Week in Review

---

Week in Review

06/22/2024

For the week 6/17-6/21

[Posted 4:30 PM ET, Friday]

Note: StocksandNews has significant ongoing costs, and your support is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974.

Edition 1,314

This coming week, June 27th, it’s all about Thursday’s presidential debate on CNN.  It’s make or break time for Joe Biden.  If he performs poorly, as in performs below an already low bar set for him, the rumblings in the Democratic Party to replace him at the convention in August will grow exponentially.

George Will of the Washington Post suggested a few questions for CNN’s Jake Tapper and Dana Bash, the moderators.

“President Biden, twice you have expressed a U.S. commitment to the military defense of an attacked Taiwan. Twice your underlings ‘clarified’ your remarks to restore ambiguity.  Should not a commitment so momentous be made by Congress?  Would either of you favor a congressional declaration making the commitment explicit?

“Mr. Trump, you say that if you are elected, Russia’s war against Ukraine will be ‘solved’ in ’24 hours.’  How, without validating George Orwell’s axiom that the quickest way to end a war is to lose it? Would you, President Biden, agree that the minimal criterion of not losing is restoration of Ukraine’s sovereignty over all territory it controlled before Russia’s Feb. 24, 2022, invasion?”

“Mr. Trump, there are 10.5 million (down from 12.2 million in 2007) illegal immigrants.  According to the Migration Policy Institute, 62 percent have been here at least 10 years, 22 percent at least 20 years, 21 percent for less than five years.  Twenty-eight percent own their homes.  Do you favor deporting them?  Might this reduction of the workforce, during full employment, injure America?  Describe the police measures necessary for expelling a cohort larger than Michigan’s population.”

“President Biden, you say our democracy hangs by a thread, that you are the thread, and that Mr. Trump is a pair of scissors in human form.  How exactly do you envision Mr. Trump destroying democracy – canceling elections, scrapping the Constitution, neutering the judiciary?”

This will be entertaining, scary, or both.  Regardless, it will be illuminating to an unknowable degree, as I write less than a week before.

---

Meanwhile, around the world...I discuss a number of issues in depth down below, but we should not be surprised if we wake up one morning and Iran has tested a nuclear weapon, given its own warnings on increased activity at its uranium enrichment facilities.  The financial markets, for one, would be awakened from their current AI/Nvidia stupor.

Such a decision is up to Ayatollah Ali Khamenei, ditto it’s his call on any move by Hezbollah to attempt to overwhelm Israel’s Iron Dome missile defense system and widen the war.

China will one day kill a Filipino in the South China Sea, and if Manila responded militarily, the U.S. is obligated to come to our ally’s aid, and then who knows what happens next.

Vladimir Putin’s meeting with Kim Jong Un in Pyongyang was as advertised...highly disturbing and threatening.

But lastly, up in space, the star-crossed Starliner spacecraft that is docked at the International Space Station, with two crew members already delayed for over a week from returning to the U.S. due to NASA and Boeing checking on helium leaks and concerns over the impact on the propulsion system, is currently slated to return with the two astronauts June 26.  Fingers crossed.    

---

Russia-Ukraine....

--World leaders gathered at a Swiss Alpine resort on Saturday to seek broader consensus for Ukraine’s peace proposals at a summit shunned by China and dismissed as a waste of time by Russia, which pushed its own rival (sham) ceasefire plans from afar.

More than 90 countries took part, but China’s particular absence dimmed hopes the summit would show Russia as globally isolated, while recent military reversals have put Kyiv on the back foot.  The war in Gaza has also diverted the world’s attention from Ukraine.

A draft of the final summit declaration blames Russia’s “war” in Ukraine for causing “large-scale human suffering and destruction” and urges Ukraine’s territorial integrity to be respected. The document also calls for Kyiv to regain control of the Zaporizhzhia nuclear power plant and access to its seaports.  The draft had deleted an earlier reference to Russian “aggression” where “war” is cited. 

Ukrainian President Volodymyr Zelensky trumpeted the summit’s attendance as a success and predicted “history being made.”

“Today’s the day when the world begins to bring a just peace closer,” he told leaders.

President Biden sent Vice President Kamala Harris to represent him – a decision that riled Kyiv.

“Putin has no interest in a genuine peace,” said British Prime Minister Rishi Sunak.  “He has launched a sustained diplomatic campaign against this summit ordering countries to stay away, spinning a phony narrative about his willingness to negotiate.”

--Three people were killed and five wounded by Russian shelling in Ulakly village in the eastern Ukrainian region of Donetsk on Saturday.  The village was hit by cluster munitions, the regional governor said on Telegram.

--A drone attack that set on fire oil storage sites in Russia’s southern Rostov region Monday night was conducted by the Security Service of Ukraine (SBU), sources told Reuters on Tuesday.  Russian officials said that several oil storage tanks had caught fire after a drone attack in the town of Azov.  The fuel depots involved have a total of 22 fuel tanks.

--A Russian missile attack on Ukraine’s east-central Poltava region on Monday damaged several apartment blocks and injured at least nine people, a local official said.

--Russia has been building new airstrips near the Ukrainian border as Ukraine targets existing ones.  Russia then launches more “glide bombs,” which have been devastating and are tough to detect and bring down.

Glide bombs have hit Kharkiv more than 50 times this year, according to the regional prosecutor’s office, which suggests that Russia is using munitions with foreign electronics, meaning Russia is using bombs that are successfully circumventing sanctions for dual-use items. Think China. [That’s me, not necessarily the prosecutor’s office.]

The aircraft deploying glide bombs can launch three and four at a time, the aircraft firing from just across the Ukrainian border in Russia.

At the end of May, President Zelensky said Russia was launching more than 3,000 of the bombs every month, with 3,200 used in May alone.  Hitting air bases is the key to slowing the number of sorties per day.

--Thursday, Russian drone and missile strikes damaged more energy infrastructure across Ukraine in the latest big attack on the country’s civilian energy system, the Ukrainian energy minister said.

Kyiv says Russian drone and missile strikes on Ukraine’s energy infrastructure this spring have knocked out half the country’s power generating capacity and forced rolling blackouts.

--Ukraine’s military launched a “mass” drone attack on southern Russia’s Krasnodar region, Friday, killing one person and targeting an oil refinery.

--In the latest figures from the NATO alliance, released Monday, 23 out of 32 NATO members now meet the 2% of GDP target for defense spending, which is twice the number from just four years ago and the most ever to meet the 2% target.  Poland leads all at 4.12% of GDP.  Among those still under 2% are Canada, Italy, and Spain.

Defense spending rose 18% across all alliance members, NATO chief Jens Stoltenberg said Monday during his visit to the White House for talks with President Biden. That 18% is the “biggest increase in decades,” he said.

“A lot of this money is actually spent here in the United States,” Stoltenberg stressed.  “Allies are buying more and more equipment from the U.S.  So NATO is good for U.S. security, but NATO is also good for U.S. jobs,” he said.

Stoltenberg also told the UK’s Telegraph the alliance is considering moving some nuclear weapons to a state of heightened readiness because of the growing threat from Russia and China.  “Transparency helps to communicate the direct message that...[NATO] is a nuclear alliance,” he said in the interview published Sunday.

Regarding this last comment, Kremlin spokesman Dmitry Peskov said Stoltenberg’s comments appeared to contradict a communique issued at the peace conference in Switzerland that said any threat or use of nuclear weapons in the Ukraine context was inadmissible.  “This is nothing but another escalation of tension,” Peskov said of Stoltenberg’s remarks.

--Speaking of Stoltenberg, Dutch Prime Minister Mark Rutte, a staunch ally of Kyiv and a critic of Russian President Vladimir Putin, will succeed Stoltenberg as NATO chief, Dutch media first reported, after Hungary and Slovakia backed him.

Rutte has been one of the driving forces behind Europe’s military support to Ukraine, stressing time and again what he said was the absolute need for a Russian battlefield defeat to secure peace in Europe.

Stoltenberg’s term ends on October 1st, 10 years after taking office in 2014, just a few months after Russia annexed Crimea.

