Week in Review

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Week in Review

05/18/2024

For the week 5/13-5/17

[Posted 4:30 PM ET, Friday]

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Edition 1,309

What a start to Friday morning.  Golf and sports fans were shocked to learn of the arrest by Louisville, Kentucky, police of World No. 1 Scottie Scheffler, a player beloved by both his peers and a rapidly growing fan base.

It was very early, still dark, raining in the area of Valhalla Golf Club, site of one of the four major championships, the PGA, and a vendor at the event, walking to his job, was hit and killed by a shuttle bus near the entrance to the club.

Chaos ensued, Scheffler was driving his courtesy car to the club, and in the massive confusion, with a fatal accident investigation having ground traffic to a halt, Scheffler attempted to navigate around traffic and bypass a heavy police presence.  He was stopped, eventually pulled over, whisked away in handcuffs, and then after being booked on multiple charges, including a felony, he made it back to the club for his delayed tee time and there he was...on the course...Scottie Scheffler.

Understand, the guy became a father for the first time, May 8, he was away from home because this is his job, and his mind in that moment might have been elsewhere, especially with the traffic pattern having changed from earlier in the week.

It was just a shocking, disturbing, tragic (with the loss of life) event.  Now we’ll see how everything plays out in the legal system.

As for Sheffler’s second round after all that...he shot a 66, 5-under, and is very much in the conversation heading into the weekend.  His arraignment is slated for Tuesday.

His performance in his post-round press conference, just now, which he didn’t have to go through, only earned him more fans.

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Editorial / The Economist

“How has it come to this?  After victory in the cold war, the American model seemed unassailable.  A generation on, Americans themselves are losing confidence in it. Feckless war-making, a financial crisis and institutional rot have let loose a ferocity in America’s politics that has given presidential contests seemingly existential stakes. Americans have heard their leaders denounce the integrity of their democracy.  They have seen fellow citizens try to block the transfer of power from one administration to the next. They have good reason to wonder how much protection their system guarantees them against the authoritarian impulse rising around the world.

“The answer is that, if Americans believe that their constitution alone can safeguard the republic from a Caesar on the Potomac, then they are too sanguine.  Preserving democracy depends today, as it always has, on the courage and convictions of countless people all across America – especially those charged with writing and upholding its laws.”

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In my WIR of 4/20/24, which was posted on the eve of the House vote on aid for Ukraine, Israel, and Taiwan, among other things, I wrote:

“Without aid, Ukraine could actually fall this year.  It might already be too late, depending on how quickly weapons, ammunition and air defense systems can get into the country.”

I cited a Wall Street Journal editorial:

“The need is urgent because Ukraine’s position is deteriorating... Ukraine’s cities are at risk...”

That was a month ago.  Last Friday, Russia launched a new offensive in the northeast, near the city of Kharkiv, and with the promised, and approved, military aid taking forever to get into the hands of those on the front lines, and manning the air defenses, the situation is not good.  You could use the words “bleak” and “grim” and you would not be overstating the situation.

Russia has been exploiting the delay to great effect.

Former Ukrainian President Viktor Yushchenko, a supporter of current President Volodymyr Zelensky, told the Associated Press in an interview Monday that the long delay by the U.S. Congress in approving military aid for his country was “a colossal waste of time,” allowing Russian President Vladimir Putin to inflict more suffering and prolong the war.

Yushchenko said the severe lack of ammunition, which has forced outgunned Ukrainian forces to surrender village after village on the front lines, also sowed concern in the West about Kyiv’s prospects for repelling Russia’s renewed invasion.

That sent a signal to Putin to “attack, ruin infrastructure, rampage all over Ukraine,” said Yushchenko, who was in Philadelphia to address a World Affairs Council event.

But Yushchenko continues to assert that no Ukrainian politician would give up territory in order to end the war.

Stephen J. Hadley, the national security adviser under President George W. Bush, said at a Harvard conference last week: “Russia oftentimes starts its wars poorly and finishes strong.”  Now, he said, Russia has “brought its mass” – a far larger population to draw troops from, and a “huge military infrastructure” – to mount a comeback.

Hadley suggested there is no single reason for Moscow’s battlefield advantage, but rather multiple factors are helping Russia’s military advance.

The delay in getting air defense ammunition for Ukraine has been deadly and allowed Russia to use its air power to great advantage, attacking Ukrainian lines with glide bombs, launched from Russian territory.  With the appropriate level of air defense, however, Ukraine could force Russia’s planes farther back.

At the same time, artillery and drones provided by the United States and NATO have been increasingly taken out by Russian electronic warfare techniques.  The Russians are turning our ‘smart bombs’ into ‘dumb bombs.’

But while there was an inexcusable delay in getting Ukraine needed aid, Ukraine has failed itself in taking forever to approve a mobilization law to bring more, and younger, soldiers into its military, which is suffering from acute shortages of troops, and it failed to build adequate defense lines, which is what the Russians did masterfully after their initial 2022 invasion was repulsed.

Only now is Ukraine apparently building stronger lines as Kharkiv, the second city, is under real threat.  If Kharkiv fell, that would be devastating.

“The situation is very serious,” President Zelensky said Thursday. “We cannot afford to lose Kharkiv.”

But NATO’s supreme allied commander Europe, General Christopher Cavoli, said he was confident Ukrainian forces would hold their lines in the region.

“The Russians don’t have the numbers necessary to do a strategic breakthrough,” Cavoli told a press conference at NATO headquarters in Brussels, Thursday, after a meeting of military chiefs from across the alliance.  “More to the point, they don’t have the skill and the capacity to do it, to operate at the scale necessary to exploit any breakthrough to a strategic advantage,” he added.

Admiral Rob Bauer, the chair of NATO’s military committee, told the press conference he expected “serious improvements” soon in the amount of ammunition Ukrainian forces would receive. [Reuters]

I hope the two are right.

And so....

This Week in Ukraine....

--President Putin removed his longstanding ally Sergei Shoigu as defense minister, the Kremlin announced over the weekend.  Shoigu has been in the role since 2012.

Shoigu was replaced by Deputy Prime Minister Andrei Belousov, an economist, as Putin wants to maximize the defense budget and target production for the war.

Shoigu will take over from Nikolai Patrushev on the powerful Security Council. Shoigu would have responsibility for the military-industrial complex.  The shake-up gives Shoigu a job that is technically regarded as senior to his defense ministry role, ensuring continuity and saving Shoigu’s face.  Valery Gerasimov, the chief of Russia’s General Staff and someone with more of a hands-on role when it comes to directing the war, will stay in his job, the Kremlin said.

Belousov, in his first comments Tuesday as incoming defense minister, said Russia’s main task is to achieve victory on the battlefield in Ukraine with the minimal loss of troops.  He said the military sector needed more efficiency and innovation in order to achieve its goals.

The comments were striking because Russian officials rarely discuss casualties in the war except to praise the heroism of fallen soldiers.

Belousov presented himself as a man of integrity, which comes as he is taking charge of a ministry embroiled in a major corruption investigation that damaged Shoigu.  He also emphasized Russia needed to work out “new methods of waging warfare” in order to stay ahead.  “The enemy is learning quickly.  The situation related to the use of new technologies changes literally every week.  And here we need not just to learn, we need to preempt the enemy.”

--Ukrainian troops are locked in intense battles with the advancing Russian army in two border areas, President Zelensky said, while the death toll from a Russian apartment building collapse blamed on Ukrainian shelling rose to 15.

Zelensky said “fierce battles” are taking place near the border in eastern and northeastern Ukraine as outgunned and outnumbered Ukrainian soldiers try to push back a significant Russian ground offense.

“Defensive battles are ongoing, fierce battles, on a large part of our border area,” Zelensky said in his nightly video address Sunday.

The new Russian push in the northeastern Kharkiv region comes after months when the 1,000-km (620-mile) front line had barely budged.  Both sides instead have been using long-range strikes in this war of attrition.

Some say the Kharkiv offensive is an attempt to create a “buffer zone” to protect Belgorod, an adjacent Russian border area.

Russia claimed on Monday that fifteen were killed in the regional capital of Belgorod, where a section of a residential building collapsed following what authorities said was Ukrainian shelling.  Three other people were killed by shelling in the city late Sunday, an official said.

One report had Russia shooting down a missile launched by Ukraine and fragments struck the building.

Ukraine said they thought it was a Russian glide bomb intended for Ukrainian territory that fell short.

--Back to the new front, Ukraine’s military chief said his country’s forces were facing a difficult situation and that they were doing all they could to hold the line.  One of the targets is Lyptsi, a town about 12 miles from Kharkiv.   In 2022, Russian forces reached Kharkiv’s outskirts before being driven back to the border.

