After storming higher last week, culminating with their 15th ascent in the past 17 weeks…

… US equity futures indicated a pause for stocks which trade at their all-time highs as investors geared up for a busy week of data, including the Fed’s preferred measure of inflation, the core PCE. As of 8:00am, futures on the S&P 500 and the Nasdaq 100 were fractionally in the red after Wall Street’s record-breaking rally stalled at the end of last week, weighed down by profit taking in megacap tech stocks. Treasuries climb, pushing 10-year yields down by 1bps to 4.24% while the dollar ticked lower.

In premarket trading, Berkshire Hathaway rose as much as 5.5% on track for a record high following its weekend earnings update, setting Warren Buffett’s conglomerate on course for a market value even closer to $1 trillion. Here are some other notable premarket movers:

• Amer Sports shares jump 7.0% after a majority of brokers initiated coverage with buy-equivalent recommendations. Analysts highlighted the strength of its high-end outdoor apparel and equipment brand Arc’teryx.
• HashiCorp shares jump 6.0% as Morgan Stanley raised the recommendation on the software company’s stock to overweight, noting that a resurgence in cloud is starting to benefit the company.
• Intuitive Machines shares fall 33% after officials said on Friday the American-made lander that touched down on the moon likely landed on its side.
• Li Auto ADRs jump 12% after the Chinese EV maker reported better-than-expected profitability and free cash flow for the fourth quarter.
• Fidelity National forecast adjusted earnings per share for the first quarter; the guidance missed the average analyst estimate.
• IBM said it is making changes to its reportable segments to reflect the way the company manages operations and allocates resources.
• Walt Disney Co. should appoint a corporate chief technology officer and focus on technology “transformation,” according to one of the activist investors pressing the company for change.
• Cathie Wood sold shares of Taiwan Semiconductor Manufacturing Corp. for the first time in more than two years, adding to moves to cut exposure in the chipmaker’s key customer Nvidia Corp.

Investor focus this week shifts from earnings to a slate of economic data, including Thursday’s core PCE price index, which is closely watched by the Fed for inflation hints. Q4 US GDP numbers are also due Wednesday, while traders will track comments from a host of central bank officials for clues on the path for interest rates.

“There is a lot of economic data coming in this week, which will be more decisive for whether investors will stay in a risk-on mood,” said Tatjana Puhan, chief investment officer at Copernicus Wealth Management. “We should factor in the possibility that if the US economy remains strong for a few more months and US corporate earnings as well, we should see at least in the US market a further potential for positive momentum.”

On the outlook for equities, strategists at Goldman Sachs said stock markets have room to extend gains beyond their record highs if the economic outlook remains upbeat and investors pour money into recent laggards. The S&P 500’s run to an all-time peak has left investor positioning “extremely” concentrated in the so-called Magnificent Seven, the team led by Cecilia Mariotti wrote in a note. While that does create the risk of a pullback, there’s also “space for bullish sentiment and positioning to be further supported, especially if we start seeing a more meaningful rotation out of cash and into risky assets and laggards within equities,” Goldman wrote.

Meanwhile, as we first reported, the latest Goldman prime figures showed that after piling into tech stocks in the weeks before Nvidia’s earnings, hedge funds are now cashing out and selling at the fastest pace in seven months. Professional managers offloaded their positions for four straight sessions last week, including Thursday, the day after Nvidia posted results. The intensity of the selling ranks in the 98th percentile of the past five years. The data suggests traders are booking profits on their tech wagers after a six-week buying streak and putting that extra cash into less volatile stocks, such as consumer staples. Companies that make household products saw the most net buying in 10 weeks, according to Goldman’s prime brokerage (more here).

European stocks fell after closing at a record high on Friday. The Stoxx 600 is down 0.3%, led by declines in mining shares as iron ore prices drop to the lowest since October; financial services and insurance stocks are the biggest outperformers. Rio Tinto Plc and Anglo American Plc led declines in basic resources amid concerns over Chinese demand. Shares in UK homebuilders dropped after Britain’s top antitrust enforcer opened an investigation to probe potential information sharing between companies. Here are the most notable movers:

• BASF rises as much as 2.2% on the back of results that suggest the German chemicals firm has overcome a slump and is poised for upside. Stifel analysts expect “substantial” earnings gains while Barclays analysts see volumes rebounding
• Zealand Pharma shares jump as much as 20% in Copenhagen, the most since September 2022, after the company’s partner, Boehringer Ingelheim, published trial results on drug candidate Survodutide
• IAG shares gain as much as 2.2% after Barclays raised its full-year Ebit estimate for the airline group, citing strong travel demand seen this summer. Deutsche Lufthansa falls after a downgrade to equal-weight at the broker
• Idorsia surges as much as 45% to the highest since Sept. 21, with trading volume more than double the 3-month daily average
• Wincanton shares gain as much as 11% after CMA CGM increased its final offer to 480p/share; ~6.7% higher than the original 450p/share bid
• Nestle shares fall 1.5% after Stifel cut its recommendation on the Swiss food maker to hold from buy. “The magic is gone,” analysts said, citing waning performance and little confidence it will improve in the short term
• Bank of Ireland shares were down as much as 11%, the most in almost two years, as the lender pointed to a weaker interest rate environment, saying they expect net interest income to be to be 5-6% lower than the fourth quarter
• Bunzl shares fall as much as 5.1%, their sharpest drop in over four months, after the distributor downgraded its revenue outlook for 2024 following a slow start to trading in North America while warning that margins will tighten, according to analysts at Citi
• PostNL shares dropped as much as 8.3%, the most since November, after the Dutch mail carrier’s forecast of normalized Ebit for 2024 missed the average analyst estimate
• International Personal Finance Group’s shares drop as much as 14% after the consumer finance company delayed its full-year results pending a review of a letter from the Polish regulator

Earlier in the session, Asian equities traded in a narrow range, as the ongoing rally in Japanese shares helped offset declines in South Korea and China. The MSCI Asia Pacific Index gained as much as 0.4% before paring much of the advance, with Toyota among the biggest boosts while Tencent weighed on the gauge. Japan’s Nikkei 225 extended its climb after reaching a record-high last week, helped by gains in trading houses after Warren Buffett’s positive comments on the sector’s shareholder-friendly policies. Last week’s rally in Chinese stocks came to a halt, with the mainland benchmark CSI 300 Index on track to snap it longest winning streak since 2018 as investors booked profits. Korean stocks fell as the nation’s much-hyped “Corporate Value-up Program” aimed at improving governance standards and valuations was launched without concrete details or an enforcement plan.

• Hang Seng and Shanghai Comp. marginally declined with weakness seen in Hong Kong consumer stocks, while the mainland was also pressured amid ongoing frictions after China’s MOFCOM slammed the latest USTR report on China’s WTO compliance.
• Nikkei 225 outperformed on its return from the long weekend and extended on record levels.
• ASX 200 finished flat after failing to sustain its early gains with price action indecisive amid a slew of earnings.
• Indian stocks fell for a second session, weighed down by declines in the nation’s largest paintmaker and IT stocks. The S&P BSE SENSEX Index fell 0.5% to 72,790.13 on Monday, while the NSE Nifty 50 Index declined 0.4%. Out of 30 stocks in the index, 25 fell and 5 rose.

“We are still in the early innings, so let’s see if the government releases more details in other dimensions outside what the Korea Exchange can do,” said Homin Lee, senior macro strategist at Lombard Odier. “As in Japan’s case, it takes time to convince investors that you are changing decades-old corporate governance culture.”

In rates, treasuries are back to little changed as US session gets underway after paring gains. The 10-year yield trades 1bp lower at 4.234% vs session low 4.215%; bunds lag by around 2bp in the sector while gilts keep pace; curve spreads broadly remain within 1bp of Friday’s close. The week’s auction cycle, compressed and accelerated for Feb. 29 settlement, begins with $63b 2-year note at 11:30am followed by $64b 5-year note at 1pm, both record sizes; it ends Tuesday with $42b 7-year note. As Bloomberg notes, while US rates stand to benefit this week from month-end rebalancing into bonds following outperformance by equities, Monday’s session includes 2- and 5-year note auctions and a potentially heavy corporate new-issue calendar. Several Fed speakers are slated this week. IG credit issuance slate includes HSBC and SMFG offerings; about $60b is expected this week, and monthly haul stands at nearly $138 billion price, setting the stage for a second straight monthly gross issuance record to fall this year.

In FX, the Bloomberg Dollar Spot Index edged lower, with Sweden’s krona and the euro leading gains against the greenback.  The kiwi is the biggest mover among the G-10 currencies, falling 0.4% versus the greenback ahead of the RBNZ interest rate decision on Wednesday; the NZD fell against all Group-of-10 currencies as traders weighed the nation’s monetary policy outlook. NZD/USD dropped as much as 0.6% to 0.6162 as traders pared bullish positions on the kiwi versus the Australian dollar and the greenback ahead of the central bank’s monetary policy decision on Wednesday, according to Asia-based FX traders.

