policy mix of trillions in federal spending, heavy regulation, the threat of higher taxes, and easy money has wrought.  Time to do the opposite.”

Europe and Asia

A flash estimate on euro area inflation for July from Eurostat pegs it at 8.9%, up from June’s 8.6%, and 2.2% July 2021.  Ex-food and energy, the figure is 5.0% vs. June’s 4.6% and July 2021’s 0.9%.   Not what the European Central Bank wants to see.

Inflation estimates for July:

Germany 8.5%, France 6.8%, Italy 8.4%, Spain 10.8%, Netherlands 11.6%!

Eurostat also released its flash estimate for GDP in the eurozone in the second quarter, up 0.7% compared with the previous quarter, up 4.0% vs. second quarter of 2021.

Flash Q2 GDP estimates:

Germany 0.0% (Q2 vs. Q1), 1.5% (vs. Q2 2021)
France 0.5, 4.2
Italy 1.0, 4.6
Spain 1.1, 6.3

Next week the final PMIs from the EA19.

Turning to Asia…nothing new of import from China, though next week it’s about the July PMI readings.

In Japan, June unemployment came in at 2.6%, unchanged; June retail sales were up a disappointing 1.5% year-over-year; and June industrial production was down 3.1% Y/Y.  Remember, some of the year-over-year comparisons are still shaded by Covid restrictions in the prior month of 2021.  [Recall, last summer we had the Tokyo Olympics, sans spectators, for the most part, July 23-Aug. 8]

Street Bytes

--Stocks rose for a second week, after a down-up-down-up-down-up stretch, sloughing off mediocre earnings numbers that for now investors think are just Jim-Dandy.  It’s kind of absurd, and I’ll have far more to say on the topic next time.

The Dow Jones rose 3.0% to 32845, the S&P 500 4.3%, and Nasdaq 4.7%.

July ended up being the best month for equities since Nov. 2020 (ditto Europe, incidentally), with the Dow up 6.7%, S&P 9.1%, and Nasdaq 12.4%.  But Nasdaq is still down nearly 21% for the year.

--U.S. Treasury Yields

6-mo. 2.84%  2-yr. 2.88%  10-yr. 2.65%*  30-yr. 3.01%

*Curve remains big-time inverted between these two.

Further volatility, with the yield on the 10-year down to its lowest weekly close since April 1st, despite the Fed’s clear statement of further rate increases.

Germany’s benchmark 10-year, the bund, saw its yield fall to 0.80%, lowest weekly close since April 8 on putrid growth numbers, as well as a flight to quality within the eurozone, not what the ECB wants to see.  [The Italian 10-year, by contrast, has a yield of 3.00%.]

--Crude oil hit $100 today before falling back some by the close, though at $98.30, still up $3.20 from last week.

Chevron and Exxon Mobil reported sharp gains in second-quarter results that exceeded expectations as high commodity prices boosted the energy giants’ operations. 

Chevron posted adjusted earnings of $5.82 per share for the June quarter, up from $1.71 a year earlier, and head of the $5.03 consensus.  Revenue rose to $68.76 billion from $37.6 billion the year before, also topping estimates of $57.60bn.

The average sales price of crude oil and natural-gas liquids within Chevron’s U.S. upstream segment advanced to $89 per barrel from $54 in the prior-year quarter, while the natural-gas price soared to $6.22 per thousand cubic feet from $2.16.

“We more than doubled investment compared to last year to grow both traditional and new energy business lines,” CEO Mike Wirth said in a statement.  “With Permian production more than 15% higher than a year ago and now as one of the leading renewable fuel producers in the United States, Chevron is increasing energy supplies to help meet the challenges facing global markets.”

Exxon’s second-quarter adjusted EPS surged to $4.14 from $1.10 last year, above the Street’s consensus of $3.89.  Revenue jumped to $115.68 billion from $67.74 billion, beating the $111.67bn projection.

“Earnings and cash flow benefited from increased production, higher realizations, and tight cost control,” CEO Darren Woods said in a statement.  “Key to our success is continued investment in our advantaged portfolio, including Guyana, the Permian, global LNG, and in our high-value performance products, along with efforts to reduce structural costs and improve efficiency.”

Chevron’s global net oil-equivalent production fell to 2.9 million barrels per day from 3.13 million barrels, while Exxon’s production rose to 3.73 million barrels per day from 3.68 million.

Exxon’s profit was $17.85 billion, Chevron’s $11.62 billion.  Good for them, and their shareholders.

--A deal in Europe to curb the use of natural gas did little to slow the rise in the price of the commodity on Tuesday, likely because the deal (as described above) is weaker than some investors had expected.

European benchmark gas prices rose 12% on Tuesday, while in the U.S., natural gas jumped as high as $9.75 per million British thermal units, the highest intraday price for gas since 2008.

Beyond Europe’s decision on rationing, record-high heats have added to upward price pressure; nat gas used for electricity, and the rising use of air conditioning is causing electricity demand to soar globally.

--General Motors on Tuesday reported lower second-quarter earnings that missed Wall Street’s estimates and offset revenue gains, as supply chain troubles led to the auto manufacturer shipping fewer vehicles than expected.

The company posted adjusted earnings of $1.14 per share, down from $1.97 a year earlier and below consensus of $1.31.  Revenue for the quarter ended June 30 totaled $35.76 billion, an increase from last year’s $34.17bn and ahead of the Street’s view.

“We have been operating with lower volumes due to the semiconductor shortage for the past year, and we have delivered strong results despite those pressures,” CEO Mary Barra said in a letter to shareholders.  “Overall, GM production continues to improve year-over-year despite some short-term challenges, and we are on track to increase our wholesales by 25% to 30%, in line with our expectations for the year.”

Revenue in GM’s North America segment amounted to $28.76 billion, as the carmaker sold 662,000 wholesale vehicles, while GM sold 155,000 wholesale units in the international division, generating $3.81 billion in revenue.

Barra also said the auto manufacturer is taking proactive measures to manage costs and cash flows, including cutting on discretionary spending and limiting hiring. 

--Ford Motor said Wednesday that its second-quarter profit had risen nearly 20 percent from a year earlier, when the global chip shortage took a severe toll on its operations.

The automaker recorded a profit of $667 million, up from $561 million a year earlier.  Revenue was up substantially, to $40.2 billion from $26.8 billion, thanks to rising vehicle sales and higher prices.

Globally, Ford sold just over one million vehicles in the latest quarter, a sharp increase from 764,000 in the 2021 period.

“We’re seeing pent-up demand, and our dealers are selling vehicles as quickly as we can produce them,” Ford’s chief financial officer, John Lawler, said in a conference call.

Before the pandemic, in 2018 and 2019, Ford’s second-quarter sales topped 1.4 million vehicles.

In the last two years, Ford redesigned its F-150 pickup and has added several vehicles generating buzz, including the Bronco sport utility vehicle, the electric Mustang Mach E and the electric F-150 Lightning.  It has also stopped making cars for the U.S. market except for the Mustang coupe.

