Week in Review

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Week in Review

09/23/2023

For the week 9/18-9/22

[Posted 5:00 PM ET, Friday]

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Edition 1,275

It’s a huge week coming up…a government shutdown seems to be a certainty; President Biden must deal with the border crisis, immediately; Biden may appear on the picket lines for the UAW strike, which expanded today; the president refuses to give an Oval Office address on Ukraine, even as the conflict heated up end of the week in ways most Americans just don’t understand because of his failure to educate the people on the paramount issue of our times; we have the second GOP debate, almost certainly with the frontrunner absent yet again; and the Federal Reserve receives another key data point, its favorite, for measuring inflation after Chair Powell and Co. issued some hawkish comments, and projections, even as they held the line on interest rates this week, the bond market finally, it seems, ‘getting it.’

House Republicans for the second week in a row failed to move forward on any legislation related to funding the government, stunning many in their ranks as a shutdown looms.

The status of negotiations on both a short-term funding bill and long-term appropriations legislation declined so severely Thursday that lawmakers returned home.

Remember what I wrote last week, addressing a contentious closed-door party meeting?

“McCarthy said: ‘When we come back [after the weekend], we’re not going to leave. We’re going to get this one.  Nobody wins in a government shutdown.  I’ve been here.’”

Well, they did not work through the week and we’re back to square one, incredibly.

Unable to overcome his far-right membership, McCarthy has scrapped discussion of a stopgap funding bill to keep the government open after the fiscal year ends Sept. 30, significantly increasing the odds for a shutdown.

The far-right faction has vowed to oppose any stopgap measure, a continuing resolution, or CR.  Instead, McCarthy will focus on passing the 11 remaining individual funding bills.

Editorial / Wall Steet Journal

“We’d be happy to support spending brinkmanship if it served some achievable goal. But taking responsibility for shutting down the government is a sure political loser. The party that seeks a shutdown is always blamed. The result in this case would likely be even more spending as Republicans need Democratic votes to reopen the government – and Democrats will demand something for it.  The GOP will get few if any policy victories.

“This is all so obvious – so Civics 101 – that it’s amazing to watch men and women who ran for Congress refuse to get it. Too many Republicans apparently come to Washington these days mainly to blow things up and count their TikTok followers.

“Some backbenchers point the finger at Mr. McCarthy and this or that promise he supposedly made to become Speaker. But who’s their alternative?  Matt Gaetz?  The kamikazes might be able to depose Mr. McCarthy, but then they’ll turn around and chew up the next unlucky person who takes the job.

“Republicans narrowly won the House in 2022 promising to rein in Democratic spending excesses, and they have.  But they lack the votes to significantly change the direction of policy.  To do that they need bigger majorities and control of the Senate.

“On their current path, however, and if they shut down the government in a stupid, futile gesture, all they’ll do is make it easier to turn the gavel over to Speaker Jeffries.”

Meanwhile, the United Auto Workers expanded its strikes against Detroit automakers GM and Stellantis on Friday, but UAW President Shawn Fain said there was real progress in talks with Ford Motor.

Fain, in a Facebook live event this morning, said the UAW is targeting distributions centers in its latest move.  He had said earlier this week that further strikes could be avoided if companies showed “significant progress” toward an agreement.  “Stellantis and GM in particular are going to need some serious pushing,” said Fain today.  But he added, “we do want to recognize that Ford is showing they’re serious about reaching a deal.”

The union invited President Biden to the picket lines, given his vocal support for the union’s demands for better pay and benefits.

I have much more below on the strike, but the White House just announced Biden will travel to Detroit on Tuesday (literally as I was going to post).  The UAW has held off on supporting him for president and he desperately needs their endorsement. 

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This Week in Ukraine….

At week’s end, Ukraine was intensifying its attacks on Crimea and Russia was ramping up its attacks on Ukraine’s energy infrastructure.  Casualties continue to mount, and winter is around the corner.

--Russia’s defense ministry said its forces had downed two Ukrainian drones over southwestern Crimea and a third over Belgorod region on Sunday.

Russia itself launched a combined drone and missile attack on Ukraine early on Sunday, targeting chiefly the southern parts of the Odesa region and hitting an agriculture facility there, Ukraine’s Air Forces said on Telegram.

“Russia launched six Iranian-made Shahed drones and 10 cruise missiles, with Ukraine’s forces destroying six drones and six missiles before they hit their target,” the Air Force said.

--The general in command of Ukraine’s ground forces said on Sunday that Ukrainian forces had recaptured the eastern village of Klishchiivka on the southern flank of Bakhmut, which the Russians claimed control of in January.

“Klishchiivka was cleared of the Russians and liberated,” Alexander Syrskyi, commander of Ukraine’s ground forces, said in a post on Telegram.  Interior Minister Ihor Klymenko also confirmed that the village was recaptured in heavy fighting.

Klishchiivka is around six miles south of Bakhmut and had a pre-war population of around 400.  It is several miles north of Andriivka, which was recaptured last week.  Both settlements were substantially destroyed in months of fighting for Bakhmut.

--Monday, Ukraine dismissed six deputy defense ministers, two weeks after President Volodymyr Zelensky replaced his military chief, citing a need for “new directions” in the ongoing war.  One of the chief spokeswomen for the military, Hanna Maliar, was one of those dismissed.

--Tuesday, President Biden, in his address to world leaders gathered at the United Nations for the annual General Assembly, said, “If we allow Ukraine to be carved up, is the independence of any nation secure?  The answer is no.”

Biden pleaded for the world to continue to support Kyiv in condemning Russia’s “naked aggression” and said the United States would continue to stand with the “brave people of Ukraine.”

“We must stand up to this naked aggression today to deter other would-be aggressors tomorrow,” he added.

“My fellow leaders, let me close with this,” Biden said.  “At this inflection point in history, we’re going to be judged by whether or not we live up to the promises we have made to ourselves, to each other, to the most vulnerable, and to all those who will inherit the world we create.”

Supporting Ukraine now, Biden argued, amounts to an investment “in the future of every country that seeks a world governed by basic rules that apply equally to all nations and uphold the rights of every nation, no matter how big or how small: sovereignty, territorial integrity.  They are the fixed foundations of this noble body, and universal human rights is its North Star.  We cannot sacrifice either.”

UN Secretary General Antonio Guterres, in a separate address Tuesday, warned that the Kremlin’s invasion “unleashed a nexus of horror” that “has serious implications for us all.”

“Ignoring global treaties and conventions makes us all less safe,” Guterres said.

President Volodymyr Zelensky pressed for additional assistance in his own address to the UN, warning that Vladimir Putin is weaponizing food and energy in his bid to crush Ukraine.

“The goal of the present war against Ukraine is to turn our land, our people, our lives, our resources into a weapon against you, against the international rules-based order,” Zelensky told the assembled leaders.  He added that Russia was weaponizing essentials like food and energy “not only against our country, but against all of yours, as well.”

Zelensky also warned wavering leaders not to trust Russia, which he said has sought to exploit divisions with propaganda campaigns across Africa, Latin America and parts of Asia.

“Evil cannot be trusted.  Ask [Yevgeny] Prigozhin if one bets on Putin’s promises,” Zelensky said, referring to the former leader of the Wagner Group, who died last month when his plane exploded after it departed a Moscow airport, in an incident that Western nations have blamed on the Kremlin.

“Weaponization must be restrained,” Zelensky said in his closing remarks.  “War crimes must be punished.  Deported people must come back home. And the occupier must return to their own land.”

The Ukrainian leader also met with members of Congress to make his case for more aid, as a growing faction of Republicans is rebelling against further spending on military aid for Ukraine.

Asked whether he would commit to the Ukrainian leader to funding more aid, House Speaker Kevin McCarthy told reporters: “Is Zelensky elected to Congress?  Is he our president? I don’t think I have to commit anything.  I have questions for him: Where’s the accountability in the money we’ve already spent?  What is the plan for victory?  I think that’s what the American public wants to know.”

[Apparently, a private discussion between McCarthy and Zelensky on Thursday went much better than McCarthy’s rhetoric would imply.]

--Russia sent 30 drones and a ballistic missile across Ukraine overnight Tuesday, with more than half a dozen drones directed at the western Lviv region, far from the front lines

--Defense Secretary Lloyd Austin said Tuesday that U.S.-provided Abrams tanks “will be entering Ukraine soon.”  His statement was part of the latest meeting of the Ukraine Defense Contact Group at Germany’s Ramstein Air Base, and first for Ukrainian military chief Rustem Umerov, the new defense minister.