--A court in Russia said on Monday that the espionage trial of Wall Street Journal reporter Evan Gershkovich would start next week and that the proceedings would be held behind closed doors.  The Kremlin said on Monday that contacts had taken place with the United States over a possible prisoner exchange involving Gershkovich.

Reports have the Kremlin wanting Vadim Krasikov, convicted in the 2019 murder of a Chechen dissident in Berlin now being held in Germany, in any possible swap.

---

Israel-Hamas....

--Eight Israeli soldiers were killed in the southern Gaza Strip on Saturday, the military said, as forces continued to push in and around the southern city of Rafah and strikes hit several areas of Gaza, killing at least 19 Palestinians.

The soldiers, all members of a combat engineering unit, were in an armored carrier that was hit by an explosion that detonated engineering materials being carried on the vehicle, apparently in contravention of standard, the military said.

The armed wing of Hamas said the vehicle had been trapped in a prepared minefield that set off the explosion.

--The Israeli military (IDF) said on Sunday it would hold daily tactical pauses in military activity in parts of southern Gaza to allow more aid to flow into the enclave, where international aid organizations have warned of a growing humanitarian crisis.

The Israeli army said the pauses will be in effect until further notice and will allow aid trucks to reach the Kerem Shalom crossing in the south. The move is being coordinated with the UN and international aid agencies, it said.  There is a huge bottleneck of trucks waiting to get in.

But Israel emphasized the humanitarian move would not impact their offensive operations.

The IDF Saturday said its forces in Rafah had captured large quantities of weapons, both above ground and concealed in the extensive tunnel network built by Hamas.

--The conflict on Israel’s northern border with Lebanon’s Hezbollah continued to escalate with intense border fire.

“Hezbollah’s increasing aggression is bringing us to the brink of what could be a wider escalation, one that could have devastating consequences for Lebanon and the entire region,” Israeli military spokesperson Rear Admiral Daniel Hagari said in a video statement.

But after very heavy activity last week, this past one there was a marked drop in Hezbollah fire, while the Israeli military said it had carried out several air strikes against the group in southern Lebanon.

The U.S. and France are working on a negotiated settlement to the hostilities along Lebanon’s southern border.  Hezbollah says it will not halt fire unless Israel stops its military offensive in Gaza.

But Tuesday, Israeli Foreign Minister Israel Katz warned that a decision on an all-out war with Hezbollah was coming soon. Katz said in an X post that in the wake of threats by Sayyed Hassan Nasrallah, Hezbollah’s leader, to damage Haifa’s ports* that are operated by Chinese and Indian companies, “We are getting very close to the moment of deciding on changing the rules of the game against Hezbollah and Lebanon.”

*Haifa is just 17 miles from the border.  Tuesday, Hezbollah published what it said was drone footage of sensitive military sites deep in Israeli territory, including Haifa.

“In an all-out war, Hezbollah will be destroyed and Lebanon will be severely beaten,” Katz added.

The IDF later said “operational plans for an offensive in Lebanon were approved and validated, and decisions were taken on the continuation of increasing the readiness of troops in the field.”

Wednesday, Nasrallah said that nowhere in Israel would be safe if a full-fledged war breaks out between the two, and he also threatened Cyprus and other parts of the Mediterranean. 

In a televised address, Nasrallah said Israel “knows that what also awaits it in the Mediterranean is very big... In the face of a battle of this magnitude, it knows that it must now wait for us on land, in the air, and at sea.”

As for the Cyprus reference, a first, Nasrallah accused it of allowing Israel to use its airports and bases for military exercises.

Cyprus is not known to offer any land or base facilities to the Israeli military but has in the past allowed Israel to use its vast airspace to occasionally conduct air drills, but never during conflict.

Nasrallah said his group would fight with “no rules” and “no ceilings” in the event of a broader war.

--Israeli Prime Minister Benjamin Netanyahu dissolved the six-member war cabinet, Monday.  The widely expected move came after the departure from government of the centrist former general Benny Gantz.

Netanyahu is now expected to hold consultations about the Gaza War with a small group of ministers, including Defense Minister Yoav Gallant and Strategic Affairs Minister Ron Dermer, who had been in the war cabinet.

The prime minister had faced demands from the nationalist-religious partners in his coalition, Finance Minister Bezalel Smotrich and National Security Minister Itamar Ben-Gvir, to be included in the war cabinet, a move that would have intensified strains with international partners including the United States.

The forum was formed after Gantz joined Netanyahu in a national unity government at the start of the war in October and included Gadi Eisenkot and Aryeh Deri, head of the religious party Shas, as observers.

Both Gantz and Eisenkot left the government last week, over what they said was Netanyahu’s failure to form a strategy for the end of the war.

--Israeli airstrikes on Tuesday killed at least 17 Palestinians in two of the Gaza Strip’s historic refugee camps and Israeli tanks pushed deeper into Rafah, according to residents and medics.

Residents reported heavy bombardments from tanks and planes in several areas of Rafah, where more than a million people had taken refuge before May.  Most of the population has fled northwards since then as Israeli forces moved into the city.

--A Biden administration plan to sell $18 billion worth of F-15 fighter jets to Israel is moving forward after two top Democratic holdouts in Congress signed off on the deal.

Rep. Gregory Meeks of New York, the top Democrat on the Foreign Affairs Committee, who had publicly opposed the transfer by citing Israel’s tactics during its campaign in Gaza, lifted his hold on the deal, one of the largest arms sales to Israel in years. 

Sen. Benjamin Cardin (D-Md.), chairman of the Foreign Relations Committee, who had delayed signing off but never publicly blocked the deal, also agreed to move forward.

--But Tuesday, Prime Minister Netanyahu claimed the United States is withholding weapons and implied that this was slowing the offensive in Rafah.

President Biden has delayed delivering certain heavy bombs since May over concerns about Israel’s killing of civilians in Gaza.  Yet the administration has gone to lengths to avoid any suggestion that Israeli forces have crossed a red line in the deepening Rafah invasion, which would trigger a sweeping ban on arms transfers.

Netanyahu, in a video, spoke directly to the camera in English as he lobbed sharp criticism at Biden over “bottlenecks” in arms transfers.

“It is inconceivable that in the past few months, the administration has been withholding weapons and ammunitions to Israel,” Netanyahu said.  “Give us the tools, and we’ll finish the job a lot faster.”

Netanyahu also claimed Secretary of State Antony Blinken told the prime minister in a recent visit to Israel that he was working around the clock to end the delays.

Blinken said Tuesday that the only pause was related to those heavy bombs from May.

But amidst reports of divisions between Israel’s military and Netanyahu, the rift spilled into the open.  The sharpest and most public break came with unusually blunt comments from the armed forces’ chief spokesman Rear Admiral Daniel Hagari.  In an interview on Israeli television on Wednesday, Hagari appeared to counter Netanyahu’s promises of “absolute victory” over Hamas.  “The idea that it is possible to destroy Hamas, to make Hamas vanish – that is throwing sand in the eyes of the public,” he said.

---

Wall Street and the Economy

It was a quiet holiday-shortened week, as the market awaits next week’s personal consumption expenditures index (PCE) for the next hint as to whether the Federal Reserve will telegraph a potential September rate cut at the July 30-31 meeting.

This week, a number of Fed governors and regional bank presidents continued to echo the caution theme and are looking for confirmation that inflation is sustainably cooling.  Fed Governor Adriana Kugler said on Tuesday she believes monetary policy is “sufficiently restrictive” to ease price pressures without causing a significant deterioration in the job market.

“If the economy evolves as I am expecting, it will likely become appropriate to begin easing policy sometime later this year,” she said in remarks to a forum in Washington.  While more progress is required, Kugler said, “I believe economic conditions are moving in the right direction.”

Dallas Fed President Lorie Logan said that while recent data showing inflation is cooling is “welcome news,” there must be “several more months of that data to really have confidence in our outlook that we’re heading to 2%.  We’re in a good position, we’re in a flexible position to watch data and to be patient.”

