Week in Review

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Week in Review

01/27/2024

For the week 1/22-1/26

[Posted 5:00 PM ET, Friday]

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Edition 1,293

Things are heating up geopolitically…albeit not yet to the boiling point, witness the spreading “low-intensity” conflict throughout the Middle East, not including Israel-Hamas, that could intensify quickly, such as Hezbollah entering the war against Israel full-bore, or the Iranian-backed militias inflicting major casualties on U.S. troops and assets that the White House would be forced to respond to in a major fashion, China ratcheting up the tension in the Taiwan Strait, Russia using a tactical nuke in Ukraine, or Kim Jong Un actually going to war, which many now seem to believe is a closer possibility than we thought just one month ago…details on all these items below.

For now, with the above in mind…Gerard Baker / Wall Street Journal

“It all feels very Second Coming – if not the actual end of the world, then certainly resonant with echoes of the famous W.B. Yeats poem written just after the Great War about things falling apart and the center not holding, lyrical intimations of the even greater calamity to come.  In Iowa last week we had a sighting of another sort of second coming, this one also moving its slow thighs and slouching toward New Hampshire.

“All this and it’s still January….

“The world may look like it’s on the brink of World War III.  Investors want to party like it’s 1939….

“The bigger question is whether the geopolitical turmoil will derail the economics.

“It’s easy to see how this could happen.  War in the Middle East could escalate, sparking a surge in oil prices, refueling inflation and choking off demand*.  The attacks on shipping in the Red Sea could sharply raise the cost of trade, further undermining price instability.  Someone somewhere could go nuclear – even the boldest bull might find that hard to take.

“From the evidence of the endless handwringing about the state of the U.S. in Davos [Ed: the recently completed World Economic Forum], the rest of the world seems to worry that in the circular feedback loop of these things, further turmoil could produce a Donald Trump victory in November, an event that would mark a further blow to geopolitical stability.

“But the geopolitical outlook is grim in significant part because of the weakness projected by the Biden administration: its failure to deter Iran, which explains several of the events on our list; its diffidence about victory in Ukraine by a proxy it has told us is essential for global security; its vacillation on Israel’s war with Hamas and longer-term security.

“I don’t doubt that a second Trump administration could heighten domestic political instability and add layers of uncertainty to an uncertain world.  But perhaps for our adversaries, some uncertainty about U.S. intentions rather than certainty about the current administration’s feckless drift is overdue.”

*At least 2,300 ships are taking lengthy detours to avoid the mess in the Red Sea – a waterway that normally handles over 12% of global sea trade.  The impact is greatest in Europe, but as noted in my ‘Wall Street and the Economy’ section, one European analyst thinks the continent is better prepared these days to handle any supply chain issues.

In line with the overall theme, Josh Rogin / Washington Post:

“What’s clear is that Russia, North Korea, Iran and China are all working together to ramp up their capacity to fight in Ukraine and the Middle East for years to come.  Leaders in Washington and Brussels can’t even promise support for Ukraine into next month.  Until the West acknowledges how all these conflicts are connected, it will be impossible to craft a comprehensive response.”

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On the Ukraine aid front, the fate of a bipartisan border deal that Senate Republicans demanded to fund Ukraine appeared to be dead, after Senate Minority Leader Mitch McConnell acknowledged that former president Donald Trump’s opposition to the deal had mucked things up royally.

A small group of Senate negotiators were closing in on a deal last week when Trump slammed the negotiations in a social media post that said he would only accept a “PERFECT” deal.

McConnell, wanting to push for Ukraine funding, had only reluctantly agreed to tie the foreign aid to border security. 

And then a significant number of Republican senators, under pressure from right-wing media, began to voice their opposition to a border deal, not knowing the details, and the overall package, which included military assistance for Israel, Ukraine and Indo-Pacific nations as well as humanitarian aid and border funds, and the effort was deemed ‘dead on arrival’ by many party leaders, including House Majority Leader Mike Johnson, who said he was in constant contact with Trump.

Johnson, in a letter today to his colleagues, said:

“I wanted to provide a brief update regarding the supplemental and the border, since the Senate appears unable to reach any agreement. If the rumors about the contents of the draft proposal are true, it would have been dead on arrival in the House anyway.”

Sen. James Lankford (R-Okla.), lead GOP negotiator, said Thursday: “There are some people that oppose the bill, based on the presidential politics issue, rather than the crisis that’s actually occurring at the border.”

Democratic Sen. Chris Murphy (Conn.), the lead Democratic negotiator, said: “If Republicans blow this up, Vladimir Putin will win the war and Europe will be at risk.”

Trump has encouraged Republicans on Truth Social to not accept any border deal with Democrats, pledging to get a better deal when he is president, which is absurd.

“We need a Strong, Powerful and essentially ‘PERFECT’ Border and, unless we get that, we are better off not making a Deal, even if that pushes our Country to temporarily ‘close up’ for a while, because it will end up closing anyway with the unsustainable invasion that is currently taking place,” Trump wrote.

Sen. Mark Warner (D-Va.): “If we don’t honor our commitment to Ukraine, there’s not a single nation – friend or foe – that will fully trust us again,” he said on social media. “Renewing our aid is essential to keeping our partnerships and maintaining our place in the world.”

I wrote the other week that Trump and a few hardliners don’t want to do anything good on the border because they want it as a campaign issue and screw what’s best for America.

Sen. Mitt Romney summed it up Thursday, telling reporters: “I think the border is a very important issue for Donald Trump. And the fact that he would communicate to Republican senators and congresspeople that he doesn’t want us to solve the border problem because he wants to blame Biden for it is really appalling.”

Editorial / Wall Street Journal

“(Giving) up on a border security bill would be a self-inflicted GOP wound.  President Biden would claim, with cause, that Republicans want border chaos as an election issue rather than solving the problem….

“Trump may imagine he can strike his own border deal if he wins, but that’s highly unlikely.  Democrats are willing to discuss asylum and parole changes now because President Biden and Democrats are suffering in the polls from the ugly scenes on television.  If Mr. Trump returns to Washington, the left will revert to its factory settings of opposing all Trump priorities.  Especially if Mr. Trump sabotages a bipartisan deal now….

“If the GOP blocks the bill in either the Senate or the House, it will share responsibility for whatever happens next in Ukraine.  Kyiv’s defeat will be signed with the party’s signature.”

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Israel-Hamas War….

--The death toll in the war in Gaza hit 25,000 last weekend, according to the AP, citing Gaza health authorities.  The daily death toll has been trending downward.  But foreign leaders are losing their patience with Israel’s military operation, as well as Prime Minister Benjamin Netanyahu’s repeated rejection of any future Palestinian state.

“What are the other solutions they have in mind – make all the Palestinians leave? Kill all of them?” asked European Union foreign policy chief Josep Borrell on Monday in Brussels. “The way they are destroying Hamas is not the way to do it. They are sealing the hate for generations,” he said.

“We have engaged in over 30 years of process and look where that has got us,” Jordanian Foreign Minister Ayman Safadi said.  “A moment of truth is upon us,” he continued.  “Do we allow a radical racist agenda to dictate the future or come together and say the path is clear, we want peace for everybody and a two-state solution is the only path, go ahead and implement it?”

[Reality check: A two-state solution is literally impossible at this point in terms of putting together a contiguous Palestinian state.  Not happening.]

--Israel’s army reported 24 soldiers were killed in fighting in central Gaza, the biggest single-day death toll since the war began in October.  An army spokesman said 21 troops died in an explosion after a grenade struck a tank, while three others died in a separate attack.

On Monday, Israeli reservists were preparing explosives to demolish two buildings when a militant fired a rocket-propelled grenade at a tank nearby.  The blast triggered the explosives, causing both two-story buildings to collapse on the soldiers inside.

Rear Admiral Daniel Hagari told reporters that the military was studying the incident.  Over the past 24 hours, he added, Israeli forces killed more than 100 militants in western Khan Younis in Southern Gaza. Hours later, the IDF announced that ground forces had encircled Khan Younis.

Prime Minister Netanyahu mourned the soldiers but vowed to press ahead with the offensive until “absolute victory” over Hamas.  He has also promised to return over 100 hostages held captive in Gaza. But Israelis are increasingly divided on the question of whether it’s possible to do either, and large numbers of Israeli casualties have pressured Israel’s government to halt past military operations.

At least 220 soldiers have been killed since the ground offensive began in late October.

--Israel said 48-60 percent of Hamas’ forces are out of commission – meaning either killed, wounded, or arrested.

The IDF estimates it has killed 9,000 Hamas terrorists, wounded around 8,000 to a degree that they cannot easily return to battle (a much larger number have been wounded at lower levels), and has arrested 2,300.

That means 19,300 can no longer fight.

Prior to the war, many reports estimated Hamas forces at 40,000 strong.

Eventually, the IDF went on record with The Jerusalem Post and others at 30,000.

U.S. intelligence agencies estimate that Israeli forces have killed 20% to 30% of Hamas’ fighters, or up to 9,000, if you use the 30,000 figure the IDF conceded.  The U.S. estimates that Hamas still has enough munitions to continue striking Israel and Israeli forces in Gaza for months, and that the group is attempting to reconstitute its police force in parts of Gaza City, according to U.S. officials who confirmed a classified report.  [Defense One]

--A senior Egyptian official meanwhile said Israel has proposed a two-month cease-fire in which the hostages would be freed in exchange for the release of Palestinians imprisoned by Israel and top Hamas leaders in Gaza would be allowed to relocate to other countries, as reported by the Associated Press.

The official, who spoke on condition of anonymity, said Hamas rejected the proposal and is insisting that no more hostages will be released until Israel ends its offensive and withdraws from Gaza.

In a video address on Sunday, Netanyahu rejected the terror group’s conditions to end the war.

“In exchange for the release of our hostages, Hamas demands the end of the war, the withdrawal of our forces from Gaza, the release of all the murderers and rapists,” Netanyahu said.

“And leaving Hamas intact. I reject outright the terms of surrender of the monsters of Hamas,” he added.

Sami Abu Zuhri, a senior Hamas official, countered by saying Netanyahu’s refusal to end the military offensive in the territory “means there is no chance for the return of the [Israeli] captives,” who were abducted in the group’s Oct. 7 terror attack.

Netanyahu has faced increasing pressure to secure the release of the 136 hostages who remain in Gaza.

--Saudi Arabia’s foreign minister said there can be no normalization of ties with Israel without resolving the Palestinian issue, he told CNN in an interview that aired on Sunday.  Asked if there could be no normal ties without a path to a credible and irreversible Palestinian state, Prince Faisal bin Farhan Al Saud told CNN: “That’s the only way we’re going to get the benefit. So, yes, because we need stability and only stability will come through resolving the Palestinian issue.”