But Ukraine still badly needs air-defense systems to protect its energy infrastructure against Russian attacks, which is why Austin pressed the delegates to inventory and share whatever stock they have available ahead of “another winter war” in the coming months.  He also stressed the need for Ukraine’s allies to share 155mm artillery ammunition.

In his last meeting with the contract group before his retirement, Joint Chiefs Chairman Army Gen. Mark Milley said, “To date, Ukraine has liberated over 54% of Russian-occupied Ukraine.”  But there are still about “a couple of hundred thousand Russian troops that remain in Russian-occupied Ukraine.”

For the U.S., Ukraine, and its allies, “The end goal remains crystal clear,” said Milley.  And that goal is to “Support Ukraine until Putin’s unwarranted, illegal and ruinous war of choice comes to an end.  Our commitment to Ukraine as a free, independent, and sovereign nation with its territory intact remains as ironclad as ever.”

“Ukraine has not asked any other country to fight for them,” Milley said.  “All they are asking for is help – help with material and training. And we collectively are all here to support Ukraine so they may remain free, independent, and sovereign.”

Secretary Austin told the delegates: “Ukraine’s fight is one of the great causes of our time.  It’s not just the right for one embattled democracy; it’s also a fight for a world where autocrats cannot just rewrite borders by force.  It’s a fight to avoid a grim new era of chaos and tyranny, and it’s a fight for a world where rules are upheld, rights are protected, and aggression is punished.”

“History will show the full folly of Putin’s reckless, cruel, and unprovoked invasion of his peaceful neighbor,” Austin said.  “Just look at the 50 countries proudly represented around this table, standing together to defend Ukraine and the rules-based international order.  And then look at the Kremlin, left alone with the likes of Iran and North Korea.”

Austin added: “I fully expect and hope that we’ll continue to enjoy bipartisan support from Congress; but we don’t take anything for granted.  We’ll continue to work with Congress to make sure that they have a full understanding of our work here and they know the importance of this work.”

--Separately, Zelensky told CNN’s Wolf Blitzer, that Donald Trump ought to release details of an apparent plan Trump has said would end the war in Ukraine “within 24 hours.”

Trump has wildly bragged in several interviews and campaign events that if elected president next year, he would lead peace negotiations between Putin and Zelensky and have the conflict resolved within one day.

But Trump has refused to provide details about the approach he would take.

“He can publicly share his idea now, not waste time, not to lose people, and say, ‘My formula is to stop the war and stop all this tragedy and stop Russian aggression,” Zelensky said.  “And he said, how he sees it, how to push Russian from our land.  Otherwise, he’s not presenting the global idea of peace.”

“So [if] the idea is how to take the part of our territory and give it to Putin, that is not the peace formula,” the Ukrainian leader said.

--Wednesday, President Zelensky made his first in-person appearance at a UN Security Council meeting on Moscow’s invasion of his country, and Russian Ambassador Vassily Nebenzia objected to him taking the floor before the 15 council members.  Albanian Prime Minister Edi Rama, serving as president of the tense session and known for his biting sense of humor, responded with a gibe at Moscow, which has described the invasion of Ukraine as a “special military operation.”

“I want to assure our Russian colleagues and everyone here that this is not a special operation by the Albanian presidency,” Rama said to muted laughter across the room.  “There is a solution for this,” Rama continued.  “If you agree, you stop the war and President Zelensky will not take the floor.”

Nebenzia went on to say the session was a show and criticized Rama for what he said was a political stance rather than an act of a neutral guardian of procedure.

When given the floor after the back-and-forth, Zelensky suggested Russia be stripped of its veto right as one of five permanent members of the post-World War II UN Security Council as punishment for attacking Ukraine.  Zelensky said the only way to a lasting peace was a full withdrawal of Russian troops and restoration of Kyiv’s control over its territory within the 1991 borders following the fall of the Soviet Union.

Zelensky and Russian Foreign Minister Sergei Lavrov avoided staring each other down as Zelensky left before Lavrov arrived, which came as Secretary of State Antony Blinken was accusing Russia of having “shredded” key provisions of the UN Charter.

Lavrov, in turn, reiterated his country’s claims that Kyiv has oppressed Russian speakers in eastern areas, violating the UN charter and getting a pass on it from the U.S. and other western countries.

While there was no finger-pointing face-off, the atmosphere was rather prickly.

--Wednesday, Russian forces struck the largest oil refinery in central Ukraine, local authorities said, in an attack that appeared to be part of a campaign by Moscow to debilitate the country’s economy and weaken the government.

Russian missiles damaged the refinery when Moscow launched its full-scale invasion of Ukraine in February 2022, and the facility has been repeatedly attacked since then.

--Also Wednesday, Ukrainian forces struck a Russian Black Sea fleet command post near Sevastopol in Crimea on Wednesday morning, the Ukrainian military said.  It gave no further details except to say the attack was successful.

--Thursday, Ukraine said its forces struck a Russian air base in Crimea overnight, confirming an attack that was earlier reported by a Ukrainian intelligence source.  The source told Reuters the attack was carried out by the SBU security service using drones and Neptune cruise missiles.  The attack “hit the target and caused serious damage” to equipment at the air base, the source said.

Earlier Thursday, Russia said it had destroyed 19 Ukrainian drones over Crimea and the Black Sea, but did not comment on the air base attack.

--But then Russia restarted its attacks on Ukraine’s energy infrastructure, Thursday, a “massive missile attack,” according to Ukraine, knocking out power across western and central sections of the country.

Grid operator Ukrenergo said on Telegram that the attacks are the first of their kind in six months and caused widespread “partial blackouts.”  A large number were wounded, three killed, last I saw.

--Poland said it would honor its existing commitments to supply arms and ammunition to Ukraine. The government clarified earlier comments by Prime Minister Morawiecki, who said his country was no longer supplying weapons to its neighbor.  Tensions have been escalating after Ukraine filed a complaint against Poland, as well as Hungary and Slovakia, at the World Trade Organization for extending bans on Ukrainian grain imports, in defiance of European Union rules.  Poland has been one of Ukraine’s staunchest allies, but an influx of Ukrainian products into its market has angered local farmers.

--President Zelensky met Thursday with President Biden at the White House and received a $325 million air-defense package, but didn’t get the ATACMS, long-range missiles he has long sought. Nor did he make much progress persuading House leadership to approve another $24 billion in military and humanitarian aid.

Zelensky capped off his long day in Washington with a speech at the National Archives Thursday evening, during which he and his wife thanked Americans for their support.

“There is not a soul in Ukraine that does not feel gratitude to you, America,” Zelensky said.  “To you, the people who help us not because you have to but because your heart cannot let you do otherwise.”

--Ukrainian ground troops are reportedly advancing through what’s been described as “the second Russian line of defense” (also referred to as the “Surovikin line”), Michael Kofman of the Carnegie Endowment for International Peace noted on social media after a Ukrainian soldier detailed some of the battlefield movements.  George Barros of the Institute for the Study of War called it “the third layer within the tri-layered belt of field fortifications.”

But the Wall Street Journal reported Friday that the Ukrainians are taking “heavy casualties.”  One Ukrainian soldier said, and didn’t complete his thought when he added, “We are destroying them.  But the price…”

Ukrainian soldiers told Reuters that in taking the village of Andriivka recently, it was a bloody slog, costing lives for every meter, before they ultimately vanquished the village’s Russian defenders.

Russian losses are also piling up.  Mobilized troops are lasting an average of just 4.5 months before being killed in Ukraine, according to a joint investigation involving the Conflict Intelligence Team.  One out of every five mobilized Russians doesn’t last more than eight weeks before they’re killed, according to the findings.

--Ukraine’s military said on Friday its forces had “successfully” struck the headquarters of Russia’s Black Sea navy in the Crimean port of Sevastopol.  Russia’s defense ministry said one serviceman was missing after the attack and that air defenses had downed a total of five missiles.  Video confirmed the headquarters had been hit.

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--Bloomberg reported today that Russia plans a huge defense spending hike in 2024 which will comprise 6% of GDP, up from 3.9% in 2023 and 2.7% in 2021.

--A New York Times investigation of the Sept. 6 missile strike on Kostiantynivka in eastern Ukraine that was one of the deadliest in the country in months, killing at least 15 civilians and injuring more than 30 others, revealed that it may have been the result of an errant Ukrainian air defense missile fired by a Buk launch system. 