Ford, GM and other automakers are benefiting from high prices of new vehicles.  That was one reason for the nearly 50 percent jump in Ford’s second-quarter revenue.  At the same time, however, inflation is also pushing up the cost of raw materials and parts.  Ford said it expected a $4 billion increase in the cost of materials this year.

--Walmart set a negative tone after the market close on Monday, when it cut its second quarter outlook, saying earnings would miss expectations as the retail giant ramps up discounts amid a softening consumer outlook.

“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” CEO Doug McMillon said Monday.  “We’re now anticipating more pressure on general merchandise in the back half (of the year).”

Back in May, Walmart and Target sparked fears about the health of the consumer after both companies flagged bloated inventories and cautious customers.

But the market essentially ignored Walmart’s warning after a one-day decline.

--Canadian e-commerce firm Shopify Inc.  announced it would cut about 10% of its workforce Tuesday, as CEO Tobi Lutke acknowledged the company’s decision to expand rapidly coming out of the pandemic didn’t pay off.

The move will eliminate about 1,000 jobs out of 10,000 or so total employees at Shopify.  Most of the affected roles are in recruiting, support and sales, Lutke said in a memo on the company’s website.

Shopify shares fell 14% in response.

“We bet that the channel mix – the share of dollars that travel through e-commerce rather than physical retail – would permanently leap ahead by five or even 10 years” because of the pandemic, Lutke wrote.

“It’s now clear that bet didn’t pay off.”

Shopify was among the hottest pandemic stocks in 2020 and 2021 as online shopping boomed.  It came crashing down this year, hampered by an economic slowdown and an easing of Covid-19 restrictions.

--Boeing Co. reported a smaller second-quarter profit* that fell short of Wall Street expectations as its defense business weakened and it remained unable to deliver any of its 787 Dreamliner planes.

*You’ll see a lot of articles talking of a loss, that was adjusted for charges. 

The aircraft manufacturer reported a profit of $193 million Wednesday, down 67% from the second quarter of last year, on a 2% drop in revenue.

Boeing remained unable to deliver one of its best-selling planes, the 787, while regulators review steps the company is taking to eliminate production problems.

The company is also faced with the threat of a strike Monday (Aug. 1) by about 2,500 workers at three of its defense plants in Missouri and Illinois.  The machinists’ union is asking for increases in wages and retirement benefits after, it says, Boeing took away a pension plan.

CEO David Calhoun said on CNBC that Boeing will continue to talk to the union and that a strike would delay deliveries to the Pentagon, although he did not give details.

Revenue from Boeing’s normally steady defense business fell 10% in the second quarter compared with a year earlier and the company has taken charges for planes in development and its Starliner spacecraft, which is designed to ferry crews to the International Space Station.

A Boeing spokesman said the charge for the Starliner was unrelated to the above story by Russia’s space agency that it will be pulling out of the ISS program.

Calhoun, who became CEO as Boeing’s financial situation worsened following two deadly crashes of 737 MAX jets, said the results showed that “we are building momentum in our turnaround” while acknowledging that “it has been a long road.”

Second-quarter net income was $160 million, but the gain attributable to shareholders was $193 million, down from $587 million a year earlier.

Total revenue slipped 2% to $16.68 billion, falling short of the Street’s forecast of $17.57 billion, despite an increase in airliner deliveries to 121 planes from 79 a year earlier.

--JetBlue is buying Spirit Airlines for $3.8 billion, creating the nation’s fifth largest airline.  The agreement Thursday comes a day after Spirit’s attempt to merge with Frontier Airlines fell apart.

JetBlue will acquire Spirit for $33.50 per share in cash, including a prepayment fee of $2.50 per share in cash payable once Spirit stockholders approve the transaction.

The combined airline will have a fleet of 458 aircraft.  The airlines will continue to operate independently until after the transaction closes.

The deal with JetBlue, which simply is not going to gain regulatory approval, is a bitter defeat for Spirit’s board, which had stuck by the Frontier deal and repeatedly rejected JetBlue’s higher offers.

--Ryanair, Europe’s low-cost airline behemoth, reported revenues for April to June increased by 600% to 2.6bn euro.  The airline said that the Ukraine war had “badly damaged” Easter bookings and fares, but overall passenger numbers in the quarter were 9% higher than pre-pandemic levels, reaching 45.5 million.

Fuel costs soared 560%, though the airline’s fuel requirements in the current fiscal year are 80% hedged.

Looking ahead, Ryanair said it is too soon to provide full-year profit guidance due to a wide range of risk factors including its later booking profile, lack of visibility into the second half of the year, volatile oil prices, potential spread of new Covid-19 variants, and geopolitical and supply chain risks.

One a different topic, CEO Michael O’Leary said the airline has been receiving letters from Boeing concerning possible delays in the delivery of 21 737 MAX jets in December.

“I am very worried about what’s going on in Boeing,” O’Leary said on a call with analysts.  “They are mumbling about delivery delays.”

The airline also expects 30 737 MAX jets between January and April of 2023.

--Southwest Airlines reported earnings and revenues that beat the Street, the former $6.73 billion, compared with $4 billion a year ago.  The company expects Q3 revenue to be up 8% to 12% compared with the same quarter in 2019.

Southwest said travel demand surged in Q2 and so far that trend continues into the third quarter.  Inflationary pressures persist, but the company said its fuel hedge provides “significant protection” against higher jet fuel prices and barring significant unforeseen events it expects to be “solidly profitable” for the remaining two quarters and full-year 2022.

That said, the shares fell 6%.

--Aer Lingus said that when it comes to the lost baggage fiasco for the industry, they expect major problems to continue for the rest of the summer.

The airline canceled flights last weekend as Heathrow Airport’s 100,000 a day passenger limit continued to bite, while illness or technical problems hit other services.

Aer Lingus says bags transferred from another airline or flight are most at risk.  About 80 percent of missing or mislaid bags are moving from another airline to an Aer Lingus service.

--Deutsche Lufthansa AG canceled almost all of its flights from two of its hub airports as ground staff staged a walkout, exacerbating disruption that has plagued the aviation industry as it tries to increase flying to meet surging travel demand.

The German carrier said 678 flights had been scrapped from Frankfurt Airport and a further 345 at its Munich hub on Wednesday ahead of the start of the vacation season in parts of the country this weekend.  About 134,000 passengers are affected, it said, adding that the strike could lead to additional delays and cancellations.

--American Airlines notified flight crews that it has canceled 1,175 flights in July and August as part of efforts to build more “buffer” into its schedule and reduce disruptions that have plagued the industry this summer.

According to FlightAware, 2.2% of all U.S. flights since June have been canceled and 22% have been delayed.

--TSA checkpoint travel numbers vs. 2019

7/28…87 percent of 2019 levels
7/27…87
7/26…87
7/25…90
7/24…83
7/23…92
7/22…89
7/21…90

Again, these are not 100% compared with pre-pandemic, and we’re still having major problems.

--Apple’s profit slipped during the past quarter, but the world’s largest technology company fared better than many of its peers.

Despite manufacturing headaches and inflation pressures that have hampered a wide range of businesses, Apple profit declined by 10% while revenue edged up 2%.  Both figures were better than analysts projected.