In commodities, oil prices declined again with WTI falling 0.4% to trade near $76.20. Spot gold is little changed around $2,035/oz.

Bitcoin is a touch firmer on the session after eclipsing USD 51k but is yet to convincingly move much higher with specifics light and general newsflow limited. Ethereum shot above $3100 over the weekend, hitting a fresh two year high.

The US economic data calendar includes January new home sales at 10am and February Dallas Fed manufacturing activity at 10:30am; later this week are durable goods orders, consumer confidence, 4Q GDP revision, personal income/spending and ISM manufacturing. Fed speakers for Monday include Schmid at 7:40pm; Barr, Bostic, Collins, Williams, Goolsbee, Mester, Williams, Waller and Kugler are slated to appear later this week.

Market Snapshot

U.S. MARKETS:

• S&P 500 futures down 0.1% to 5,095.00
• STOXX Europe 600 down 0.3% to 495.72
• MXAP little changed at 172.87
• MXAPJ down 0.4% to 526.78
• Nikkei up 0.3% to 39,233.71
• Topix up 0.5% to 2,673.62
• Hang Seng Index down 0.5% to 16,634.74
• Shanghai Composite down 0.9% to 2,977.02
• Sensex down 0.4% to 72,852.56
• Australia S&P/ASX 200 up 0.1% to 7,652.84
• Kospi down 0.8% to 2,647.08
• German 10Y yield little changed at 2.37%
• Euro up 0.1% to $1.0837
• Brent Futures down 0.6% to $81.13/bbl
• Gold spot down 0.1% to $2,032.84
• U.S. Dollar Index little changed at 103.88

Top Overnight News

• Citadel Securities was outbid by Ant for Credit Suisse’s investment bank venture in China. The surprise move will be subject to close regulatory scrutiny as China prefers a foreign buyer, people familiar said. Other bidders may still join the fray. BBG
• Ukraine and its foreign partners could invite Russia to a future peace summit to discuss an end to Moscow’s two-year-old invasion on Kyiv’s terms, a senior Ukrainian official said on Sunday. Switzerland will host a summit to discuss a vision for peace by Ukrainian President Zelenskiy, which could be handed to Russia during a second meeting at a later date, said Andriy Yermak, Zelenskiy’s chief of staff. RTRS
• The widespread drop in global house prices that hit advanced economies has largely petered out, according to a Financial Times analysis of OECD data, leading economists to predict that the deepest property downturn in a decade has hit a turning point. FT
• Berkshire Hathaway’s cash pile hit a record $167.6 billion last quarter as Warren Buffett decried a lack of meaningful deals that would give a shot at “eye-popping performance.” Operating earnings rose. Buffett again endorsed Japan trading firms, boosting their shares. BBG
• Senate Majority Leader Chuck Schumer said congressional efforts to put together a spending package fell short over the weekend, leaving the US to “once again face the specter of a harmful and unnecessary government shutdown” starting March 2. BBG
• Trump secures a strong victory in South Carolina, beating Haley by ~20 points (~60%-40%), relatively inline w/pre-election polls, and while Haley is staying in the race for now, she hinted at exiting after Super Tuesday. Politico
• US national security adviser Jake Sullivan said on Sunday he hoped a “firm and final agreement” on a temporary Gaza ceasefire and the release of hostages could be reached “in the coming days”, after progress in negotiations at the weekend. FT
• Just two new supertankers are due to join the oil tanker fleet in 2024 — the fewest in almost four decades and about 90% below the yearly average this millennium. The shortage comes as the efficiency of the global fleet is faltering amid Red Sea disruptions. BBG
• Last week US equities saw the largest net selling in 5 weeks, driven by Macro Products as well as Single Stocks. Net flows point to rotation out of Tech, HC, and Industrials, while all other sectors were net bought. After a 6-week buying streak, HFs unloaded Tech stocks at the fastest pace in 7+ months, as the sector was net sold for 4 straight sessions incl. Thurs post NVDA results. GSPB

Earnings

• Berkshire Hathaway (BRK.B) – Operating earnings rise, driven by gains in its insurance units; Q4 operating earnings USD 8.481bln (vs 6.625bln Y/Y); FY23 operating earnings USD 37.35bln (vs 30.853bln Y/Y). Berkshire held USD 167.6bln in cash (vs 157.2bln Q/Q). Berkshire made USD 2.2bln of share buybacks in Q4 (vs USD 1.1bln in Q3); FY23 total repurchases were around USD 9.2bln. In his letter, Warren Buffett cautioned about limited future growth prospects, citing scarce transformative deals. He emphasised the challenge of finding significant investment opportunities both domestically and internationally. On future leadership transitions, Buffett said Greg Abel, who runs all non-insurance operations for Berkshire, is ready to be CEO of Berkshire tomorrow. +4.5% in pre-market trade.
• Broadcom (AVGO) – Broadcom is close to selling its end-user computing unit to private-equity firm KKR for USD 3.8bln, CNBC reports. KKR outbid other firms in the auction, and a deal may be announced soon, the report adds. +1.2% in pre-market trade.
• Li Auto Inc (LI) Q4 2023 (USD): EPS 0.75 (exp. 0.29), Revenue 5.88bln (exp. 5.48bln). +11.5% in pre-market trade.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly subdued amid a lack of fresh catalysts ahead of month-end and this week’s key data releases including the Fed’s preferred inflation gauge, while weekend macro newsflow was light and dominated by geopolitical commentary. ASX 200 finished flat after failing to sustain its early gains with price action indecisive amid a slew of earnings. Nikkei 225 outperformed on its return from the long weekend and extended on record levels. Hang Seng and Shanghai Comp. marginally declined with weakness seen in Hong Kong consumer stocks, while the mainland was also pressured amid ongoing frictions after China’s MOFCOM slammed the latest USTR report on China’s WTO compliance.

Top Asian News

• China’s Mofcom commented regarding the US report about China’s WTO compliance in which it noted that the US falsely claims China has created ‘overcapacity’ which fully reflects the US side’s ‘unilateralism and hegemonic behaviour’. Mofcom added the US side ignores the ‘great achievements’ made by China in fulfilling its WTO commitments and denies the important contribution made by China to the multilateral trading system and world economy, according to Reuters.
• China’s Commerce Minister said China is willing to work with New Zealand to implement a free trade agreement and continue to strengthen cooperation in the process of joining the CPTPP.
• US Deputy Treasury Secretary Adeyemo said on Friday that it is clear the Chinese economy is facing challenges from the property sector and demographics, while he is not concerned about headwinds from China’s economic challenges but has concerns about China’s excess production capacity flowing to global markets.

European bourses are a touch softer, Stoxx 600 -0.3%, following a similar APAC handover as newsflow remains light on broader macro themes despite a handful of interesting equity-specific developments. Sectors have a similar negative tilt, Basic Resource & Energy names lag given benchmark pricing. Housing names within the UK are lagging after the commencement of a CMA investigation into the market. DAX 40, +0.2%, the relative outperformer and in close proximity to record levels for both cash and future at 17443 & 17487 respectively. Stateside, futures are essentially flat ES -0.1%, with some modest underperformance in the RTY -0.3%; weekend focus on Berkshire Hathaway numbers/commentary around “limited future growth prospects, citing scare transformative deals”.

Top European News

• ECB is reportedly close to agreeing on a new monetary framework that some officials hope will pave the way to an ultimate revival of the interbank market, according to people familiar cited by Bloomberg.
• EU finance ministers reportedly clash over efforts to centralise markets supervision with Eurogroup President Donohoe noting there is a ‘strong diversity of views,’ and that member states disagree over the level of ambition to build a common supervisory regime as part of the roadmap to progress toward a capital markets union that the EU wants to settle by next month, according to Bloomberg.
• Hopes of a reversal in the UK’s “tourist tax” in the upcoming budget are “diminishing” after the financial secretary to the Treasury warned of the complexities of such a move, according to The Times.

FX

• DXY is a touch softer with the 103.79 trough just above Friday’s 103.76 base before downside support via the 200 DMA at 103.69. Newsflow for the USD light, week’s focal points are PCE & ISM Manufacturing on Thursday & Friday.
• EUR benefitting from the softer USD with specifics light ahead of potential remarks from ECB’s Lagarde later in the session; while action is limited, the single currency has surpassed the 100- & 200-DMAs.
• A similar story for GBP but with EUR/GBP action hitting Cable a touch, nothing from BoE’s Breeden or Pill thus far. Cable at 1.2675 and respecting Friday’s 1.2649-1.2702 bounds.
• Antipodeans lag; no specific driver or catalyst, though potentially profit taking, positioning (RBNZ Wednesday) and the tepid risk tone weighing.
• USD/JPY modestly higher but remains shy of Friday’s 150.77 best and by extension the YTD peak at 150.88; domestic CPI due afterhours.
• PBoC set USD/CNY mid-point at 7.1080 vs exp. 7.1998 (prev. 7.1064).

