Member Briefing January 24, 2024
Trump Wins New Hampshire Primary
Former President Donald Trump defeated former South Carolina Gov. Nikki Haley in the New Hampshire Republican primary, winning over crucial Granite State voters. The New Hampshire primary has long wielded the power to make or break presidential candidates. Today, all eyes were on the GOP race as Haley tried to build momentum against Trump with a coalition that included moderate and independent voters.
The former president is expected to win more than 55% of the vote to Haley’s 38%, according to AP VoteCast, a survey of voters who said they were participating in the election. After the loss, Haley said “this race is far from over” but her failure to score an upset in the state means she'll face pressure to quit the race and clear the way for Trump’s third GOP nomination.
Pentagon Makes It Official: U.S. Industrial Decline Is Undermining National Defense
Earlier this month the Department of Defense released its first-ever National Defense Industrial Strategy, setting forth a framework for revitalizing the sinews of American economic strength most critical to military preparedness. The document is strikingly similar in tone to a series of industrial assessments issued during the Trump administration, the last of which warned that the “steady deindustrialization” of the United States in recent decades had left the nation militarily vulnerable.
The Biden administration sees the problem, and the Trump administration saw it too. The evidence of industrial decline has become so overwhelming that a bipartisan consensus now exists to reverse trends leaving the U.S. vulnerable to exploitation and blackmail by rivals like China. China now generates as much manufacturing output as all four members of the Quadrilateral Security Dialogue—the U.S., Japan, India and Australia—combined. It regularly beats American companies to market in new technologies potentially relevant to defense such as low-cost drones and high-density batteries.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Israeli Military Suffers Deadliest Day Since Gaza War Began - WSJ
- An Isolated Israel Doubles Down on War in Gaza — At All Costs - Bloomberg
- Israeli Troops Cut Off Khan Younis After Suffering Worst Gaza Loss - Reuters
- Vast Majority of Voters Back Israel Over Hamas: Poll – The Hill
- Israel’s Economy Undergoes Wartime Transformation - Bloomberg
- Risk of 'Pockets of Famine' in Gaza, World Food Programme Says – Reuters
- 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
- Decree Could Give Ukrainian Citizenship to Foreign Fighters, Nation's Diaspora - VOA
- EU Tackles New $22 Billion Plan to Boost Ukraine Military Aid - WSJ
- 'Send Back Our Husbands' - Russian Women in Rare Protest - BBC
- Russian Missile Attacks on Ukrainian Cities Leave Dead and Wounded - Politico
- Ukraine Isn’t Running Out Of Tanks. It’s Running Out Of Tank Parts. - Forbes
- NATO Inks Twin Artillery Deals Worth $1.2B to Replenish Allies’ Stocks, Help Ukraine – Breaking Defense
- Film About Russia’s Destruction of Mariupol Gets Nod for Oscars – Politico
- 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
- U.S. and U.K. Launch Major Strike on Houthi Sites in Yemen - WSJ
- Are the EU and China Hurtling Towards a Trade War? - SCMP
- WHO Notes Alarming 30-Fold Rise in Measles in Europe - BBC
- Red Sea Crisis Sparking Air Cargo Surge - SupplyChain
- A War in All but Name Simmers at Israel-Lebanon Border - WSJ
- Ecuador's President Seeks U.S., European Financial Support Amid War on Gangs - NBC
- Desperate Chinese Property Developers Resort to Bizarre Marketing Tactics - WSJ
- 2023: Highest Number of Humanitarian Emergencies in a Decade - VOA
- Doomsday Clock Stays at 90 Seconds to Midnight – BBC
Policy and Politics
N.Y. Coalition Looking for Increased Funding for Roads and Bridges
Back in December, a coalition of disparate groups, including counties, contractors, tourism, farmers, unions and business associations wrote to Gov. Kathy Hochul concerned about the rollout of an initiative to fund the state’s aging infrastructure. In the letter, the coalition stated that while New York started receiving additional funds from the Infrastructure Investment and Jobs Act, the New York state Department of Transportation’s investment in its core highway and bridge funding declined from 2021 to 2022. The coalition is afraid that decline will be repeated next year.
Michael Elmendorf, president and CEO of Associated General Contractors of New York State, told Capital Tonight that inflation is eating up a good portion of the increased funding, which is a problem because the state of the roads is “bad.” The coalition is looking for at least an additional $400 million to be added to the 2024-25 budget for core highway construction to keep funding at a similar level to when the five-year program was initially adopted in 2022.
