Week in Review

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Week in Review

05/25/2024

For the week 5/20-5/24

[Posted 4:30 PM ET, Friday]

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Edition 1,310

To start out on a lighter note, before I get into the darker stuff, I saw where Citigroup, HSBC and Barclays are ordering more staffers to report to the company five days a week.  Citigroup is requiring about 600 employees previously eligible to work remotely to commute to company offices full time, HSBC about 530 staff in New York – roughly half of its workforce in the city, and Barclays is requiring thousands of investment bank staff globally to spend five days a week in the office or traveling to see clients, beginning from June 1, it said late Thursday in a memo.

Why?  It’s partly about regulatory changes and new policies, specifically from the Financial Industry Regulatory Authority, FINRA – the brokerage industry’s main watchdog – which is set to reinstate pre-pandemic rules for monitoring workplaces in coming weeks.  Other brokerages and banks will be following.

I’ve told you how I pass a commuter parking lot for trains into New York each day (except Fridays), and the lot I see pre-pandemic was always 100% full.  By the second half of 2023 it was about 50% after being nearly empty for a long stretch, and then around 60% by end of last year, and suddenly there was a distinct tick up start of April and into early May to around 70%.  I checked with a friend who commutes into Gotham four days a week (per company orders) and he confirmed he noticed a pickup in activity in Manhattan during the same period as well.

But the last two weeks the lot was suddenly back to only 50% full.

I’m really talking Tuesdays through Thursdays, because so many have had the flexibility of staying home Monday or Friday, or both.

Then yesterday, Thursday, it was comical...only about 20%, which meant one thing...an awful lot of folks were starting not just a four-day weekend but turning it into five.

As in further confirmation America is going to see very heavy traffic on the roads and at the airports this holiday stretch.

AAA’s annual forecast has nearly 43.8 million travelers heading out of town, a 4% increase over last year and close to matching 2005’s record of 44 million travelers.  As I show below in my TSA figures, Thursday was the heaviest day since Thanksgiving, and Friday, Sunday and Monday are expected to be similarly heavy at the airports.

But you’ve seen how the forecast is not good for the Midwest and then the Northeast, so expect lots of stories on local and national news about the surge, the hordes, and the delays.

Good luck to all.

Personally, I have my eye on Indianapolis, Indiana, wanting to see the Indy 500 on Sunday and the forecast is not good.  They can always race on Monday, but rain Sunday spoils what could have been an historic day...NASCAR’s Kyle Larson attempting the Indy/Charlotte 600 double...racing in both.  The only way he can do this, however, is for the weather in Indy to be good and the race to be on time, without a significant delay.

However, the forecast for Charlotte is OK on Sunday.  Ergo, maybe Larson can race Sunday in Charlotte and Monday at Indy, assuming the 500 is postponed until then, which he has said he would do should this be the case.  This will be fascinating.  Root for a Sunday washout in Indy, in other words.

OK, back to our regularly scheduled programming....

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Walter Russell Mead / Wall Street Journal

“ ‘This is 1938,’ historian Timothy Snyder said at a weekend conference in Estonia. He warned that a Ukrainian defeat would shift the calendar to 1939.

“Many Americans still don’t fully grasp how serious the international situation has become. Iran has set the Middle East ablaze, Russia is advancing in Ukraine, and China is pursuing pressure campaigns against Japan, Taiwan and the Philippines.

“Even more challenging times lie ahead.  While Washington and its allies try to calm things and return the world to something like normalcy, the revisionists are strengthening their cooperation and mobilizing their societies and economies for war....

“Iran’s sputtering economy has powered its war machine for years. Neither U.S. sanctions nor the costs of supporting proxy militias across the Mideast have prevented Tehran from developing a nuclear program and a massive drone industry. Russia and China are moving in the same direction.

“The war in Ukraine was a wake-up call for Russia.  Once Kremlin hopes of an early victory disappeared, Moscow put Russia’s society and economy on a war footing for the long term. Dissent is quashed, antiwar protesters are mercilessly pursued, and schools teach hatred of the West.  Meanwhile, Mr. Putin appointed the man behind Russia’s recent gains in drones and microelectronics, Andrei Belousov, to modernize the military industrial base.

“China’s war preparations are much more advanced than most Americans understand.  A recent report by Mackenzie Eaglen of the American Enterprise Institute estimates that measured by purchasing power parity China is nearly matching America’s global defense spending....

“That isn’t all.  China is stockpiling key commodities to prevent interruptions in trade that would accompany a war.  It is driving for self-sufficiency in energy and food.  Under proposed legislation, high school and college students would face the prospect of compulsory military training....

“(The) U.S. and its allies are politically and militarily unprepared for war in the short to medium term.  The revisionists therefore want to escalate crises around the globe without triggering an overwhelming response as, for example, Japan did by bombing Pearl Harbor in 1941.  Against this pressure, they reason, the disorganized allies will retreat, conciliate and appease.

“So far, that bet has paid off. Russia is winning its uneven contest with the West.  Iran, despite the sudden death of President Ebrahm Raisi, is on a roll in the Middle East.  China’s relentless campaign of small-scale menacing acts, known as ‘gray-zone aggressions,’ is eroding America’s power in the Far East.

“The goal is to trap America between two losing choices.  We can focus all our efforts and energies on one theater – China, Ukraine or the Middle East – or we can attempt to stop everything everywhere.  Neither approach solves our problems....

“Team Biden, unfortunately, would rather starve the military and embrace the diplomacy of retreat. There is an off-ramp for every provocation, a search for a ‘diplomatic solution’ to every military attack.

“This can’t last.  Our adversaries have ambitious goals.  We face an increasingly successful and ambitious assault on the U.S.’s international position. Either we and our allies recover our military might and political will, or our foes will fatally undermine the edifice of American power and the international order that depends on it.”

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This Week in Ukraine....

--Over the weekend, Ukraine’s General Oleksandr Syrskyi, head of the armed forces, said Russia’s attack on the Kharkiv region, launched May 10, had made inroads of up to 10km (6 miles), and came ahead of schedule after “it noticed the deployment of our forces.”

“We understand there will be heavy battles and that the enemy is preparing for that,” Syrskyi wrote on Telegram.  He added that Ukrainian forces were also preparing defensive lines for a possible Russian assault on the Sumy region (next to Kharkiv), which would further expand the front, another challenge for Ukraine.

--Russia said it shot down some 60 drones and several missiles over its territory while Ukraine in turn said it destroyed over 30 Russian drones.  At least five people were reported killed in an attack on the outskirts of Kharkiv on Sunday, a recreation area destroyed where many people were enjoying a sunny day.  Then the toll increased to at least 10 with a second attack, a “double tap” designed to strike emergency workers who arrive at the scene of an initial blast.  There were no soldiers in the area.

President Volodymyr Zelensky again called on Western allies to supply Kyiv with additional air defense systems to protect Kharkiv and other cities.

“The world can stop Russian terror – and to do so, the lack of political will among leaders must be overcome,” Zelensky said on Telegram.  “Two Patriots for Kharkiv will make a fundamental difference,” he said, referring to Patriot missile defense systems.

Russian air defenses shot down 57 Ukrainian drones over the southern Krasnodar region overnight, the Russian Defense Ministry said, an oil refinery forced to halt operations with local officials saying six drones crashed onto the territory of the refinery in Slavyansk. TASS quoted an official at the refinery as saying the charges carried by the Ukrainian-launched drones were bigger than previous attacks and that they included steel balls.

The Ukrainian navy said it had destroyed a Russian minesweeper.

Nine long-range ballistic missiles and a drone were destroyed over the Crimean Peninsula, following last Friday’s massive Ukrainian drone attack that cut off power in the city of Sevastopol.

--President Zelensky told Reuters in an interview on Monday that the situation north of Kharkiv was now “under control.”  But Russian forces moved closer to the outskirts of Ukraine’s second-largest city, which could soon be within artillery range, potentially allowing Moscow to strike residential neighborhoods and target power stations more regularly.

Some experts say Russia could be trying to create a buffer zone to prevent Ukrainians from targeting Russian towns and cities with artillery.  President Vladimir Putin said during his state visit to China, that was indeed the goal of the offensive, and that Russian forces had no plans to take the city itself.  It was more a response to Ukraine’s attacks on Russian border regions such as Belgorod, Putin wanted us to believe.

But Ukraine has few reserves to deploy in the region, it being already overstretched along a more than 600-mile front line.  On Saturday, a mobilization law came into force that includes incentives for volunteers and new penalties for those trying to evade conscription.  And now Ukraine is allowing some convicts to serve.

[The new law would provide a maximum potential of only 20,000 who could join the army.]

