Middle East and Other Musings: Market Comment Update. Has Israel Shifted It's Strategy? The U.N. Continues Bashing Israel. More.

Life can be great if you are rescued!

Dagny at 10 with mom.

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Market Comment Update:

Now that the Fed has taken the higher action regarding rates and the brief rally is over, I find it interesting that, in order to help shield the lower socio economic sector from inflation, The Fed may put them out of work by pushing us into a recession.

Earnings estimates remain higher than they should in view of the economic outlook. Thus, I still believe the market has not discounted all the bad news ahead. That said, I also know markets have sharp upward rallies as we work through downward earning revisions, even in a bear market.

Therefore, after this vicious downward reaction to The Fed's increase in interest rates subsides, I suspect we will have a decent "hiccup" rally which will be followed by other down moves as the market seeks a bottom. Depending upon where earnings revisions end up and applying a multiple of 13 to 15, we should get an idea where the new bull base will establish itself.

Having said all this, what do I now?

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Has Israel shifted it's efforts to contain Iran?

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Israel’s Shadow War With Iran Goes Nonnuclear

The Jewish state escalates its effort by targeting a broader range of security personnel and facilities.

By Jonathan Spyer

The killing of Iranian Col. Hassan Khodaei outside his Tehran home signaled a major shift in Israel’s strategy toward Iran. The Jewish state’s apparently considerable efforts on Iranian soil had formerly been directed at the Iranian nuclear program. But Jerusalem seems to have adopted a broader definition of the challenge it faces—and the measures it will adopt to address it.

Khodaei, who was killed May 22, had no known connection to the nuclear program. Rather, he was one of the most seasoned special-operations men in the Quds Force, a branch of the Islamic Revolutionary Guard Corps. Khodaei was engaged in external operations said to include kidnappings and assassinations. He played an important role in the transfer of drone and missile technology to Lebanese Hezbollah, Tehran’s key regional proxy. According to Hebrew media reports, he was in the midst of masterminding a plan for the abduction of Israelis overseas at the time of his demise.

Khodaei’s killing was the second known operation carried out this year by Israel on Iranian soil against a target unconnected to Tehran’s nuclear program, and the first to directly target a specific individual. An earlier strike, at an air base at Kermanshah in mid-February, destroyed hundreds of drones.

Israeli operations on Iranian soil in recent years have included the theft of the Iranian nuclear archive in 2018, the killings of scientists associated with the nuclear program, and probably also acts of sabotage against nuclear facilities, such as the December 2021 explosion at the enrichment complex at Natanz. These actions indicate that Israel has succeeded in thoroughly penetrating Iran’s defenses.

More broadly, Israel has engaged in a shadow war against Iranian efforts at power-building across the Middle East. Israeli air power has been active in disrupting and damaging Iranian infrastructure in Syria. Individual assassinations have taken place in Syria and probably also in Lebanon. Israeli planes have struck as far afield as Iraq.

But the extension of Israel’s campaign against Iran’s nonnuclear subversive activities onto Iranian soil is a new development and a significant escalation. Such a change isn’t merely tactical in nature, and a decision to adopt it wouldn’t have been taken without the prime minister’s approval. The growing perception in Israel is that the Iranian nuclear program can’t be seen in isolation from Tehran’s broader strategy for regional domination.

Prime Minister Naftali Bennett has long been vocal in support of this view. While serving as defense minister in February 2020, Mr. Bennett told Israeli reporters: “When the octopus tentacles hit you, you must fight back not just against the tentacles, but also make sure to suffocate the head. . . . For years on end, we have fought against the Iranian tentacles in Lebanon, Syria and the Gaza Strip, but we have not focused enough on weakening Iran itself. Now we are changing the paradigm.”

In June, 2020, the Israel Defense Forces established the Strategy and Third Circle Directorate, assigned to formulate a comprehensive view of the Iranian threat facing Israel in all its aspects. It now appears that this approach is being extended to the sphere of action. Israel sees Iran as engaged in a comprehensive, strategic drive intended to result in Tehran’s emergence as the dominant or hegemonic power in the Middle East. The destruction of Israel is a key element in this strategy. This project focuses on political and proxy military activity, investment in Iran’s ballistic missile program, and the development of a nuclear capacity intended as a kind of insurance policy for the other two elements.

