Week in Review

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Week in Review

04/06/2024

For the week 4/1-4/5

[Posted 4:45 PM ET, Friday]

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Edition 1,303

I get into the Israeli strike on the Iranian consulate in Damascus down below in detail, but up top, it was a bit disconcerting that Hezbollah leader Sayyed Hassan Nasrallah, in televised remarks today, said Iran’s response was coming.

“Be certain, be sure, that the Iranian response to the targeting of the consulate in Damascus is definitely coming against Israel,” he said.

Israel is bracing for the possibility of a retaliatory attack, cancelling leave for all combat units and mobilizing more troops for air defense units.

Israeli Defense Minister Yoav Gallant said Israel was attacking enemies wherever it decided to do so.

“It could be in Damascus and it could be in Beirut,” he said.  “The enemy is badly hit in all places and is therefore looking for ways to respond. We are ready with a multi-layered defense.”

Crude oil, for one, has been rising in response.  So, it could be another interesting week coming up.

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For now, though, when Congress returns next week, it will be largely about aid for Ukraine, as well as Israel for multiple reasons.

Ukrainian President Volodymyr Zelensky gave an interview to the Washington Post’s David Ignatius, delivering a stark message, as Ignatius wrote: “Give us the weapons to stop the Russian attacks, or Ukraine will escalate its counterattacks on Russia’s airfields, energy facilities and other strategic targets.”

I get into the issue below of the U.S. House refusing to approve badly needed military aid for Ukraine but Zelensky, aside from air defense systems, urgently seeks “long-range ATACM-300 missiles, which he said could strike targets in Russian-occupied Crimea, especially the airfields from which Russia launches planes with precision-guided missiles that are doing heavy damage. These missiles recently hit Odessa and several other targets.

“ ‘When Russia has missiles and we don’t, they attack by missiles: Everything – gas, energy, schools, factories, civilian buildings,’ Zelensky said.

“ ‘ATACM-300s, that is the answer,’ he continued.  He said he wanted to use the longer-range missiles not to attack Russian territory but those airfields in Crimea.  ‘When Russia knows we can destroy these jets, they will not attack from Crimea.  It’s like with the sea fleet.  We pushed them from our territorial waters. Now we will push them from the airports in Crimea.’”

Ignatius:

“The lesson of war for Zelensky, after two years of brutal fighting that has killed many of the best officers and soldiers in the Ukrainian army, is that Putin should have been stopped sooner.

“President Barack Obama ‘was not strong against him’ when Putin seized Crimea in 2014, Zelensky said.  ‘Europe wanted to have security on the border and big trade with Russia. That opened the way to war with Ukraine.’

“ ‘He captured Crimea, and there was no reaction at all.  Nobody pushed him back. Nobody stopped him.’ When I asked whether he would have allowed Biden to send U.S. troops into Ukraine to deter the February 2022 invasion, he said simply: ‘Yes.’  In hindsight, that show of force might have been the only way this terrible conflict could have been averted.

“Zelensky offered a chilling characterization of his adversary.  ‘Putin is cunning, but he’s not smart,’ he said.  ‘When you fight with a smart person, it’s a fight with rules.  But when you fight with a cunning person, it’s always dangerous.’

“Looking ahead, Zelensky said Ukraine’s options depend on what Congress decides....

“ ‘We lost half a year,’ while Congress bickered, he said.  ‘We can’t waste time anymore.  Ukraine can’t be a political issue between the parties.’  He said critics of aid for Ukraine didn’t understand the stakes in the war.  ‘If Ukraine falls, Putin will divide the world’ into Russia’s friends and enemies,’ he said.”

Tuesday, Zelensky signed a bill to lower the mobilization age for combat duty from 27 to 25.  It’s been sitting on his desk for months amidst a big national debate after he said the military needed to add at least 500,000 troops in order to keep up the fight against Putin.  The move has long been viewed by Zelensky’s staff as politically toxic.

Zelensky has voiced concerns that Russia is planning to launch a spring or summer offensive this year.

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This Week in Ukraine....

--House Speaker Mike Johnson wants new Ukraine aid approved “right away” but is still grappling to soften opposition from hardliners, leaving doubts about whether the billions in assistance will reach the front lines in time to make a difference.

Multiple members of the House Republican leadership said Monday the odds lawmakers would approve more assistance were no better than 50% and the speaker hasn’t made clear how much of his own political standing he is willing to put on the line.

But Johnson is now saying he will set a timeline when Congress returns from its recess next week.  He indicated, however, in an interview with Fox News Sunday that the House would attach new conditions to the aid, possibly including the providing of the assistance as a loan to eventually be repaid, or overturning a Biden administration freeze on new licenses to export liquefied natural gas that is opposed by Republican allies in the energy industry.

The problem is the Senate already passed its own Ukraine aid plan in February. If the House passed a new version, that would create a lengthy delay, even if the Democratic-controlled Senate agrees.

Mitch McConnell, the Senate Republican leader who has repeatedly urged Johnson to bring up the Senate version for a vote, on Monday called the Ukraine aid “extremely important” and said he planned to focus on fighting growing isolationism particularly in his own party over the next few years...which doesn’t help Ukraine today.

“The Russians have become like the old Soviet Union,” McConnell said in a local radio interview in Kentucky.  “I think this is the most dangerous time for the free world since the Berlin Wall fell down.”

McConnell said arguments of isolationists are easily refuted. “We’re not losing any of our troops,” he said. But if Ukraine falls, “some NATO country will be next and then we will be right in the middle of it.”

The other thing that McConnell pointed out that the American people just don’t understand, because it hasn’t been well explained to them by the man occupying the White House, much of the funding in the Ukraine supplemental funds projects in 38 states for the purpose of replacing weapons stockpiles with newer weapons.

While this debate is taking place, NATO has been discussing plans this week to put together a 100 billion euro ($107 billion) five-year fund for military support for Ukraine, a plan seen as a way to “Trump-proof” aid for Kyiv.

The proposal by NATO Secretary-General Jens Stoltenberg would give the alliance a more direct role in coordinating the supply of arms, ammunition and equipment to Ukraine.

Stoltenberg said as he arrived at the Brussels meeting: “We must ensure reliable and predictable security assistance to Ukraine for the long haul, so that we rely less on voluntary contributions and more on NATO commitments.  Less on short-term offers and more on multi-year pledges.”

The aim is to reach a decision by the time of the July summit of alliance leaders in Washington.

--Meanwhile, Russia has stepped up missile strikes on Ukrainian cities and energy infrastructure.  On the front lines, delays in supplies of artillery shells from allies – especially the U.S. – have left Ukraine’s forces out-gunned by as much as six to one.

Hundreds of thousands in the Odesa region were left without power Sunday after debris from a downed Russian drone caused a blaze at an energy facility, Gov. Oleh Kiper said.  Two people died in weekend attacks in Ukraine’s western Lviv region and in the northeast.

Ukraine’s largest private energy firm, DTEK, said last Saturday that five of its six plants had been damaged or destroyed with 80 percent of its generating capacity lost, and that repairs could take up to 18 months.

--Ukraine said one of their drones struck Russia’s third-largest oil refinery on Tuesday about 1,300km from the front lines, hitting a unit that processes about 155,000 barrels of crude per day, though an industry source said the strike caused no critical damage.

--Russian Security Council secretary Nikolai Patrushev, one of Vladimir Putin’s most powerful allies, said over the weekend that the 75 years of NATO history since its founding on April 4, 1949, had shown it to be a long-term source of “danger, crisis and conflict.”

“The North Atlantic Alliance is de facto a party to the Ukrainian conflict and is actively involved in organizing the shelling of Russian territories,” Patrushev told the Argumenty I Fakty newspaper.

--Polish Prime Minister Donald Tusk warned Europe is in a “pre-war era” and Ukraine must not be defeated by Russia for the good of the whole continent.

He said war was “no longer a concept from the past,” adding: “It’s real and it started over two years ago.”

Tusk’s comments came after Russia’s latest massive attack on Ukraine’s energy system.

Vladimir Putin said Moscow had “no aggressive intentions” towards NATO countries.

The idea that his country would attack Poland, the Baltic states and the Czech Republic was “complete nonsense,” he said.

However, he warned that if Ukraine used Western F-16 warplanes from airfields in other countries, they would become “legitimate targets, wherever they might be located.”

Appealing for urgent military aid for Ukraine, Tusk warned the next two years of the war would decide everything, adding: “We are living in the most critical moment since the end of the Second World War.”

--A nighttime Russian attack using Iranian-designed drones killed four people and wounded 12 in Kharkiv, Ukraine’s second-largest city, authorities said Thursday.

The Shahed drones smashed into two apartment buildings.

Three of the four victims were first responders, killed when Russia struck a multistory building twice in quick succession, a tactic used before by Russia. The first strike draws crews to the scene and the second one is designed to kill or wound them.

--Friday, Russia targeted energy infrastructure in the Odesa region but Ukrainian air defenses repelled the attacks, the military said.

Russian air defenses downed 53 Ukrainian drones overnight, most of them over the Rostov region, the RIA news agency reported, citing the Russian defense ministry.

