The Biden administration and US Treasury on Wednesday unveiled nearly 300 new anti-Russia sanctions which especially target third party entities which are said to help Moscow in sanctions-busting activities.

“The almost 300 targets being sanctioned by both Treasury and the Department of State include sanctions on dozens of actors that have enabled Russia to acquire desperately needed technology and equipment from abroad,” the Treasury Department said in a press release.

So-called dual-use items out of China are a key focus of the action, which is being hailed as one of “the most wide-ranging actions against Chinese companies so far in Washington’s sanctions aimed at Russia.” 20 companies based in China and Hong Kong were named.

Companies in Turkey, Belgium, Azerbaijan, Slovakia and the United Arab Emirates (UAE) are also targeted.

“Treasury has consistently warned that companies will face significant consequences for providing material support for Russia’s war, and the U.S. is imposing them today on almost 300 targets,” Treasury Secretary Janet Yellen said.

It also marks the furthest reaching action that seeks to specifically degrade Russia’s military-industrial base, as well as its biological and chemical weapons programs. For example, companies involved in manufacturing precursor materials for Russia to make explosives are listed.

Last week during Secretary of State Antony Blinken’s visit to China he warned about Beijing’s support for Russia’s war in Ukraine. “Russia would struggle to sustain its assault on Ukraine without China’s support,” Blinken had claimed provocatively, while also asserting China is the “top supplier” of Russia’s defense industrial base – albeit not in terms of lethal aid (but instead “dual use” technologies).

This support to Russia’s defense industry additionally constitutes a “medium to long-term threat that many Europeans feel viscerally that Russia poses to them,” Blinken had asserted.

Meanwhile, as Ukraine forces continue getting pushed back from frontline positions by the better-armed Russian force, hawkish threats out of Congress are getting more frantic…

🤡We must be prepared to strike back at Putin on Russian soil – Congressman Scott

“Supporting Ukraine means defeating Vladimir Putin in Russia. We must be prepared to hit him back on Russian territory. And when I see the Biden administration, which does not want to comply with… pic.twitter.com/B3UlXzV5ak

— Victor vicktop55 (@vicktop55) April 30, 2024

He warned last week that the Biden administration stood ready to introduce more sanctions against China if dual-use goods and technologies continue to be sent to Russia, including things previously identified by Washington as problematic: semiconductors, machine tools, chemical precursors, ball bearings, and optical systems. Based on Wednesday’s Treasury action it is clear that the sanctions were already being prepared even as Blinken was on the three-day trip, which including a meeting with President Xi.

Authored by Megan Redshaw, J.D. via The Epoch Times (emphasis ours),

People with a history of uveitis may experience a recurrence of the eye inflammatory disorder following COVID-19 vaccination, especially in the early postvaccination period.

A recently published study in JAMA Ophthalmology found that about 17 percent of nearly 474,000 vaccinated individuals with a history of uveitis experienced a recurrence within one year after vaccination.

Uveitis is inflammation inside the eye that occurs when the immune system is fighting an infection or attacks healthy tissue in the eyes. It can cause symptoms including pain, redness, and vision loss while damaging the uvea and other parts of the eye.

Researchers collected data on all individuals diagnosed with uveitis in South Korea between January 2015 and February 2021 to determine the risk of recurrence after COVID-19 vaccination. Data was retrieved from the Korean National Health Insurance Service and Korea Disease Control and Prevention Agency databases. The incidence of uveitis was assessed from Feb. 26, 2021, to Dec. 31, 2022. The cases were classified according to the onset at three months, six months, and one year, the type of uveitis (anterior or nonanterior), and vaccine type.

Individuals included in the study received at least one dose of a COVID-19 vaccine from Pfizer, Moderna, AstraZeneca, or Johnson & Johnson and did not test positive for SARS-CoV-2 during the study period.

Study Findings

Of the 473,934 individuals included in the study, the cumulative incidence of postvaccination uveitis was 8.6 percent at three months, 12.5 percent at six months, and 16.8 percent at one year—primarily of the anterior type, which affects the iris at the front of the eye. Moreover, the risk of uveitis reoccurrence was highest in the first 30 days after vaccination, peaked between the first and second vaccine doses, and decreased with subsequent vaccinations.

According to the researchers, the first dose of the vaccine may activate inflammatory pathways leading to initial inflammation in people who are prone to autoimmune reactions or have a history of uveitis. However, there’s a declining risk with repeated vaccination that may be due to the immune system’s adaptation to the vaccine antigen, although further studies are needed to confirm this hypothesis.

Additionally, the risk of experiencing the condition increased among recipients of all four vaccine types, especially among those who received Pfizer’s COVID-19 vaccine. These patients were more likely to experience uveitis recurrence during the early-onset period. Likewise, those who received Moderna were at a higher risk of experiencing uveitis after the first vaccination and during the early-onset period.

Notably, there were variations in the types of uveitis observed in the periods before and after vaccination. Among patients with infectious uveitis prior to receiving a COVID-19 vaccine, nearly 54 percent had noninfectious uveitis after being vaccinated, whereas most of the individuals with noninfectious uveitis before vaccination had a recurrence of the same type after vaccination.