Ukrainians did receive a big morale boost last weekend when boxer Oleksandr Usyk became the world’s undisputed heavyweight champion.

--In an interview with the New York Times also on Monday, Zelensky urged the U.S. and Europe to do more to defend Ukraine. He proposed that NATO planes shoot down Russian missiles in Ukrainian airspace.

“What’s the problem?” Zelensky said during the interview conducted in Kyiv.  “Why can’t we shoot them down? Is it defense? Yes.  Is it an attack on Russia?  No.  Are you shooting down Russian planes and killing Russian pilots?  No.  So what’s the issue with involving NATO countries in the war? There is no such issue.”

Such direct NATO involvement has long been resisted in Western capitals.  Zelensky drew a comparison to how the U.S. and Britain helped Israel shoot down a barrage of drones and missiles from Iran last month.

Zelensky said he had also appealed to senior U.S. officials to allow Ukraine to fire U.S. missiles and other weaponry at military targets inside Russia.  The inability to do so, he said, gave Russia a “huge advantage” in cross-border warfare that it is exploiting with assaults in Ukraine’s northeast.

--Before dawn on Wednesday, a Russian drone attack on Sumy plunged the northern city into darkness, with some power to the city of 250,000 restored in the following hours.

But with no end in sight to the attacks on the power grid and without a way to adequately defend against them, there are no quick fixes to the electricity shortages, Ukraine’s Energy Minister Herman Halushchenko explained.

“Should we repair (power stations) just for them (Russians) to renew strikes while we are unable to defend ourselves?” the minister asked.

Kyiv has been suffering from rolling blackouts after Russia began targeting the grid anew in March.

--Russia pounded Kharkiv with missiles on Thursday, killing seven people inside a printing house, as President Zelensky chided Ukraine’s allies for not providing enough military support to rebuff Russian attacks.  Some 50 people were reportedly in the facility when it was hit.  Another 24 were wounded.

Moscow continues to hammer the northeastern regional capital as they press their ground assault on the border region and stretch Ukraine’s defenses.

Zelensky said of the failure to provide Ukraine enough air-defense systems or allowing Ukraine to use Western-provided weapons to strike missile-launchers inside Russia, “This weakness is not our weakness, but that of the world’s, which for the third year already has not dared to deal with the terrorists exactly as they deserve,” he posted on social media.

Foreign Minister Dmytro Kuleba echoed Zelensky’s plea for more air-defense systems on Thursday, writing on X: “Unfortunately, mere words of solidarity do not intercept Russian missiles.”

--A Quinnipiac University national poll of registered U.S. voters released this week had 65% believing supporting Ukraine is in the national interest of the United States, while 29% think it is not.  I’m somewhat encouraged by this.

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--Russia began its exercise to practice the use of battlefield nuclear weapons in Ukraine on Tuesday, two weeks after Vladimir Putin ordered the provocative drills.  Russia’s Defense Ministry, in a statement accompanying video of the exercises, said the goal is to “unconditionally ensure the territorial integrity and sovereignty of the Russian state in response to provocative statements and threats of individual Western officials.”

--The U.S. has assessed that last week Russia launched a satellite that U.S. intelligence officials believe to be a weapon capable of inspecting and attacking other satellites, the U.S. Space Command said on Tuesday as the Russian spacecraft trails a U.S. spy satellite in orbit.

The Soyuz rocket blasted off on May 16, deploying in low-Earth orbit at least nine satellites including COSMOS 2576, a type of Russian military “inspector” spacecraft U.S. officials have long condemned as exhibiting reckless space behavior. A spokesman for U.S. Space Command said in a statement that the assessment is “it is likely a counterspace weapon presumably capable of attacking other satellites in low Earth orbit.”

COSMOS 2576 appears similar to satellites Russia launched in 2019 and 2022, which the U.S. also claimed were counterspace weapons.

--Russia detained a senior general on corruption charges Thursday, the fourth top defense official to be held within a month, widening the highest-profile purge in the Russian military in years. And then later in the day, a fifth official was detained.

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Israel and Hamas....

--An Israeli airstrike killed 20 people in central Gaza, mostly women and children, as fighting raged across the north on Sunday as Israel’s leaders aired their divisions over who should govern Gaza after the war.

Other airstrikes killed another 15, according to the Palestinian Red Crescent emergency service.

Hamas, along with armed wings of Islamic Jihad and Fatah, said they had battled with Israeli forces in the sprawling Jabalia refugee camp with anti-tank rockets, mortar bombs, and explosive devices already planted in some of the roads, killing and wounding many soldiers.  Israel said 281 soldiers have been killed in fighting since the first ground incursion in Gaza on Oct. 20.

--Prime Minister Benjamin Netanyahu faced criticism from his own War Cabinet, with his main political rival, Benny Gantz, threatening to leave the government if a plan is not formulated by June 8 that includes an international administration for postwar Gaza.

Gantz withdrawal would not bring down Netanyahu’s coalition government, but it would leave him more reliant on far-right allies who support the “voluntary emigration” of Palestinians from Gaza, full military occupation and the rebuilding of Jewish settlements there.

“If you choose the path of fanatics and lead the entire nation to the abyss – we will be forced to quit the government,” Gantz said.

Netanyahu called Gantz’s conditions “euphemisms” for Israel’s defeat.

Last week, Israeli Defense Minister Yoav Gallant, the third member of the War Cabinet, said he would not remain in his post if Israel elected to reoccupy Gaza.  Gallant also called on the government to make plans for Palestinian administration of the enclave.

Polls show that Gantz, a political centrist, would likely succeed Netanyahu if early elections were held.  That would then expose Netanyahu to prosecution on longstanding corruption allegations.

Netanyahu said he has no political motives (cough cough) and says the offensive must continue until Hamas is dismantled and the estimated 100 hostages held in Gaza, and the remains of 30 others, returned. He has said it’s pointless to discuss postwar arrangements while Hamas is still fighting because the militants have threatened anyone who cooperates with Israel.

--U.S. national security adviser Jake Sullivan met with top Israeli leaders on Sunday to discuss an ambitious plan for Saudi Arabia to recognize Israel and help the Palestinian Authority to govern Gaza in exchange for a path to eventual statehood.

Sullivan met with Saudi Crown Prince Mohammed bin Salman on Saturday.

Netanyahu, who is opposed to Palestinian statehood, has rejected the proposals, saying Israel will maintain open-ended security control over Gaza and partner with local Palestinians unaffiliated with Hamas or the Western-backed PA.

--The International Criminal Court issued arrest warrants Monday for the leaders of Hamas and Prime Minister Netanyahu on charges of war crimes for the conflict in Gaza.  Three Hamas leaders made the list, along with Netanyahu and Defense Minister Yoav Gallant.

“Nothing can justify willfully depriving human beings, including so many women and children, the basic necessities required for life,” said ICC Prosecutor Karim A.A. Khan KC.  And “Nothing can justify the taking of hostages or the targeting of civilians,” he added.

Netanyahu called the decision a “travesty of justice” and said the ICC’s decision “will not stop us from waging our just war against Hamas.”

In a statement, President Biden said the application for the warrants for Israeli leaders was “outrageous” and that “there is no equivalence – none – between Israel and Hamas.” 

Editorial / Wall Street Journal

“The International Criminal Court has lost more than the plot.  In requesting arrest warrants on Monday for [Netanyahu and Gallant], alongside a trio of Hamas leaders responsible for Oct. 7, the ICC has lost sight of the crucial distinction between the death squad and the bomber pilot, on which the possibility of just war depends.  President Biden is right to call the court’s action “outrageous,” but the grotesque false equivalence demands more than tough words.

“On one side are Israel’s democratic leaders, waging a war to reclaim hostages and root out terrorists in Gaza.  On the other side is Hamas, which precipitated the war with its mass murder, rape and kidnapping on Oct. 7, and whose officials pledge to do it ‘again and again.’  Lumping them together is a slander for the history books.  Imagine some international body prosecuting Tojo and Roosevelt, or Hitler and Churchill, amid World War II....

“The ICC claims Israel is ‘intentionally directing attacks against a civilian population,’ another allegation that’s upside-down.  ‘Israel has done more to prevent civilian casualties in war than any military in history,’ John Spencer, chair of urban warfare at West Point, has said, ‘setting a standard that will be both hard and potentially problematic to repeat.’  If nations can’t wage just war, evil prevails, meaning the ICC isn’t giving a win only to Hamas....

“The ICC is supposed to intervene as a ‘court of last resort,’ in the absence of national judiciaries able to hold leaders to account. Think of Hamas, whose courts are rubber stamps.  Israel has an independent court that is renowned for its activist, antigovernment tilt.