--But also Friday, Ukraine attacked Russia’s Morozovsky military air base in the Rostov region, reportedly destroying at least six Russian warplanes in a joint operation conducted by the SBU security service and military, according to Ukrainian intelligence officials, and as reported by Reuters and the Associated Press.  About 20 personnel were allegedly killed in the overnight drone strike.

It’s not known if Russia’s claims of downing 53 Ukrainian drones in the region was related to the attack.

Morozovsky air base was used by Russian tactical bombers like the Sukhoi Su-24 and Su-24M that Moscow’s air force uses to fire guided bombs at the Ukrainian military and frontline towns and cities.

If the details are true, this would represent one of Ukraine’s most successful cross-border strikes.

--Unfortunately, we are likely to hear a lot about the town of Chasiv Yar in the coming days.  Like Bakhmut and Avdiivka in eastern Ukraine, Chasiv Yar, a heavily fortified town with a pre-war population of 12,200, is the next target of Russian forces and there is said to be heavy fighting there today.

Should this town fall, it would be another grim setback for Kyiv, and a further example of how Ukraine desperately needs U.S. aid...and fast.

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--The Kremlin on Monday dismissed a report that Russian military intelligence may be behind the mysterious “Havana Syndrome” ailment that has afflicted U.S. diplomats and spies globally.  As CBS’ “60 Minutes” reported in a bombshell report on Sunday, in collaboration with Insider, a Russia-focused investigative media group based in Riga, Latvia, and Germany’s Der Spiegel, members of a Russian military intelligence (GRU) unit known as 29155 had been placed at the scene of reported health incidents involving U.S. personnel.

The year-long investigation also reported that senior members of Unit 29155 received awards and promotions for work related to the development of “non-lethal acoustic weapons.”

“This is not a new topic at all; for many years the topic of the co-called ‘Havana Syndrome’ has been exaggerated in the press, and from the very beginning it was linked to accusations against the Russian side,” Kremlin spokesman Dmitry Peskov told reporters when asked about the report.  “But no one has ever published or expressed any convincing evidence of these unfounded accusations anywhere,” he added.  “Therefore, all this is nothing more than baseless, unfounded accusations by the media.”

In Washington, the Pentagon confirmed that a senior Pentagon official experienced symptoms similar to those associated with the “Havana Syndrome” during the NATO summit in Vilnius last year.  Symptoms of the ailment have included migraines, nausea, memory lapses and dizziness.

The Office of the Director for National Intelligence pointed to the 2024 Annual Threat Assessment that said the U.S. intelligence community continues “to closely examine” so-called Anomalous Health Incidents but noted that most agencies concluded that it “is very unlikely a foreign adversary is responsible.”

But the report says differently.

An American military investigator examining instances of the syndrome told “60 Minutes” that the common link between victims of the syndrome was a “Russia nexus.”

Greg Edgreen explained: “There was some angle where they had worked against Russia, focused on Russia, and done extremely well.”

He also said the official U.S. bar of proof to show Russian involvement had been set too high, as the U.S. did not want to “face some very hard truths.”

--Reuters reported in an exclusive that Iran tipped off Russia about the possibility of a major “terrorist operation” on its soil ahead of the concert hall massacre near Moscow.

Moscow had played down U.S. intelligence that had also warned Russia in advance of a likely militant Islamist attack but it is harder for the Kremlin to dismiss intelligence from a diplomatic ally on the attack.

“Days before the attack in Russia, Tehran shared information with Moscow about a possible big terrorist attack inside Russia that was acquired during interrogations of those arrested in connection with deadly bombings in Iran,” one of the sources told Reuters.

Iran arrested 35 people in January, including a commander of ISIS-K, who it said were linked to twin bombings on Jan. 3 in the city of Kerman that killed nearly 100 people.  ISIS claimed responsibility for the Iran blasts, the bloodiest since the 1979 Islamic Revolution.  U.S. intelligence sources said ISIS-K carried out both the Jan. 3 attacks and the March 22 shootings in Moscow.

Reuters reports that its three sources on the angle of Iran warning Moscow lacked specific details regarding timing and the target.

The Washington Post’s Shane Harris reported on Tuesday: “More than two weeks before terrorists staged a bloody attack in the suburbs of Moscow, the U.S. government told Russian officials that Crocus City Hall, a popular concert venue, was a potential target, according to U.S. officials familiar with the matter.

“The high degree of specificity conveyed in the warning underscores Washington’s confidence that the Islamic State was preparing an attack that threatened large numbers of civilians, and it directly contradicts Moscow’s claims that the U.S. warnings were too general to help preempt the assault.

“The U.S. identification of the Crocus concert hall as a potential target – a fact that has not been previously reported – raises new questions about why Russian authorities failed to take stronger measures to protect the venue, where gunmen killed more than 140 people and set fire to the building.”

--Editorial / Wall Street Journal

“The U.S. homeland hasn’t suffered a terrorist attack from Islamic extremists in years, but that doesn’t mean the threat has gone away, and it may be increasing again.  That was the warning Sunday from retired Gen. Frank McKenzie, who was in charge of U.S. forces in Afghanistan during President Biden’s withdrawal.

“ ‘We should believe them when they say that.  They’re going to try to do it,’ Gen. McKenzie told ABC News’ ‘This Week.’  ‘I think the threat is growing.’

“He said the threat began ‘to grow as soon as we left Afghanistan, it took pressure off ISIS-K.  So I think we should expect further attempts of this nature against the United States as well as our partners and other nations abroad.’....

“President Biden assured the American people when he left Afghanistan that the U.S. would retain an over-the-horizon ability to monitor terrorists there.  But Gen. McKenzie said that isn’t true now: ‘In Afghanistan, we have almost no ability to see into that country and almost no ability to strike into that country.’

“Seth Jones, of the Center for Strategic and International Studies, made the same point about the lack of U.S. capability to see in Afghanistan on the Journal Editorial Report on Fox News on Saturday.

“The Biden Administration doesn’t want to talk about this for obvious political reasons, especially in an election year.  All the more so when the porous southern U.S. border could be an avenue for terrorist infiltration. But it doesn’t enhance U.S. safety to hide the truth.”

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Israel and Hamas....

--Tens of thousands protested in Jerusalem on Sunday night calling for the release of the hostages held in Hamas captivity and for new elections.

The protesters set up a four-day protest camp outside the Knesset parliament and some marched through ultra-Orthodox Jerusalem neighborhoods, criticizing the exemption from military service enjoyed by religious seminary students.

With the Gaza war having raged nearly six months, many of the hostages’ relatives are now calling explicitly for Prime Minister Benjamin Netanyahu to be ousted from office and issued the following statement, addressed to the PM: “You are the obstacle to a deal.  We will act for your immediate ouster from office and replacement because that is the only way to get them home.  We will pursue you and we won’t relent.”

“Netanyahu is guilty of the October 7th failure and is deliberately leading us to the country’s destruction” read a statement by the Kaplan Force, one of the main anti-government protest groups.  “At this stage courageous civil action is once again needed to genuinely save Israel.”

Netanyahu, in a news conference on Sunday night, hours before undergoing a hernia operation, said he is working around the clock to free all the hostages and he warned that new elections would paralyze Israel for six to eight months.  “It would paralyze negotiations for freeing our hostages and would bring an end to the war before achieving its goals, and the first who welcome this is Hamas, and that says everything.”

He also vowed nothing will prevent Israel attacking the southern city of Rafah.

Benny Gantz, a member of the country’s war cabinet and Netanyahu’s chief rival, called for early elections, like by September, piling more pressure on the prime minister.

--The Israeli military said it killed a Hezbollah commander in an airstrike on a vehicle in Lebanon on Sunday, identifying him as Ismail Al-Zin, a commander in the anti-tank missile unit of Hezbollah’s Radwan Forces.  Hezbollah said Al-Zin was part of the elite Radwan unit but not a senior figure.

Israel said it has killed around 25 members of the unit.

Overall, since Hezbollah began launching rockets from southern Lebanon into Israel on Oct. 8 in support of Hamas, Israel’s shelling of Lebanon has killed nearly 270 Hezbollah fighters, but has also killed around 50 civilians.

--Israeli forces left Al Shifa Hospital in Gaza City on Monday after a two-week operation by special forces who detained hundreds of suspected Palestinian militants and left a wasteland of destroyed buildings.

Palestinian officials called the raid on a hospital treating severely wounded patients a war crime, while Israeli officials said special forces units conducted a targeted strike against a Hamas stronghold deliberately located among vulnerable civilians.

Thousands of Palestinians had been sheltering in the complex, one of a handful of locations in the north of Gaza with some access to electricity and water.

Israeli military spokesman Daniel Hagari said Hamas was using the hospital for safe haven, and “they know that they use it intentionally as their command and control center,” he told reporters. He said 200 militants and two Israeli servicemen had been killed during the operation, and more than 900 suspected militants detained, of whom some 500 were identified as Hamas or Islamic Jihad, including senior commanders and officials.

--Meanwhile, as alluded to above in Prime Minister Netanyahu’s comments on Sunday evening, the IDF has stepped up preparations for an assault on Rafah, where more than 1 million people displaced by the fighting have been sheltering, many in improvised encampments.  An Israeli airstrike over the weekend there killed six people, Palestinian health officials said.

