WSJ : In China, Xi Jinping Faces a Difficult Year on Several Fronts

In China, Xi Jinping Faces a Difficult Year on Several Fronts
The pivot away from ‘zero Covid’ could have profound health, social, political and economic impacts

Chinese leader Xi Jinping went from cementing his supremacy last fall to battling a public-health and economic crisis into the new year—fallout from an abrupt pivot from “zero Covid” that could cast a shadow over China for months to come.

Mr. Xi secured a norm-breaking third term as Communist Party chief in October, and stacked the leadership with allies who sang their leader’s praises and trumpeted his vision of a thriving China. That rosiness dissolved amid intensifying economic pain and a wave of public protests against Mr. Xi’s zero-tolerance Covid strategy of lockdowns and border controls, followed by a haphazard dismantling of pandemic protocols that threatens to further batter the world’s second-largest economy.

Some analysts describe China’s tumultuous exit from zero-Covid policies as largely self-inflicted pain, exacerbated by Mr. Xi’s domineering style. The repercussions could be profound for Mr. Xi, who had touted his pandemic strategy as an example of the Communist Party’s superior governance.

“This is likely to be a year of turbulence for Xi Jinping,” says Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy in Singapore.

The party’s energies are set to be consumed managing the economic and social impact from the end of zero Covid, as well as restoring public trust, Mr. Wu says, adding that the paramount leader’s prestige is at stake. “Xi claims all the credit but deserves all the blame, too.”

Seeking ‘reasonable’ growth
Chinese leaders have struck a stoic tone. They promised to deliver “reasonable” economic growth in 2023, calling on officials to stimulate domestic demand while signaling plans to further ease regulations that have triggered a downward spiral in the property market and hampered private business investments.

Mr. Xi also brooked no criticism of his top-down methods. At a Politburo meeting in December, Mr. Xi insisted on “absolute loyalty” to his leadership “under any circumstance,” while appearing to blame local officials for faulty implementation of his policies.

“We have now entered a new phase of pandemic controls, where tough challenges remain,” Mr. Xi said in a televised New Year message. “Let’s make extra efforts to pull through, for perseverance is triumph, unity is victory.”

Many economists expect a fraught year ahead for China, citing the risk of surging Covid-19 infections disrupting supply chains and overwhelming the healthcare system. Though some analysts forecast a rebound in commerce and consumption after fresh outbreaks subside, possibly in the spring, it remains to be seen how firm this recovery will be.

“The transition to living with Covid will be a bumpy one, not least because of the abrupt change in policy itself, which leaves many people unprepared (and unvaccinated) and the medical system inadequately geared for the surge in cases,” Bert Hofman, director of the East Asian Institute at the National University of Singapore, wrote in a recent newsletter.

Tentative consumers
Chinese consumers appeared tentative as 2022 drew to a close. Domestic trips edged up 0.4% over the New Year holiday weekend compared with the same period a year earlier, while tourist spending ticked up 4%. Movie box-office receipts fell more than 45% year-over-year.

Beijing also faces an uphill battle in rebuilding confidence among businesses, which increasingly regard Mr. Xi’s government as capricious in setting policy, says Jörg Wuttke, president of the European Union Chamber of Commerce in China.

In a 2022 survey of its members, the EU Chamber reported that 60% of respondents reported increased difficulties in doing business in China, compared with 47% in the previous year, in part due to the opaque regulatory environment and the increased politicization of business. “We associate China with a very well-planned, well-organized government, and all of a sudden we see it capitulate in the face of Omicron,” Mr. Wuttke says. “That takes away a lot of trust in the government’s abilities.”

The onus therefore falls upon the Xi administration to restore public confidence, economists and business groups say. “Chinese citizens know who is in charge,” says Andrew Collier, managing director of Orient Capital Research in Hong Kong. “The huge death toll, coupled with the collapsing property market, are going to test the people’s trust in Beijing in 2023.”

On the diplomatic front, Beijing’s transition to a postpandemic future has raised hopes that a revival of cross-border interactions could help mitigate geopolitical tensions with the West. Mr. Xi himself has already re-emerged from a self-imposed absence from the international stage by attending a number of multilateral summits in the latter months of 2022.

China’s ties with Western governments remain fraught over Beijing’s support for Moscow throughout the Russian invasion of Ukraine. Tensions with the U.S. still simmer even as Mr. Xi and President Biden, who met in November, pledged to restore dialogue and a measure of stability in a fractious relationship.

“Like Washington, Beijing seeks greater stability in the near term while investing in efforts to deter and counter perceived threats,” says Jessica Chen Weiss, a Cornell University professor who studies Chinese foreign policy. Tensions aren’t likely to subside, she says, “without reciprocal actions to lower the temperature,” while the campaigning ahead of the 2024 presidential elections in the U.S. and the island democracy of Taiwan could add complications.

Beijing, which claims Taiwan as its territory, continues to regard with deep suspicion U.S. efforts to strengthen cooperation with the island. Since then-House Speaker Nancy Pelosi’s August visit to Taipei, which China condemned, the People’s Liberation Army has conducted an array of combat drills that showcased capabilities to cut off Taiwan. Nonetheless, the Biden administration has pledged to continue providing arms and training to help Taipei defend itself.

Notwithstanding recent setbacks, Mr. Xi seems set to double down on his priorities, says Mr. Wu, the Singapore-based academic. “In difficult times like these, he often emphasizes the need for greater ‘fighting spirit,’ and insists that they must overcome any challenges.”

WSJ : U.S., Russia Agree to Use Russian Ship for Backup Space Station Mission

U.S., Russia Agree to Use Russian Ship for Backup Space Station Mission
NASA is in discussions with SpaceX if there is an emergency at research facility

The space agencies for the U.S. and Russia agreed that a Russian spacecraft will fly next month to the International Space Station to retrieve three people, after a leak emerged on the Russian ship that flew them to the facility.

Officials are still determining when the trio would board the empty ship, called Soyuz MS-23, for a return trip to Earth after it docks to the research facility. They are expected to remain in orbit for several extra months, beyond their planned six-month mission.