The results for Q2 weren’t a huge surprise as Apple had already warned that its revenue would be depressed by as much as $8 billion because of supply chain problems that have been compounded by pandemic-related shutdowns in Chinese factories that make iPhones and other Apple products.

Earnings fell to $19.4 billion, while revenue edged up to nearly $83 billion.

As usual, Apple’s results were propelled by the iPhone, which posted a 3% gain in sales from the same time last year.  Analysts were expecting a slight decline because of the supply chain issues.

In its most recent fiscal year, nearly a fifth of Apple’s sales came from its Greater China region after two years of struggling sales there.  But now Apple is confronting slow overall economic growth in China, where its fiscal third-quarter sales were $14.6 billion, down 1%.

Growth in the company’s services business, which has provided a boost to sales and profits in recent years, was 12%, below the previous year’s 33% rate and resulting in $19.6 billion in revenue, below estimates of $19.7 billion.

Apple said it now has 860 million paying subscribers on either its paid services or to paid software in its App Store, up from the previous quarter’s 825 million.

CEO Tim Cook acknowledged his company isn’t immune to the current economic turbulence squeezing consumer budgets, but was mostly upbeat on a call with analysts.

So far, Cook said, inflation seems to be affecting Apple’s sales of wearable technology, a segment that includes Apple Watch, more than those of the iPhone.  In the past quarter, revenue in Apple’s wearables division fell 8% to $8.1 billion.  And Mac sales fell 10%, after record sales since 2020, owing to the work-from-home boost.

On the upside, Apple expects supply-chain issues to ease in the current quarter.  And it has the next iPhone model coming later in the year.

--Amazon reported its second-consecutive quarterly loss but its revenue topped Wall Street expectations, sending the stock sharply higher.

The company also said it is making progress in controlling some of its excess costs from its massive expansion during the pandemic.

Amazon lost $2.03 billion in the three months to June 30, driven by a $3.9 billion write-down of the value of its stock investment in electric vehicle start-up Rivian Automotive.

That compared to a profit of $7.78 billion a year ago.  It posted a loss of $3.84 billion in this year’s first quarter, its first quarterly loss since 2015, which was also marked by a large Rivian write-down.

But the Street was cheered by Amazon’s $121.2 billion in revenue, topping expectations.

CEO Andy Jassy said in a statement that Amazon is seeing its revenue accelerate as it invests in its Prime membership and offers more benefits to members, such as its recent deal to give free access to meal delivery service Grubhub for a year.

He said Amazon continues to feel inflationary pressure from higher energy and transportation costs, but it’s been making progress controlling expenses related to its fulfillment network.

Between 2019 and 2021, Amazon nearly doubled the number of warehouses and data centers it leased and owned to keep up with rising consumer demand.  But as consumers shifted their habits, Amazon found itself with too many workers and too much space, which added billions in extra costs.  The company has been subleasing some of its warehouses, ending some of the leases and deferring construction on others to deal with the problem.

Meanwhile, AWS, the company’s highly profitable cloud-computing unit facing increasing competition from Microsoft Azure, earned $19.74 billion in revenue, a 33% jump from last year.  Its advertising business, another burgeoning moneymaker, pulled in $8.76 billion, an increase of 18% from last year.

Amazon is expecting to post between $125 billion and $130 billion in revenue for the third quarter, a growth rate of 13% to 17% compared to the same period a year ago.

In its earnings release, the company also revealed it finished the quarter with 1,523,000 full-time and part-time employees; down from 1,622,000 at the end of March, but still up 14% from a year ago.

Just how Amazon brought down the numbers isn’t entirely clear.

--On Wednesday, Meta Platforms Inc., formerly Facebook, reported a 1 percent decline in quarterly revenue from the previous year.  It was the first time the social media giant’s revenue had fallen since it went public a decade ago, as it confronts increased regulatory scrutiny and a turbulent economy.

Meta’s revenue for the second quarter was $28.82 billion, down from $29.07 billion a year earlier.  Profit was $6.60 billion, down 36 percent from a year ago.  Wall Street analysts had predicted profits of $7.04 billion on revenue of $28.9 billion, according to FactSet.

The same day, Meta was sued by the Federal Trade Commission over a deal to buy a virtual reality company called Within.  The lawsuit struck directly at the ambitions of Mark Zuckerberg, Meta’s founder and chief executive, who has been spending billions of dollars to create an immersive world of social interaction in the ‘metaverse,’ which is a combination of virtual and augmented realities that will be bound by commerce and online relationships.

Meta’s declining revenue was especially stark given that in 2019, its quarterly revenue growth was 28 percent.  The lackluster results were blamed on weaker demand for digital advertising and the broader economic uncertainty.

“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Zuckerberg said in an earnings call.  “The situation seems worse than it did a quarter ago.”

Similar sentiments have been echoed by the likes of Google, Twitter and Snap, which rely on online advertising.  Some are citing the effects of the Ukraine war and its destabilizing impact on the European ad market.

At least Meta said its “daily active people,” the term to describe users across the family of apps – which includes Facebook, Instagram and WhatsApp – increased to 2.88 billion, up 4 percent from a year ago.

--Speaking of Google, parent Alphabet reported second-quarter earnings clocked in below expectations, but the stock still gained.

The company reported second-quarter revenue of $69.69 billion, up 13% year over year.  Net income was $16 billion, or $1.21 per share.  Wall Street was calling for $1.27, with revenue of $69.87 billion.  Operating income of $19.4 billion was below expectations.

The company’s Google advertising revenue grew nearly 12% in the quarter to $56.29 billion, edging out expectations for $55.89 billion.  YouTube ad revenue grew 4.8% to $7.34 billion. Google cloud revenue jumped 36% year over year to $6.28 billion.

CFO Ruth Porat didn’t provide a revenue outlook during the company’s earnings call, but did note that 2022 revenue faces strong year over year comparisons from last year due to pandemic-fueled growth.

“We use the term ‘uncertainty’ because that is the best way to characterize what we are seeing,” Porat said, noting Google has been affected by “pullbacks” among an unspecified number of advertisers.

--Microsoft on Tuesday reported fiscal fourth-quarter profit of $16.7 billion, or $2.23 per share, falling short of analyst expectations, a rare disappointment from the tech giant that has consistently beat Wall Street expectations in recent year.

Microsoft posted revenue of $51.9 billion in the April-June period, up 12% from last year.  Analysts had been looking for revenue of $52.94 billion.

The company blamed a number of “evolving macroeconomic conditions and other unforeseen items” for affecting its financial performance, including pandemic-related production shutdowns in China, a deteriorating personal computer market, lowered spending on advertisements and the war in Ukraine, which led Microsoft to scale down its operations in Russia.

The company had already lowered its profit and sales estimates in early June based on what it described as “unfavorable” changes in the foreign exchange rate as the dollar surged.