--Suspected Israeli warplanes bombed Iran’s embassy/consulate in Syria on Monday in an escalation of Israel’s war against Iran’s regional proxies, flattening a building in a strike Tehran said killed a top Revolutionary Guards commander, two other generals and several other officers and diplomats.  Photos showed the consulate was destroyed.

Israel has long targeted Iranian military installations and those of its proxies in Syria, and has ramped up those strikes in parallel with its campaign against Iran-backed Hamas in Gaza.  But Monday’s attack was the first time the vast embassy compound itself had been hit.

Israel offered no comment.

The Iranian ambassador to Syria, Hossein Akbari, who was not injured, said Tehran’s response would be “harsh.”

Iranian state media said one of those killed was Gen. Mohammad Reza Zahedi, a senior commander in Iran’s Revolutionary Guards Corp (IRGC) who oversaw Iran’s covert military operations in Syria and Lebanon, and that Tehran believed he was the target of the attack.

Since Hamas’ attack on Israel on Oct. 7, Israel has been escalating airstrikes in Syria against both Iran’s Guards Corps and Lebanese-based Hezbollah, which also operated in Syria with the support of the government of President Bashar al-Assad.

--Monday, seven aid workers were killed in an Israeli strike in central Gaza while delivering humanitarian aid, World Central Kitchen (WCK) said on Tuesday.

The food aid charity said despite coordinating movements with Israeli Defense Forces, their convoy was hit as it was leaving the Deir al-Balah warehouse, where the team had unloaded more than 100 tons of humanitarian food aid brought to Gaza on the maritime route.

[A convoy of three ships with nearly 240 tons of food, enough for more than a million meals, and other supplies arrived off the northern Gaza coast on Monday.  But as I noted the other week, these deliveries are but a drop in the bucket, with deliveries by road far more efficient, with larger supplies.  But after the WCK tragedy, the ships turned back from Gaza just a day after arriving, saying it was too dangerous to offer help.]

The charity said the team was traveling in a three-car convoy that included two armored vehicles, and its movements had been coordinated with the Israeli army.

WCK was key to the recently opened sea route, which offered some hope for northern Gaza – where the UN says much of the population is on the brink of starvation, largely cut off from the rest of the territory by Israeli forces.

The seven killed were confirmed to be from Australia, Poland, the UK (3), a dual citizen of the U.S. and Canada, and Palestine.

“This is not only an attack against WCK, this is an attack on humanitarian organizations showing up in the most dire of situations where food is being used as a weapon of war. This is unforgivable,” said WCK CEO Erin Gore.

WCK said it was pausing operations immediately and will be making decisions about the future of the charity’s work soon.

Australian Prime Minister Anthony Albanese confirmed an Australian national was among those killed while doing “extraordinarily important work,” naming her as Zomi Frankcom.

Albanese said on Tuesday his government would call in the Israeli ambassador over an incident that was “beyond any reasonable circumstances,” adding: “Australia expects full accountability for the deaths of aid workers, which is completely unacceptable.”

Albanese: “I’m very concerned about the loss of life that is occurring in Gaza.  My government has supported a sustainable ceasefire with a call for the release of hostages, and there have been far too many innocent lives of Palestinians and Israelis lost during the Gaza Hamas conflict.”

Chef Jose Andres, the founder of WCK, said the charity “lost several of our sisters and brothers in an IDF air strike in Gaza.”

“I am heartbroken and grieving for their families and friends and our whole WCK family.  These are people...angels...I served alongside in Ukraine, Gaza, Turkey, Morocco, Bahamas, Indonesia.  They are not faceless...they are not nameless,” Andres said.

He said the Israeli government needed to “stop this indiscriminate killing.” Writing on X, Andres added; “It needs to stop restricting humanitarian aid, stop killing civilians and aid workers, and stop using food as a weapon.”

Commenting on the reports, the Israeli military said it was conducting a thorough review at the highest levels to understand the circumstances of this “tragic” incident.

“The IDF makes extensive efforts to enable the safe delivery of humanitarian aid, and has been working closely with WCK in their vital efforts to provide food and humanitarian aid to the people of Gaza,” the military statement said.

But then Prime Minister Netanyahu issued a statement:   

“Unfortunately, over the last day there was a tragic incident of an unintended strike of our forces on innocent people in the Gaza Strip.” He said officials are “checking this thoroughly” and “will do everything for this not to happen again.”

President Biden said the deaths were tragic, but that even worse, it was not a stand-alone incident and said flatly that Israel was not doing enough to protect civilians.

“The United States has repeatedly urged Israel to deconflict their military operations against Hamas with humanitarian operations, in order to avoid civilian casualties,” he said, in a tone that was notably sharper and more direct than his other rebukes of Israel’s decisions since the start of the war.

“This conflict has been one of the worst in recent memory in terms of how many aid workers have been killed.  This is a major reason why distributing humanitarian aid in Gaza has been so difficult – because Israel has not done enough to protect aid workers trying to deliver desperately needed help to civilians.”

Jose Andres then wrote some of the following for the New York Times:

“In the worst conditions you can imagine – after hurricanes, earthquakes, bombs and gunfire – the best of humanity shows up.  Not once or twice but always.

“The seven people killed...were the best of humanity....

“Their work was based on the simple belief that food is a universal human right. It is not conditional on being good or bad, rich or poor, left or right.  We do not ask what religion you belong to. We just ask how many meals you need....

“We know Israelis. Israelis, in their heart of hearts, know that food is not a weapon of war.

“Israel is better than the way this war is being waged.  It is better than blocking food and medicine to civilians. It is better than killing aid workers who had coordinated their movements with the Israel Defense Forces....

“Prime Minister Benjamin Netanyahu has said of the Israeli killings of our team, ‘It happens in war.’  It was a direct attack on clearly marked vehicles whose movements were known by the Israel Defense Forces.

“It was also the direct result of a policy that squeezed humanitarian aid to desperate levels. Our team was en route from a delivery of almost 400 tons of aid by sea – our second shipment, funded by the United Arab Emirates, supported by Cyprus and with clearance from the Israel Defense Forces.

“The team members put their lives at risk precisely because this food aid is so rare and desperately needed....

“The peoples of the Mediterranean and Middle East, regardless of ethnicity and religion, share a culture that values food as a powerful statement of humanity and hospitality – of our shared hope for a better tomorrow....

“It is not a sign of weakness to feed strangers; it is a sign of strength. The people of Israel need to remember, at this darkest hour, what strength truly looks like.”

--On Wednesday, Hamas chief Ismail Haniyeh said the Islamist movement was sticking to its conditions for a ceasefire in Gaza, including an Israeli military withdrawal.

“We are committed to our demands; the permanent ceasefire, comprehensive and complete withdrawal of the enemy out of the Gaza Strip, the return of all displaced people to their homes, allowing all aid needed for our people in Gaza, rebuilding the Strip, lifting the blockade and achieving an honorable prisoner exchange deal,” Haniyey said in a televised speech marking Al-Quds (Jerusalem) Day.

Israel said it is only interested in a temporary truce to free hostages, while Hamas says it will let them go only as part of a deal to permanently end the war.

--And then on Thursday, President Biden spoke with Netanyahu for the first time since the World Central Kitchen tragedy and Biden issued a strong rebuke toward Israel, calling for an immediate ceasefire.

The White House said Biden “made clear the need for Israel to announce and implement a series of specific, concrete, and measurable steps to address civilian harm, humanitarian suffering, and the safety of aid workers.”

Biden “made clear that U.S. policy with respect to Gaza will be determined by our assessment of Israel’s immediate action on these steps,” the White House said in a statement.

The statement reflected a sharp change in Biden’s tone and, for what appears to be the first time, a set of strings attached to continued U.S. support.  It would be the first time the U.S. has suggested it would condition its support.

But after the call, White House spokesperson John Kirby didn’t elaborate on what specific changes the U.S. would make on its policy toward Israel and Gaza.  He said the administration hoped to see an announcement of Israeli steps in the “coming hours and days.”

While Biden has been described by the White House as outraged and heartbroken, he has previously made no fundamental change in his steadfast support for Israel in the conflict.

Secretary of State Antony Blinken said Israel “must meet this moment” by surging humanitarian assistance and ensuring the security of those who provide aid.  “If we don’t see the changes that we need to see, there’ll be changes in our policy,” Blinken told reporters.

Prior to the call with the president, Netanyahu, in a meeting in Jerusalem with visiting Republican lawmakers, pushed back against Biden’s insistence on a two-state solution to the Palestinian conflict.

“There is a contrary move, an attempt to force, ram down our throats a Palestinian state, which will be another terror haven, another launching ground for an attempt, as was the Hamas state in Gaza,” Netanyahu said. “That is opposed by Israelis, overwhelmingly.”

In a separate video statement, he focused on the threat he sees from Iran.  “For years Iran has been acting against us, both directly and through its proxies, and therefore Israel is acting against Iran and its proxies, in both defensive and offensive operations,” he said, referring to the strike that killed seven Iranian military officers in Damascus.

