January 23: Biden’s drippy docs, Russia can’t scare the Leopards, and good economic news that doesn’t help
by Joe Noser, Research Associate
How are you? I am buoyed by the fact that Opening Day is 66 days away. Hope springs eternal, as they say.
Last Week
I predicted the U.S. would hit the debt ceiling Thursday; Germany would face more pressure to give Ukraine access to Leopard II tanks; and new unemployment claims would come in at 200,000 or below. Well, we hit the debt ceiling; Germany signaled it would allow Poland to deliver Leopard II tanks to Ukraine on specific conditions; and unemployment figures came in at 190,000. As you can see, I am a better prognosticator than Jim Cramer, but then again, so is a canary.
In response to hitting the debt ceiling, the White House said it will not capitulate to House Freedom Caucus (HFC) demands for cuts to mandatory spending (read: Social Security and Medicare/Medicaid) in exchange for an increase to the amount of money the U.S. can borrow. Other Democrats, including Sen. Joe Manchin, said they agree with the White House's position. Manchin went as far as declaring his opposition to raising the Social Security retirement age or any cuts in benefits for current Medicare/Social Security recipients, a position that puts him to the left of the Obama Administration the first time the HFC threw an entitlements-themed hissyfit. For his part, HFC chairman Scott Perry – alongside Chip Roy, perhaps the only principled ideologue in the bunch – signaled the caucus is ready for a fight. Such a fight has Republicans from more moderate districts worried.
On another critical note, my dishwasher turned out to be both ancient and irreparable, so I am now waiting on a replacement. Let's hope I have better news to deliver next week.
This week
The drip-drip of Biden classified documents will continue.
With new revelations almost every day that President Biden improperly stored a number of classified documents, the Biden Administration has officially lost the moral high ground over former president Trump on the issue. The latest update is that the FBI, in coordination with Justice Department lawyers, searched Biden's Delaware home Friday and found six more materials marked classified, some of which went back to his time as a Senator and were found in his garage. The news comes on top of the Biden Administration's Jan. 12 revelation that Biden's lawyers found some classified material when they cleaned out his UPenn office.
Major’s Place, home of the Biden family dog. No classified documents have been found there yet.
There are some marked differences between Biden's conduct and Trump's. Critically, the Biden team voluntarily reported its failure to properly store classified material, while Trump covered up such information for years. The FBI's search of Biden's home was done voluntarily, while the Bureau had to get a search warrant to search Mar-a-Lago because Trump's lawyers dragged their feet for so long. In other words, Biden most certainly will not be on the hook for obstruction, but Trump might be.
In my view, Biden's disregard for proper storage of classified material means an indictment of Trump for the same is highly unlikely. Such an indictment was already going to be inflammatory, but it will be even more so if a similar indictment doesn't come for Biden – and, as the Trump presidency made clear, it is against DOJ policy to indict a sitting president. Also, if the Mueller investigation was any indication, an indictment for obstruction of justice alone is unlikely. Something much more severe will be needed in order for Jack Smith to sign off on an indictment of a leading candidate for the Republican nomination in 2024. Biden's carelessness and callousness at his own carelessness ("There's no 'there,' there," he said at a recent press conference) makes Smith's job that much harder. With current Chief of Staff Ronald Klain set to depart the administration in the coming weeks, it is my hope the Biden team will get serious about what is a major and embarrassing mistake.
Russia's reported escalation of its shadow war against the West will have little impact on tanks being delivered to the front in Ukraine.
The New York Times reported Friday that Russian intelligence is likely behind a Russian Imperial Front (RIF) plot that sent mail bombs to high-ranking Spanish officials – including the country's Prime Minister – in December. The RIF is a white supremacist, pseudo-GRU-affiliated group that holds the distinction of being the first white supremacist group declared an international terrorist organization by the U.S. government. It's exactly the kind of group the GRU, especially its Unit 29155 (a.k.a., Russian foreign intelligence's assissination gurus), uses to spread instability abroad while maintaining plausible deniability.