Most patients with uveitis were 60 to 79 years old, followed by those aged 40 to 59. Among those with comorbidities, high blood pressure, diabetes, and rheumatic diseases were the most common.

“Although uveitis following vaccination is rare, our findings support an increased risk after COVID-19 vaccination, particularly in the early postvaccination period,” the authors wrote. “These results emphasize the importance of vigilance and monitoring for uveitis in the context of vaccinations, including COVID-19 vaccinations, particularly in individuals with a history of uveitis.”

Other Studies of Vaccine-Associated Uveitis

Other studies have found an association between uveitis and COVID-19 vaccination, including a February 2023 study published in Ophthalmology. The study provided insights into a possible temporal association between reported vaccine-associated events and SARS-CoV-2 vaccines from Pfizer, Moderna, and Johnson & Johnson.

Moreover, ocular adverse events have been reported following COVID-19 vaccination in addition to uveitis, including facial nerve palsy, retinal vascular occlusion, acute macular neuroretinopathy, thrombosis, and new-onset Graves’ disease.

In a June 2022 paper published in Vaccines, researchers analyzed ocular adverse events reported to the Vaccine Adverse Event Reporting System (VAERS) to provide clinicians and researchers with a broader picture of ocular side effects of COVID-19 vaccinations.

VAERS is a voluntary reporting system comanaged by the U.S. Food and Drug Administration and the Centers for Disease Control and Prevention. It is designed to detect vaccine safety signals, although it is estimated to represent less than 1 percent of actual adverse events.

During the analysis period of December 2020 to December 2021, VAERS received 55,313 reports for ocular adverse events, 6,688 of which met the inclusion criteria. Of those reports, 2,229 were related to eyelid swelling, ocular hyperemia, and conjunctivitis, 1,785 were reports of blurred vision, and 1,322 were reports of visual impairment.

Females accounted for 74 percent of the reports, and eye conditions affected primarily individuals between the ages of 40 and 59 who had received either the Johnson & Johnson shot or Moderna’s vaccine.

Of the patients who reported ocular-related complications, 50 percent received Pfizer’s COVID-19 vaccine, 38 percent received Moderna, and 12 percent received the Johnson & Johnson vaccine.

Although the study’s authors said they could not determine whether the vaccines were associated with an increased risk of adverse events, their data suggests a “possible association between COVID-19 vaccines and ocular adverse events.”

“Physicians are cautioned not only to be aware of this potential problem, but to check any underlying patient conditions, and to carefully document in VAERS within a few weeks of vaccination,” they wrote.

According to current VAERS data, 734 cases of uveitis, 539 cases of eye inflammation, 2,781 cases of retina disorders, 11,641 cases of facial nerve disorders, and 3,909 reports of eyelid swelling, ocular hyperaemia, and conjunctivitis were reported following COVID-19 vaccination between Dec. 14, 2020, and March 29.

Potential associations between uveitis and other vaccinations have been reported, including influenza, human papillomavirus, and varicella zoster virus vaccines. However, these studies did not necessarily establish a causal link.

Late in the afternoon Wednesday the House approved a bill which seeks to crack down on antisemitism on college and university campuses following days of protests and unrest driven by pro-Palestinian activists.

The Antisemitism Awareness Act has been approved in a 320-91 vote and will now head to the Senate. But the central question is: how and by what measure will federal authorities crack down on speech deemed “antisemitic”?

Will criticism of the government of Israel be deemed antisemitic? Will highlighting alleged war crimes or human rights abuses by the IDF be considered so? Will involvement in the BDS movement be deemed anti-Jewish? Will slogans such as “from the river to the sea, Palestine will be free” be illegal according to federal law? Will criticizing the US $3+ billion in annual foreign aid be considered anti-Jewish? 

And what of the many Jewish protesters who are engaged in speech condemning the nation-state of Israel? 

Already, active participation in causes boycotting Israel is ‘illegal’ in a number of US states (typically taking the form of prohibiting state agencies from engaging with companies involved in BDS).

According to an explanation of the definition of antisemitism outlined by the new House-passed bill: 

The bill would require the Department of Education to use the International Holocaust Remembrance Alliance’s (IHRA) working definition of antisemitism when enforcing antidiscrimination laws.

The group defines antisemitism as “a certain perception of Jews, which may be expressed as hatred toward Jews” and says “Rhetorical and physical manifestations of antisemitism are directed toward Jewish or non-Jewish individuals and/or their property, toward Jewish community institutions and religious facilities.”

The organization provides a number of examples for what qualifies as antisemitism, including calling for the harming of Jews in the name of a radical ideology or an extremist view of religion, and accusing Jewish individuals as inventing or exaggerating the Holocaust.

By this measure, even theoretical historical discussions or interpretation could be considered illegal (such has long been the case in some European countries). Like with any attempt to legislate limits related to the 1st Amendment, this is certainly going to prove very slippery — especially if it gets signed into law and then comes the question of actual enforcement on the ground.

A tiny minority of Republicans are voicing fierce opposition to the bill…

Antisemitism is wrong, but I will not be voting for the Antisemitism Awareness Act of 2023 (H.R. 6090) today that could convict Christians of antisemitism for believing the Gospel that says Jesus was handed over to Herod to be crucified by the Jews.