The U.S. and Russian space agencies have continued to work together on space missions, despite ongoing tensions between the two countries over the war in Ukraine, officials from the National Aeronautics and Space Administration have said. The space station, which relies on technology from both NASA and Roscosmos, is operated by international partnership that also includes space agencies for Europe and Japan.

In December, the Russian-made spacecraft that transported NASA astronaut Frank Rubio and Russian cosmonauts Sergey Prokopyev and Dmitri Petelin to the facility began to leak, according to both agencies.

The leak was caused by a micrometeorite that punctured a component on the vehicle, Roscosmos said. Joel Montalbano, NASA’s program manager for the space station, said at a briefing Wednesday that images of the problem pointed to that debris as the cause of the leak. “So far we are in concurrence with Roscosmos,” he said.

NASA and Roscosmos are also evaluating options in the event of an emergency, officials said, given the damage to the Russian Soyuz ship.

For one option, NASA has been in discussions with SpaceX about transporting additional people off the station in an emergency, Mr. Montalbano said. Under that potential scenario, one or more additional people would board the SpaceX Crew Dragon craft that is docked right now to the facility for a return flight to Earth, he said.

Sergei Krikalev, executive director for human space flight programs at Roscosmos, said at the briefing that the Soyuz vehicle that sustained the leak could be used in an emergency situation, but with added risk.

“With our NASA colleagues, we are looking for several options to minimize risk,” such as shifting at least one crew member onto SpaceX’s ship, he said.

Space Exploration Technologies Corp., the formal name for the Elon Musk -led company, didn’t respond to a request for comment.

In October, SpaceX transported two NASA astronauts, one Japanese astronaut and a Russian cosmonaut to the space station on a mission for NASA, which has hired aerospace companies to handle crew and cargo runs to the facility.

Anna Kikina, the Russian cosmonaut on board, joined the SpaceX flight as part of a crew swap between Roscosmos and NASA. Under that deal, NASA’s Mr. Rubio flew to the station on the Russian spacecraft that dealt with the leak.

NASA, Roscosmos and other space agencies have been setting plans for the future of the space station, where astronauts and cosmonauts work on experiments and conduct scientific research.

Yury Borisov, head of the Russian space agency, said this past July that Roscosmos would pull out of the facility at some point after 2024. Mr. Krikalev, the agency’s human-spaceflight executive, later said during a briefing with NASA officials that a decision about Russia’s role in the station could occur as soon as 2025 or even in 2030.

NASA wants to keep the station in operation through 2030. The agency is working in parallel with space companies, such as Jeff Bezos ‘s Blue Origin LLC and Northrop Grumman Corp. , on developing privately run stations.

WSJ : George Santos Raised Money for Company the SEC Says Was a Ponzi Scheme

George Santos Raised Money for Company the SEC Says Was a Ponzi Scheme
New York congressman, under scrutiny for his finances and lies about his past, was paid by Florida-based company, now in receivership after it was sued by regulator

WASHINGTON—Embattled Rep. George Santos persuaded at least one person to make a six-figure investment in a Florida-based company that the U.S. Securities and Exchange Commission later said was a Ponzi scheme, according to people familiar with the matter and documents viewed by The Wall Street Journal.

Mr. Santos was hired in 2020 to raise capital for the company, Harbor City Capital, and landed at least one significant investment from a wealthy investor, the people said. When the investment failed to deliver on the promised returns, according to one of the people, Mr. Santos sought to reassure the investor by saying he had personally raised nearly $100 million and had invested his own family’s money in Harbor City.

Mr. Santos, a 34-year-old freshman Republican member of Congress from Long Island, is facing calls to resign from Democrats and a number of New York Republicans amid investigations into his campaign finances and lies he told during his campaign, pertaining to his education, work history, wealth, ancestry and other matters. The Republicans’ narrow majority in the House made his vote crucial for the election of Kevin McCarthy as speaker.

Mr. Santos has admitted to lying about working at Goldman Sachs Group Inc. and Citigroup Inc. but has defended his experience in the financial-services sector, saying in one interview: “I did work in the industry for a number of years.”

Mr. Santos’s financial-industry experience, according to his résumé, included a job in 2017 with a company that organized conferences for money managers and private-wealth investors, as well as his 2020 stint at Harbor City Capital. Harbor City has been in receivership since soon after the SEC accused it of being a Ponzi scheme in a 2021 civil lawsuit. Mr. Santos was paid for work he did at Harbor City, according to the receiver, Katherine Donlon. She declined to comment further on Mr. Santos’s work for Harbor City.

The SEC declined to comment on Mr. Santos’s role at Harbor City. Mr. Santos has denied wrongdoing and previously said in interviews that he wasn’t named as a defendant in the SEC’s lawsuit against the company. A spokesperson for Mr. Santos didn’t respond to a request for comment for this article.

People who raise money from investors and are paid in the form of commissions generally have to be brokers and be registered to work with a licensed brokerage firm. The SEC routinely brings civil-enforcement actions against people who conduct the work of brokers but aren’t licensed to do so; it has filed no such action against Mr. Santos. A search of a database maintained by the Financial Industry Regulatory Authority, or Finra, doesn’t show Mr. Santos registered as a broker. The terms under which Mr. Santos was paid for his work at Harbor City couldn’t be determined.

Those raising money for smaller businesses or investment managers are sometimes called “finders,” and they are often paid for recruiting investors. Since the companies seeking the capital are private, the deals often don’t involve audited financial statements or other disclosures that investors in the public markets rely upon.

Mr. Santos didn’t disclose any income from Harbor City on the financial-disclosure forms that federal candidates are required to file when running for office, as earlier reported by the Washington Post.

At Harbor City Capital, Mr. Santos’s job was to bring in investors for the company’s financial offering, one of the people familiar with the matter said. Harbor City said in a 2020 press release that Mr. Santos would serve as regional director of its New York City office and “will represent Harbor City Capital Corp primarily with domestic and international family offices, institutional investors, and high net worth clientele.”

Harbor City promised investors returns from investing in digital marketing campaigns. Such advertising campaigns typically aren’t investor-funded but rather paid for by corporations through their ad agencies as part of their standard marketing budgets.