Fixed Income

• Contained start with specifics light into ECB’s Lagarde. Bunds near the unchanged mark despite printing above Friday’s best at the start of the session. Since, EGBs have been fading and are modestly in the red at 133.06 at worst but well above Friday’s 132.05 base.
• Gilts modestly outperforming, but action directionally and in terms of magnitudes in-fitting with Bunds but just a few hours behind given the lack of APAC trade for Gilts. Similarly surmounted Friday’s 98.17 best before fading though, again in-fitting with Bunds, are well above that session’s 97.10 base.
• USTs firmer but off best. Specifics light and the docket thin to start a key week aside from 2yr & 5yr supply. Yield curve currently under modest pressure and slightly flatter.

Commodities

• Subdued session for crude despite a slew of weekend geopols., though no major escalation thus far. WTI & Brent under modest pressure but have dipped below USD 76/bbl and tested USD 80.00/bbl respectively.
• LNG somewhat uneventful though the complex is digesting an extensive weekend announcement from QatarEnergy (details below). Elsewhere, exports via the Wafa oil field in Libya have closed due to protests, via BBG citing sources.
• Precious metals benefit from the tepid tone, softer USD and slightly weaker yields stateside in a quiet start to a key week of US data. By contrast, base metals are lower across the board given the general risk tone and thus far failing to benefit from the factors supporting precious peers.
• US Treasury official said on Friday the US is encouraged by ‘significant progress’ in the second phase of the Russian oil price cap.
• QatarEnergy CEO said Europe will continue to need gas as part of an energy mix for a very long time and Europe’s gas needs have not peaked, while QatarEnergy also stated that it may need to make additional orders of tankers to ship expanded LNG volumes.
• Exports from the Wafa oil field in western Libya and a subsea natural gas link to Italy were closed following protests, according to Bloomberg citing a person familiar with the matter.

Geopolitics: Middle East

• Israeli PM Netanyahu said that they are all working on a hostage deal but he cannot say if they will have it, while he added that they will be weeks away from total victory once they begin the Rafah operation, according to a CBS interview.
• Israel’s army presented at the war council meeting a plan to evacuate residents from fighting zones in Gaza, according to Al Jazeera. It was also reported that Israeli PM Netanyahu’s spokesman said the war council approved a plan to supply the Gaza Strip with humanitarian aid, according to Al Arabiya.
• Israel’s Defense Minister said there will be no let up in Israeli action against Lebanon’s Hezbollah movement, even if a ceasefire and hostage deal is secured in Gaza, according to AFP.
• White House National Security Adviser Sullivan said Israel, Egypt, Qatar and the US came to a basic understanding of the basic contours of a hostage deal for a temporary ceasefire and the US is hopeful that an agreement could be reached in the coming days, although he noted that a deal is still under negotiation and there will have to be indirect discussions by Qatar and Egypt with Hamas. It was also reported that Egyptian security sources said Qatar will host mediated Hamas-Israel truce talks this week.
• Hezbollah said they targeted a gathering of Israeli enemy soldiers in the vicinity of the Marj site with a volcano missile and achieved a direct hit, according to Al Jazeera.
• US Central Command said Yemen’s Houthis launched one anti-ship ballistic missile likely targeting MV Torm Thor in the Gulf of Aden on Saturday although the missile impacted water causing no damage nor injuries, while US forces shot down two one-way attack unmanned aerial vehicles over the southern Red Sea.
• US and UK forces conducted 9 air strikes in Sanaa, according to Al Masirah TV cited by Reuters.
• UKMTO received a report of a small fast boat behaving in an irregular manner 20NM east of UAE’s Khor Fakkan.
• Syrian Defence Ministry said its forces downed seven drones that tried to target military positions and villages in the vicinity of Hama and Idlib, according to state media.
• Palestinian Authority PM has submitted his resignation to the Palestinian President; “The next phase needs the administration of the PA for all Palestinian territories”.
• Israeli strike targets Lebanon’s Easter Baalbek for the first time since the Gaza war, according to Reuters sources.

Geopolitics: Other

• Ukrainian President Zelensky said he hopes a peace summit in Switzerland will take place in spring and a peace plan prepared with partners in Switzerland will be presented to Russia. Zelensky said that the current moment is the most difficult for Ukrainian unity and that improving troop rotations is critical to the war effort, while he also noted there is a clear plan for a new Ukrainian offensive but didn’t give details and said Russian forces will attempt another offensive in late May or summer.
• Ukrainian President Zelensky said a US aid package is needed within a month and is essential to support troops on the battlefield, according to FT. It was separately reported that Zelensky and Canadian PM Trudeau signed a bilateral security agreement during a ceremony in Kyiv and Zelensky stated via Telegram that Canada is to provide more than CAD 3bln in financial and defence aid this year. Zelensky also signed a security agreement with Italian PM Meloni, while Meloni stated that Italy committed to military support for Ukraine and said peace cannot mean surrender, according to Reuters.
• G7 Leaders’ statement stated they remain convinced that they can ensure Ukraine prevails in fighting for its future and will help Ukraine meet its urgent financing needs, while it added that Ukraine can count on their support for as long as it takes.
• UK PM Sunak called for Western countries to be more aggressive in seizing frozen Russian assets and passing the proceeds on to Ukraine to finance its defence, according to Bloomberg.
• Ukraine attacked Russia’s Novolipetsk Steel plant with drones which caused a major fire at the facility, according to Reuters.
• Russian Defence Ministry said Russian forces took a more advantageous position near Avdiivka and rebuffed seven Ukrainian counterattacks, according to Reuters.
• Russia’s Deputy Foreign Minister said contact with the US over nuclear weapons in space has proven to be unproductive, while he added that the US has not presented any proof of allegations that Russia wants to put nuclear weapons in space.
• US military aircraft intercepted a balloon over Utah on Friday which was said to be small and not manoeuvrable, while the balloon was allowed to continue flying as the US concluded the balloon was not a threat to civil aviation or national security.
• G7 Finance Ministers and Central Bankers are reportedly expected to gold a meeting on 28th Feb to discuss strengthening sanctions against Russia, according to Kyodo.

US Event Calendar

• 10:00: Jan. New Home Sales MoM, est. 3.0%, prior 8.0%
• 10:00: Jan. New Home Sales, est. 684,000, prior 664,000
• 10:30: Feb. Dallas Fed Manf. Activity, est. -14.0, prior -27.4

Central Bank Speakers

• 19:40: Fed’s Schmid Gives Speech on Economy, Monetary Policy Outlook

DB’s Jim Reid concludes the overnight wrap

By Seth Carpenter, Morgan Stanley chief global economist

January’s FOMC meeting, labor market data, and inflation data have all pushed the market from pricing nearly 200bp of Fed rate cuts starting in March to broadly aligning with our view of cuts starting in June and cumulating to 100bp at the end of the year. But between now and year-end comes the election…a fact that has driven client questions about the implications for Fed independence.

Matt Hornbach and I wrote a piece last month emphatically making the case that the election will not affect Fed policy this year. Client questions range from “Does the Fed have to cut more because it is an election year?” to “Does it have to start cutting in June because otherwise it will be too close to the election?” and sometimes “Won’t the Fed seem too political if it cuts at all?” From my first-hand experience in 15 years of working at the Fed, I can confidently say that the institution does not change based on the electoral cycle. In the piece with Matt, we show that there is no discernible difference in Fed decisions between years with elections and those without. But don’t take our word for it. Matt dug through years of FOMC transcripts, and the Committee’s discussions of elections only reflect macroeconomic concerns. Will uncertainty before the election damp spending? Will a change in fiscal policy drive aggregate demand? Whatever questions may arise, the evidence is clear that the Fed’s election-year decisions will be driven by its mandate, not by attempts to influence the outcome of the election.

But as the saying goes, “Elections have consequences,” and what happens after the election is a different story. Specifically, former President Trump has stated that if he is re-elected, he will not re-appoint Chair Powell. In collaboration with our public policy research colleagues, we tackled the question of how much risk such a circumstance would pose to Fed independence. The first point to make is that any such change would come a year after the new president is inaugurated, so it’s an issue for 2026, not 2025. While a new chair could easily bring changes to communication and perhaps more dissents at Fed meetings, the worst-case scenario that many clients worry about will likely be avoided.

Although the president nominates the chair and the members of the Federal Reserve Board, the next president’s term will have only two vacancies, far short of a majority. Also, the Senate must confirm the president’s nominees, adding another layer of checks and balances against a subservient Fed. And the Fed Board isn’t the whole story. The FOMC comprises the Fed Board plus the 12 Reserve Bank presidents, and the Reserve Bank presidents are chosen through a wholly separate process, specifically designed to insulate the FOMC from political pressure.