“We know how to defend ourselves,” he added, “and we will operate according to the simple principle by which those who attack us or plan to attack us – we will attack them.” [New York Times]

The White House said Biden stood by Israel against Iran during the Thursday call. 

Later, Israel said it had agreed to open another crossing for aid to get into northern Gaza at Erez, to use the port of Ashdod in southern Israel to direct aid into the enclave and to significantly increase deliveries from Jordan – “at the president’s request.”

A statement from the National Security Council said, “These steps must now be fully and rapidly implemented.”

The IDF then said Friday it had dismissed two officers and reprimanded three others for their roles in the World Central Kitchen drone strikes.

“It’s a tragedy,” the military’s spokesman, Rear Adm. Daniel Hagari, told reporters.  “It’s a serious event that we are responsible for, and it shouldn’t have happened, and we will make sure that it won’t happen again.”

The investigation determined that a colonel had authorized the series of deadly drone strikes on the convoy based on one major’s observation – from grainy drone-camera footage – that someone in the convoy was armed. That observation turned out to be untrue, military officials said.

WCK and Secretary of State Blinken are among those calling for an independent commission to investigate the killings.

Editorial / Wall Street Journal

“(The Biden administration is) using the World Central Kitchen tragedy to push Israel to cut short the war and let Hamas survive.  It’s also the worst thing the President could do to free the hostages.

“The message Hamas will take away is clear: Keep rejecting hostage deals, do whatever you can to worsen the humanitarian catastrophe, and watch Mr. Biden blame and pressure Israel to compromise on its war aims. After Oct. 7, the U.S. demanded that Hamas release the hostages ‘unconditionally.’ It is now closer to demanding that Israel unconditionally stop fighting.

“Mr. Biden also seems to have forgotten his own mistaken missile strike.  When the President’s Irish goodbye from Afghanistan was spoiled by a suicide bombing that killed 13 U.S. troops, he ordered retaliation against ISIS-K.  On Aug. 29, 2021, a U.S. Hellfire missile struck a car at a family home in Kabul in what Gen. Mark Milley called a ‘righteous strike.’

“It turned out the strike killed 10 civilians, including seven children. But the Biden Administration wasn’t quick to apologize. ‘Almost everything senior defense officials asserted in the hours, days and weeks after it turned out to be false,’ the New York Times reported....

“It took weeks for the Pentagon to own up to what it called a ‘tragic mistake.’

“The fog of war is real, and for Mr. Biden this and other U.S. strikes were mistakes.  But he now holds Israel to a different standard....

“Rather than hold Hamas accountable and demand at every opportunity that it release the hostages, including five Americans, Mr. Biden places the full burden on Israel.  He puts Israel on trial each day from Washington lecterns, undermining support for its war effort.

“Mr. Biden has mostly resisted pressure from his left to cut off Israel and deny it the weapons it needs to defeat Hamas.  But in the wake of this tragic Israeli mistake, and while Israel goes on high alert for an Iranian attack, he threatens to reverse even that support.

“If he does so, he will send the wrong message to our friends and especially our enemies in the Middle East.  He may also pay a bigger political price at home than he realizes.”

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Wall Street and the Economy

Federal Reserve Chair Jerome Powell, in a speech at Stanford University on Wednesday, said Fed officials will likely reduce their benchmark funds rate later this year, despite recent reports showing that the U.S. economy is still strong, and that U.S. inflation picked up in January and February.

“The recent data do not...materially change the overall picture,” Powell said, “which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path.”

Most Fed officials “see it as likely to be appropriate” to start cutting their key rate “at some point this year,” he added.

Powell also sought to dispel any notion that the Fed’s interest-rate decisions might be affected by the presidential election.

In his speech, Powell noted that Congress intended the Fed to be fully independent of politics, with officials serving long terms that don’t coincide with elections.

“This independence,” Powell said, “both enables and requires us to make our monetary policy decisions without consideration of short-term political matters.”

Federal Reserve Bank of Atlanta President Raphael Bostic, a voting member this year, said it will likely be appropriate to lower interest rates in the fourth quarter, emphasizing the bumpy nature of inflation progress.

In an interview with CNBC, Bostic reiterated his expectation for just one rate cut this year, pointing to the strength of the economy and a slower decline in inflation.

“I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter. If that trajectory slows down in terms of inflation, then we’re going to have to be more patient than I think many have expected.”

Another 2024 FOMC voting member, Cleveland Fed President Loretta Mester, said on Tuesday that inflation is still on a bumpy path lower this year, but more evidence will be needed to confirm that the process is still on track.

Speaking of the higher-than-expected inflation figures for January and February, Mester said in a speech, “It’s a good reminder of what we already knew: the disinflation process won’t be a smooth path back to 2%.”

But she hinted she might be amenable to a cut in June, as she continued to pencil in three rate cuts this year.

Thursday, another 2024 voting member, Thomas Barkin of the Richmond Fed, said the central bank has “time for the clouds to clear” on inflation before starting to cut interest rates.

Inflation data at the start of this year “has been a little less encouraging,” Barkin told the Home Building Association of Richmond, and while that may be a result of weather-related or seasonal issues “it does raise the question of whether we are seeing a real shift in the economic outlook, or merely a bump along the way.”

“I think it is smart for the Fed to take our time,” Barkin added. “No one wants inflation to reemerge. And given a strong labor market, we have time for the clouds to clear before beginning the process of toggling rates down.”

Also Thursday, Minneapolis Fed Bank President Neel Kashkari, not a voting member this year, said that at the last FOMC meeting he penciled in two rate cuts this year but that if inflation continues to stall, none may be required.

“There’s a lot of momentum in the economy right now,” Kashkari said in an interview with Pensions & Investments.

Such cautious talk helped lead to Thursday’s market selloff, along with renewed Middle East tensions.

And speaking of momentum, Friday’s March jobs report provided a further example of same, 303,000, far greater than expected, with February revised down just 5,000 to 270,000.  The unemployment rate ticked down to 3.8%, and average hourly earnings were exactly as expected, up 0.3% and 4.1% year-over-year, the latter down from 4.3% prior.  As in kind of a perfect report; strong job growth and easing wage pressures.

Earlier, we had ISM data for March, with manufacturing stronger than forecast, 50.3 vs. 47.8 prior (50 the dividing line between growth and contraction), but the service sector reading disappointed at 51.4, down from 52.6 in February, so the market recovered some of its losses on Thursday.

Construction spending for February was down 0.3% when a hefty gain was forecast, while February factory orders rose 1.4%.

The Atlanta Fed’s GDPNow barometer for first-quarter growth is at 2.5%.

Freddie Mac’s 30-year fixed-rate mortgage is 6.82% this week.

Next week, we get key inflation data for March on consumer and producer prices.

--On a different topic, the coming electricity crisis, the Wall Street Journal had the following editorial comments.

“President Biden and the press keep raising alarms about a climate crisis that his policies can’t do much about.  Yet in the meantime they’re ignoring how government climate policies are contributing to a looming electric-grid crisis that is more urgent and could be avoided.

“These pages have been warning for years about an electric-power shortage. And now grid regulators and utilities are ramping up warnings.  Projections for U.S. electricity demand growth over the next five years have doubled from a year ago.  The major culprits: New artificial-intelligence data centers, federally subsidized manufacturing plants, and the government-driven electric-vehicle transition.

“Georgia Power recently increased 17-fold its winter power demand forecast by 2031, citing growth in industries such as EV and battery factories....

“Don’t expect the power to come from New York, which is marching toward a power shortage as it shuts down nuclear and fossil-fuel power in favor of wind and solar. A new Micron chip factory in upstate New York is expected to require as much power by the 2040s as the states of New Hampshire and Vermont combined.

“Electricity demand to power data centers is projected to increase by 13% to 15% compounded annually through 2030.  Yet a shortage of power is already delaying new data centers by two to six years, according to commercial-real estate firm CBRE Group....

“Data centers – like manufacturing plants – require reliable power around the clock year-round, which wind and solar don’t provide.  Businesses can’t afford to wait for batteries to become cost-effective.  Building transmission lines to connect distant renewables to the grid typically takes 10 to 12 years....

“The media will discover this problem eventually, though not this year if it might call into question Mr. Biden’s climate agenda.  Perhaps they’ll notice when more blackouts arrive.”

Europe and Asia

We had March PMI data for the euro area this week, courtesy of S&P Global and Hamburg Commercial Bank.  The composite reading was 50.3, a 10-month high, with manufacturing at 46.1, services 51.5, a 9-month high

Germany: 41.9 mfg., 50.1 services
France: 46.2 mfg., 48.3 services
Italy: 50.4 mfg., 54.6 services
Spain: 51.4 mfg., 56.1 services
Ireland: 49.6 mfg., 56.6 services
Netherlands: 49.7 mfg.
Greece: 56.9 mfg. (25-mo. high)

UK: 50.3 mfg. (20-mo. high), 53.1 services

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

“It’s a bit disheartening: over the last eight months, the manufacturing industry has been gradually climbing the Output PMI ladder, but it still finds itself on the basement staircase.  However, progress to the next floor has yet to materialize, largely owing to the underperformance of the German and French industries. Given this, it comes as no surprise that our GDP nowcast model, incorporating PMI data, predicts a continuation of the recession in the manufacturing sector of the eurozone....