The Jewish state, in turn, is in the process of formulating and implementing a comprehensive response. A counterenvelopment of Iran through deepening ties with states surrounding it—including Azerbaijan to the north and the United Arab Emirates, Bahrain and Saudi Arabia to the southwest—forms part of this approach. Israel’s 2021 transfer to the U.S. Central Command’s area of responsibility offers potential for making these growing links operational in key areas, such as missile defense.

It appears that a bold change of the rules of engagement, in which the totality of Iranian strategy will now be opposed also on Iranian soil, forms an additional component of this effort. The strike on the drone fleet at Kermanshah and the killing of Khodaei in Tehran were the first manifestations of this new approach. Three additional unexplained deaths of senior Iranian security personnel have occurred in subsequent weeks. The shadow war between Israel and Iran has entered a new phase.

Mr. Spyer is director of the Middle East Center for Reporting and Analysis and a research fellow at the Middle East Forum. He is author of “Days of the Fall: A Reporter’s Journey in the Syria and Iraq Wars.”

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Slouching Toward Inflation Reality

The Fed is front-loading higher rate increases, but will that be enough?

The Editorial Board

Federal Reserve Chair Jerome Powell speaks about interest rates, the economy and monetary policy actions at the Federal Reserve Building, Washington, D.C., June 15.

The media and market chatter is that the Federal Reserve finally took out the anti-inflation bazooka with a 75-point rate increase on Wednesday, and there’s no doubt Chairman Jerome Powell sounded hawkish rhetorical notes. But the overall message still looked more like a central bank slouching toward inflation reality, but not yet convinced it has to do all that much to get prices under control.

The 75-point increase at a single meeting was supposed to signal shock and awe, and it was the Fed’s first move of that magnitude since 1994. Mr. Powell also said an increase of between 50 and 75 basis points is likely at its next meeting in July.

But if you look at the Fed’s median forecast, the fed-funds interest rate is expected to rise only to 3.4% by the end of this year. That means increases will taper off through the rest of the year, and the Fed predicts a peak of only 3.8% in 2023. The Fed is front-loading its rate increases, but it’s still not anticipating that it has to go all that high to beat inflation.

No wonder bond yields retreated Wednesday even as equities rallied. Markets read the Fed’s median forecast on Wednesday as less hawkish than Monday’s Fed leak to the press about the likely 75-point increase.

Will this really be enough to get consumer-price inflation down from 8.6% today to the Fed’s target of 2%? Perhaps, but at this rate it’s going to take a while. The Fed forecast for its preferred measure of inflation (the personal-consumption expenditure or PCE index) at the end of this year is now 5.2%. But PCE inflation has been more than 6% at an annual rate in recent months, which means inflation would have to fall sharply over the next six months to hit 5.2% for the year. The Fed’s forecast that inflation will hit 2.6% in 2023 seems even more unlikely—unless there’s a recession.

The central bankers certainly are optimistic—which makes us wonder if they still think, down in the bones of their economic models, that inflation really is “transitory.” They still seem to believe the main inflationary fault lies with Covid, supply chains and the Ukraine war, not with their monetary policy, so the Fed doesn’t have to do all that much monetary tightening.

The Fed’s median forecast is also remarkably sunny for the economy, despite rate increases. The forecast has the jobless rate rising to only 3.9% in 2023 from 3.6% today, and GDP growth falling no lower than 1.7%.

We hope Mr. Powell is right that the economy is “very strong” and the consumer is in shape to power through higher rates. But the economy shrank 1.4% in the first quarter, and the Atlanta Fed’s GDPNow tracker on Wednesday cut its growth forecast in the second quarter to zero. Consumers whacked by inflation and gas prices are reining in their spending, as retail sales fell in May.

Mr. Powell is sounding the right note when he says price stability is the bedrock of economic growth. But regaining the Fed’s inflation-fighting credibility after two years of mistakes will take more than one 75-basis-point increase, and Americans will believe it only when they see it in falling prices.

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The UN continues Israel-bashing after Biden promised to stop it

By Richard Goldberg

The US should leave the UN Human Rights Council if it will not stop ant-Semitic probes into Israel.

When the Biden administration last year reversed its predecessor’s decision to abandon the UN Human Rights Council, Secretary of State Antony Blinken pledged his team would use diplomatic engagement to stop its focus on delegitimizing Israel. That promise remains unfulfilled — and the administration stands on the verge of complicity in UN-sponsored anti-Semitism.

If US diplomats can’t put an end to the council’s anti-Semitic circus in Geneva this month, Congress should put an end to US participation in the council.