A tough season for computer sales “blamed on supply chain disruptions and geopolitical instability” put pressure on Microsoft’s personal computing business, which relies on licensing revenue from PC manufacturers who install its Windows operating system on their products.  The company also saw a 6% drop in sales of its Xbox gaming-related content, while the broader personal computing business segment, which grew just 2% to $14.4 billion for the quarter.

The market research firm Gartner recently said global PC shipments declined 12.6% in the second quarter of 2022 from the same time last year, the sharpest decline in nine years.  Another report by International Data Corp. estimates PC shipments declined 15.3% during Q2, the second consecutive quarter of lower shipments after two years of growth.

Microsoft’s cloud-based segment saw revenue of $20.9 billion, up 20% from last year.

Microsoft is currently aiming to close on a $68.7 billion purchase of video game company Activision Blizzard, in what could be the largest-ever tech industry acquisition.

--Shares in Intel fell 9% after the company badly missed on the top and bottom line in Q2, while the company issued poor guidance for the third quarter.

--General Electric’s second-quarter results came in higher than market estimates, driven by aerospace strength, while the industrial conglomerate reiterated that its performance this year was trending toward the bottom end of its outlook.

Adjusted earnings rose to $0.78 per share during the three months to June 30 from $0.22 a year earlier, surpassing consensus of $0.42.  Revenue edged 2% higher to $18.65 billion, versus the $17.9 billion estimate, while organic (ex-acquisitions) rev growth totaled 5% in the quarter.

Aerospace revenue climbed 27% to $6.13 billion as strong demand for commercial engines and services helped boost aggregate orders by 26%.  Renewable energy revenues tumbled 23% to $3.1 billion due to lower onshore wind deliveries across North America amid the expiration of a U.S. production tax credit.

--United Parcel Service’s second-quarter results surpassed the Street’s expectations as price gains more than offset volume declines, while the package delivery company affirmed its full-year revenue outlook with deliveries seen picking up in the second half of the year.

Adjusted earnings rose to $3.29 per share from $3.06 a year earlier.  Revenue gained nearly 6% to $24.77 billion.

U.S. sales grew over 7% to $15.46 billion as a nearly 12% increase in revenue per piece was partially offset by a 4% drop in average volume.

--Procter & Gamble’s shares cratered 6% as the world’s largest consumer products maker gave a lackluster fiscal 2023 sales forecast as it contends with rising commodity and freight costs.

Like many companies, P&G is dealing with consumers pulling back on their spending as they worry about inflation and a possible recession.

“The operational cost and currency challenges we faced over the last two years will continue in fiscal 2023.  We began the new fiscal year with consumers facing inflation levels not seen in the last 40 years,” Chairman and CEO Jon Mueller said during a conference call.

Despite consumers’ growing concerns, revenue climbed to $19.52 billion from $18.9 billion during the quarter, helped by higher prices.

P&G earned $3.05 billion, or $1.21 per share, 2 cents shy of what the Street expected.

But for fiscal 2023, the company foresees sales to be flat to up 2% from the prior year.  Earnings are anticipated to be flat to up 4% from the previous year’s $5.81 per share; both below current Street forecasts.

--McDonald’s sales fell short of expectations in the second quarter as Covid restrictions shuttered stores in China and higher prices took a toll on U.S. demand.

The Chicago burger giant said revenue fell 3% to $5.72 billion in the April-June period, a little short of consensus of $5.8bn.

Same-store sales were up nearly 10% worldwide, with U.S. sales rising 3.7%.  Most of the increase was due to higher prices, with store traffic remaining flat.

CFO Kevin Ozan said McDonald’s is seeing some trade-down to cheaper items and lower sales of combo meals in the U.S., particularly among lower-income consumers.  The number of customers per sale has also declined from the height of the pandemic, when locked-down families would often pick up large orders at the drive-thru.

Ozan said year-over-year U.S. price increases in the 8% to 9% range will likely continue through the remainder of the year as McDonald’s compensates for its higher costs.  The company expects food and paper costs to be up 12% to 14% for the full year, while its labor costs are up 10%.

CEO Chris Kempczinski said McDonald’s has benefited from another form of trading down, with higher-income Americans choosing on some days to hit a McDonald’s rather than more expensive sit-down restaurants.

McDonald’s profit fell 46% to $1.19 billion, including $1.2 billion in charges related to the sale of its 850 stores in Russia.

--Grill maker Weber Inc. replaced its CEO, suspended its dividend and withdrew financial guidance for the year as the industry continues to struggle following a boom in outdoor cooking during the Covid-19 pandemic.

Weber has already twice cut its outlook for the year and now says it is working with lenders to ensure it remains in compliance with its debt covenants.

The shares cratered 18% and are down more than 50% on the year.

Weber is projecting sales to fall more than 20% to between $525 million and $530 million in its third quarter ended June 30, as consumers cut back drastically on their spending due to rising inflation.

--The MTA needs billions in new funding by 2025 to avoid dire cuts to mass transit service in and around New York City, agency officials said Monday.

Before the pandemic, rider fares and driver tolls covered about 40% of the agency’s roughly $18 billion in annual operating expenses.  But new ridership projections show that model is not longer sustainable..

Using the new projections, the MTA faces a $2.5 billion shortfall come 2025.

The MTA previously estimated ridership on the agency’s subways, buses and railroads would reach 77% of pre-pandemic levels in 2022, bumping up to 86% in 2023.

The MTA now projects just 61% of those riders will be back on trains and buses this year – with just 69% of them returning in 2023.

Planned fare hikes for 2023 and 2025 won’t be enough to cover the shortfall.

--On Broadway, ticket sales were almost $30 million during the week of July 18 and attendance was just below 225,000, but the figures still represent a 15% decrease from the equivalent week in 2019.

--The search for Alex Trebek’s successor as “Jeopardy!” host is officially over: Sony Pictures Television announced Wednesday that Mayim Bialik and Ken Jennings, who split hosting duties throughout the past season, have each closed and signed deals to become a permanent host of the show going forward.

According to executive producer Michael Davies, viewership numbers were up with Bialik and Jennings as hosts; more than 27 million viewers tuned in each week.  That gives you a sense on what a money-maker the show is.

The Pandemic

--Hospital admissions for Covid-19 in Australia have reached a new high for a second straight day, as of Tuesday, while the daily death toll rose to its second-highest as an outbreak fueled by the BA.5 subvariant sweeps the country.

Nearly 5,600 patients infected with Covid are in hospital with 100 new deaths reported, just short of a record 102 on Saturday.

Actually, the daily death toll the other day was 157!

--Covid-19 outbreaks hit Los Angeles International Airport with at least 400 confirmed cases among TSA staff and workers at American and Southwest airlines, according to county health officials.

However, TSA disputes the numbers, saying they are far too high.

--Here in New Jersey, the CDC continues to recommend masking up for public, indoor spaces.  Hospitalizations are slowing ticking up, surpassing 1,100 for the first time since mid-February.

But we had over 6,000 in April, 2020, when we all were scared to death, and then over 6,000 last January amid the Omicron wave.

--President Biden ended his isolation after testing negative and recovering from mild symptoms.  Biden said his bout of Covid was a testament to the tools that the U.S. has to fight the pandemic, and you know what, the soon-to-be 80-year-old geezer is right!