“(But), finally some good news again.  The service sector in the eurozone is gradually finding its footing, with activity stabilizing in February and showing signs of moderate growth in March.  It’s particularly encouraging to note that new business has resumed growth after an eight-month dry spell.  This favorable trend is expected to persist, fueled by wage growth outpacing inflation, thus bolstering the purchasing power of households.  Consequently, individuals are more inclined to dine out, travel, and spend their money on other services.  However, a full-fledged boom is not on the horizon.”

Separately, a flash estimate on March inflation in the eurozone, courtesy of Eurostat, came in at 2.4%, down from 2.6% in February.  The core rate, ex-food and energy, was 3.1%, down from 3.3% in February.

Germany 2.3%, France 2.4%, Italy 1.3%, Spain 3.2%, Netherlands 3.1%, Ireland 1.7%.

The European Central Bank meets next Thursday and could decide to lower rates, or maybe wait until the following meeting for further confirmation.

Industrial producer prices for February in the EA20 decreased by 1.0% over January, and have fallen 8.3% year-over year, after soaring in 2022.

The euro area unemployment rate for February was 6.5%, down from 6.6% in February 2023.

Germany 3.2%, France 7.4%, Italy 7.5%, Spain 11.5%, Netherlands 3.7%, Ireland 4.2% [Eurostat]

Lastly, February retail sales/trade in the eurozone fell 0.5% compared with January, and was down 0.7% vs. a year ago. [Eurostat]

Turning to Asia...China reported out its PMI data, with the official government manufacturing figure for March coming in at 50.8 vs. 49.1 prior, the first reading above 50 since September and a further sign the economy is stabilizing.  The services number was 53.1 vs. 51.4 in February.

The private Caixin Mach manufacturing PMI was 51.1 vs. 50.9 in February, services 52.7 vs. 52.5.

Treasury Secretary Janet Yellen is in China for a few days meeting with government officials.  Friday, she expressed growing concerns over the global economic fallout from China’s excess manufacturing capacity.

Yellen and Biden administration officials are growing increasingly concerned about China’s overproduction of electric vehicles, solar panels, semiconductors and other goods that are flooding into global markets in the face of a demand slump in China’s domestic market.

Japan’s manufacturing PMI for March was 48.2 vs. 47.2 prior, still contraction, while the service sector reading was 54.1 vs. 52.9.

February household spending rose a better-than-expected 1.4% month-over-month, 0.5% year-over-year.

South Korea’s manufacturing PMI for March was 49.8 vs. 50.7 in February.

Taiwan’s was 49.3 vs. 48.6 prior.

Street Bytes

--Stocks fell on the cautious Fed comments, though as noted above, today’s jobs report was a winner. The Dow Jones had its worst week of the year, -2.3% to 38904, while the S&P 500 lost 1% and Nasdaq 0.8%.  Earnings season is around the corner.

--U.S. Treasury Yields

6-mo. 5.32%  2-yr. 4.74%  10-yr. 4.39%  30-yr. 4.54%

The yield on the 10-year rose 19 basis points this week.  The 2-year 12 bps.  Strong economic news could mean fewer rate cuts, sports fans.

Consumer and producer price data next week.  Buckle up.

--Crude oil rose to over $87, as measured by West Texas Intermediate, before finishing the week at $86.75, as OPEC+ supply cuts underpin a steadily strengthening market in terms of consumption.  Conflict in the Middle East has also caused swaths of global shipping to divert around Africa to keep crews and cargo safe.  And then we had Israel’s strike on Iran’s embassy in Damascus, adding to concerns of an escalating conflict.

Tuesday, a meeting of the top OPEC+ ministers kept oil output policy unchanged and pressed some countries to boost compliance with output cuts.

--General Motors on Tuesday reported a drop in first-quarter U.S. auto sales on lower deliveries to commercial customers, but strong retail demand helped it stay ahead of rival Toyota Motor.

GM’s sales fell 1.5% to 594, 233 units in the first three months of the year, while Toyota’s jumped 20% to 565,098 vehicles in the quarter.

Automakers have seen strong sales over the past quarters, helped by a surge in consumer interest toward new vehicles for personal mobility after the pandemic, but industry experts expect prices to taper off from year-ago levels as inventory at dealer lots improves.

U.S. new-vehicle sales volume in the first quarter is expected to grow by 5.6% to 3.8 million units from a year earlier, according to Coz Automotive.  March seasonally adjusted annual rate is expected to finish near 15.5 million, up 0.6 million over last year’s pace.

Average transaction prices are expected to be $44,186 in March, down 3.6% from a year ago, according to J.D. Power.

Last week I wrote how GM and Ford executives gave upbeat outlooks for the U.S. market and their profit plans, but Ford said demand for electric vehicles is “much lower than the industry expected,” and added that it would rely on demand for hybrid models “as an important part of that bridge over the next five years.”

Back to Toyota, sales of electrified vehicles totaled 206,850, a surge of more than 74% on a volume basis from a year earlier.  But something like 99% of these are hybrids. It can be confusing.

--Ford Motor Co. reported a 6.8% rise in first-quarter U.S. auto sales, driven by demand for its pickup trucks and crossover SUVs.  The automaker notched sales of 508,083, compared with 475,906 a year earlier. Sales of Ford’s hybrid vehicles rose 42% to 38,421 from a year ago, while EVs jumped 86.1%

Hybrid growth is expected to continue as more versions of the new F-150 hybrid ship to dealers.  Ford sold 20,223 EVs in Q1, making it the second best-selling EV brand behind Tesla for the quarter.  Mustang Mach-E posted strong Q1 sales of 9,589 SUVs – up 77% from a year ago.

But you can see that 20,233 EVs still pales in comparison to the 508,000 total. 

And then Thursday, Ford said it was delaying some spending on all-electric vehicles to focus more on hybrids.

--Tesla shares fell 5% on Tuesday after the EV maker posted a quarterly fall in deliveries for the first time in nearly four years and missed Wall Street estimates badly, a sign that the effects of its price cuts are waning as it battles rising competition and softer demand.

Tesla handed over about 386,810 vehicles in the three months to March 31, down 20.2% from the prior quarter.  It produced 433,371 vehicles during the period.  Wall Street on average had expected Tesla to deliver 454,200 vehicles, according to 18 analysts polled by Visible Alpha.

The EV maker’s deliveries fell 8.5% from a year ago.  The last time it posted a sales fall was in the second quarter of 2020 when the pandemic forced the automaker to shut down production.

The company said the drop in volumes was partially due to its efforts to prepare the Fremont factory in California to increase production of the updated Model 3 and shutdowns at its plant in Berlin as a result of shipping diversions caused by the Red Sea conflict. Tesla has also been facing intense competition in China from local players including market leader BYD, which overtook Tesla as the largest EV maker in the fourth quarter – and new entrant Xiaomi.

In January, Tesla warned of ‘notably lower’ sales growth this year as it focuses on the production of its next-generation electric vehicle.

Through Tuesday, Tesla shares were down 33% this year.  They then rallied some, but fell back today, Friday, on a Reuters report that Tesla was scrapping plans for a mass market EV. Elon Musk then called the report a ‘lie.’

Tesla sold 89,064 China-made EVs in March, a 0.2% increase from a year earlier, China Passenger Car Association data showed on Tuesday. 

--But rival BYD sold 302,459 vehicles last month, a 46% increase from a year earlier and its second-highest monthly sales tally after December.  However, this included plug-in hybrids.  Purely electric vehicle sales hit 139,902 in March, a 36.3% increase year-on-year, while sales of plug-in hybrids rose 56.4% to 161,729.  [Overall sales up 46% from a year ago.]

On the straight EV front however, BYD sold 300,114 units in the quarter, down from a record quarterly high of 526,409 units sold in the previous three-month period, when it surpassed Tesla.

So, yes, this is confusing, but BYD’s super fourth quarter was largely about domestic price cuts.

BYD sold 626,263 units of all vehicle types in the first quarter, EVs and plug-ins, down from a record quarterly high of 944,779, but up 13.4% from a year ago.

BYD recently set a 3.6-million-unit sales target for 2024, a 20% increase from 2023.

--TSA checkpoint numbers vs. 2023

4/4...103 percent of 2023 levels
4/3...102
4/2...109
4/1...110
3/31...102
3/30...102
3/29...106
3/28...112

It's going to be interesting to see how the numbers play out the next 4 days with eclipse travel.

--Walt Disney’s slate of 12 board director nominees all won in the latest proxy fight over activist investor Nelson Peltz’s Trian Partners, defeating Peltz’s two nominees handily.

Over the past year, Trian has agitated for changes at Disney that it said would improve returns, while Disney and CEO Bob Iger argued their strategy is working and that the hedge fund’s proposals were unnecessary and disruptive.

Trian and other activists involved argued the $225 billion media company has bungled its CEO succession planning, lost its creative spark and failed to properly harness new technology.