--Ruthless Chechnya warlord – and staunch Putin ally – Ramzan Kadyrov is reportedly hospitalized in critical condition, according to Ukrainian intelligence.

“There is information that the war criminal Kadyrov is in a serious condition – existing illnesses have worsened and caused such a serious condition,” Andriy Yusov, a representative of Ukraine’s military intelligence branch, told a Ukrainian media outlet.

Kadyrov’s condition has been confirmed by multiple sources and is said to be about systemic health problems, not the result of an injury.  He is rumored to suffer from kidney problems as a result of drug addiction, though some believe he may have been poisoned.

--Editorial / Washington Post

“Virtually no one predicted that Ukraine would not only stand fast but also, within months, push Russian forces back from key territory they had captured, let alone launch a counteroffensive that has put what was once regarded as the world’s second-most powerful army on the back foot.

“Those developments are a tribute to two things: First, Kyiv’s iron-willed determination to remain free of the Kremlin’s yoke. Second, the West’s – above all, Mr. Biden’s – determination to provide Ukrainians with the wherewithal to fight. And fight they have.

“Still, the West, and specifically the United States, has not done enough to help Kyiv achieve anything that could be defined as victory.  Despite Ukraine’s battlefield achievements, there is every indication that the war, which has killed or wounded nearly a half-million troops, will not end any time soon.

“Mr. Putin, having retooled Russian industry for a war of attrition, is playing for time in the evident hope that Donald Trump will retake the White House and slash U.S. aid to Ukraine.  Mr. Zelensky, having reinvented himself as one of modern history’s most inspirational wartime leaders, has rallied his countrymen with the call to push the invaders out of the nearly 20 percent of the country the occupy.

“That goal might not be achievable, at least not soon.  Ukraine’s counteroffensive, launched in June, has been a slow and bloody slog.  It is impossible to say whether Ukrainian forces would have been more successful had they received all the weapons Mr. Zelensky and his top generals have pleaded for – or had gotten them earlier.  There is no denying that U.S. arms shipments to Ukraine have been substantial.  It is equally true that the Biden administration has repeatedly dragged its feet.

“It is by now a well-established pattern that the White House has balked at Ukrainian requests for advanced weapons, only to grant them months later. It has done so with M1 Abrams battle tanks, F-16 fighter jets, HIMARS rocket-launchers, air defense missiles, and other arms.  Even now, months after Mr. Biden approved F-16 training for Ukrainian pilots, it will be months before those aircraft are deployed to support Kyiv’s forces.

“Mr. Biden is reportedly now considering whether to approve the delivery to Ukraine of U.S.-made long-range missiles known as ATACMS, a weapon Mr. Zelensky has requested for months.  The White House and Pentagon have resisted granting the request, variously saying that the United States has too few ATACMS in its arsenal or that they are not a particularly effective weapon or that the Ukrainians do not need them.

“In the meantime, the French and British have provided Ukraine with air-launched cruise missiles whose range is nearly that of ATACMS.  Ukrainian forces were reported to have used them last week to attack Russia’s Black Sea Fleet in Sevastopol, in Crimea, badly damaging a ship and a submarine in dry dock.

“There is no single weapon system that would provide the Ukrainians with game-changing firepower. Over time, however, the Ukrainians have proved adept at using most of the weapons they have been given.  Mr. Biden should stop dawdling and provide Kyiv with ATACMS.

“Mr. Biden’s success in galvanizing U.S. allies also has not been matched by a full-court press to prepare Americans for a long struggle.  The White House repeats that it will stand by Ukraine ‘as long as it takes.’ The implicit goal is to convince Mr. Putin that the war has become too costly – to Russia’s military, economy and standing in the world – to continue.  The idea is that he might be compelled, eventually, to negotiate if he is subjected to the right combination of pressure and inducements.

“Yet while Mr. Biden has delivered speeches on Ukraine on his travels to Lithuania and Kyiv, he has yet to give a major address about the war from the Oval Office, directed at the American people.  He can make the case forcefully for intensified U.S. support, including by explaining his policy’s deterrent effect on Chinese ambitions in East Asia.  It should be a message with bipartisan appeal – that the best way to dissuade China from invading Taiwan is to succeed in thwarting Russia in Ukraine.

“Mr. Biden’s leadership on the war has been critical to Ukraine’s survival. Now he needs to press ahead toward forcing Moscow to sue for peace.”

Well, we learned at week’s end, no ATACMS.

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Wall Street and the Economy

The Federal Reserve left its benchmark interest rate unchanged as expected on Wednesday, while signaling borrowing costs will likely stay higher for longer after one more hike this year.

The Federal Open Market Committee in its statement repeated language saying officials will determine the “extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

The Fed said recent economic indicators suggest activity has been “expanding at a solid pace.”  Job growth has “slowed in recent months,” but remains strong, while the unemployment rate is low, according to the statement.

The FOMC held its target range for the federal funds rate at 5.25% to 5.5%, while updated quarterly projections (the Summary of Economic Projections, or SEP) showed 12 of 19 officials favored another rate hike in 2023, underscoring a desire to ensure inflation continues to decelerate.

One more rate hike this year would bring the funds rate to a band of 5.50% to 5.75%, call it 5.6%, the statement of additional projections has the rate coming down to 5.1% by the end of next year, reflecting fewer interest rate cuts than they anticipated three months ago, according to the median of 19 forecasts.

Fed officials now see the personal consumption expenditures price index (PCE) at 3.3% at year end, falling to 2.5% by the end of next year.  They envision inflation reaching 2.2% by the end of 2025, before finally attaining their 2.0% goal in 2026.

Overall the updated projections suggest mounting confidence in a “soft landing” scenario for the economy.

Policymakers see U.S. GDP growing 2.1% this year, a notable upgrade from the 1.0% growth projected in June and expanding by 1.5% next year.  Meanwhile, the unemployment rate – currently at 3.8% - is seen peaking at 4.1% in 2024 – and remaining there for 2025 – versus the 4.5% high-water mark projected in June.

In his press conference remarks, Chair Jerome Powell said: “Given how far we have come, we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks.  Real interest rates now are well above mainstream estimates of the neutral policy rate, but we are mindful of the inherent uncertainties in precisely gauging the stance of policy.  We are prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective.”

Rate decreases will be appropriate at some point, Powell conceded, but he would not commit to the timing of the unwinding, saying the FOMC will do what it thinks is correct at that moment and that the SEP estimates do not represent a concrete plan.

As for rising bond yields, the 2-year hitting its highest levels since 2006, the 10-year since 2007, Powell said the yields do not appear to suggest a lack of market confidence that central bank officials will fail to bring inflation back down to target, but rather they reflect market views of better growth and the impact of high Treasury bond supply (to fund the rising deficit, which Powell didn’t include in his assumption).

On the economic data front this week, August housing starts came in far less than expected, a 1.283 million annualized pace vs. a forecast of 1.435m.

August existing home sales fell 0.7% to 4.04 million over July, down 15.3% year-over-year. The median existing-home sales price rose 3.9% Y/Y to $407,000.

Sales are weak due to rising mortgage rates, while the lack of supply is aiding prices.

Freddie Mac’s 30-year fixed-rate mortgage, a weekly barometer, is at 7.19% but destined to hit a new cycle high next week.

The Atlanta Fed’s GDPNow indicator for third-quarter growth is at 4.9%.

The figure for August leading economic indicators fell a 17th consecutive month, this metric long forecasting recession.

Meanwhile, the Organization for Economic Cooperation and Development (OECD) issued its latest forecast for world growth, 2.7% in 2024 after an already “sub-par” expansion of 3% this year.  With the exception of 2020 when Covid hit, that would mark the weakest annual expansion since the global financial crisis.

“While high inflation continues to unwind the world economy remains in a difficult place,” OECD Chief Economist Clare Lombardelli told a news conference on Tuesday.  “We’re confronting the double challenges of inflation and low growth.”

The OECD projects U.S. growth will slow to 1.3% in 2024 from 2.2% in 2023.

Euro area growth will be 0.6% this year, 1.1% next.  Germany will contract 0.2% in 2023.

UK growth 0.3% in 2023, 0.8% in 2024.

China 5.1% this year, 4.6% next.

Japan 1.8% in 2023, 1.0% in 2024.

Europe and Asia

Euro area inflation fell to 5.2% annualized in August, down from 5.3% in July, according to Eurostat.  A year earlier, the rate was 9.1%.

Germany 6.4% ann., France 5.7%, Italy 5.5%, Spain 2.4%, Netherlands 3.4%, Ireland 4.9%.