New York Fed President John Williams said in an interview on the Fox Business channel, “I expect interest rates to come down gradually over the next couple of years, reflecting the fact that inflation is coming back to our 2% target and the economy is moving in a very strong sustainable path.”  But Williams, like most Fed officials of late, declined to specify when the pivot to easing rates could occur.

Financial markets think the first cut is in September, and then another in December.  “I’m not going to make a prediction” about the exact path of policy.  What happens “depends on how the data evolves,” said Williams.  “I think that things are easing in the right direction” for an eventual easing.

Richmond Fed President Thomas Barkin said the key will be for price pressures to ease persistently in services as well as in goods.  “We are clearly on the back side of inflation,” Barkin said in an interview.  “We will learn a lot more over the next several months and I think we are well positioned from a policy standpoint to react.”

You get the picture.  Let’s see what next week’s PCE reveals.

This week, May retail sales came in weaker-than-expected, 0.1% when 0.3% was forecast, with ex-autos at -0.1%, a big miss from the consensus of a gain of 0.3%. So that was good for the bond market.  But May industrial production rose a much better-than-expected 0.9%.

May housing starts fell to a 4-year low, 1.277 million annualized vs. expectations of 1.373 million, a rather big miss.

May existing home sales fell to a 4.11 million seasonally adjusted annual rate from 4.14 million in April, a little better than consensus.  Total sales were down 2.8% from a year earlier.

The median home price increased to a record high of $419,300 from $406,600, up 5.8% from $396,500 level one year ago.

S&P Global’s flash PMI readings for June had manufacturing at 51.7 (50 the dividing line between growth and contraction), and services 55.1, both stronger than expected.

The Atlanta Fed’s GDPNow barometer for second-quarter growth is at 3.0 percent.

Freddie Mac’s 30-year fixed-rate mortgage fell to 6.87% from 6.95% prior, and last October’s high of 7.79%.

Lastly, the Congressional Budget Office projected Tuesday that the federal debt will equal 122 percent of the United States’ annual economic output by 2034, far surpassing the high set in the aftermath of World War II.

The deficit will swell to $1.9 trillion this fiscal year and keep growing until the overall national debt hits $50.7 trillion a decade from now. The group revised its forecast from four months ago, when it projected that the debt would reach $48.3 trillion in 2034, and 116 percent of economic output.

Well, I noted a few weeks ago that the Wall Street Journal editorial board loves to weigh in on such projections, saying it’s all about spending, and sure enough, on cue, Thursday the Journal said the same.

Whether it is “Biden’s latest plans for student-loan debt transfer to taxpayers, which CBO estimates could cost $211 billion this year above what it estimated in February,” or spending on Affordable Care Act subsidies and Medicaid, which is also exceeding earlier projections owing to higher enrollment, $22 billion for this year and $244 billion over the next decade, or Inflation Reduction Act sweetened subsidies...it’s a s---show.

“CBO’s budget forecasts are getting progressively uglier,” the Journal opines, “but it’s not because Americans aren’t paying their fair share in taxes.  If spending as a share of GDP remained at the pre-pandemic average, the deficit would be roughly $890 billion this year and $13.4 trillion smaller than CBO’s 10-year projection. This would keep debt as a share of GDP at roughly 90%.

“Neither Mr. Biden nor Donald Trump talks about the national debt, perhaps because they might then have to do something about it.  But a moment of tax truth at least will arrive at the end of 2025 when most of the 2017 Trump individual tax cuts expire.

“Mr. Biden’s plan is to raise taxes by $5 trillion or more, which would put the overall federal tax burden above 20% of GDP, which is close to the highest in peacetime.  That still won’t finance Mr. Biden’s spending ambitions, which will continue to cost trillions in future years even if he loses the election.

“Mr. Trump says he wants to renew and maybe expand the Trump tax cuts, and the best way to finance that is by repealing the Biden spending blowouts in the Inflation Reduction Act, student-loan write-offs and pandemic-era welfare expansions.  Failing to take on that challenge means either a monumental tax increase or a debt panic down the road.”

Europe and Asia

We had May inflation readings for the euro area, curtesy of Eurostat...up 2.6% vs. 2.4% in April.  Ex-food and energy, the figure was 2.9% vs. 2.8% prior.  This will prevent the European Central Bank from cutting interest rates a second time, at least for the foreseeable future, so says moi.

Headline inflation....

Germany 2.8%, France 2.6%, Italy 0.8%, Spain 3.8%, Netherlands 2.7%, Ireland 2.0%.

We also flash PMI readings for the month of June, with the eurozone manufacturing number at 46.0 vs. May’s 49.3, and the service sector at 52.6 vs. 53.2 prior. [S&P Global / Hamburg Commercial Bank]

Germany: mfg. 44.9 vs. 48.9 in May; services 53.5.
France: mfg. 45.3; services 48.8

UK: mfg. 54.2 vs. 53.4 in May; services 51.2.

Dr. Cyrus de la Rubia, Chief Economist HCB:

“Is the recovery in the manufacturing sector ending before it began?  Both we and the market consensus anticipated that the increase in the index in May would be followed by another rise in June, potentially setting the stage for an upward trend.  However, rather than moving closer to expansionary territory, the HCOB Flash Eurozone Manufacturing PMI reading fell, dashing hopes for a recovery. This setback was compounded by the fact that new orders, which typically serve as a good indicator of near-term activity, fell at a much faster rate than in May.  This rapid decline in new orders suggests that a recovery may be further off than initially expected.”

Britain’s annual inflation rate fell to 2% in May from 2.3% in April, reaching the Bank of England’s target for the first time in three years.  The core rate was 3.5%, down from 3.9% in April.  The news will help the struggling election campaign of Prime Minister Rishi Sunak.

But the Bank of England didn’t help Sunak as on Thursday, it held the line on interest rates, with minutes from the meeting suggesting the BOE was above politics: “The committee noted that the timing of the election on 4 July was not relevant to its decision at this meeting.”

But the Bank of England certainly hinted it would start cutting rates early into the new government.

France: The first round of elections starts June 30, and while polls indicate Marine Le Pen’s National Rally (RN) party will become the largest group in the National Assembly in the end, projections don’t show it winning more than half of the 577 seats.

Jordan Bardella, the leader of RN in the assembly and potential prime minister (Le Pen the head of the party and presidential candidate in 2027), called on his supporters to hand the party a resounding victory to enable him to govern.

Assuming National Rally falls short of a full majority, any so-called cohabitation with those supporting President Emmanuel Macron will be difficult in terms of accomplishing RN’s legislative goals, that’s why an absolute majority is critical for Le Pen and the 28-year-old Bardella.

For her part, Le Pen said she won’t try to push out Macron if her party wins.

“I’m respectful of institutions, and I’m not calling for institutional chaos,” Le Pen told Le Figaro newspaper.  “There will simply be cohabitation.”

Le Pen, who for new readers I marched with twice at May Day celebrations (for reporting purposes) and was feet away throughout, has tried very hard since her last electoral defeat to appeal to mainstream voters by toning down her father’s (the racist Jean-Marie Le Pen) harsh rhetoric. 

According to three polls from IFOP, Harris Interactive, and Opinion Way, National Rally would secure 33% to 35% of the vote.  The leftwing Popular Front is at 26% to 29%, and Macron’s centrists at 20% to 22%.

But this isn’t an accurate depiction of the final makeup of the National Assembly as this is a two-round majority vote in each district.

Turning to Asia...China’s National Bureau of Statistics reported May industrial production was up 5.6% year-over-year. May retail sales rose 3.7% Y/Y, and fixed asset investments increased 4.0% year-to-date.  The May unemployment rate was 5%.

Japan’s May inflation rate was 2.8%, but ex-food and energy, 2.1% vs. 2.4% prior.  Good news for the Bank of Japan.

May exports rose 13.5% year-over-year, while imports rose 9.5%.

A flash PMI manufacturing reading for June came in at 50.1, 49.8 for services (down from 53.8 in May).

Street Bytes

--The three major indices finished up on the week, barely, thanks to Nasdaq’s 0.48-point gain (unchanged percentagewise), with the Dow Jones adding 1.4% to 39150, while the S&P 500 gained 0.6%.

