Member Briefing February 12, 2024
Super Bowl: Chiefs Defeat 49ers in Overtime 25-22, Mahomes MVP
Patrick Mahomes engineered a 75-yard touchdown drive to conclude overtime of Super Bowl LVIII, leading the Chiefs to their second consecutive NFL championship. Kansas City became the first team since the 2003-04 New England Patriots to win back-to-back titles in what was just the second overtime game in Super Bowl history.
Mahomes, with his third Super Bowl MVP, now sits alongside Tom Brady (five) and Joe Montana (three) atop the mountain while becoming just the third player to win the award back-to-back, joining Bart Starr (I-II) and Terry Bradshaw (XIII-XIV)
Wholesale Inventories in U.S. Rise 0.4% in December
The Commerce Department's Census Bureau said wholesale inventories increased 0.4% as estimated last month. Stocks at wholesalers declined 0.4% in November. Economists polled by Reuters had expected that inventories would be unrevised. Inventories are a key part of gross domestic product. They fell 2.7% on a year-on-year basis in December. Private inventory investment added 0.1 percentage point to the economy's 3.3% annualized growth pace in the fourth quarter after providing a large boost in the July-September quarter.
Wholesale motor vehicle inventories accelerated 2.9% in December after dropping 2.0% in November. There were also increases in wholesale stocks of professional and computer equipment as well as machinery, paper and medication. But stocks of furniture, apparel and petroleum declined. Excluding autos, wholesale inventories edged up 0.1% in December. The inventory-to-sales ratio was flat at 1.34 months . A year ago the ratio stood at a much higher 1.40. The ratio reflects how long it would take a company to sell all the goods sitting on warehouse shelves. The lower readings vs. last year suggests it’s taking less time for companies to sell their goods.
White House Sets Aside $5B for CHIPs R&D
The White House on Friday touted the U.S. government's plan to spend $11 billion on semiconductor-related research and development and said it was launching the $5 billion National Semiconductor Technology Center. Congress in August 2022 approved the landmark Chips and Science Act. The law provides that $52.7 billion, including $39 billion in subsidies for semiconductor production and $11 billion research and development. It also creates a 25% investment tax credit for building chip plants, estimated to be worth $24 billion.
The centerpiece of the R&D program is the National Semiconductor Technology Center, which will conduct research and prototyping of advanced semiconductor technology. The center is a "public private partnership that the government, industry customers, suppliers, academics, entrepreneurs, venture capitalists to come together to innovate, connect, network, solve problems and allow Americans to compete and out compete the world," U.S. Commerce Secretary Gina Raimondo said at a White House event. The 2022 law also creates the National Advanced Packaging Manufacturing Program and new Manufacturing USA institutes focused on semiconductors.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Prepares Assault on Rafah, Seeks to Allay Fears of 'Bloodbath' – Reuters
- Hamas Military Compound Found Beneath U.N. Agency Headquarters in Gaza - WSJ
- Netanyahu Insists on Rafah Offensive, Orders Civilian Evacuation - BBC
- US Confronts Dangers From 'Not Very Good' Iran-Backed Militants – Reuters
- Invasion of Gaza Border City Looms as Biden Calls Israel’s Offensive ‘Over the Top’ - WSJ
- Netanyahu Rejects Hamas’ ‘Delusional’ Cease-Fire Demands - Politico
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- Russian Forces Push into Ukraine’s Avdiivka, Piling Pressure on New Army Chief - CNN
- Putin Uses Tucker Carlson Interview to Press his Ukraine Narrative, Hints at Swapping WSJ Reporter - AP
- Tucker Carlson Interview: Fact-Checking Putin's 'Nonsense' History -BBC
- Ukrainian Man Accused of Espionage Dies in Russian Prison – Reuters
- Republican Senators Continue to Push for Revisions to Ukraine-Israel Aid Bill - NYT
- Five Facts About Oleksandr Syrskyi, Ukraine's New Army Chief - Reuters
- Russia’s War Economy Cannot Last But Has Bought Time - BBC
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Other Headlines
- Allies of Jailed Ex-Leader Khan Win Most Seats in Pakistan Election- CNN
- Pakistan Army Urges Unity as Ex-PMs Both Declare Election Win - BBC
- Three Dead in Senegal Protests Over Delayed Presidential Election - Reuters
- Millions Continue to Ring in Lunar New Year - BBC
- Trump’s NATO Threat Denounced Across Europe – Politico
- U.S.-China Tensions Have a New Front: A Naval Base in Africa - WSJ
- Taiwan Reports More Chinese Balloons Over Taiwan Strait – Reuters
- U.S. Orders 'Assurances' from Nations Receiving American Weapons - Yahoo
- Argentina's Milei Calls on Two Officials to Resign After Reform Setback - Reuters
- Indonesia Polls Favor Ex-General Seen Bolstering Ties With China – Bloomberg
Policy and Politics
CBO Warns 2025 Debt Interest Costs to Exceed World War II Levels
The federal government is on track to spend $1.6 trillion more than it brings in this fiscal year with new projections published Wednesday showing federal spending is projected to remain unsustainable in the decades to come. The Congressional Budget published its Budget and Economic Outlook on Wednesday. The new projections show Congress has made limited progress on tackling deficits and debt. The projections show troubling financial trends will continue, according to experts.