“All we want is for Disney to get back to making great content and delighting consumers and to creating sustainable long-term value for all of us,” Peltz said at the meeting before the results were announced.

Disney shares fell on the news but are up over 30% this year and nearly 50% in less than six months.

As media mogul Barry Diller put it, “this whole thing was a grand waste of time.”

--Shares in Intel fell 7% on Wednesday after the chipmaker restated operating losses for its foundry business, as it reorganizes its financial reporting structure to save costs and provide greater transparency.

The company’s manufacturing division, Intel Foundry, recorded a full-year 2023 operating loss of $6.96 billion, wider than the $5.17 billion loss logged a year ago, it said in a regulatory filing with the SEC.  The unit’s overall revenue came in at $18.91 billion versus $27.49 billion in the 2022 financial year.

The foundry unit has more than $15 billion of lifetime deal value committed from external customers, according to Intel.  The company also named a new chief financial of the division.

Intel Foundry is a newly established operating segment that includes foundry technology development, foundry manufacturing and supply chain, and foundry services.

--I have to go back to last Friday and China’s Huawei Technologies, which reported earnings as I was posting.  Net profit more than doubled in 2023, a stunning comeback for the company years after U.S. export controls cut it off from advanced technology.

Net profit rose to $12 billion, a rise of more than 140% from the same period a year ago.  Revenue rose 10% to $99 billion.

The company said growth was driven by higher sales in consumer electronics and cloud computing offerings.  Last September, Huawei surprised U.S. authorities with the release of a new smartphone, the Mate 60 Pro, with 5G-like capabilities, running on its homegrown chips. This came five years after the U.S. restricted sales of the most powerful chips to Huawei.

Last year, nearly 70% of Huawei’s revenue came from China as its overseas presence shrunk.

Huawei had been one of the world’s largest providers of telecom equipment and among the biggest smartphone makers globally, but U.S. sanctions beginning in 2019 crushed its smartphone business.  U.S. authorities also blocked American carriers from buying Huawei’s telecom equipment and asked allies not to use it, calling the company a national security threat.

--Samsung Electronics says it expects its profits for the first three months of 2024 to jump by more than 10-fold compared to a year earlier.

It comes as prices of chips have recovered from a post-pandemic slump and demand for artificial intelligence related products booms.

South Korea-based Samsung is the world’s largest maker of memory chips, smartphones and televisions.

The tech giant is estimating that its operating profit rose to $4.9 billion in the January-March quarter.  The company is scheduled to release its official earnings on April 30.

Global memory chip prices are estimated to have risen by around a fifth in the last year.

--Citigroup said on Monday its primary banking unit Citibank will lay off 363 employees in New York. The bank said last week it was in the last phase of a sweeping overhaul aimed at simplifying its structure and reducing management layers.  Citi has set a broader goal to trim its global workforce of 239,000 by 20,000 over the next two years.

--Argentina said Wednesday it had cut 15,000 state jobs as part of President Javier Milei’s aggressive campaign to slash spending, the latest in a series of painful economic measures that have put the libertarian government on a collision course with angry protesters and powerful trade unions.

At a new conference, a presidential spokesperson announced the cuts, describing them as key to Milei’s promised shake-up of Argentina’s bloated public sector.

--Shares of Trump Media & Technology Group fell 20% on Monday (and further the rest of the week) as the parent of the Truth Social platform raised going-concern doubts due to struggles to meet its financial liabilities just days after going public through a blank-check merger.

The company posted a net loss of $58.2 million in the year ended December 2023, compared with a net profit of $50.5 million a year earlier.  Revenue was $4.13 million last year, up from $1.47 million in 2022, it said in a filing.

“As of December 31, 2023, and 2022, management had substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG,” the company said.

Trump Media said it expects to incur operating losses and negative cash flows from operations for the foreseeable future, as it works to expand its user base, attracting more platform partners and advertisers.

--Monday, hourly pay for more than 500,000 fast-food workers in California jumped from $16 to $20, America’s highest minimum wage.  Governor Gavin Newcom, a Democrat, has praised the landmark law as a step forward for “inclusion.”

But in anticipation of higher priced labor, California’s fast-food industry has been shedding jobs, and now more layoffs are expected, especially in restaurant delivery services.  Items that take longer to make are being dropped from some menus.  Popular chains such as Chipotle, Jack in the Box, Starbucks and McDonald’s are raising prices.  Newsom denied allegations that he pushed for an exemption in the new rules for Panera Bread, a chain owned by one of his donors.  The firm has said it will pay at least $20.

--Gold hit another new high, $2,341 per troy ounce at week’s end.  Prices marched higher in recent weeks amid expectations that the Federal Reserve would start cutting interest rates soon, which would put downward pressure on bond yields and the dollar, which typically benefits gold.  But gold kept rising even when rate-cut bets came under pressure – because traders saw it as an inflation hedge.

So this makes little sense, overall, but then you have central banks adding gold to their portfolios, particularly the People’s Bank of China, according to analysts, and that is drawing in retail investors.

--An avian-influenza outbreak that has led to the death of about 80 million birds over the past two years is now sickening dairy cattle, temporarily curbing their milk production and prompting some states to increase restrictions on the livestock crossing state lines.

Concern that the disease could spread to beef cattle and hurt consumer meat demand has roiled livestock markets.  Farmers are ramping up preventive measures, drawing on poultry-industry tactics to drive off wild birds known for spreading the disease.

No infected dairy cows have died from the malady, according to the USDA.

--Forbes released its annual list of the world’s billionaires and in 2024, there are more people on the list than ever – and they’re richer than ever.

There are 141 more billionaires in the world than last year, with 2,781 in total.

The top 20 on the list gained the most, adding $700 billion to their combined net worth since 2023.  The U.S. has a record 813 billionaires – the most of any country.  China has 473; India 200.

Bernard Arnault and his family are at number one, with a net worth of $233 billion.  Arnault is head of LVMH, a luxury fashion and cosmetics conglomerate in France.  The family is usually in the top three of Forbes’ lists.

Elon Musk is No. 2, with a net worth of $195 billion, but not sure how this has been impacted recently, the way that Forbes weighs everything.

Jeff Bezos is No. 3, with a net worth of $194 billion, then Mark Zuckerberg at $177 billion.

Taylor Swift made the list for the first time at $1.1 billion.

--Next Monday’s Solar Eclipse will be spanning 13 states across the United States, including major cities from Texas to Maine, such as Dallas, Indianapolis, and Cleveland, which are throwing eclipse watch festivals, hoping to lure throngs of tourists.  Hotels and restaurants are offering packages, with big spending expected.

Indiana anticipates 500,000 people will travel to the state from out of the zone, with officials calling it “the largest natural tourism event in Indiana’s history,” according to Amy Howell, vice president for tourism and marketing at VisitIndiana.com, the state’s tourism development corporation.

University of Texas-Austin professor Raji Srinivasan forecasts direct spending from $1.6 billion to $2 billion, based on estimates that four million people will travel to somewhere within the zone of totality and spend $400 to $500 each. [Liz Moyer and Janet Cho / Wall Street Journal]

But the weather will invariably come into play.  Not all of the area is going to be cloudless on Monday.  There are going to be some deeply disappointed people.

--“Godzilla x Kong: The New Empire” had a rather shockingly strong opening weekend, an estimated $80 million in the U.S. and Canada, surpassing expectations of between $50 million and $55 million last weekend, according to Comscore.

Worldwide, the film grossed an estimated $194 million.

But thus far, domestic ticket sales are lagging behind the year-to-date total for 2023 by about 6%, at $1.65 billion.

Foreign Affairs, Part II

China: President Xi Jinping and Joe Biden spoke by phone on Tuesday, an attempt to make headway in their limited areas of aligned interests amid heightening tensions between the two countries.

“The two heads of state had a candid and in-depth exchange of views on Sino-U.S. relations and issues of common concern to both sides,” state news agency Xinhua reported, adding, though, that Xi criticized the Biden administration’s “endless stream of efforts” to block the transfer of advanced technology to China.

The White House said ahead of the call that the leaders would discuss progress on the agreements reached during their November summit in California, which effectively hit the pause button on deteriorating bilateral relations.

A White House official said cooperation on counter-narcotics, risk and safety issues related to artificial intelligence, the resumption of military-to-military communication channels and climate issues would be covered.

Treasury Secretary Janet Yellen is visiting China next week, while Secretary of State Antony Blinken is scheduling a trip there in the next few weeks.

“In the past few months, teams from both sides have conscientiously implemented the consensus we reached, and Sino-U.S. relations have stabilized, which has been welcomed by all walks of life in both countries and the international community,” Xinhua reported.

“On the other hand, negative factors in the relations between the two countries have also increased, which require the attention of both parties,” it said.

“The United States has launched an endless stream of measures to suppress China’s economy, trade, science and technology, and the list of sanctions against Chinese companies is getting longer and longer,” Xinhua added.  “This is not ‘risk removal’ but creation of risk.”

Beijing made similar statements after the November summit, in which Xi said the Biden administration’s control measures “have seriously harmed China’s legitimate interests.”