Kharkiv has roughly 1.3 million inhabitants who continue to live there despite regular missile and drone strikes.  The region’s governor, Oleh Syniehubov, said there was no imminent danger to the city.  Kyiv has rushed in reinforcements to deal with the incursion.

President Zelensky urged Kyiv’s allies to speed up the supply of weapons pledged.  “It is important that partners support our soldiers and Ukrainian stability with timely supplies.  Really timely.  The package that really helps is the weapons brought to Ukraine, not just the ones announced,” he said in a statement.

--Ukraine said on Monday it thwarted a Russian operation to set off a series of bomb attacks in builder’s markets and near a café in the capital of Kyiv, and at a defense enterprise in the western city of Lviv.  Two Russian military agents were detained on suspicion of involvement in the alleged plot and 19 explosive devices were seized, the prosecutor general’s office wrote on Telegram. 

The Security Service of Ukraine (SBU) said in a statement that four bombs had been intended for detonation in the capital on May 9, the day when Russia celebrates the Soviet victory over Nazi Germany in 1945.

--Tuesday, Secretary of State Antony Blinken told president Zelensky during a trip to Kyiv that part of a major U.S. aid package had arrived in Ukraine and that more was on its way that was going to “make a real difference.”

“We know this is a challenging time,” Blinken said.  “But we also know that in the near term the assistance is now on the way, some of it has already arrived and more of it will be arriving.  And that’s going to make a real difference against the ongoing Russian aggression on the battlefield.”

Zelensky told Blinken that air defense supplies* were “the biggest deficit for us” with Russia’s attacks since March on electricity facilities.

“Really, we need today two Patriots for Kharkiv, for Kharkiv region because there the people are under attack.  Civilians, warriors, everybody they are under Russian missiles.”

*The Wall Street Journal recently reported that “in the past six months, Ukraine intercepted around 46% of Russian missiles, compared with 73% in the preceding six-month period. ...Last month the interception rate fell to 30% of missiles.”  Russia, as a result, has been pummeling Ukraine’s front-line troops with air power.

Officials have said long-range missiles known as ATACMS and air defense interceptors are now reaching the Ukrainian forces.  National Security Advisor Jake Sullivan said the U.S. was trying to accelerate “the tempo of the deliveries” of weapons to help it reverse its disadvantage.  “The delay put Ukraine in a hole and we’re trying to help them dig out of that hole as rapidly as possible,” Sullivan said.

--Tuesday evening, Russia carried out a series of air strikes on Kharkiv, hitting a high-rise residential building and injuring at least 17 people.  Regional officials said Russia used guided bombs.  President Zelensky has accused Moscow of seeking to reduce Kharkiv to rubble.

But Ukrainian military officials said Kyiv’s troops appeared close to stabilizing the situation after Russia’s ground attack into the Kharkiv region. At the same time, Ukraine warned of a buildup of Russian forces to the north near the Sumy region.  A cross-border attack on a new flank there would further deplete Kyiv’s defenders.

And Ukraine’s military spy chief Kyrylo Budanov said Moscow had committed all the troops it had in the border areas for the Kharkiv operation, but that it had other reserve forces that he expected to be used in the coming days.

--Wednesday, Russia’s Defense Ministry said its air defenses shot down 10 U.S.-supplied Ukrainian missiles targeting Crimea early in the day just as Sec. Blinken was visiting Kyiv.

The ministry said 10 U.S. ATACMS missiles were destroyed over the Black Sea and near the Belbek air base.  Russia also claimed to have shot down nine Ukrainian drones and various missiles over the Belgorod region early Wednesday.

Five other Ukrainian drones were downed over the Kursk region and three were shot down over Bryansk.  And....the Defense Ministry said another Ukrainian drone was downed over the Tartarstan region, located 600 miles east of the border with Ukraine.

None of this could be verified, but as alluded to above, IF the details on the ATACMS are accurate, it is yet another example of how the U.S. is falling way short of Russia’s advances in electronic warfare, which they are using to jam Ukrainian drones and rockets.

--Wednesday, President Zelensky’s office announced he will halt all international events scheduled for the coming days, including trips to Portugal and Spain, as Russia’s offensive in the Kharkiv region intensified.  Ukraine’s top general warned the fighting there had “significantly worsened.”

Nearly 8,000 people had been evacuated from the northeastern border town of Vovchansk and border areas since last Friday’s assault.

Also Wednesday, Russian airstrikes hit the southern cities of Mykolaiv and Kherson, injuring at least 17 people.

--According to the Washington-based Institute for the Study of War, it seemed that “Russian forces are prioritizing the creation of a ‘buffer zone’ in the international border area over a deeper penetration of Kharkiv Oblast.”  Relatedly, Ukrainian officials claim Russian forces in the vicinity of Vovchansk had lost up to 1,740 soldiers over a 24-hour period, “which would be a very high rate of losses,” ISW noted.

“All of our forces are either here or in the [Donetsk city of] Chasiv Yar,” Ukraine’s military intelligence chief, Gen. Budanov, told the New York Times on Tuesday speaking in a video call from a bunker in Kharkiv.  “I’ve used everything we have.  Unfortunately, we don’t have anyone else in the reserves,” he said.

Jack Watling of the UK’s Royal United Services Institute wrote in an analysis published Tuesday: “Having stretched the Ukrainians out, the contours of the Russian summer offensive are easy to discern. First, there will be the push against Kharkiv.  Ukraine must commit troops to defend its second largest city...Second, Russia will apply pressure on the other end of the line, initially threatening to reverse Ukraine’s gains from its 2023 offensive, and secondly putting at risk the city of Zaporizhzhia.  Ukraine should be able to blunt this attack, but this will require the commitment of reserve units.”

Russia’s objective in Donetsk is “to cut Ukrainian supply lines...” Watling continues, and once they accomplish this, “they will be able to push north and south, stranding Ukrainian artillery on one axis or the other.” [Defense One]

--Thursday, President Zelensky visited Kharkiv in an attempt to boost morale and reinforce Ukraine’s troops in the region, who are attempting to hold the line on this new front in the northeast as Russian mounts more pressure on the front in the east.

“The direction remains extremely difficult – we are strengthening our units,” Zelensky said after holding a meeting in the city with his top commanders and senior military leaders. 

Ukraine announced late Wednesday it was pulling back from the town of Kupiansk, some 85 km (52 miles) southeast of Kharkiv.  Ukraine’s General Staff said Russia was directing its most intense assaults on the fronts near the cities of Pokrovsk and Krmatorsk in the eastern Donetsk region, where Russia’s offensive has been unrelenting for months. 

Vladimir Putin said Moscow’s forces were improving their positions “every day” along the front in all directions and that the advance was going to plan.

Putin also said Wednesday that Russia’s total defense and security spending may reach a little more than 8.7% of GDP in 2024, after a meeting of the defense minister and top generals.

--Then we learned Friday that a long-range Ukrainian strike on the Moscow-controlled Belbek airbase in Crimea, a target earlier in the above-noted supposedly unsuccessful attack, this time destroyed three Russian warplanes and a fuel facility near the main runway, according to U.S. commercial satellite company Maxar.

The imagery taken on Thursday showed two MiG-31 fighter jets and a Su-27 fighter jet had been destroyed.  Another MiG-29 fighter aircraft also appeared to have been damaged.

The Russian Defense Ministry said on Thursday that Ukraine had staged an overnight attack on Crimea and that its air defense forces had intercepted five long-range ATACMS.

It was the day before Russia said it had intercepted 10 ATACMS, but the ministry didn’t report any damage to military facilities in either attack.

But all the above is different from a massive Ukrainian drone attack on Crimea early Friday that caused power cutoffs in the city of Sevastopol and set a refinery ablaze in southern Russia, Russian authorities said.

The Russian Defense Ministry said air defenses downed 51 Ukrainian drones over Crimea, another 44 over the Krasnodar region and six over the Belgorod region.  It said Russian warplanes and patrol boats also destroyed six sea drones in the Black Sea.

Sevastopol is the main base for Russia’s Black Sea Fleet, and the governor there said the drone attack damaged the city’s power plant.

--Lastly, U.S. officials said this week that Russia launched a satellite into space in February 2022 that is designed to test components for a potential antisatellite weapon that would carry a nuclear device. The satellite that was launched doesn’t carry a nuclear weapon, but it is linked to a continuing Russian nuclear antisatellite program that has been a growing worry for the Biden administration, Congress, and experts outside the government.