In investor material viewed by The Wall Street Journal, Harbor City was offering what it alternatively called “secured bonds” or “fixed income strategy” investments. Harbor City promised investors high yields of up to 20% with a secured principal—in some instances claiming that investors “can’t lose” or that their initial investment was “100% safe.” At times the company described the investment vehicle as “digital marketing arbitrage,” suggesting that Harbor City was able to take advantage of inefficiencies in digital advertising to deliver guaranteed returns.

At the time Mr. Santos worked there in 2020, Harbor City proposed using a financial instrument known as a Standby Letter of Credit, or SBLC, to protect investor principal, offering extremely high returns with what the company assured investors was almost no risk, investor materials show.

In its 2021 lawsuit, the SEC said Harbor City and its affiliates had no underlying business activity or revenue and appeared either to be paying dividends to other investors or diverting funds for the personal use of Harbor City’s chief executive officer and founder, J.P. Maroney. Mr. Maroney didn’t respond to repeated requests for comment.

The SEC alleged that Mr. Maroney, a Florida businessman, ran the company as a Ponzi scheme since 2015 and defrauded more than 100 investors out of more than $17 million. In connection with the SEC’s lawsuit, numerous investors provided sworn statements in Florida federal court describing the same pattern: investing in Harbor City and receiving a handful of the promised distributions of returns before they abruptly stopped. The investor recruited by Mr. Santos experienced just that pattern, according to one of the people familiar with the matter.

Mr. Maroney has said in a court filing that he is the subject of a continuing criminal investigation into Harbor City’s activities, but no criminal charges have been made public. The Harbor City receiver has taken possession of a multimillion-dollar property, as well as Mr. Maroney’s four Jet Skis and his Mercedes automobile in an attempt to recoup money for investors, according to court documents.

Mr. Santos has been facing numerous inquiries about his campaign-financing and business activities since his deceptions came to light, most prominently through reporting by the New York Times. The district attorneys in Queens and Nassau counties, as well as federal prosecutors from the Eastern District of New York, are investigating the congressman, according to people familiar with the matter.

Brazilian authorities said they intend to reopen a criminal investigation into Mr. Santos over charges that he committed check fraud in 2008 in Brazil—a case that had been suspended because police had been unable to find him. Mr. Santos previously said he hasn’t committed any crimes.

WSJ : Turkey’s Approval of NATO Expansion Could Take Months

Turkey’s Approval of NATO Expansion Could Take Months
Turkish lawmakers likely won’t vote on Swedish, Finnish membership bids before election, says presidential aide

ISTANBUL—The Turkish government is unlikely to seek parliamentary approval for Ankara to back Sweden and Finland’s entrance to NATO before Turkey’s national election later this year, a top aide to President Recep Tayyip Erdogan said Saturday.

Ibrahim Kalin, who is Mr. Erdogan’s spokesman and effectively serves as his national-security adviser, told journalists in Istanbul that the government was unlikely to seek a vote in parliament due to public opinion in Turkey, which is broadly supportive of Mr. Erdogan’s hard line against Sweden and Finland over their relations with Kurdish separatists.

“The opposition will ask all kinds of questions, and we cannot risk our political capital as we go into elections in the next three, four months,” he said.

Mr. Erdogan’s ruling party has a strong majority in parliament, but both the president and his Justice and Development Party, or AKP, are facing a close reelection bid this year due to Turkey’s struggling economy. Turkey’s largest opposition parties have joined Mr. Erdogan in strongly criticizing Sweden in particular over allowing alleged Kurdish separatists into the country.

Mr. Kalin said the election would most likely take place in May, slightly earlier than a constitutional deadline in June.

The comments come as Western leaders are intensifying efforts to convince Turkey to drop its opposition to the two Nordic countries’ joining the alliance before the North Atlantic Treaty Organization summit in Lithuania in July.

Finland and Sweden applied to join NATO last year in a historic shift in security policy for both countries, responding to Russia’s invasion of Ukraine. Every member of NATO has approved the Nordic nations’ entry except for Turkey and Hungary, and Hungarian officials have said they would send the matter to parliament early this year.

Mr. Erdogan first threatened to veto Sweden’s and Finland’s entrance to NATO last year, citing what he said were ties to Kurdish militant groups including the Kurdistan Workers’ Party, or PKK, which is considered a terrorist group by the U.S. and the European Union. Members of the PKK’s Syrian branch are part of a U.S.-led military coalition fighting Islamic State, and the Kurdish group also has some support among Kurdish communities in Europe.

Turkey signed an agreement with Finland and Sweden in June, a deal intended to resolve the dispute through a security dialogue. The two countries also dropped barriers to arms sales to Turkey, and Sweden in November amended its constitution to make it easier to pass counterterrorism laws.

NATO Secretary-General Jens Stoltenberg has said that Finland and Sweden have upheld their obligations under the June agreement, but Turkish officials say they want more concrete action from Sweden, citing a protest earlier this week in which demonstrators in Stockholm hanged an effigy of Mr. Erdogan. Turkish officials also say they want more suspected Kurdish militants extradited by Sweden.

“We are not in a rush here, they are in a rush to join NATO,” said Mr. Kalin.

Mr. Erdogan has played a role as a go-between between Russia and Ukraine since the Kremlin launched its invasion last year, helping to broker talks over a deal that included the resumption of Ukrainian grain via key Black Sea ports, prisoner exchanges and other issues. The Turkish president has sought to leverage his role in the crisis to expand his international influence and improve his standing within Turkey and internationally.

The Turkish official’s comments come as the Biden administration prepares to seek congressional approval for a $20 billion sale of a new fleet of F-16 warplanes to Turkey. Administration officials intend the prospect of the sale to prod Turkey to sign off on Finland and Sweden’s accession to NATO, The Wall Street Journal reported on Friday.

Mr. Kalin said that congressional approval of the F-16 deal would depend on whether the Biden administration would pressure members of Congress such as Senate Foreign Relations Committee Chairman Bob Menendez, who has vowed to oppose the sale on human-rights grounds. He said congressional opponents of Turkey seemed to have an “endless” list of demands for Ankara.

“They will continue to oppose whatever comes from Turkey,” Mr. Kalin said of Turkey’s critics in the U.S. Congress.

“I hope they don’t go down that way, so the F-16 thing does not become hostage to Sweden and Finland joining NATO or other demands. This has been going on for too long already,” he said.