“The ICC’s disregard for procedure exposes its bias, and if the warrant request is an effort to undermine Mr. Netanyahu’s government, it won’t work. The opposition leader has already rallied to condemn the ICC’s ‘complete moral failure.’....

“The ICC’s budget, coming largely from Japan, Germany, France, the UK, Italy and South Korea, should be in jeopardy.  How can these countries host or train with U.S. troops while funding a body that threatens to prosecute them without jurisdiction?

“Mr. Khan was warned of the consequences of subordinating the law in pursuit of Israel. The judges who will consider his arrest warrants are being asked to sign the ICC’s epitaph.”

--Israel pressed its assault on the Jabalia camp on Tuesday, laying waste to residential districts with tank and air bombardments, while Israeli air strikes killed at least five people in the city of Rafah.

Israel said it returned to the Jabalia camp, where it had claimed to have dismantled Hamas months ago, to prevent the militants from rebuilding their operations there.

--The UN suspended food distribution in Rafah on Tuesday due to a lack of supplies and untenable security situation caused by Israel’s expanding military operation. The UN warned that humanitarian operations across the territory were nearing collapse.

A senior U.S. official told reporters that Israel has addressed many of the Biden administration’s concerns about a full-scale ground invasion of Rafah aimed at rooting out Hamas fighters there.

Hundreds of thousands of people have fled Rafah in a chaotic exodus.

Speaking of delivering aid, the effort by the U.S. military to surge it from the newly built floating pier off Gaza is off to a chaotic start, with aid trucks being overrun and at least one person feared dead, prompting a pause in the distribution, from last Saturday through Tuesday.

A Pentagon spokesman said Tuesday that the issues have arisen once the aid was loaded onto nongovernmental organization trucks, departing the marshaling area and headed toward distribution warehouses in Gaza.

Over the weekend, some of the trucks were overtaken by Palestinians, according to UN officials.  Only five of the 16 aid trucks that left the secured area on Saturday arrived at the intended warehouse with their cargo intact, a UN World Food Program spokesperson told the Associated Press.  He said the other 11 trucks were waylaid by what became a crowd of people and arrived without their cargo.

--Norway, Ireland and Spain said Wednesday they are recognizing a Palestinian state in a historic move that drew condemnation from Israel and jubilation from the Palestinians.  Israel immediately ordered back its ambassadors from Norway and Ireland.

The formal recognition will be made on May 28

Norwegian Prime Minister Jonas Gahr Store said, “there cannot be peace in the Midde East if there is no recognition.”

“By recognizing a Palestinian state, Norway supports the Arab peace plan,” he said and added the country will “regard Palestine as an independent state with all the rights and obligations that entails.”

The Biden administration believes a Palestinian state should be achieved through negotiations, not unilateral recognition, the White House said after the move by the above three.

--Tensions between Israel and Egypt continue to rise, with Cairo saying respect for treaties, such as the peace treaty with Israel signed in 1979, do not prevent it from using “all scenarios to preserve its national security and the historical rights of Palestinians,” state media reported on Tuesday.

For years Egypt and Israel have cooperated closely on security across their shared border and on the border between Gaza and Egypt.  But Cairo has warned that relations could be undermined by Israel’s campaign in Gaza.  It says the offensive in Rafah is preventing use of the Rafah crossing for deliveries of humanitarian aid.  Egypt wants Israel to withdraw from the border crossing.

Egypt has also expressed concern that the campaign in Rafah could push residents of Gaza across its border.

--Israeli forces killed 10 Palestinians and wounded 25 others in the occupied West Bank city of Jenin over Tuesday and Wednesday, according to the Palestinian health ministry.  The IDF raid on Jenin involved dozens of vehicles.

The death toll in the West Bank is 516 since October 7.

--The bodies of three more hostages killed on Oct. 7 were recovered last night from Gaza, the IDF said Friday.  The army said they were killed on the day of the attack and their bodies taken to Gaza.

--The above comes as today, Friday, judges at the top United Nations court ordered Israel to immediately halt its military assault on Rafah, a landmark emergency ruling that is part of South Africa’s case accusing Israel of genocide.

But the International Court of Justice, or World Court, has no means to enforce its orders, though it is another sign of Israel’s growing global isolation over its campaign in Gaza.

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Wall Street and the Economy

The Federal Reserve released the minutes of its May 1 meeting and officials concluded then that it would take longer than they previously thought for inflation to cool enough to justify reducing their benchmark funds rate.

Officials also debated whether their key rate was exerting enough of a drag on the economy to further slow inflation.

High interest rates “may be having smaller effects than in the past,” the minutes said.  Economists have noted that many American homeowners, for example, refinanced their mortgages during the pandemic and locked in very low mortgage rates.  Most large companies also refinanced their debt at low rates, which has blunted the impact of the Fed’s 11 rate hikes in 2022 and 2023.

But the Fed, specifically Chair Jerome Powell, said it was “unlikely” that the Fed would resume raising rates.

On Tuesday, Christopher Waller, a permanent voting member on the Open Market Committee, said he would “need to see several more months of good inflation data before” he would support reducing rates. That suggests that the Fed wouldn’t likely consider rate cuts until September at the earliest.

Goldman Sachs Group CEO David Solomon said he expects the Fed won’t cut interest rates this year given the resiliency of the U.S. economy.  Investments in AI infrastructure have been one of the main drivers, he said, as has government spending.  But Solomon also contends the consumer is feeling a longer-term bite from higher prices. 

“If you’re talking to CEOs...they have been starting to see change in consumer behaviors,” he said.  “Inflation is not just nominal.  It’s cumulative.”

April existing home sales fell 1.9% to 4.14 million seasonally adjusted annual rate from 4.22 million in March.  Sales were up 6.8% from a year ago.  The median home price increased to $407,600, up 5.7% from $385,800 one year ago.

April new home sales came in well below forecasts, 634,000 annualized pace vs. 675,000 expected and 665,000 prior (revised).

April durable goods (big ticket items) rose much more strongly than forecast, 0.7% vs. an anticipated -0.5% decline, up 0.4% ex-transportation.

The Atlanta Fed’s GDPNow barometer for second-quarter growth is at 3.5%.

Freddie Mac’s 30-year fixed-rate mortgage is 6.94%, back below 7.00%, but this could be short lived.

Next week, it’s all about the key personal consumption expenditures index reading on Friday, which will help the Fed formulate its statement, and Chair Powell’s comments after, following its June 11-12 FOMC confab.

The Fed will see new data on consumer prices the day it releases its statement, June 12.

Europe and Asia

We had flash PMI readings for the month of May in the eurozone. The composite reading of 52.3 was a 12-month high (50 the dividing line between growth and contraction), with manufacturing at 49.6 (14-mo. high) and services at 53.3.  [S&P Global / Hamburg Commercial Bank]

Germany: manufacturing 48.9 (13-mo. high); services 53.9 (11-mo. high)
France: mfg. 47.3; services 49.4

UK: mfg. 52.7 (25-mo. high); services 52.9

Dr. Cyrus de la Rubia, Chief Economist HCB:

“This looks as good as it could be. The PMI composite for May indicates growth for three months straight and that the eurozone’s economy is gathering further strength.  Encouragingly, new orders are growing at a healthy rate while the companies’ confidence is reflected by a steady hiring pace.  This time, there is also some good news for the European Central Bank (ECB) as the rates of inflation for input and output prices in the services sector has softened compared to the month before.  This will be supportive for the apparent stance of the ECB to cut rates at the meeting on June 6.  However, the better inflation outlook will most probably not be enough for the central bank to announce that further rate cuts will follow suit....

“The German economy is outshining the French one, driven by a robustly growing services sector which is shrinking in France... (The) good news here is that overall, both economies move in tandem. This means that there are good chances for France to catch up eventually in the services sector which would put eurozone growth on a sounder footing.”

Britain: Prime Minister Rishi Sunak called a snap election for July 4.

Sunak’s Conservatives are running way behind Labour in the opinion polls, and despite hailing a decline in inflation and an increase in defense spending, they have failed to make a dent in the opposition party’s lead.

Labour has held a lead over the Conservatives of around 20 points since late 2021 – before Sunak took office in October of that year.  Get ready for Labour leader Keir Starmer to be the new prime minister, even though Labour hasn’t given a good reason why they should be in power. The best they can do is to say they aren’t the Conservatives.

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

But President Xi Jinping on Thursday called for deepened reforms to address the country’s economic issue during a meeting with the heads of state-owned firms, private entrepreneurs and overseas investors.

“Reform is the driving force for development,” Xi told the meeting in Shandong province.