Another safeguard of independence is that according to the letter of the law, the FOMC picks its own chair, and only convention makes that person the chair of the Fed Board. In practice, of course, I suspect the FOMC would defer to the choice of the president and the Senate, but that safeguard exists, nevertheless. History also shows that Paul Volcker faced tremendous dissent in his fight against inflation, he lost one Board vote, and news reports stated that he threatened to resign when faced with opposition within the FOMC. The institution is set up with many layers to prevent any president from getting a “rubber stamp” Fed chair.

Overall, we are highly convicted that Fed policy this year will not be swayed by the fact of the election. The place simply does not work that way. And for the first year of the next administration, whoever wins, Chair Powell’s place is secure. A new Fed chair could very well shift the FOMC’s reaction function at the margin, and each president and Senate get to express their views about the best candidate. But the institutional process is designed to guard against the extreme case of a Fed that is directed by the White House instead of the dual mandate.

More in the full note available to pro subs.

Today in ‘the de-evolution of Western society’ news, one store in San Francisco is fighting back against rampant theft and looting by requiring that customers shop with an in-store escort. 

Fredericksen’s Hardware and Paint in Cow Hollow, is now requiring customers to be accompanied by an employee while shopping to combat widespread shoplifting, according to the NY Post. The store has implemented a policy of serving customers one at a time during specific hours and has restricted access to parts of the store, creating a designated waiting area for shoppers until they can be assisted, as first reported by KRON4.

A sign at the store says: “Attention shoppers. Due to the rampant shoplifting, Fredericksen has introduced a one-on-one shopping experience: wait here and a clerk will be right with you to help you with all your shopping needs.”

Manager Sam Black commented: “It’s pretty bad. I mean, the dollar amounts are pretty significant, and with the tools and now we’re getting snatch-and-grabs when they take whole displays, so it’s getting kind of dangerous for the employees and the customers.”

“We just want to make it uncomfortable for the thieves so they go somewhere else,” he added. “Yeah, people aren’t happy. The regulars can’t believe it like we can’t believe it, but they’ve been really understanding.”

Fredericksen’s has introduced measures to restrict access to part of the store’s entrance during specific hours, requiring customers to wait for employee assistance before shopping. The store’s long-standing manager believes this strategy is beneficial for the business, its employees, and customers, KRON reported:

Black says for two hours in the morning and two hours in the evening an employee will work with individual customers. A table at the front serves as a way to keep potential thieves from moving freely in and out of the store.

San Francisco supervisor Catherine Stefani commented on the situation, stating:  “This situation is tragic and embarrassing for our city, and it’s all the more reason to get serious about solving our police staffing crisis. We need more police on our streets, and we need them now. That’s why I’ll hold a series of hearings in March to push our city agencies to fill the hundreds of vacancies at the Police Department as soon as possible––to stop the bleeding, reverse the damage, and finally protect our residents and small businesses.” 

It’s not just fentanyl that is flooding the US courtesy of Biden’s open border policies: a record amount of methamphetamine was seized by US Customs and Border Protection agents at the Camino Real International Bridge in Eagle Pass, Texas, which is also known locally as Bridge II.

A statement from the CBP said officers seized six and a half tons of methamphetamine valued at more than $117 million, the largest ever at a port of entry, in a single enforcement action, Fox 5 San Diego reported.

CBP says the drugs were found in a tractor-trailer that had listed its load on the customs manifest as a shipment of drying agent for piglets. A canine unit alerted officers, and a non-intrusive inspection system examination was done on the truck, which was then sent to secondary inspection where they discovered over 13,000 pounds of meth, the agency said.

“This gargantuan methamphetamine seizure, the largest ever taken down by CBP officers at a port of entry, uniquely illustrates the serious narcotics threat our officers face on a daily basis and their effectiveness at utilizing our technological enforcement tools, expertise and experience to zero-in on these threats,” said Director, Field Operations Donald Kusser, Laredo Field Office. “This seizure exemplifies our officers’ steadfast commitment to advancing CBP’s priority border security mission while facilitating lawful trade and travel.”

Bridge II is the only international bridge where cargo trucks can cross from Piedras Negras to Eagle Pass.

“For far too long, drug trafficking organizations have been raking in billions of dollars at the expense of our communities that are left ravaged by addiction, death and despair as a result of these poisonous substances,” said Homeland Security Investigations Special Agent in Charge Mark Dawson, of Houston. “Thanks to the outstanding teamwork between HSI Houston, HSI Eagle Pass, HSI Mexico City and our partners at CBP, we have prevented a record-breaking amount of these narcotics from making it to Houston where they would have destroyed an untold number of lives.”

Submitted by Ahmed Bin Sulayem, executive chairman of DMCC in Dubai

How the EU/Belgium mechanism will do little to depower Russia but attempt to restore Antwerp’s ailing relevance at the cost of the wider industry.

* * *

Almost two years ago to the day, Russia invaded Ukraine as an escalation of events that started in 2014, and to the widespread condemnation of the international community. Depending on which newspaper you read, reasons behind the invasion vary from Vladimir Putin’s grandiose, expansionist plans to restore the former glory of the Soviet Empire, through to Russia’s wider, and well established concerns about NATO enlargement; a reason perhaps unintentionally acknowledged by NATO Secretary-General Jens Stoltenberg, and explicitly stated by Putin during his recent interview with Tucker Carlson – his first with an American commentator since Oliver Stone’s four-part documentary, The Putin Interviews, conducted between 2015 – 2017.

As a consequence, western sanctions followed in quick succession. Primarily aimed at banks, military exports, and oil refineries, sanctions escalated to a G7 ban on Russian gold imports on 27th June 2022 and a $60-per-barrel price cap for crude oil and petroleum oils by the G7, Australia and the EU between 02nd – 07th December 2022.

For diamonds, sanctions were first imposed by the United States on 07th April 2022, aimed at Russian state-owned diamond giant PJSC Alrosa, blocking all of its US-based property and interests. In 2023, the United Kingdom imposed a general import ban on Russian diamonds, however, it wasn’t until the end of last year that a political strategy was set into motion, seemingly to seize control of the sector and allocate undemocratic, centralised authority to Antwerp.

On 06th December 2023, G7 leaders agreed to “introduce import restrictions on non-industrial diamonds, mined, processed, or produced in Russia, by January 1, 2024.” Following this initial ban, two further critical dates are now ear-marked to have far reaching effects on the diamond industry, namely 01st March when the ban extends to polished diamonds above one carat in size that originate from Russia, and finally 01st September, when a further restriction will include Russian lab-grown diamonds, as well as jewellery and watches with diamonds larger than half a carat.

As an outcome, the EU has assigned the Belgian Federal Public Service of Economy as the responsible authority for all non-Russian diamond verification, which, in practical terms will likely mean the rerouting of the world’s rough diamonds for cataloguing through Antwerp – a sharp U-turn from Belgian prime minister Alexander De Croo, who just over a year earlier rejected sanctions on the Russian diamond market, stating that “sanctions should focus more on the aggressor, than  ourselves.” Even entities such as the Antwerp World Diamond Centre, which previously stated that Antwerp must remain “an open door for companies who have no options”, have had a change in heart. Whether it is because they’ve found a way to make a ban on Russian diamonds work for the ailing city isn’t for me to say, however, its requirement would mean that all countries, with the potential exception of Canada, the G7’s only producing nation, will be expected to adhere to the newly proposed policy, despite its opaque structure, unanswered questions, and imminent deadline. As eloquently outlined by an industry veteran, “So far, we have been provided a ‘what’, not a ‘how’.”

Depowering Russia

Before digging into the consequences of this imperialist decree that shows little understanding or regard for the overwhelming majority of countries and stakeholders involved in the diamond industry, it is worth understanding the practical impact of how such sanctions will achieve the G7’s stated objective. By implementing such a centralised system, the G7 aims to reduce Russia’s ability to wage war in Ukraine, by cutting off critical funding garnered from the sale of rough diamonds. However, after a quick dive into the economies of scale, it becomes abundantly clear that the extensive, global disruption to an already increasingly well-regulated industry might not be worth the effort.

In a simple case of global supply and demand, there’s no question that Russia’s production is vast. As the world’s largest producer of rough diamonds, it accounts for about 30 per cent of the global market with Alrosa being responsible for almost all production, and while efforts to curtail diamond sales have been attempted, Alrosa reported only a 2.8 per cent year-on-year fall in output to 34.6 million carats, matching its initial production plan, “despite the negative external environment”. Financially, this translated into a marginal increase in sales to $1.9bn for the first six months of 2023, while profits were down by 35 per cent to $562.5 million. Even if we assume the impossible, that no money is reinvested into Yakutia, Russian’s primary mining region, or into the livelihoods of the people who live in sub-zero conditions for the majority of the year, it would mean Alrosa could, in theory contribute approximately $1.12bn per year to Russia’s coffers. So how does that measure up to the cost of war?