--On a different topic, the World Health Organization has dubbed the quickly growing monkeypox outbreak a public health emergency of international concern, the highest alert level issued by the agency.

WHO Director-General Tedros Adhanom Ghebreyesus issued the designation on Saturday despite a lack of consensus among members on the emergency committee.  It means the UN health agency leader sees the outbreak as severe enough to warrant a coordinated global response in order to prevent it from reaching pandemic levels.

So far, infections have cropped up in more than 70 countries around the world with Europe facing the fiercest wave of infections.

Covid-19 death tolls, as of early tonight….

World…6,416,938
USA…1,054,689
Brazil…678,375
India…526,258
Russia…382,352
Mexico…327,525
Peru…214,154
UK…183,953
Italy…171,882
Indonesia…156,970
France…151,983

Canada…43,583

[Source: worldometers.info]

U.S. daily death tolls…Mon. 203; Tues. 387; Wed. 457; Thurs. 270; Fri. 204.

Foreign Affairs, part II

China: In a phone call with President Biden on Thursday, President Xi Jinping warned his U.S. counterpart that China remained staunchly committed to resisting “interference by external forces” in Taiwan, as tensions soar between the two powers over a possible trip to the self-governed island by House Speaker Nancy Pelosi.

“Those who play with fire will perish by it,” Xi was quoted by the Chinese embassy in Washington as telling Biden in the call that lasted two hours and 15 minutes, according to the White House.  “It is hoped that the U.S. will be clear-eyed about this.”

Xi also told Biden that Washington’s assessment that China represents the most serious long-term challenge to the U.S. was a misperception of the bilateral relationship and a misreading of China’s development.

Asked whether Biden had perceived Xi’s comments as a threat, a senior White House official briefing reporters said the Chinese leader “used similar language in the conversation that the two leaders had back in November.” She added she “was not going to get into parsing metaphors.”

“The two leaders basically discussed the fact that the United States and China have differences when it comes to Taiwan, but that they have managed those for over 40 years, and that keeping an open line of communication on this issue is essential to continuing to do so,” she said.

The White House would not comment on Pelosi’s trip to Asia, saying only that “no trip (to Taiwan) has been announced and as we said previously, it’s her decision.”

Despite the stern rhetoric, each leader viewed the conversation as “candid, in-depth and constructive,” the embassy said, adding that both sides had instructed their teams to maintain “communication and cooperation.”

The administration has warned Pelosi of the risks of a side-trip to Taiwan, including pushing China further toward action against the island.

The U.S. Navy redeployed ships to the South China Sea.  It’s with Pelosi’s possible visit as the backdrop that a U.S. aircraft carrier, the USS Ronald Reagan, and its strike group returned from a port call in Singapore, according to Reuters. [I hope the sailors visited Singapore’s two fantastic zoos.]

Back in May, while in Asia, Biden seemed to say the quiet part of U.S. foreign policy out loud  when he said the U.S. would respond “militarily” if China was to attack Taiwan.

While the U.S. does not officially recognize Taiwan’s government, it does sell defensive weapons to Taiwan – part of the longstanding policy of “strategic ambiguity,” in which the U.S. stays vague on whether it would defend Taiwan in case of a Chinese invasion.

For its part, China’s People’s Liberation Army is strengthening its deployment in the region, including expanding an airbase in Fujian, directly across the strait from Taiwan, and a place I’m most familiar with.

Fighter jets from Longtian Airbase can reach Taipei in seven minutes.

Ditto, special drones, which, in the event of conflict with Taiwan, thousands of these could be used as decoys to overwhelm the air defense system, carry electronic warfare devices or be packed with explosives to act as a missile.

[My former investment in Fujian was made in large part because it was at a new port facility that is the shortest point between the mainland and Taipei, which, pre-Xi, was a good thing.]

Wang Yang, No. 4 in the Chinese leadership, said this week that when it came to Taiwan, “some countries condone the separatist forces agitating for ‘Taiwan independence’ to cause trouble and provocation.  If they continue, Taiwan will be pushed into the abyss of disaster and bring serious harm to the majority of Taiwan compatriots.”

“The majority of Taiwan compatriots must deeply understand that reunification is beneficial, and that Taiwan independence is a dead end.  They should understand that they cannot rely on outsiders.”

Meanwhile, CNN recently reported on a scuttled plan by the Chinese government to fund an ornate garden at the National Arboretum in Washington, D.C., which U.S. officials were concerned could disrupt U.S. nuclear arsenal communications.

U.S. officials are warning of a dramatic increase in espionage activity by the Chinese government.

Back to Xi and the domestic issues he is facing, he told a group of local government leaders on Tuesday in Beijing that the country is facing more complex risks and challenges, both domestically and on the international stage, than ever before.

China is entering a new phase that offers strategic opportunities, though increasingly complicated problems must be addressed.  The upcoming 20th Party Congress will lay out development goals and major policies for the next five years or longer, he said.  It will also presumably appoint Mr. Xi to another unprecedented five years in power.

Xi said he will promote a “comprehensive process” of people’s democracy, safeguard national security and maintain peace and stability in the Taiwan Strait.

Ah yes, “people’s democracy.”

North Korea: Kim Jong Un warned he’s ready to use his nuclear weapons in potential military conflicts with the United States and South Korea, state media said Thursday, as he unleashed fiery rhetoric against rivals he says are pushing the Korean Peninsula to the brink of war.

Kim’s speech to war veterans on the 69th anniversary of the end of the 1950-53 Korean War was apparently meant to boost internal unity in the impoverished country amid pandemic-related economic difficulties.  While Kim has increasingly threatened his rivals with nuclear weapons, it’s unlikely that he would use them first against the superior militaries of the U.S. and its allies, observers say.

“Our armed forces are completely prepared to respond to any crisis, and our country’s nuclear war deterrent is also ready to mobilize its absolute power dutifully, exactly and swiftly in accordance with its mission,” Kim said in the speech, according to the official Korean Central News Agency.

He accused the U.S. of “demonizing” North Korea to justify its hostile policies.  He said U.S.-South Korea military drills targeting North Korea show the U.S.’s “double standards” and “gangster-like” aspects because it brands North Korea’s routine military activities – an apparent reference to its missile tests – as provocations or threats.

Kim also alleged the new South Korean government of President Yoon Suk Yeol is led by “confrontation maniacs” and “gangsters” who have gone further than previous South Korean conservative governments.  Since taking office in May, the Yoon government has moved to strengthen Seoul’s military alliance with the United States and bolster its capacity to neutralize North Korean nuclear threats including a preemptive strike capability.

“Talking about military action against our nation, which possesses absolute weapons that they fear the most, is preposterous and is very dangerous suicidal action,” Kim said.  “Such a dangerous attempt will be immediately punished by our powerful strength and the Yoon Suk Yeol government and his military will be annihilated.”

Iran: There has been little if any news on the Iran nuclear negotiations front, and that’s not good.