Both the S&P and Nasdaq hit new all-time highs both Monday and Tuesday before falling back the rest of the week.

Tuesday, Nvidia became the most valuable company in the world for the first time, surpassing Microsoft and Apple.

Here’s a kind of startling factoid I saw.  Just 12 companies have led the S&P 500 by market valuation since the index was created in 1926.  I’ll turn this into a quiz, with the answer at the end of Street Bytes.  Name them.

The Nvidia frenzy also drove record inflows into tech funds, Bank of America strategists reported.  About $8.7 billion flowed into tech funds in the week through June 19.

Nvidia then fell back to third in market cap on Thursday and Friday, behind Microsoft and Apple.

But amidst the AI boom, chip makers such as Nvidia are the only ones that can say AI has already put money in their coffers.  Even with Microsoft, the benefits have yet to filter through to the bottom line.  Which has many believing the market is incredibly vulnerable, a la the Tech Bubble of late 1999, chronicled in this very space back then.

--U.S. Treasury Yields

6-mo. 5.35%  2-yr. 4.73%  10-yr. 4.25%  30-yr. 4.40%

Boring week, yields ticking up a few basis points across the curve.  Next week’s PCE on Friday is a market mover potentially.

--Crude oil, as measured by West Texas Intermediate, climbed back to the $81 level (though finished at about $80.60 today), best in two months as falling inventories and conflict in the Middle East bolstered prices.

But natural gas futures fell to the $2.70 level, as producers ramped up output to meet increased demand from power generators running air conditioners.  Production growth also came as prices rose to the $3.00 level.

At the same time, meteorologists forecast hot weather through at least July 5 across much of the United States, driving up demand for gas from power plants.  Prices could easily spike back up.

--A Senate committee released new whistleblower allegations against Boeing on Tuesday just hours before CEO David Calhoun testified before the panel to respond to myriad investigations into quality control and production failures.

The new whistleblower, Sam Mohawk, told Senate investigators in May that he witnessed “systematic disregard” for documentation of nonconforming parts at Boeing’s Renton, Wash., aircraft manufacturing plant, according to a staff memorandum prepared for members of the Senate Permanent Subcommittee on Investigations.

Mohawk alleges that in June 2023, Boeing, alerted to an imminent inspection by the Federal Aviation Administration, moved parts that were stored outside the plant “to intentionally hide improperly stored parts from the FAA,” according to the report.  Mohawk, a Boeing quality assurance investigator, feared that nonconforming parts were being installed in planes, the report said.  Mohawk also alleges the company retaliated against him for raising concerns.

Calhoun then faced tough questioning, particularly from Missouri Republican Senator Josh Hawley, who blistered Calhoun for his pay package ($32.8 million), with a 40% raise in 2023, when Boeing was experiencing one problem after another, Hawley calling on Calhoun to resign.

Calhoun apologized to the families who lost loved ones in the 737 MAX crashes five years ago that killed 346 people in Indonesia and Ethiopia.  Calhoun claimed the company is taking action and making progress.

Families of the victims of the two crashes asked the Justice Department to seek to fine Boeing Co. nearly $25 billion, saying the company committed “the deadliest corporate crime in U.S. history.”

--A pilots strike at Aer Lingus looked “inevitable” on Monday after more than 99 percent of them voted for industrial action in a dispute over pay.  Pilots are seeking pay hikes of more than 20 percent.

A series of one-day strikes is thought to be the most likely course that they will follow, though they could opt for the option of “working to rule,” which could still disrupt flights. 

The Irish Pilots Association then notified Aer Lingus that members based in the Republic will, from Wednesday, June 26th, start an indefinite strict work-to-rule policy whereby pilots will not work overtime or beyond contracted hours, and will refuse management requests to change their rosters.  That can severely limit an airline’s flexibility during the busiest time of the year.

And Thursday, Aer Lingus said it will cancel up to 20% of its flights from next Wednesday in response to the planned “industrial” action, as the Irish press puts it.

I’m writing about this in this space because it is going to be another chaotic summer in Europe with job actions in the airline industry, when some airlines, like Ryanair, are already struggling with capacity issues because Boeing can’t deliver the promised 737 MAX aircraft.  Like the airline below...which has had a myriad of issues....

--A Southwest Airlines passenger flight in April came within 400 feet of slamming into the ocean off the coast of Hawaii after weather conditions forced pilots to bypass a landing attempt.

As uncovered by Bloomberg News, the Boeing 737 MAX 8 jet briefly dropped at an abnormally high rate of more than 4,000 feet per minute before the flight crew pulled up to avoid disaster, according to a memo that Southwest distributed to pilots last week.  No one was injured on the flight.

The incident hadn’t been reported, which is hardly a good reflection on Southwest.  And then we have the case of a Southwest aircraft flying as low as 525 feet over a neighborhood in Oklahoma (Yukon) as it approached Oklahoma City/Will Rogers airport, but well before it should have been at such a low altitude.  Air traffic controllers asked if there was a problem.  “No,” came the reply. But that’s a problem!

--American Airlines unionized flight attendants are threatening to strike after the latest round of talks with the company concluded without an agreement on a new contract.

The union is restricted from walking off the job while in mediation.  If the National Mediation Board declares talks at an impasse, it would trigger a 30-day “cooling off” period prior to a possible strike.

--TSA checkpoint numbers vs. 2023

6/20...103 percent of 2023 levels
6/19...107
6/18...104
6/17...99...first time under 100 in ages...
6/16...108
6/15...107
6/14...105
6/13...104

--Electric vehicle maker Fisker filed for bankruptcy, roughly a year after releasing its first EV model.

It’s the second time an automotive venture by car designer Henrik Fisker has gone bust and follows weeks of quietly winding down its operations.

The seven-year-old California-based company sought a cheaper and faster entry into the auto industry by outsourcing manufacturing but struggled with the complexities of running a publicly held company.

Other once-highflying EV startups have filed for bankruptcy protection – Lordstown Motors and bus/van manufacturer Arrival.  Others are cutting costs or delaying investments.

Fisker last summer started delivering its first electric model, the Ocean SUV, just as the market for EVs was cooling.  Trade tensions between China, the U.S. and Europe over EVs are compounding matters.

Brian Swint of Barron’s noted:

“Semiconductors have now replaced EVs as the darling of the market, and things seem to be going great for chip makers,” see Nvidia, whose “success has inspired a lot of would-be rivals to jump into the fray.

“For now, that’s no big deal because demand is swamping supply.  Nevertheless, competition is heating up.  Geopolitical problems are also likely to get worse before they get better.

“In a few years chip makers may lose their luster and look a lot like today’s EV makers.  That’s not to say a market leader like Nvidia will fall off its perch – Tesla is still managing to outperform many of its rivals.  But sectors can fall in and out of favor.”

--Meanwhile, sales of new battery-electric cars in the European Union dropped 12% in May from a year earlier, led by a 30% plunge in Germany, data from Europe’s auto industry body showed on Thursday.

Germany, the bloc’s largest electric vehicle market, in December brought an early end to subsidies for buying EVs as part of a last-minute 2024 budget deal.  It has now seen a year-to-date 16% decline in EV sales, according to the European Automobile Manufacturers Association.

--The U.S. is as many as 15 years behind China in developing high-tech nuclear power as Beijing’s state-backed technology approach and extensive financing give it an edge, according to a study by Information Technology & Innovation Foundation, a Washington-based nonpartisan research institute.

China has 27 nuclear reactors under construction with average construction timelines of about seven years, far faster than other countries, the study said.

The U.S. has the world’s largest fleet of nuclear power plants and the Biden administration considers the virtually emissions-free electricity source to be critical in curbing climate change.

--In line with the above, Bill Gates said he’s prepared to plow $billions into a next-generation nuclear power plant project in Wyoming to meet growing U.S. electricity needs.

TerraPower LLC, a startup founded by Gates, broke ground for construction of its first commercial reactor last week in Wyoming, where a coal plant is shutting down, Gates said last Sunday on CBS’ “Face the Nation.”  TerraPower has explored simpler, cheaper reactors since 2008 and expects to complete the new reactor in 2030.