Understand when it comes to Germany, people there are really feeling the pain when you consider their economy isn’t growing at all.

S&P Global reported the flash eurozone PMI for September, with the composite at 47.1 vs. 46.7 in August, but still contraction (50 the dividing line between growth and contraction).  Manufacturing was 43.4, unchanged from August; services 48.4.

Germany: mfg. 39.2, a 40-month low; services 49.8, 2-month high.
France: mfg. 41.8, 40-month low; services 43.9, 34-month low.

UK: mfg. 44.6; services 47.3, 32-month low.

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

“The numbers for PMI services in the Eurozone paint a grim picture, but it’s not all doom and gloom.  Sure, activity has been reduced once again and new incoming business has been shrinking for three months in a row.  However, companies are hiring in September at a somewhat faster pace than they did in August. Thus, companies still show some resilience and optimism in the face of lower demand.  Having said this, we expect the eurozone to enter a contraction in the third quarter.  Our nowcast, which incorporates the PMI indices, points to a drop of 0.4% compared to the second quarter.”

Britain: Bank of England Governor Andrew Bailey said on Thursday that the central bank would be watching closely to see if further increases to interest rates are needed, after the BoE decided to hold rates at 5.25%, halting its long run of interest rate increases.

“We will need to keep interest rates high enough for long enough to ensure that we get the job done.  Whatever happens we will do what is needed to get inflation back to normal.”

Earlier, Britain’s inflation rate unexpectedly slowed, after the consumer price index sank to an 18-month low of 6.7% in August, a tick down from July’s 6.8% but better than expected.

Core inflation, ex-food and energy, declined to 6.2% from 6.9% in July.  The figures are obviously still way too high.

Turning to Asia…nothing on the data front of import from China this week.

Japan reported flash PMI readings for September, with manufacturing at 48.6, services 53.3.

August exports fell 0.8% year-over-year, imports -17.8% Y/Y.

August inflation was 3.2%, though ex-food and energy still 4.3%.

Nonetheless, the Bank of Japan said it would maintain its ultra-loose policy, no one expecting a change.

Street Bytes

--It was a lousy week for the equity and bond markets, as the ‘higher for longer’ mantra held sway, though this should have been the case for much of the year, frankly.  Certainly, it has been your editor’s mantra.

The Dow Jones fell 1.9% to 33963, the S&P 500 lost 2.9%, and Nasdaq 3.6%, the worst week for the latter two since March.

Next week, Friday, we get the August personal consumption expenditures index that the Fed always highlights in its interest rate deliberations.  In fact, we get two of them before the Fed’s next meeting Oct. 31-Nov. 1.

--U.S. Treasury Yields

6-mo. 5.53%  2-yr. 5.11%  10-yr.  4.43%  30-yr. 4.52%

As the Fed’s and Chair Powell’s comments sunk in Wednesday afternoon and Thursday, Treasuries, as measured by the 2- and 10-year, broke through key technical levels to hit new cycle highs, with the 10-year closing at 4.49%, highest level since 2007, and the 2-year 5.17% (5.14% close), highest for this one since 2006.

Yields eased off a bit today but were still up substantially for the week.  Next week’s PCE is rather important.

But it’s not just the data, it’s the supply hitting the market owing to our mammoth budget deficit, and overall debt level.

--Speaking of which…America’s national debt soared past the $33 trillion mark for the first time ever, according to the Treasury Department, even as the Biden administration and the GOP-led House are on a collision course that may prompt the first government shutdown in nearly four years.

According to Treasury Department data, the federal government has spent nearly a quarter of its budget – 23% - on Social Security in fiscal year 2023.

Health care swallows up 15% of federal spending while national defense, Medicare and income security each take up 13% of the budget.

In fiscal year 2022, the federal government spent $6.27 trillion, which represents one-fourth of gross domestic product ($25.02 trillion).

In the last 100 years, the U.S. national debt has ballooned from $408 billion in 1922 to $33 trillion.  Just four decades ago, the total stood at $907 billion.

--United Auto Workers President Shawn Fain rejected a 21% pay increase from Stellantis over the weekend as nearly 13,000 auto workers continued their third day of picketing outside three plants in Michigan, Missouri, and Ohio on Sunday.

Fain told CBS’ “Face the Nation” that Stellantis’ offer, made public by the maker of Chrysler and other brands on Saturday, was “definitely a no go.”

Fain continued to tell interviewers that auto workers have been left out of the industry’s record profit.

“This is about working class people standing up to get their share of economic justice and social justice after being left behind for decades,” Fain told MSNBC’s “The Sunday Show.”

Fain’s big talking point has been that the auto maker CEOs have seen their pay rise 40% over the past four years at Ford, GM and Stellantis and workers should get similar pay boosts.

Fain told CBS that “If we don’t get better offers and we don’t get down and take care of the members’ needs, then we’re going to amp this thing up even more.”

Stellantis, in announcing its offer, said: “Our goal is to secure a sustainable future that provides all our UAW-represented employees with an opportunity to thrive in a company that will be competitive during the automotive industry’s historic transformation.”

Former vice president Mike Pence told CNN’s “State of the Union” the Biden administration’s push to encourage electric vehicles is causing anxiety among auto workers.

Rep. Debbie Dingell (D-Mich.) told “Face the Nation” that the UAW’s contract negotiations are “going to determine the future of the auto industry in Michigan.”

Wednesday, GM and Stellantis laid off workers due to the impact of the strike.  GM laid off about 2,000 workers at its Fairfax, Kansas assembly plant after it idled the facility because of a “shortage of critical stampings.” According to an NBC report, affected staff will not be given unemployment benefits “due to the specific circumstances of this situation.”

Stellantis furloughed 68 employees at its Toledo machining plant in Perrysburg, Ohio due to “storage constraints.”  The automaker was expected to do the same to about 300 employees at its casting and transmission facilities in Kokomo, Indiana.

George Will / Washington Post

“Henry Ford, according to corporate legend, said that if he had asked potential customers what they wanted when he founded his company in 1903, they would have said faster horses.  The infant automobile industry began by giving people what they did not know they wanted.  Twelves decades later, this industry is being discombobulated by government pressure to manufacture products – electric vehicles – that the public does not much want, least of all in the quantities that Washington’s central planners deem proper….

“The UAW reasons, not unreasonably, that its job is to seize for its members as much as it can of the billions sloshing around in the name of ‘industrial policy’ subsidies.  Meanwhile, non-UAW production lines are still humming along, disproportionately in the South’s right-to-work states.

“The UAW worries that EVs, having many fewer components than internal combustion vehicles, will require many fewer assembly workers.  Last year, Ford’s CEO suggested 40 percent fewer. The union probably cannot even moderate the Biden administration’s climate monomania. It might, however, extort some taxpayer-funded payoffs.

“The union should also worry that many Americans will keep their gas-powered cars longer than usual, rather than take a leap of faith regarding EVs.  How many miles can they go between charges?  The government is in charge of guaranteeing an adequate supply of charging stations, so drivers, too, should worry. To understand why this month’s inventory of unsold EVs is almost twice that of gas-powered vehicles, start by reading NPR’s report on Energy Secretary Jennifer Granholm’s misadventures during her planned drive from Charlotte to Memphis, trying to demonstrate EVs’ delights.  Fortunately, her advance team had a gas-powered car.

“Regarding one matter, the UAW is too timid, given the nation’s increasingly political – very political – economy. The UAW rails against the CEOs’ salaries at GM, Ford and Stellantis – reportedly $29 million (362 times a median employee’s earnings), $21 million (281 times), and $24.8 million (365 times), respectively, in 2022.

“The UAW should propose each CEO be paid $152,771, the highest base pay for GS-15 federal civil servants.  This is what the CEOs should be considered, because their companies have become appendages of government, implementing its policies.”

One final note related to the EV industry, the European Union has launched an investigation into Chinese subsidies for electric vehicles in a bid to ward off a flood of cheap imports, an escalation that opens the door to retaliation which would hit the bloc’s carmakers hard.

Given the size of the market and its rapid growth, potential tariffs from the probe could have a far bigger impact than any previous anti-subsidy actions against Chinese imports.

Taking an unusually aggressive stance, European Commission President Ursula von der Leyen said on Wednesday that the global market is overrun with cheap Chinese cars and that the bloc will fight back.

“Their price is kept artificially low by huge state subsidies,” the head of the EU’s executive arm said in her annual speech to the European Parliament.  “This is distorting our market.”