According to non-profit research organisation RAND, Russia’s direct military costs as of September 2022 were $40 billion, and are expected to amount to almost “$132 billion through 2024”. Based on these figures, on average, the Russian war machine requires approximately $126.56 million per day to mobilise, meaning a dent of just under nine days or roughly 0.85 per cent of the conflict’s total budget from 24th February 2022 to a projected date of 31st December 2024. It is also worth noting that Alrosa’s production is dominated by small diamonds, not only meaning the majority of its production wouldn’t qualify under the sanction criteria, but furthermore continue to find their way into the global supply chain without resistance.

Certainly, for the G7, even a dollar earned from diamonds is one too many, however, giving them the benefit of the doubt that curbing revenues, however small, are part of winning the battle in the context of war, it is next essential to understand the effects of such policies, particularly towards producing countries, and supply chain stakeholders.

The Impracticalities of Antwerp

Based on Russia’s known contribution, the proposed EU/Belgium mechanism will extend to the lion’s share of global, rough production, requiring all diamonds (with the possible exception of Canada) to be sent to Antwerp for cataloguing. However, several flags have already been raised by industry stakeholders surrounding diamond aggregation, traceability, transparency, scale, execution, Belgium’s notoriously difficult banking system, and of course, Antwerp’s chequered history with fraud and corruption.

Starting with aggregation, for many diamond traders, rough diamonds are mixed from different sources to create added value before being processed. Under the new proposed scheme, diamonds would need to be sent separately to ensure proper cataloguing, resulting in a major win for logistics contractors, but a major loss for producing nations and the environment.

When it comes to traceability and transparency, it is difficult to posture, as the exact details have yet to be published. Certainly, questions to which the wider industry would want answers include what information is required for each diamond, who has access, or the ability to edit data, and how much of it will be made available to the public? Given that Antwerp ceased publishing its data in January 2022, who will be responsible for supplying data and can it be relied upon as truthful and accurate?

Regarding logistics and scale, what preparation has been made by the Antwerp Diamond Office or Antwerp World Diamond Centre in terms of handling and processing, and will they have the capacity to immediately handle 70 per cent of the world’s rough diamond output? Even if suitable preparations have been made, no proof-of-concept has been tested meaning significant delays to the current processes, adding on to what was already a notoriously slow year.

According to Peter Kovacs, head of unit at the European commission, that doesn’t matter, a feeling shared by Brad Brooks-Rubin, senior advisor at the US State Department. They have been working on implementing the G7 mechanism that Antwerp lobbied for, however, when I met Peter and team in Belgium a few weeks ago, they stated they expect all markets to have issues with the new G7 policy, which will need to be ironed out in due course. When asked how long that will take, there were no concrete answers. From my experience alone, whether that’s six weeks or six months, African nations and the industry at large cannot afford to wait that long. Unfortunately, the resounding message from Peter Kovacs on behalf of the G7 was simply that sanctions had to be put in place at any cost. Having recently visited the Central African Republic and seeing first-hand the damage that global policies can have on some of the poorest communities in the world, I am deeply concerned. I can only hope that the G7 begins to properly consult with all non-Russian diamond producing nations – not just Botswana, rather than implementing an untested experiment, designed by technocrats who have no understanding of the diamond industry, and the millions of people around the world whose livelihoods depend on it.

If companies are effectively coerced into sending goods to Antwerp, will more companies be required to establish a business presence in Belgium, and or set up a bank account? If so, a lot more will need to be done to make the financial sector more diamond-friendly, bearing in mind its current stance which considers the diamond industry as ‘high risk’. Through personal contacts, I know of one highly successful Belgian businessmen who’d diversified into the diamond business, only to receive a letter from his bank stating that his account would be closed in forty days due to his new “high risk” activity. If this is the reception extended to Belgian nationals, I’m uncertain whether African-based diamond traders will fare any better.

Finally, there is the spectre of fraud and corruption and while I appreciate the EU’s proposal for selecting Antwerp as the obvious choice for its sanction scheme, given its extensive history with the diamond industry, it isn’t without its well-documented cases of fraud and corruption.

On 17th May 2016, the Monstrey Case uncovered a large-scale fraud involving 220 suspects, of which 36 were brought to trial. The case included document falsification (including fraudulent Kimberley Process certificates), money laundering and criminal conspiracy to the amount of over €100 million. A year later, the Belgian Federal Police Corps’ second highest-ranking official, head of the special Diamond Task Force and UN-expert, Agim De Bruycker was arrested twice and served a custodial sentence for falsifying documents and money laundering. While I appreciate that criminality is a global issue, I am certainly not alone in thinking that if the EU/ Belgium wants to centralise an entire industry, it needs to do so through consensus, complete transparency, and with a lot more thought than is currently being presented. If the result is to utilize blockchain technology, then surely cataloguing can occur in each diamond producing nation, as opposed to the highly convoluted process of physically sending products to Belgium at great cost. Which neatly brings me on to the topic of sovereign accountability.

Stakeholder Autonomy

Having recently attended Mining Indaba in Cape Town where I met several ministers of mines, it is clear that most African nations are not only tired of having to abide by policies in which they have little to no say, but particularly over minerals which are rightfully theirs. Producing African nations not only have a right to certify and verify their own production, but furthermore are accountable to their national stakeholders in terms of protecting employment and generating wider industry development. This further extends to the artisanal and small-scale mining communities which are estimated to account for 20 per cent of the world’s gem-quality diamonds. Estimated to include between one to two million workers worldwide, the EU/ Belgium mechanism needs some considerable thought as to how its decentralised traceability solutions can be made to work for all stakeholders, without alienating the industry’s most vulnerable communities.

Then there are the world’s diamond centres, most notably Dubai, Mumbai, and Surat, which have become global hubs for trading and manufacturing rough into polished diamonds. In 2022, the UAE had a trade volume of $37 billion in rough and polished diamonds, while India remained responsible for the cutting and polishing of around 90 per cent of the market. As natural trading partners, the relationship was further boosted through its mutual CEPA policy. In the same year, the UAE’s non- Russian rough diamond trade was valued at $17.5 billion, a figure that would be put under significant threat through the current proposal.

Outside of the core trading, cutting and polishing markets, there is also little consideration shown for the largest consumer market of the U.S. To date, no dialogue has been established between the G7 and U.S customs, meaning that on the 01st March/01st September there will likely be a complete block on imports. This further extends to other issues such as how lab-grown diamonds will be identified or distinguished as non-Russian.

As major stakeholders within the diamond supply chain, it simply isn’t good enough that the EU and Belgium can expect blind compliance with policies that solely serve their best interests, and not those of the wider industry. Not only are there significant questions that need answering, but clear stakeholder disruptions that require meaningful accountability.

Two-Tiered Diamond Industry

It is also worth remembering that a potential outcome of an active Belgian/EU mechanism will be a two-tier market. On one hand, the G7 economies with their extra burden of added certification, inefficient, centralised logistics and dictated, unilateral rules, and on the other, the BRICS+ nations, which will allow all diamonds to flow freely, based only on KPCS. As the existing trade centre for diamonds and based on its highly functional relationship with the world’s largest polishing market of India, Dubai will continue to function as a bridge between diamond producing nations and all consumer markets. It is also worth noting, that according to the IMF, the BRICS+ countries already had 36 per cent of world GDP in 2022 at power-purchasing parity, against the G7’s 25 – a difference of $10.44 trillion, and a gap that is only likely to increase in the future.

My stance, however, is not to segregate, but to unite the industry, while promoting fair competition, and the complete involvement of all stakeholders throughout the value chain.

The Kimberley Process

Probably the most obvious elephant in the room is that of the Kimberley Process – the twenty-one year-old, multilateral trade regime equipped with a certification scheme that enables states to implement safeguards on shipments of rough diamonds and certify them as “conflict free”. As an organisation, the KP’s role is to cooperate and create dialogue for all matters concerning diamonds, in particular when it comes to transparency. Underpinned by the United Nations mandate, actively supported by 85 nations, and backed by the leading civil organisations, the KP has been successful in stemming 99.8 per cent of the world’s conflict diamonds. As an organisation whose chair changes every year, its existing structure and policies are the perfect fit for discussing and addressing concerns in an open, fair, and democratic manner, however, its evident ostracization would suggest the EU and Belgium have other reasons for their highly impractical proposal.

Before February 2022, Alrosa was a strategic partner to Antwerp, however, in light of international competition and the European Commission’s stance on Russian sanctions, Belgium’s Russian rough diamond imports fell by almost 70 per cent in just two years from 2021 – H1 2023. With Antwerp’s well-documented decline as a relevant hub for the world diamond industry, it could certainly be argued that the proposed mechanism is more accurately designed to reinvigorate relevance into the ailing hub by leveraging the G7’s blinkered focus on “defeating Russia”, regardless of cost or collateral damage.