Although the bombs killed no one, they're being seen as a signal that Putin is prepared to support terrorism against Western targets if the Ukraine War continues to go poorly for him. He's been hesitant to do so to this point because plots against high-ranking NATO figures that can be tied directly back to Russia will see the nation declared an international supporter of terrorism. But as Putin gets more desperate, he could become inclined to encourage his Hitler-loving buddies to further embrace their inner Ted Kaczynski.
For its part, Germany has shown no indications that Friday's revelations changed its view toward providing tanks to Ukraine. The country, which has more advanced battle tanks than any other nation in Europe, claims it will not provide those Leopard II tanks until the U.S. declares it will provide its M1 Abrams tanks. But the U.S. is saying it will not provide Ukraine with Abrams because the tanks are both gas guzzlers and require extraordinary training and upkeep. They're less of a tank and more of a weapons system, and it would take Ukraine about nine months to be able to use them in combat. Leopard II's, on the other hand, could take less than three weeks to be operational.
In the meantime, Ukrainian apartment buildings get hit by Russian missile strikes, and Russian propagandists pontificate about killing tens of thousands of Americans.
Q4 Real GDP comes out Thursday and Core CPI comes out Friday. Neither will clear up where the market is going in Q1.
Q4 Real GDP is projected at a 2.8% increase, a slight decrease from the 3.2% we enjoyed in Q3 of 2022 but still a sign of an economy that, at least for now, is pretty healthy. But there are some measurements that are causing concern. For one, the bond markets are already starting to show some uncertainty, especially in the long term, as Congress shows no sign of a debt ceiling compromise. Additionally, an index simply called "Major Economic Indicators," which aggregates a bunch of economic indicators into one number, came in even lower than expected, meaning it is continuing to predict recession. Finally, Microsoft, Google, and Amazon have all announced or carried out major layoffs in the last two weeks, as Big Tech's pandemic bubble is perhaps bursting.
We should get decent news on Core CPI, a measure of household goods that excludes food and energy and is projected to be up by just 0.3%. But because prices at the pump and the grocery store have been especially volatile, even a good number will not tell the whole story. While inflation has slowed considerably in the last six months, Americans still feel it's rampant and are saving in preparation for a recession. With the debt ceiling issue on the horizon, I don't think that's a bad idea.
Good news of the week
At long last, Somalia is having military success against al-Shabaab. The Al-Qaeda-affiliated terrorist network – in fact, it's al-Qaeda's largest network – has been at war in the country since 2006, seeking to establish a caliphate. Using tried-and-true tactics of exploitation of clan rivalries and seizure of international aid, the militants have been able to slow Somalia's recovery from decades of civil war. (I say tried and true because that formula was exactly the one Mohamed Farrah Aidid used to control Somalia in 1993, leading to the U.S.' intervention against him. After the "Black Hawk Down" incident of October 3-4, 1993, the Clinton Administration cut and ran. By 1995, Aidid had declared himself president of Somalia, although he died at the hands of his countrymen a year later).
The government intervention in 2023 could not come at a better time. Just as it was in 1993, Somalia is in the midst of a climate-fueled drought that's led to conditions of acute starvation for many of its residents, particularly its children. If the world wants to prevent mass death in Somalia, it will have to support efforts to destroy al-Shabab. For its part, AFRICOM (the U.S. military's Africa command) is providing the Somali military with ongoing advising and drone strikes coordinated with the Somali government.
What I read/recommend from this week
I am not usually a proponent of op-eds, but I thought this one about American ingenuity made some points worth sharing. For all its deficiencies, our country remains the world's leader in scientific innovation. And oh, by the way, a lot of those innovators are immigrants.
A man who held one of the most powerful counterintelligence jobs in the FBI as recently as 2018 was charged alongside a former Soviet diplomat with evading U.S. sanctions on behalf of a Russian oligarch with close ties to Putin. This is certainly a bad look for the Bureau, and it might have 2016 implications as well, as lots of Russian efforts to subvert the presidential election ran through the oligarch.
This video of a Japanese woman loving her time in America demonstrates an interesting contrast between the U.S. and Japan (and, by extension, China): our relative appreciation of heterogeneity and diversity. It's a nice reminder of what makes us good (Note: if you can't stand the robot voice thing TikTok does, don't watch the video with sound).
I hope you all have a good week. Joy cometh in the morning.
All the best,
Joe