He told Biden at the time that these measures were “suppressing China’s science and technology to hinder China’s high-quality development and deprive the Chinese people of their right to development.” [South China Morning Post]

U.S. Commerce Secretary Gina Raimondo said hours later that Washington was “adopting targeted, precise protections [so] our most sensitive technology...cannot be used against us.”

On the issue of Taiwan, Xi has called on the U.S. not to support independence for the island and to stop selling arms to Taipei.  According to the readout, Biden assured the Chinese leader that Washington’s attitude towards the island had not changed.

Like most countries, the U.S. does not recognize Taiwan as independent, but is opposed to any unilateral change to the island’s status quo.

Biden was also said to warn China over escalating confrontations in the South China Sea, such as that described below, as well as Beijing’s substantial support for Russia’s defense industry, the White House said.

China has refrained from sending lethal weapons to Russia for the war in Ukraine, but has found other ways to strengthen Russia’s defense capability and indirectly help Moscow’s military campaign, U.S. officials say.

The two presidents also discussed TikTok and U.S. concerns over its ownership.  National Security Council spokesman John Kirby said Biden “made it clear to President X that this was not about a ban of the application, but rather our interest in divestiture so that the national security interest and the data security of the American people can be protected.”

This was the first time the two leaders have spoken on the phone since July 2022.

Philippine President Ferdinand Marcos Jr. has ordered his government to strengthen its coordination on maritime security to confront “a range of serious challenges” to territorial integrity and peace, as a dispute with China escalates.

Last week I wrote of how China used water cannon to disrupt a Philippine resupply mission to the Second Thomas Shoal for soldiers guarding a warship intentionally grounded on a reef 25 years ago.

“Despite efforts to promote stability and security in our maritime domain, the Philippines continues to confront a range of serious challenges that threaten territorial integrity, but also the peaceful existence of Filipinos,” Marcos said in the order.

Meanwhile, the Wall Street Journal reported that Radio Free Asia, a U.S. government-funded news operation, closed its offices in Hong Kong, an early sign of the impact that a new national security law is having on some media operations in the regional financial center.

The law, Article 23, went into effect last Saturday.  It imposes severe punishments for interference by foreign forces deemed to threaten national security and criminalizes the possession or disclosure of state secrets.

Because RFA was supported by the U.S. government, it was potentially more exposed than more commercial outlets.  Hong Kong’s Secretary for Security Chris Tang recently criticized RFA for what he called inaccurate reporting on the new law and specifically pointed out RFA was funded by Washington.

From the Journal’s Elaine Yu:

“Media groups have expressed concern that the new law’s provisions around state secrets and foreign interference could further inhibit reporting or increase risks for reporters.  Two-thirds of the journalists surveyed by the Foreign Correspondents’ Club in Hong Kong last year said they had censored themselves, either in the content or their stories or by avoiding certain subjects.”

Back to Taiwan, the island was hit with its worst earthquake in 25 years early Wednesday morning, 7.4, striking in waters about 15 miles south of the eastern county of Hualien and 85 miles from Taipei, according to the Central Weather Bureau.  The shock was felt across the island, causing buildings to collapse and landslides that have blocked major roads and stranded hikers in the starkly beautiful countryside.  Those videos of the boulders crashing onto the highway are scary as you’ll ever see.

One survivor told Taiwan’s Central News Agency, “The mountain started raining rocks like bullets, we had nowhere to escape to.”

As I go to post, at least ten have died, with over 1,000 injured and dozens missing.  But thanks to decades of preparation and stricter building codes, it’s amazing the death toll isn’t greater.

The semiconductor industry on the island has been affected, with industry giant Taiwan Semiconductor Manufacturing Co. (TSMC) evacuating factory areas and partially shutting down for preventive measures.

But in a statement to the South China Morning Post, TSMC said all of its personnel were safe and some had since returned to work. It said initial inspections showed that construction sites were not damaged but work on those sites would “resume following further inspections.”

By Thursday, TSMC said work has resumed following further inspections.

“As of April 4, overall tool recovery of our fabs reached more than 80%, with new fabs such as the Fab 18 facility are expected to reach full recovery later tonight,” the chipmaker said in a regulatory filing.

The company said that all available resources are being deployed for full recovery, adding that it is continuing to resume production.

The company’s facility in the city of Tainan in southern Taiwan is the top producer of advanced chips for Apple and Nvidia, according to a Bloomberg report.

Earlier, TSMC said the financial impact would be minimal.

Other chip plants said operations were partially shut as a preventive measure and some plants partially closed at last word.

North Korea: Pyongyang fired a suspected intermediate-range ballistic missile into the sea off its east coast on Tuesday, South Korea’s military said, in a move that sparked immediate condemnation from the prime minister of Japan.

The statement from the South Korea’s Joint Chiefs of Staff did not specify the exact type of missile, which reportedly flew for 372 miles, but the North has been testing a new intermediate-range hypersonic missile powered by a solid-fuel engine.  In March, Kim Jong Un oversaw a ground test of a solid-fuel engine for a new type of intermediate-range hypersonic missile, state media reported.

The U.S. is greatly concerned that the North continues to develop missiles capable of targeting American military bases in the Western Pacific (i.e. Guam).

Japanese Prime Minister Fumio Kishida condemned North Korea for the missile launch that affected the peace and stability of the region, he told reporters.  This comes after Pyongyang said it had no interest in a summit with Tokyo and would reject any talks, potentially worsening already-hostile relations between the two countries.

Meanwhile, the U.S. is arranging a summit between President Biden and his Japanese and South Korean counterparts in July on the sidelines of a NATO summit in Washington.

Random Musings

--Presidential approval ratings....

Gallup: 40% approve of President Biden’s job performance, 55% disapprove; 34% of independents approve (March 1-20).

Rasmussen: 43% approve, 55% disapprove (April 5).

--A new Wall Street Journal poll finds Donald Trump leading President Biden in six of the seven most competitive states in the 2024 election, propelled by broad voter dissatisfaction with the national economy and deep doubts about Biden’s capabilities and job performance.  The poll of the election’s main battlegrounds shows Trump holding leads of between 2 and 8 points in six states – Pennsylvania, Michigan, Arizona, Georgia, Nevada and North Carolina – on a test ballot that includes third-party and independent candidates.

The one outlier is Wisconsin, where Biden leads by 3 points on the multiple candidate ballot and is tied in a head-to-head matchup.

Biden won Pennsylvania, Michigan and Wisconsin in 2020, which had backed Trump in 2016.

On the issues, Trump is viewed better on handling the economy, 54-34; immigration and border security, 52-32; and mental and physical fitness needed to be president, 48-28.  Biden is viewed better on the issue of abortion, 45-33.

--In Tuesday’s four primaries in Connecticut, New York, Rhode Island and Wisconsin, Nikki Haley took at least 10 percent of the vote in all four, a sign of lingering discontent in the Republican Party.

Joe Biden received at least 80 percent in each, but the “uncommitted” ballot option took between 8 and 15 percent of the vote in the states where that was an option.

--Donald Trump posted a $175 million bond on Monday in his New York civil fraud case, halting collection of the more than $454 million he owes and preventing the state from seizing his assets to satisfy the debt while he appeals.

A New York appellate court had given the former president 10 days to put up the money after a panel of judges agreed last month to slash the amount needed to stop the clock on enforcement.

The bond Trump posted is a placeholder, meant to guarantee payment if the judgment is upheld.

If Trump wins, he won’t have to pay the state anything and will get back the money he has put up now.

The state courts’ Appellate Division has said it would not hear arguments in the case until September, which means it could easily be delayed until after the election at this point.

--Special Counsel Jack Smith publicly assailed U.S. District Judge Aileen Cannon, a 43-year-old appointee of Donald Trump who Smith said risks fatally damaging his prosecution of the former president on charges he mishandled top secret government files.

In a court filing, Smith called Cannon’s understanding of key legal issues “fundamentally flawed” and urged her to clarify her intentions so he can potentially challenge her rulings before the U.S. Court of Appeals.  Cannon ordered Smith and Trump last month to draft instructions for a jury even though she has yet to set a trial date.  Cannon’s order was especially controversial because it directed Smith to assume Trump may have had the right to declare the documents – including highly sensitive national security files – are personal rather than official under a 1978 law known as the Presidential Records Act.

“Any jury instructions that reflect those scenarios would be error,” Smith wrote. “Whatever the court decides, it must resolve these crucial threshold legal questions promptly.”

Smith also voiced concerns about a delay in the trial, which could push it past Election Day 2024.

So then Judge Cannon on Thursday refused to throw out the classified documents prosecution, rejecting a defense argument that the case should be tossed because he was entitled to retain the records after he left office.

Judge Cannon sided with the government in a three-page order, writing that the indictment makes “no reference to the Presidential Records Act, nor do they rely on that statute for purposes of stating an offense.”

--In the Georgia election interference case, Fulton County Superior Judge McAfee ruled that the First Amendment doesn’t protect speech that is part of a crime – and that a jury must decide whether it was in Trump’s case, rejecting an argument from Trump’s lawyers that the First Amendment shielded him from racketeering charges because his unfounded claims of widespread election fraud were political speech.

--Donald Trump and the Republican National Committee jointly raised $65.6 million in March and ended the month with $93.1 million in cash on hand, representing a big boost from February’s totals.