The EU’s move is designed to prevent a replay of what happened to Europe’s solar industry a decade ago, when local manufacturers failed to keep up with state-backed Chinese rivals.

The share of Chinese brands of electric vehicles in the bloc was 8% last year, according to an EU official.  With Chinese models about 20% cheaper than domestic offerings, the expectation is that they will control 15% by 2025, the official said.

--FedEx raised the lower end of its full-year adjusted profit forecast on Wednesday as it benefited from problems experienced by rivals UPS and Yellow.  FedEx shares rose 5% in the aftermarket Wednesday in response and finished up that much on the week. The company, which has been slashing costs to protect profits, has also benefited as some worried UPS customers shifted packages to the FedEx network ahead of the Aug. 1 expiration of that rivals’ contract covering about 340,000 United Brotherhood of Teamsters-represented workers.  As one of the largest providers of less-than-truckload shipping, FedEx also was in prime position to benefit from last month’s demise of Yellow, one of that sector’s dominant players.

The global shipping downturn which has hurt margins for the sector has pushed several companies to adopt a balancing act of matching costs and capacity to lower demand.  The fall in demand comes against the backdrop of a decline in e-commerce volumes as the pandemic-driven online shopping bubble burst.  Last fiscal year, FedEx slashed 29,000 jobs, retired 18 planes, shuttered offices and pared back profit-sapping Sunday deliveries in a bid to cut $4 billion in permanent costs by the end of its 2025 financial year.

FedEx now expects adjusted full-year earnings per share between $17.00 and $18.50, compared with a prior forecast of $16.50 to $18.50.  Revenue declined to $21.7 billion from $23.2 billion, trailing the Street’s $21.83bn view.

Operating income at ground operations surged 59% mainly due to yield improvement and cost reductions.  Freight’s operating income slid 26% on the back of lower fuel surcharges and shipments.  The Freight segment closed 29 terminal locations in August.

--TSA checkpoint numbers vs. 2019

9/21…105 percent of 2019 levels
9/20…100
9/19…98
9/18…103
9/17…105
9/16…102
9/15…100
9/14…105

--I feel like a significant event happened late Thursday didn’t get enough attention before the market close, that being Deere & Company’s announcement that it was placing 225 production employees at John Deere Harvester Works in East Moline, Illinois, on indefinite layoff effective Oct. 16.

While the layoffs are small, not a good sign for the overall health of the economy.  The shares fell 3.5% on the news, and then further on Friday.

--On the other hand, Amazon.com plans to hire 250,000 logistics workers, suggesting the online retailer is bullish about what’s otherwise expected to be a humdrum holiday shopping season.

The recruits will include full-time, part-time and seasonal workers at hourly rates ranging from $17 to $28 per hour depending on location, the company said Tuesday in a blog post. Some new hires will be eligible for bonuses ranging from $1,000 to $3,000. Amazon also said it will boost average pay for logistics personnel to about $20.50 an hour as it seeks to recruit and retain workers amid a labor shortage.

Amazon’s move will prove to be a mistake when its fourth-quarter earnings come out, so says moi.

--Cisco Systems is acquiring cybersecurity firm Splunk in a $28 billion deal as it bolsters its defense against potential security threats that may be heightened by the widening use of artificial intelligence.

The Silicon Valley tech giant will pay $157 per Splunk Inc. share, Splunk closing at $118 prior to the announcement.

“Our combined capabilities will drive the next generation of AI-enabled security and observability,” Cisco Chair and CEO Chuck Robbins said in a prepared statement.  “From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient.” 

It will take about a year for the deal to close, and still needs the approval of Splunk shareholders.

Curiously, the shares finished the week at $145, well below the $157 offer price.

--Bank of America will boost its minimum hourly wage to $23 in October as it heads toward a goal of raising hourly pay to $25 by 2025, the company said in a statement Wednesday.  The pay bump translates to a minimum salary of almost $48,000 a year for full-time employees.  “Providing a competitive minimum rate of pay is foundational,” Sheri Bronstein, the bank’s chief human resources officer said in the statement.

--General Mills on Wednesday reported mixed fiscal first-quarter results as earnings declined but topped market estimates, while price increases helped lift sales.

The packaged foods maker’s adjusted earnings came in at $1.09 a share for the quarter ended Aug. 27, down from $1.11 the year before, but just ahead of consensus at $1.08.  Sales moved 4% higher to $4.9 billion, matching the Street’s view.

North America retail sales rose 3% to $3.07 billion.  Pet sales were flat.

“We delivered growth on the top and bottom lines in the first quarter amid an evolving external environment characterized by moderating inflation, stabilizing supply chains, and a resilient but increasingly cautious consumer,” CEO Jeff Harmening said in a statement.  “Looking ahead, we will remain focused on executing our accelerate strategy and driving strong growth for our brands.”

GIS continues to expect adjusted EPS to grow by 4% to 6% for fiscal 2024, while reiterating its full-year organic sales growth outlook of 3% to 4%.

The company forecasts its annual performance to be affected by the economic health of consumers, the rising stability of the supply chain environment and moderating cost inflation.  It projects input cost inflation at 5% of total cost of goods sold, mainly driven by labor inflation.

--Instacart, officially called Maplebear, went public Tuesday.  Priced at $30, the shares opened at $42 but gradually sank throughout the trading day to close at $33.70, up 12%.

But then the grocery delivery company retreated further as many analysts talked about slowing growth after a pandemic-driven surge in demand. Online grocery sales in the U.S. grew nearly 60% a year from 2019 to 2022, according to Needham analyst Bernie McTernan, who predicted that will slip back to about 12% a year through 2025.

The analyst said a Needham survey of consumers found that 38% don’t plan to use an online grocery marketplace over the next month. He said that the three primary reasons people cited for not buying groceries online were a desire to make sure they got the right products, enjoyment in going to the grocery store, and higher costs. [Barron’s]

Personally, I love going to the grocery store.

Maplebear shares closed at the IPO price of $30 today.

[Speaking of IPOs, Arm Holdings, the chipmaker that went public last week at $51 and shot to $66 before closing its first day at $63.60, is now already back down to $51 at the close of the week.]

--Speaking of chipmakers, Intel shares fell 4% Tuesday after the company made some cautionary comments on data chip demand in a meeting with analysts.

Intel CFO David Zinsner told investors that channel inventory of data center processors is taking longer to clear than it did for the company’s PC processor business.  He said Intel is finding the recovery in the data center business to be “a little bit more delayed.”

Zinsner added that Intel is going through “inventory digestion” in the third quarter and likely the fourth quarter before seeing a turnaround on the data center business.  He added that the data center business in the September quarter will be down quarter over quarter.

--For just the third time since March 2020, New York’s in-office occupancy exceeded 50% of pre-pandemic levels last week.

In-person activity in the city clocked in at an average of 50.1% for the seven-day period ending Sept. 13, marking a 7.5% increase from the week prior, according to data from real estate technology firm Kastle Systems, which tracks badge swipes at commercial office buildings in ten major U.S. cities.

In New York, Tuesday is the busiest day with office swipes nearing 63% of pre-pandemic levels, whereas in-office activity dipped below 30% on Friday.

In Houston, in-person activity is at 61.6% of pre-pandemic levels.  Chicago is at 53.6%, Los Angeles 49.5% [Crain’s New York Business]

--Crain’s also reported that straphangers are returning to Gotham’s subways, with more than 4.14 million hitting the rails this past Tuesday, a new post-pandemic high, the MTA reported.  The agency depends on passenger fares for nearly $5 billion of its $19 billion budget.

The 4.14 million is still just 72 percent of the 5.7 million riders who took the subway on the third Tuesday after Labor Day in 2019, before the pandemic.

--Anyone looking to stock up on Clorox bleach or the brand’s other products may have trouble finding them on store shelves for the next several months after a recent cyberattack upended the company’s production process.

The cybersecurity violation was first discovered Aug. 14 when the company detected unauthorized activity on several IT systems, Clorox said in an SEC filing Monday.

In response to the attack, Clorox took the affected systems offline and began operating at a reduced production capacity, resulting in “an elevated level of consumer product availability issues.”

The limited output and manual ordering have led Clorox to anticipate shortages affecting sales through March.

The shares fell 2.4% after the filing.

--Walt Disney announced plans to nearly double its investment in its Disney Parks, Experiences, and Products segment over the next decade.

Disney said in a filing with the Securities and Exchange Commission Tuesday that it plans to accelerate and expand the investment over the course of about 10 years to about $60 billion.  This includes investments in its theme parks and cruise lines, the company said.