Read the bill text and… pic.twitter.com/Y0eeOiVfnw

— Rep. Marjorie Taylor Greene🇺🇸 (@RepMTG) May 1, 2024

Currently and historically, pro-Israel hawks who advocate for sending billions in American taxpayer dollars to Israel each year tend to accuse any and all opponents of such policies of being antisemitic. Some independent journalists say they’ve struggled to find blatant examples of people being targeted in antisemitic attacks on campuses for the sole reason of being Jewish. 

So if the federal government gets involved in these polemical and semantic games, where will it end? 

The vast majority of Republicans just voted for a bill to criminalize criticisms of the Israeli government. If the bill passes you will be guilty of hate speech if you “apply double standards” to the government of Israel or accuse it of genocide. This is honestly one of the most… https://t.co/5SPRT0I0jk pic.twitter.com/2k6n9A3hiY

— Matt Walsh (@MattWalshBlog) May 1, 2024

Authored by Katabella Roberts via The Epoch Times,

A group of six Republican state attorneys general filed a lawsuit against the Biden administration’s Department of Education on Tuesday over what they said were “radical and illegal” changes to Title IX rules.

The lawsuit, led by Kentucky Attorney General Russell Coleman and Tennessee Attorney General Jonathan Skrmetti, was filed in the U.S. District Court for the Eastern District of Kentucky.

In their legal filing, the GOP attorneys general argued that the department overstepped its authority when rolling out new updates to Title IX rules that expanded protections to students by incorporating gender identity into the legal text.

They further claimed the changes to the rules override state laws and will harm Tennessee students, families, and schools. The attorneys general called on the court to pause and overturn the newly expanded policy.

“The U.S. Department of Education has no authority to let boys into girls’ locker rooms,” Mr. Skrmetti said in a statement.

“In the decades since its adoption, Title IX has been universally understood to protect the privacy and safety of women in private spaces like locker rooms and bathrooms. Federal bureaucrats have no power to rewrite laws passed by the people’s elected representatives, and I expect the courts will put a stop to this unconstitutional power grab.”

Mr. Coleman, meanwhile argued the new changes to Title IX rules would “rip away 50 years of Title IX’s protections for women and put entire generations of young girls at risk.”

“As Attorney General, it is my duty to protect the people of Kentucky. As a Dad, it is my duty to protect my daughters,” Mr. Coleman said. “Today, I do both.”

Biden Admin Unveils Changes to Rules

The Kentucky attorney general added that his office is joining the lawsuit to “lead this fight for our daughters, granddaughters, nieces, and all the women of our Commonwealth.”

Title IX of the Education Amendments of 1972 is a longstanding policy designed to protect people from discrimination based on sex in schools.

Specifically, the protections prohibit sex-based discrimination in any school or any other education program that receives funding, either directly or indirectly, from the federal government.

However, the Department of Education last week rolled out newly updated Title IX rules that include expanded protections for LGBTQ students for the first time.

Under the updated rules, the prohibition against discrimination based on “sex” has been updated to include a prohibition against discrimination “based on sex stereotypes, sex-related characteristics (including intersex traits), pregnancy or related conditions, sexual orientation, and gender identity.”

The new rules also dictate that any K-12 school or institution of higher education that receives any federal funding may not separate or treat individuals differently based on sex “in a manner that subjects that person to more than de minimis harm,” which Republicans say will lead to shared bathrooms, locker rooms and more.

It does, however, clarify that such separations are allowed “in the context of sex-separate living facilities and sex-separate athletic teams.”

The rules also state that all “non-confidential” school employees are required to notify a Title IX coordinator if they learn of any violations.

According to the Biden administration, the new regulations are set to take effect on Aug. 1.

President Joe Biden (R) speaks in the Roosevelt Room of the White House, on June 30, 2023. (Jim Watson/AFP via Getty Images)

‘Radical, Illegal Attempt to Rewrite the Statute’

In a statement announcing the newly updated rules, U.S. Secretary of Education Miguel Cardona said they “build on the legacy of Title IX by clarifying that all our nation’s students can access schools that are safe, welcoming, and respect their rights.”

“The final regulations promote educational equity and opportunity for students across the country as well as accountability and fairness while empowering and supporting students and families,” the department said.

However, the attorneys general of Kentucky and Tennessee claim the new rules could put schools at risk of losing federal education funding, including access to free and reduced lunch programs and Individuals with Disabilities Education Act (IDEA) grants if they fail to abide by them.

The new rules would also require K-12 schools, colleges, and universities to “allow males identifying as females access to women’s sports, bathrooms and locker rooms,” they said.

“Under this radical and illegal attempt to rewrite the statute, if a man enters a woman’s locker room and a woman complains that makes her uncomfortable, the woman will be subject to investigation and penalties for violating the man’s civil rights,” Mr. Skrmetti said.

“Federal bureaucrats have no power to rewrite laws passed by the people’s elected representatives, and I expect the courts will put a stop to this unconstitutional power grab.”

The attorneys general of Indiana, Ohio, West Virginia, and Virginia have also joined the lawsuit with Tennessee and Kentucky.