“We must pursue an approach that is both goal- and problem-oriented to solve problems...focus on deep-seated institutional obstacles and structural issues.”

The pro-business message comes ahead of a key Communist Party meeting in July – when the country’s leaders are expected to map out new reform agendas and set the course for future growth.

A protracted property sector downturn, stubbornly weak internal demand, mounting local government debt, rising trade barriers and deeply ingrained structural issues threaten to further impede China’s recovery and growth.

We had flash PMI readings for the month of May in Japan, 50.5 for manufacturing (the first above 50 since May 2023), and 53.6 services.

April exports and imports both rose 8.3% year-over-year, though the figures were lower than consensus estimates.

But today, Japan’s inflation rate for April was announced, 2.5%, and 2.4% ex-food and energy, which was down from 2.9% prior.  Good news for the Bank of Japan, which next meets in mid-June.

Street Bytes

--Kind of a strange week.  Despite Nvidia’s strong earnings and that stock soaring further, the day after the earnings release, the Dow Jones fell 605 points, and was off 2.3% for the week to 39,069.  But the S&P 500 gained a single point (0.03%) to 5304 and Nasdaq hit more new highs, 1.4% to Friday’s record close of 16920.

Zero market-moving earnings next week, and really until July.

--U.S. Treasury Yields

6-mo. 5.38%  2-yr. 4.95%  10-yr. 4.46%  30-yr. 4.57%

Treasuries didn’t receive any love after the Fed’s Open Market Committee meeting minutes and the further realization Chair Powell’s band of merry pranksters will be patient, and we had further signs of economic strength, ex-housing, so the yield on the 10-year rose a bit on the week, while the 2-year surged 13 basis points to 4.95%.

PCE next week will be key.

--In an attempt to lower gasoline prices at the pump, the Biden administration plans to sell one million barrels of gasoline from two reserves – including the bulk from the beautiful Port Reading reserve in Carteret, New Jersey, across from Staten Island.

“The Biden-Harris Administration is laser focused on lowering prices at the pump for American families, especially as drivers hit the road for summer driving season,” Secretary of Energy Jennifer Granholm said in a statement.

[The national average for gasoline (regular) is $3.60 today, 4 cents higher than this time last year.]

--Ahead of Wednesday’s earnings after the close, Tuesday, Nvidia shares closed at a record level, $953.86, its first record close since late March. Through Monday, the stock had risen 91% this year, compared with Nasdaq’s 12% rise over the same period.

So the consensus was for Nvidia to report revenue of $24.59 billion and earnings of $5.58 per share, but in order for the stock to continue to run, Nvidia has to handily exceed these expectations. 

And that the company did, surpassing estimates as demand for generative artificial intelligence drove record data-center revenue while the chipmaker announced a stock split.

Adjusted earnings surged to $6.12 for the three months ended April 28 from $1.09 a year earlier.  And revenue more than tripled to $26.04 billion.

“Companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center – AI factories,” CEO Jensen Huang said in a statement late Wednesday.

“The next industrial revolution has begun,” Huang said in the earnings release. “Companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center – AI factories – to produce a new commodity: artificial intelligence.”

Data-center revenue surged 427% year-over-year to a record $22.6 billion, reflecting higher shipments of the Hopper graphics processing unit computing platform used for the training of large language models and generative AI applications.

Large cloud providers continued to drive strong growth, said CFO Colette Kress. Their demand accounted for around 45% of all data center revenue in the quarter.

Nvidia expects second-quarter consolidated revenue of $28 billion, plus or minus 2%.  The consensus estimate is $26.84 billion.

The company announced a 10-for-1 stock split for shares owned as of June 6, to be distributed after the close on June 7. And the company raised its quarterly cash dividend by 150% to $0.10 per share (or $0.01 per share on a post-split basis).

Yup, Nvidia delivered, and the shares rose 7% at the open Thursday morning before closing the day at $1,038 and the week at $1,065.

At the close on Thursday, CEO Huang’s net worth jumped to $91.3 billion, bumping him up to No. 17 in the world on the Bloomberg Billionaires Index.  Nearly all his wealth is in Nvidia stock.

--Target’s fiscal first-quarter earnings unexpectedly declined, while the retailer issued a downbeat bottom line guidance at the midpoint for the ongoing three-month period.

The company’s adjusted earnings fell to $2.03 a share for the quarter ended May 4 from $2.05 the year before, versus consensus of $2.06. Total revenue moved 3.1% lower to $24.53 billion, with the Street at $24.54bn.  Comparable sales slid 3.75, in line.

Gross margin increased to 27.7% from 26.3% in the prior-year quarter amid cost improvements that more than offset higher promotional markdowns.

For the current quarter, Target expects adjusted EPS between $1.95 and $2.35, while the Street is looking for normalized EPS of $2.18.  Comp sales are set to be in a range of flat to up 2% vs. the market’s estimate for a 1.6% gain.

The retailer continues to project adjusted EPS of $8.60 to $9.60 for the full year with same-store sales flat to up 2%.

The shares fell 8% on the news.

Target then said it was extending its cost cut program to some 5,000 food, drink and essential household items to help customers deal with inflation.

--Lowe’s on Tuesday recorded better-than-expected fiscal first quarter results, even as consumers cut back on big-budget spending on home improvement projects.

The retailer’s earnings came in at $3.06 per share for the quarter ended May 3, down from $3.77 the year before, but topped the Capital IQ-polled consensus of $2.96.  Sales slipped to $21.36 billion from $22.35bn but were ahead of the Street’s view for $21.1 billion.

Comparable sales decreased 4.1%, but this was better than analysts’ forecasts.  CEO Marvin Ellison said the chain is “pleased with our start to spring, driven by strong execution and enhanced customer service.”

Gross margin as a percentage of sales was 33.2%, compared with 33.7% in the prior-year quarter.

For fiscal year 2024, Lowe’s, the junior rival to Home Depot, continues to project EPS of about $12 to $12.30 and sales to come in between $84 and $85 billion.  It also reiterated its outlook for comparable sales to decline by 2% to 3%, with the Street at -2.5%.

--ASML Holding NV and Taiwan Semiconductor Manufacturing Co. have ways to disable the world’s most sophisticated chipmaking machines in the event that China invades Taiwan, according to a report in Bloomberg this week.

“Officials from the U.S. government have privately expressed concerns to both their Dutch and Taiwanese counterparts about what happens if Chinese aggression escalates into an attack on the island responsible for producing the vast majority of the world’s advanced semiconductors, two of the people said, speaking on condition of anonymity.”

ASML reassured officials when they met with the Dutch government on the threat, other sources said.

[Much more on China/Taiwan below.]

--South Korea unveiled a $19 billion package of incentives to bolster its chip sector, a boon to Samsung Electronics Co. and SK Hynix Inc. as they attempt to stay ahead in this highly competitive industry.

Such spending from the U.S. to China, and the likes of Taiwan, is accelerating amid the Beijing-Washington trade tensions that threaten to snarl the supply of components critical to most modern devices and the military.

--One person died and over 100 were injured during a Singapore Airlines’ London-Singapore flight that encountered severe turbulence Tuesday, plummeting severely for a number of minutes before it was diverted to Bangkok, where emergency crews rushed to help injured passengers amid stormy weather.

The Boeing 777-300ER, with a total of 211 passengers and 18 crew members on board was cruising at an altitude of 37,000 feet when it suddenly and sharply pitched down to 31,000 feet over the span of three minutes, tracking data captured by FlightRadar 24 showed.

The plane pitched back up before falling again to 31,000 for just under 10 minutes before rapidly descending and landing in Bangkok in just under an hour.  During this time, passengers and crew were attempting to take care of the injured, photos showing just how chaotic it had been.

As one of the passengers, a 28-year-old student, said: “Everyone seated and not wearing their seatbelt was launched immediately into the ceiling, some people hit their heads on the baggage cabins overhead and dented it, they hit the places where lights and masks are and broke straight through it.  There were a lot of head and spinal injuries.”

At one of the hospitals in Bangkok treating passengers, six were found to have skull and brain injuries, and 22 suffered injuries of the spine or spinal cord.  Some patients have shown signs of paralysis, though it isn’t yet known if the damage is permanent, said Dr. Adinum Kittiratanapaibool of one of the medical facilities.  At least 17 have undergone surgery.

It was absolutely horrific, “one of the worst turbulence-related accidents ever,” as the Wall Street Journal put it.  The flight was over the Andaman Sea approaching Myanmar at the time.

Understand, if you don’t wear your seat belt and something like this happens, you become like a missile, endangering others.

A 2023 study found that climate change had contributed to a 55% increase in severe turbulence over the past four decades and predicted the trend would continue.