--Israel killed three Iranian Revolutionary Guards officers in an Israeli strike that flattened a building in Damascus last Saturday, according to Iranian state media, using an honorific used only for generals, suggesting the targets were senior commanders.

Tehran vowed to take revenge after the strike which it said killed five Guards and an unspecified number of Syrian troops.

“The Islamic Republic will not leave the Zionist regime’s crimes unanswered,” President Ebrahim Raisi said in a statement condemning the strike.

Foreign Minister Hossein Amirabdollahian said on X: “The activities of Iran’s military advisers in the fight against terrorism and securing the region will continue with full strength.”

There was no comment from Israel, which has been stepping up its attacks on the Iranian Guards forces in the wake of Oct. 7.

--Hamas suddenly changed its stance, the Wall Street Journal reported late on Tuesday, citing Egyptian sources, when it came to a ceasefire deal that would include the release of some of the remaining 130 hostages.

As per officials in Cairo, Hamas “expressed openness” to a deal to release all remaining women and children, not including female soldiers taken into Gaza.

Reuters reported early on Wednesday that Israel and Hamas “broadly agree in principle” that an exchange of Israeli hostages for Palestinian prisoners could take place during a month-long ceasefire, but the framework plan is being held up by the two sides’ differences over how to bring a permanent end to the Gaza war.

But Qatar said it was appalled Wednesday by leaked remarks made by Prime Minister Netanyahu in which he criticized the country’s mediation efforts with Hamas, complicating the arduous negotiations.

In a meeting with families of hostages, Netanyahu said Qatar’s role in the mediation was “problematic.”  Qatar, a key mediator that also has deep ties to the militant group and hosts some of its exiled leaders, said Netanyahu’s remarks were “irresponsible and destructive.”

Well, Qatar’s role is problematic when it hosts many of Hamas’ leaders.

--Israeli forces battled Palestinian militants Wednesday near the main hospital in Khan Younis, where medics said hundreds of patients and thousands of displaced people were unable to leave because of the fighting.

Israel has ordered residents to leave a swath of downtown Khan Younis that includes Nasser Hospital and two smaller ones as it pushes ahead with its offensive.  The United Nations humanitarian office said the area was home to 88,000 Palestinians and was hosting another 425,000 displaced by fighting elsewhere.

The aid group Doctors Without Borders said its staff was trapped insider Nasser Hospital with some 850 patients and thousands of displaced people because the surrounding roads were inaccessible or too dangerous.

The IDF said its forces were battling militants inside Khan Younis after completing their encirclement of the city the day before.

Also Wednesday in Khan Younis, the United States was concerned by an Israeli attack on a UN training center sheltering displaced people in the city, repeating Washington’s calls for protection of civilians, humanitarian workers and aid facilities.

Deputy State Department spokesperson Vedant Patel told a news briefing: “We deplore today’s attack on the Khan Younis training center,” that the Director of UNRWA Affairs in Gaza said had killed nine (later amended to at least 12) and wounded 75 when two tank rounds hit the building sheltering around 800 people.

--The head of the World Health Organization, Tedros Adhanom Ghebreyesus, called for a ceasefire and a “true solution” to the Gaza war in an emotional plea to the global health body’s governing body on Thursday, where he described conditions there as “hellish.”

The director-general, who lived through war as a child and whose own children hid in a bunker during bombardments in Ethiopia’s 1998-2000 border war with Eritrea, became emotional in describing the conditions in the bombed-out enclave.

“I’m a true believer because of my own experience that war doesn’t bring solution, except more war, more hatred, more agony, more destruction.  So let’s choose peace and resolve this issue politically,” Tedros told the WHO Executive Board in Geneva.

Israeli ambassador Meirav Eilon Shahar said that Tedros’ comments represented a “complete leadership failure.”

“The statement by the director-general was the embodiment of everything that is wrong with WHO since October 7th.  No mention of the hostages, the rapes, the murder of Israelis, nor the militarization of hospitals and Hamas’ despicable use of human shields,” she said. 

Tedros, in the same address, warned that more people in Gaza would die of starvation and disease.

“If you add all that, I think it’s not easy to understand how hellish the situation is,” he said.

--Today, Friday, the World Court ordered Israel to take action to prevent acts of genocide as it wages war against Hamas, but it stopped short of calling for an immediate ceasefire.

Ruling on a case by South Africa, the court said Israel must ensure its forces did not commit genocide and take measures to improve the humanitarian situation for Palestinian civilians in the enclave.

In the ruling, 15 of the 17 judges on the International Court of Justice (ICJ) panel voted for emergency measures which covered most of what South Africa asked for, with the notable exception of ordering a halt to Israeli military action in Gaza.

The court said it was “gravely concerned” about the fate of the hostages in Gaza and called on Hamas and other armed groups to immediately release them without conditions.  But the ruling, welcomed by Palestinians, will still be an embarrassment for Israel and its closest allies, including the United States.

Israel had asked the court to reject the case outright, saying it respects international law and has a right to defend itself.

Israel must report back to the court on what steps it was taking in a month’s time.

Prime Minister Netanyahu said the charge of genocide was “outrageous” and said it would do whatever is necessary to defend itself.

“The vile attempt to deny Israel this fundamental right is blatant discrimination against the Jewish state, and it was justly rejected,” he said in a statement.  “But the mere claim that Israel is committing genocide against Palestinians is not only false, it’s outrageous, and the willingness of the court to even discuss this is a disgrace that will not be erased for generations.”

While the ICJ’s decisions are final and without appeal, the court has no way to enforce them.

The 1948 Genocide Convention, enacted in the wake of the Holocaust, defines genocide as “acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group.”

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The Week in Ukraine….

--Twenty-seven people were killed and 25 injured when Ukrainian forces shelled the Russian-controlled city of Donetsk in eastern Ukraine, Denis Pushilin, the Russian-appointed head of the Donetsk region, said on Sunday. Pushilin said the city was shelled by Ukrainian artillery.

Kremlin spokesman Dmitry Peskov called it a “monstrous terrorist act.”

The Ukrainian military, however, denied it had anything to do with it.

--Also Sunday, fire broke out at a chemical and fuel transport terminal at Russia’s Ust-Luga port following two explosions, regional officials said.  Local media reported that the port had been attacked by Ukrainian drones, causing a gas tank to explode.

The blaze was at a site run by Russia’s second-largest natural gas producer, Novatek, 165km southwest of St. Petersburg.

Novatek said on Sunday it had been forced to suspend some operations at the huge Baltic Sea fuel export terminal due to the fire.  It was unclear how long the disruption would last, and what the knock-on effect would be on international energy markets.

Fuel is refined there, which, among other things, is also supplied to Russian troops.

If this was a Ukrainian drone attack, it would demonstrate Kyiv’s growing ability to conduct strikes deeper into Russia than usual using what are believed to be domestically produced drones at a time when it is on the defensive on the battlefield and struggling to secure as much Western financing as it requires.

--Russian air strikes hit Kyiv and other Ukrainian cities on Tuesday, killing at least nine people and wounding more than 80.  Eight of the dead as well as over 55 wounded were in the eastern city of Kharkiv.  More than 100 apartment buildings had been damaged in the early-morning strikes.  A gas pipeline in Kharkiv was also damaged, the state energy firm said.  Thousands were left without power after electricity infrastructure was hit as well, the energy ministry reported.

In Kyiv, at least 22 people were wounded, with several apartments and non-residential buildings catching fire.

Ukraine’s air force said the military had destroyed 21 out of 41 missiles of various types fired by Russia.  Nearly 20 had been shot down over Kyiv, a city spokesman said.  A Ukrainian general, Serhiy Naiev, posted a video which he said depicted air defense forces shooting down a Russian missile with a machinegun.  Yes, Kyiv needs higher quantities of advanced air defense systems.  You see the percentage of missiles getting through, compared to even six months ago.  Kyiv is always going to be the best defended and that leaves the likes of ‘second city’ Kharkiv highly vulnerable.

“The world must understand that this terror can only be stopped by force,” the head of Ukraine’s presidential administration, Andriy Yermak, wrote on Telegram.

--Russia’s foreign minister, Sergei Lavrov, said that any peace plans backed by the West are “a road to nowhere” at the UN Security Council in New York.  He also claimed that Ukrainian forces have been “a complete failure” on the battlefield and are “incapable” of defeating Russia.

--Turkey’s parliament approved Sweden’s NATO membership bid on Tuesday, clearing the biggest remaining hurdle to expanding the Western military alliance after 20 months of delays.

The measure passed after a vote of 287 to 44, with four abstentions in the 600-menber body.  It will go into effect once it is published in the country’s official gazette, usually a swift formality.  This leaves Hungary as the only member state not to have approved Sweden’s accession.  Hungary had pledged not to be the last ally to ratify, but its parliament is in recess until around mid-February.

In response, President Biden sent a letter to four senior members of Congress urging them to quickly approve a $20 billion sale of F-16 fighter jets to Turkey.  President Erdogan of Turkey had linked his country’s approval of Sweden’s accession to the F-16 sales, which have been pending for some time, and we should honor this.

--And then we had a potentially huge development on Wednesday. Russia accused Ukraine of deliberately shooting down a Russian military transport plane carrying 65 captured Ukrainian soldiers to a prisoner exchange, and a local official said all 74 people on board had been killed.  Russian state media said six Russian crew members and three guards were on the Ilyushin Il-76 military transport plane which was shot down near the Russian city of Belgorod near the Ukrainian border.

“It was absolutely deliberate.  They knew very well that the plane was enroute, where it was going and the operators of (Ukrainian) surface-to-air missile systems cannot mistake transport planes for military planes or helicopters as targets,” Andrei Kartapolov, a lawmaker in Russia’s parliament and a retired general, said in an interview with the SHOT outlet.  “It was done deliberately to sabotage the prisoner exchange.”

Kartapolov, who still has close links to the defense ministry, said the plane had been shot down by three missiles of either U.S. or German origin.

If the details are confirmed, it would be the deadliest incident of the almost two-year-old war inside Russia’s internationally recognized borders.

Ukraine’s defense ministry did not immediately comment.  Mykhailo Podolyak, a Ukrainian presidential adviser, told Reuters: “Time is needed to clarify all the data.”

But Ukrainian media outlet Ukrainska Pravda initially cited military sources as saying Kyiv had shot down the plane because it was carrying S-300 missiles, but later corrected the story saying that information had not been confirmed by other sources.

Video linked to Russian security services showed a large aircraft falling towards the ground and exploding in a vast fireball.

The Il-76 is a military transport aircraft designed to airlift troops, cargo, military equipment and weapons.

Later Wednesday, Ukrainian military intelligence said Kyiv was not asked to ensure air space security around the Belgorod area as had been the case during previous prisoner of war swaps with Moscow.