Read more at NY State of Politics
Biden Has Forgiven Billions in Student Loans. Who Has Gotten the Relief?
Under the Biden administration, more than 3.7 million student loan borrowers have had their debt forgiven by various executive actions. Many borrowers, largely those on income-driven repayment (IDR) plans and in the Public Service Loan Forgiveness (PSLF) program, have received relief, but they represent only a small fraction of the 44.5 million Americans with student debt.
The administration has forgiven $136.6 billion for more than 3.7 million student loan borrowers in the first three years of Biden’s presidency. On Friday, the administration announced almost $5 billion in debt relief for almost 74,000 people, including $3.2 billion for those on the PSLF program, which is available to people in government jobs and certain nonprofit workers. The universal student debt relief option Biden previously tried hinged on the emergency powers that were left over from the pandemic, and which the Supreme Court deemed inefficient for such a big policy. The administration is now attempting to create a new student debt relief process through the Higher Education Act (HEA).
What Is Humanitarian Parole? How an Obscure Biden Immigration Policy Became So Controversial
An obscure aspect of immigration law called humanitarian parole has suddenly become the primary sticking point preventing lawmakers from closing a deal on a border-security package that would unlock billions of dollars in security aid to Ukraine. Republicans have insisted that, as part of any deal, the government’s ability to use parole be curtailed. The White House, in turn, has so far guarded the power more fiercely than any other aspect of immigration law Republicans have wanted to change.
In the immigration context, parole is an authority the government can use to grant a foreigner official entry into the U.S. when the person can’t get a visa in time—or can’t qualify for one. Typically, someone is granted parole for a fixed amount of time, anywhere from a few weeks to a couple of years. And, under some circumstances, the person can apply for a work permit under that temporary status. According to the law that created it in 1952, parole can be granted to someone in the case of an urgent humanitarian need or if his or her presence in the U.S. would carry a significant public benefit. Those definitions haven’t been tested in a crucial way, though, because, until recently, parole was used in a relatively narrow set of circumstances.
Health and Wellness
That Nagging Cough You Have Might Not be COVID. Here’s How to Determine if it’s the JN.1 Variant, RSV, the Flu, or a Cold Instead
You—or your child—have body aches, fever, and cough. Is it RSV, COVID, the flu, a common cold, or something else? And does it even matter anymore? Unfortunately, it’s impossible to definitively tell the conditions apart without testing—even by cough, experts tell Fortune. But the answer will still matter, if your condition is severe and a treatment plan is needed. While there are distinct differences between all four illnesses, they can present differently, depending on the patient. That’s why it’s impossible to tell the them apart by symptoms alone.
At-home testing kits are available for COVID, of course. But while at-home collection kits exist for RSV and the flu, none will give you results in home. A trip to your doctor or urgent care will be necessary. (Your doctor can run tests to see if you have a virus that causes common colds. But such a test won’t be necessary unless you have severe symptoms.)
Election 2024
Treasury Secretary Janet Yellen is Hitting the Campaign Trail to Talk up Bidenomics - Marketplace
Here’s Why The New Hampshire Primary Could Make Or Break Nikki Haley’s Campaign - Forbes
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
A Majority of States Added to Payrolls to Bring 2023 to a Close
A majority of states added to payrolls to end the year, as 39 states posted job growth over the month, up slightly from November's tally. Although still positive, the pace of employment growth in most states appears to be moderating. A normalization in labor market conditions throughout 2023 also has resulted in slightly higher unemployment rates across the nation. The count of states experiencing an uptick in their unemployment rates fell in December, yet the vast majority of states have seen a trend rise over the second half of the year.
California led the way and registered a gain of 23,400 jobs, ahead of Texas and Florida which added 19,100 and 16,500 jobs, respectively. New Jersey added 12,100 jobs over the month—the Garden State's best gain in 11 months. Conversely, payrolls declined in 11 states. Notably, headcounts slipped by 11,800 in Virginia—Old Dominion's first monthly loss since October 2022. Although most states are still adding jobs, the pace of growth within each state generally moderated in Q4-2023. New York added 8,300 jobs.