The Biden administration’s plans to seek congressional approval for the F-16 deal coincides with a visit to Washington next week by Turkish Foreign Minister Mevlut Cavusoglu, where he is expected to discuss NATO expansion and a range of other issues with U.S. officials.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-George Santos’s Lies Were Known to Some Well-Connected Republicans. Mr. Santos ignored advice to drop out of his House race after an extensive background check in 2021 uncovered his deceits, people with knowledge of the matter said. The episode reveals that a small circle of Republican campaign professionals had indications of his lies far earlier than the public.
-Russia’s claim to seize a Ukrainian town exposes rifts among forces. After Russia said it had taken Soledar, a leader of a mercenary group accused Moscow of stealing credit. Ukraine said forces were still fighting there.
-How do Western goods reach Russia? A long line of trucks through Georgia offers a hint. With Western sanctions barring many imports, a lot of what Russia needs now travels a slow, crowded truck route through the Caucasus Mountains.
-Russian forces have targeted Kiev, the Ukrainian capital, and other cities with missile and drone attacks off-and-on for months, devastating the power grid and forcing rolling blackouts.
-The Treasury Department expects to begin taking “extraordinary measures” to continue paying the government’s obligations before what is expected to be a big fight to raise the borrowing cap.
-Washington adjusts to new landscape after installation of special counsel. The documents investigation involving President Biden is sure to muddy the waters politically as former President Trump argues persecution over his own inquiry.
-Presidents and Their Prosecutors: Since the days of Watergate, every president but one has faced a special prosecutor scrutinizing them or their associates. President Biden now joins them.
-Sweden says it has uncovered a rare earth bonanza. A state-owned mining company said it had found Europe’s largest deposit of the vital minerals used in electric vehicles and other green technology.
-A German Village is at center of a fight over coal and climate is cleared out. For years, activists tried to save Lützerath from being razed to make way for the expansion of a coal mine. This past week, the police moved them out.
-Biden and Kishida vow to bolster US-Japan Alliance as China’s Power grows. The two leaders discussed tensions with China, North Korea and Russia and plans for deterrence in Asia with US troops and missiles.
-The Iranian government has executed a former defense official, a dual UK citizen, on spy charges. Alireza Akbari, previously a senior military and defense official, had moved to Britain a decade ago. He had been detained since 2019.
-Saks Fifth Avenue Wants to Add a Casino Atop Its Flagship Store. Hudson’s Bay Company, the owner of the department store, unveiled plans for a casino in Midtown Manhattan, joining the race for one of three full-fledged gambling licenses in the city.

THE FINANCIAL TIMES
-Bonds are on track for their best January performance in more than three decades, spurred by a growing conviction that inflation has peaked on both sides of the Atlantic. The Bloomberg Global Aggregate index, a broad gauge of global fixed income, has delivered a 3.1% return so far this month. If that continues for the rest of January it will be the biggest rise logged in the first month of the year in records going back to 1991.
-Nelson Peltz is set to take on Disney in the most high-profile proxy battle in years as he seeks shareholder support for a board seat. The co-founder of Trian Fund Management has been on a media blitz, comparing the company to communist China in a television interview with CNBC, setting the tone for a protracted and bitter fight.
-Germany’s defense minister Christine Lambrecht plans to step down, according to a German government source, following a series of errors that badly hurt her credibility as commander-in-chief of the country’s armed forces. The person said Lambrecht could announce her decision to resign as early as next week. Her resignation will trigger huge uncertainty at a time when Germany is facing a momentous decision on whether to break with longstanding policy and supply battle tanks to Ukraine, a move that chancellor Olaf Scholz has so far been reluctant to make.
-Russia’s defense ministry on Friday claimed its forces had taken complete control of the frontline Ukrainian settlement of Soledar, known for its underground salt mines and tunnels, after weeks of heavy fighting in and around the town.
-Chinese scholars involved in Alibaba’s lobbying operation published essays and submitted reports in support of the company to authorities in Beijing, including the State Administration for Market Regulation, which hit the group with a record fine for antitrust abuses in 2021. Alibaba provided the scholars with money, data, information and interview opportunities to bolster their research, according to more than 10 academics, government officials and company employees who spoke to the Financial Times.
-UK Prime Minister Rishi Sunak has accused Iran of a “cowardly act” after the Islamic republic executed an Iranian-British national convicted of espionage. Iranian state media said the Islamic regime had hanged Alireza Akbari, who had held various senior positions in Iran’s security and military institutions, after he was accused of spying for Britain’s MI6 spy agency.
-There has been a significant shift in western attitudes to Ukraine’s war with Russia. Thinking has moved a long way since the hopes earlier in the war that it would be enough to keep Ukraine in the fight until an opportunity for a peaceful settlement came along. The consensus now among leading western states is that the only way to persuade Russia that it cannot succeed in its war of conquest is for Ukraine’s armed forces to liberate much more territory.
-Fears that Germany could enter recession have eased after the federal statistical agency reported that the economy grew by 1.9% in 2022 and was likely to have stagnated in the fourth quarter. Data released by the agency suggested the boost delivered to private consumption by government fiscal support measures, combined with the lifting of coronavirus pandemic-era lockdowns, had outweighed the economic fallout from the conflict in Ukraine.
-US Treasury secretary Janet Yellen has warned the US will hit its $31.4T borrowing limit next week and could run the risk of a damaging debt default starting in early June, setting the stage for a high-stakes fiscal negotiation between the White House and Congress in the coming months.
-Donald Trump’s business empire will be forced to pay about $1.6M in penalties after being convicted of running a 13-year tax fraud scheme in which executives were handed “off-the-books” perks including a luxury apartment, Mercedes cars and school tuition.
-Qatar is seeking to keep momentum behind its push into sport, as the tiny desert state moves to diversify its economy away from oil and gas, further its soft power reach and burnish its credentials as investor.
One option now under consideration is an investment in the English Premier League. Qatar Sports Investments, the state-backed entity that bought PSG in 2011, recently held tentative talks with Tottenham Hotspur, according to a person familiar with the matter, although those at the London-based club denies it has discussed the sale of an equity stake.
-BlackRock’s Larry Fink has admitted that “negative markets had a substantial impact” on the world’s largest fund manager last year, wiping out $1.4T of its assets and hitting profits. In an internal memo seen by the Financial Times, the chief executive said the operating environment “is unlike anything we’ve seen in decades”.
-Prada is taking decisive steps towards implementing the complex succession that will eventually lead to Lorenzo Bertelli taking over from his parents, Patrizio Bertelli and Miuccia Prada, who have led the 110-year-old retailer since the late 1970s. The group, which also owns brands Miu Miu and Church’s, named former Luxottica chief Andrea Guerra as successor to co-chief executives Bertelli and Prada in December. It also appointed Gianfranco D’Attis, the departing boss of Dior US, as the first ever chief of Prada, the company’s main brand. Both executives start this month. Lorenzo, 34, who currently heads the group’s corporate social responsibility department, is expected to take the helm within a few years.