Walter Russell Mead / Wall Street Journal

“No matter what you call it, the Joint Comprehensive Plan of Action – JCPOA for short or ‘Iran nuclear deal’ for convenience is in trouble.  Since Donald Trump pulled the U.S.  out of Barack Obama’s agreement that ended economic sanctions on Iran in exchange for temporary limits on Iran’s nuclear activities, the deal has been the Schrodinger’s cat of diplomacy – sealed in a box, neither dead nor alive but in some indeterminate state.

“These days, however, the stench from the box is getting harder to ignore. As Iran approaches the nuclear threshold, the saga seems to be moving toward a close.

“In December Secretary of State Antony Blinken told reporters that ‘what we will not allow is for Iran to, in effect, tread water at talks, while at the same time advancing its program.’  Iran was not deterred and has been merrily treading water and advancing its nuclear program ever since.  Last week Britain’s intelligence chief told reporters that Iran had decided to reject America’s terms for re-entering the deal, though it was happy to let negotiations drag on.  Last week the International Atomic Energy Agency’s head, Rafael Grossi, said that Iran’s nuclear program is ‘galloping ahead.’

“Even the most optimistic Washington insiders are losing hope.  In lead negotiator Robert Malley’s words, ‘You can’t revive a dead corpse.’

“One reason for letting talks drag on inconclusively for so long is the unappetizing consequences of admitting their failure.  The definitive end of the Iran deal would almost certainly force the administration to choose between accepting a nuclear-armed Iran and initiating a confrontation likely to culminate in another American war in the Middle East.  Both courses of action entail unpredictable but large risks and costs.  Avoiding this ugly choice has, understandably, been the Biden administration’s central goal in the region.

“Unfortunately, time wasn’t on President Biden’s side.  The Iran negotiations have moved toward failure as America’s international position grew less secure, and today the deal’s impending collapse is part of a global crisis of American power.  With Russian missiles raining down on Odessa and China threatening massive consequences if House Speaker Nancy Pelosi goes to Taiwan, the administration is already grappling with an international situation far graver than anything it expected or prepared for.  Whatever their long-term concerns about a nuclear Iran, both Xi Jinping and Vladimir Putin seem more interested in stiffening Iran’s commitment to the anti-American alliance than in facilitating an agreement that would reduce the pressure on a beleaguered American president.

“Americans need to see Iran’s nuclear push in a global context. The crisis with Tehran comes at an extremely beneficial moment for Russia and China.  Our opponents hope that simultaneous geopolitical crises in Europe, the Middle East and East Asia will overwhelm a dazed and weary America. As the economic consequences of those crises ripple through the U.S. and global economies, the revisionists hope that America’s cohesion at home and alliances abroad will weaken as the threats grow. To prevent that, Team Biden needs to restore a sense of deterrence and caution to adversaries who have enjoyed a long run of success.

“If the U.S. is going to develop an effective response to this combination of strategic threats, our political leaders will have to move beyond finger pointing and blame games over the fate of the JCPOA.  Republicans can say justly that Mr. Obama’s decision to sign something as consequential and controversial as the Iran nuclear deal without the bipartisan support needed to get a treaty ratified in the Senate was a historical mistake.  Democrats can reasonably riposte that Mr. Trump’s unilateral withdrawal made everything worse.  [Ed. my opinion.]    Such matters can be left to the historians.  The question before us now is not who was right in 2015 or 2018.  It is what we do next.

“Mr. Biden has repeatedly said that allowing Iran to build nuclear weapons is not an option.  If his administration fails to hold that line, the consequences for American power in the Middle East and globally would be profound and perhaps irreversible.  If America attacks Iranian nuclear facilities and finds itself stuck in yet another Middle Eastern quagmire, the effects at home and abroad will also be dire.  China and Russia would take advantage of America’s Middle East preoccupation to make trouble elsewhere, and U.S. public opinion would be further polarized.

“Few presidents have faced policy choices this tough or consequential.  It’s understandable if not commendable that the administration postponed the day of reckoning for so long, but as the dead-cat stink intensifies, Mr. Biden is coming closer to the greatest test of his career.”

Hungary: A member of Viktor Orban’s inner circle has resigned after the Hungarian prime minister spoke out against becoming a “mixed race.”

Zsuzsa Hegedus, who has known the nationalist Mr. Orban for 20 years, described the speech as a “pure Nazi text,” according to Hungarian media.

The International Auschwitz Committee of Holocaust survivors called the speech “stupid and dangerous.”

Orban’s spokesman said the media had misrepresented the comments.

The speech took place on Saturday in a region of Romania which has a large Hungarian community.

In it, Orban said European peoples should be free to mix with one another, but that mixing with non-Europeans created a “mixed-race world.”

“We are willing to mix with one another, but we do not want to become peoples of mixed-race,” he said.

While Orban’s anti-migration views are well known, for Hegedus the speech crossed a line.

“I don’t know how you didn’t notice that the speech you delivered is a purely Nazi diatribe worthy of Joseph Goebbels,” she wrote in her resignation letter.

Orban is going to be visiting the United States next month and will be addressing a conference of conservative activists in Dallas, the Conservative Political Action Conference (CPAC), where he’ll be joined by Donald Trump and right-wing icons such as Rep. Marjorie Taylor Greene (R-Ga.).

It is beyond pathetic that a leader criticized for pushing anti-democratic principles has become a hero to segments of the Republican Party.

Orban has curbed immigration and stymied those who envision a more middle-of-the-road European democracy for their country.  He’s done so by seizing control of Hungary’s judiciary and media, and he’s accused of enabling widespread corruption and nepotism.

“The Trumpist side of the Republican Party is coming for the rhetoric, but staying for the autocracy,” said Kim L. Schepple, a sociologist at Princeton University who has studied Orban.  “I’m worried the attraction to Orban is only superficially the culture war stuff and more deeply about how to prevent power from ever rotating out of their hands.”

Conservatives dismiss that notion – or even that Orban is an authoritarian.

“What we like about him is that he’s actually standing up for the freedom of his people against the tyranny of the EU,” said Matt Schlapp, head of CPAC, which meets in Dallas starting Aug. 4.  “He’s captured the attention of a lot of people, including a lot of people in America who are worried about the decline of the family.”

I’m biting my tongue.

Random Musings

--Presidential approval ratings….

Gallup: *New #s today…38% approve of President Biden’s job performance, 59% disapprove; 32% of independents approve (July 5-26).

*These are the worst in all three categories of the Biden presidency!  And if you look at only one poll, it should be the oldest and most-respected one.

Rasmussen: 44% approve of Biden’s performance, 54% disapprove (July 29).  Rather volatile last few weeks.

--A new CNN poll finds 75% of Democratic and Democratic-leaning voters want the party to nominate someone other than President Biden in the 2024 election, a sharp increase from earlier this year (18% in Jan. and Feb.).

Among Democratic and Democratic-leaning voters 45 years and under, just 18% Prefer Biden as the 2024 nominee.

This particular survey was released the same day as a new Granite State Poll from the University of New Hampshire that shows just 31% of New Hampshire Democrats want Biden to run for reelection and that 59% do not want him to run again.