In a post on Telegram, it said Russia’s accusations that Kyiv shot down the plane could be “a planned action to destabilize the situation in Ukraine and weaken international support for our state.”

The agency said it had no reliable information on who was onboard the crashed plane.

The Ukrainian military intelligence agency did say a swap of prisoners was planned and Kyiv had met all the terms, but it was not informed by Russia about the number of planes carrying prisoners and their routes.

“At the same time, the Ukrainian side was not informed about the need to ensure the security of the air space in the area of the city of Belgorod at a certain period of time, as has been repeatedly done in the past,” the agency added.

And Ukraine’s military said it would continue to destroy Russian military transport aircraft it believed were carrying missiles with which to strike Ukraine.  It said it had noticed more Russian military transport aircraft landing in Belgorod, something it linked to Russian missile strikes on Kharkiv and other Ukrainian cities.

Wednesday night, President Zelensky said Russia is “playing with the lives of Ukrainian prisoners of war.” The president called for full clarity into the circumstances of the crash.

Russian news agency TASS reported Kremlin spokesman Dmitry Peskov’s response to the call by Zelensky for an investigation was to call for an investigation into Kyiv’s actions.

Ukrainian military intelligence said it did not have “reliable and comprehensive” information about who or what was onboard the flight.

Ukraine air force commander Mykola Oleshchuk accused Russia of trying to undermine international support for Ukraine.  “Ukraine has the right to defend itself and destroy the means of the aggressors’ aerial attack,” he said.

Reuters reported that both black boxes were recovered.

Russian lawmaker Kartapolov was quoted as saying Thursday that Russia and Ukraine will continue exchanging prisoners of war.

President Putin, in his first televised comments today after the crash, said it was shot down by Ukrainian air defenses, whether on purpose or by mistake.

“I don’t know if they did it on purpose or by mistake, but it is obvious that they did it,” Putin said.  “In any case, what happened is a crime.  Either through negligence or on purpose, but in any case it is a crime.”

As of today, Ukraine continues to dispute Russia’s assertion that it was warned in advance that a plane carrying Ukrainian POWs would be flying over Belgorod at that time.

Putin said the missiles fired were most likely American or French, but this would be established in two to three days.

--Chelsey Dulaney / Wall Street Journal

“Ukraine will run out of money within months and be forced to take painful economic measures to keep the government running if aid from the U.S. or Europe doesn’t come through, according to economists and Ukrainian officials.

“The U.S. and the European Union, Ukraine’s largest financial backers, have promised Kyiv billions of dollars in new financial and military aid.  But pledges from both have been upended by infighting in Washington and Brussels. While political leaders insist those aid packages will pass eventually, timing is critical for Ukraine.

“The country faces a $40 billion-plus financial shortfall this year, slightly smaller than 2023’s gap.  Funding from the U.S. and EU was expected to cover some $30 billion of that. The money is needed to keep the government running and is used to fund salaries, pensions and subsidies to the population.

“Ukraine has introduced a windfall tax on banks, reallocated some tax revenues and ramped up domestic borrowing, which should cover budget spending through February, according to the Ukrainian Finance Ministry….

“Ultimately, Ukraine could be forced into printing money, a strategy that has fueled economic implosions in countries such as Venezuela.”

--Russia is cementing control of occupied territories in Ukraine through a vast range of governmental, bureaucratic, legal, educational, and other levers, writes David Lewis in Foreign Affairs. 

“Russian officials have transformed the governance of the areas under its control, holding sham elections last September and appointing pro-Moscow officials at every level.  An army of technocrats is overseeing the complete absorption of these territories, aligning their laws, regulations, and tax and banking systems with Russia, and getting rid of any traces of institutional ties to Ukraine,” writes Lewis, a professor at the University of Exeter, who has a forthcoming book titled “Occupation: Russian Rule in South-Eastern Ukraine.”  [Defense One]

--Last Friday, Ukrainian President Zelensky said he was worried at the prospect of Donald Trump returning to the White House, branding Trump’s claim that he could stop Ukraine’s war with Russia in 24 hours as “very dangerous.”

“Donald Trump, I invite you to Ukraine, to Kyiv. If you can stop the war during 24 hours, I think it will be enough to come,” Zelensky said.

Zelensky is apprehensive that Trump’s idea of a negotiated solution might involve Ukraine making major concessions to Russia.

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Wall Street and the Economy

With the Federal Reserve in its “quiet period” ahead of next week’s FOMC meeting, Jan. 30-31, there was some important economic news this week. Thursday, we received our first look at fourth-quarter GDP, and the White House was beaming, 3.3%, beating consensus of 2.0%. [The Atlanta Fed’s last look in their GDPNow barometer was 2.4%.]

While 3.3% is less than the prior 4.9% for Q3 2023, this is strong (though it can be revised downward in the next two looks).

What it does say is that it is further ammunition for the Fed to hold off cutting rates in March.  But as Chair Jerome Powell will say next week in his presser, it’s all about the data, boys and girls, though he’ll throw out a line or two that will cause the markets to stay optimistic.  ‘The numbers have been encouraging and we don’t necessarily need to see our target for inflation (2%) to be hit on the number before we move…but the data will determine that.’

And so Friday, we received another critical piece of same, the personal consumption expenditures index, PCE, the Fed’s preferred inflation barometer.  Core PCE for December was expected to come in at 3.0%, down from 3.2% prior…and the numbers are…0.2% on headline, 2.6% year-over-year, both as expected, and on core, 0.2% and 2.9% Y/Y, the last one, the money number, a tick better than expected and below 3% for the first time since March 2021…so good news, but hardly what the Fed needs to move in March.

Personal income came in up 0.3%, in line, but consumption/spending rose 0.7%, a big number and not exactly Fed friendly.

Some other items…December durable goods were unchanged, but up 0.6% ex-transportation, the former short of expectations, the latter above, though we all know this is a particularly volatile dataset.

December new home sales were a bit better than forecast, 664,00 annualized.

And we had our 21st consecutive negative reading for December leading economic indicators, -0.1%, which has been presaging recession for a long time and falling short.  The other times we had such a run of negative figures we indeed had recessions.

The Atlanta Fed’s GDPNow barometer for the first quarter, its first read, is 3.0%.

Freddie Mac’s 30-year fixed-rate mortgage is 6.69%, up from 6.60% prior.

Next week is huge…the Fed’s pronouncements, the January employment report, and earnings reports from the tech titans…if you keep it where it is….

Europe and Asia

We had flash PMI readings for January in the eurozone, courtesy of S&P Global / Hamburg Commercial Bank, the composite at 47.9 vs. 47.6 in December (50 the dividing line between growth and contraction).  Manufacturing was 46.6, a 9-month high, to show you awful things have been in this sector, and services came in at 48.4.

Germany: Manufacturing 46.0, 8-month high; services 47.8
France: Mfg. 40.5, 44-month low; services 45.0

UK: Mfg. 44.9; services 53.8, 8-month high

Dr. Cyrus de la Rubia, Chief Economist, HCB:

“The commencement of the year brings positive tidings for the Eurozone as manufacturing experiences a widespread easing of the downward trajectory witnessed in the past year.  This positive shift is evident across key indicators such as output, employment, and new orders.  Notably, the export sector plays a pivotal role in driving the improvement of the latter, showing better conditions compared to the end of the preceding year.

“The persistent attacks by Houthi rebels on commercial vessels navigating the Red Sea are exerting discernible impacts on supply chains… Nevertheless, various industry reports indicate that businesses are not caught off guard like they have been previously, having learned from past disruptions.  Many have proactively diversified their suppliers across geographical regions and enterprises, mitigating the potential fallout from such unforeseen challenges.”

We have final manufacturing PMI readings next week, services the following one.

The European Central Bank on Thursday decided to keep its benchmark interest rates unchanged, saying in its statement:

“Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued, and the past interest rate increases keep being transmitted forcefully into financing conditions.  Tight financing conditions are dampening demand, and this is helping to push down inflation.

“The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.  Based on its current assessment, the Governing Council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.”

Ergo, higher for longer, the ECB’s key lending rate remaining unchanged for a third straight meeting at 4.00%.

Turning to Asia…no big economic data out of China this week, the Lunar New Year also coming up, Feb. 10-24.

But China’s central bank announced it would cut the amount of money that the country’s lenders are required to hold in reserve by 0.5 percentage points.  The reduction, which goes into force February 5, aims to boost Chinese lending and support the stock market. China’s economy is grappling with deflation, a property-sector downturn (collapse) and weak investor sentiment.

Wednesday, Beijing also said it was widening the uses for commercial property lending by banks in its latest effort to ease a liquidity crunch facing troubled real estate firms.

In Japan, flash PMIs for January had manufacturing at 48.0, the service sector 52.7.

December exports rose 9.8% year-over-year, while imports fell 6.8% Y/Y.

Taiwan reported its ‘export orders’* nosedived in December as plummeting demand from the U.S. and Europe brought a brief rebound to an abrupt end.

Export orders plunged 16% in December from a year earlier, according to Taipei’s Ministry of Economic Affairs.  This was far worse than the 1% drop economists had forecast, according to Bloomberg.  Orders had risen 1% in November, the first increase in 15 months.

Orders from the U.S., Taiwan’s largest source of exports, were down 21.6%, while those from Europe, third-largest, fell 39.4%.  Orders from China, the second biggest source, fell just 3.5%.

*Export orders is a broader measure than exports, encompassing shipments from manufacturing facilities both at home and from Taiwanese-owned factories abroad.

So this raises questions about global demand and the health of Taiwan’s export recovery.

Street Bytes

--Stocks rose a 12th week in 13, the Dow Jones closing at another all-time high today, 38109, up 0.7% on the week.  The S&P 500 was down fractionally today from its new high set Thursday, 4894, but up 1.1% overall, and Nasdaq rose 0.9%.

As Ray Stevens once sang in his 1970 #1 hit, “Everything is beautiful, in its own way…” even if it really isn’t.  The markets will eventually figure it out.

For next week, aside from the key data noted above and the Fed, we have big earnings from the likes of Microsoft, Apple, Alphabet, Amazon, and Meta.

--U.S. Treasury Yields

6-mo. 5.21%  2-yr. 4.36%  10-yr. 4.15%  30-yr. 4.38%

Yields little changed this week ahead of the Fed meeting.

--Netflix shares soared 12% on Wednesday, following Tuesday’s late earnings release.  The company picked up 13.1 million net new subscribers, its highest-ever fourth quarter for subscriber additions and above its own forecast for 8.7 million.  Ad-based subscription plans accounted for 40% of new sign-ups.

Netflix added subscribers globally, including 2.81 million in the U.S. and Canada.  Revenue rose 12.5% to $8.8 billion from a year earlier.  It has a 10-year, $5 billion deal with TKO Group Holdings to show the WWE’s* wrestling federation weekly show Raw starting in January 2025.