NY POST
-In Jamestown, New York — about as far as one can get from the southern border without entering Canada — residents are bracing for an influx of migrants that could cause a crisis similar to the one that has New York City facing a fiscal cliff. “If a city of 8 million people can be overwhelmed by a couple thousand migrants, imagine what a couple hundred can do to overwhelm a small rural community upstate?” warned state Sen. Joe Borrello (R-Jamestown). “It wouldn’t take many migrants to overwhelm the system,” he added. At least 35 migrants from Colombia are known to have arrived in the tiny upstate city since late last year, with others believed to be living and the shadows and more certainly on the way, a leading Hispanic advocate told The Post.
-President Biden back at Delaware home where classified documents were stashed in garage. The 80-year-old commander-in-chief arrived Friday evening at the Delaware home where he kept classified documents from his time as vice president next to his 1967 Corvette Stingray, one day after Attorney General Merrick Garland appointed a special counsel to investigate the matter. Friday’s trip is Biden’s 52nd to Wilmington since taking office in January 2021. According to a tally by The Post, Biden has spent all or part of 151 days of his presidency at the 6,850-square-foot mansion.Meanwhile, Hunter Biden lived at Delaware home where classified docs were kept. President Biden already admitted guilt — he's just betting Garland doesn't prosecute him, or Trump.
-Dem Rep. Hank Johnson suggests classified documents ‘planted’ in Biden office, garage. Rep. Hank Johnson (D-Ga.), who once worried Guam would sink from overpopulation, floated a theory on Thursday that sensitive papers found at Biden’s Delaware home and an office he used at a Washington, DC, think tank could have been “planted.”
-A conservative group alleges in a new IRS whistleblower complaint that the University of Pennsylvania’s Biden Center for Diplomacy and Global Engagement flouted non-profit rules — in part by giving the future president (Biden) and his allies “no show” jobs. The center burst into the national spotlight Monday with the revelation that classified documents dating from President Biden’s vice presidency were found at its Washington office, ultimately leading to the appointment of special counsel Robert Hur to determine whether Biden or others in his orbit illegally mishandled records.
-L’Oréal is bringing inclusivity to the makeup chair in 2023. The beauty giant announced on Jan. 3 that the brand will be releasing the world’s first handheld lipstick applicator designed for people with limited hand and arm mobility. L’Oréal-owned Lancome will pilot the ultra-precise computerized applicator, called HAPTA. The tool was displayed recently at the Consumer Electronics Show (CES) 2023 in Las Vegas.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: 10 Barron’s panelists help make sense of increasingly complicated market dynamics as part of their annual gathering

Cover Story:
-10 Barron’s panelists help make sense of increasingly complicated market dynamics as part of their annual gathering, which was held on Jan. 9 in New York City. The participants agree on a few fundamentals: The age of free money is over. Valuation matters again in equity markets, unlike in recent years, and fixed income finally lives up to its name, offering ample income and a viable alternative to stocks. Regardless of the economic backdrop—and few see a deep or lengthy recession in 2023—bulls and bears alike should find plenty to entice them amid the rubble of 2022. Prospective winners include, among many others, broken IPOs, dividend payers, international issues, even the shares of tech companies getting religion on costs.

Interview:
No interview in this weekend’s edition

Tech Trader:
-Even without major moves from Congress, 2023 is shaping up as a year in which the government will have a big impact on tech. For example, coming this September is the US vs. Google, the longstanding Department of Justice case asserting antitrust violations by the search giant. The crucial question is whether Alphabet has furthered a monopoly by paying Apple for the right to be the preferred search engine on Apple devices. Any ruling that breaks up the cozy relationship would be bad for both sides—Apple provides more than half of Google’s search traffic, according to some estimates, while collecting an annual fee reportedly above $10 billion. (The actual number isn’t disclosed.) A court-ordered change could be a big win for Microsoft Bing.

The Trader:
-Inflation, while slowing, is still present, though it might not be for much longer. Signs of looming price declines are starting to show up. Take apartments, which about 40M Americans call home. They felt the inflationary pain in 2022, with average rents up about 7% year over year, according to the Bureau of Labor Statistics. But those high prices have started to pinch, and now it seems like no one is looking to move. Real estate service provider RealPage notes that demand had “all but evaporated” by the end of 2022. “Volume always precedes price,” says one real estate investor, and he’s right. Rents will have to fall to get people thinking about moving again. Car prices are also too high. The average new-car price in the US hit a record $49,507 in December, according to data provider Cox Automotive. Those prices are starting to hit demand as well, and forcing companies to reconsider. Tesla, for one, cut prices for some of its vehicles by up to 20% this past week as inventory piled up and order rates took a dive.
-Barron’s calls Martin Marietta Materials a stock for all seasons. Martin Marietta is a producer of aggregates, the industry term for stone, sand, and gravel, and it’s a pretty solid business. It has some natural barriers to entry—it isn’t easy to find and start a new quarry—and high regional market shares give players some pricing stability. It can weather both inflationary and deflationary environments, and despite the weakening economy, its outlook for growth is improving.
How is that possible? For starters, Martin Marietta has between 20% and 30% share of the markets it operates in, including Texas, Florida, Georgia, and Colorado, and aggregates markets are largely local because it’s too expensive to ship gravel long distances. Rocks are dirt cheap, but pricing has been moving up over time. In the third quarter, Martin Marietta realized $16.65 for a ton of aggregate, up from $13.40 five years ago, an average annual gain of about 4%. Volumes at Martin Marietta have grown at an annual rate of about 6.5% over that span, both organically and through acquisition.