It marks the latest lawsuit against the new Title IX changes after Republican attorneys general from nine states including Alabama and Louisiana filed similar legal challenges against the newly updated protections on Monday.

The Texas attorney general also has filed a lawsuit against the expanded rules, calling them “unlawful” and claiming they mandate schools comply with a “radical gender ideology.”

Authored by Peter Reagan for Birch Gold Group,

President Biden’s decision to participate in the Ukraine-Russia conflict back in February 2022 has taken a new and dangerous turn this year.

The U.S. dollar could suffer dramatically as a result.

Before we explore that new development, we’re going to start by quickly summarizing some of the events that led the United States to this point.

Let’s begin…

In the February 28th, 2022 issue of Matt Levine’s Money Stuff column for Bloomberg, Levine wrote about the sanctions placed on Russia:

the U.S., the European Union, the U.K., Switzerland, Singapore and other countries announced harsh sanctions against Russia for its unprovoked invasion of Ukraine. There are a lot of these sanctions – banning Russian flights through European airspace, limiting Russian banks’ access to the SWIFT interbank messaging system, etc. – but the most drastic might be U.S., U.K. and EU bans on any transactions with the Russian central bank. The bulk of Russia’s foreign reserves are held in the form of securities, deposits at other central banks and deposits at foreign commercial banks. A ban on transactions with Russia’s central bank means that it can’t sell those securities or access those deposits. Its foreign currency reserves turned out to be mostly useless.

As is the case with most geopolitical conflicts, there is always a lot more to the story than gets reported in the mainstream media (Russian, U.S., or otherwise). For example, some of the history behind the current conflict actually dates back to 2014.

Nonetheless, the bottom line is that the financial sanctions placed on Russia in 2022 were supposed to have a severe impact on Russia’s economy.

Unfortunately, for President Biden and NATO allies…

Russia shrugs off brutal sanctions

If the sanctions placed on Russia in 2022 had their intended effect, Russia’s economy would’ve been wrecked, set back 30 years or more. It would’ve become a third-world country by now.

But that hasn’t happened. Russia has prospered despite those sanctions.

A revealing NPR interview shed light on some of the economic impacts, as of December 2023:

Russia has been hit with huge economic sanctions since it invaded Ukraine nearly two years ago. But the Russian economy has remained strong, defying many economists’ expectations.

Alexandra Prokopenko, a fellow at Carnegie Eurasia Center, explained:

Economic growth in Russia in 2023 is likely to exceed 3%. It is – in terms of figures, I mean, it’s great. It’s more than the economy of the United Kingdom or of Germans’ economy. So what’s behind these figures is that over a third of this growth is attributed to the war economy, where defense-related industries are flourishing at double-digit rates.

Now, it makes sense that war would boost military and defense-related industries. But Russia’s economy also doesn’t appear to be suffering much.

In fact, according to Bloomberg, Russia’s economy is actually at risk of overheating.

Even left-leaning think tanks can’t do much more than wag their fingers and exclaim “just you wait”:

Russia’s economy is now stable both in spite of and as a result of Western sanctions…

Russia’s economy could begin to see major challenges in the next year-and-a-half, think tank researchers write.

Just like Bidenomics! “Sure, it’s not working yet, but it will eventually, any day now…”

Nonsense. Russia’s currency, GDP, and banks are thriving:

The ruble is steady at about 92:1 (compare this to Biden’s claims from 2022 that “the ruble will be rubble”). Russia’s debt-to-GDP level is 17.2%, compared with the U.S. level of 131.0%. Russian bank profits for 2024 are projected to exceed the record profits in 2023.

In other words, Russia’s economy is outperforming the U.S. by almost every measure, and is doing so on a more sustainable level from a debt perspective.

So, let’s take stock…

Two years after these shock-and-awe sanctions intended to pressure Russia into ending its invasion of Ukraine:

• Russia’s economy is outperforming not only the U.S. but also NATO allies (including the UK’s, Germany’s etc.)

• The embargo on Russian oil by the West had zero impact on Russian exports

• Russia’s defense and military industries are booming (talk about unintended consequences!)

Don’t misunderstand! I’m no fan of Vladimir Putin.

But I’m also not a fan of the Biden administration’s half-baked plan to teach Russia a lesson. It’s a total failure.

At this point, a rational person would assess the situation, look at the data and make a new plan.

Never one to learn from his mistakes, President Biden has instead opened a new front in his financial war on Russia.

This time, though, I’m seriously concerned he’s gone too far…

“This is outright theft”

Thanks to a recently passed piece of legislation, the Biden administration plans to take control of Russia’s frozen assets.

Rickards provided a nice summary:

The House passed the “REPO Act” this weekend, which authorizes the administration to seize about $20 billion worth of Russian assets sitting in U.S. banks, mostly Treasury securities. It would then transfer that money to Ukraine.

The securities were legally purchased by Russia using dollars earned through the sale of oil prior to the war. They were frozen in early 2022. That means the securities are still legally owned by Russia, but they can’t be sold or pledged, and Russia can’t receive the interest or cash at maturity.