Disney sees significant room for land and sea expansion, the company said Tuesday.  Disney Parks alone has more than 1,000 acres of land available for possible development.  For its cruises, the company plans to nearly double the worldwide capacity of its line, adding two ships in fiscal year 2025 and another in 2026.

The market reacted negatively to the news, the stock falling 3.6%.

--Rupert Murdoch has stepped down as the chairman of Fox Corp. and News Corp., ending a more than seven-decade career during which he created a media empire spanning from Australia to the United States.  His son, Lachlan Murdoch, will become the sole chairman of News Corp. and continue as the chair and CEO of Fox, the companies said on Thursday.

The transition solidifies Lachlan’s role as the leader of the media empire, putting to rest questions of succession within the Murdoch family.  In a memo to staff Thursday, Murdoch wrote: “Our companies are in robust health, as am I.”  The transition comes ahead of an annual shareholder meeting in mid-November.  It also comes just months after Murdoch, 92, scrapped a plan that would have reunited his media empire by merging Fox and News Corp., after several top shareholders rejected the proposal on the grounds that it would fail to realize the full value of the company.

Murdoch, who has near-controlling stakes in both companies, will be appointed chairman emeritus of both companies.

Lachlan takes over as the media industry is battered by challenges ranging from the decline in traditional television viewership, to news organizations battling tech companies over alleged copyright theft in the age of artificial intelligence.

Earlier this year, Fox settled a defamation lawsuit with Dominion Voting Systems for $787.5 million, averting a trial in which Murdoch, his son, and Fox executives and hosts were expected to testify.  The trial would have put Fox in the crosshairs over its amplification of false vote-rigging claims in the 2020 U.S. presidential election.  Fox still faces a lawsuit from voting technology firm Smartmatic, which in 2021 sued Fox for $2.7 billion over similar claims, as well as shareholder lawsuits accusing Fox Corp. officers and directors of breaching their duties by allowing the company to become mired in defamation claims.

Foreign Affairs

China:  The United States saw some “limited” signs that China may allow some communications between the countries’ militaries during 12 hours of talks between senior diplomats in Malta this weekend, according to national security adviser Jake Sullivan, who also raised concerns over China’s assistance to Russia and recent actions by Beijing in the Taiwan Strait during his talks with Chinese Foreign Minister Wang Yi.

Meanwhile, Vladimir Putin confirmed he will meet President Xi in Beijing next month for the latest high-level engagement between the two neighbors

As for the fate of former Foreign Minister Qin Gang, senior Chinese officials were told that an internal Communist Party investigation found Qin engaged in an extramarital affair that lasted throughout his tenure as Beijing’s top envoy to Washington, as reported by the Wall Street Journal.

Qin, once considered a trusted aide to President Xi, was stripped of his foreign minister title in July without explanation after he disappeared from public view a month earlier.

North Korea / Russia: Kim Jong Un inspected Russian nuclear-capable strategic bombers, hypersonic missiles and warships on Saturday, accompanied by Russian Defense Minister Sergei Shoigu, who saluted him.

Kim then hopped on his train for the journey back home on Sunday, ending a longer than expected six-day trip.  It was Kim’s longest foreign trip since he took power in 2011.

Thursday, South Korean President Yoon Suk Yeol said that if Russia helped North Korea enhance its weapons program in return for assistance for its war in Ukraine, it would be “a direct provocation.”  Seoul placed fresh sanctions on individuals and entities in relation to North Korea’s arms trade.

Josh Rogin / Washington Post…on the Biden’s administration’s ‘nonpolicy’ towards Pyongyang…

“Privately, Biden officials often say that there’s no sign the North Koreans are interested in talking to the United States.  The long-used communication channel that runs through Pyongyang’s United Nations mission in New York remains in place, but it has gone largely silent.  Official statements coming out of North Korea’s propaganda ministry range from the insulting to the absurd.

“U.S. officials also note that the South Koreans have little interest in pursuing negotiations with the North, following the failure of the previous administration in Seoul. The administration’s North Korea-watchers also argue that (former president) Trump’s erratic and incoherent diplomatic gambit undermined any trust Kim had in the United States.

“To be sure, any Biden administration effort to reengage with North Korea would be very difficult: the chance of success would be low. There’s also a high likelihood it would prove a political loser for Biden, especially as he prepares to run for reelection.  Engaging with North Korea requires both leadership and political capital.

“But it is precisely because Trump’s diplomacy was such a mess that Biden should try again.  Kim could be in power for several decades.  Shouldn’t at least one serious attempt to engage him be mounted?  What will happen if Trump comes back to office?  That could mean four more years of erratic threats and love letters.

“Strategic patience is dangerous in 2023 for the same reason it was dangerous when the Obama administration practiced it a decade ago. When there’s no diplomacy, North Korea accelerates its weapons programs and grows closer to U.S. adversaries – and the risk of conflict rises.  Engaging the Kim regime is hard.  Not engaging it is much worse.”

Israel: President Biden and Prime Minister Benjamin Netanyahu met Wednesday on the sidelines of the UN General Assembly and pledged to work together toward a landmark agreement to forge diplomatic relations between Israel and Saudi Arabia. 

Meeting for the first time since Netanyahu returned to power in December, both leaders signaled a desire to ease strains in their relationship, but Biden also made clear he was determined to discuss their differences.  These included Biden’s opposition to Netanyahu’s far-right government’s controversial judicial overhaul plan as well as his concern about Israel’s hard line toward the Palestinians.

“I hope we can get some things settled today,” Biden said at the start of the talks with Netanyahu at a New York hotel.

U.S. officials insist any breakthrough in normalizing Israel-Saudi relations is far away.  But the potential of a deal has big implications.  The Biden administration is calculating that the U.S. could reap big rewards from such a mega-deal if it can overcome steep obstacles.  “We’ve had decades of conflict in the Middle East. To bring these two countries together would have a powerful effect in stabilizing the region,” Secretary of State Antony Blinken told ABC News’ “Good Morning America” program, noting challenges remain to reach an agreement.

In the end, Biden invited Netanyahu to the White House by end of the year.

Meanwhile, Fox News got Saudi Crown Prince Mohammed bin Salman to sit down for a rare interview, with MBS saying the prospects of normalized relations between the kingdom and Israel “get closer” every day, but that treatment of Palestinians remains a “very important” issue to be resolved.

Prince Mohammed was also questioned about the possibility of Iran eventually building a nuclear weapon and said “we are concerned of any country getting a nuclear weapon” and that if Iran were to get one, Saudi Arabia will seek to do the same: “We will have to get one.”

On the issue of the 2018 killing of Jamal Khashoggi, MBS said “we tried to reform the security system to be sure that these kinds of mistakes don’t happen again.”

“It was a mistake.  It was painful,” the crown prince said, while insisting that “everyone involved” served jail time.

Iran: Speaking of Iran, as expected, five Americans were released on Monday, part of a larger step back from sanctions enforcement that has seen Iran’s energy exports grow.

The Americans were released after the Biden administration issued a waiver for international banks to transfer $6 billion in frozen Iranian money from South Korea to Qatar.  The administration insists the money will only be used for food and medicine, while Iranian President Raisi has said they’ll do what they want with it.

The United States and Iran apparently have reached an understanding to avoid actions that might increase tensions amid ongoing negotiations, including Tehran agreeing to stop its military from harassing or seizing foreign tankers in the Persian Gulf and the U.S. stepping back from seizing Iranian oil cargoes.

On the oil front, Iranian crude production has topped 3 million barrels a day and oil exports are approaching 2 million barrels a day, according to analysts.

Azerbaijan / Armenia: At least 200 people have been killed in Karabakh as a result of an Azerbaijani military offensive and more than 400 have been wounded, a separatist Armenian human rights official in the breakaway region said on Wednesday.  Azerbaijan said earlier on Wednesday it had halted military action in disputed Nagorno-Karabakh after its battlefield success forced Armenian separatist forces to agree to a ceasefire that will see the area fully return to Baku’s control.

The capitulation signals the end of decades of ethnic-Armenian rule in the enclave and the rapid decline of Russian influence in the former Soviet Union territories.

The terms of the cease-fire lay groundwork that could bring to a close the autonomous rule by the population of Nagorno-Karabakh, which was won from Baku in a bloody yearslong war after the fall of the Soviet empire.

The Kremlin has used the frozen conflict – one of a handful that dotted the post-Soviet landscape – as a lever to maintain sway over both Armenia and Azerbaijan.  Over the years, Moscow has sent both weapons and peacekeepers to the region while using diplomacy to retain its position as ultimate arbiter over geopolitics there.