Features:
-It’s looking like a buyer’s market for companies looking for acquisitions and partnerships, according to many of the pharmaceutical and medical technology executives who gathered at this year’s J.P. Morgan healthcare investor conference, which wrapped up in San Francisco on Thursday.
“We’re getting lots of calls from companies that literally we talked to six months ago,” says Geoff Martha, CEO of Medtronic, a medical device manufacturer. The change to the medical device and biotech sector has come just in the past few months. As recently as April, when the SPDR S&P Biotech exchange-traded fund dropped 40% from its early 2021 peak, Merck CFO Caroline Litchfield told Barron’s that biotech leaders still thought their firms were worth what they had been before the market fell. Now biotech boards are no longer counting on the prices ticking back up soon. “It’s changed completely in terms of both the deal structures they’ll contemplate, the valuations that they’re thinking about,” says Andrew Dickinson, CFO of Gilead Sciences.
-Rising rates have made all types of annuities more interesting investments, but two in particular are worth considering now: Multi-year guaranteed annuities—MYGAs, for short—are the insurance world equivalent of a bank certificate of deposit. Just like with CDs, rates have shot up in the last year. Unlike CDs, gains in a MYGA are tax-deferred until you take the money out. And these same tax deferral in fixed index annuities, which are otherwise far more complicated products. They promise returns linked to a myriad of different indexes. In many FIAs, your investment doesn’t lose value when the index drops, however, you only get a portion of the gains when it rises. The upshot is that higher rates allow insurers to give investors a bigger share of gains during up years.

European Trader:
-Mining and commodities trading giant Glencore was one of the FTSE 100’s top performers last year, and it could be set to repeat the trick in 2023.
Glencore was the third-best performing stock in 2022, behind defense giant BAE Systems and publisher Pearson, climbing 47%, largely driven by record thermal coal prices. The miner’s exposure to coal is also what makes it an attractive proposition in 2023, while China’s reopening should push metals prices higher, adding to Glencore’s upside. Over the longer term, its status as one of the world’s leading producers and marketers of copper leaves it well placed to benefit from the global transition toward greener energy.

Emerging Markets:
-Despite an episode of unrest in the Brazilian capital, the markets promoted Brazil over the past week. The iShares MSCI Brazil ETF climbed 6% since rioters swarmed the Congress and presidential palace in Brasilia on January 8. The yield on 10-year sovereign bonds shrank more than half a percentage point to 12.4%. Brazil’s event bears extensive parallels with the US insurrection a year and two days earlier—only Brazil’s elite united much more decisively to defend their democracy afterwards. Society seems inclined to follow for now.
-China is reopening faster than many anticipated after policy makers’ abrupt U-turn on their harsh Covid policies. But unlike past Chinese recoveries, this one is unlikely to set off a surge in demand for commodities and send prices soaring, including for oil. That’s good news for global central bankers trying to tamp down inflation.
When Europe and the US started to reopen following pandemic restrictions, it sparked inflationary pressures by increasing supply chain snarls. Demand outstripped capacity, and created a surge in prices, including for hotels, dining out and airfare as consumers tried to make up for lost time.

Commodities:
-You say crypto, I say tomato or better corn: Over the past two years, cryptocurrency companies like FTX, Coinbase and Cash App lured several athletes, in equity and sponsorship deals ,while paying them the company’s shares, or crypto itself. That didn’t work out very well for some high-profile athletes. You might ask one Tom Brady about this. The high profile failures may have injected a dose of more common sense into athletes’ ambitions. Cincinnati Bengals quarterback Joe Burrow, Boston Celtics forward Blake Griffin, New York Islanders forward Anders Lee, Toronto Blue Jays pitcher Kevin Gausman, and Milwaukee Bucks forward Khris Middleton are among the pro-athletes who recently purchased a 104-acre corn and soy Iowa farm for $5M.The financial acquisition was made through investment vehicle Patricof Co. The plan is to lease the land to farmers, in hopes of a single-digit-percentage annual return—24 athletes in total are part of the purchase, according to FrontOfficeSports.

Streetwise:
-This week Jack Hough talks about noted activist investor Neslon Petz’s appetite for turnarounds and penchant for PowerPoint presentations to highlight the errors of smug CEO’s. This past week, Peltz targeted no less than Bob Iger, CEO of Disney. Peltz argues that Disney’s adjusted show-business earnings should have climbed from $9.4B before the Fox deal to $13.3B with promised synergies, but have instead fallen to $3.1B, or $7.1B not counting streaming losses. “Is there a large Fox write-down on the horizon?” his report asks. Debt is up, the dividend is gone, and the stock has stunk. As Peltz puts it, Disney has spent $162B since 2018 on deals, content, and capital investments, and the result is a halving of earnings per share.

FT : Climate graphic of the week: ‘alarming’ trends revealed in weather reports

Climate graphic of the week: ‘alarming’ trends revealed in weather reports
Findings from US agencies serve as ‘call for action’ to mitigate against rising temperatures


Last year was the fifth warmest on record, with global land and ocean temperatures about 1.1C warmer than during the pre-industrial era, according to the US’s top climate scientists.

The data, from the National Oceanic and Atmospheric Administration (NOAA) and the National Aeronautics and Space Administration (Nasa), come days after similar findings from the EU’s earth observation programme, Copernicus, which also ranked 2022 as the fifth warmest year, and said temperatures had been about 1.2C higher than before human-driven warming set in.

A fourth group, the Geneva-based World Meteorological Organisation, reached a strikingly similar conclusion, estimating that the average global temperature in 2022 was about 1.2C above pre-industrial levels.

The data are “pretty alarming”, said Nasa’s administrator Bill Nelson. “Science leaves no room for doubt,” he added. “What we’re seeing is our warming climate [. . .] it’s a warning all of us.”

“If our leaders [. . . ] do not act on this scientific data, our ice sheets are going to continue to melt, our oceans will become more acidic, extreme weather will intensify [. . .] This is a call for action.”

Last year brought a series of devastating extreme weather events to countries around the world, from floods to wildfires and droughts. Scientists are clear that such events will become more common and intense with every fraction of a degree of warming.