--The Justice Department is investigating President Trump’s actions as part of its criminal probe of efforts to overturn the 2020 election results, according to the Washington Post.

Prosecutors who are questioning witnesses before a grand jury – including two top aides to Vice President Mike Pence* – have asked in recent days about conversations with Trump, his lawyers, and others in his inner circle who sought to substitute Trump allies for certified electors from some states Joe Biden won, according to two people familiar with the matter.

The prosecutors have asked hours of detailed questions about meetings Trump led in December 2020 and January 2021; his pressure campaign on Pence to overturn the election; and what instructions Trump gave his lawyers and advisers about fake electors and sending electors back to the states.

*Marc Short and Greg Jacob.  Former aide to Mark Meadows, Cassidy Hutchinson, is also cooperating with the Justice Department probe.

--Donald Trump and Mike Pence gave dueling speeches in Washington on Tuesday on the future of the Republican Party.

Trump, in his first return to Washington since Joe Biden ousted him from the White House, repeated the false election fraud claims that sparked the Jan. 6 insurrection, while Pence, in a separate address, implored the party to move on from Trump’s defeat.

“It was a catastrophe, that election,” Trump declared to an audience of cheering supporters at the America First Agenda Summit, about a mile from the White House.

Hours earlier, addressing a student conservative group, Pence said, “Some people may choose to focus on the past, but elections are about the future.”

--I will have a few comments on Donald Trump and the LIV Golf event being held at his course this weekend in Bedminster, NJ, next time.

But he has already made a total fool of himself when it comes to the issue of the Saudi funding of LIV and 9/11.

For now, today, the family members of 9/11 held a news conference near Trump Bedminster and a number of them made mention of a 2019 meeting with Trump where he posed for photos and promised to release classified memos linking the Saudi government to the terrorist attack.  Trump never followed through, with President Biden eventually making the documents public.

“You lied to our faces and continued your bullshit statements,” said Tim Frolic, who miraculously found his way out from the 80th Floor of the South Tower.  “It’s deplorable.”

--Marc A. Thiessen / Washington Post

On why people believe the “big lie.”

“Because they don’t trust the media – and with good reason.

“In 1977, Gallup found that 72 percent of Americans had a ‘great deal’ or ‘fair amount’ of trust and confidence in the news media.  But this month, Gallup found that just 16 percent of U.S. adults say they have ‘a great deal’ or ‘quite a lot’ of confidence in newspapers, and just 11 percent have confidence in television news.  This collapse in confidence stretches across ideological lines but is most pronounced on the right.  Just 5 percent of Republicans said they had confidence in newspapers (compared to 35 percent of Democrats) while just 8 percent of Republicans had confidence in TV news (compared to 20 percent of Democrats).

“Public trust is crumbling, in large part, because of a growing perception of media bias.  According to a Pew Research Center survey published this month, 76 percent of Americans believe the media should strive to give equal coverage to all sides of an issue.  But a 55 percent majority of journalists disagree.  The disdain for evenhanded reporting is even worse among younger journalists and those from left-leaning outlets: 63 percent of reporters ages 18 to 29 say both sides do not deserve equal coverage, as do 69 percent of journalists who say their outlet’s audience leans left. By contrast, 57 percent of reporters who say their outlet has a right-leaning audience think the profession should strive for equal coverage….

“The sad part is, many in the media see the Jan. 6 hearings as vindication of their Trump resistance – proof that they were right about him all along.  In fact, the hearings are as much an indictment of the media as they are of the former president.  It was because of their collective failure to report objectively for four years, that when Trump finally told the “big lie” – and Americans needed to know the facts – few trusted the media.”

--A CNN /SSRS poll conducted after the last public hearing held by the House Select Committee investigating the January 6, 2021, attack on the Capitol found that 69% of Americans found Jan. 6 to be a crisis or major problem for American democracy.  That’s up slightly since earlier this year, when 65% said the same.  More broadly, 54% say they see American democracy as under attack, about the same as the 52% who felt that way earlier this year.

Although three was little movement, Democrats are becoming more likely to say democracy is under attack (55% now, up from 46% earlier this year) and that the Jan. 6 attack is a major problem or a crisis (96% now, up from 91%).  Republicans are now less likely to feel that way than earlier this year, before the select committee’s hearings.  Just 36% of Republicans now say that Jan. 6 was a crisis or a major problem, down 7 points since February, and 54% feel American democracy is under attack, down from 66% earlier this year.

But when asked whether then-Vice President Pence or Trump did more to act in the best interests of the country on January 6, Republicans split on the question, with 52% saying Trump did more to protect the country’s interests and 46% saying Pence did.  I think I’ll shoot myself.

--In a straw poll at a summit in Florida, young conservatives overwhelmingly chose Donald Trump over Florida Gov. Ron DeSantis.  At a Turning Point USA gathering, 78.7% of the attendees tabbed Trump, while 19% picked DeSantis, Fox News reported.

--Stumping for Republican candidates in Arizona, Trump, in classic Donald fashion, claimed at one point that a friend told him “I was the most persecuted person in the history of our country.”

Mike Pence, campaigning for other Republican candidates, those that don’t believe in the “big lie,” tweeted during his road trip:

“If the Republican Party allows itself to become consumed by yesterday’s grievances, we will lose.”

--Editorial / New York Post

“He was watching television for the entire span of time the riots were taking place.

“Trump waited over three hours to respond to the Capitol Riots.

“As his followers stormed the Capitol, calling on his vice president to be hanged, President Donald Trump sat in his private dining room, watching TV, doing nothing.

“For three hours, seven minutes.

“There has been much debate over whether Trump’s rally speech on Jan. 6, 2021, constituted ‘incitement.’  That’s somewhat of a red herring.  What matters more – and has become crystal clear in recent days – is that Trump didn’t lift a finger to stop the violence that followed.

“And he was the only person who could stop what was happening. He was the only one the crowd was listening to.  It was incitement by silence.

“Trump only wanted one thing during that infamous afternoon: to pressure Vice President Mike Pence to decertify the election of Joe Biden.

“He thought the violence of his loyal followers would make Pence crack, or delay the vote altogether.

“To his eternal shame, as appalled aides implored him to publicly call on his followers to go home, he instead further fanned the flames by tweeting: ‘Mike Pence didn’t have the courage to do what should have been done to protect our Country and our Constitution.’

“His only focus was to find any means – damn the consequences – to block the peaceful transfer of power.

“There is no other explanation, just as there is no defense, for his refusal to stop the violence.

“It’s up to the Justice Department to decide if this is a crime.  But as a matter of principle, as a matter of character, Trump has proven himself unworthy to be this country’s chief executive again.”

Editorial / Wall Street Journal

“No matter your views of the Jan. 6 special committee, the facts it is laying out in hearings are sobering.  The most horrifying to date came Thursday in a hearing on President Trump’s conduct as the riot raged and he sat watching TV, posting inflammatory tweets and refusing to send help.

“Shortly after Mr. Trump urged protesters to march on the Capitol, he was told violence was breaking out.  At about 1:30 p.m. he went to the dining room, where he stayed until 4 p.m.  There is no official record of what he did, and the photographer was told no pictures.