Canada / India: The killing of a Sikh separatist leader has set off a rapidly escalating battle between these two allies of the United States.

Monday, Canadian Prime Minister Justin Trudeau issued a stunning allegation that “agents of the Indian government” were involved in the assassination of the Sikh separatist, a Canadian citizen, on Canadian soil.

That was followed by vehement denials from India and allegations that Canada is a haven for terrorists, as both countries expelled diplomats.

The allegation comes as President Biden has spent much of the past few months courting Prime Minister Narendra Modi, seeking to draw him closer to the American orbit at a time when India has refused to break with Russia over its invasion of Ukraine.

Canadians are outraged and will be looking for support from the United States.

Trudeau has urged India to cooperate in the investigation of the shooting in suburban Vancouver, British Columbia of Hardeep Singh Nijjar in June.  Trudeau has only cited “credible allegations,” which he said have been pursued by Canada’s security agencies for several weeks.

Nijjar was shot dead in his vehicle by two masked gunmen outside a Sikh temple.

India has not said it will cooperate and instead issued an advisory urging its citizens traveling to or living in Canada to “exercise utmost caution.”

Canada has the highest number of Sikhs outside Punjab and has seen several pro-Khalistan protests and demonstrations, Khalistan the name for a separate Sikh homeland.

India, in responding to the allegations, said Canada was trying to “shift the focus from Khalistani terrorists and extremists” who had been given shelter there.

Random Musings

--Presidential approval ratings….

Gallup: 42% approve of President Biden’s job performance, 53% disapprove; 39% of independents approve (Aug. 1-23).

Rasmussen: 45% approve, 54% disapprove (Sept. 22).

--According to a new Reuters/Ipsos poll, a plurality of Americans support the idea of opening an impeachment probe of Joe Biden.  Some 41% of respondents support opening the investigation related to allegations involving Hunter, while 35% were opposed and 24% said they were not sure.

--In two key Fox Business polls of prospective Republican primary voters, in Iowa, Donald Trump is at 46%, Ron DeSantis 15%, and Nikki Haley 11%.

In South Carolina, Trump is at 46%, Haley 18%, and DeSantis 10%.

In a CNN/UNH survey of New Hampshire Republican primary voters, Trump garners 39%, Vivek Ramaswamy 13%, Haley 12%, Chris Christie 11% and DeSantis 10% (down from 23% in the last poll).

--Editorial / Wall Street Journal

“Donald Trump has a big lead in the polls for the GOP presidential nomination, but he’s acting as if he has already won.  After skipping the first GOP debate, he is also planning to blow off the second one, scheduled for next week at the Reagan Presidential Library in California.  Instead Mr. Trump will give a speech to union workers in Detroit.

“Why is Mr. Trump afraid to confront other Republicans without the aid of a teleprompter? Is he worried he’d look his age at 77 next to younger candidates?  To state the obvious, Mr. Trump is running to be President and leader of the free world.  Voters deserve to hear him defend his record and his platform.

“Abortion.  Mr. Trump said this weekend that Gov. Ron DeSantis made a ‘terrible mistake’ by signing Florida’s six-week abortion ban. Yet Mr. Trump refuses to explain where in pregnancy he’d draw the line, saying vaguely that ‘we’ll come up with a number.’

“How?  By spinning a giant wheel, like on a TV game show, except marked with ’10 weeks,’ ’15 weeks,’ and so forth?  The public takes the abortion question seriously, and Mr. Trump owes a serious answer.

“Covid-19.  Whose pandemic policies worked?  Mr. Trump has exchanged barbs with Mr. DeSantis, and a recent Trump advertisement intones that ‘Lockdown Ron’ failed Florida.  But Florida was one of the earliest states to reopen, and it became a mecca for many Americans fleeing the locked-down blue states.

“ ‘Even January of 2021, I was getting hit by the White House task force under Trump,’ Mr. DeSantis recalled recently.  ‘Weeks before he left office, they were sending us missives to Florida, saying, ‘Impose a mask mandate, and close bars and restaurants and businesses.’’  Covid was a classic example of an unexpected crisis that Presidents have to face, and Mr. Trump’s record deserves a public vetting.

“Trade and tariffs.  Mr. Trump wants to impose a 10% tariff on all U.S. imports, which would cost Americans something like $300 billion a year, while inviting retaliation and alienating friends and allies.  Sen. Tim Scott’s new economic plan says he would ‘avoid blunt trade wars with our friends and allies that hurt consumers and set us back in the mission of isolating China.’ It sounds like a good subject to debate.

“Foreign Policy.  Mr. Trump believes so much in the art of the deal that he has pledged to have the Ukraine war ‘solved in 24 hours.’  Maybe his fans take this seriously and not literally, but he ought to explain what he means.  Former national security adviser John Bolton wrote in his book that Mr. Trump signaled privately he wouldn’t defend Taiwan if China invaded.  Is that what he thinks now? ….

“Age and competence.  The public is understandably worried about the visible decline of Mr. Biden, who is 80 years old and would be 86 at the end of a second term.  Yet Mr. Trump would be 82 at the end of his second term in 2029, and he isn’t exactly in shape to set records at the YMCA senior triathlon.  Do the concerns about age not apply to him?

“If Mr. Trump wasn’t able to tame the federal leviathan the first time, why should Republicans believe he can do it next time?  And who would agree to serve in a second Trump Administration after all the good people he fired and then belittled in the first one? ….

“Mr. Trump’s advisers may be telling him he shouldn’t appear lest he say something that hurts his legal defense. But that’s a sign of weakness, not strength, and he’ll have to answer those questions eventually.  What is the former President afraid of?”

Speaking of Trump’s age and competence, having blistered President Biden incessantly, last weekend at the Washington, D.C., Pray Vote Stand Summit, Trump suggested former President Obama was running in 2024 as he warned “cognitively impaired” President Biden could lead the country into “World War Two” if he wins re-election.

Trump said: “We have a man who is totally corrupt and the worst president in the history of our country, who is cognitively impaired, in no condition to lead, and is now in charge of dealing with Russia and possible nuclear war.”

“Just think of it. We would be in World War Two very quickly if we’re going to be relying on this man, and far more devastating than any war.  There will never be a war if that happens – there will never be a war like this. It will obliterate everything there is, everybody, it will obliterate every country.”

The thing is, Trump continued, saying he was beating “Obama” in the 2024 election polls and then appeared to suggest he had beaten him in 2016 before correcting himself that his opponent then was Hillary Clinton.

Alyssa Farah Griffin: “I’ve been outspoken over my concerns about Biden’s age. But being consistent: This is a word-salad mess.  Trump seems confused about who he ran against in ’16.  He’s just 3 years younger than Biden.”

At another event last Friday, Trump also repeated the bizarre claim that Americans need to show ID to buy a loaf of bread.

--Being in New York this week, President Biden had a chance to address the migrant crisis in the Big Apple, yet at a UN leaders reception at the Metropolitan Museum of Art Tuesday evening, Biden thanked attendees’ work “to support the world’s most vulnerable,” but didn’t once mention the masses of vulnerable migrants left to fend for themselves by the White House outside the Roosevelt Hotel down the road in Midtown.

Nowhere to be heard in the president’s brief remarks was any word for Mayor Eric Adams, who just hours earlier bristled to reporters about the White House’s lack of response to the migrant crisis which has saddled New York with billions of dollars in debt and costs.

Adams declined to attend the event at the Met – which he went to last year.

Instead, Biden thanked New York Governor Kathy Hochul, “for everything this great city has done to make this General Assembly a success,” despite the state having virtually nothing to do with organizing UN week.  All the big responsibilities fall on the NYPD and its officers, not the state.

Adams said earlier about the president and his priorities: “I am hoping that he understands this beautiful city that’s the economic engine of the entire country is being saddled with $2 billion that we spent already, $5 billion we’re going to spend in this fiscal crisis, $12 billion in the next two budgetary cycles,” he told reporters Tuesday.

New York continues to bear the brunt of the crisis and has admitted 95,000 migrants so far in 2023, a staggering figure.  The city has taken in more than twice as many migrants as locations in Texas, California and Florida since Title 42 was lifted in May.

Between June and September, 41,277 migrants listed NYC as their destination when coming over the border  and given Notices to Appear (NTA) before an immigration court in the city, according to Syracuse University’s immigration database.