Under the Paris climate accord signed in 2016, almost 200 nations pledged to strive to limit warming to 1.5C. But the WMO said on Thursday that the “likelihood of — temporarily — breaching the 1.5C limit of the Paris Agreement is increasing with time”.


According to NOAA, the 2022 annual Antarctic sea ice extent was at a near-record low, second only to 1987, and the 10-warmest years on record have all occurred since 2010.

The group found that Europe and Asia had their second warmest years, behind 2020, while Copernicus concluded that 2022 had been Europe’s hottest summer on record. NOAA’s analysis of global surface temperatures ranked last year as the sixth warmest year.

The unusual heat last year occurred despite the “temperature-suppressing” presence of the La Niña phenomenon. La Niña involves the large-scale cooling of the Pacific Ocean’s surface, and has persisted for three consecutive years.

“Even those years with a temporary cooling influence from La Niña, such as 2022, are now much warmer than all years before 2015,” the UK’s Met Office said. 2022 was the ninth successive year to have “equalled or exceeded 1C above the pre-industrial period”, the group said.

However, both Copernicus and NOAA said this week that the chances of a fourth La Niña year were waning. Instead, the chances of an occurrence of the opposing phenomenon, El Niño, which has a warming effect, had increased, said Michelle L’Heureux, a scientist at the US National Weather Service’s Climate Prediction Center.

There was roughly a “50 per cent chance” of El Niño occurring later this year, she said. However, similar indications were present at the beginning of the last few years, “so that does give us pause,” she added. “I would not be shocked to even see a return of La Niña.”

One of the last significant El Niño events was in 2016. Meteorological agencies said that year was the warmest on record, raising concerns that the phenomenon’s return could fuel one of the hottest ever years in 2023.

FT : Charting a road map for the European Political Community

Charting a road map for the European Political Community
Europe’s latest new organisation unites 44 states but its purpose and value remain open questions

First, the results of last week’s poll. In response to the question of whether China’s economic influence and soft power in Europe are too strong, some 75 per cent of you said yes, 11 per cent were on the fence and 13 per cent said no. Thanks for voting!

Non-Europeans, and for that matter most Europeans, deserve a medal if they can name and define the purpose of all the institutions set up since the second world war to defend peace, liberty and prosperity on the continent — or just to provide an opportunity to meet, talk and not do very much.

In a nerd-free world, many would struggle to distinguish between the European Council and the Council of Europe, or to remember much about the European Social and Economic Committee or the European Neighbourhood Policy.

Now we have the European Political Community, or EPC. In October it held its inaugural meeting in Prague, with 44 countries in attendance. In spring, everyone will reconvene in the Moldovan capital of Chişinău. Later on in the year the EPC will meet in Spain, and then the UK will play host in the first half of 2024. This map, prepared by Geopolitical Intelligence Services, shows the group’s members, bringing together all European countries except Belarus and Russia.

First and foremost, the EPC is an informal club for diplomatic discussions among equals. It doesn’t have a central secretariat or financial resources of its own, as pointed out by Sir Michael Leigh, a former senior European Commission official responsible for EU enlargement.

The EPC’s member governments do not wish it to overlap with weightier institutions such as Nato, the EU, the G7, the G20, the OSCE or the OECD, as Christian Turner writes for the UK in a Changing Europe research unit.

Who is in the EPC and who is out
The EPC doesn’t include Russia or Belarus — and so the gathering in Prague carried a certain symbolic significance as a moment of collective opposition to the Kremlin’s aggression in Ukraine.

At the same time, the US and Canada are not part of the EPC, which is therefore a purely European entity — welcome evidence of autonomy to those who would like Europe to stand more on its own feet in the world. On the other hand, the EPC isn’t directly involved in what, for Europe, is the most critical decision-making of our time — the west’s military and financial support for Ukraine’s war of self-defence.

Neither, strictly speaking, is the EPC a club of democracies, since it includes countries with a questionable record on civil liberties, free institutions and the rule of law such as Azerbaijan, Hungary, Serbia and Turkey.

However, the EPC is distinctive in that it brings together all 27 EU states, some that have been trying to join for many years (mainly in the Balkans), some that have just been invited to join (Moldova and Ukraine), some that are outside but aligned with the EU in various ways (Iceland, Norway and Switzerland), some that will probably never join (Armenia and Azerbaijan) and one that has just left (the UK).

Is the EPC an excuse for putting off EU enlargement?
Immediately after President Emmanuel Macron of France gave a speech last May proposing the EPC’s creation, some countries expressed concern that the new group might serve as a way of being nice to them while ultimately keeping them out of the EU.

“Nothing that falls short of EU membership would be acceptable,” warned Dmytro Kuleba, Ukraine’s foreign minister.

The EPC “should not and must not be a substitute for full European Union membership”, said Dimitar Kovačevski, North Macedonia’s prime minister.

To their credit, however, the French quickly reassured these doubters that the EPC would not be used as a vehicle for blocking their progress towards the EU. For this reason, the EPC should in principle have more staying power than the now largely forgotten 1989 proposal of François Mitterrand, the late French president, for a “European Confederation” of states.

Central and eastern European countries, which had just thrown off Soviet-imposed communism, correctly saw Mitterrand’s initiative as an attempt to fob them off with something less than full EU membership.

How can the EPC be useful in practical terms?
At the EPC meeting in Prague, discussions were held on issues such as peace, security, climate change, energy, migration and economic co-operation. As Suzana Anghel wrote in a perceptive piece for the European parliament’s research service, the informal nature of the Prague talks recalled the type of meetings once held by leaders of the old European Economic Community — the EU’s forerunner.

It was not until December 1974 that EEC leaders decided to hold regular, formal summits as the European Council, the body that unites EU heads of state and government. After that step, a kind of bureaucratisation of high-level policymaking took hold — something the EPC’s member states want to avoid.

What, then, did the EPC achieve in Prague, and what can it do in the future?

Well, the Prague event provided an opportunity for some useful talks on the sidelines to try to defuse the long-running conflict between Armenia and Azerbaijan. Unfortunately, things have gone into reverse on that front since October.