In a glimmer of hope, a virtual meeting which took place between a US government official and the country’s leading jewellers on 15th February suggested that “America could accept ‘self-certification’ from its jewellers that the diamonds imported into the country have no Russian links”. The conversation further recognised that the EU’s proposed regulation had been ‘questioned by African countries and India which feel that a system of first funneling stones into Belgium before moving them to final consumption centres would push up cost, delay deals and disrupt the age-old trade.’ The fact that the U.S is considering a multi-node approach is at least a step in the right direction, however, given Antwerp’s long-standing, often dependent relationship with Alrosa, it should consider a fully transparent mechanism that avoids centralised control and provides all diamond centres with the autonomy to self-regulate.

As candidly shared by an Ipis researcher who acknowledged the relationship between Alrosa and the Belgian diamond market, “It’s such an important supplier, corresponding to 25 per cent of diamonds coming into Antwerp. If they lose it and Dubai (UAE) takes over, then it’s a very difficult movement to stop. Now their way is to say that the demand is reducing”.

In a similar way, should the EU/Belgium mechanism be enforced, its impact will also be difficult to stop, but most worryingly will set precedent as an authoritarian decision made to achieve the tangential goals of the few, at the cost of the many. It would seem now more than ever that this is the right time to remind the G7, the EU and Belgium that the era of colonial rule is over, even when disguised as protectionist policy.

Authored by Thaddeus G.McCotter via American Greatness,

In yet another example of “how the more things change…”

When assessing the Domino Theory 2.0, one discovers the dominoes are in the details – or, more accurately, the lack of them.

The first incarnation of the “Domino Theory” argued that the triumph of communism in one nation would invariably lead to communism’s triumph in neighboring nations. Based on the rapid Sovietization and illegal occupations of eastern Europe in the aftermath of World War II, the Domino Theory predicted the same result would occur elsewhere. Unfortunately, the theory was less of a strategic assessment than it was a myopic prism, coloring every incident abroad as proof of its predetermined conclusion and justifying its efforts to stanch communism’s advance by any means fair or foul, including the deployment of the American military. So doing, the Domino Theory proved a blunt and, ultimately, deleterious instrument for stemming the advance of that hideous, anti-human ideology.

For Americans, the Vietnam War painfully revealed the counterproductive consequences of this overly simplistic theory. Between 1965 and 1973, more than 58,000 American service personnel, 250,000 South Vietnamese troops, 1.1 million North Vietnamese and Viet Cong fighters, and close to 2 million civilians of North and South Vietnam were killed, and more than $120 billion of U.S. tax dollars were expended on the war effort. At home, Americans were torn along political and generational lines over the draft and the war; youth was radicalized; and disillusionment with and alienation from representative institutions increased throughout the citizenry. When America ultimately failed to stem North Vietnam’s conquest of South Vietnam, the ensuing decade witnessed communism’s advance around the globe. At home, many of the political divisions spawned by the Vietnam War never fully healed.

Importantly, this was during a time when the Soviet Union and its proxies were in fact bent upon expanding communism across the globe, and most Americans understood this. Nevertheless, the failure to explain the rationale for the Vietnam War to the satisfaction of Americans, especially the young men being drafted and their parents, constituted the sifting quicksand that finally engulfed America’s war effort, especially when the government’s official statements continually failed to match the reality on the ground and the war dragged on.

In the aftermath of Vietnam, policymakers did learn the hard lessons of America’s military defeat. Communism remained an existential threat to free peoples, one the Soviets continued to spread. But America and her allies gradually became more attuned to the specific conditions within a communist endangered country, and, given the American public’s chary post-Vietnam attitude toward military interventions, became more circumspect in their assessments and responses to such threats. With fits and starts, wins and losses, by 1991, this more circumspect view of how to defeat communism through a more deliberative and discerning, holistic roll-back strategy facilitated the liberation of eastern Europe from communism and the Soviet Union’s implosion.

Failure might be an orphan, but it is a better teacher than success. While making room to stuff the Soviet Union in history’s trash can, policymakers retrieved from it the garbage theory, the “End of History.” In sum, Francis Fukuyama’s “end” was the absence of an ideological opponent to western democratic capitalism, which allegedly had forever won the hearts and minds of all peoples. It seems Mr. Fukuyama didn’t consult the over 70,000,000 members of the Chinese Communist Party (or radical Islamists, for that matter).

In the heady, heedless days following the demise of the Soviet Union, the botched, venal western “shock therapy” approach to Russian reconstruction led to the rise of an authoritarian regime headed by former KGB Lt. Colonel Vladimir Putin, a foreign intelligence officer. Due to western recklessness and covetousness, democracy and capitalism had an abysmal trial run in post-Soviet Russia. The people came to view the “end of history” as a dead end for Russia. With selective nostalgia coloring their memories, they reached back out for the iron hand of a strong leader (if not a Stalin, then an Ivan the Terrible) and a Russia that was feared and respected throughout the world. Mr. Putin and his thuggish ex-KGB cronies (Siloviki) readily obliged. The result is a revanchist, neo-imperial Russia currently on display in Ukraine.

Further, in the wake of the CCP’s barbaric butchering of pro-democracy protestors in Tiananmen Square, a similar response threw this hideous regime a lifeline: no amount of mass slaughter would stop western capitalists from enriching themselves in communist China. Throughout the ensuing years, policymakers and the elites have enriched themselves by, among other means, outsourcing American jobs to and investing in communist China, thereby making the regime both more secure and more potent as they engaged in unrestricted warfare against the United States. And a nation that, during Mao’s great famine, was still exporting wheat from the hands of starving peasants to ensure the communist regime had enough foreign reserves to advance the nation’s aims throughout the world, now holds over $850 billion of American debt. No doubt, Xi Jinping and his politburo pals will continue putting their current foreign reserves and their holding of the U.S. debt to effective, if not good, use against America.

In sum, today, policymakers and elites have now stuck the rest of us with the butcher’s bill for their arrogance and avarice: a revanchist, authoritarian Russia and an avowedly hostile, implacably aggressive communist China, both of which view the United States as their primary enemy.

This is the situation as American and other western policymakers tender their dire demands for taxpayer funding for Ukraine. For some abstruse reason, they expect the public to forget or ignore that these policymakers and their corporate cronies have been culpable for causing this crisis. These policymakers have forgotten the hard lessons of Vietnam, and in refusing to explain in detail the strategic stakes in defending Ukraine from Russia’s invasion, they have resorted to the Domino Theory 2.0.

Consider this February 12 tweet by Senator John Cornyn (R-Tex.), in which he cites an earlier statement by Speaker of the House Mike Johnson (R-La.):

“Speaker Johnson is right: ‘We can’t allow Vladimir Putin to prevail in Ukraine because I don’t believe it would stop there. It would probably encourage and empower China to perhaps make a move on Taiwan.’”

And there it is. The assumption that an authoritarian victory will lead to another authoritarian’s invasion of another country.

Sure, the Speaker hedged with “probably.” Moreover, Senator Cornyn was citing an October 27, 2023, interview with the Speaker, wherein he, Johnson, also stated: “We’re not going to abandon them, but we have a responsibility, a stewardship responsibility, over the precious treasure of the American people, and we have to make sure that the White House is providing the people with some accountability for the dollars.” Oddly, the Speaker also hedged by adding “some accountability.”

Yet, this merely reinforces the point. The Speaker felt compelled to regurgitate the Dominio Theory 2.0. His admission that there needs to be “some accountability” underscores the absence of accountability to the American public regarding military aid to Ukraine’s. Excepting the rote invocation of the “Taiwan must be defended” mantra, it also unwittingly reveals policymakers’ almost zero discourse with the American people as to why a free Taiwan is an imperative in protecting our nation’s vital strategic interests. Instead, the public gets the Domino Theory 2.0.

It is beyond the purpose of this essay to delve into how the current efforts to aid the defense of Ukraine may or may not have already indicated to the CCP the probability of successfully subjugating Taiwan. What is obvious, however, is that despite Americans’ disapprobation for Mr. Putin and his regime, the continued funding for Ukraine’s defense is increasingly precarious, as public support is ebbing over time (due in no small part to the absence of “some accountability”).

Now consider this in light of what the Domino Theory 2.0’s proponent’s believe is the “hammer” in their argument for more Ukraine spending: the long-threatened communist Chinese invasion of Taiwan.

As the Vietnam War intensified, one of the arguments of anti-war protestors was that our kids were being sent to die in a country most Americans couldn’t find on a map. A terse expression of how policymakers had failed to adequately explain how America’s vital national security interests were involved, it was an inarguable indictment of the original Domino Theory. But it is important to note that the Domino Theory was initially sufficient for the American public to accept our nation’s involvement in Vietnam. Why?