“I put in over a billion, and I’ll put in billions more,” said Gates.

TerraPower’s plant is backed by the U.S. Department of Energy.

The reactor design uses liquid sodium as a coolant rather than water and includes molten salt that can store heat to boost its output.

“Coal is being outcompeted by natural gas,” Gates said on CNN separately.  “And so what we have to do is compete effectively with natural gas.”

Tuesday, the Senate then passed a bill to accelerate the deployment of nuclear energy capacity, including by speeding permitting and creating new incentives for advanced nuclear reactor technologies.

Expanding nuclear power has broad bipartisan support, with Democrats seeing it as critical to decarbonizing the power sector to fight climate change and Republicans viewing it as a way to ensure reliable electricity supply and create jobs.

A version of the bill had already passed in the House and it will now go to President Biden for signature to become law. The legislation passed the Senate by an 88-2 margin.

And sure enough, the news writeup I saw on the Senate’s action mentioned Bill Gates’ TerraPower as being one of the beneficiaries.

--On a related topic, the amount of electricity that data centers need these days is soaring because of AI.  Training artificial intelligence models and using AI to execute even simple tasks involves ever more complicated, faster and voluminous computations that are straining the electrical grid.

According to the Washington Post, “A ChatGPT-powered search on Google, according to the International Energy Agency, consumes almost 10 times the amount of electricity as a traditional search.  One large data center complex in Iowa owned by Meta burns the annual equivalent amount of power as 7 million laptops running eight hours every day, based on data shared publicly by the company.

“The data-center-driven resurgence in fossil fuel power contrasts starkly with the sustainability commitments of tech giants Microsoft, Google, Amazon and Meta, all of which say they will erase their emissions entirely as soon as 2030.”

--Chipotle shareholders at the end of trading Tuesday will be included in the company’s upcoming 50-for-one stock split.  The split is a first for the company and one of the largest in the history of the stock market.  Chipotle executives said the split is aimed at improving the stock’s affordability.

The shares hit a high of $3,700 in pre-market trading on Tuesday, before finishing the day at $3427, an all-time high. It then closed the week at $3,190.

--Kroger posted a surprise fiscal first-quarter revenue increase and stronger-than-expected earnings per share on Thursday while affirming its 2024 outlook despite ongoing profitability pressures in its pharmacy business.

The grocery store operator’s revenue edged up to $45.27 billion for the three months ended May 25 from $45.17 billion a year earlier and above consensus at $45.12bn.

Adjusted earnings per share fell to $1.43 from $1.51 the prior year but were ahead of the Street’s view of $1.37.

For the full year, adjusted EPS are now slated to come in at $4.30 to $4.50, with consensus at $4.43.  The shares fell 2% in response.

--More than three years into a worldwide outbreak of bird flu, the virus continues to expand in the U.S. with growing impacts to food production and animals.  Over 80 million chickens, thousands of wild birds and dozens of mammal species, including a polar bear, have been infected.

And it’s running rampant among dairy cows, turning up in 94 herds across 12 states since March.

“It’s gigantic, the scope and scale of the presence of the disease,” said Julianna Lenoch, national coordinator for the Department of Agriculture’s wildlife disease program.

U.S. milk production is starting to get hit by the bird flu virus, which first made the jump to cows earlier this year. Output in Texas and Kanas slumped in March and April, according to the U.S. Department of Agriculture data, at a time of year when output is usually rising.

As the outbreak lingers and expands, there are growing concerns about the risks to humans, as cases have been detected in humans from Australia to the United States to India. [Dinah Voyles Pulver / USA TODAY]

--Thousands of car dealers around the U.S. lost access for at least two days this week to software that helps underpin their day-to-day operations, disrupting their ability to sell or repair cars.

CDK Global, which provides the technology to auto dealers, said it experienced cyber incidents that first affected service to dealers on Wednesday.  The company shut down most of its systems while it assesses the situation, a spokeswoman said.

CDK said it didn’t have an estimated time frame for a resolution.

Dealers were forced to use pen and paper to record sales, among other things.

--The U.S. Surgeon General, Dr. Vivek Murthy, announced on Monday that he would push for a warning label on social media platforms advising parents that using the platforms might damage adolescents’ mental health.

Warning labels – like those that appear on tobacco and alcohol products – are one of the most powerful tools available to the nation’s top health official, but Dr. Murthy cannot unilaterally require them; the action requires approval by Congress.  No such legislation has yet been introduced in either chamber.

In an op-ed published in the New York Times, Dr. Murthy said a warning label would send a powerful message to parents “that social media has not been proved safe.”

Dr. Murthy cast the effects of social media on children and teenagers as a public health risk on par with road fatalities or contaminated food.

“Why is it that we have failed to respond to the harms of social media when they are no less urgent or widespread than those posed by unsafe cars, planes or food?” he writes. “These harms are not a failure of willpower and parenting; they are the consequence of unleashing powerful technology without adequate safety measures, transparency or accountability.”

Dr. Murthy pointed to research that showed that teens who spent more than three hours a day on social media faced a significantly higher risk of mental health problems, and that 46 percent of adolescents said social media made them feel worse about their bodies.

U.S. teens are spending an average of 4.8 hours per day on social media platforms like YouTube, TikTok and Instagram, according to a Gallup survey of more than 1,500 adolescents released last fall.

While we already know all this and have for years when it comes to social media’s destructive nature, we do nothing about it.  And the big players spend $millions and $millions in lobbying Congress not to take action.

Dr. Murthy lays out an easy, at least partial solution.  “Schools should ensure that classroom learning and social time are phone-free experiences.”  Some schools do, but they are few and far between.

And, of course, another big problem is that parents spend a ton of time themselves on social media.  Tough to tell your kid to limit their use when they can fire back, “Well what about you, Mom?!  You’re on it as much as I am!”

Dr. Murthy:

“The moral test of any society is how well it protects its children. ...We have the expertise, resources and tools to make social media safe for our kids.  Now is the time to summon the will to act.  Our children’s well-being is at stake.”

Tuesday, the Los Angeles Unified School District voted to ban cellphones during the entire school day, becoming the largest school system to take such a step. 

But L.A., like many districts, currently has a policy prohibiting phone use during class time while allowing devices during lunchtime and breaks.  Implementation has been difficult.

School leaders have until January to figure out a policy on how to enforce a ban.

--Shares of Trump Media & Technology Group (symbol DJT), the parent company of former president Trump’s Truth Social platform, dropped 10% on Tuesday, and then a further 12% in after-hours trading. 

In a Securities and Exchange Commission filing, Trump Media said the agency had signed off on its registration statement and on the resale of shares and warrants issued by the company.  The selling shareholders can publicly resell the securities and the warrants are eligible to be exercised for cash.  That could put further pressure on the shares.

DJT finished the week at $27.64, lowest since April 17, and down 70%+ from its all-time closing high of $97.54 on March 4, 2022, though it is still up for the year (not post-merger with Trump Media in late March).

--Hollywood received a much-needed shot in the arm with the massive debut of Disney and Pixar’s “Inside Out 2.”  The animated sequel earned $155 million in ticket sales from 4,400 theaters in the U.S. and Canada last weekend, according to studio estimates Sunday.

Not only is it the second-highest opening weekend in Pixar’s nearly 29 years of making films and the second-biggest animated opening ever (behind only the $182.7 million launch of “Incredibles 2” in 2018); it’s also the biggest of 2024, which had not had any films debut over $100 million.  With an estimated $140 million from international showings, “Inside Out 2” had a staggering, and record-breaking, $295 million global debut.

--What an awful week for New Jersey Transit train riders. Four out of five days, including today, saw delays of 1 ½ hours and more to get into New York’s Penn Station due to overhead wire problems, and, Thursday, a wildfire near the main Secaucus terminal, not far from the NJ Turnpike and NJ Transit’s Northeast Corridor Line.

This doesn’t help, when it comes to companies attempting to force their employees to come back to offices in Gotham.