U.S. Union Membership Rate Hits Fresh Record Low in 2023 -Labor Dept
U.S. union membership rates fell to a fresh record low in 2023 despite it being a year of headline-grabbing organized labor strikes from the Rustbelt to Hollywood and some continued organizing successes at companies such as Starbucks. The union membership rate fell to 10.0% from what had already been a record-low 10.1% in 2022, the Labor Department said on Tuesday in an annual census of the U.S. organized labor landscape.
Union membership has been in steady decline since the 1970s and is now less than a third of its peak rate in the 1950s when more than 30% of workers were in a union. That said, unions carry outsized political clout, especially in states critical to the outcome of this year's presidential race like Michigan and Pennsylvania where membership rates are higher than the national average. In Michigan, 12.8% of workers were in a union, down from 14% a year earlier, the report showed, while in Pennsylvania union membership rates bucked the trend to climb to 12.9% from 12.7%.
Boeing Faces New Pressure as United Questions MAX 10 Order
United Airlines CEO Scott Kirby on Tuesday said the airline, which says it has ordered 277 of the MAX 10 jets with options for another 200, would build a new fleet plan that does not include a model already mired in regulatory and delivery delays. U.S. regulators have grounded most of Boeing's MAX 9 jets for checks after a plug replacing an unused exit door tore off an Alaska Airlines jet on Jan. 5, forcing an emergency landing.
Industry watchers have been looking for concrete signs that Boeing's woes with the MAX 9 and the legacy of earlier MAX safety groundings are undermining support for the larger MAX 10, which makes up more than a fifth of outstanding MAX orders. After disappointing MAX 9 sales, Boeing is betting on its newest proposal, the larger-capacity MAX 10, to dent the runaway lead of Airbus's A321neo at the busiest end of the market.
Mfg Industry Quarterly Earnings Reports – Good Results – Dimmer Prospects
3M: Reported better-than-expected quarterly earnings, but gave a lackluster 2024 outlook. Adjusted fourth-quarter earnings, which excludes nonrecurring items such as litigation costs and other special items, were $2.42 a share, above the FactSet estimate. Fourth-quarter sales fell 0.8% to $8.01 billion, also surpassing the FactSet consensus. It projected 2024 adjusted per-share earnings of $9.35 to $9.75, below the FactSet consensus of $9.90. The stock fell more than 9% in morning trading; before Tuesday, shares have fallen about 12% in the past 12 months. WSJ
General Electric: Reported fourth-quarter earnings that beat expectations but provided a downbeat outlook. GE is focused on its aerospace business, which makes jet engines, after spinning off its healthcare division last year and planning to separate its renewable-energy business later this year. Earnings fell but surpassed analysts' expectations. Revenue rose 15%, with aerospace revenue increasing 12%. GE sees adjusted per-share earnings between 60 cents and 65 cents, below the FactSet estimate of 70 cents. Shares dropped more than 1% in early trading; before Tuesday, the stock had jumped 70% over 12 months.
Johnson & Johnson: Reported higher sales and earnings, helped in part by the company’s MedTech segment. Adjusted per-share earnings were $2.29, a penny ahead of the FactSet estimate. Sales rose 7.3% to $21.4 billion, also ahead of the FactSet consensus. Sales at the MedTech segment gained around 13%. J&J tentatively agreed to pay about $700 million to settle an investigation brought by more than 40 states into the marketing of its talcum-based baby powder.
Lockheed Martin: reported lower fourth-quarter revenue, dragged down by lower sales in its missiles and fire-control unit as well as its rotary and mission systems segment. Adjusted earnings, which strips out severance charges and other one-time items, were $7.90 a share, surpassing the FactSet estimate. Revenue declined less than 1% but still beat expectations. For 2024, Lockheed is targeting revenue of $68.5 billion to $70 billion, mostly above analysts expectations.
Proctor & Gamble: Reported mixed quarterly earnings and revenue for its fiscal second quarter of 2024 as price hikes helped boost revenue 3%. The company also narrowed its outlook for full-year adjusted earnings per share to a range of $6.37 to $6.43, although its forecast for unadjusted earnings fell due to its plans to write down Gillette and restructure certain markets. Earnings per share: $1.84 adjusted vs. $1.70 expected. Revenue: $21.44 billion vs. $21.48 billion expected. P&G reported fiscal second-quarter net income attributable to the company of $3.47 billion, or $1.40 per share, down from $3.93 billion, or $1.59 per share, a year earlier.