--JetBlue, having been thwarted in its acquisition of Spirit Airlines and forced to abandon a route-sharing partnership with American Airlines in the busy Northeast corridor, now wants to team up with British Airways so each carrier can expand service to new destinations in the U.S. and Europe.

The carriers asked the Transportation Department to approve a code-sharing agreement that would allow them to sell tickets for each other’s flights, including 75 U.S. and 17 European destinations.  JetBlue just announced daily nonstop service from New York’s JFK Airport to Edinburgh Airport, Scotland, through Sept. 30.

--TSA checkpoint numbers vs. 2023

5/23...108 percent of 2023 levels...2,897,400...most since last Thanksgiving
5/22...103
5/21...107
5/20...106
5/19...106
5/18...107
5/17...107
5/16...106

--JPMorgan Chase CEO Jamie Dimon said at the bank’s annual investor day that plans for his succession are “well on the way.”  The 68-year-old, the most respected CEO in America these days, suggested he would step down sooner than previously expected, saying, “It’s not five years anymore.” 

For at least a decade, every time Dimon was asked about potentially retiring he had the same response: five more years.  His succession has long obsessed Wall Street and the shares fell on his comment.

In 2021, Dimon was given a special bonus by the board that he could earn by staying as CEO until at least 2026.  On Monday, he said that his successor could come from within the bank’s ranks.  If Dimon needed an immediate successor, he has Daniel Pinto, the bank’s president and chief operating officer.

But he said he still feels up for the job.

“I still have the energy I’ve always had,” Dimon said.  “I think when I can’t put on the jersey or any given full thing, I should leave.”

Dimon took over as CEO of JPMorgan at the end of 2005, and the shares have returned more than 700% since he took over, including dividends, while the S&P 500’s total return is around 500%, according to Dow Jones Market Data.

He is the only remaining leader of the biggest banks who was CEO before the 2008-09 financial crisis.  JPM stood strong during that tumultuous period.

Dimon also delivered his now regular economic warning Monday as he said he’s “cautiously pessimistic,” given the complicated geopolitical situation and the prospect of inflation proving stickier than expected.

--Workers at a Mercedes-Benz plant in Alabama handed a stinging loss to the United Auto Workers on Friday, rejecting the union in a vote it had expected would build on a win at a Tennessee Volkswagen plant and push it deeper into the South.

It marked the first big loss for UAW organizers after a series of victories, including double-digit raises for Detroit workers and the union’s expansion to a VW factory in Chattanooga last month. The UAW is in the midst of a $40 million campaign targeting other automakers including Toyota and Tesla.

The workers at the plant in Vance, Alabama, and a nearby battery facility voted 2,642 to 2,045 against joining the UAW, meaning 56% voted “no,” according to the National Labor Relations Board, which oversaw the vote.

“While this loss stings, we’ll keep our heads up,” UAW President Shawn Fain said following the loss.

--In a Reuters interview with Stellantis CEO Carlos Tavares, Tavares said he expects a major battle with Chinese rivals in the European market for electric vehicles, as tensions among Beijing, Brussels and Washington over the EV trade grow. The EU is expected to decide next month on whether to follow the U.S. in imposing additional tariffs on Chinese carmakers, after last Wednesday, the Biden administration said it planned to hit Chinese made EVs and EV materials with duties up to 100% by Aug. 1.

Tavares said tariffs on Chinese vehicles imported to Europe and the United States are “a major trap for the countries that go on that path” and will not allow Western automakers to avoid restructuring to meet the challenge from lower cost Chinese manufacturers.

--Macy’s shares rose 5% after the company lifted its full-year earnings outlook on Tuesday.  The department store operator’s fiscal first-quarter bottom line also topped market expectations.

The company now anticipates adjusted earnings to come in between $2.55 and $2.90 for the ongoing year, up from its prior forecast of $2.45 to $2.85.  The consensus was at $2.63.

Sales are pegged at $22.3 billion to $22.9 billion, a slight increase over the company’s prior outlook.  Comp sales are expected to be down 1.5% year on year.

For the three months through May 4, Macy’s reported adjusted EPS of $0.27, down from $0.56 the year before, but ahead of consensus of $0.17.  Sales slipped 2.7% to $4.85 billion.  Comp sales were 1.2% lower.

Americans are still spending but they’re getting more selective and are also more likely to wait until something goes on sale.

Against this background, Macy’s is trying to shore up sales by accelerating the expansion of small-format stores, while closing locations where sales have lagged.

The company is opening 30 small-format locations through the fall of 2025 but closing 150 unproductive stores over the next three years, a third of them by end of 2024.

At the same time, Macy’s is upgrading its remaining 350 traditional stores, adding more salespeople to fitting areas and shoe departments, and adding more visual displays. It is also pivoting to more luxury sales, which have held up better overall compared with other categories.  The company is also opening 156 higher end Bloomingdale’s stores and 30 luxury Bluemercury cosmetics locations to cater to customers seeking higher end services and goods. 

--Pixar Animation Studios is laying off about 14% of its workforce as parent company Disney seeks to cut costs and scale back the volume of content made exclusively for streaming.

The cuts will affect about 175 employees, and signals Pixar will likely not invest in streaming-only series going forward and will focus on making feature films.

Bob Iger, Disney’s chief executive, has said in recent months that the company is reining in content spending and trying to produce fewer, better shows and movies.

Pixar, which Disney acquired in 2006 for $7.4 billion and before Tuesday’s layoffs had around 1,300 employees, is responsible for some of Disney’s biggest hits, including the “Toy Story,” “The Incredibles” and “Monsters, Inc.” franchises, as well as “Up” and “Coco.”

But recently, Pixar titles such as “Elemental” and “Lightyear” have underperformed at the box office.

--Shares in Workday tanked on Friday, some 15%, unfairly so I can’t help but muse, as the cloud human resources company lowered its full-year subscription sales outlook, despite recording better-than-expected fiscal first-quarter results.

Here’s the thing.  Subscription revenue is now set to come in between $7.7 billion and $7.73 billion for fiscal 2025, representing annual gains of about 17%, while the company previously forecast the metric to be a range of $7.73 billion to $7.78 billion, or year-over-year growth of 17% to 18%.  That forecast ‘miss’ is worthy of a 15% decline?!

As in as former NBA All-Star Derrick Coleman would have said, “Whoopty-damn-do.”

--Billionaire investor Berry Sternlicht’s giant real estate fund, Starwood Real Estate Income Trust, was forced to limit withdrawals to fend off a potential cash crunch as the value of the fund’s commercial properties has plummeted – hit by both lower occupancy rates since the pandemic and by high interest rates.

In a letter to shareholders, Sternlicht, who leads the Starwood Capital Group, and Sean Harris, the CEO of Starwood’s REIT, said: “We cannot recommend being an aggressive seller of real estate assets today given what we believe to be a near-bottom market with limited transaction volumes, and our belief that the real estate markets will improve.”

But such a move to limit withdrawals spooks investors for sure.

--New York rents were back at record highs in April after dropping slightly in March, indicating another painful spring and summer could be in store.

The median rent in Manhattan rose to a record high for April of $4,250.  In Brooklyn, the median rent hit $3,599, also a record for April, according to the latest report from Douglas Elliman and Miller Samuel.

--Red Lobster filed for bankruptcy, as expected, on Sunday.  According to the filing by the chain’s new management, the chain was saddled with suffocating leases at “above-market” rents, which were the product of a financing deal entered into by previous private equity owners, San Francisco-based Golden Gate Capital. The new owner, Thai Union, a giant Bangkok-based seafood company, pressured the company into “burdensome supply obligations” that had little to do with the restaurants’ actual needs.

Red Lobster is handing control of the company to its lenders, who have agreed to provide $100 million in financing to support the chain through bankruptcy.

--Shares in Trump Media & Technology Group stock fell nearly 9% Tuesday after the company posted first-quarter earnings.

The operator of the Truth Social media platform reported revenue of $770,500 in the January-march period, while recording a $12.1 million operating loss for the quarter.

--The Justice Department on Thursday sued Live Nation Entertainment, the concert giant that owns Ticketmaster, asking a court to break up the company over claims it illegally maintained a monopoly in the live entertainment industry.

In the lawsuit, which is joined by 29 states and the District of Columbia, the government accuses Live Nation of dominating the industry by locking venues into exclusive ticketing contracts, pressuring artists to use its service and threatening its rivals with financial retribution.

The tactics, the government argues, have resulted in higher tickets prices for consumers, while stifling innovation and competition throughout the industry.

The case has the potential to transform the multi-billion concert industry.