--S&P 500 Quiz Answer: Twelve companies to lead the S&P 500 by market valuation since the index was created in 1926: AT&T, Apple, Cisco, DuPont, Exxon Mobil, General Electric, General Motors, IBM, Microsoft, Philip Morris, Walmart and now Nvidia, according to S&P Dow Jonex Indices.

Foreign Affairs, Part II

China: A Chinese vessel and a Philippine supply ship collided near the disputed Spratly Islands in the South China Sea on Monday, China’s coast guard said, in the latest flare-up of escalating territorial disputes that have sparked alarm.

The coast guard said a Philippine supply ship entered waters near the Second Thomas Shoal, a submerged reef in the Spratly Islands that’s part of territory claimed by several nations.

The Chinese coast guard said in a statement on the social media platform WeChat the Philippine supply ship “ignored China’s repeated solemn warnings...and dangerously approached a Chinese vessel in normal navigation in an unprofessional manner, resulting in a collision.”

“The Philippines is entirely responsible for this,” it added.

Philippine military spokesperson Col. Xerxes Trinidad said, “We will not dignify the deceptive and misleading claims of the China coast guard. The main issue remains to be the illegal presence and actions of Chinese vessels within the Philippines’ exclusive economic zone, which infringes on our sovereignty and sovereign rights.”

Editorial / Wall Street Journal

“In case you missed it, China this week stepped up its naval harassment of an important American friend in Asia – and we don’t mean Taiwan.  A serious skirmish involving the Philippine navy is a reminder that Beijing’s ambitions in the region are bigger than one island.

“Chinese boats on Monday seized two Philippine vessels attempting to resupply an outpost on the Second Thomas Shoal.  This is an area within the Philippines’ exclusive economic zone in the South China Sea on which Manila maintains a World War II-era ship as a military post....

“Manila is a treaty ally of the U.S., meaning America has committed to come to Manila’s aid in case of an attack.  Manila and Washington made clear they don’t believe Monday’s actions rise to that level, but it’s hard to escape the suspicion that Beijing is probing to see how much it can get away with.

“The episode is a reminder that while much strategic discussion about China these days focuses on Taiwan – with good reason – that island isn’t America’s only strategic interest in the region.  The U.S. has obligations to other allies, and military and commercial interests in securing freedom of navigation through the South China Sea.

“Beijing disagrees, to put mildly. The danger is growing that if the U.S. can’t muster the resources to deter China’s growing assertiveness in the region, Beijing will try to make a land grab and dare the U.S. to respond.”

With regards to Taiwan, their defense minister, Wellington Koo, said on Monday Taiwan is not seeking war with Beijing, and its policy is to build up a defensive, multi-level deterrence capability to make it harder for China to capture the island.

Taiwan President Lai Ching-te on Sunday said that China views the annexation and “elimination” of Taiwan as its great national cause, telling Taiwanese military cadets not to give in to the defeatism of “the first battle is the last battle,” a theory that Taiwan could collapse as soon as China launched an attack.

China’s top political adviser and No. 4 official said at a forum on Saturday that Beijing has “firm determination, sufficient confidence and strong capability” to destroy any efforts by Taiwanese separatists, Wang Huning said in a speech at the annual Straits Forum, held in Xiamen, Fujian province.  “The historic trend of China’s renaissance and reunification is unstoppable,” Wang added.

Wang is Beijing’s top man on Taiwan affairs and a member of the Politburo Standing Committee, the Communist Party’s top decision-making body.

Meanwhile, according to the Stockholm International Peace Research Institute (SIPRI)’s annual yearbook published on Monday, China is expanding its nuclear forces “faster than any other country” and may end up with more intercontinental ballistic missiles than Russia or the United States within a decade.  China added 90 more warheads to its nuclear stockpile, holding a total of 500 as of January this year.

It also said its total number of ICBMs – which currently stands at around 238 – could surpass America’s holding of 800 or even Russia’s total of 1,244 within the next 10 years.

However, the overall size of the nuclear arsenal is expected to remain much smaller than those held by the two largest nuclear powers.  The U.S. has 5,044 warheads while Russia has 5,580, the report said.

The SIPRI estimates there are a total of 12,121 warheads in the global nuclear stockpile as of Jan. 2024, with Russia and the U.S. together possessing almost 90 percent of all nuclear arms.  About 9,585 of these are ready to be used, with the rest consisting of retired warheads from the Cold War that have not been fully dismantled.

North Korea: Russian President Vladimir Putin arrived in North Korea early Wednesday, after he said the two countries want to cooperate closely to overcome U.S.-led sanctions in the face of intensifying confrontations with Washington.

Putin was met at Pyongyang’s airport by North Korean leader Kim Jong Un.

Putin, making his first trip to North Korea in 24 years, said in comments that appeared in its state media hours before he landed that he appreciates the country’s firm support of his military actions in Ukraine. 

He said the countries would continue to “resolutely oppose” what he described as Western ambitions “to hinder the establishment of a multipolar world based on justice, mutual respect for sovereignty, considering each other’s interests.”

In an article printed on the front page of North Korea’s Rodong Sinmun, the ruling Workers’ Party mouthpiece, Putin said:  “Russia has always supported and will continue to support the DPRK and the heroic Korean people in their opposition to the insidious, dangerous and aggressive enemy.”

Putin’s visit comes amid growing concerns about an arms arrangement in which Pyongyang provides Moscow with badly needed munitions to fuel Russia’s war in Ukraine in exchange for economic assistance and technology transfers that would enhance the threat posed by Kim’s nuclear weapons and missile program.

In Pyongyang, the streets were decorated with portraits of Putin and Russian flags.

Putin also said in his published remarks that Russia and North Korea will develop trade and payment systems “that are not controlled by the West” and jointly oppose sanctions against the countries, which he described as “illegal, unilateral restrictions.”

Among the agreements that were then signed was one on a comprehensive strategic partnership.

Kim pledged to “unconditionally support” Russia in its invasion of Ukraine.  The two leaders said relations are headed to new levels when they met Wednesday to start formal discussions.  Kim said Russia is playing a critical role in keeping a strategic balance in the world, while Putin said he hopes Kim will visit him in Moscow.

“Today we have prepared a new fundamental document that will form the basis of our relations for the long term,” Putin told Kim.  “We highly appreciate your consistent and unwavering support for Russian policy, including in the Ukrainian direction.”

Kim said his country would “strengthen strategic communication with the Russian leadership and Russia and unwaveringly, unconditionally support Russia’s every policy regardless of any complication on the international geopolitical situation going forward.”

The strategic partnership pact signed by Putin and Kim also included a mutual defense clause under which each country agrees to help the other repel external aggression, Putin said.

“The comprehensive partnership agreement signed today provides, among other things, for mutual assistance in the event of aggression against one of the parties to this agreement,” Putin said.

Putin drew attention to statements by the United States and other NATO countries which have agreed to let Ukraine strike targets inside Russia with Western-supplied weapons.

“This is not just statements; it is already happening, and all this is a gross violation of the restrictions that Western countries have assumed within the framework of various international obligations,” Putin said.

U.S. and South Korean officials accuse the North of providing Russia with artillery, missiles and other military equipment for use in Ukraine, possibly in return for key military technologies and aid.  Both Pyongyang and Moscow deny accusations about North Korean weapons transfers, which would violate multiple UN Security Council sanctions that Russia previously endorsed.  Of course Russia and North Korea are tremendous liars.  Ukraine has hard evidence of North Korean weapons being used against them. 

North Korea has indeed supplied Russia with millions of rounds of Soviet-era artillery munitions as a crucial lifeline to prop up the Russian military campaign in Ukraine.  U.S. Secretary of Defense Lloyd Austin said last month the supplies of munitions and missiles, as well as Iranian drones, had helped the Russian military “get back up on their feet.”

Victor Cha, former U.S. national security official now with the Center for Strategic and International Studies, said the relationship between Putin and Kim, “deep in history and reinvigorated by the war in Ukraine, undermines the security of Europe, Asia, and the U.S. homeland,” he wrote in a report on Monday, and presents the greatest threat to U.S. national security since the Korean War.