Netflix said in a letter to shareholders that revenue was buoyed by its password-sharing crackdown, price changes and a strong content slate.

Co-CEO Ted Sarandos addressed possible industry M&A, saying it’s logical for companies that have large but declining traditional broadcast and cable businesses, also known as linear.  “We’re not interested in acquiring linear assets.  Nor do we believe that further M&A” among traditional companies will change the competitive environment.

For the March quarter, Netflix sees revenue rising 13.2% to $9.24 billion, roughly in line with Wall Street estimates.  It projects first-quarter profit of $4.49 a share.  It also sees double-digit revenue growth for the year.

*WWE boss Vince McMahon was accused of sex trafficking Thursday by a WWE staffer he previously paid to keep quiet when he was CEO.  Former employee Janel Grant signed a nondisclosure agreement in 2022 in which McMahon agreed to pay $3 million for her to not discuss their relationship or to disparage him.  But then McMahon, according to Thursday’s lawsuit, stopped making payments after the initial $1 million installment.  Ms. Grant is now seeking to void the agreement.

--ASML Holdings NV, Europe’s most valuable technology company, saw its shares soar nearly 9% on Wednesday, after the company reported orders more than tripled last quarter from the previous three months, in a sign that the semiconductor industry is resurgent.

ASML is the only company that produces equipment needed to make the most sophisticated semiconductors, and demand for its products is a bellwether for the industry’s health. Record orders for its top-of-the-line extreme ultraviolet lithography machines show optimism among the biggest customers for the technology, including Intel Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co.

Artificial intelligence, which requires massive amounts of computing power, is going to be a “big driver for our business and the business of our customers,” CEO Peter Wennink said in an interview with Bloomberg TV.

--But chipmaker Texas Instruments forecast quarterly revenue and profit below estimates on Tuesday, as chip inventory builds up in its key markets with initial signs of weakness in the automotive sector adding to continued industrial weariness.  The shares fell 2% in response.

Automotive – once one of TI’s fastest growing end markets – is now starting to show signs of inventory corrections.  The pressure of high borrowing costs has dampened end-market demand for the automotive industry.  U.S. new vehicle sales are expected to rise just 1% in 2024, according to Edmunds.  Demand from industrial customers – one of the company’s largest – has waned as global manufacturing activity remains weak.

TI forecast first-quarter revenue between $3.45 billion and $3.75 billion, compared with analysts’ average estimate of $4.06 billion.  The company expects earnings in the range of 96 cents-$1.16 share for the current quarter, missing consensus of $1.41.

--After the market close Thursday, Intel, the world’s largest maker of computer processors, provided a revenue forecast for the first quarter significantly below expectations, driving its shares lower by 10% at the open on Friday.

The semiconductor company reported fourth-quarter adjusted earnings per share of 54 cents, compared with the Street’s consensus estimate of 45 cents.  Revenue came in at $15.4 billion, also above expectations of $15.2 billion.

But the outlook was miserable, a revenue forecast range of $12.2 billion to $13.2 billion, well below consensus of $14.2bn.

Intel stock had been up 67% over the past 12 months as of Thursday’s closing price.

--Tesla’s net income more than doubled last quarter thanks to a big one-time tax benefit, but it warned of “notably lower” sales growth this year.

The Austin, Texas, electric vehicle, solar panel and battery maker said Wednesday that its net income was $7.93 billion from October through December, compared with $3.69 billion a year earlier.

But ex- one-time items, the company made $2.49bn, or 71 cents per share, down 39% from a year ago and short of analyst estimates of 73 cents.

Tesla reported quarterly revenue of $25.17bn, up 3% from a year earlier but also below analyst estimates of $25.64bn.

Profits were off because Tesla lowered prices worldwide through the year in an effort to boost its sales and market share.

Earlier this month Tesla reported that fourth-quarter sales rose by about 20%, boosted by steep price cuts in the U.S. and worldwide through the year.  Some cuts amounted to $20,000 on higher priced models.

Tesla shares fell 12% as the sales growth rate was slower than previous quarters. For the full year, sales rose 37.7%, short of the 50% growth rate that CEO Elon Musk predicted in most years.  The company reported deliveries of 484,507 for the quarter and roughly 1.8 million for the full year.

In its letter to shareholders, Tesla cautioned that sales growth this year may be “notably lower” than the 2023 growth rate, as it works to launch a more affordable next-generation vehicle at a factory near Austin.

On a conference call with analysts, Musk said Tesla expects to begin producing the new vehicle toward the end of 2025.  Revolutionary manufacturing techniques that require innovative equipment will require engineers to be “living on the (assembly) line,” Musk said.

After Austin, the company will build the new vehicle at a new plant to be constructed in Mexico, he said.

But investors are questioning the effectiveness of Tesla’s strategy, cutting prices to boost sales, China is beginning to clean Tesla’s clock on the mainland with the likes of BYD, and many are tired of Musk continually talking about the future while the present outlook is not terrific.

--The Federal Aviation Administration recommended Sunday that airlines visually inspect their fleets of Boeing 737-900ER aircraft after the Jan. 5 midair blowout of an exit-door plug aboard a 737 MAX 9 led to a nationwide grounding of all such models.

A safety alert sent to operators said that although the older 737-900ER is not part of the newer MAX planes, both share the same door plug design.  It said some operators had already examined their 737-900ER mid-exit door plugs and “have noted findings with bolts during the maintenance inspections.”

The alert also recommended that operators scrutinize the four bolts holding the pieces in place “to ensure the door is properly secured.”

So then we had the report that the nose wheel of a Boeing 757 passenger jet operated by Delta Air Lines popped off and rolled away as the plane was lining up for takeoff over the weekend from Atlanta’s Hartfield-Jackson International Airport, the FAA said.

According to a preliminary FAA notice filed on Monday documenting the 757 nose gear detachment, none of the 184 passengers or six crew members aboard was hurt.

The report said the aircraft was lining up and waiting for takeoff when the “nose wheel came off and rolled down the hill.”

The plane had been scheduled for a flight to Bogota, Colombia.  Passengers were put on a replacement flight.

It turns out it was one wheel of two on the front nose-gear, so it was towed back to the gate.  We also later learned this was a 32-year-old plane.

According to a Boeing brochure, as reported by Reuters, “most landing gear have to be removed and overhauled about every 10 years, depending on the type of plane.  Tires are changed every 150 to 400 landings, according to aviation publication Simple Flying.”

But then Wednesday, the FAA said it had approved an inspection and maintenance process to allow grounded 737 MAX 9 planes to return to service* but would not allow any ramp up of MAX production by Boeing.

FAA Administrator Mike Whitaker said in a statement: “We will not agree to any request from Boeing for an expansion in production or approve additional production lines for the 737 MAX until we are satisfied that the quality control issues uncovered during this process are resolved,” Whitaker said.

Boeing did deliver its first 737 MAX to a Chinese airline (Chinese Southern) since March 2019 on Wednesday, ending a four-year freeze on imports of the planemaker’s most profitable product in a respite for severely strained trade relations between the world’s two largest economies.

*Alaska Airlines resumed MAX 9 flights today, United will on Sunday.

--Speaking of UAL, United forecast a first-quarter loss because regulators have grounded Boeing 737 MAX 9 planes.

The carrier said it expects an adjusted loss of 35 cents to 85 cents in the first quarter, which is a wider loss than analysts had expected.

The gloomy outlook for the first three months of the year comes after the carrier reported stronger than expected profit for the fourth quarter, which covered the holiday travel season.

Untied reported adjusted earnings of $2 a share, and a 10% gain in revenue, to $13.6 billion.  Analysts expected profit of $1.70 a share on revenue of $13.55 billion.

The shares rose because United also said it expects full-year 2024 adjusted profit of $9 to $11 a share, compared with the Street’s current consensus of $9.48.  For the full year 2023, United reported adjusted profit of $10.05 a share.

But United is one of two major U.S. airlines, along with Alaska Air, that operate MAX 9 jets, and United was canceling 11% of its scheduled flights for days after the emergency incident onboard an Alaska Airlines flight.

United CEO Scott Kirby said in a CNBC interview on Tuesday the company was going to build a fleet plan that does not include Boeing’s 737 MAX 10 jets, citing delivery delays.  In the best case scenario, MAX 10 deliveries are five years behind their original delivery date, Kirby added.  United in 2021 placed orders for 150 MAX 10s.

“I think the MAX 9 grounding is probably the straw that broke the camel’s back for us,” Kirby said on Squawk Box.  His remarks open the possibility of United cancelling MAX 10 orders, though in practice large airlines rarely cancel outright and tend to juggle their order books.

Industry executives say that United turning its back on Boeing’s largest single-aisle model, mired in certification delays, would be a severe setback to Boeing and increase pressure on Airbus to increase production of its heavily sold-out A321neo.

Ryanair CEO Michael O’Leary said recently he was not sure the MAX 10 would be certified before 2025. The airline had ordered 150 units of the aircraft.

Separately, higher labor costs as a result of new pilot pay deals and rising fuel prices as well as supply-chain issues have threatened to pressure airlines’ profitability this year.

But the decision, by a federal judge, to block JetBlue Airways’ proposed $3.8 billion merger with Spirit Airlines should ultimately help the Big 4 – Delta, United, American and Southwest.

[JetBlue and Spirit are appealing the court’s decision.]

--Speaking of Southwest, its pilots approved a new labor agreement on Monday, which will offer about a 50% pay raise over a five-year period.  About 11,000 pilots affiliated with the Southwest Airlines Pilots Association had been negotiating for better pay, retirement benefits, disability insurance and a revised scheduling process after the contract ended in September 2020.

Pilots at the Dallas-based carrier will get a 29.15% pay increase immediately and a hike of 4% each in 2025, 2026 and 2027.  The agreement provides for a 3.25% gain in wages in 2028.  United, American and Delta pilots had previously ratified similar sized packages.

Southwest Airlines flight attendants voted to approve a strike against the carrier, the union said on Tuesday, the first time in the union’s history that flight attendants authorized a strike against the company.

Meanwhile, Southwest reported a loss for the fourth quarter, and said it expects to receive fewer new planes than it expected this year because of Boeing’s ongoing production problems.

Southwest lost $219 million in Q4, nearly identical to its results in the same quarter a year earlier.  Ex- one-time costs, mostly tied to the new contract with pilots, the airline said adjusted earnings were 37 cents per share, with the Street at 12 cents.

Revenue increased more than 10%, to $6.82 billion, beating expectations.

Southwest said it expects to get 79 new Boeing planes this year, six fewer than it had planned, and none of them will be 737 MAX 7 jets.

Boeing is already behind schedule in gaining regulatory approval for the small MAX 7, and that process will likely be pushed back even further with its latest issues.