But this legislation goes one step further and authorizes the actual seizure of these assets. This is outright theft and a violation of the Sovereign Immunities Act, but no one seems to care about that.

We’ve discussed dollar weaponization repeatedly over the last couple of years.

This development is next-level.

Freezing assets is bad enough – but seizing those legally-purchased assets? In violation of all international law?

That’s the act of an autocrat. Which is exactly what Biden calls Putin.

Is this a good idea? Probably not. Russia already can’t get its hands on those assets. So how does stealing them make Russia’s situation worse?

It doesn’t!

Instead, what it does accomplish (again, unintended consequences) is send a message to the rest of the world.

It’s not a hopeful message.

Are dollars assets? Or liabilities?

In today’s financialized world, most financial assets are based on debt. They’re promises to pay. As Ray Dalio recently reminded us:

…the dollar, to a lesser extent the euro, to a much lesser extent the yen, and to an even lesser extent the Chinese renminbi… are held in debt assets – i.e., they are debt-backed money—i.e., currency = debt. In other words, when you hold these monies, you are holding debt liabilities, which are promises to deliver you money.

The REPO Act has broken this promise to deliver money.

Which begs the question: What if central banks start to view dollars as a liability rather than an asset?

This Wall Street Journal article shows that economists were already grappling with this question back in 2022:

Recent events highlight the error in this thinking: Barring gold, these assets are someone else’s liability – someone who can just decide they are worth nothing…

What can investors do? For once, the old trope may not be ill advised: buy gold. Many of the world’s central banks will surely be doing it.

Indeed, 2022 was the biggest year for central bank gold-buying in history.

2023 was a close second-place, coming in just 4% below the previous year’s record.

The lesson is quite clear. What we think of as assets can become liabilities overnight.

So what can we do about it?

Do you have enough non-debt money?

Between brutal loss of purchasing power over the last three years, and now this escalation of dollar weaponization, you have to wonder: How much more abuse can the dollar take?

There’s no way to know.

That’s why Dalio wants you to ponder the question, “Do you have enough non-debt money?”

Gold, on the other hand, is a non-debt-backed form of money. It’s like cash, except unlike cash, which is devalued by risks of default or inflation, gold is supported by risks of debt defaults and inflation. It is held by central banks and other investors for this reason. In fact, gold is the third-most-held reserve currency by central banks, more so than the yen or renminbi…

When the financial system is working well – which is when there aren’t debt and inflation crises and the borrower-debtor governments printing debt-backed monies are meeting their obligations and paying their interest without printing and devaluing money – debt assets and other financial assets are good assets to hold; on the other hand, when the reverse is the case, gold is a good asset to own. That’s the main reason that gold is a good diversifier and why I have some in my portfolio.

Physical precious metals are just about the only asset that isn’t someone else’s liability. They aren’t an easily-broken promise to pay. They’re not an obligation.

With physical precious metals, you either own them or you don’t. Learn more about why physical gold ownership is vital.

Do you have enough non-debt money?

If all the promises to pay you own were broken, where would that leave you?

*  *  *

With global instability increasing and election uncertainties on the horizon, protecting your retirement savings is more important than ever. And this is why you should consider diversifying into a physical gold IRA. Because they offer an easy and tax-deferred way to safeguard your savings using tangible assets. To learn more, click here to get your FREE info kit on Gold IRAs from Birch Gold Group.

Authored by Mike Shedlock via MishTalk.com,

It’s ridiculous to have red lines if you are not going to do anything when they are crossed. So what should Biden do?

China Has Crossed Biden’s Red Line on Ukraine

A Wall Street Journal Op-Ed moans China Has Crossed Biden’s Red Line on Ukraine.

President Biden warned China two years ago not to provide “material support” for Russia’s war in Ukraine. On Friday, Secretary of State Antony Blinken conceded that Xi Jinping ignored that warning. China, Mr. Blinken said, was “overwhelmingly the No. 1 supplier” of Russia’s military industrial base, with the “material effect” of having fundamentally changed the course of the war. Whatever Mr. Biden chooses to do next will be momentous for global security and stability.

Mr. Biden can either enforce his red line through sanctions or other means, or he can signal a collapse of American resolve by applying merely symbolic penalties. Beijing and its strategic partners in Moscow, Tehran, Pyongyang and Caracas would surely interpret half-hearted enforcement as a green light to deepen their campaign of global chaos. Mr. Xi sees a historic opportunity here to undermine the West.

What sanctions? On Who? On What? For How Long?

Op-ed writer Matt Pottinger provided no details, he just wants action. He needs to explain what sanctions make any sense at all, and how they would work.

Numerous US sanctions on Russia, China, Iran, all failed. Hell some of them on Russia and China not only failed they backfired.

So funny. Adding to my post on red lines and sanction failures.

— Mike “Mish” Shedlock (@MishGEA) May 1, 2024

How China Gets Around US Sanctions on Semiconductors

On February 18, 2024, I explained How China Gets Around US Sanctions on Semiconductors

How Russia Makes a Mockery of US Sanctions in One Picture

Unprecedented US and EU sanctions against Russia have had no impact on Russia’s oil exports or revenue. Who’s the beneficiary?