RTX: The former Raytheon Technologies posted better-than-expected sales on strong military orders. Adjusted earnings at the aerospace and defense company were $1.29 a share, above analysts' estimates. Sales rose to $19.93 billion from $18.09 billion, beating estimates. For 2024, RTX sees per-share earnings mostly above analyst estimates.
United Airlines: The airline said late Monday that it expects to lose money in the first quarter as the continued grounding of Boeing’s 737 MAX 9 jets weighs on its finances.United projected an adjusted first-quarter loss of 35 cents per share to 85 cents per share, assuming the planes remain grounded through the end of the month. The airline said it has seen “durable” demand for travel.
Pentagon Approves B-21 Raider for Production
Following the first flight of the Air Force’s newest stealth bomber, the Pentagon has formally approved the B-21 Raider program to begin production, the Pentagon’s top acquisition official confirmed to Breaking Defense today. “Production of the B-21 ‘Raider’ stealth bomber is moving forward. This past fall, based on the results of ground and flight tests and the team’s mature plans for manufacturing, I gave the go-ahead to begin producing B-21s at a low rate,” Under Secretary of Defense for Acquisition & Sustainment William LaPlante said in a statement.
Further detail about the contract award value and delivery dates were not immediately available. News of the bomber beginning production was first reported by Bloomberg. Set to replace both the B-2 Spirit and B-1 Lancer, the nuclear-capable Raider is designed for long-range missions with stealth features that can help it slip through enemy air defenses. The Air Force plans to buy at least 100 of the bombers and enter them into service in the mid-2020s.
Oil Prices End at Highest Level in a Month on Supply Risks, ‘Positive Risk Sentiment’
Oil prices settled Monday at their highest level in about a month, finding support from ongoing risks to global supplies as a rally in U.S. equities lifted prospects for the economy and energy demand. West Texas Intermediate crude for February delivery settled at $75.19 a barrel on the New York Mercantile Exchange on the contract’s expiration day. Natural gas for February delivery NGG24, settled at $2.42 per million British thermal units, down 4%.
Oil traders are “starting to realize, with the stock market breaking record highs, that it’s unlikely that we’re going to see an economic recession,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch. That is “adding to demand expectations at a time when the supply situation looks to be tightening.” Tensions in the Red Sea and tensions between China and Taiwan show that the risk to oil supply is “high at the same time North Dakota oil production took a hard hit from the cold, reducing output for at least the rest of the month,” Flynn said.
Tough Start to the Year for Tesla
Only a few weeks into the new year, Tesla Inc. has been put through the wringer. In just two weeks, the company’s stock is down about 16% YTD, cutting roughly $120 billion from the company’s market value thanks to a slew of largely negative headlines. Last year, CEO Elon Musk stressed that they needed to make cars cheaper, but without reducing their own profit margins, which have taken a significant hit over the past year. Although still the most valuable car company in the world, Tesla’s gross margin has steadily fallen the past six quarters, tumbling to 17% in its most recent earnings compared to 25% the year before. With executives set to report fourth-quarter earnings on Jan. 24, recent news doesn’t suggest the trend will reverse itself any time soon.
In October, Swedish technicians covered by the auto worker union IF Metall decided to strike when Tesla executives refused to sign a collective bargaining agreement. In the United States Tesla is Looking to stave off UAW organizing efforts. The company recently announced via internal communication that workers in multiple roles at its Fremont, California, plant and other gigafactories would receive a “market adjustment pay increase.”
“Password Spray” Attack - Microsoft Hacked by the Russians
Microsoft announced that a Russian state-sponsored cybercrime group known as Midnight Blizzard gained a beachhead onto Microsoft’s network through a “password spray attack.” The breached account was a “test tenant” account, meaning it was probably used for testing and development purposes versus a live email account used by an employee on a regular basis.
As explained by BleepingComputer, password spraying means collecting a list of potential login names and attempting to log into all of them with the same password. The hackers either eventually run out of passwords or hit paydirt and breach an account. And, as also pointed out by BleepingComputer, this only works if the account doesn’t have additional protections like multi-factor authentication. The Russian hackers then used permissions attached to a hacked account to access corporate email accounts “including members of our senior leadership team and employees in our cybersecurity, legal, and other functions,” according to Microsoft’s notice.