Biden and the Democrats have yet to release their March figures.

--Donald Trump on Tuesday, in a speech in Michigan, resorted to his degrading rhetoric on the topic of immigration, calling immigrants illegally in the U.S. “animals” and “not human.” He warned that violence and chaos would consume America if he did not win the Nov. 5 election.

In a later speech in Green Bay, Wisconsin, Trump described the 2024 election as the nation’s “final battle.”

--I have to admit I never heard of International Transgender Day of Visibility, which is always March 31st.  Alas, this year that happened to fall on Easter Sunday, and we had another political mess between Democrats and Republicans, and I’ll leave it at that.

--No Labels announced Thursday it will not field a presidential candidate in November after strategists for the bipartisan organization were unable to attract a legitimate candidate willing to seize on all the dissatisfaction with Biden and Trump.

What a disappointment. 

--In my home state of New Jersey, a new Emerson College survey released Tuesday of registered voters in my state shows Joe Biden with just a 46% to 39% lead over Donald Trump, with 15% undecided.

When third-party candidates are added to the ballot, Biden’s support decreases 5 points to 41%, and Trump drops 3 points to 36%.  Robert F. Kennedy Jr. received 8%. 

Biden won New Jersey in 2020 by a 57-41 margin.

--A federal judge, Royce Lamberth, admonished a Jan. 6 rioter during his sentencing Wednesday after the man, Taylor James Johnatakis, downplayed the severity of the riots and his violent conduct.

“This cannot become normal. ...We cannot condone the normalization of the Jan. 6 U.S. Capitol riot,” Judge Lamberth said.

Johnatakis, a self-described “sovereign citizen,” was found guilty of assaulting a police officer and other felony and misdemeanor charges related to the riot, and he was sentenced to seven years in prison.  After his conviction last year, he repeatedly downplayed the riots in interviews, calling the riot “overblown” and his prison accommodations a “gulag.”

Lamberth warned that future political violence may be possible if the country does not learn lessons from Jan. 6, warning of a “vicious cycle...that could imperil our institutions” resulting in “vigilantism, lawlessness and anarchy.”

It was the second time Lamberth (a Ronald Reagan appointee) denounced the rhetoric of rioters and their supporters.  In January, he blasted conservatives who dubbed convicted rioters “hostages” and “patriots.”

“In my thirty-seven years on the bench, I cannot recall a time when such meritless justifications of criminal activity have gone mainstream,” Lamberth wrote. “I have been dismayed to see distortions and outright falsehoods seep into the public consciousness.” 

--The Florida Supreme Court overturned decades of legal precedent on Monday in ruling that the State Constitution’s privacy protections do not extend to abortion, effectively allowing Florida to ban the procedure after six weeks of pregnancy.

But in a separate decision released at the same time, the justices allowed Florida voters to decide this fall whether to expand abortion access.  The court ruled 4-3 that a proposed constitutional amendment that would guarantee the right to abortion “before viability,” usually around 24 weeks, could go on the November ballot.

This is how the country is grappling with the abortion issue since the U.S. Supreme Court overturned Roe v. Wade.

The six-week ban could take effect within 30 days.

Florida was once a destination for women seeking abortions in the South, but now its policies are as restrictive as those in surrounding states.

But now it’s up to the voters.  Ballot measures in favor of abortion rights have already succeeded in seven states, including Kansas, Ohio and Michigan.

--Pope Francis rallied from a winter-long bout of respiratory problems to lead some 60,000 faithful in Easter celebrations at the Vatican, making a strong appeal for a cease-fire in Gaza and a prisoner swap between Russia and Ukraine.

“Peace is never made with weapons, but with outstretched hands and open hearts,” Francis said.

In a sign he was feeling OK, he made several loops around the piazza in his popemobile after Mass, greeting well-wishers.

--King Charles III shook hands and chatted with onlookers after attending an Easter service at Windsor Castle on Sunday in his most significant public outing since being diagnosed with cancer last month.

The 75-year-old monarch’s appearance was seen as an effort to reassure the public after Charles stepped back from public duties in early February.  It was even more important since William, Kate and family weren’t seen due to Kate’s cancer issue.

--Births in Italy dropped 3.6 percent last year to an all-time low, highlighting the challenge facing Prime Minister Giorgia Meloni as she seeks to reverse the rapid ageing of the population.

Istat, the national statistical agency, said just 379,000 babies were born in Italy in 2023, down from the previous year’s record low of 393,000, which was the fewest births since Italy’s unification in 1861.  Italy’s fertility rate fell to 1.2, far below the replacement level of 2.1.

--Last weekend’s rainstorm in California dumped up to 4 inches in some areas (lots more snow in the Sierras), with Los Angeles hitting a new two-year rain total not seen since the late 1800s and forestalling any hope for a quick end to the rainy season.

As of Monday morning, downtown L.A. had received 52.46 inches of rain the latest two water years, the second-highest amount in recorded history.  The only other two-year October-through-September period – the period for the so-called water year – that saw more rain was from 1888 through 1890, according to the National Weather Service.

The NWS considers 14.25 inches the area’s normal annual rainfall, making last year’s total of 31.07 more than 200% of average.  With six months left to go, this water year has recorded 21.29 inches.

The state’s reservoirs are 116% of historical average, while snowpack was at 105% of its average for April 1, the date when it is typically at its peak.

--Hurricane researchers at Colorado State University released their 2024 Atlantic hurricane season forecast, and the overall probability of major hurricanes making landfall somewhere in the continental U.S. is 62 percent, compared to an average of 43 percent, researchers said.

CSU predicts 23 named tropical storms, including 11 hurricanes, 5 of which could be Category 3 or higher “major” hurricanes.

A ‘normal’ forecast would be 14, 7 and 3.

If a La Nina climate pattern forms as expected, that increases the chances for an intense hurricane season as wind shear will decrease.  We already know Atlantic Ocean surface temperatures are at record levels.

--The Washington Post’s Andrew Van Dam had a story on the new Census of Agriculture, which takes place every five years, and after almost two decades of relentless colony collapse coverage, the census shows “America’s honeybee population has rocketed to an all-time high.”

Huh.  As Andrew Van Dam noted: “We’ve added almost a million bee colonies in the past five years. We now have 3.8 million, the census shows. Since 2007, the first census after alarming bee die-offs began in 2006, the honeybee has been the fastest-growing livestock segment in the country. And that doesn’t count feral honeybees, which may outnumber their captive cousins several times over.”

Bee colonies are up 31% since 2007, while the number of ducks, at 4,449,078, is up 12%.

Geese, on the other hand, are supposedly down 43%, which if true is great news for golf devotees.

The agriculture census includes every farm in the country, “farm” meaning any plot of land that sells at least $1,000 of agriculture products in a year.  But the Agriculture Department’s $1,000 farm definition hasn’t changed since 1975, so inflation increases the share of beekeepers who qualify for the census.

There are skeptics of the seemingly good bee news.  You can make your own observations this spring and summer.  But I’m skeptical.

--Lastly, I live on the top floor of a multi-use building in New Jersey, retail on the ground floor, and at 10:23 a.m. this morning, ET, I’m sitting in my office, working on this column, and the earthquake hits.  Because of my location, the building shook violently for five seconds and it was loud, and frankly a bit disconcerting.  Being afraid of a power failure I immediately ‘saved’ the column.

It was a magnitude 4.8, which doesn’t seem like much compared to what our California friends regularly feel, but it was indeed the strongest in the immediate area (I’m about 25 miles from the epicenter) in 140 years.

Thankfully, no major damage anywhere but it did disrupt air and train travel for a while.

I’d prefer not to experience this again. [Ironically, I was literally updating the Taiwan story like two minutes earlier.]

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

We note the passing of Lou Conter, the last living survivor of the USS Arizona battleship that exploded and sank during the Japanese bombing of Pearl Harbor. He was 102.

The Arizona lost 1,177 sailors and Marines in the attack, with the battleship’s dead accounting for nearly half of those killed at Pearl Harbor that awful day.

More than 900 sailors and Marines remain entombed inside the Arizona.  Only 335 crew members survived.

Conter went to flight school after Pearl Harbor and would fly 200 combat missions in the Pacific.

Pray for Ukraine and the innocent in Gaza.

God bless America.

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Gold $2341...another record
Oil $86.75

Bitcoin: $67,400 [4:00 PM ET, Fri.]

Regular Gas: $3.58; Diesel: $4.04 [$3.52 / $4.21 yr. ago]

Returns for the week 4/1-4/5

Dow Jones  -2.3%  [38904]
S&P 500  -1.0%  [5204]
S&P MidCap  -1.9%
Russell 2000  -2.8%
Nasdaq  -0.8%  [16248]

Returns for the period 1/1/24-4/5/24

Dow Jones  +3.2%
S&P 500  +9.1%
S&P MidCap  +7.5%
Russell 2000  +1.8%
Nasdaq  +8.2%

Bulls 62.5...highest in 3 years, a cursory look at my files reveals...I’ll doublecheck for next week.
Bears 14.1

Hang in there.

Brian Trumbore

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