According to the Justice Department, Live Nation controls around 60 percent of concert promotions at major venues around the U.S. and roughly 80 percent of primary ticketing at major concert venues.

This is indeed a monopoly and ticket prices are outrageous (though they are largely set by the performers), especially in terms of ‘service fees’ levied.  All Americans can agree on this.

Unfortunately, such cases can drag on for years.

--Finally, Ivan Boesky, the financier who gave birth to the “greed is good” mantra before going to prison in one of the biggest Wall Street insider trading scandals of the 1980s, died at the age of 87 on Monday. Boesky, who partly inspired the Gordon Gekko character in the 1987 movie “Wall Street” was at his peak considered a genius at risk arbitrage – the business of speculating in takeover stocks, and his wealth was estimated at $280 million.

“I think greed is healthy.  You can be greedy and still feel good about yourself,” he said in a commencement speech to the business school at Cal Berkeley in 1986.  Just a few months later, the man known on Wall Street as “Ivan the Terrible” was indicted on the charges that would send him to disgrace, near bankruptcy and prison.

Boesky would commit vast sums of money to potential merger deals, trying to take advantage of the small but predictable gains that follow takeovers.  But the Securities and Exchange Commission proved he obtained tips from investment bankers about deals in the works and use them illegally before the information was released to the public.  He received some leniency by cooperating in the government’s investigation of insider trading rings and reportedly taped conversations with his business contacts.

Boesky, born in Detroit, received a law degree from the Detroit College of Law, worked as a law clerk to a U.S. District Court Judge, joined an accounting firm, and then moved to Wall Street in 1966, where he joined L.F. Rothschild as an analyst.  In 1975, with $700,000 in capital bankrolled by his wife’s family, he established his own firm specializing in risk arbitrage.

Foreign Affairs, Part II

China / Taiwan: Taiwan’s new president, Lai Ching-te, aka William Lai, said in his inauguration speech Monday that he wants peace with China and urged it to stop its military threats and intimidation of the self-governed island that Beijing claims as its own territory.

“I hope that China will face the reality of (Taiwan’s) existence, respect the choices of the people of Taiwan, and in good faith, choose dialogue over confrontation,” Lai said after being sworn in.

Lai pledged to “neither yield nor provoke” Beijing and said he sought peace in relations with China. But he emphasized the island democracy is determined to defend itself “in the face of the many threats and attempts at infiltration from China.”

Lai’s party, the Democratic Progressive Party, doesn’t seek independence from China but maintains that Taiwan is already a sovereign nation.

Lai is seen as inheriting his predecessor Tsai Ing-wen’s progressive policies, including universal health care, backing for higher education and support for minority groups, including making Taiwan the first place in Asia to recognize same-sex marriages.

Lai vowed to continue Tsai’s push to maintain stability with China while beefing up Taiwan’s security through imports of military equipment from close partner the U.S., the expansion of the defense industry with the manufacture of submarines and aircraft, and the reinforcing of regional partnerships with ‘unofficial’ allies such as the U.S., Japan, South Korea and the Philippines.

All in all, Lai, once known as a firebrand, had a relatively conciliatory tone in his address, but of course that wasn’t enough for China, which responded by saying, “Taiwan independence is a dead end.”

“Regardless of the pretext or the banner under which it is pursued, the push for Taiwan independence is destined to fail,” China’s Foreign Ministry spokesperson Wang Wenbin said at Monday’s daily press briefing.

Lai, in his speech said China’s military incursions around Taiwan’s waters and airspace since his election win in January was the “greatest strategic challenge to global peace and stability.”

About five hours after Lai’s speech, China’s Taiwan Affairs Office released a statement, saying Lai had fully exposed his true nature as a “Taiwan independence worker.”

“We will never tolerate any form of ‘Taiwan independence’ separatist activities,” spokesman Chen Binhua said in the statement.

Lai’s speech “stubbornly adheres to the stance of ‘Taiwan independence,’ vigorously promotes the fallacy of separatism, incites cross-strait confrontation, and attempts to ‘rely on external forces to seek independence,’” according to the statement.

There has been no formal communication between Beijing and Taipei since 2016.

Tuesday, China’s Taiwan Affairs Office released another strongly worded statement, saying William Lai’s attitude in his inauguration remarks was “extremely rampant” while “his advocacy is even more radical” than before.

“The entire speech was filled with antagonism and provocation, lies and deception – the ‘Taiwan independence’ stance is even more radical and risky.”

Beijing also rejected Lai’s offer to resume tourism and student exchanges.

And then late in the week, China held two days of military drills surrounding (encircling) Taiwan as “punishment” for what it called the “separatist acts” of holding an election and inaugurating a new president.

At least 15 Chinese navy ships, 16 Chinese coast guard vessels, and 49 aircraft operated around Taiwan and its outlying islands, according to Taipei’s defense ministry.

Chinese state media claimed that dozens of People’s Liberation Army fighter jets carrying live missiles had carried out mock strikes against “high value military targets,” operating alongside navy and rocket forces.

Beijing’s Foreign Ministry spokesman Wang Wenbin said the drills were “a necessary and legitimate move to crack down on ‘Taiwan independence’ separatist forces and their separatist activities and send a warning to external interference and provocations.”

In response, Taiwan accused China of “irrational provocation and disruption of regional peace and stability.”

The defense ministry said sea, air and ground forces had been put on alert, base security had been strengthened, and air defense and missile forces ordered to monitor possible targets.

The drills were the most widespread conducted by China since 2022.

A very real fear is that Taiwan has 15 cables carrying internet into the island.  They represent Taiwan’s digital lifeline and China could plunge the people and businesses into digital darkness by cutting them.

On a different topic...Eric Lipton / New York Times

“The Pentagon is rushing to expand its capacity to wage war in space, convinced that rapid advances by China and Russia in space-based operations pose a growing threat to U.S. troops and other military assets on the ground and American satellites in orbit.

“Details of the push by the Pentagon remain highly classified. But Defense Department officials have increasingly acknowledged that the initiative reflects a major shift in military operations as space increasingly becomes a battleground.

“No longer will the United States simply rely on military satellites to communicate, navigate and track and target terrestrial threats, tools that for decades have given the Pentagon a major advantage in conflicts.

“Instead, the Defense Department is looking to acquire a new generation of ground- and space-based tools that will allow it to defend its satellite network from attack and, if necessary, to disrupt or disable enemy spacecraft in orbit, Pentagon officials have said in a series of interviews, speeches and recent statements.”

Iran: President Ebrahim Raisi, Foreign Minister Hossein Amirabdollahian, and several other officials were found dead on Monday, some sixteen hours after their helicopter crashed in a foggy, mountainous region of the country’s northwest on Sunday, state media reported.

Raisi, 63, under Supreme Leader Ayatollah Ali Khamenei, launched an unprecedented drone-and-missile attack on Israel just last month.

Khamenei announced Monday that Iran’s first vice president, Mohammad Mokhber, would serve as the country’s acting president until elections are held.

Iran’s constitution says that the first vice president takes over for an interim period of 50 days, with the approval of the supreme leader, who has the final say in all matters of state in Iran.  A new election would be held at the end of the 50 days.

But Tuesday, the government said an election would be held June 28.

Raisi, known as the Butcher of Tehran, for his hardline, brutal policies and tactics, had Iran enriching uranium closer than ever to weapons-grade levels during his tenure, further escalating tensions with the West as Tehran also supplied bomb-carrying drones to Russia for its war in Ukraine and armed militia groups across the region.

At the same time, Iran has faced years of mass protests against its Shiite theocracy over its ailing economy and women’s rights – making this a very sensitive moment for Tehran and the future of the country.

Raisi has long been seen as a possible success to Ayatollah Khamenei.  In 1988, he helped oversee the mass executions of thousands (some estimates say 10,000).

It was in a September 2022 interview on CBS’ “60 Minutes” that Raisi suggested that “There are some signs that [the Holocaust] happened, but further research needs to be done to investigate it.”  On resolving the Israeli-Palestinian conflict, Raisi made clear his intentions, stating, “The only solution is a Palestinian state from the river to the sea.”  He has often talked of “Israel’s destruction.”

Raisi had earlier lost a presidential election to the ‘moderate’* incumbent Hassan Rouhani in 2017, but ended up coming to power four years later in a vote carefully managed by Khamenei to clear any major opposition candidate.

*Rouhani was still a hardliner, but he saw the need for change and was certainly more moderate on some social issues than both his predecessors and Raisi.

Foreign Minister Amirabdollahian represented the hardline shift after the collapse of Tehran’s nuclear deal with world powers.