The weapon, if deployed, would give Moscow the ability to destroy hundreds of satellites in low Earth orbit with a nuclear blast, as reported by the Wall Street Journal.

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Israel and Hamas....

--Israel on Saturday called for Palestinians in more areas of Gaza’s southern city of Rafah to evacuate and head to what it calls an expanded humanitarian area in Al-Mawasi, as the Israeli military (IDF) pressed ahead with a planned ground attack on the city.  About 300,000 Gazans had moved towards Al-Mawasi, according to the IDF.

As of the weekend, the Rafah border crossing from Egypt* had been closed five days and the Kerem Shalom crossing from southern Israel for a week, according to the Palestinian WAFA news agency.

*Egypt has refused to coordinate with Israel on the entry of aid into Gaza from Rafah due to Israel’s “unacceptable escalation,” Egypt’s state TV reported Saturday, citing a senior official.  The official also said Egypt held Israel responsible for the deterioration of the situation on the Gaza Strip.

--German Chancellor Olaf Scholz said on Saturday that a ground attack on Rafah would be irresponsible and lead to a massive loss of civilian lives.

“We don’t believe that there is any approach that would not lead in the end to incredible loss of human life of innocent civilians,” Scholz said, adding that he told this to Israeli Prime Minister Benjamin Netanyahu.

--Sunday, Secretary of State Blinken delivered some of the Biden administration’s strongest public criticism yet of Israel’s conduct of the war in Gaza, saying Israeli tactics have meant “a horrible loss of life of innocent civilians” but failed to neutralize Hamas leaders and fighters and could drive a lasting insurgency.

In a pair of TV interviews, Blinken underscored that the United States believes Israeli forces should “get out of Gaza,” but also is waiting to see credible plans from Israel for security and governance in the territory after the war.

Hamas has reemerged in parts of Gaza, Blinken said, and “heavy action” by Israeli forces in the southern city of Rafah risks leaving America’s closest Mideast ally “holding the bag on an enduring insurgency.”

Blinken also said that as Israel pushes deeper into Rafah in the south, a military operation may “have some initial success” but risks “terrible harm” to the population without solving a problem “that both of us want to solve, which is making sure Hamas cannot again govern Gaza.”

Israel’s conduct of the war, Blinken said, has put the country “on the trajectory, potentially, to inherit an insurgency with many armed Hamas left or, if it leaves, a vacuum filled by chaos, filled by anarchy, and probably refilled by Hamas. We’ve been talking to them about a much better way of getting an enduring result, enduring security.”

On Wednesday, Netanyahu rejected U.S. demands for a postwar Gaza, arguing that it would be “just chatter” while Hamas remains intact.

“There is no alternative to military victory,” the prime minister said in a video released by his office.  “The attempts to bypass it with this or that claim is simply detached from reality.”

But Netanyahu’s defense minister, Yoav Gallant, delivered an extraordinary televised address in which the former general and Likud party member “publicly rebuked the government for failing to establish a postwar plan for Gaza” and demanded the prime minister commit to allowing the enclave to govern itself, as The Atlantic reported.

“Without such a political strategy, Gallant argued, no military strategy can succeed, and Israel will be left occupying Gaza and fighting a never-ending counterinsurgency against Hamas that saps the country’s military, economic, and diplomatic resources.”

--Israel sent tanks into eastern Jabalia in the northern Gaza Strip on Sunday, after a night of heavy aerial and ground bombardments, killing 19 people and wounding dozens of others, health officials said.  Jabalia is the biggest of Gaza’s eight historic refugee camps and is home to more than 100,000 people.  Late on Saturday, the Israeli military (IDF) said forces were operating in Jabalia and preventing Hamas from reestablishing its military capabilities there.

--Israeli protesters blocked aid trucks destined for Gaza on Monday, throwing food packages onto the road and ripping bags of grain open in the occupied West Bank.  The trucks came from Jordan and were headed to the Gaza Strip.

The White House condemned the attack, describing the “looting” of aid convoys as “a total outrage.”  The group reportedly behind the protest said they were demonstrating against the continued detention of Israeli hostages in Gaza.

--Israeli tanks pushed deeper into eastern Rafah on Tuesday, reaching some residential districts of the southern border city.  Hamas’ armed wing said it had destroyed an Israeli troop carrier with a missile, killing some crew members.  The IDF declined to comment.

The IDF did say its forces had eliminated “several armed terrorists” cells in close quarter fighting on the Gaza side of the Rafah border crossing with Egypt.  In the east of the city, it said it had also destroyed militant cells and a launch post from where missiles were being fired at IDF troops.

Israel issued evacuation orders for people to move to parts of eastern Rafah over two weeks ago.  Aid agencies estimate 450,000 people have fled Rafah since May 6, but nowhere is safe in the enclave.  The humanitarian situation, including devastated medical facilities, is grim.  Israeli Foreign Minister Israel Katz said on Tuesday Egypt must be “persuaded” to reopen the Rafah border crossing to “allow the continued delivery of international humanitarian aid” into Gaza.

But Egypt’s Foreign Minister Sameh Shoukry fired back that Israel’s seizure of the Rafah crossing and its military operations in the area were the main obstacles to aid entering Gaza.

--The IDF announced that five Israeli soldiers had been killed in Gaza, in one of the deadliest incidents of its kind since the war began in October.  Israeli media said the troops were killed when they were mistakenly hit by Israeli tank fire.  The tragedy occurred in Jabalia, where Israeli forces are battling Hamas, which has regrouped there.

As of this incident, 278 Israeli soldiers have been killed in Gaza since the ground offensive commenced on Oct. 27.

--Friday, the IDF recovered the bodies of three hostages in a tunnel in the Gaza Strip, IDF spokesperson Rear Adm. Daniel Hagari said in a news conference.  All three were taken hostage on October 7 and were killed while escaping the Nova music festival and their bodies were taken into Gaza.

--Qatar’s Prime Minister Sheikh Mohammed Al-Thani said ceasefire talks, mediated by his country and Egypt, were at a stalemate.

--The United States anchored a temporary floating pier to a beach in Gaza on Thursday to boost aid deliveries, but Washington faces the same challenges that have beset the UN and relief groups in distributing assistance to the enclave.

These include working in a war zone to stave off famine and a dire shortage of fuel for aid trucks.

Trucks carrying humanitarian assistance are expected to begin moving ashore in the coming days, U.S. Central Command said in a statement, and a few indeed did on Friday.

But... “Once you get food or supplies into the Gaza Strip, whether it’s from the pier or crossing points, there is no security and....there’s no fuel,’ said Bob Kitchen, the International Rescue Committee’s vice-president for emergencies.

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Wall Steet and the Economy

Before I get into this week’s edition of “Fed Chat,” board members were closely dissecting the inflation news Tuesday and Wednesday for the month of April.

First, producer prices came in hotter than expected, 0.5%, 2.2% year-over-year, when 0.2% and 2.1% was forecast.  Core PPI, ex-food and energy, was also 0.5%, and 2.4% compared to a year ago, though this latter figure was in line with expectations and same as the prior month.

The market took the PPI in stride mainly because March’s data was revised sharply lower, there were individual components that were actually bullish, and CPI is just more important these days.

Wednesday brought the consumer price figures for last month and they were exactly in line across-the-board; 0.3% on headline, 3.4% year-over-year; and on core, 0.3%, and 3.6%.

The 3.6% on core was the lowest increase since April 2021 and down from 3.8% the month prior.

Put the PPI and CPI data together and stocks and bonds rallied, the former to new highs.  What helped was that April’s retail sales figure was unchanged, when a 0.4% increase was expected; ex-autos 0.2%, which was in line with forecasts.

But the CPI data was in reality just a tick or two better than the prior month, and it isn’t near the Fed’s 2% target, though the trend, after the hiccups of the prior few months, is favorable.  That’s the context then for the following.

Federal Reserve Chair Jerome Powell, during a moderated discussion in Amsterdam Tuesday, affirmed the Fed’s plans to hold interest rates higher for longer as it awaits evidence that a slowdown in inflation will resume after the aforementioned setbacks.

Powell said he expected inflation to continue heading lower but that he was less confident than he had previously been about that outlook, leaving the Fed unable to say whether or when it might be able to lower interest rates.

“We’re just going to have to see where the inflation data fall out,” he said.  The Chair added: “We did not expect this to be a smooth road, but (the first few inflation reports of the year) were higher than I think anybody expected.”  He repeated his view that interest rates “by many, many measures” are high enough to slow demand, meaning “we’ll need to be patient and let restrictive policy do its work.”

Powell reiterated he doesn’t see the need to hike rates. 