On December 29, 2023 I noted How Russia Makes a Mockery of US Sanctions in One Picture

On September 19, 2023, I commented Lesson of the Day: Sanctions Don’t Work Because They Create New Markets

Why Sanctions Fail

• Someone always has an incentive to break sanctions.

• Sanctions create new markets.

This is how Russia sells oil and how China gets access to equipment and parts.

In the case of chips, the US has forced China into a path to self-sufficiency. Hooray?!

Matt Pottinger wants sanctions. He should name some. Nah, what he really wants is to promote his book “The Boiling Moat: Urgent Steps to Defend Taiwan.”

What Color Are Biden’s Red Lines?

On March 10, I asked Are Biden’s Red Lines to Netanyahu Really Yellow or Green?

Presumably you know the answer now, but if not, please consider this idle threat: Biden Threatens Sanctions on Israeli Soldiers Yet Wants More Money for Israel

If you are going to have red lines, I suggest they should be red.

Israel vs China Red Lines

In the case of Israel, there was an easy remedy. Biden could have withheld aid. Instead, when Israel repeatedly crossed lines, Biden stepped up the aid further emboldening Netanyahu.

In the case of China, there are no sanctions or policy actions that make any sense, so there should not be any red lines.

Attempting to set foreign policy for the world is a huge mistake. And setting red lines you cannot or will not do anything about makes one look silly.

Starbucks shares plummeted by 16% during the early cash session, approaching the -16.2% level last seen during the Covid crash. If intraday losses surpass 16.2% and remain above this level at closing, it would mark the company’s worst single-day loss since the Dot Com crash in early 2000.

“Starbucks reported what’s perhaps the worst set of results of any large company so far” this quarter, analyst Adam Crisafulli of Vital Knowledge wrote in a note. William Blair downgraded the coffee chain, citing last quarter’s “stunning across-the-board miss on all key metrics.”

Starbucks reported a 4% drop in same-store sales in the second quarter compared with the same period last year, while analysts tracked by Bloomberg were expecting growth. In China, same-store sales plunged 11%. The company’s top geographic segments are showing a pullback in consumer spending. 

On Tuesday evening, CEO Laxman Narasimhan started the earnings call with investors by clarifying his unhappiness with last quarter’s results. 

“Let me be clear from the beginning. Our performance this quarter was disappointing and did not meet our expectations,” Narasimhan said. 

He said major headwinds originate from a “cautious consumer,” adding, “A deteriorating economic outlook has weighed on customer traffic and impact felt broadly across the industry.” 

Here’s a snapshot of the second quarter’s earnings results (list courtesy of Bloomberg):

• Comparable sales -4%, estimate +1.46% (Bloomberg Consensus)

• North America comparable sales -3%, estimate +2.05%

• US comparable sales -3%, estimate +2.31%

• International comparable sales -6%, estimate +1.36%

• China comparable sales -11%, estimate -1.62% 

• Adjusted EPS 68c, estimate 80c 

• Net revenue $8.56 billion, estimate $9.13 billion

• Operating income $1.10 billion, -17% y/y, estimate $1.35 billion

• Adjusted operating margin 12.8%, estimate 14.5%

• Operating margin 12.8%, estimate 14.4%

• North America operating margin +18%, estimate +19.5%

• International operating margin 13.3%, estimate 15.2% 

• Channel development operating margin 51.7%, estimate 43.6%

• Average ticket +2%, estimate +2.41% 

• North American average ticket price +4%, estimate +4.15%

• International avg. ticket -3%, estimate +0.1%

• North America net new stores 134, estimate 144.33

• International net new store openings 230, estimate 429.23

• Comparable transactions -6%, estimate -0.27% 

• North America comparable transactions -7%, estimate -1.86%

• International comparable transactions -3%, estimate +1.37%

Goldman analysts Eric Mihelc and Scott Feiler told clients, “Expectations were for a clear sales miss and a modest EPS miss, but both came worse than the lowered bar.” 

They added, “The miss was across geography and was as bad, if not worse, than worst fears.” 

Other Wall Street analysts shared the same gloom and doom about the coffee chain (list courtesy of Bloomberg): 

Deutsche Bank analyst Lauren Silberman cuts Starbucks to hold from buy 

• Says the “challenging” results was a sign “headwinds are more pervasive and persistent than we expected, and we have limited visibility into the pace and magnitude of a recovery”

• Had thought comparable sales deceleration in the US was more transitory and isolated to a specific cohort

•  However, with the decline in 2Q traffic and what seems to be limited improvement from Lavender and Spicy Refreshers, Silberman sees it being difficult to “underwrite a meaningful reacceleration,” which is key to the bull case

William Blair, Sharon Zackfia (cuts to market perform from outperform)

• After healthy demand over the past three years, Zackfia says the “tide has turned quickly,” with Starbucks posting the weakest traffic performance outside the pandemic or Great Recession

• China now “looks more fragile,” with comparable sales down 11%, and even Starbucks Rewards members “took a rare dip,” she adds

Jefferies, Andy Barish (hold)

• There was a “notable” miss on US and international comparable sales as well as EPS, and Barish says there is “no easy fix in sight to reaccelerate SSS near-term”