The Big Apple’s numbers dwarfed its closest runners up – 15,416 listed Houston as their destination, 15,329 said they were heading to Los Angeles County and 11,081 were on their way to Miami-Dade County in the same time period.

So then the Biden administration suddenly gave thousands of Venezuelans in Gotham the ability to work, which has left City Hall scrambling. The administration has promised just 50 staffers to help New York process employment permit applications for the roughly 10,000 migrants from the country – and it’s not clear how many staffers have even arrived to start the job.

Further chaos. 

--Editorial / New York Post

“Attorney General Merrick Garland dodged and deflected for hours Wednesday before the House Judiciary Committee – yet still had to admit to misleading-at-least past testimony.

“His dodges included refusing to address multiple questions about the Biden-family-crimes investigation, citing special counsel David Weiss’ ongoing probe.

“Garland prepped well in advance for that one by finally naming Weiss as the ‘independent’ prosecutor on Hunter Biden just this August, when Weiss had charge of the case for years before then, and as U.S. Attorney for Delaware still reports directly to the AG.

“Plus, Weiss has plainly bungled the case to date, letting the statute of limitations lapse on many of the most serious tax charges and offering the First Son a plea deal that got thrown out as soon as it came before a judge.

“Garland couldn’t explain why Weiss has taken so long, nor why he let those charges lapse – though the AG did finally admit that Weiss long lacked the full authority to charge Hunter.

“That was a complete contradiction of Garland’s past testimony to, among others, Sen. Charles Grassley – though of course the AG hedged even as he admitted it.

“In fact, Weiss had been turned down by at least one other U.S. attorney on charging Hunter before Grassley even asked Garland about it.

“The AG refused to say whether he’d ever discussed the Hunter case with Weiss, and couldn’t ‘recollect’ whether he’d talked to anyone at the FBI or Justice Department about it.

“Another damning hedge: ‘No one that I know of’ at Justice has discussed the case with the White House.”

--The Senate voted to confirm the nomination of Gen. C.Q. Brown to be the next chairman of the Joint Chiefs of Staff, following a monthslong hold on more than 300 military promotions by Republican Sen. Tommy Tuberville of Alabama.

Senate Majority Leader Chuck Schumer moved Wednesday to have the three spots – the chairman of the Joint chiefs of Staff, the Marine Corps commandant, and the Army chief of staff – voted on separately rather than as part of a bloc of holds by Tuberville.

Thursday, the Senate voted to confirm the new Army chief of staff and the new Marine Corps commandant.

Tuberville has refused to drop his holds, insisting instead that Schumer set up individual votes on each nominee.  Until Wednesday, Schumer has resisted, saying that all nominees should have been considered and confirmed “in a bipartisan way.”

Schumer warned that having to give in to Tuberville’s demands for votes could set a precedent where senators can use widely supported nominees as leverage for their top issues.

“The Senate runs on unanimous consent, and we depend on each other to ensure this institution functions smoothly,” Schumer said.  “That’s how we make things happen around here. If everyone objected to everything, to get leverage for their pet priorities, it will grind this body to a halt.”

--On a totally different matter involving Majority Leader Schumer, he relaxed the Senate’s unwritten dress code requiring senators to wear business attire to accommodate the total slob, Pennsylvania Democrat John Fetterman.  Beyond pathetic.

Editorial / Washington Post

“Dressing formally conveys respect for the sanctity of the institution and for the real-world impact of the policies it advances.  Putting on a suit creates an occasion for lawmakers to reflect, just for a moment, on the special responsibilities with which the people have entrusted them and on a deliberative process that at least aspires to solemnity.  Judges are perfectly ‘able to choose’ what they wear while on the bench, but court wouldn’t be court unless they put on black robes.”

--The local NBC News affiliate reported this week that New Jersey Democratic Sen. Robert Menendez will be indicted for improperly taking gifts, including four gold bars given to his wife by an Egyptian businessman, worth $400,000, in exchange for favors from the senator.

And then the indictments came Friday morning.  [Good work NBC’s Jonathan Dienst.]  Menendez and his wife have been charged with bribery offenses in connection with their relationship with three New Jersey businessmen, federal prosecutors said today. 

The U.S. Attorney’s office in Manhattan accused the defendants of accepting thousands of dollars of bribes in exchange for using Menendez’s power and influence as a senator to seek to protect and enrich the businessmen and benefit the government of Egypt.

Prosecutors said the bribes included cash, gold, payments toward a home mortgage, compensation for a job with minimal requirements, a luxury vehicle and other things of value.

Menendez and his wife Nadine Menendez face three criminal counts each.

The senator is chair of the powerful Foreign Relations Committee, from which he will now have to step down as chair (but he can remain on the committee).

This is not his first rodeo on the corruption circuit.  He was previously charged in New Jersey with accepting gifts, campaign contributions and other bribes from a wealthy patron in exchange for official favors, but a 2017 trial ended in a jury deadlock.  But even before then he has basically been under constant investigation, having entered the Senate in 2006.

Prosecutors are seeking to have Menendez forfeit assets including his New Jersey home, a 2019 Mercedes-Benz, and about $566,000 in cash, gold bars and funds from a bank account.

Menendez, in an emailed statement, accused prosecutors of misrepresenting “the normal work of a congressional office.”

“For years, forces behind the scenes have repeatedly attempted to silence my voice and dig my political grave,” Menendez said.  “Since this investigation was leaked nearly a year ago, there has been an active smear campaign of anonymous sources and innuendos to create an air of impropriety where none exists.”

Menendez added he “will not be distracted” from his work in the Senate.  [These are the same words he used in 2017.]

Well, Senator, Me thinks you are lying and prosecutors have a mountain of evidence.  This time you’ll go down, despite the Supreme Court having recently created a high bar for conviction in such public corruption cases.

--San Francisco hit another record high when it comes to drug overdoses in the city, with almost 85 deaths last month – with residents saying the alarming numbers are just more proof that the city has turned into a “zombie apocalypse.”

August’s total of 84 deaths tied for the deadliest month since the city began tracking overdose deaths in the beginning of 2020.

George Taylor, 21, who is homeless and abuses fentanyl, told the San Francisco Chronicle, “You can’t help people who don’t want help.”

--Starting Sept. 25, people can request four free Covid tests per household through covidtests.gov.

But there have been delays in getting out the new vaccine that deals with the latest variants the test kits are capable of picking up.  And those looking for a vaccine could be facing a cost of $200 as the government and insurance companies haven’t worked out details.

I’m glad I got my sixth shot six weeks ago even if it doesn’t cover the latest variant as it was free.

--The sea-ice surrounding Antarctica is well below any previous recorded winter level, satellite data shows, a worrying new benchmark for a region that once seemed resistant to global warming.

“It’s so far outside anything we’ve seen, it’s almost mind-blowing,” says Walter Meier, who monitors sea-ice with the National Snow and Ice Data Center.

An unstable Antarctica could have far-reaching consequences, polar experts warn.

Antarctica’s huge ice expanse regulates the planet’s temperature, as the white surface reflects the Sun’s energy back into the atmosphere and also cools the water beneath and near it.

Without ice cooling the planet, Antarctica could transform from Earth’s refrigerator to a radiator, experts say.

The area of missing ice, well below previous winter record lows, is about five times the size of the British Islaes.

Studying trends in Antarctica has always been challenging, but some scientists insist the low sea-ice is the measure to pay attention to.

“We can see how much more vulnerable it is,” says dr. Robbie Mallet, of the University of Manitoba, who is based on the Antarctica peninsula.

Already braving isolation, extreme cold and powerful winds, this year’s thin sea-ice has made his team’s work even more difficult.  “There is a risk that it breaks off and drift out to sea with us on it,” Dr. Mallet told the BBC.

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

Pray for Ukraine.

God bless America.

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Gold $1945
Oil $90.35

Regular Gas: $3.85; Diesel: $4.58 [$3.68 / $4.91 yr. ago]

Returns for the week 9/18-9/22

Dow Jones  -1.9%  [33963]
S&P 500  -2.9%  [4320]
S&P MidCap  -2.8%
Russell 2000  -3.8%
Nasdaq  -3.6%  [13211]

Returns for the period 1/1/23-9/22/23

Dow Jones  +2.5%
S&P 500  +12.5%
S&P MidCap  +2.7%
Russell 2000  +0.9%
Nasdaq  +26.2%

Bulls 48.6
Bears 22.8….prior week, 50.7 / 22.5

Hang in there.

For those observing Yom Kippur, have a good holy day.

Brian Trumbore

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