Federal Reserve Bank of New York President John Williams welcomed the arrival of softer consumer inflation data, but saying in an interview with Reuters Thursday the positive news is still not enough to call for rate cuts anytime soon.

While it is important not to overemphasize the latest economic news, the softer tone of April’s CPI data is “kind of a positive development after a few months where the data were disappointing,” Williams said.

“The overall trend looks reasonably good” for a gradual slowdown in inflation pressures, but he is still not sufficiently confident that price pressures are moving sustainably to the Fed’s 2% inflation target before lowering short-term borrowing costs.

Monetary policy is “restrictive” and “is in a good place,” Williams said.  “I don’t see any indicators now telling me...there’s a reason to change the stance of monetary policy now, and I don’t expect that, I don’t expect to get that greater confidence that we need to see on the inflation progress towards a 2% goal in the very near term.”

Williams, like Chair Powell, also said “I don’t see any need to tighten monetary policy today.”

“I do think it’s really a question of keeping policy at the current rate for longer than had been thought,” he added.

So there you have it.  Certainly, this week’s inflation data won’t have the Federal Open Market Committee targeting a July rate cut when it meets June 11-12.  September and after?  It’s all about the data.

Speaking of which, just two other items.  April housing starts came in less than forecast, 1.36 million annualized, and industrial production for the month was unchanged.

The Atlanta Fed’s GDPNow barometer for second quarter growth fell to 3.6% from last week’s 4.2%.

Freddie Mac’s 30-year fixed-rate mortgage declined to 7.02% this week, down from 7.22% two weeks prior.

The next big data point for the Fed is personal consumption expenditures (PCE) on Friday, May 31.

Europe and Asia

We had April inflation data for the euro area, courtesy of Eurostat, up 2.4%, unchanged from March, and vs. 7.0% a year ago.  Ex-food and energy, the figure was 2.8%, down from 3.1% in March and 3.6% in January, so a good trend continues.

Headline inflation (ann.)

Germany 2.4%, France 2.4%, Italy 0.9%, Spain 3.4%, Netherlands 2.6%, Ireland 1.6%.

The European Central Bank has all but promised a rate cut on June 6, when it will release new projections on the economy as well, which may help forecast further cuts beyond the first one.

A flash estimate of first quarter GDP in the eurozone had it up 0.3% compared with the previous quarter.  Versus a year ago, GDP increased by 0.4%, as in minimal. [Eurostat]

Q1 2024 vs. Q1 2023

Germany -0.2%, France 1.1%, Italy 0.6%, Spain 2.4%, Netherlands -0.6%

Industrial production in March for the EA20 was up 0.6% compared with February, but down 1.0% year-over-year. [Eurostat]

Netherlands: Dutch nationalist Geert Wilders on Wednesday said a deal had been reached to form what was set to be the most right-wing government in the Netherlands in decades, almost six months after a major election victory.  Wilders, who has influenced Dutch immigration policy from the opposition benches since 2006 and is known for his outspoken views on Islam, announced a successful outcome in negotiations between four parties, talks having dragged out for months since his upset election victory on Nov. 22.

Wilders said he would not become prime minister himself, having given up the chance in a bid to secure a deal.  He has yet to name his preferred candidate.

Turning to Asia....lots of China news.

Early Tuesday, as expected, the White House unveiled a slate of tariffs on China-made products from steel to electric vehicles, escalating trade tensions between the world’s two largest economies.  The Biden administration said it was imposing new tariffs on $18 billion of Chinese imports – a move it says will protect U.S. businesses and jobs, but could put new pressure on prices ahead of the election.

The tariffs on steel and aluminum products will increase to 25% from a range of zero to 7.5%.  Tariffs on semiconductors will double to 50% by 2025, while those on solar cells will do the same this year.

The levy on Chinese EVs will quadruple to 100% in 2024, while those on lithium-ion batteries will increase to 25% from 7.5%. 

The White House, in announcing the tariffs, cited Chinese support of its own companies that is leading to overcapacity and artificially cheap prices in many industries.

“China is using the same playbook it has before to power its own growth at the expense of others by continuing to invest despite excess Chinese capacity and [by] flooding global markets with exports that are underpriced due to unfair practices,” said Lael Brainard, director of the White House National Economic Council.  “China’s simply too big to play by its own rules.”

Regarding EVs, earlier in the year, Tesla CEO Elon Musk said Chinese companies would “demolish” their global rivals unless the United States and Europe erected new trade barriers.

The new tariffs will have little impact on domestic EV sales at the moment, according to analysts.  The only Chinese electric vehicle for sale in the United States now is made by Polestar, which is owned by China’s Zhejiang Geely Holding.

But Volvo, owned by the same company, has been planning to introduce new electric models as soon as this summer.

China then said it was strongly dissatisfied with the new tariff hikes and will take ‘resolute’ measures to defend its rights and interests, the Chinese commerce ministry said in a statement.

Foreign Minister Wang Yi said the U.S. move is a case of “typical bullying” and “shows that some people in the United States have reached the point of losing their minds.”

“The U.S. suppression of China does not prove that the U.S. is strong, but rather exposes that the U.S. has lost its self-confidence and is out of order,” Wang said, according to state broadcaster CCTV.

Meanwhile, we had a slew of economic data from China.

April retail sales rose a less-than-expected 2.3% year-over-year, while April industrial production was up 6.7% Y/Y, and fixed asset investment increased 4.2% year-to-date, vs. a year ago.

April inflation rose 0.3% year-over-year vs. 0.1% prior, while producer prices fell 2.5% vs. -2.8% prior Y/Y.

The April unemployment rate was 5%.

One more...on Friday, Chinese officials signaled their growing alarm over the country’s worsening real estate market, unveiling a plan to step in to buy up some of the vast housing stock and announcing even looser rules for mortgages.

Chinese authorities are staring at a hard truth: No one wants to buy a home today.

Japan’s economy contracted in the first quarter at a 2.0% annualized pace (a preliminary reading), -0.5% for the quarter, worse than expected, weighed down by sluggish private consumption and exports, government data showed on Thursday.

Policymakers are counting on rising wages and income tax cuts from June to help spur consumption.  The Bank of Japan, which raised interest rates in March for the first time since 2007, is expected to go slow in unwinding easy money conditions for the time being given the fragile economy.

Separately, March producer prices rose 0.9% year-over-year, while March industrial production fell 6.2% Y/Y.

Street Bytes

--Stocks rose to new highs across the board after traders saw the good in the inflation data, and not the bad.  Nasdaq hit its first record close on Tuesday since April 11, and the S&P 500 closed at a new high on Wednesday, as did the Dow Jones.

For the week, the Dow Jones finished up 1.2% to 40003, a new record close [after hitting 40051 intraday on Thursday], the S&P gained 1.5% to 5305, the closing high set Wednesday at 5308, and Nasdaq rose 2.1%, its Wed. new record closing high being 16742, for those of you playing along at home.

Next week, it’s all about Nvidia, earnings Wednesday after the close.

--U.S. Treasury Yields

6-mo. 5.36%  2-yr. 4.82%  10-yr. 4.42%  30-yr. 4.56%

Bonds rallied on the generally tame inflation data and the hope the Fed will indeed cut before year end.

--OPEC stuck to its forecast for strong growth in global oil demand in 2024 on Tuesday and said it would switch to focus on projected demand for OPEC+ crude, reflecting that the wider group is now the main forum for cooperation in the market.

In its monthly report, OPEC said it expected world oil demand to rise by 2.25 million barrels day in 2024 and by 1.85 million bpd in 2025.  Both forecasts were unchanged from last month.

OPEC+, including allies led by Russia, meets on June 1 to decide whether to extend voluntary oil output cuts into the second half of the year.

“Despite certain downside risks, the continued momentum observed since the start of the year could create additional upside potential for global economic growth in 2024 and beyond,” OPEC said in the report.

The International Energy Agency, which represents industrialized countries and forecasts oil demand will peak by 2030, sees things a bit differently from OPEC, trimming its forecast for 2024 oil demand growth in its monthly report released Wednesday, widening the gap with the cartel.  Global oil demand this year will grow by 1.1 million bpd, largely citing weak demand in developed OECD nations.

The IEA and OPEC are closer in their projections for 2025, the IEA on Wednesday slightly raised its demand growth estimate to 1.2 million bpd, while OPEC is at 1.85 mbpd.

OPEC believes oil use will keep rising for the next two decades and has not forecast a peak.

--Home Depot shares fell a bit on Tuesday as sales continued to soften in the first quarter as the nation’s largest home improvement retailer was not only constrained by high mortgage rates and higher inflation for its customers, but it also had to deal with a delayed start to spring.