Tensions on the Korean Peninsula are at their highest point in years, including two recent incidents of South Korea’s military having to fire warning shots to repel North Korean soldiers who temporarily crossed the land border.

In Tuesday’s incident, North Korea appeared to be attempting to install anti-tank barriers, reinforce roads and plant land mines.  The work has gone on uninterrupted despite several explosions caused by mines that killed or injured an unspecified number of North Korean soldiers, according to the South’s Joint Chiefs of Staff.  It’s when they cross the demarcation line that bisects the countries that the South then responds.

[Putin then went on to Hanoi Thursday, where the focus was on trade, particularly energy, as well as defense and security matters.]

South Korea said it was considering sending arms to Ukraine, which had Vladimir Putin then warning Seoul it would be making “a big mistake” if it does so.

Putin, speaking from Vietnam, also warned that Moscow is willing to arm Pyongyang if the U.S. and its allies continue supplying Ukraine with weapons.

Iran/Yemen: Inspectors with the International Atomic Energy Agency confirmed new construction activity inside the Fordow enrichment plant, just days after Tehran formally notified the nuclear watchdog of plans for a substantial upgrade at the underground facility in north-central Iran.

Iran also disclosed plans for expanding production at its main enrichment plant near the city of Natanz, the two moves increasing fears Iran could be preparing to “break out” and build a nuclear bomb or two...or five or six.

U.S. intelligence experts have long said the further refinement of Iran’s stockpile of already highly enriched uranium could lead to the production of nuclear bombs within two weeks, if not days.

Iran has long said it has no plans to make nuclear weapons, but recently, leaders of the country’s nuclear program have been bragging publicly that their scientists now possess all the components and skills necessary to build a weapon...and quickly.

With the expansion at Fordow, the Washington Post’s Joby Warrick said Iran “could soon triple the site’s production of enriched uranium and give Tehran new options for quickly assembling a nuclear arsenal if it chooses to, according to confidential documents and analysis by weapons experts.”

Fordow, due to its underground nature, is nearly invulnerable to airstrikes.

Robert Litwak, author of several books on Iran’s nuclear weapons proliferation and a senior vice president at the Woodrow Wilson International Center for Scholars, a Washington think tank, told the Post:

“Iran’s nuclear program is both a deterrent and a bargaining chip,” he said.  While its planned expansion is more evidence of “pushing the bounds,” such moves simultaneously strengthen Iran’s hand, should the regime decide that a return to the negotiating table serves its interests, Litwak said.

“Iran’s nuclear intentions should be viewed through the prism of regime survival.”  For now, at least, “Iran does not face an existential threat that would compel the regime to cross the line of overt weaponization.”

Just as in the case of Hezbollah and Israel, what happens next regarding Iran’s nuclear program is all up to Supreme Leader Ali Khamenei.

Meanwhile, the United Kingdom Maritime Trade Operations (UKMTO) said on Saturday the crew of a Greek-owned cargo ship, the Tutor, had been evacuated and the ship was on fire and sinking, referring to an incident that happened 98 nautical miles east of Yemen’s Aden on June 13.  The Brits then said Tuesday it was “believed to have sunk,” the second downing of a commercial vessel targeted by the Houthis.  A crew member on the Tutor remained missing.

The Iran-allied Houthis have launched dozens of attacks on international shipping in the Red Sea region since November, disrupting global shipping, cascading delays and costs through supply chains.  Aside from the now two ships that have been sunk, the militants seized another vessel and killed three seafarers in separate attacks.

The U.S. destroyer Laboon is one of the U.S. warships whose crew has just minutes or even seconds to respond to incoming fire in the Red Sea.  “It is every single day, every single watch, and some of our ships have been out here for seven-plus months doing that,” said Capt. David Wroe, the commodore overseeing the guided missile destroyer.

The fight against the Houthis in Yemen is “the most intense running sea battle the Navy has faced since World War II,” service leaders told the Associated Press, which writes: “The combat pits the Navy’s mission to keep international waterways open against a group whose former arsenal of assault rifles and pickup trucks has grown into a seemingly inexhaustible supply of drones, missiles and other weaponry.  Near-daily attacks by the Houthis since November has seen more than 50 vessels clearly targeted, while shipping volume has dropped in the vital Red Sea corridor that leads to the Suez Canal and into the Mediterranean.”

“I don’t think people really understand just how deadly it is what we’re doing and how under threat the ships continue to be,” Commodore Eric Blomberg told the AP.

Separately, Sweden and Iran carried out a prisoner exchange on Saturday, officials said, with Sweden freeing a former Iranian official convicted for his role in a mass execution in the 1980s while Iran released two Swedes being held there. The prisoner swap was mediated by Oman.

The Iranian was Hamid Noury, who was arrested at a Stockholm airport in 2019 and later sentenced to life in prison for war crimes for the mass execution and torture of political prisoners at the Gohardasht prison in Karaj, Iran, in 1988.

The National Council of Resistance of Iran, a coalition of groups opposed to Iran’s Islamic Republic government, said it appeared Sweden had yielded to blackmail and hostage-taking tactics in a move that would encourage Tehran.

Random Musings

--Presidential approval ratings....

Gallup: 39% approve of President Biden’s job performance, 56% disapprove; 34% of independents approve (May 1-23).

Rasmussen: 43% approve, 57% disapprove (June 21).

--A new NPR/PBS News/Marist national poll of registered voters out Tuesday had President Biden and former President Trump at 49% each.  When other candidates were added to the race, Trump topped Biden 42% to 41%, followed by Robert F. Kennedy Jr. (11%), Cornel West (3%), Jill Stein (1%) and Libertarian candidate Chase Oliver (1%).

With the debate next week, nearly two-thirds (65%) said they intend to watch it.

--A new Fox News national poll has Biden with a 2-point lead over Trump, 50% to 48%.  Biden leads 43% to 42% in a hypothetical five-way race.

Last month, Trump held a 1-point lead, and a 3-point lead with third party candidates included.

--In surveys from Emerson College and The Hill of six battleground states, Donald Trump edges out Biden in Arizona (47%-43%), Georgia (45%-41%), Michigan (46%-45%), Nevada (46%-43%), Pennsylvania (47%-45%), and Wisconsin (47%-44%).

The polls show little movement since Trump’s conviction last month.

Trump and Biden are also dead even at 45% each in Minnesota, the Trump campaign insisting the Land of 10,000 Lakes is in play this time around.  [Biden won Minnesota in 2020 by 7 points...52.40% to 45.26%.]

--Joe Biden and the Democratic National Committee raised $85 million in May – a figure well short of Donald Trump’s massive fundraising haul of $141 million.

The Biden re-election effort now has $212 million in cash on hand, up from $192 million at the end of April.  A partial count on Thursday, revealed in Federal Election Commission filings, showed Trump with a war chest of at least $170 million.  At the start of April, Trump was $100 million behind Biden.  And for the first time, Trump’s principal campaign committee had more cash than Biden’s: $116.5 million to $91.6 million.

--Billionaire Mike Bloomberg has given nearly $20 million to help Joe Biden’s re-election effort, sources familiar with the matter told Reuters on Thursday.

--President Biden announced sweeping new legal protections Tuesday for undocumented immigrants who have been living in the U.S. for years and are married to Americans. It is one of the most expansive presidential actions to protect immigrants in more than a decade. [Tuesday was the 12-year anniversary of Deferred Action for Childhood Arrivals, or DACA.]

Under the new policy, 500,000 people would be shielded from deportation, given work permits and offered a pathway to citizenship.  The benefits would also extend to the roughly 50,000 children of undocumented spouses who became stepchildren to American citizens.  Biden administration officials said they expected the program to launch by the end of the summer.

“These couples have been raising families, sending their kids to church and school, paying taxes, contributing to our country,” Biden said at the White House.  “They’re living in the United States all this time with fear and uncertainty. We can fix that.”  The new program allows families to remain in the country while they pursue legal status.