Due to the Sovietization of eastern Europe, the communist capture of China, and the United States’ subsequent, excruciating experience in the Korean War (or maybe because of the sacrifices entailed to keep South Korea free), the American public recognized communism was an existential threat to our nation and allies. Engendering and perpetuating this recognition constituted a concerted national effort that endured over decades until America and her allies won the Cold War.

Today, this is decidedly not the case.

Feckless policymakers, in league with their rapacious corporate cronies and other greedy elitists, have divined a critical distinction between the defunct Soviet variant of the communist virus and that of the Chinese Communist Party (CCP): unlike the former Soviet Union, western elites can make a buck off the communist China.

But, you may ask, what about communist China’s “unrestricted warfare” against their primary enemy, the hegemonic United States? What about the communist regime’s repression of their own people, including the genocide of the Uighurs? How can American and western policymakers and their elitist cronies do business with a totalitarian government that is leveraging their own captive people as a “market” for western corporate investment? Or threatening to invade their neighboring free republic, Taiwan?

To keep their gravy train rolling requires the public to believe the policymakers’ and the elites false narrative that the communist Chinese regime is magically not in control of their totalitarian state. Somehow, despite all evidence and communist ideology to the contrary, communist China’s business sector (one cannot call it a “private sector”) is a sufficiently independent actor to ignore the regime’s aggressive domestic and global malevolence. In short, policymakers and elites need the American public to play “let’s pretend” along with them.

This deliberate downplaying of communist China’s aims promotes the willful misperception that there is a difference between the communist Chinese regime and its economy—one that is not recognized in that nation’s laws—and has not ended the American people’s distrust of the communist Chinese state. But it has had detrimental impact. While not spurring calls for peaceful coexistence or détente, it has negated a comprehensive estimation of the threat communist China’s unrestricted warfare poses to America’s vital strategic interests, as well as the measures required to protect and defend ourselves and our allies. Truly, then, it is odd how, in pushing the Domino Theory 2.0, policy makers and the elites are aiming to leverage a fear of communist China that they’ve spend decades trying to diminish.

This brings us face to face with the real Domino Theory of communism: namely, how the willful blindness to communist China’s avowed unrestricted warfare against our nation leads to the spread of the vile, murderous, anti-human ideology of communism at home and abroad.

For example, why should communist indoctrinators on campuses not be treated the same as Nazi indoctrinators? Why should an ideology responsible for killing more innocents than any other screed be considered acceptable in any quarter, let alone grow in popularity, especially among young Americans?

Why should Americans oppose the repressive communist Cuban regime, one that exports its hateful ideology and undermines free nations in Latin America, when the most populous and powerful communist nation in the world, China, despite being engaged in “unrestricted warfare” against the U.S., is being treated as a responsible international actor and business opportunity?

Equally, at a time when American elected officials are endangering national security by signing non-disclosure agreements with communist Chinese companies and, in the name of creating jobs their failed policies have precluded by any other means, are doling out billions in taxpayer dollars to them to locate in areas of America where it is all the better to engage in military and corporate espionage and other nefarious activities, why should the public respond to the Domino Theory 2.0’s concern for free Taiwan?

Indeed, while many policymakers, their elitist cronies, and the regime press pooh-pooh the public’s concerns about communist China buying American farmland, why would the public care about communist China invading Taiwan—let alone be prepared to risk World War III over it?

See how those dominoes fall when policymakers and their elitist cronies put money over country and sell our communist enemies the rope they will use to hang us?

Unless and until policymakers and their elitist cronies cease their remunerative apologies for the regime and commence defeating the existential threat of communist China’s unrestricted warfare, the Domino Theory 2.0 is a self-defeating piece of self-satire that merely serves to further disillusion and alienate Americans whose public support is needed to defend our republic and the entire free world.

In the end, of course, the question of whether the Domino Theory 2.0 works as the policymakers and the elites intend is a secondary consideration. The first consideration is to do what is comprehensively necessary as a nation to ensure that question never requires an answer.

On Sunday The New York Times published an explosive and very belated full admission that US intelligence has not only been instrumental in Ukraine wartime decision-making, but has established and financed high tech command-and-control spy centers, and was doing so long prior to the Feb. 24 Russian invasion of two years ago.

Among the biggest revelations is that the program was established a decade ago and spans three different American presidents. The Times says the CIA program to modernize Ukraine’s intelligence services has “transformed” the former Soviet state and its capabilities into “Washington’s most important intelligence partners against the Kremlin today.”

This has included the agency having secretly trained and equipped Ukrainian intelligence officers spanning back to just after the 2014 Maidan coup events, as well constructing a network of 12 secret bases along the Russian border—work which began eight years ago. These intelligence bases, from which Russian commanders’ communications can be swept up and Russian spy satellites monitored, are being used launch and track cross-border drone and missile attacks on Russian territory. 

This means that with the disclosure of the longtime “closely guarded secret” the world just got a big step closer to WW3, given it means the CIA is largely responsible for the effectiveness of the recent spate of attacks which have included direct drone hits on key oil refineries and energy infrastructure. 

“Without them [the CIA and elite commandoes it’s trained], there would have been no way for us to resist the Russians, or to beat them,” according to Ivan Bakanov, former head of the SBU, which is Ukraine’s domestic intelligence agency.

A main source of the NYT revelations—disclosures which might come as no surprise to those never willing to so easily swallow the mainstream ‘official’ narrative of events—is identified as a top intelligence commander named Gen. Serhii Dvoretskiy.

Clearly, Kiev and Washington now want world to know of the deep intelligence relationship they tried to conceal for over the past decade. It is perhaps a kind of warning to Moscow at a moment Ukraine’s forces are in retreat: the US is fighting hand in glove with the Ukrainians. And yet the revelations contained in the NY Times report also confirm what President Putin has precisely accused Washington of all along.

While the lengthy NYT report is full of fresh revelations and confirmation of just how deeply the CIA has always been involved in Ukraine, below are seven of the biggest contained in the story…

Description of secret spy bunker

The report contains a surprisingly detailed description of one of the ‘secret’ underground command centers established by the CIA near the Russian border… location undisclosed of course:

Not far away, a discreet passageway descends to a subterranean bunker where teams of Ukrainian soldiers track Russian spy satellites and eavesdrop on conversations between Russian commanders. On one screen, a red line followed the route of an explosive drone threading through Russian air defenses from a point in central Ukraine to a target in the Russian city of Rostov.

The underground bunker, built to replace the destroyed command center in the months after Russia’s invasion, is a secret nerve center of Ukraine’s military.

There is also one more secret: The base is almost fully financed, and partly equipped, by the CIA.

Elite commando force

Within two years after the 2014 West-backed coup in Ukraine, the CIA had set up a training program for elite Ukrainian operatives:

Around 2016, the CIA began training an elite Ukrainian commando force — known as Unit 2245 — which captured Russian drones and communications gear so that CIA technicians could reverse-engineer them and crack Moscow’s encryption systems. (One officer in the unit was Kyrylo Budanov, now the general leading Ukraine’s military intelligence.)

And the CIA also helped train a new generation of Ukrainian spies who operated inside Russia, across Europe, and in Cuba and other places where the Russians have a large presence.

Ukraine transformed into an “intelligence-gathering hub”

The US intelligence network in Ukraine (which is tantamount to NATO intelligence network too) has in reality been more extensive than pretty much all prior media speculation has envisioned. Ukraine has long been a massive “intelligence gathering hub” for Washington and its partners:

In more than 200 interviews, current and former officials in Ukraine, the United States and Europe described a partnership that nearly foundered from mutual distrust before it steadily expanded, turning Ukraine into an intelligence-gathering hub that intercepted more Russian communications than the CIA station in Kyiv, Ukraine, could initially handle. Many of the officials spoke on condition of anonymity to discuss intelligence and matters of sensitive diplomacy.

Now these intelligence networks are more important than ever, as Russia is on the offensive and Ukraine is more dependent on sabotage and long-range missile strikes that require spies far behind enemy lines. And they are increasingly at risk: If Republicans in Congress end military funding to Kyiv, the CIA may have to scale back.

Huge NYT admission that Putin was basically right

Below is a hugely ironic excerpt from the Times report. The section begins by noting that Putin has repeatedly blamed the US-NATO for expanding its military and intelligence infrastructure into Ukraine. Not only had this precisely been going on for the past decade, as is now being admitted, but was presented by the Kremlin as a key cause of the Russian invasion of Feb.24, 2022. Putin and his officials were adamant on the eve of the invasion that NATO was militarizing Ukraine. The Times appears to now fully admit that, yes – this was actually the case: 

Putin has long blamed Western intelligence agencies for manipulating Kyiv and sowing anti-Russia sentiment in Ukraine.

Toward the end of 2021, according to a senior European official, Putin was weighing whether to launch his full-scale invasion when he met with the head of one of Russia’s main spy services, who told him that the CIA, together with Britain’s MI6, were controlling Ukraine and turning it into a beachhead for operations against Moscow.