Iran’s state-run IRNA news agency reported that the crash killed eight people in all, including three crew members on the Bell helicopter, which Iran purchased in the early 2000s.

Aircraft in Iran face a shortage of parts, often flying without safety checks over Western sanctions.  Because of this, former Iranian Foreign Minister Mohammad Javad Zarif initially sought to blame the United States for the crash in an interview Monday.

“One of the main culprits of yesterday’s tragedy is the United States, which...embargoed the sale of aircraft and aviation parts to Iran and does not allow the people of Iran to enjoy good aviation facilities,” Zarif said.  “These will be recorded in the list of U.S. crimes against the Iranian people.”

[Hundreds of thousands turned out in the streets of some of Iran’s biggest cities to pay their respects to Raisi in a state funeral.]

Afghanistan: The Washington Post obtained a transcript of the last four-star U.S. commander in Kabul, Retired Gen. Austin Miller, as he met with lawmakers last month in closed-door testimony, and he said during the American military’s 2021 withdrawal he repeatedly warned Washington that security would get “very bad, very fast” after troops departed, but the Biden administration still failed to grasp the danger in keeping its embassy open with only nominal protection.

In the Post report by Dan Lamothe on Monday, Miller told the Republican-led House Foreign Affairs Committee that, as his tour was nearing its end in July 2021, he was so troubled by the administration’s “lack of understanding of the risk” that he privately warned a Marine Corps commander charged with planning for a possible evacuation to prepare for “really adverse conditions.”

“I did not foresee a good future for Afghanistan as I was departing,” the general said in his testimony, later adding that he wishes he had done more to ensure his perspective from Kabul was consistently represented as plans took shape in Washington.

I wrote of Afghanistan in this space as part of my lead two weeks ago, 5/11/24, to point out how campaigning Republicans are missing the boat in discussing Biden’s failed foreign policy, and how Afghanistan is the prime example the average American can relate to, especially women.

So this transcript obtained by the Post provides fresh political ammunition ahead of November, with the scenes of chaos and despair in Kabul when the Taliban returned to power in seemingly hours.

Committee chair Rep. Michael McCaul (R-Tex.) is expected to issue a report this summer detailing the investigation’s findings.

Separately, ISIS on Sunday claimed responsibility for an attack by gunmen on tourists in Afghanistan’s central Bamiyan province, the group said on its Telegram channel. Three Spanish tourists were killed and at least one Spaniard was injured in the attack, Spain’s foreign ministry said.

The Taliban has been attempting to increase tourism as a way to bring in cash.

Georgia: President Salome Zourabichvili vetoed the so-called “Russian Law” targeting media that has sparked weeks of protests in the country. [The ruling party, Georgian Dream, can override it and vowed to do so next week.]

As I’ve written the past few weeks, the law would require media and non-governmental organizations (NGOs) to register as “pursuing the interests of a foreign power” if they receive more than 20 percent of their funding from abroad.

Critics of the bill say it closely resembles legislation used by the Kremlin to silence opponents. 

Georgia is bidding to join the European Union, but this law will prevent that, which is what today’s ruling party in Tbilisi seeks.

President Zourabichvili is largely a figurehead, but she said the law contradicts Georgia’s constitution and “all European standards,” and added that it “must be abolished.”

European Council President Charles Michel said last week that if Georgians “want to join the EU, they have to respect the fundamental principles of the rule of law and the democratic principles.”

Zourabichvili said it was hard to say whether the Bill was the ruling party’s initiative or if Moscow had played any role in its passage, but she emphasized that the Kremlin is unhappy with Georgia’s pro-Western aspirations.

“It’s clear that Moscow is not seeing with lots of appreciation this accelerated pace of Georgia towards the European Union,” she added.

But the president also told the London Times: “We are now a test case for [Russian] hybrid war rather than for direct war.”

Editorial / Wall Street Journal

“Georgia will hold parliamentary elections in October, and an electoral college composed of lawmakers and local representatives will choose a president later this year. Former Prime Minister Bidzina Ivanishvili, who remains a Georgia Dream power broker, has threatened ‘due punishment’ for his opponents in the rival United National Movement.

“The harassment has already extended to Georgia’s independent election observers, says Nino Dolidze, the executive director of the Tbilisi-based International Society for Fair Elections and Democracy.  She says she’s received obscene calls, and one caller also tried to phone her 11-year-old daughter.

“ ‘It was good I was standing next to her. I turned off the phone,’ she says.  A few days ago, someone entered the apartment building where Ms. Dolidze lives with her children, got into the locked foyer area and plastered posters calling her a ‘traitor of the country’ immediately outside her door, she says.

“Rep. Joe Wilson (R-S.C.) of the House Foreign Affairs Committee plans to sponsor legislation in response to the Georgia events. The bill would require the Secretary of State to report to Congress on improper political influence, kleptocracy, elite corruption, sanctions evasion and Russian intelligence assets within Georgia.  Those responsible for the foreign-agents legislation and the broader assault on democracy could face sanctions.

“The bill also offers opportunities for Georgia to strengthen its trade, defense and cultural ties with the U.S. if it reverses course. This could be a defining moment for Georgia’s democratic future as its citizens try to stop a tool of authoritarian control.”

The problem is, October seems a long way off in this increasingly volatile country.  Will elections even be held?

Today, Friday, Georgia’s ruling party accused the U.S. of pursuing a policy of “threats and blackmail” after Washington announced new visa restrictions over the “Russian Law.”  Georgia’s opposition parties issued a statement applauding the U.S. move, saying it would “protect the constitution, sovereignty and freedom of Georgia, and the European and Euro-Atlantic future of our country.”

Russia has also accused the U.S. of “blackmail.”

Slovakia: Prime Minister Robert Fico remained in serious condition, but he has stabilized,  officials said.  His recovery, though, will take time, officials at the hospital treating him said on Sunday, and it wasn’t possible to move him to the capital Bratislava, which has better facilities.

[Nothing had changed by week’s end.]

France: The country’s far-right Rassemblement National (National Rally), leading the race for EU elections in France, will no longer sit with the Alternative for Germany (AfD) in the European Parliament after the AfD’s top candidate said members of the Nazi SS force were “not all criminals.”

The far-right AfD, running second in German opinion polls before June’s elections, has come under harsh scrutiny after senior figures attended a meeting where deportation of immigrants was discussed, and over allegations that it harbors agents for Russia and China.

“The AfD has crossed lines that I see as red,” Jordan Bardella, head of the Rassemblement National candidate list, said during an election debate on French television.  He added that the RN (led overall by Marine Le Pen) would build “new alliances” after the election, aiming to be part of the largest possible group in parliament.  Polls suggest that nationalist and Eurosceptic parties will win a record number of votes in June.  Voters are expected to punish mainstream parties for failing to shield households from high inflation, curb immigration or deliver adequate housing and healthcare.

Random Musings

--Presidential approval ratings....

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

Rasmussen: 41% approve, 57% disapprove (May 24).

--A national Quinnipiac University poll of registered voters released Wednesday has Joe Biden receiving 48% and Donald Trump 47% in a head-to-head.  In a five-candidate race, Biden receives 41%, Trump 38%, Robert F. Kennedy Jr. 14%, and Jill Stein and Cornel West 2% apiece.

Biden has just a 39% job approval rating in this survey, 56% disapproving.

Trump has a 41% favorable rating, Biden 40% (as in favorable or unfavorable opinion of...).

--Former president Trump opted not to testify in his criminal hush money trial on Tuesday, bringing his defense to a quick conclusion and clearing the way for jurors to begin deliberations next week.  Trump has pleaded not guilty to 34 charges of falsifying business records. He has denied wrongdoing and said he never had sex with Stormy Daniels.

Prosecutors say the altered records covered up election-law and tax-law violations that elevate the crimes from misdemeanors to felonies punishable by up to four years in prison.

But the case largely rests on the testimony of a single witness, former Trump fixer Michael Cohen, who came in with a well-documented history of lying and I’m guessing Trump wins this one.

In the above-noted Quinnipiac poll, I was a little surprised that 70% of voters said they are following news regarding the trial either very closely or somewhat closely.

--Nikki Haley threw her support behind Donald Trump, making her first appearance since she ended her own White House bid in early March.

“As a voter, I put my priorities on a president who is going to have the backs of our allies and hold our enemies to account, who would secure the border, no more excuses.  A president who would support capitalism and freedom.  A president who understands we need less debt, not more debt.  Trump has not been perfect on these policies.  I’ve made that clear many, many times. But Biden has been a catastrophe, so I will be voting for Trump,” Haley said Wednesday during an appearance at the Hudson Institute.