--American Airlines Group reported fourth-quarter earnings of $19 million, or 29 cents per share adjusted, exceeding Street expectations of 8 cents.

The world’s largest airline posted revenue of $13.06 billion in the period, which also beat expectations, but was lower than the $13.19 billion of a year ago.

For the current quarter ending in March, American expects results to range from a loss of 35 cents per share to a loss of 15 cents, with current consensus at a loss of $0.22.  The company expects full-year earnings in the range of $2.25 to $3.25 per share.

The airline sees a “modest impact” concerning its MAX deliveries this year, with 20 slated.

--The Wall Street Journal conducted its annual survey on the nine major airlines servicing the U.S., ranking them on items such as on-time arrivals, flight cancellations, extreme delays, baggage handling, involuntary bumping and complaints.  [Hawaiian Airlines was excluded given its regional niche.]

1. Delta
2. Alaska Airlines
3. Budget carrier Allegiant Air
4. Southwest
5. American
6. United
7. Spirit
8. Frontier
9. JetBlue

--TSA checkpoint numbers vs. 2023

1/25…106 percent of 2023 levels
1/24…108
1/23…102
1/22…104
1/21…105
1/20…105
1/19…100
1/18…105

--Ford Motor is recalling about 1.9 million units of its 2011 to 2019 Explorer SUV models in the U.S. because the A-pillar exterior trim located near the windshield may fall off while the vehicle is moving, the company said in documents posted on Wednesday to the National Highway Traffic Safety Administration’s website.

Notification will be sent to owners in mid-March.  There are no reports of accidents or injuries related to the defect.

--Kia America is recalling more than 101,000 cars and SUVs due to a potentially deadly hazard with the vehicle’s roofs, the NHTSA is reporting.

Federal safety regulators published the recall Monday after the safety issues were reported to NHTSA. Vehicles’ roof molding can become loose or detach while driving, which may have been a result of improper installation during vehicle assembly.

Needless to say, this creates a risk for other vehicles, which is the issue with the Ford defect.

--According to IDC, Apple’s smartphone shipments in China fell 2.1% in the fourth quarter, hurt by weak consumer demand and rising market share for rival Huawei.

But for the full year, Apple overtook local rival Vivo to become China’s top smartphone vendor for the first time, with its market share rising to 17.3% from 16.8% a year earlier.

--IBM forecast full-year revenue growth above market estimates on Wednesday after the close, banking on stable demand for its IT software and consultancy services from businesses looking to adopt artificial intelligence. Shares opened up 6% on Thursday.

The company will also lay off some employees in 2024 but will hire for more AI-centered roles, the company said, and will likely end the year with a largely unchanged headcount.

Big Blue’s generative AI book of business, comprising actual sales and bookings from various offerings, roughly doubled sequentially in the fourth quarter, CEO Arvind Krishna said.  About one-third of this came from software, and the rest from consulting.

IBM expects 2024 revenue to grow in the mid-single-digits, at around 4%-6%, compared with Wall Street expectations of about 3%.  “Technology budgets should stay in line with 2023 going into ’24,” CEO Krishna said on an earnings call.

For the quarter, IBM posted revenue of $17.4 billion, up 4% from a year ago, and ahead of consensus of $17.3 billion.

Asked about the overall outlook for AI in 2024, Krishna’s advice to clients is that this has to be “the year of scaling.”  Krishna said he tells clients to avoid dabbling.  “Don’t do 100 experiments,” he said in an interview with Barron’s.  “Pick two or three things that can scale, so it shows up on the bottom line…this is the year where it has to get real.”

--Johnson & Johnson on Tuesday reported fourth-quarter profit that was slightly above the Street’s expectations, helped by stronger-than-expected demand for its blockbuster psoriasis treatment Stelara.  It expects higher revenue from its multiple myeloma drug Darzalex and newer oncology drugs such as Carvykti and Tecvayli to help it meet its 2025 pharmaceutical sales target of $57 billion.  The company is expected to face fresh competition that year from the first biosimilar versions of Stelara.

Stelara brought in sales of $2.75 billion for the quarter, but a key patent for it expired in the U.S. last year.  JNJ, however, struck deals with competitors to delay the launches of their biosimilars until 2025.  Amgen’s Wezlana is expected to be the first near-copy of Stelara to launch in the U.S. next year.

Cancer therapy Carvykti brought in sales of $159 million for the quarter.

The drug and medical device maker posted an adjusted profit of $2.29 per share, a penny ahead of the Street, with quarterly revenue of $21.4 billion, above market expectations.  The company reaffirmed its adjusted operating profit forecast of $10.55 to $10.75 per share for 2024.

--Shares in Humana cratered 12% on Thursday as the company said it believes the elevated costs from seniors utilizing Medicare Advantage “are an industry dynamic, not specific to Humana, and that they may persist for an extended period or, in some case, permanently reset the baseline.”

Shares in CVS Health, United Health and Centene fell as well, all four with significant Medicare Advantage businesses that have been facing pressure from slowing growth and tougher scrutiny by the Centers for Medicare and Medicaid Services.

Humana forecast an adjusted earnings per share of about $16 for 2024, much lower than analysts’ expectations of $29.  The company also reported an adjusted loss of 11 cents a share for the fourth quarter, widely missing a consensus estimate for a profit.

--Procter & Gamble cut its annual profit forecast on Tuesday as the boost from earlier price hikes fades and on writing down the value of its Gillette business in December.  Previously, P&G said it would record a $1.3 billion charge related to a drop in the book value of its Gillette division as volume growth slowed due to the hybrid post-pandemic work culture and a stronger dollar.

The company now expects fiscal 2024 earnings to range from a fall of 1% to in line with fiscal 2023 earnings per share, compared with its prior forecast of 6% to 9% growth.  The company’s quarterly net sales rose 3.2% to $21.44 billion from $20.77 billion a year earlier, slightly below estimates.  Adjusted earnings per share of $1.84 beat expectations for $1.70.

P&G’s overall volumes were flat during the fiscal second quarter, while average prices across its product categories rose 4%.

--Industrial conglomerate 3M Co. forecast full-year earnings below analyst estimates, as the diversified manufacture faces slow demand, sending its shares down 6% at the open on Tuesday.  Higher interest rates and inflation have dampened demand for non-essential big-ticket purchases, hurting 3M’s electronics business that makes displays for smartphones and tablets.

3M in September warned of “a slow growth environment” in 2024 and forecast weakness in its electronics and consumer segments in the third and fourth quarter.  Additionally, the company is facing thousands of lawsuits related to defective earplugs that caused hearing loss for U.S. military members and its use of “forever chemicals,” which are linked to cancer, hormonal dysfunction and environmental damage.

3M forecast 2024 profit between $9.35 and $9.75 per share, compared with analysts’ average estimate of $9.81.  Revenue for the quarter fell 0.8% to $8.01 billion.

--Archer-Daniels-Midland Company stock dropped 24% on Monday, the most on record, after the agricultural trading giant placed its CFO on leave and delayed its fourth quarter earnings release following an investigation into its accounting practices.

--In an interview with Fox’s Maria Bartiromo, Donald Trump declined to declare his support for Taiwan against China, saying the democratic-island “took our business away” by building the world’s best chip fabs. 

Huh?  

--Ebay will lay off about 9% of its full-time workforce, part of efforts to boost performance at a time of rising competition and softer consumer spending.

The San Jose, Calif.-based online marketplace will cut about 1,000 full-time employees, CEO Jamie Iannone said in an internal memo posted on the company’s website late Tuesday.

Ebay had about 11,600 employees globally at the end of 2022, including 6,800 in the U.S.

Amazon.com and Walmart have been providing increasing competition, as well as emerging Chinese retailers such as Temu and Shein.

--Software giant Salesforce is laying off around 700 employees across the country, about 1% of the roughly 70,000-person company, according to the Wall Street Journal.  One year ago, it cut 10% of its workers (8,000), amid pressure from investors to reduce costs.

--Microsoft late last Friday disclosed that the email accounts of some of the company’s senior leadership team have been accessed by hackers backed by the Russian government, allowing them to read some email messages and attached documents.

The software company said it “detected a nation-state attack on our corporate systems” on Jan. 12 “and immediately activated our response process to investigate, disrupt malicious activity, mitigate the attack, and deny the threat actor further access.”

The company identified the “threat actor” as Midnight Blizzard, “the Russian state-sponsored actor also known as Nobelium.”  Midnight Blizzard has launched previous attacks on Microsoft, including last August.

Separately, Microsoft announced Thursday it will let go of 1,900 employees at Activision Blizzard (no relation to Midnight Blizzard) and Xbox this week, the latest cuts in the tech sector that has extended massive layoffs over the past years into 2024.  The cuts represent about 8% of the overall Microsoft Gaming division and will mostly happen at Activision Blizzard.

The news comes months after Microsoft closed its $69 billion deal for Activision Blizzard, boosting its heft in the videogaming market with titles such as “Call of Duty,” to better compete with industry leader Sony.

--New Jersey Transit (NJ Transit) wants to raise fares an eye-popping 15%, which would hike the price of a monthly pass for a commuter coming into Penn Station from Summit (a major hub) to $342 for a monthly pass, up from $298.  Eegads.

--Finally, back in 1976 when I arrived on the Wake Forest campus in Winston-Salem, North Carolina, the only bank on campus I could open an account with was Wachovia, a name I had never heard of and it took me a while to get the name right.

At about the same time a young bank president, Edward “Fast Eddie” Crutchfield, was running another little bank in the state, First Union.  Fueled by a 1985 Supreme Court ruling legalizing interstate banking, Crutchfield, who had risen to chairman and CEO, began to gobble up rival banks and failed thrifts, transforming First Union into a super-regional bank with thousands of branches throughout the Southeast.

Crutchfield retired in 2000, after First Union had acquired more than 90 banks and lending companies, becoming the sixth-largest bank by assets.  In 2001, First Union merged with Wachovia, taking on the latter’s name.  Wells Fargo then bought Wachovia in 2008, during the financial crisis.

Today, Wells Fargo has 27,000 workers in Charlotte, more than it employs at its San Francisco headquarters.

Crutchfield was born in Dearborn, Michigan in 1941, but graduated from Davidson College, a terrific school I hasten to add, before going on to Wharton.

He died a few weeks ago, but it just became public the other day.  Crutchfield was 82.  Your editor has been with Wachovia/Wells Fargo since that day in 1976 when I opened an account.

Foreign Affairs, Part II

Iran/Houthis:  Iran-backed militants attacked U.S. forces inside Iraq with ballistic missiles Saturday at the Al-Asad airbase about 100 miles west of Baghdad. The attack occurred at about 6:30 p.m. local, and featured “multiple ballistic missiles and rockets,” officials at the Tampa-based Central Command announced that evening.  The New York Times reported “Two out of an estimated 17 rockets and short-range ballistic missiles fired at the base made it through air defense systems.”