Sales slipped 2.3% to $36.42 billion for the period ended April 28, just shy of the $36.65 billion expected.  It was the third consecutive quarter of declining sales for the retailer, which saw sales skyrocket during the pandemic.

Sales at stores open at least a year declined 2.8% globally, and 3.2% in the U.S.

Americans have been pulling back on large home remodeling projects, like bathrooms and kitchens, and that is hitting HD.

While people are still spending money on less expensive home décor projects, Home Depot faces more competition in that area from garden centers, paint specialists and others.

For the first quarter, HD earned $3.8 billion, or $3.63 per share, down from the $3.87 billion, or the $3.82 it earned in the same period last year but beating consensus by two cents.

The company maintained its fiscal full year forecast for total sales growth of about 1%, which includes a 53rd week.  It still anticipates same-store sales falling approximately 1% for the year.

--Walmart reported fiscal Q1 adjusted earnings Thursday of $0.60 per share, up from $0.49 a year earlier and compared with consensus of $0.52.

Revenue for the quarter ended April 30 was $161.50 billion compared with $152.3bn a year earlier.  Analysts were expecting $158.14bn.

U.S. comparable sales rose 3.9%, ex-fuel, in the quarter, above expectations.

The company said it expects fiscal Q2 adjusted EPS of $0.62 to $0.65 and net sales growth of 3.5% to 4.5%, with consensus at $0.64 on revenue of $166.25bn.

For the full fiscal year, Walmart now expects to meet the high-end or “slightly” exceed its initial outlook of $2.23 to $2.37 and 3% to 4% in net sales growth.  Analysts are at $2.37 on revenue of $670.35 billion.

The retail giant said it is betting on easing inflation to further boost demand for essentials and bring a rebound in sales of discretionary products like electronics.

The shares rose 6% at the open.

Separately, Walmart announced it is cutting hundreds of corporate jobs and asking most remote workers to relocate to three main tech offices or quit the company.   Workers at the company’s smaller offices in Dallas, Atlanta and Toronto are being asked to move to other central hubs such as Walmart’s corporate base in Bentonville, Arkansas, as well as Hoboken, New Jersey, or Sunnyvale, California.  [Hey kids, Hoboken has a great bar scene and some terrific restaurants.]

--Boeing delivered fewer jets in April than Wall Street expected, shipping 24 last month, including 16 MAX jets. That’s down from March, when the company delivered 29 jets, including 24 MAX aircraft. 

So far in 2024, Boeing has delivered 107 jets, including 82 MAX jets, which compares with 156 jets in the first four months of 2023, including 128 MAX jets.

But the shares didn’t swoon because investors are now well aware of the slower pace at Boeing in its attempt to focus on quality in the aftermath of the Jan. 5 emergency door plug blowout on a 737 MAX 9 jet operated by Alaska Airlines.  Plus, a lot of bad news is already reflected in the share price.

The stock fell Wednesday, however, after a report that the Department of Justice told a federal judge in a court filing that Boeing violated a 2021 agreement that shielded it from criminal prosecution after two MAX disasters left 346 people dead overseas.

According to the DOJ, Boeing failed to “design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations.”

The government has not yet decided if it will pursue prosecution of Boeing, but lawyers representing families of the victims who died in the crash said they hope to see further action in the case.

Government officials plan to meet May 31 with victims of the crash and directed Boeing to reply to the filing by June 13.  The department will then inform the court by July 7 how it plans to proceed, which could lead to criminal charges against the company.

--TSA checkpoint numbers vs. 2023

5/16...106 percent of 2023 levels
5/15...106
5/14...105
5/13...104
5/12...106
5/11...108
5/10...107
5/9...107

--According to reports, Ford Motor Co. has begun cutting orders from battery suppliers to stem growing electric-vehicle losses, as it throttles back ambitions in a rapidly decelerating market for plug-in models.

The move is a retrenchment of Ford’s EV strategy, which includes reduced spending by $12 billion on battery-powered models, delaying new EVs, cutting prices, and postponing and shrinking planned battery plants.  Ford has forecast EV losses of up to $5.5 billion this year and CEO Jim Farley recently said its EV unit, Model e, “is the main drag on the whole company right now.”

As EV prices have plunged and demand has slackened, Ford’s losses per EV exceeded $100,000 in the first quarter, more than double the deficit from last year, sources told Bloomberg, which estimates the losses Ford expects to sustain in its EV unit this year will come close to wiping out the profits it earns from its Ford Blue division, which makes traditional internal combustion engine vehicles like the Bronco SUV and gas-electric hybrids such as the Maverick truck.

Separately, Chinese EV giant BYD unveiled a plug-in hybrid truck, Shark, the company’s first truck that is going after Ford’s Maverick and a similar size Toyota Tacoma truck.

But for now, the Shark is built in China, which means it would be subject to the import tariff President Biden announced on Tuesday.  For now, BYD is attempting to make inroads with the truck in Mexico, but it is more expensive than the Toyota Tacoma (called Hilux overseas).

--OpenAI unveiled an updated artificial-intelligence model complete with a voice assistant that can interact with people in real time.  The Microsoft-backed AI developer is racing its competitors by adding features that make its system easier to use.  The new ChatGPT-4o will be available to everyone for free.  [The “o” stands for “omni”]

GPT-4o is faster than previous models, with audio, text, and visual improvements.  The demonstration I saw looked amazing.

OpenAI offered no news about a potential partnership with Apple following reports that the companies are completing terms for an agreement that would allow the personal-tech company to use ChatGPT features in iOS 18 for the iPhone.

Separately, OpenAI chief scientist and co-founder Ilya Sutskever is leaving the company, ending months of speculation in Silicon Valley about the future of a top AI researcher who played a key role in the brief ousting of CEO Sam Altman last year.  Sutskever will be replaced by Research Director Jakub Pachocki, OpenAI said.

Sutskever joined OpenAI in 2015, after being recruited by Elon Musk.  He was already well known in the field for his research on neural networks at the University of Toronto and his work at the Google Brain lab.

--Speaking of Google, and parent Alphabet, this week it debuted a beefed-up Gemini chatbot and improvement to its search engine as it races to compete with AI rivals.  The flurry of announcements underscored Google’s efforts to refresh its products since the launch of OpenAI’s ChatGPT in 2022, threatening Google’s long reign over online search and AI.

--What will the impact of AI be on the labor force?  International Monetary Fund Managing Director Kristalina Georgieva said on Monday that AI is hitting the global labor market “like a tsunami.”

Artificial intelligence is likely to impact 60% of jobs in advanced economies and 40% of jobs around the world in the next two years, Georgieva told an event in Zurich. 

“We have very little time to get people ready for it, businesses ready for it,” she said.  “It could bring tremendous increase in productivity if we manage it well, but it can also lead to more misinformation and, of course, more inequality in our society.”

--Cisco Systems shares rose after the networking equipment maker forecast fourth-quarter revenue above Wall Street estimates on Wednesday as it benefits from a pickup in enterprise spending and easing supply chain constraints.

Cisco has been benefiting from an increase in spending, with companies trying to boost their growing artificial intelligence and cloud computing needs. The company has also been trying to reduce its reliance on its massive networking equipment business, which has suffered in recent years from supply chain issues and a post-pandemic slowdown in demand.  Last year, Cisco agreed to buy Splunk, to enhance its cybersecurity capabilities and broaden its market reach.  The deal, which closed in March, is expected to accelerate revenue growth and gross margin expansion.

Cisco forecast fiscal fourth-quarter revenue between $13.4 billion and $13.6 billion, compared with analysts’ estimates of $13.23 billion.  For the third quarter, revenue came in at $12.7 billion, beating estimates of $12.53 billion.  On an adjusted basis, CSCO earned 88 cents per share, beating estimates of 82 cents.

--Shares in Deere & Co. fell over 3% after reporting fiscal second-quarter results that beat the Street, but the company lowered its full-year profit forecast for a second time as farmers buy fewer tractors and other equipment as they deal with declining prices for their crops.

Deere cut its profit outlook to $7 billion from a previous range of $7.50 to $7.75 billion.  Prior to that, the agricultural giant had forecast a 2024 profit between $7.75bn and $8.25bn.

The U.S. Department of Agriculture anticipates that 2024 net farm income, which is a broad measure of profits, will total $116.1 billion.  That’s down 25.5% from a year earlier.  Adjusting for inflation, net farm income is expected to be down 27.1% this year as farmers contend with lower prices for soybeans and corn.  The USDA said that lower direct government payments and increased production costs are also weighing on farmers.