“All of MAGA world was texting Chief of Staff Mark Meadows that Mr. Trump needed to call off his supporters.  White House Counsel Pat Cipollone testified that he argued internally ‘there needs to be a public announcement, fast, that they need to leave the Capitol.’  He added that Mr. Meadows joined those calls throughout the day, as did Ivanka Trump….

“At 2:24 Mr. Trump issued his tweet saying Mr. Pence ‘didn’t have the courage’ to stop the electoral count.  The VP was evacuated from the Capitol at 2:26, according to the committee.  What if that route had been blocked?  Would the mob have harmed Mr. Pence?  Would the Secret Service have opened fire?

“At 2:38 Mr. Trump tweeted: ‘Please support our Capitol Police and Law Enforcement. They are truly on the side of our Country. Stay peaceful!’  Sarah Matthews, a White House communications aide, didn’t think Mr. Trump was doing enough, and she recounted a conversation with Press Secretary Kayleigh McEnany.

“ ‘She looked directly at me and, in a hushed tone, shared with me that the President did not want to include any sort of mention of ‘peace,’ in that tweet,’ Ms. Matthews said.  ‘It took some convincing on their part, those who were in the room.’  The group tried to find some language Mr. Trump would consent to post, and ‘it wasn’t until Ivanka Trump suggested the phrase ‘stay peaceful’ that he finally agreed to include it.’

“How did rioters react to the tweet about the Capitol police?  The committee played what it said was radio chatter by Oath Keepers.  ‘He didn’t say not to do anything to the Congressmen,’ one voice chuckled.  Another added: ‘Well, he did not ask them to stand down.’  Not until 4:17 did Mr. Trump post a video telling rioters to go home, while justifying their actions, since ‘this was a fraudulent election.’

“The committee’s critics are right that it lacks political balance.  It is trying to make a criminal case that might be hard to prove and might tear the country apart.  It undermines its argument by not releasing full transcripts of testimony.  Why rely on what Ms. Matthews said that Ms. McEnany said that Mr. Trump said?  The committee interviewed Ms. McEnany.

“Still, the brute facts remain: Mr. Trump took an oath to defend the Constitution, and he had a duty as Commander in Chief to protect the Capitol from a mob attacking it in his name.  He refused.  He didn’t call the military to send help. He didn’t call Mr. Pence to check on the safety of his loyal VP.  Instead, he fed the mob’s anger and let the riot play out.

“In the 18 months since, Mr. Trump has shown not an iota of regret.  On Thursday he claimed to be vindicated by a bill to clarify the Electoral Count Act.  ‘Mike Pence told me, and everybody else, there was nothing he could do,’ Mr. Trump wrote.  ‘If so, how come the Democrats and RINOs are working so hard to make sure there is nothing a VP can do.’

“Character is revealed in a crisis, and Mr. Pence passed his Jan. 6 trial.  Mr. Trump utterly failed his.”

David French / The Atlantic

“As I’ve written before, Trump’s recorded demand that Georgia Secretary of State Brad Raffensperger ‘find 11,780 votes’ – along with his not-so-veiled threat that Raffensperger faced a ‘big risk’ of criminal prosecution if he failed – was already quite legally problematic.  Add this threat to the fake-electors scheme, and the elements of a criminal conspiracy come clearly into view.

“At the end of the day, it is highly likely that the key question for federal and state prosecutors won’t be Can we make a case against Trump?  Instead, it will be Should we make a case against Trump?  Should the government seek to prosecute and imprison a former president of the United States?  Does that calculus change if that former president is also the current front-runner for the Republican nomination?

“I won’t pretend the answers are easy.  I won’t pretend prosecution isn’t a risk.  But as the evidence accumulates, the moral and political imperative becomes apparent.  The former president isn’t a king.  He’s a citizen of a constitutional republic, and citizens should stand trial when the evidence indicates they may have committed serious crimes.”

--The Canadian government made clear Wednesday that Pope Francis’ apology to Indigenous peoples for abuses in the country’s church-run residential schools didn’t go far enough, suggesting the reconciliation over the fraught history is still very much a work in progress.

The official government reaction came as Francis arrived in Quebec City for meetings with Prime Minister Justin Trudeau and Governor General Mary Simon.

The government’s criticisms echo those of some survivors and concern Francis’ omission of any reference to the sexual abuse suffered by Indigenous children in the schools, as well as his original reluctance to name the Catholic Church as an institution bearing responsibility.

Francis has said he is on a “penitential pilgrimage” to atone for the church’s role in the residential school system, in which generations of Indigenous children were forcibly removed from their homes and forced to attend church-run, government-funded boarding schools to assimilate them into Christian, Canadian society.  The Canadian government has said physical and sexual abuse were rampant at the schools, with students beaten for speaking their native languages.

--The weather extremes continue, with record rainfall in the St. Louis area on Tuesday, killing at least one, and prompting hundreds of water rescues.

Over 9 inches of rain had fallen at Lambert Airport, demolishing the previous daily record of 6.85 inches set Aug. 20, 1915, when remnants of the Galveston, Texas, hurricane moved north to St. Louis.

More than 12 inches of rain fell in parts of St. Charles County and 10 inches elsewhere in the St. Louis metropolitan area…most of it falling in just a few hours.  And then more flooding rains came two days later.

A sudden fierce heavy storm that passed through the Norfolk, Va., area on Tuesday, damaged 10 U.S. Navy helicopters.  The storm hit so quickly, and with just 12 minutes warning from the National Weather Service, that it wasn’t enough time to take the aircraft into their hangars or tie them down.  It didn’t help it also literally occurred during a shift change.

Torrential rains also devastated Appalachia, as fast-rising water killed at least 16 people in Kentucky.  Parts of western Virginia and southern West Virginia also saw extensive flooding.

Some areas received 6 inches in just a few hours, and like in St. Louis, the worst of it was at night.

Here in my neck of the woods, Newark Liberty International Airport saw the air temp hit 100 degrees five consecutive days, according to the National Weather Service’s regional office, the longest streak of 100-degree days ever recorded in Newark since detailed records began in 1931.

China has been experiencing 40C temps (104F) in many parts, 20 degrees above normal for the likes of Zhejiang.  Excessive use of air conditioning, however, just like in the U.S., leads to national power grid issues in the land of human rights violations.

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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 $1782…finally, big move up
Oil $98.30

Regular gas: $4.25, nationally; Diesel $5.31 [$3.16 / $3.27 a year ago]

Returns for the week 7/25-7/29

Dow Jones  +3.0%  [32845]
S&P 500  +4.3%  [4130]
S&P MidCap  +4.8%
Russell 2000  +4.3%
Nasdaq  +4.7%  [12390]

Returns for the period 1/1/22-7/29/22

Dow Jones  -9.6%
S&P 500  -13.3%
S&P MidCap  -11.6%
Russell 2000  -16.0%
Nasdaq  -20.8%

Bulls 38.9
Bears 33.3

Hang in there.

Brian Trumbore

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