An unspecified “number of U.S. personnel are undergoing evaluation for traumatic brain injuries,” and “At least one Iraqi service member was wounded,” CENTCOM said.  The Pentagon later said at least four U.S. service members were “injured.”

U.S. forces in Iraq and Syria have been attacked more than 140 times since Hamas launched its attack on Israel in early October.  The attacks have injured more than 70 U.S. personnel (later amended to 83), Peter Baker of the New York Times reported Sunday.  The looming consideration for the Biden administration?  “At some point, if U.S. forces are killed, they’ll have no alternative but to respond directly against Iranian assets,” Aaron David Miller of the Carnegie Endowment for International Peace told Baker.

On Tuesday, the United States carried out military strikes against three facilities in western Iraq associated with Iran-linked militias that American officials say attacked Al-Asad, according to Central Command,

“These precision strikes are in direct response to a series of escalatory attacks against U.S. and coalition personnel in Iraq and Syria by Iranian-sponsored militias,” Defense Secretary Lloyd Austin said in a statement, and that President Biden “will not hesitate to take necessary action to defend” American troops in the region.  “We do not seek to escalate conflict in the region,” he said.  “We are fully prepared to take further measures to protect our people and our facilities.”

The United States and Britain carried out large-scale military strikes on Monday against eight sites in Yemen controlled by the Houthis.  The strikes further signaled the Biden administration is prepared to wage a sustained and, for now, open-ended campaign.

The strikes Monday represented the eighth in about two weeks and were more than hitting Houthi missiles that the Americans said popped up on short notice.  Those were hit before they could be fired into the Red Sea or Gulf of Aden.

Monday’s coordinated strikes, however, hit radars, as well as drone and missile sites and underground weapons storage bunkers.

“Let us reiterate our warning to Houthi leadership: We will not hesitate to defend lives and the free flow of commerce in one of the world’s most critical waterways in the face of continued threats,” the American and British governments said in a statement.

Other nations such as the Netherlands, Australia, Canada and Bahrain, contributed logistics, intelligence and other support, according to U.S. officials.

But the strikes have so far failed to deter the Houthis from attacking shipping lanes, though as yet there has been no significant damage or casualties.

Saudi Arabia’s foreign minister said the kingdom was “very worried” that tensions in the Red Sea amid attacks by Yemen’s Houthis and U.S. strikes on Houthi targets could spiral out of control and escalate the conflict in the region. “I mean, of course, we are very worried.  I mean, you know, we are in a very difficult and dangerous time in the region, and that’s why we are calling for de-escalation,” Prince Faisal bin Farhan told CNN’s “Fareed Zakaria GPS” in an interview aired Sunday.

Wednesday, shipping company Maersk said two U.S.-flagged vessels transiting the Bab el-Mandeb strait northbound accompanied by the U.S. Navy had turned around after seeing explosions nearby.

Maersk said in a statement that the vessels both “reported seeing explosions close by and the U.S. Navy accompaniment also intercepted multiple projectiles.”

The vessels and crew were unharmed and were being escorted back to the Gulf of Aden by the Navy.  Both vessels are operated by Maersk’s U.S. subsidiary that carries cargo for the Department of Defense, Department of State, USAID, and other U.S. government agencies.

Reuel Marc Gerecht and Ray Takeyh / New York Times

“While Iran is clearly asserting its military strength amid the widening regional turmoil, that doesn’t mean its leaders want to be drawn into a wider war. They have said as much publicly, and perhaps most important, they have meticulously avoided taking direct military action against either Israel or the United States. The regime appears to be content for now to lean into its longtime strategy of proxy warfare: The groups they back are fighting Iran’s foes and so far, neither Israel nor the United States has signaled any interest in retaliating directly.

“At the heart of Iran’s aversion to a major conflict are the domestic issues that have been preoccupying the regime. The elderly supreme leader, Ali Khamenei, is seeking to secure his legacy – by overcoming political headwinds to install a like-minded successor, pursuing a nuclear weapon and ensuring the survival of the regime as an Islamist paladin dominating the Middle East – and that means not getting dragged into a wider war….

“Of course, the more conflict Iran engages in – directly or indirectly – also increases the chance that a rogue or poorly judged strike could send the violence spinning out of control – in a direction Iran does not favor.  History is riddled with miscalculations, and there is a real possibly that Iran could find itself pulled into the larger conflict that it has sought to avoid.

“But Iran’s supreme leader is the longest-serving ruler in the Middle East precisely because of his uncanny ability to blend militancy with caution.  He understands the weaknesses and strengths of his homeland when he seeks to advance the Islamic revolution beyond its borders.

“In other words, Mr. Khamenei know his limits – and he knows the legacy he needs to secure for the revolution to survive his passing.”

Lastly, Iran said Saturday it had conducted a successful satellite launch into its highest orbit yet, the latest for a program the West fears improves Tehran’s ballistic missiles.

The Soraya satellite was placed in an orbit at some 460 miles above the Earth’s surface with its three-stage Qaem 100 rocket, the state-run IRNA news agency said.  It did not immediately acknowledge what the satellite did.

Iraq: The United States and Iraq are set to initiate talks on the end of a U.S.-led international military coalition in Iraq and how to replace it with bilateral relations, a step forward in a process that was stalled by the Gaza war.  But there is no timetable for when these talks will be held. When they are, they are expected to take several months, if not longer, with the outcome unclear and no U.S. troop withdrawal imminent.

The U.S. has 2,500 troops in Iraq, advising and assisting local forces to prevent a resurgence of ISIS, which in 2014 seized large parts of Iraq and Syria before being defeated.  Hundreds of troops from many other mostly European countries are also in Iraq as part of the U.S.-led coalition that was set up to fight Islamic State.

Iraq, a rare ally of both the United States and Iran, has witnessed escalating tit-for-tat attacks between militias and U.S. forces since the Gaza war began, and U.S. troops in Iraq and Syria have been attacked 150 times, as noted above, by Iran-based militants in Iraq.  The U.S. has begun responding in kind, and that is what has Iraqi Prime Minister Sudani in a real bind, under intense political pressure, to negotiate a quick exit of the coalition forces.

China/Taiwan: Taiwan president-elect Lai Ching-te (William Lai) said on Thursday he hopes that the United States can continue to firmly support Taiwan, as he met the first group of U.S. lawmakers to visit Taipei since he won the election earlier in the month.  Lai takes office May 20.

China has rejected his offers of talks.

Addressing the congressional delegation, Lai said democracy and freedom were core shared values with the U.S.

“Taiwan is situated in the first island chain and stands on the frontline of China’s authoritarian expansionism.  This makes Taiwan a crucial strategic location.  Stability across the Taiwan Strait is extremely important to regional and global peace and prosperity,” Lai said.  He added he would continue to defend the cross-Taiwan Strait status quo of peace and stability.

“I hope the United States can continue to firmly support Taiwan, deepen bilateral cooperation and relations and work with other democratic partners to ensure peace and prosperity in the region,” he said. “I also hope that the two co-chairs and our friends in the U.S. Congress can continue to support Taiwan in bolstering its self-defense capabilities.”

Republican Representative Mario Diaz-Balart told Lai, “Rest assured that you have the support of the United States Congress,” and that support was firm, real and “100% bipartisan.”

As for China’s actions since Lai’s election, there has been an above-normal number of planes crossing the dividing line, but nothing extreme.

North Korea: Pyongyang said Russian President Putin could visit soon as the two counties deepen ties and seek to establish “a new multi-polarized international order.”’

Putin told visiting Foreign Minister Choe Son Hui that he was grateful for the invitation from North Korean leader Kim Jong Un, and that he’d make the trip to Pyongyang at an early date, the official Korean Central News Agency reported Sunday.

Moscow is keen to cement relations with allies hostile to the U.S. as it prosecutes its war in Ukraine.  Both the Kremlin and Pyongyang have denied claims by the U.S. and South Korea that North Korea was providing missiles for use in Russia’s bombardment of its neighbor.

Wednesday, North Korea fired multiple cruise missiles towards the sea off its west coast, South Korea’s Joint Chiefs of Staff said, in the latest sign of heightened tensions on the peninsula. 

Separately, an analysis of commercial satellite images suggested that the North has torn down a huge arch in its capital that symbolized reconciliation with war-divided rival South Korea.

Kim Jong Un last week described the Pyongyang monument as an “eyesore” and called for its removal while declaring that the North was abandoning long-standing goals of a peaceful unification with the South and ordered a rewriting of the North’s constitution to define South Korea as its most hostile foreign adversary.

Meanwhile, South Korean President Yoon Suk Yeol is in a mess that may threaten his bid to reclaim a parliamentary majority in April’s election.  His wife, the First Lady, is shown on hidden camera accepting a Dior bag as a gift.  Seems like a small deal, but it isn’t.

Yoon won a close election in 2022 but his PPP is a minority in the parliament.

John Bolton / Wall Street Journal

“North Korea’s Supreme Leader Kim Jong Un last week eviscerated any remaining pretense that his regime seeks peaceful reunification with South Korea.  Now that Pyongyang has nearly developed the ability to deliver a nuclear warhead on an intercontinental ballistic missile, Mr. Kim has decided to scrap almost 80 years of intra-Korean policy….

“By effectively recognizing that there are two states on the Korean Peninsula, Mr. Kim has ensured there is no turning back.  If war breaks out, he said, the North plans on ‘completely occupying, subjugating and reclaiming’ South Korea and annexing it ‘as a part of the territory of our Republic.’

“Mr. Kim’s belligerence and constitutional changes are bell ringers, the strongest possible signals of his intentions.  The audience is both domestic and global.  His rhetoric exposes how the South Korean left’s ‘sunshine policy’ of détente and appeasement is not only wrong but dangerous….

“Over the years, many credulous South Korean and American leaders have accepted the North’s claims that it pursued nuclear weapons only because it was afraid of being attacked… This argument failed to grasp that the regime wanted nuclear weapons to pursue reunification its own way – the North absorbing the South, not the other way around….

“The U.S. failure to repulse Russia’s invasion of Ukraine and Iran’s ‘ring of fire’ strategy against Israel is undoubtedly prompting considerable deliberation in China.  While Ukraine wasn’t overrun, it is far from being victorious, thereby proving to the world that the West will tolerate unprovoked aggression.  In the Middle East, Americans and Israelis disagree on how to prosecute the war on Hamas, likely to the detriment of both countries.  Mr. Trump’s only contribution to date has been to say that he’ll resolve both conflicts quickly, details to follow.

“With the Biden administration overwhelmed and a presidential election looming, Pyongyang and Beijing may well believe their window of opportunity has arrived.  By rallying the North’s people, rewriting its constitution, and abolishing the machinery of reunification diplomacy, Mr. Kim could be preparing to jump through it.”