For the three months ended April 28, DE earned $2.37 billion, or $8.53 per share, easily beating consensus of $7.86.  A year earlier, it earned $2.86bn, or $9.65 per share. 

Revenue fell 12% to $15.24 billion.

--Red Lobster abruptly closed at least 50 restaurants nationwide on Monday (one story I saw said 87), including 14 in New York and New Jersey, blindsiding employees, as it prepares for a bankruptcy filing before Memorial Day, reports have it.

TAGeX Brands, a restaurant liquidator, revealed it was auctioning off kitchen items and furniture, in case you’re looking for a booth.

The chain has/had 649 locations across the country, with sales of $2.2 billion domestically last year, down 8% from 2022.

At least the New Jersey location I go to with my friend from Newark, Mary, stayed open.  It’s the perfect spot for us to meet.  But I was always ticked off a Red Lobster didn’t freakin’ have lobster rolls!

Yes, as noted last year, the chain has been done in by its ‘ultimate endless shrimp’ promotion (which is now up to $25 from $20).

--According to a report from the National Insurance Crime Bureau, Kia and Hyundai models now hold the top three spots in a 2023 ranking of stolen vehicles.

Hyundai Elantras were stolen more than 48,000 times and Hyundai Sonatas were stolen more than 42,000 times, according to the report. The Kia Optima experienced the third-highest volume of theft, at more than 30,000.

The analysis is based on the 1,020,729 vehicle thefts from 2023 reported to law enforcement and entered into the FBI’s National Crime Information Center. [Bailey Schulz / USA TODAY]

Uh oh...my Honda Civic is No. 7.

--Meme stocks were suddenly back in the news on Monday, surging even as the broader market was falling.  The poster child for the movement, which got started in 2021, was videogame retailer GameStop, which rallied along with the shares of movie-theater chain AMC Entertainment (and others).  The catalyst was the unexpected return of meme trader Roaring Kitty.

GameStop stock more than doubled and closed up 74% Monday.  This after the prominent Reddit chat room participant Keith Gill, who goes by the handle ‘Roaring Kitty,’ made his first post on social-media platform X since January 2021.  Gill’s bullish posts on GameStop (GME) helped spark the original meme rally.  The thing is, much of what Gill wrote about going back to 2020 re GME hasn’t panned out.

AMC stock spiked 78% on Monday, the largest percentage increase since June 2, 2021, with a record 476.3 million shares traded.

But AMC is still struggling after last year’s Hollywood actors’ and writers’ strikes, which have meant fewer films in theaters.  Management expects second-quarter box-office ticket sales to remain below last year’s second quarter, though some analysts expect momentum to pick up in the second half.

AMC also has a heavy debt burden, with significant obligations due in 2026.  So Wednesday, the company issued 23.3 million shares in exchange for $163.9 million in subordinated notes due in 2026.  The shares were priced at $7.33 and then the stock fell to $5.

At the end of the week, GME shares had gone from $17.46 at last Friday’s close to $64.83, intraday, on Tuesday, to $22.25 at the close today.

AMC had gone from $2.91 last Friday to $11.88, intraday, Tuesday, to finish up the week at $4.40.

--Speaking of box office, last weekend, “Kingdom of the Planet of the Apes” had a terrific opening, $58.5 million, better than expected, and $72.7 overseas for a global take of $131.2m.

--Netflix announced Wednesday it will stream at least one NFL game globally on Christmas for the next three years, including this year’s Wednesday Christmas Day doubleheader, the league said.  Netflix is paying $75 million a game this year as the company places its biggest bet on live sports yet.

--Finally, we note the passing of Jim Simons, 86. He was the prizewinning mathematician who abandoned a stellar academic career to plunge into finance – and became one of the most successful Wall Street investors ever.

Jonathan Kandell / New York Times

“After publishing breakthrough studies in mathematics that would play a seminal role in quantum field theory, string theory and condensed matter physics, Mr. Simons decided to apply his genius to a more prosaic subject – making as much money as he could in as short a time as possible.

“So at age 40 he opened a storefront office in a Long Island strip mall and set about proving that trading commodities, currencies, stocks and bonds could be nearly as predictable as calculus and partial differential equations.  Spurning financial analysts and business school graduates, he hired like-minded mathematicians and scientists.

“Mr. Simons equipped his colleagues with advanced computers to process torrents of data filtered through mathematical models and turned the four investment funds in his new firm, Renaissance Technologies, into virtual money printing machines.”

Renaissance’s largest fund, Medallion, earned more than $100 billion in trading profits in the 30 years following its inception in 1988, generating a 66% average annual return during that period; far better long-term performance than the likes of George Soros and Warren Buffett, for example.

Renaissance funds were the largest quant funds on Wall Street for much of this time and changed the way hedge funds traded and made money for their wealthy investors and pension funds.

When Simon retired in 2010 as CEO of the business, he was worth $11 billion, and a decade later his fortune had doubled.  His Simons Foundation became one of the largest private funders of basic science research.  He and his wife also gave massive amounts of money to Stony Brook University on Long Island, including $500 million in 2023, the school being where Simons chaired the math department, and his wife Marilyn matriculated.

A truly great American story. RIP.

Foreign Affairs, Part II

China:  Taiwan reported Tuesday that Chinese forces were carrying out another combat patrol near the island, sending aircraft across the Taiwan Strait’s sensitive median line, as tensions rose a week before William Lai became Taiwan’s new president (Monday).

Lai, addressing the Copenhagen Democracy Summit, said he “will not rule out dialogue with China on the principles of mutual respect, mutual benefits and dignity, with no preconditions.”

Taiwan’s defense ministry said that it had spotted 23 Chinese military aircraft, including advanced Su-30 fighters, carrying out joint combat patrols in conjunction with warships.  Remember, China does not recognize the median line.

[There were chaotic scenes in Taiwan’s parliament today as lawmakers shoved, tackled, and hit each other in a bitter dispute about reforms to the chamber.  The opposition wants to give parliament greater scrutiny powers over the government.]

Meanwhile, President Xi Jinping met with Vladimir Putin in Beijing on Thursday, Putin’s second visit to China since October and the latest display of the strong ties between the two.

While China has not openly supported Putin’s invasion of Ukraine more than two years ago, its “no limits” strategic partnership with Russia has come under intense scrutiny from the United States and its allies, who have imposed sanctions on Moscow and called repeatedly for Beijing to use its leverage to bring the war to an end.

After the two met Thursday, state broadcaster CCTV reported that Xi told Putin his nation was “ready to work with Russia as a good neighbor, friend and partner with mutual trust. China was prepared “to consolidate the friendship between the two peoples for generations to come,” Xi added.

Putin described the nations’ cooperation as “one of the main stabilizing factors in the international arena,” according to a video posted on a Kremlin social media account.

Xi also took a veiled swipe at the U.S., saying that “unilateral hegemony, confrontation and power politics threaten global peace and all countries’ security.”  He repeated China’s position on the war in Ukraine, saying that “a political solution to the Ukraine crisis is the correct direction.”

[But China’s ‘detailed plan’ from last year is in essence a surrender plan for Kyiv.]

A Russian version of a joint statement issued by the two said: “The parties reiterate their serious concern over the attempts of the United States to disrupt the strategic security balance in the region.”

At a press conference, Xi said: “China-Russia relations have withstood the test of time and become even stronger.  The generational friendship and comprehensive cooperation between China and Russia have formed a strong driving force that allows us to move forward without fear of wind and rain.”

In other China news....

Beijing deployed dozens of coast guard and maritime militia ships toward Scarborough Shoal, a disputed atoll in the South China Sea, to block a fleet of about 100 small Filipino fishing boats. Such confrontations have become commonplace, but this was an escalation.

“What we’re seeing this time, I would say, is definitely of another order,” said the director of SeaLight, a group that monitors the sea.  He called China’s response a show of “overwhelming force.”

The Filipino group organizing the flotilla of fishing boats said it wanted to assert the Philippines’ claims to Scarborough Shoal, which Beijing calls Huangyan Island, and has been under Chinese control since 2012.

Lastly, China has not responded to U.S. nuclear-weapons risk-reduction proposals and Washington has questions about Beijing’s calls for no first use talks while China continues to build up its arsenal, the top arms control officials said on Wednesday.

Under Secretary of State Bonnie Jenkins told the Senate Foreign Relations Committee the U.S. estimates China currently has 500 operational nuclear warheads and will probably have more than 1,000 by 2030.  She said U.S. officials met with Chinese counterparts last November to discuss arms control and proliferation, their first such talks in nearly five years.