• Notes that international comparable sales was “similarly weak,” with traffic and comparable transactions both declining; China’s comparable sales miss and Middle East volatility more than offset positive comps seen in Japan, APAC and Latin America

• PT cut to $84 from $94

Citi, Jon Tower (neutral) 

• Starbucks is “putting a lot of oars in the water to try and paddle” its way back to a stable comparable sales outlook that investors would be willing to underwrite

• However, Tower expresses concern that there is not enough “coxswain keeping oarsmen working in unison/with accountability”; adds that it ignores the “true leak in the bottom of the boat,” flagging broad consumer pushback to cumulative transaction growth and the value equation

•  Notes China store margins are still in the double digits and the segment is profitable despite top-line declines

•  PT cut to $85 from $95

Cowen, Andrew Charles (hold)

•  “We believe 2024 guidance has been derisked as we model 0% NA comps & 3% EPS growth, the high end of the range”

• Expects shares to be in a “holding pattern” as Starbucks restores credibility while competition and tough macroeconomic conditions present headwinds

• PT cut to $85 from $100

Bloomberg Intelligence, Michael Halen and Jennifer Bartashus

• “Starbucks slashed fiscal 2024 same-store sales, revenue and EPS guidance and lacks a cogent plan to boost demand”

• “We believe several initiatives, including targeting overnight sales, dozens of new products and a four-week mobile- app upgrade cycle are overkill — a distraction unlikely to boost traffic”

On Tuesday, a similar story occurred at McDonald’s when the burger chain reported lower-than-expected quarterly sales growth. 

Notably, working-poor consumers are pulling back spending in a period of stagflation (read here & here). 

Authored by Jonathan Turley,

Northwestern University has agreed to a controversial settlement with pro-Palestinian protesters encamped on its campus this week, including a commitment for scholarships for Palestinians, Palestinian faculty appointments, and special housing for Muslim students.

The protesters will also be allowed to continue their protests while agreeing to stay in a particular area of campus.  It will also put the students and supporting faculty on bodies to review any university investments and purchases, a major demand from supporters of the Boycott, Divestment and Sanctions (BDS) movement.

Previously, protesters had reportedly prevented some students and faculty from entering buildings and engaged in property damage.

The Daily Northwestern reported the details of the deal and noted

“the University has committed to provide a conduit for students to engage with the Investment Committee of the Board of Trustees. It will also re-establish an Advisory Committee on Investment Responsibility this fall, which will include students, faculty and staff.

…

In addition, the University committed to some support for Palestinian students and faculty in the agreement. NU will ‘support visiting Palestinian faculty and students at risk,’ and will provide the cost of attendance for five Palestinian undergraduates to attend Northwestern.

…

The University also committed to providing an ‘immediate temporary space for MENA/Muslim students’ — a longtime demand from students on campus — and will provide and renovate a house for MENA/Muslims students as soon as possible. The final house is expected to come in 2026.”

It also includes a commitment of the university to intervene with employers to guarantee that students suffer no consequences for participating in protests in their jobs and internships.

Northwestern (my alma mater) has always chosen the path of least resistance when it comes to protesters, including at times surrendering core academic functions. I have been particularly critical of the loss of freedom of speech and academic integrity on campus.

Students previously succeeded in cancelling a speech by former U.S. Attorney General Jeff Sessions. Student Zachery Novicoff embodied the rising intolerance to free speech on campus. He is quoted as saying “There’s a limitation to free speech. That ends at overtly racist old white dudes.”

I criticized former Northwestern University President Morton Schapiro for his lack of support for free speech on campus. Schapiro denounced what he called “absolute” free speech positions and endorsed speech sanctions, including treating speech as a form of assault.

During his tenure, the university often seemed a mere pedestrian to mob action taken against dissenting voices. For example, we previously discussed a Sociology 201 class by Professor Beth Redbird that examined “inequality in American society with an emphasis on race, class and gender.”  To that end, Redbird invited both an undocumented person and a spokesperson for the Immigration and Customs Enforcement.  It is the type of balance that is now considered verboten on campuses.

Members of MEChA de Northwestern, Black Lives Matter NU, the Immigrant Justice Project, the Asian Pacific American Coalition, NU Queer Trans Intersex People of Color and Rainbow Alliance organized to stop other students from hearing from the ICE representative.  However, they could not have succeeded without the help of Northwestern administrators (including  Dean of Students Todd Adams).  The protesters were screaming “F**k ICE” outside of the hall.  Adams and the other administrators then said that the protesters screaming profanities would be allowed into the class if they promised not to disrupt the class.  Really?  They were screaming profanities and seeking to stop the class but would just sit nicely as the speaker answered questions?

Of course, that did not happen. As soon as the protesters were allowed into the classroom, they prevented the ICE representative from speaking.  The ICE official eventually left and Redbird canceled the class to discuss the issue with the protesters that just prevented her students from hearing an opposing view.