The Prague meeting also saw the UK quietly expand contacts with its former EU partners, leading to an agreement in December on British participation with EU and North Seas countries on renewable energy projects. The British government goes so far as to call this “a new phase of UK-EU co-operation”.

The UK’s willingness to host the EPC in 2024 is another sign that even a neuralgically Eurosceptic Conservative government is apparently comfortable with hanging out with other Europeans in a new, loose format.

If things go well, the EPC will start promoting further practical initiatives on energy and infrastructure. This might be a way of integrating EU candidate states, such as the Balkan countries and Ukraine, into some EU activities in the period — likely to last many years — before they qualify as full members, as Milica Delević writes for the European Council on Foreign Relations.

But I still have some concerns.

The EPC’s relevance would be severely tested if some crisis arose, for example, between Greece and Turkey, or if Moldova came under even more pressure than it already is from Russia — on which, please read this incisive analysis by Jakob Hedenskog for the Stockholm Centre for eastern European Studies.

It would be unfair to write off the EPC at such an early stage as just another European talking shop. However, the jury is out on whether the EPC can and will add something useful to the somewhat higgledy-piggledy architecture of European co-operation.

More on this topic
The EPC should function like a “regional United Nations” rather than a discussion forum or the EU-style body that its name implies, Derrick Wyatt, emeritus professor of law at the University of Oxford, writes for the London School of Economics’ European politics blog

New order: there can be no turning back — an analysis of the impact of the Ukraine war on Europe and the international system by Michel Duclos, a former French ambassador, for the Paris-based Institut Montaigne

FT : How UK retailers are defying the consumer gloom

How UK retailers are defying the consumer gloom
The country’s biggest players have been surprisingly upbeat — so far

The first two weeks of the new year have delivered a spate of profit warnings in sectors ranging from housebuilding to recruitment, but one part of the UK’s corporate landscape has proved surprisingly resilient: retail.

Predictions of a yuletide of woe on the high street, as shoppers faced with rising borrowing and household bills drastically cut back on spending, have failed to materialise. So far, car parts and bike seller Halfords has been the only conspicuous profit warning — easily outnumbered by upgrades from peers including Next, JD Sports and B&M.

Compared to recruitment, where important players Robert Walters and PageGroup have warned on profits, or technology, where cyber security specialist Darktrace and video game developer Frontier have said they would record lower revenues than expected, retailers have largely stuck with their full-year forecasts.

They do not yet appear to have suffered from political uncertainty or the knock-on effect from a recent jump in mortgage costs, both of which were flagged by housebuilder Barratt for slowing home reservations.

Kien Tan, retail director at PwC, said this was partly a function of which names had updated investors so far — mostly blue-chip companies with strong market positions and clear strategies that had “been at the good end of lots of trends”.

Higher prices
Many areas of retail, from food to technology, have been broadly deflationary for years, increasing the purchasing power of consumers. That changed in 2022 as prices surged, particularly following Russia’s invasion of Ukraine, and meant that retailers needed to sell fewer wares in order to achieve the same revenue. Broadly speaking, consumers bought fewer things but retailers’ turnover still rose.

Price inflation in areas such as fashion has been fairly modest so far, but in food it has been high — and a creditable 7 per cent rise in festive sales at both J Sainsbury and Tesco needs to be seen in the context of food prices that are on average 16 per cent higher than a year ago.

Favourable comparisons
December 2021 was marked by the rapid advance of the Omicron variant of coronavirus and although no national lockdowns were imposed, many consumers remained wary of mixing in crowded places or had smaller gatherings at Christmas. That hurt retailers with thousands of stores and meant that this year’s sales were up against weak comparative figures.

The most obvious example of this was Argos, the general merchandise seller owned by supermarket chain J Sainsbury. A 4.5 per cent increase in sales for the third quarter looks healthy enough — but sales fell 16 per cent in the same period a year ago.

Shoppers flock back to the stores
When Britain was gripped by fear of catching Covid-19, consumers largely shopped online. But one of the defining trends of last year was the return to shops, and stores got a further boost in December from a sudden cold snap and disruption to delivery services due to postal strikes.

“The channel shift [back to stores] has been a benefit for the biggest retailers,” said Lisa Hooker, head of UK retail at PwC. “The online share of sales is now only a year ahead of where it would probably have been had Covid never happened.”

At Next, store sales grew 7.5 per cent in the nine weeks to December 30 while online sales fell. At Marks and Spencer, clothing sales in stores were up 12 per cent in the third quarter.

Sales made in stores generally mean higher profit margins than those made online for many retailers, because the customer bears the cost of “last mile” transport and the running costs of stores are largely fixed.

Protecting Christmas
Supermarket bosses readily acknowledged that consumers shopped earlier and more carefully this year. But like the annual summer holiday, Christmas is an event that many families regard as almost sacrosanct — especially after the disruptions of the past two years — and were determined to enjoy it.

Lionel Desclée, chief executive of Very Group, agrees. “Christmas is very important to the families that we serve and they have clearly worked hard to protect it,” he said. The online retailer and credit provider sells mostly to customers in lower income groups, who in theory would be the most exposed to cost-of-living concerns.

Hooker added that in-person gatherings of families “tend to mean more food and more presents”, which may explain why half of the respondents to PwC’s latest survey ended up spending more on presents, not less.

Surplus stock
The summer of 2021 featured heavy disruption to the global supply chains that keep shelves stocked — including renewed lockdowns in Asian manufacturing centres and limited shipping capacity. That meant many retailers, especially in toys, electronics and technology, went into their peak trading period with far less inventory than usual.

Next chief executive Lord Simon Wolfson said that with hindsight, availability may have affected sales more than he believed at the time, with a correspondingly beneficial impact in 2022.

Overdone pessimism?
Many retailers issued their most recent and arguably conservative profit guidance between April and October, a period bookended by Russia’s invasion of Ukraine and the brief but chaotic Liz Truss premiership in the UK.

As some inflationary pressures come down, chief executives are a little more confident.

“There is nothing yet that we are particularly worried about” said M&S chief executive Stuart Machin, when asked about the outlook this week. Ken Murphy at Tesco declared himself “cautiously optimistic”.

Richard Walker at Iceland Foods said there “seems to be a bit of normalisation”, though spending among lower income groups is still under intense pressure.