One more…the above-mentioned Josh Rogin of the Washington Post, one of my go-to foreign policy experts, said it’s not Kim going to war with South Korea that we should be worried about today, it’s more about Ukraine and the Middle East, which Kim is using as testing grounds for his weapons.

“Even worse, every time a North Korean weapon kills a Ukrainian, that’s a sales pitch for Pyongyang’s weapons industry to any aggressor with cash on hand. Considering the long relationship between North Korea and Iran, it is no surprise North Korean weapons are reportedly also being used today by Hamas.  With demand around the world skyrocketing, North Korea’s weapons manufacturing business could refill Kim’s coffers.”

India: On Monday, Prime Minister Narendra Modi presided over the consecration of a $220 million temple in the northern city of Ayodhya, much to the alarm of the country’s 200 million Muslims, and many secular-minded Indians.  But this marks Modi’s Bharatiya Janata Party’s decades-long Hindu-nationalist project.  The temple is built on the site where in 1992 a mob razed a 450-year-old mosque.

For many Hindus this occasion rights an ancient wrong: the location is the mythical birthplace of the Hindu god Ram.  Most offices, stock markets and even casinos closed for the occasion, which serves as the informal launch of Modi’s campaign for a third term in elections to be held over April and May.  India’s Supreme Court has ruled that “religion and politics” should not mix.  But Modi is counting on the combination of just that to propel him into power yet again.

Sudan: According to a United Nations report to the UN Security Council, between 10,000 and 15,000 people were killed in one city in Sudan’s West Darfur region last year in ethnic violence by the paramilitary Rapid Support Forces and allied Arab militia.

Independent UN sanctions monitors attributed the toll in El Geneina to intelligence sources and contrasted it with the UN estimate that about 12,000 people have been killed across Sudan since war erupted on April 15, 2023, between the Sudanese army and the RSF.

The monitors also described as “credible” accusations that the United Arab Emirates had provided military support to the RSF “several times per week” via northern Chad.  The UAE claims 122 flights had delivered humanitarian aid to help Sudanese fleeing the war. [Reuters]

Random Musings

--Presidential approval ratings….

Gallup: New numbers…41% approve of President Biden’s job performance, 54% disapprove; 35% of independents approve (Jan. 2-22).  Previous split…39-59, 34 ind.

Rasmussen: 45% approve, 54% disapprove (Jan. 26)…unchanged from week prior.

--Nikki Haley vowed to take her bid to become the Republican party’s presidential candidate back home to her native South Carolina, after falling to Donald Trump 54.3% to 43.2% in the New Hampshire primary, Tuesday.

Self-identified Republicans voted 74-25 in favor of Trump, while those describing themselves as independents voted 60-38 for Haley.  College grads went 58-39 Haley; non-college grads 66-32 for Trump.

Joe Biden won the “unofficial” Democratic vote, 63.9% to 19.6% for Rep. Dean Phillips, Biden supporters needing to write in his name.

The Democrats’ first official primary is South Carolina on Feb. 3.  Republicans don’t vote in the Palmetto State until Feb. 24.

Haley was magnanimous.

“I want to congratulate Donald Trump on his victory tonight.  He’s earned it and I want to acknowledge that.  Now, you’ve all heard the chatter among the political class.  They are falling all over themselves saying this race is over.  Well I have news for all of them.

“New Hampshire is first in the nation,” Haley said to a room of enthusiastic supporters.  “It is not the last in the nation.

“This race is far from over.  There are dozens of states left to go.  And the next one is my sweet state of South Carolina.”

“Our country is in a real mess,” she said, with feeling.

“With Donald Trump, Republicans have lost almost every competitive election. We lost the Senate.  We lost the House.  We lost the White House.  We lost in 2018.  We lost in 2020. And we lost in 2022. The worst kept secret in politics is how badly the Democrats want to run against Donald Trump.  They know he is the only Republican in the country who Joe Biden can defeat.

“You can’t fix the mess if you don’t win an election. A Trump nomination is a Biden win and a Kamala Harris presidency.  The first party to retire its 80-year-old candidate is going to be the party that wins this election.”

Donald Trump, who after Iowa said it was time for unity and time to bring the country together, was furious, seething, that Haley didn’t drop out, calling her “delusional” at his own election night party.  “Who the hell was that imposter that went up on that stage…and claimed victory?” he said.

“She is doing a speech like she won.  She didn’t win. She lost.  Last week we had a little bit of a problem and if you remember Ron [DeSantis] was very upset because she ran up and pretended she won Iowa.  And I looked around, I said: didn’t she come in third?  Yeah, she came in third.”

“I don’t get too angry, I get even.”

Team Haley hit back almost immediately, describing his speech as a “furious and rumbling rant.”

“If Mr. Trump is in such good shape, why is he so angry?” the campaign said in a statement.

Editorial / Wall Street Journal

“Mr. Trump has the majority of his party behind him, but his appeal across the electorate remains as limited as it was during his Presidency and when he lost in 2020….

“The pressure from the Trump-GOP establishment (for Haley) to leave the race will be intense, with threats to her political future if she declines to do so. She is only 52 and could plausibly make another run in 2028.

“But there’s a case for contesting South Carolina, and even beyond that, if she can withstand the abuse and fill out her campaign message.  The abuse started on Tuesday night as Mr. Trump insinuated that she would be ‘under investigation’ for some unspoken reason, while also insulting the quality of, yes, her dress. His surrogates were all over cable insulting her as well. They must be worried that she is telling voters the truth about Mr. Trump’s political vulnerabilities….

“Mr. Trump derided her performance with independents, but who does he think will decide the November election?  He also said 4,000 Democrats had voted in the primary way back in October, but that’s the number who merely changed their registration to Republican or unaffiliated. Registered Democrats couldn’t vote in the GOP primary.

“To make it a race, Ms. Haley will have to toughen and expand her message.  She has been reluctant to make a harder case against Mr. Trump lest she alienate people who voted for him twice. But now that it’s one-on-one she has to give Republicans reasons to favor her….

“Ms. Haley has never provided Trump voters from 2016 and 2020 a compelling reason to choose her, other than that he’s too old, too divisive, and would be an immediate lame duck if he wins. All true and essential points to make, but not enough….

“If she can remain competitive, there’s an argument for Ms. Haley to stay in the race through the July convention. Mr. Trump faces a treacherous legal road, and one of the cases against him could go to trial. If he’s convicted of a felony, 42% of voters in New Hampshire and nearly a third of Iowa’s Republican caucus-goers said Mr. Trump would be unfit for the Presidency. That would mean he can’t win.  Ms. Haley could stay in the race, rack up delegates, and see what happens if he is found guilty.

“If Mr. Trump wins the nomination but loses in November, Ms. Haley will be able to say she took the risk to warn the party. The race in 2028 will be wide open.  Meanwhile, she can give the party a policy debate that Mr. Trump wants to duck and audition across the country for her political future. He won’t debate her as long as he leads in the polls.  But she is right to taunt him for his lack of courage….

“The 2024 election may have more twists before the Trump vs. Biden die is cast and, if that is the choice, millions of Americans will look for a third-party alternative.  Meanwhile, millions of Republicans who aren’t bending the knee to Mr. Trump would like to see how Ms. Haley performs mano a mano against a former President.”

--Sunday afternoon, Ron DeSantis suspended his campaign.  He was doing poorly in New Hampshire and wouldn’t have fared any better in South Carolina.

“Following our second-place finish in Iowa, we’ve prayed and deliberated on the way forward.  If there was anything I could do to produce a favorable outcome – more campaign stops, more interviews, I would do it,” DeSantis announced in a video address.

“But I can’t ask our supporters to volunteer their time, and donate their resources, if we don’t have a clear path to victory. Accordingly, I am today suspending my campaign.”

DeSantis said although he has had disagreements with former President Donald Trump, “he is superior to the current incumbent, Joe Biden.”

DeSantis said it was now clear that “a majority of Republican primary voters want to give Donald Trump another chance.”

He said he is endorsing Trump because “we can’t go back to the old Republican guard of yesteryear, a repackaged form of warmed-over corporatism that Nikki Haley represents.”

Nothing wrong with the old Republican guard, Governor!  Remember, those tax cuts Trump enacted were Paul Ryan’s!

Trump, in a visit to his New Hampshire campaign headquarters Sunday afternoon, acknowledged the endorsement from DeSantis, whom he called a “very capable person.”

“Without the endorsement, I think we would have gotten almost all of those votes because we have very similar policies – strong borders, great education, low taxes, very, very few regulations,” Trump said.

Early in 2023, DeSantis led the race in New Hampshire. 

--Heading into Tuesday, for the record in the Granite State, we had the following polls….

A CNN/UNH survey without DeSantis had Trump winning 54-41.

A Washington Post-Monmouth University poll of potential primary voters had Trump at 52%, Haley 34%.  DeSantis was at 8%, the survey completed before he dropped out.

--Editorial / Wall Street Journal…Sunday evening…

“The Trump campaign, the press and the Biden Democrats say the race is over.  Mr. Biden wants Mr. Trump as the nominee because he believes Mr. Trump is the easiest to beat.  But before the die is cast, it’s worth thinking about the risks GOP voters would be taking, both in November and in a second term if by some chance Mr. Trump defeated Mr. Biden.

“The election risks are sitting in plain sight. Mr. Trump faces 91 felony charges in four different indictments.  You can think the indictments are politically motivated and an awful precedent, as these columns have argued.  But they exist, and amid the legal battling a jury could convict Mr. Trump by the summer.

“Then what?  Mr. Trump would never withdraw.  But no fewer than 31% of Iowa caucus voters said in the entrance poll that a conviction would make Mr. Trump unfit for the White House.  [42% said this in New Hampshire.]  That would mean Mr. Trump can’t win.  GOP voters would have played into Democratic and media hands.

“If Mr. Trump does somehow win, Democrats predict a second Trump term will end in dictatorship. But that undersells the resilience of American institutions, which have held up so far against the stress test of Mr. Trump and his enemies, including the riot of Jan. 6, 2021.  Congress responded quickly and ratified the Electoral College votes. The plotters were a rump group opposed across the government. There was nothing close to a coup d’etat.

“The better question in our view is whether Mr. Trump can deliver the policy and political victories that GOP voters want.  There are many reasons to think he can’t.

“Start with the fact that Mr. Trump would be an immediate lame duck.  He can’t serve more than one more term, and if he does win it will be narrowly with little political capital. He has never reached an approval rating above 50%, and his rolling seven-week RealClearPolitics average favorability is 41.5%.  If there’s a strong third-party ticket, he might win with the smallest plurality since 1912.  Mr. Trump would lack the most potent presidential power – the ability to persuade.