Immediately after the announcement, House Speaker Mike Johnson said the president was “granting amnesty to hundreds of thousands of illegal aliens.”

Talk about whiplash.  The move came just two weeks after Biden imposed a major crackdown at the U.S.-Mexico border, cutting off access to asylum for people who crossed into the U.S. illegally.  Polls show Americans want tougher policies on immigration.

--Gerard Baker / Wall Street Journal

“Like a good movie, a successful presidential campaign requires the willing suspension of disbelief on the part of the viewing public.  On the screen, we know that improbable plot twists, physically impossible stunt acts, and the ubiquity of dreamily beautiful characters bear little resemblance to the reality of our own human drama. But we waive our incredulity because we feel that somewhere beyond the preposterous embellishments is a core truth that speaks credibly to our hopes and fears....

“But has there ever been a campaign in American history in which so many were required to suspend so much disbelief in such daunting circumstances as the 2024 election?  Have we ever faced a campaign in which we have been more obliged to smother the small, hard kernel of fear at the heart of our choice with ever thinner gossamer layers of hope?

“What makes this contest especially unusual is that this must be the first contest in which those close to the two main protagonists know only too well more reasons to doubt the fitness of their man for office than do the voters at large.

“On President Biden’s side, the louder the protestations we hear from his aides that his age isn’t a problem, the more we can be certain that it is.  ‘Behind closed doors, Biden shows signs of slipping,’ as a Journal article put it recently. The energy Democrats exert rebutting the story is all you needed to know about its accuracy.

“No one needs to go behind closed doors to see the slippage.  The inner-sanctum fiction we have been sold for the past few years is that Mr. Biden isn’t the fumbling, mumbling, stumbling geriatric on display every day on our screens. Behind closed doors, he’s as sharp as a tack, smart as a whip, fresh as a daisy. The effort to persuade us to suspend our growing disbelief in his capabilities that we derive from the evidence of our own eyes isn’t only risible. It is an act of disreputable and irresponsible dishonesty from those who know best.

“I would wager that if you fed the president’s senior associates a truth serum and then asked them if they were confident he could do the job for another four years, the honesty you would hear would scare the living daylights out of you.

“But the fictions we are being asked to believe about Donald Trump are equally far-fetched. Though he too is showing indications of age-related decline, it’s not his competence that’s primarily at issue but his character.  The public has had a good chance to see the measure of the man by now and most continue to think it unsuited to the presidency. As it is with Mr. Biden’s closest associates, you can rest assured that those who have worked closely with the man are swallowing doubts so large they have lumps the size of basketballs in their throats.

“Ask any number of the many people who served in his first administration and have sworn, public or privately, that they will never work for him again. I still have whiplash from the exercise of listening to Republicans say lacerating things about him in private and then spinning around to hear them extol his peerless virtues in public.

“In their defense, the reason they, and many ordinary voters on both sides of the aisle, will argue for their candidate despite their mountain of doubts is a simple one.  Their disbelief in the desirability of their own candidate’s presidency is outweighed only by their disbelief in the plausibility of the other’s.  We are in an alarming condition: My fear of the other guy is slightly larger than my fear of my own guy.”

--House Freedom Caucus Chairman Bob Good trailed John J. McGuire III, a state senator whose bid to oust his fellow hard-liner drew support from former president Trump, by 327 votes with 98% counted in their primary.  McGuire declared victory Tuesday night.

--The U.S. Supreme Court on Friday upheld a federal law that makes it a crime for people under domestic violence restraining orders to have guns, handing a victory to the Biden administration as the justices, in an 8-1 ruling, opted not to further widen firearms rights after a major expansion in 2022.

--Louisiana Republican Gov. Jeff Landry signed legislation on Wednesday requiring the display of the Ten Commandments in every public classroom in the state, making it the only state with such a mandate.

Critics have vowed a legal fight deeming the law “blatantly unconstitutional.”

I assume schools will also be required to display Ronald Reagan’s Eleventh Commandment: Thou shalt not speak ill of any fellow Republican.

--The Washington Post on coffee drinkers and more good news for same.

“Sedentary coffee drinkers had a 24 percent reduced risk of mortality compared with those who sat for more than six hours and didn’t drink coffee, according to the lead author of a study published recently in the journal BMC Public Health....

“The researchers, primarily from the Medical College of Soochow University in Suzhou, China, also found that sitting more than eight hours a day was associated with a 46 percent higher risk of all-cause mortality and 79 percent higher risk of cardiovascular disease mortality, when compared with those sitting for less than four hours a day.

“Additionally, those who drank the most coffee (more than two cups per day) showed a 33 percent reduced risk of all-cause mortality and 54 percent reduced risk of cardiovascular disease mortality compared with non-coffee drinkers.”

--It was good to see Kate, Princess of Wales, make her first public appearance of the year on Saturday at Buckingham Palace, watching a military parade, as she undergoes treatment for cancer.

In a statement prior, Kate said: “I am making good progress, but as anyone going through chemotherapy will know, there are good days and bad days.”

King Charles is also undergoing treatment for cancer, but he returned to public duties in April and has remained busy.  Poor guy.  He finally gets to be king, but there’s a chance it could be a rather short reign. 

--The heatwave in the Midwest and Northeast set numerous records, among them Syracuse, New York hitting 96 degrees Monday-Wednesday.  Chicago’s O’Hare International Airport on Monday registered 97 degrees, breaking a previous record set in 1957. Cleveland, Detroit and Philadelphia hit records Monday, as well as cities in New Hampshire, Connecticut and Maine that were due for record highs.  Bangor, Maine, and cities in the state like Caribou, are seeing their highest temperatures for any day in history.

Bangor hit 96 on Wednesday, and then 98! on Thursday (air temp).  Manchester, New Hampshire, saw 96-97 Tuesday-Thursday.

Sunday, in my neck of the woods, we will have a heat index of 105. Washington, D.C. is forecast to hit 101 (air temp) on Sunday, which would mark the first time in triple digits since 2016.  Eegads.

Halfway around the world, at least 530 people have died on hajj, the annual Muslim pilgrimage to Mecca amid scorching heat, temperatures reaching 51 degrees Celsius, 124 F.

This afternoon, a major power outage hit Montenegro, Bosnia, Albania, and most of Croatia’s coast, leaving people sweltering without air conditioning in the middle of an intense heatwave, temps hitting 40 C., 104 F. in much of the region.

“The failure occurred as a result of a heavy load on the network, a sudden increase in power consumption due to high temperatures,” Montenegro’s energy minister said.  Some power was restored hours later.  It wasn’t clear where the outage started.

--Tropical Storm Alberto, the first of the season, pounded parts of Mexico with up to 20 inches of rain, killing at least three, while causing severe flooding along the southern Texas Gulf Coast.

Wildfires in New Mexico killed two.

It’s going to be a long tropical season in the Gulf this year, it would seem.  As for the Atlantic, well, you’ve seen the potentially gruesome forecasts.

--Finally, the best story of the week was easily the rescue of two Beluga whales from an aquarium in Kharkiv, Ukraine, which as you know has been under constant shelling by Russia, to an aquarium in Spain, via Moldova.  It was an incredibly difficult task for the whales’ rescuers, and immensely stressful for the whales, but as of yesterday, they seemed to be in pretty good health.  God is upstairs nodding his approval.

---

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

Pray for Ukraine.

God bless America.

---

Gold $2334
Oil $80.61

Bitcoin: $64,146 [4:00 PM ET, Friday]

Regular Gas: $3.45; Diesel: $3.80 [$3.58 - $3.89 yr. ago]

Returns for the week 6/17-6/21

Dow Jones  +1.4%  [39150]
S&P 500  +0.6%  [5464]
S&P MidCap  +1.3%
Russell 2000  +0.8%
Nasdaq  +0.0% [17689]

Returns for the period 1/1/24-6/21/24

Dow Jones  +3.9%
S&P 500  +14.6%
S&P MidCap  +5.4%
Russell 2000  -0.3%
Nasdaq  +17.8%

Bulls 61.2
Bears 17.9

Hang in there. Stay hydrated.

Brian Trumbore

---