“The meeting enabled a preliminary discussion on potential measures for managing and reducing risks,” she said. “Unfortunately...the PRC (People’s Republic of China) has declined a follow-on meeting and has not provided (a) substantive response to risk-reduction suggestions we put forward,” she said.

Which means the U.S. “may soon face two expansionary and significantly nuclear-armed peers” in Russia and China, Jenkins added.

North Korea: Kim Yo Jong, the powerful sister of North Korean leader Kim Jong Un, denied arms exchanges with Russia on Friday, state media KCNA reported. The U.S. and South Korea accused Pyongyang of transferring weapons to Russia for use against Ukraine, and Ukraine and others have proof North Korean missiles have been fired into Ukraine, including Kharkiv.

Presidents Xi and Putin criticized Washington and its allies for their “intimidation in the military sphere” against North Korea, according to their joint statement in Beijing.

Friday, Pyongyang fired suspected short-range ballistic missiles off its east coast, South Korea’s military said, a day after South Korea and the U.S. flew powerful fighter jets in a joint drill that the North views as a major security threat.

Slovakia: Prime Minister Robert Fico suffered life-threatening injuries when he was shot and wounded in an attempted assassination on Wednesday, the government office said. He was shot four times and a minister in his government said Wednesday evening Fico was “fighting for his life.”

Fico, 59, was rushed to hospital in the central city of Handlova after holding a government meeting there.  Police detained a man.  European leaders immediately condemned the violent act.  As Austria’s conservative Chancellor Karl Nehammer said: “Hate and violence must not be allowed to take hold in our democracies and must be fought with the utmost determination!”

A hospital official on Thursday then announced Fico was in serious but stable condition.  But whether or not he is able to make a full recovery is not answerable at this time, according to a deputy prime minister, Robert Kalinak, “because the extent of the injuries caused by four gunshot wounds is so extensive that the body’s response will still be very difficult.”

Interior Minister Matus Sutaj Estok said a preliminary investigation into the shooter found “a clear political motivation” behind the attack, the minister not specifying what the motivation was.  He was acting as a “lone wolf” who “did not belong to any political groups,” but took part in anti-government protests.

The suspect listed government policies on Ukraine and its plans to reform the country’s public broadcaster and dismantle the special prosecutor’s office as reasons for the attack, the interior minister added.

Fico became prime minister for a third time last year after shifting political gears to appeal to a changing electorate.  During a three-decade career, Fico has veered between pro-European mainstream and nationalistic positions opposed to European Union and U.S. policies.  He has shown a willingness to in essence shift with the political winds and changing public opinion.

Critics in Slovakia have worried that Fico would abandon the country’s pro-Western course and follow the direction of Hungary under populist Prime Minister Viktor Orban.  Thousands have repeatedly rallied in the capital and across Slovakia to protest Fico’s policies.

Fico has halted arms deliveries to Ukraine and has plans to amend the penal code to eliminate a special anti-graft prosecutor* and to take control of public media. He has also promised a tough stance against migration and non-governmental organizations and campaigned against LGBTQ+ rights.

*His party has long been tainted by scandal.

Vladimir Putin sent a message to Slovakia’s president: “This atrocious crime cannot be justified.  I know Robert Fico as a courageous and strong-willed person. I truly hope these personal qualities will help him overcome this harsh situation.”

The shooting comes three weeks ahead of crucial European Parliament elections, in which populist and hard-right parties in the 27-nation bloc appear poised to make gains.

Georgia: About 50,000 opponents of a “foreign agents” bill marched peacefully through the Georgian capital of Tbilisi on Saturday, after the United States said the country had to choose between the “Kremlin-style” law and the people’s Euro-Atlantic aspirations.

“We are deeply alarmed about democratic backslide in Georgia,” White House national security adviser Jake Sullivan wrote on X. “Georgian Parliamentarians face a critical choice – whether to support the Georgian people’s EuroAtlantic aspirations or pass a Kremlin-style foreign agents’ law that runs counter to democratic values,” he said.  “We stand with the Georgian people.”

The bill, as I explained a few weeks ago, would require organizations receiving more than 20% of their funding from abroad to register as “agents of foreign influence,” which has touched off a political crisis.  This is what the Kremlin has done in recent years to then suspend such organizations, which then immediately fold up.

The Georgian Dream party and its allies began committee hearings on the bill’s third and final reading on Monday.  The party’s founder, billionaire ex-prime minister Bidzhina Ivanishvili, said last month that the law was necessary to assert Georgian sovereignty against Western powers which he said wanted to drag the country into a confrontation with Russia.

Parliament then passed the final reading on the bill Tuesday. It now goes to President Salome Zourabichvili, who has said she will veto it, but her decision is likely to be overridden by another vote in parliament.

So now it’s about parliamentary elections this coming fall

Random Musings

--Presidential approval ratings....

Gallup: 38% approve of President Biden’s job performance, 58% disapprove; 33% of independents approve (Apr. 1-22).

Rasmussen: 43% approve, 56% disapprove (May 17).

--A Fox News national survey of registered voters, released Wednesday, has Donald Trump leading Joe Biden in a hypothetical head-to-head matchup, 49% to 48%.

In a five-way race, Trump leads 43% to 40%. [Robert F. Kennedy Jr. at 11%.]

A Fox poll in March had Biden trailing Trump 50% to 45% head-to-head, and 43% to 38% with third-party candidates.

Biden’s approval rating was measured at 45%, a 4-point increase from March.

--In a new NY Times/Siena College Poll of six critical battleground states released Monday, Trump leads Biden in five of them.  Among registered voters:

Wisconsin: Biden 47%...Trump 45%
Pennsylvania: Trump 47%...Biden 44%
Arizona: Trump 49%...Biden 42%
Michigan: Trump 49%...Biden 42%
Georgia: Trump 49%...Biden 39%
Nevada: Trump 50%...Biden 38%

Among “likely voters,” Biden edged ahead in Michigan while trailing only narrowly in Wisconsin and Pennsylvania. 

Biden won all six of these states in 2020.  This time, victories in Pennsylvania, Michigan and Wisconsin would be enough for him to win re-election, provided he won everywhere else he did four years ago.

If you add RFK Jr. to the equation, he wins an average of 24% across the six states and drew roughly equally from both Trump and Biden.  Trump’s lead grows to 9 in Arizona, to 14 in Nevada and drops to 8 in Georgia.

The findings are mostly unchanged since the last series of Times/Siena polls in battleground states in November.

The poll data shows that Trump and Biden are essentially tied among 18-to-29-year-olds and Hispanic voters, even though each group gave Biden more than 60% of their vote in 2020.  Trump also wins more than 20% of Black voters – a tally that would be the highest level of Black support for any Republican presidential candidate since the enactment of the Civil Rights Act of 1964.

While abortion is cited as the third most important campaign issue behind the economy and immigration, by 64% to 27%, battleground voters prefer abortion be always or mostly legal rather than always or mostly illegal.

The Times/Siena poll also looked at key Senate races in the battleground states.  Democrats outperform their top of ticket as Ruben Gallego leads Kari Lake by 3 in Arizona, Jacky Rosen is even with Sam Brown in Nevada, Bob Casey holds a 2-point advantage over David McCormick in Pennsylvania and Tammy Baldwin tops Eric Hovde by 7 in Wisconsin.  The four Democratic Senate candidates outpace Biden by between one and 13 points.

--So then Wednesday, President Biden suddenly announced he was willing to debate former President Trump in a pair of debates ahead of the election – but only if he agrees to his strict terms.

“Donald Trump lost two debates to me in 2020, and now he wants to debate me again,” Biden said in a fiery video released Wednesday.  “Well, make my day pal,” Biden added.

But the Biden camp rejected allowing the nonpartisan Commission on Presidential Debates to run the debates, despite it doing so since 1988.

Instead of the commission debates on Sept. 16, Oct. 1, and Oct. 9, Biden wants to face off with Trump on a more compressed schedule, with the first debate in June, his campaign said.

The Biden team wants the debates to be stages inside a television studio with microphones that automatically cut out when the speaker’s time elapses – and no live audience.

The proposed debates would also exclude Robert F. Kennedy Jr. and any other third-party candidates, RFK Jr. slamming the move for “undermining democracy.”

Trump responded on Truth Social saying he was “ready and willing” to debate Biden.

“Crooked Joe Biden is the WORST debater I have ever faced – He can’t put two sentences together! Crooked is also the WORST President in the history of the United States, by far.  It’s time for a debate so that he can explain to the American People his highly destructive Open Border Policy, new and ridiculous EV Mandates, the allowance of Crushing Inflation, High Taxes, and his really WEAK Foreign Policy, which is allowing the World to ‘Catch on Fire,’” he wrote.