“Republicans are favored to win a Senate majority, albeit narrowly. But the House is up for grabs and could easily go Democratic.  If the first term is a guide, Democrats will oppose anything Mr. Trump proposes that isn’t one of their priorities….

“Mr. Trump says he now knows from hard experience how to manage the executive branch, but his governing style is undisciplined to say the least.  The internal opposition will still be implacable, the leaks unending, the press relentlessly hostile.  This is another reason the Trump-as-Hitler fears are implausible.

“It also isn’t clear Mr. Trump could attract first-rate advisers.  The lure of power is strong, but anyone who takes a job had better have a lawyer on retainer.  No conservative who wants a career in the law is likely to accept a job in the White House or Justice – not after what Mr. Trump asked his lawyers to do after the 2020 elections.

“Looking ahead, a second Trump term would surely mean a Republican wipeout in the 2026 midterms.  The Senate map that year tilts strongly Democratic. There would be no more Supreme Court confirmations. If the GOP takes another MAGA turn in 2028, the stage would be set for Democrats to run the election table, break the Senate filibuster, and pack the Court.

“The failing Biden Presidency obscures all of this for millions of GOP voters, who see a Trump victory as a return to better, pre-Covid times. This misses that Mr. Biden’s failure presents the GOP with an historic opportunity. The President hasn’t fulfilled his promise of a return to normalcy and instead has delivered more polarization.  Bidenomics hasn’t lifted real incomes, while the world is more dangerous than at any time since the 1930s.

“But a Trump victory will bring no return to normalcy, nor the ‘unity’ he sometimes mentions before he denounces some other former ally.  A different GOP nominee would shake up political categories, win independents, and offer a better chance at a conservative restoration.

“If Republicans nominate Mr. Trump again, that’s democracy – the worst system except for all the others.  But our unhappy guess is that, sooner or later, the choice will end in tears for his voters.”

Editorial / Washington Post

“The two remaining contenders for the Republican presidential nomination each warned of ‘an unholy alliance’ in their closing pitches to New Hampshire voters ahead of Tuesday’s primary. But they had very different enemies in mind.

“Arguing to continue arming Ukraine, former UN ambassador Nikki Haley decried ‘an unholy alliance’ among Russia, China and Iran aimed at undermining the cause of democracy and human freedom.

“Meanwhile, former president Donald Trump condemned ‘an unholy alliance’ aimed at denying him another term in the White House. In Mr. Trump’s telling, Never Trumpers and the billionaire industrialist Charles Koch, through his group Americans for Prosperity, are conspiring with ‘globalists’ and ‘communists’ to encourage independents to support Ms. Haley in the GOP primary.

“These dueling narratives depict the choice Republicans are facing.  Ms. Haley talks about the real world and countering the United States’ adversaries.  Mr. Trump looks inward, consumed by grievances and promising retribution against his domestic critics.”

--Donald Trump said this of Hungarian Prime Minister Viktor Orban at a rally on Saturday: “There is a great man, a great leader – Viktor Orban.  He is the Prime Minister of Hungary. He is a very great leader, a very strong man.  Some people don’t like him because he’s too strong.”

Since the beginning of Russia’s invasion of Ukraine, Orban has repeatedly made anti-Ukrainian statements and has blocked European Union aid for Kyiv.  Last October, Orban met with Vladimir Putin in China, and after criticizing the EU and the United States, he said he was “proud” of the meeting.

Trump last Friday night also continually confused Nikki Haley with Nancy Pelosi as he discussed the Jan. 6, 2021, riot at the Capitol.

“You know Nikki Haley, Nikki Haley, Nikki Haley, did you know they destroyed all of the information, all of the evidence, everything,” Trump told his crowd Friday. “Deleted it and destroyed all of it because of lots of things, like Nikki Haley is in charge of security. We offered her 10,000 people.”

“The man was going on a rant about how I was keeping Capitol police from going in on January 6.  He went on and on,” Haley said the next day.  “I wasn’t in DC on January 6. I had nothing to do with the Capitol.”

Haley excoriated Trump’s “dangerous” foreign policy, and how he repeatedly defends his overtures to the likes of Putin, Xi and Kim Jong Un, claiming that his sweet-talk approach to diplomacy was “a good thing, not a bad thing.”

But the hawkish Haley observed:

“What about the fact that Trump praised President Xi of China a dozen times after China gave us Covid?” she asked.

“He said he stood with China when they took Hong Kong’s democracy. He congratulated the Chinese Communist Party on their 70th anniversary,” Haley continued.

“Who does that? Not an American president!”

Haley said that when she was UN ambassador during the Trump presidency, “I had to sit down and have a conversation with him because he was having too much of a bromance with Putin.”

--Last week I was complimentary of Sen. Tim Scott after he endorsed Donald Trump, but this was hours before Scott made his first campaign appearance with Trump in New Hampshire Friday night.

Let’s just say the next five days, Tim Scott was an embarrassment, a joke, pathetic, a lapdog, a bootlicker.  I lost a ton of respect for him…but he can gain it back.  Stop campaigning with the man and regain your stature in the Senate.

--As I go to post, a jury ruled Donald Trump must pay E. Jean Carroll $83 million in damages in her defamation case, after he had already been found guilty of sexual assault.

Trump no doubt Friday night, and for his remaining days until he dies, will continue to defame her over and over again.  Some people never learn.  And some people are just career jerks.

--Former Trump White House official Peter Navarro was sentenced to four months behind bars for contempt of Congress for flouting a subpoena from the House select committee that investigated the 2021 Capitol riot.

Navarro, 74, argued that he couldn’t comply with the subpoena for his testimony and relevant documents because of executive privilege, but that claim was rejected in court and a DC jury convicted him in September of two counts of contempt of Congress.

“I haven’t heard a word of contrition from Dr. Navarro since this case began,” U.S. District Judge Amit Mehta said before imposing the penalty.

--The Bulletin of the Atomic Scientists announced this week that the Doomsday Clock this year was set to 90 seconds to midnight – for the second year in a row, “reflecting the continued state of unprecedented danger the world faces.”

When it was set to 90 seconds to midnight last year, that was the closest it’s ever been to midnight in the history of the clock.

“Make no mistake: resetting the Clock at 90 second to midnight is not an indication that the world is stable.  Quite the opposite.  It’s urgent for governments and communities around the world to act.  And the Bulletin remains hopeful – and inspired – in seeing the younger generations leading the charge,” Rachel Bronson, PhD, president and CEO of the Bulletin of the Atomic Scientists, said in a statement.

The board cited a variety of global threats that were taken into account when deliberating on the clock time, including: the Russia-Ukraine war and deterioration of nuclear arms reduction agreements; the Climate Crisis and 2023’s official designation as the hottest year on record; the increased sophistication of genetic engineering technologies; and the dramatic advance of generative AI which could magnify disinformation and corrupt the global information environment making it harder to solve the larger existential challenges.

Might be time to dust off those family evacuation plans.  [Pssst...Kiawah Island, S.C., but bring lots of cash.  Then again, that could get hit by a hurricane.  Canada, yeah, that’s the ticket.  Oops, wildfires.  Maybe I’ll just stay here and make sure the windows are sealed.]

--The U.S. recorded at least 90 deaths as a result of last week’s storms and severe cold across much of the country.  At least 30 died in Tennessee and 16 in Oregon, both of which suffered from snow and ice and deep cold.  My friend Steve G. who lives in a Nashville suburb said his son was out of school for six days!  Good lord.

That was so sad when in Portland, Oregon, three people were electrocuted to death when powerful winds caused a power line to fall and strike the vehicle in which they were traveling.  They died when they got out of the car and their feet touched the ground while they were still partially in the vehicle. 

“They became part of the active electrical circuit which resulted in their deaths,” the fire department said in a release.

A baby in the vehicle survived.

You hear it all the time.  Do not get out of the car when a wire has fallen on it. Wait for help. You’ll be safe.

--Monday, hundreds of people had to be rescued as historic rain hit San Diego, causing significant flooding that closed major roadways, shut down bus lines, cut power and sent scores of residents scrambling for higher ground.

Nearly 4 inches of rain fell in less than three hours in some areas of the city – almost double the region’s average rainfall for the month – inundating the city and setting a record for the area’s wettest January day, according to the National Weather Service in San Diego.  Previously Jan. 31, 1979, was San Diego’s wettest day, when 2.57 inches fell at San Diego International Airport, but reports I saw had it at 2.73 on Monday, more than 25% of what the site would normally get in an entire year.

I contacted an old friend Bob C. who lives in the area and he said a major issue, particularly in the heavily flooded area, is the city has never taken proper care of its storm drains…as in they weren’t cleaned out beforehand.

More storms are coming next week for the area. 

--Finally, we note the passing of Charles Osgood, the bow-tie-wearing former host of “CBS Sunday Morning” and a fixture for decades on network radio.  He had been suffering from dementia and was 91.

Osgood was a weekend companion for millions of viewers during his 22-year run as host of “Sunday Morning,” taking over from Charles Kuralt in 1994 and remaining host until October 2016, when he was well into his 80s.  He was succeeded by Jane Pauley.  The stature and popularity of “Sunday Morning” grew under Osgood.  I know it was destination television for my parents for decades.

But Osgood was also known for his radio bits, which he always expressed his preference for.  His television sign-off was, “See you on the radio.”

“Television is wonderful, and I don’t mean to take anything away from it, but the fact is that a TV picture is very literally ‘what you see is what you get,’ Osgood said in a 1991 interview.  “You bring your own experience and emotions to radio that you don’t to television.  I do think that radio is more visual.  It’s a paradox but it’s true.”

---

Pray for the men and women of our armed forces…and all the fallen.

The Navy identified the two Navy SEALs who died during an Iranian weapons seizure mission this month…Navy Special Warfare Operator 1st Class Christopher J. Chambers and Navy Special Warfare Operator 2nd Class Nathan G. Ingram.

Pray for Ukraine, Israel and the innocent in Gaza.

God bless America.

---

Gold $2018
Oil $78.17

Regular Gas: $3.10; Diesel: $3.91 [$3.50 / $4.68 yr. ago]

Returns for the week 1/22-1/26

Dow Jones  +0.7%  [38109]
S&P 500  +1.1%  [4890]
S&P MidCap  +0.8%
Russell 2000  +1.8%
Nasdaq  +0.9%  [15455]

Returns for the period 1/1/24-1/26/24

Dow Jones  +1.1%
S&P 500  +2.5%
S&P MidCap  -0.6%
Russell 2000  -2.3%
Nasdaq  +3.0%

Bulls 52.9
Bears 17.1 [Investors Intelligence]

Hang in there.

[I was excused from Jury Duty.  Good thing because it was a case that would have lasted a while.]

Brian Trumbore

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