- The federal debt will continue to climb compared to the nation's gross domestic product or GDP, a metric of economic output, according to the CBO projections. Debt held by the public rises each year in relation to the size of the economy, reaching 116% of GDP in 2034 – an amount greater than at any point in the nation's history.
- From 2024 to 2034, increases in mandatory spending and interest costs outpace declines in discretionary spending and growth in revenues and the economy, driving up debt. That trend pushes federal debt to 172% of GDP in 2054.
- The CBO projected that annual interest payments will reach $1.6 trillion by 2034 and will continue to grow from there. By comparison, interest costs on the country's debt were $879 billion in fiscal year 2023.
- "The deficits that CBO projects are large by historical standards. Over the past 50 years, the annual deficit has averaged 3.7 percent of GDP," according to the report. "In CBO's projections, deficits equal or exceed 5.2 percent of GDP in every year from 2024 to 2034. Since at least 1930, deficits have not remained that large for more than five years in a row."
“High Cost, Little Impact” NAM Critical of New EPA Air Standard
In a move that could have a significant negative impact on manufacturing in the U.S., the Environmental Protection Agency on Wednesday finalized an update to the federal air quality particulate matter standard. The EPA announced a significantly stricter standard for fine soot, lowering the National Ambient Air Quality Standards for fine particulate matter (PM2.5) from 12 micrograms per cubic meter of air to 9 micrograms.
If enacted, the aggressive standard would make it far more difficult and costly for manufacturers to operate in the United States by putting huge swaths of the country in “nonattainment,” meaning that they would not meet ambient air quality standards. Factories in nonattainment areas would be unable to operate. Permitting would become almost impossible, and economic development would grind to a halt. “The Biden administration’s new PM2.5 standard takes direct aim at manufacturing investment and job creation in direct contradiction to the president’s stated goal of strengthening manufacturing in communities all across America,” said NAM President and CEO Jay Timmons.
Senate Advances Ukraine Aide Over Conservatives’ Blockade
The Senate voted 67-27 Sunday afternoon to move the $95.3 billion package another step toward final passage, assembling in the chamber shortly before the Super Bowl kickoff. The package includes $60 billion for Ukraine, $14 billion in security assistance for Israel, $9 billion in humanitarian assistance for Gaza, the West Bank and Ukraine, and $4.8 billion to support allies in the Indo-Pacific. It was stripped of border provisions last week after conservatives objected to a bipartisan border deal.
Senate Majority Leader Chuck Schumer (D-N.Y.) remarked on the rare occasion of voting on Super Bowl Sunday but reminded colleagues of the high stakes of the moment. Senate Republican Leader Mitch McConnell (Ky.), speaking right after Schumer, warned that failing to support Ukraine would put America’s allies at risk by giving China a “green light” to project power in Asia and the Indo-Pacific.
Health and Wellness
Thousands of Seniors are Still Dying of Covid-19. Do We Care?
The covid-19 pandemic would be a wake-up call for America, advocates for the elderly predicted: incontrovertible proof that the nation wasn’t doing enough to care for vulnerable older adults. But decisive actions that advocates had hoped for haven’t materialized. Today, most people — and government officials — appear to accept covid as a part of ordinary life. Many seniors at high risk aren’t getting antiviral therapies for covid, and most older adults in nursing homes aren’t getting updated vaccines. Efforts to strengthen care quality in nursing homes and assisted living centers have stalled amid debate over costs and the availability of staff. And only a small percentage of people are masking or taking other precautions in public despite a new wave of covid, flu, and respiratory syncytial virus infections hospitalizing and killing seniors.
In the last week of 2023 and the first two weeks of 2024 alone, 4,810 people 65 and older lost their lives to covid — a group that would fill more than 10 large airliners — according to data provided by the CDC. But the alarm that would attend plane crashes is notably absent. (During the same period, the flu killed an additional 1,201 seniors, and RSV killed 126.)
Read more at Kaiser Health News
NYS COVID Update
The Governor updated COVID data for the week ending January 12th.