Thus far, the two sides have tentatively agreed to a debate on June 27 hosted by CNN and then Sept. 10, hosted by ABC – but they are far apart on key details.

--Michael Cohen directly connected Donald Trump to the hush-money payment to Stormy Daniels as he took the stand in the trial on Monday.  Trump’s former lawyer and fixer recalled an October 2016 conversation in which the former president said that public disclosure of Daniels’ story would spell “disaster” for his White House bid.  Trump expressed frustration that Daniels was trying to shop her story to the media and told Cohen to pay her $130,000 to buy her silence.

“This is a disaster, a total disaster,” Cohen said Trump told him.  “Women will hate me. Guys may think it’s cool, but this is going to be a disaster for the campaign.”

Cohen said Trump told him that when Daniels threatened to come forward with her allegation of an affair with Trump at a golf event a decade earlier, Trump was fuming because he thought Cohen had handled the matter five years earlier, Cohen told the jury.

“I thought you had this under control,” Cohen said Trump told him, later instructing, “Just take care of it.”

Trump then told Cohen to drag out any negotiations on payment as long as possible. “Just get past the election,” Cohen said Trump told him.  “I win, it has no relevance because I’m president, and if I lose, I don’t really care.”

Cohen was then cross-examined Tuesday and Thursday (court off Wednesday) by Trump attorney, Todd Blanche, who suggested he was being evasive on the stand, had selective amnesia and was a jilted former employee profiting off his hatred of the former president.

Blanche on Thursday accused Cohen of lying on the stand about a phone conversation Cohen claimed to have had with Trump about the hush-money payment to Stormy shortly before the 2016 election, but Blanche said the phone conversation was about harassment from a prank caller and not, as Cohen had asserted in previous testimony, about a $130,000 payment to Daniels.  “That is a lie,” Blanche said.  “You can admit it!”  “No sir I can’t, because I am not certain that is accurate,” Cohen responded.

At the end of the week, prosecutors said Cohen would be their last witness, but when the defense presents its case to the jury next week, there is still the mystery of whether Donald Trump will take the stand.  Judge Juan Merchan asked Blanche if Trump might testify.

“No determination yet?”  Merchan asked.  “No,” said Blanche.

[By the way, it was The Castaways with the one-hit wonder, “Liar, Liar,” in case you were wondering.  Peaked at No. 12, 1965, on the Billboard charts.]

--Sen. Mitt Romney (R-Utah), in an interview on MSNBC, voiced bewilderment at why President Biden didn’t pardon Trump as soon as the federal indictments came down, with Romney saying “he should have fought like crazy” to keep them from moving forward, especially the hush-money case.  “It’s a win-win for Donald Trump.”

“Had I been President Biden, when the Justice Department brought on indictments, I would have immediately pardoned him.  Because it makes me, President Biden, the big guy and the person I pardoned a little guy.”

--President Biden asserted executive privilege over the audio of his two-day interview with the special counsel investigating his handling of classified documents, as Republicans threatened to hold Attorney General Merrick Garland in contempt for refusing to relinquish the recordings.

Yes, while the transcripts have been released, Republicans want to use the audio for attacks on Biden’s mental acuity.

But it’s not just Republicans who want the audio tape, the mainstream media wants it as well. It’s newsworthy.

--New Jersey Sen. Robert Menendez (D), went on trial in Manhattan federal court Monday, accused of accepting bribes of gold and cash to use his influence to deliver favors that would help three New Jersey businessmen.

In his opening statement Wednesday, Menendez’ defense lawyer Avi Weitman blamed the senator’s wife for his legal problems, telling the jury that the senator wasn’t aware his spouse had taken gifts from a trio of businessmen and didn’t know about cash and gold bars hidden in a closet at their New Jersey home.

“She kept him in the dark about what she was asking others to give her,” Weitzman said, portraying it as a desperate search for funds from relatives and friends.  “She wasn’t going to let Bob know that he she had financial problems.”

Assistant U.S. Attorney Lara Pomerantz told the jury the senator’s wife, Nadine, did play a central role in her husband’s corruption, but said he hid behind her while using her as a conduit to the businessmen who delivered bribes.

“He was careful not to send too many texts,” she said.  “He used Nadine as his go-between to deliver messages to and from the people paying bribes.” [NJ.com]

Menendez then on Thursday said his wife had breast cancer, finally answering questions about why her own trial has been delayed due to pending surgery.

--Billionaire investor Kenneth Griffin, founder of hedge fund Citadel, called on his alma mater Harvard University on Saturday to embrace “Western values,” saying that the turmoil across college campuses was the product of a “cultural revolution” in U.S. education.

Griffin told the Financial Times in an interview that the U.S. had “lost sight of education as the means of pursuing truth and acquiring knowledge” over the past decade.

“Harvard should put front and center (that it) stands for meritocracy in America...,” Griffin said, adding that schools should “embrace Western values that have built one of the greatest nations in the world.”

Griffin has donated more than half a billion dollars to Harvard but said in January he had halted donations over how it handled antisemitism on campus.

“What you’re seeing now is the end-product of this cultural revolution in American education playing out on American campuses, in particular, using the paradigm of the oppressor and the oppressed,” Griffin told the FT.

“The protests on college campuses are almost like performative art,” he said.  “Freedom of speech does not give you the right to storm a building or vandalize it,” he added.  “That’s not freedom of speech.  That’s just anarchy.”  [Reuters]

--Melinda French Gates is stepping down as co-chair of the Bill and Melinda Gates Foundation, one of the world’s biggest private charitable foundations that she co-founded with her former spouse more than 20 years ago.

Bill and Melinda Gates filed for divorce in 2021 after 27 years of marriage but had pledged to continue their philanthropic work together.

Under the terms of the agreement between the two, Melinda announced she would get an additional $12.5 billion “to commit to my work on behalf of women and families,” she wrote on X.

The foundation has been one of the most powerful and influential forces in global public health, having spent more than $50 billion over the past two decades to bring a business approach to combating poverty and disease.

--Gunmen ambushed a prison van in northern France on Tuesday to free a drug dealer known as “The Fly,” killing two prison guards, severely wounding three and triggering a major police manhunt...as in hundreds of police were mobilized.  The brazen attack underlines the growing threat of drug crime across Europe, the world’s No. 1 cocaine market.

The fugitive inmate, named Mohamed Amra, is a 30-year-old drug dealer from northern France, according to prosecutors, but among his crimes was a kidnapping that led to a death in Marseille (of course, this place long known for the drug trade).

Drug-related killings now rival terrorism as the European Union’s top security threat, according to EU officials.

--Overdose deaths surpassed 100,000 for a third straight year in 2023, according to federal data released Wednesday.

Per provisional data released by the Centers for Disease Control and Prevention, an estimated 107,543 people died in 2023, a slight decrease from the previous year, which would make it the first annual decrease in deaths since 2018.

To state the obvious...the toll remains far too high.

--The heat index in Key West, Florida, on Wednesday tied an all-time record high of 115.  That’s all-time, any day of the year.  It shattered the record for the day by 17 degrees!  Unreal.  Needless to say, the Gulf of Mexico will be rather warm again this hurricane season.

--Our thoughts and prayers go out to the victims of the horrible storms that went through the Houston area Thursday, at least four dead, a million homes and businesses losing power.  Houston Mayor John Whitmire urged people to not go to work, Friday... “stay home, take care of your children.”

Wind speeds reached 100 mph and Whitmire said there were “some twisters.”

Hundreds of windows were shattered at downtown hotels and office buildings. At least 2,500 traffic lights were out.  The area is a mess.

Power could be out for weeks in some parts of the area, and the temperature is going to hit 90 every day for the foreseeable future.

The photos of major transmission lines nearly destroyed outside of Houston are unreal.

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

Pray for Ukraine and the innocent in Gaza.

God bless America.

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Gold $2417...all-time high on weekly close basis
Oil $79.50

Bitcoin: $66,900 [4:00 PM ET, Friday]...up $6,000 on the week

Regular Gas: $3.59; Diesel: $3.92 [$3.53 / $4.01 yr. ago]

Returns for the week 5/13-5/17

Dow Jones  +1.2%  [40003]
S&P 500  +1.5%  [5303]
S&P MidCap  +0.7%
Russell 2000  +1.7%
Nasdaq  +2.1%  [16685]

Returns for the period 1/1/24-5/17/24

Dow Jones  +6.1%
S&P 500  +11.2%
S&P MidCap  +8.4%
Russell 2000  +3.4%
Nasdaq  +11.2%

Bulls 56.5
Bears 17.7

Hang in there.

Brian Trumbore

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