After Hamas terrorists rained down thousands of rockets on Israeli civilians last year, forcing the democratically elected Israeli government to respond militarily to defend its citizens, the Human Rights Council voted to establish a commission of inquiry into Israel. It has a mandate not just to compile alleged human-rights abuses but to concoct a body of so-called evidence to buttress broader anti-Semitic efforts to label racist the very notion of a Jewish state.

Why does the mandate rise to the level of anti-Semitism? It meets the criteria of the US State Department-adopted International Holocaust Remembrance Alliance’s working definition. The alliance cites two prime examples of modern anti-Semitism: “claiming that the existence of a State of Israel is a racist endeavor” and “applying double standards by requiring of it a behavior not expected or demanded of any other democratic nation.”

The Human Rights Council has long applied a double standard to Israel — the only country for which it has a dedicated agenda item. But its new commission’s mandate goes even further, aiming to produce a UN document that countries can cite to justify anti-Semitic claims that Zionism is racism.

And, unlike the mandates of other commissions of inquiry, which the council must renew annually, this one comes without an expiration date.

To its credit, the Biden administration recognizes the commission’s appalling nature. When late last year the UN General Assembly considered the commission’s budget, including millions of dollars and dozens of staff, Washington spoke out in opposition. But it turns out an engagement-only strategy at the United Nations doesn’t work. The UN in December handed the commission $4.2 million, and America officially joined the Human Rights Council days later, pledging to use its membership and influence to terminate the commission’s mandate.

Despite congressional calls to follow through, Team Biden hasn’t met its promise. When the council met in March, Washington was understandably distracted by Russia’s invasion of Ukraine — and mustering diplomatic support to suspend Moscow from its seat on the council. The Biden administration celebrated a diplomatic victory — but at what cost? That same session, the council passed four anti-Israel resolutions and left the commission’s mandate untouched.

This month, the commission published its first report, which largely rehashed previous UN denunciations of Israel. The absence of fresh analysis likely reflects circumstantial limitations: The UN had approved the commission’s budget and staff only a few months prior. The commission vows its investigation is about to expand to “preserve and analyze information and evidence on international crimes with a view to identifying those bearing individual criminal responsibility” and “ensuring individual, State and corporate accountability.”

The Biden administration previously vowed to stop the council from attempting to delegitimize Israel.The Biden administration previously vowed to stop the council from attempting to delegitimize Israel.

Biden’s ambassador in Geneva this week issued a statement, with 21 other countries, denouncing the report. But words alone won’t derail the commission; that requires a resolution passed by the 47-member council.

With China continuing a genocide in Xinjiang and Russia committing crimes against humanity in Ukraine, the council shouldn’t devote precious resources to widen an anti-Semitic probe. It’s time for the Biden administration to make good on its promise to seek reform by putting forward a resolution this month to terminate the commission’s mandate.

The administration, unfortunately, has signaled it may not leave the council even if the mandate continues, claiming the body “plays a crucial role in promoting respect for human rights as well as fundamental freedoms all around the world.”

Tell that to the Uighurs of Xinjiang, the Tibetan people and the citizens of Hong Kong, particularly in the wake of UN human-rights chief Michelle Bachelet’s much-criticized visit to China, in which Beijing media quoted her praising the Communist Party’s work to alleviate poverty and calling its role within international institutions “crucial.”

There’s no shame in admitting the Human Rights Council is broken beyond repair. Blinken could take credit for trying his best to end its systemic anti-Semitism — even if his strategy was naïve and the effort doomed from the start.

But if the Biden team fails to terminate the commission’s mandate this month, it will have to face the realization that its continued presence in the council would make the United States complicit in UN-sponsored anti-Semitism and erode America’s moral leadership in combating this global scourge.

At that point, it will be up to Congress to prohibit US participation in the Human Rights Council — just as it has done for other international organizations that run afoul of US values and foreign-policy interests.

Richard Goldberg is a senior adviser at the Foundation for Defense of Democracies. He served on Capitol Hill, on the US National Security Council, as the Illinois governor’s chief of staff and as a Navy Reserve intelligence officer.

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Kids Who Are Homeschooled Could Miss Out On Opportunity To Be A Gay Communist

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Not likely, but he should

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If Trump Goes Down for January 6, Then Schumer’s Next for Kavanaugh Threats

By Spencer Brown

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They Even Dislike Joe In Biden Country

By Derek Hunter

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Reliable Sources Say That CNN's Brian Stelter Could Be Gone Soon

By Matt Vespa