Deaths:
- Weekly: 102
- Total Reported to CDC: 82,582
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,898
- Patients in ICU Beds: 202
7 Day Average Cases per 100K population
- 12.7 positive cases per 100,00 population, Statewide
- 17.0 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Why AP Called the Nevada GOP Caucuses for Trump: Race Call Explained - AP
- Panic, Fury and Blame: Inside the White House After Report Targets Biden’s Age - WSJ
- Democrats Rally Around Biden as Report Raises Age Concerns - BBC
- The Unpredictable But Entirely Possible Events That Could Throw 2024 Into Turmoil - Politico
- Takeaways From the New York Special Election Debate - CNN
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Caterpillar Has Blowout Earnings Report
Caterpillar rose to a record high last week after the excavator and bulldozer builder reported a fourth-quarter profit that topped expectations. Caterpillar’s construction equipment sales in North America rose 4% in the quarter, with government-funded infrastructure projects helping drive demand. The company said increased spending on computer data centers is boosting demand for its power-generating engines.
CEO Jim Umpleby told analysts that the supply-chain constraints that held down production in recent years have eased, but added "our manufacturing operations are not running as efficiently as I would like." Sales rose 3% to $17.07 billion, in line with the estimates of analysts polled by FactSet. Earnings jumped to $2.68 billion, or $5.28 a share, from $1.45 billion, or $2.79 a share, a year ago. Last year, the company booked a $925 million goodwill impairment charge in its railroad business. Per-share adjusted earnings, which strip out one-time items, of $5.23 topped analyst projections by 47 cents.
IBM to Install Artificial Intelligence Unit Chip Cluster at UAlbany
IBM is installing a cluster of IBM Artificial Intelligence Unit (AIU) prototype chips at the Center for Emerging Artificial Intelligence Systems (CEAIS) at the University at Albany (UAlbany) in New York. Announced by Governor Kathy Hochul in October 2022, CEAIS is a $20 million joint venture between IBM and the UAlbany.Using cloud computing technology and hardware provided by the IBM Research AI Hardware Center, CEAIS will make the university one of the biggest AI test beds in the US and enable students and researchers to run complex AI models.
The AIU cluster is the first to be installed on a university campus anywhere in the world. Currently, the only other site with a cluster is IBM Research, headquartered at Yorktown Heights, New York, where it is being used to power internal production workloads on IBM watsonx. The AIU, debuted by IBM in late 2022, is a complete system-on-a-chip (SOC) that has been designed to run and train deep learning models faster and more efficiently than general-purpose CPUs.
Mexico Passes China as No. 1 Source of US Imports
Data released by the U.S. Department of Commerce show a dynamic upset of global trade, highlighted by a $130 billion flip between China and Mexico. Trade with Mexican goods grew by nearly $21 billion and Chinese merchandise fell by $119 billion. Put another way, China’s exports decline last year was roughly the total amount of U.S. imports from India and Brazil combined.
While near-shoring, the practice of moving manufacturing from Asia closer to the United States to shorten supply lies, may have played a factor, it doesn’t look like it played much or a role outside of Mexico. Imports to the U.S. from South and Central America were down nearly 6%, a much better showing than the Middle East’s 17.4% drop in goods sent to the U.S. or the Pacific Rim’s 11.7% decline (driven almost entirely by China’s 20.3% dive in exports to the U.S.). The overall decline in imports to the U.S. is the first major drop since pandemic-fueled declines in 2020.
Farley: Ford’s Next-Gen EVs Will Need to Turn Profit In First Year
Jim Farley has set the bar: Ford Motor Co.’s second-generation of electric vehicles will need to be profitable within 12 months of being launched later this decade. The president and CEO of Ford said Feb. 6 the company’s “ultimate competition” in the EV market will be Tesla Inc.’s planned cheaper EV as well as Chinese competitors. To measure up to those products, he said on Ford’s fourth-quarter earnings conference call, his team will push hard to lower manufacturing costs and trim capital spending where it can: Capex this year is forecast to be between $8 billion and $9.5 billion versus $8.2 billion in 2023.
Another key factor in meeting the profitability goal, Farley told analysts and investors, will be “a super-talented skunkworks team” that has been working on a platform for making lower-cost and smaller EVs that will be better able to integrate technologies for which Ford can set up subscriptions. Ford has used isolated development teams several times throughout the past decade to launch strategic, or just-plain-cool projects. The 2017 GT supercar came out of a similar skunkworks team with many engineers sneaking into a basement design studio after hours.
Maersk Forecasts Steep Drop in Profits
Investors expecting an adventure on the high seas with A.P. Moller-Maerskare now experiencing that sinking feeling instead. Shares plummeted as much as 18% in early trade on Thursday after the shipping giant suspended its share buyback program and forecast a profit drop of up to 90% for 2024. The culprit has actually been hiding in plain sight for a while: a looming wave of new freight capacity poised to enter the world’s shipping lanes amid still-weak global trade. Meanwhile, the main factor pushing up shipping rates and shares—the Houthi attacks on Red Sea shipping, which is forcing ships to take longer routes—could easily prove transitory.