She added: “Having said that, I stand by what I said in my suspension speech.  Trump would be smart to reach out to the millions of people who voted for me and continue to support me, and not assume that they’re just gonna be with him.  And I genuinely hope that he does that.”

For Haley, it’s all about staying positioned for 2028.

--Last Friday, during an address to the Minnesota Republican Party’s annual Lincoln-Reagan Dinner in St. Paul, Donald Trump repeated the claim that he won the 2020 election and that it was tainted by widespread fraud.

“I know we won [Minnesota] in 2020,” Trump said to applause.  “We’ve got to be careful.  We’ve got to watch those votes.”

For the record, Joe Biden won Minnesota by 233,000 votes, 52.4% to 45.3%.

Yes, Trump does, however, have an outside shot at pulling off an upset in the state in November.

--Trump held a large rally in the Bronx on Thursday, billed as an attempt to reach out to Blacks and Hispanics, yet I watched the rally at Crotona Park on Fox and other networks and the crowd was 90% white...whites traveling from the surrounding area, no doubt.  It was funny. 

Trump referenced Putin, Kim Jong Un, Xi Jinping and Hungarian Prime Minister Viktor Orban, seeking to contrast them with President Biden, saying the leaders were “at the top of their game, whether you like it or not.”

Well, that’s what Walter Russell Mead is referring to above, but just go back to Helsinki, 2018, to know where Trump’s own heart is.

--Editorial / Wall Street Journal

“The polls say President Biden has lost support among black Americans, and the White House appears to have settled on a strategy to win them back: spread more racial division. That’s the main message from the President’s dishonorable commencement address Sunday at storied Morehouse College in Atlanta.

“Mr. Biden naturally offered the 2024 graduates a list of what he sees as his accomplishments for black Americans. He indulged in his familiar gilded personal history as a civil-rights crusader. He gave the impression that the Delaware Democratic Party was a racist operation until Sen. Joe Biden came along. At least that’s the somewhat forgivable politics of self-aggrandizement.

“Less forgivable was the President’s attempt to stir resentment among the graduates on what should be a day to appreciate what they accomplished and to inspire hope for the future.  Here’s what Mr. Biden said instead:

“ ‘You started college just as George Floyd was murdered and there was a reckoning on race. It’s natural to wonder if democracy you hear about actually works for you.

“ ‘What is democracy if black men are being killed in the street?

“ ‘What is democracy if you have to be 10 times better than anyone else to get a fair shot?

“ ‘And most of all, what does it mean, as we’ve heard before, to be a black man who loves his country even if it doesn’t love him back in equal measure?’

“Thanks for the uplift, Mr. President.  Since Mr. Biden is asking questions, is this what he wants these young graduates to believe about their country – that American democracy is defined by its racial animosity, as if they still live in the Jim Crow South?

“As others have noted, imagine working hard for four years to graduate and on a day of celebration for you and your families the President of the United States sends you off with a message that your countrymen who are white want you to fail.  Is this what President Biden thinks of America?....

“All of this is a long way from the Joe Biden who promised Americans in 2020 that he would unite the country.  But it may reflect his political desperation. The reason he has lost the support of millions of blacks and Hispanics is the same reason he is trailing in the polls to the man he defeated in 2020.

“It is because his economic policies have failed to deliver the gains he promised.  It’s because the inflation ignited by his overspending has caused real wages to decline across his Presidency.  It’s because the world is a mess and he seems to have no idea what to do about it.

“He can’t run on that record, so he is trying to change the subject by dividing Americans with racial demagoguery.  It’s not a message worthy of a President, though it looks like it’s the best Mr. Biden has to offer.”

--In contrast to Biden, Fed Chair Jerome Powell gave the commencement address the same day at Georgetown University Law Center, a traditional speech which he had to videotape after he tested positive for Covid days earlier.

Powell stressed the inevitability of fundamental change in the workplace and life, much of it driven by technology, and urged graduates to take risks so that they keep growing – personally and professionally.

“If I could tell my younger self something, it would be to...put yourself in situations in which you will be seriously challenged to do new things.  Assume that you will make mistakes.  Learn from those mistakes; do not dwell excessively upon them in regret,” he said.  “You will fall down. Get up.  Repeat cycle.”

--A second human case of bird flu in a dairy worker has been confirmed in Michigan, state and federal health officials announced Wednesday.

The symptoms were mild, consisting of conjunctivitis.  A Texas dairy worker who contracted the virus in March also came down with pink eye.

At a press conference, Nirav Shah, principal deputy director of the Centers for Disease Control and Prevention, said the finding was “not unexpected” and that it was a scenario “that we had been preparing for.”

Meanwhile, Moderna and Pfizer are in talks with the federal government over a potential avian flu vaccine program.  But there are no immediate signs that the virus is about to cause a human pandemic, with the CDC saying that the current public health risk remains low.

But the second detected case in the U.S. came amid a drumbeat of news on the topic, including a report of Australia’s first-ever human avian flu infection.

The number of U.S. dairy farms with confirmed cases of the avian influenza virus known as H5N1 continues to rise, and was up to 51 as of midweek, according to the Department of Agriculture.

But all are in agreement there are far more human cases. Veterinarians have reported that some farmworkers have developed flulike symptoms, but few farmers and farmworkers have agreed to be tested for the cause.  The farmers don’t want their farms, herds and products being singled out for obvious reasons, but that doesn’t help officials prevent a spread.

For example, as reported by the New York Times, “Michigan officials have reported four infected herds that were not included in the federal count.”

--Five people died as tornadoes ripped through Iowa on Tuesday, four of the victims in the small town of Greenfield.  The scenes are just so sad and tragic. Debris from Greenfield was actually found as far away as 100 miles (ripped family photos, yearbook pages and other items).

Through Tuesday, there had been 859 confirmed tornadoes this year, 27% more than the U.S. average, according to NOAA’s Storm Prediction Center in Norman, Oklahoma.  Iowa has actually had the most, with 81 confirmed twisters.

--Separately, NOAA issued a rather dire forecast for the hurricane season, predicting an above-average 25 named storms developing in the Atlantic this year and pegging the odds of an above-normal season at 85%.

Government forecasters say very warm water temperatures and a transition from the current El Nino weather pattern to a La Nina pattern later this year will likely enhance the number of storms forming in the Atlantic hurricane basis.  Reduced Atlantic trade winds and less wind shear are factors favoring tropical storm formation, NOAA said.

--Gusts of wind brought down the stage at a campaign event for Mexican presidential candidate Jorge Alvarez Maynez’s Movimiento Ciudadano party, killing at least nine people.  Another 50+ were injured, many seriously.

Alvarez Maynez, third out of three candidates with about 7% support, behind Xochitl Galvez and the frontrunner, ruling party candidate Claudia Sheinbaum, who had 67% in Bloomberg’s most recent Mexican Election Poll tracker, was taken to the hospital but was fine.  Elections will be held on June 2.

--Hundreds are feared dead after a massive landslide flattened more than 100 homes and buried families alive in at least one village in northern Papua New Guinea.  The landslide hit at 3:00 a.m. local time, so these people never had a chance.

--Indians have been going to the polls for weeks in their massive election, the results of which will be declared on June 4.

But imagine standing in line in the capital of Delhi this week.  The temperature hit 118F on Sunday, highest in the country this year.  [That’s air temp, not heat index...and it doesn’t drop below 88 at night.]

--Today marks two years since the awful tragedy at Robb Elementary in Uvalde, Texas...19 students and 2 teachers killed as law enforcement, both state and local, waited for a sickening 77 minutes before going in when they knew a shooter was on the other side of the door.  Cowards.  And then the community failed the victims’ families. An American travesty in so many ways.

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

“I Give Unto Them Eternal Life And They Shall Never Perish”

[Inscription in a chapel at the Normandy American Cemetery.]

God bless America.

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Gold $2334
Oil $77.72

Bitcoin: $69,000 [4:00 PM ET, Friday]...the SEC approved rule changes that pave the way for the launch of exchange-traded funds tied to Ether, the world’s second-largest cryptocurrency.

Regular Gas: $3.60; Diesel: $3.89 [$3.56 / $3.98 yr. ago]

Returns for the week 5/20-5/24

Dow Jones  -2.3%  [39069]
S&P 500  +0.03%  [5304]
S&P MidCap  -1.4%
Russell 2000  -1.2%
Nasdaq  +1.4% 

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

Dow Jones  +3.7%
S&P 500  +11.2%
S&P MidCap  +7.0%
Russell 2000  +2.1%
Nasdaq  +12.7%

Bulls 59.4
Bears 17.2

Enjoy the holiday.  Travel safe.  Don’t look at your phone while driving!

Brian Trumbore

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