The comments of the Northwestern students were predictable after being told by people like Schapiro that some offensive speech should be treated as a form of assault.  SESP sophomore April Navarro rejected that faculty should be allowed to invite such speakers to their classrooms for a “good, nice conversation with ICE.” She insisted such speakers needed to be silenced because they “terrorize communities” and profit from detainee labor. Here is the face of the new generation of censors being shaped by speech-intolerant academics like Schapiro:

“We’re not interested in having those types of conversations that would be like, ‘Oh, let’s listen to their side of it’ because that’s making them passive rule-followers rather than active proponents of violence. We’re not engaging in those kinds of things; it legitimizes ICE’s violence, it makes Northwestern complicit in this. There’s an unequal power balance that happens when you deal with state apparatuses.”

Last year, the Northwestern student body banned press from meetings to protect students from the harm of media coverage. The students also have previously frozen funds of conservative groups.

The Northwestern journalism faculty is little better.  Steven Thrasher, the Daniel H. Renberg Chair of social justice in reporting at Northwestern, who trashed a reporter who waited for the facts before reporting on a police shooting.

Of course, it is not just conservative speakers that the students want to ban. In 2021, they called for the removal of the President of the Board of Trustees. Despite being a major donor and supporter of the school, J. Landis Martin was denounced as a Republican who donated money to former President Donald Trump.

The university issued a statement that “This path forward requires the immediate removal of tents on Deering Meadow, cessation of non-approved use of amplified sound and a commitment that all conduct on Deering and across campus will comply with all University rules and policies. Compliant demonstration can continue at Deering Meadow through June 1.”

The university has long lacked the fortitude to stand up to students engaging in disruptive protests.

The danger of such passivity is evident on our campuses. As Henry David Thoreau warned, “all rivers and most corrupt men follow the path of least resistance.”

Here is the Northwestern agreement.

Ahead of today’s FOMC statement and Powell presser, we said that the bogey for a dovish interpretation today will come not from the Fed’s rate decision, which we knew would be unchanged, but the QT tapering decision…

The big question for today: how much will Fed taper QT by?

If Taper goes to $30BN (from $60BN/month), that means less funding needed in Q3 (most likely from Bills), and means less pressure on issuance. Yields should slide

— zerohedge (@zerohedge) May 1, 2024

… and sure enough, the fact that the Fed announced an accelerated QT tapering and it was bigger than expected ($35BN vs $30BN) is why the market is viewing the Fed announcement as dovish and futures are now soaring.

And while we wait for Powell’s presser to conclude, here are some other hot takes from Wall Street strategists and thinkers:

David Russell, head of market strategy at TradeStation

“The Fed is still in wait-and-see mode before they get dovish. But the data hasn’t been cooperating. This statement keeps investors data dependent and focused on April numbers like CPI two weeks from now.”  

Audrey Childe-Freeman, chief G-10 FX strategist at Bloomberg Intelligence

“A first glance at the statement brings dollar bears some breathing space as the language adjustment is not as hawkish as may have been feared, though the reference about underwhelming inflation progress entertains a potential new layer of hawkishness at a later stage that could contain dollar downside ahead of the press conference. Muted dollar reaction so far captures this well.

“The language embraced thus far does not signal that the narrative has shifted back to new rate-hike debates, but rather to pushing back the timing on a rate cut. This is probably good enough for near-term euro-dollar relief given the feared hawkish pivot.”

Brian Coulton, chief economist at Fitch Ratings

“With unemployment still low and the labor market still tight, there is only a limited risk to the Fed’s employment mandate from waiting longer before embarking on rate cuts. On the other hand the risk of failing to get inflation down on a sustained basis seems to be rising as each week goes by. Patience is the watchword now for the Fed and the risk of fewer or no rate cuts this year is growing.”

Erica Adelberg, Bloomberg Intelligence’s mortgage-backed securities strategist:

“Making it explicit that any surplus MBS paydowns will be reinvested into Treasuries could adversely affect the MBS/Treasury basis, but at this point MBS paydowns are projected to be about half of the $35 monthly cap on average for the foreseeable future. The average loan rate backing the Fed’s MBS holdings is more than 300 bps below current mortgage rates, so it would take a significant interest rate rally to hit the MBS cap.”

Kathy Bostjancic, Chief Economist at Nationwide:

“We expect Chairman Powell will underscore this hawkish pivot in his press conference and emphasize that the timing of pace of rate cuts will depend highly on the future path of inflation. He likely will indicate the Fed is on an extended pause until inflation resumes its disinflationary trend.”

Ira Jersey, Bloomberg rates strategist:

“His lack of comment about the possibility of a hike is interesting, and I’d be surprised if he’s not asked about the potential for hikes in the press conference. But it seems that ‘on hold’ is his base case for now.”

Bloomberg Economics’ Anna Wong and Stuart Paul:

“For anyone wondering if this year’s hot inflation readings were just a blip, the May 1 FOMC meeting offered a clear answer: Hawkish tweaks to the statement show policymakers have lost confidence that inflation is moving in the right direction. At the same time, the Fed announced it would start tapering its balance-sheet run off in June – a month earlier than we expected — and will reduce the runoff cap by a bit more than we foresaw. That initially comes across as dovish, but the motivation here is key. If it turns out the Fed wants the run-off process to last longer — ultimately boosting the chance that its balance sheet will return to pre-pandemic size – that actually would be hawkish.”

Developing