Maersk, which released its full-year earnings Thursday morning, made no bones about the challenging outlook. The shipper forecast that its underlying Ebitda could be anywhere between $1 billion and $6 billion in 2024—down from $9.8 billion last year. It was a spectacular $36.8 billion in 2022. According to Maersk’s estimates, freight rates will revert to pre-disruption levels as record new-vessel deliveries make their way into service even if the Red Sea problems persist for the whole year.
DOD Official Highlights Workforce, Supply Chain Challenges
Aviation and Missile Commander Maj. Gen. Tom O’Connor visited an industry partner in Decatur, GA on Jan. 29 to meet with the leadership and discuss the importance of a strong defense industrial base. Joining O’Connor in a fireside chat at the event was former commander of the Army Materiel Command Paul Kern, who opened the informal discussion with his thoughts about the newly published Department of Defense National Defense Industrial Strategy.
The AMCOM commander said there were two key efforts: investing in the workforce in order to maintain the skills necessary to create the capacity and capability needed to be successful and ensuring supply chain resiliency. “COVID definitely brought to the light some of the challenges within the supply chain and made us think through some of the critical vulnerabilities,” he said. “This policy is certainly the right step forward to mitigate some of those risks.” “We look for our next-generation combat systems to include a lot of composite materials,” he said. “We are starting to transition our organic industrial base to set the conditions to ensure that we have the ability to maintain, repair and leverage the composites.”
Read more at The Redstone Rocket
ABB and Microsoft partner to advance industrial generative AI
ABB and Microsoft have been collaborating for several years in the deployment and development of integrated industrial IoT solutions, artificial intelligence, machine learning and visualization technologies. Now, the two are integrating generative AI capabilities for a more intuitive user interaction with ABB Ability Genix Industrial Analytics and AI Suite and applications, leveraging Microsoft’s Azure OpenAI Service. The new application Genix Copilot will provide industry executives, functional specialists, and shop floor engineers with real-time production insights. ABB predicts these insights have the potential to extend asset lifespan by up to 20% and minimize unplanned downtime by up to 60%.
In addition to AzureOpenAI Service, Microsoft will leverage Azure ML services, a cloud-based service for building, training, and deploying machine learning models. “Genix AI services leverages Azure ML services for identifying anomalous operating conditions and predicting failure of specific assets,” Vinod Ninan, product director for IoT platform suite at ABB Process Automation says. Microsoft’s Azure Cognitive Services provides application programming interfaces (APIs) that allow developers to easily add AI capabilities to their applications.
Pratt & Whitney Targets 2029 for Upgraded F-35 Engine Deliveries"
An upgrade to the F-35’s engine offered by Pratt & Whitney is set to enter service by 2029, company officials said Tuesday, adding that the program remains “on track” despite the lack of an approved fiscal year 2024 budget. Speaking during a briefing with reporters, Pratt Vice President for the F135 program Jennifer Latka said the company is planning for a preliminary design review (PDR) for the engine upgrade in May and aims to finish its design phase with a critical design review “in roughly the middle of 2025.” The program, known as the Engine Core Upgrade (ECU), is then set to run its first engine test by 2026 and field in 2029, according to Latka.
Still, the company’s previous timelines projected slightly earlier dates for the ECU program. For example, late last year Latka said the PDR was planned for January, and in June 2023 at the Paris Air Show, Pratt President of Military Engines Jill Albertelli said the ECU could be fielded by 2028.
Gas Stoves, Dishwashers and Dryers—the Growing Energy Battle Over Appliances
When Jessica Romer pulls clothes out of her new washer-dryer, they feel cool and a bit damp but dry to the touch within seconds. Using no electric heating element or natural gas, the unit’s dryer employs a pump to draw in ambient heat from its surroundings, making it 50% more energy efficient than traditional models—though without producing that warm, toasty feel. Whether Romer’s heat-pump dryer represents the pinnacle of energy efficiency or just the latest stop on a long climb is part of a debate in Washington.
The Energy Department requires appliance makers to meet efficiency standards that are periodically reviewed and tightened—a rule that sparked the recent tussle over gas stoves. Manufacturers are pushing for a change. An industry group says appliances are far more efficient than versions sold a few decades ago, and some can’t improve much more without harming performance. It wants evolving technology to drive the standards, not government timetables. “The reality of the laws of physics that require some amount of energy and water for home appliances to keep food cold and to clean and dry clothes and dishes has to be recognized,” Kevin Messner, chief policy officer of the Association of Home Appliance Manufacturers, told a congressional hearing last year.