…U.S. officials were often reluctant to fully engage, fearing that Ukrainian officials could not be trusted, and worrying about provoking the Kremlin.Yet a tight circle of Ukrainian intelligence officials assiduously courted the CIA and gradually made themselves vital to the Americans. In 2015, Gen. Valeriy Kondratiuk, then Ukraine’s head of military intelligence, arrived at a meeting with the CIA’s deputy station chief and without warning handed over a stack of top-secret files.

According to a new account in the NYT:

On the night of the Maidan coup in Ukraine ten years ago, Feb. 24th 2014, Ukraine’s post-coup spy chief Valentyn Nalyvaichenko arrived at his new headquarters and made his first call to “the C.I.A. station chief and the local head of MI6.”… pic.twitter.com/Dun8mPmnIR

— Aaron Maté (@aaronjmate) February 25, 2024

2014 Coup… and Crimea

The report indirectly references this very critical period which set Ukraine and Russian on their tragic collision course: 

With violence escalating, an unmarked U.S. government plane touched down at an airport in Kyiv carrying John Brennan, then the director of the CIA. He told Nalyvaichenko that the CIA was interested in developing a relationship but only at a pace the agency was comfortable with, according to U.S. and Ukrainian officials.

To the CIA, the unknown question was how long Nalyvaichenko and the pro-Western government would be around. The CIA had been burned before in Ukraine.

…The result was a delicate balancing act. The CIA was supposed to strengthen Ukraine’s intelligence agencies without provoking the Russians. The red lines were never precisely clear, which created a persistent tension in the partnership.

Operation Goldfish

Money and advanced tech given by the CIA has allowed the Ukrainians to establish eavesdropping operations far beyond what they would otherwise be capable of. All the while, elite commando teams were being trained by the CIA in European cities as part of a program called ‘Operation Goldfish’. The NYT reporting includes a bit of a ‘boast’ of the Ukrainians now being able to hack into Russian military networks: 

In the bunker, Dvoretskiy pointed to communications equipment and large computer servers, some of which were financed by the CIA. He said his teams were using the base to hack into the Russian military’s secure communications networks.

“This is the thing that breaks into satellites and decodes secret conversations,” Dvoretskiy told a Times journalist on a tour, adding that they were hacking into spy satellites from China and Belarus, too.

…The CIA began sending equipment in 2016, after the pivotal meeting at Scattergood, Dvoretskiy said, providing encrypted radios and devices for intercepting secret enemy communications.

A stunning admission: “Tiptoeing Around Trump”

Among the most interesting and curious moments of the NYT report is a description of the CIA program’s expanse under the Trump administration. The report suggests that the true scope may have even been hidden from Trump. The Russian hawks in his administration quietly did the ‘dirty work’, we are told: 

The election of Trump in November 2016 put the Ukrainians and their CIA partners on edge.

Trump praised Putin and dismissed Russia’s role in election interference. He was suspicious of Ukraine and later tried to pressure its president, Volodymyr Zelenskyy, to investigate his Democratic rival, Biden, resulting in Trump’s first impeachment.

Official Narrative update: the idea that the CIA has been deeply involved in Ukraine for over a decade waging a secret war against Russia is no longer a conspiracy theory. pic.twitter.com/sxv2472VqY

— David Sacks (@DavidSacks) February 25, 2024

The report then emphasizes, “But whatever Trump said and did, his administration often went in the other direction. This is because Trump had put Russia hawks in key positions, including Mike Pompeo as CIA director and John Bolton as national security adviser.”

And further, “They visited Kyiv to underline their full support for the secret partnership, which expanded to include more specialized training programs and the building of additional secret bases.” Given the attempt to place Trump in a negative light (he had to be ‘tiptoed around’…), it will be interesting to see how he and his campaign respond to the report. But more consequential will be the reaction of Putin and the Kremlin in the coming days.

“We are here today because California Public Safety is in crisis. Crime is steadily on the rise – and our public safety policy is one of the worst, if not the worst, in the nation,” Riverside County Sheriff Chad Bianco said last week while joining lawmakers in Sacramento in support of several new bills dealing with public safety.

Bianco emphasized: I want to make this clear, and I want there to be no mistake in what I am saying … this is not by accident … the driving force in our crisis is a radical Progressive agenda fraudulently called Criminal Justice Reform. This is nothing short of a sick and twisted social experiment where law enforcement is the bad guy and criminals are somehow victims of society and not responsible for their actions.”

This radical “agenda began with the passage of AB 109, the so-called Public Safety Realignment Act. The state government failed to take responsibility for prison overcrowding or their failure to build more prisons and instead forced county jails to house state inmates while simultaneously releasing thousands of felons early. This has pushed our county jails to a near collapse and caused the early release of countless criminals thousands.” 

Bianco continued: “Thousands upon thousands of criminals are being released from custody early – crime is increasing, and our governor is closing prisons instead of building new ones. It defies common sense. In 2014, a complete fraud was perpetrated in California. The so-called Safe Streets and Safe Schools initiative, Prop 47, changed many felonies to misdemeanors, basically legalized drug use, and increased the amount of petty theft to nearly $1,000. In 2016, another lie was perpetrated on voters with the naming and wording of Prop 57, tricking voters into approving the release of thousands of violent criminals onto our streets and neighborhoods. This why we are here everyone knows Prop 47 and 57 are disasters – and yet Governor Newsom adamantly touts it as a success, and lawmakers continue to refuse to fix their mistake and the problems that they have created.” 

“Once crimes are no longer crimes it allows Governor Nome and Attorney General Bon to cite completely flawed data points to support their failures. Californians are now suffering the consequences of a failed social agenda,” he said. 

The reality in California is that criminal justice reforms are an epic failure by Democrats. Now, more and more state leaders are pushing to overhaul these disastrous ballot measures that have transformed some cities in the state into third-world-like conditions. 

Footage showing chaos in California! pic.twitter.com/MAYIQ5vCPJ

— Osaka James (@osakajayms) February 23, 2024

Here’s the sheriff’s entire speech, reminding voters to support public safety after a decade of chaos:

Authored by Chris Bray via ‘Tell Me How This Ends’ Substack,

Give me five minutes to sum up a century, and to show where it leaves us.

Taylor Lorenz interviewing Chaya Raichik is an instant classic of anthropological fieldwork, and it tells us far more about the interviewer and the culture she represents than it tells us about the interviewee. I warn you that watching the whole thing rewards Taylor Lorenz with a click, but just look at the thumbnail to get started:

To get the whole flavor in condensed form, click here to watch an extraordinary five-minute excerpt.

Taylor Lorenz admits in her interview with Libs of TikTok that she hasn’t read any of the books she’s defending and attacking Chaya for trying to remove from public school libraries. She’s shocked when Chaya shows them to her. pic.twitter.com/49ZDAqEnZj

— Ian Miles Cheong (@stillgray) February 24, 2024

They’re talking about graphic sexual materials in schools, and Chaya Raichik shows batshit cat lady some of the images that are at the center of the debate. Then she asks batshit if she thinks it’s reasonable to show those pictures — graphic pictures of anal sex — to young children.

Batshit’s answer, around the 4:22 mark, takes a century of cultural decline and neatly distills it into a few seconds of lunatic babbling:

I guess…I don’t know. I don’t know. Because — you know who I would defer to on that, just because neither of us are sex educators? I would defer that question to a qualified professional, a sex educator, and say hey, you’re an expert, you’ve treated tons, you know, you’ve educated tons of people, you’re a full-time sex educator, you’ve really studied this. What are the appropriate boundaries? I don’t think that myself, as a journalist, or a media personality, I don’t think I’m the right one to make that decision. And I guess I’m wondering why you….I’m wondering why you feel like you’re qualified to be a sex educator when you have no background in that.

Should we sodomize kittens? Should old men recruit toddlers for dildo play? Should you invite middle-schoolers you meet on the street to your golden showers party in Vegas? Look, who can even say, right? I mean, do you even have a graduate degree in the field? There are simply no questions about appropriateness or decency or propriety that you can even begin to think about until the committee approves your dissertation. Bend over and defer, because you don’t have the credentials to understand the question.

Fuck these people, and fuck the hole they’ve dug.

Chaya Raichik’s response:

“I don’t want to be a sex educator — I just don’t want to give kids porn in school.”

Of course. You know right and wrong, and the babbling idiot asking if you’re a credentialed sex educator knows it too. Leave children alone, scumbags, and stop pretending it’s complicated.

Remember that Christopher Lasch wrote about the displacement of family functions by the “helping professions,” starting with the Progressive Era, and remember what Charlotte Perkins Gilman wrote about bread, discussed in the middle of this post. The long descent into rule by experts is a project of cultural disempowerment, in which you — you personally — are being gaslit into abandoning your own eyes and your own mind.

Q: Should we show graphic sexual pictures to very young children at school?

A: Well, I don’t know, what are your credentials?

No more of this. Not another second. No more.