By Russell Clark, author of the Capital Flows and Asset Market substack

Japan and Treasuries

My interest in Japan dates from 1991 when I was fresh faced high school exchange student in Kobe. There are no prizes for finding me in the above photo. I was the only “foreigner” in the school, and would go days without seeing anyone else that looked like me or even speaking English. I managed to combine my knowledge and experience in Japan with my other love, economics. I don’t think its too much of an exaggeration to say I owe my career and wealth through studying the Japan experience carefully and then applying those lessons to the rest of the world.

One of the most fascinating things about Japanese, economically speaking, is that almost its entire foreign reserves are made up of US treasuries, with almost no gold. As the right hand side column below shows, the share of gold as foreign exchange reserves is highest for the “old world”, while new powers such as China, Japan, Taiwan and Saudi Arabia have relatively low shares.

In absolute terms, China and Japan are by far the largest holders of foreign exchange reserves.

While China has larger foreign reserves than Japan now, Japan basically “invented” the idea of sovereign bonds as foreign exchange reserves. During the gold standard days, if a country like the US wanted to consume more than it produced, it would need to transfer gold overseas. With limited gold supply, this limited consumption. Moving to a treasury based financial system essentially removed this constraint. The only issue is whether other governments would accept treasuries or not.

Why did Japan buy treasuries? Well when the bubble economy burst in the early 1990s, the BOJ cut rates to near zero, but the Yen did not collapse as expected.

In fact in the first stages of BOJ interest rates cuts, the Yen actually rallied. The failure of monetary policy to work as it should led the Ministry of Finance to intervene to try and help weaken the Yen, and official buying of US dollar assets took off.

In pro-labor terms, when a government is pro-capital it wants to devalue to reduce the wages of its workers. This creates a trade surplus, which should cause the currency to appreciate, but if the government wants to keep the exchange rate competitive (i.e. keep real wages low), then it needs to buy more and more treasuries. A pro-labor government is happy to see its currency appreciate, and hence does not build foreign currency reserves. What is odd recently is that even as the BOJ remains extremely tardy in its monetary policy response, the Ministry of Finance in Japan has started using foreign reserves to “strengthen” the Yen. As the Economist points out, Japan is currently intervening in the currency market to try and strengthen the Yen.

We don’t know the cost of the foreign exchange intervention at the moment [ZHwe do, it was $59BN], but as can be seen above, Japanese foreign exchange reserves have not been rebuilt since the last intervention in 2022. Japan also does not run the structural trade surplus that it did from 1980 to 2010.

With falling foreign exchange reserves, trade deficit, and the likely increase in defence spending that the Russian-Ukrainian war implies, BOJ policy looks increasingly wrong. Markets seem to agree, with 10 year JGB yields at 13 year highs.

With either a Biden or Trump presidency in 2025, the chances of an austerity driven fiscal policy or a change in trade policy looks unlikely to me. The Japanese may well be caught in a doom loop, where they need to sell more foreign reserves to prop up the currency, which cause US yields to rise, which causes the Yen to weaken further and so on.

Until and unless the BOJ becomes more aggressive, Treasuries look like to have a systematic buyer turn into a systematic seller. China is likely a seller of treasuries and buyer of gold for political and strategic reasons, and Japan is a seller of treasuries for economic reasons. I am still baffled to why retail investors prefer treasuries to gold.

Japan was the key to understanding why treasuries did so well form 1980 to 2020. I think it is now the key to understanding why treasuries are going to do poorly from 2020 onwards.

The House Select Subcommittee on the Coronavirus Pandemic has revealed that classified documents from the State Department “credibly suggest” that COVID-19 originated from a “lab-related accident in Wuhan, China,” and that the CCP “attempted to cover up the lab leak.”

In a Tuesday letter to Secretary of Stater Antony Blinken, Committee Chairman Brad Wenstrup (R-OH) asks that the State Department declassify the records to “share the truth” about the origins of COVID-19 with the American people.

Wenstrup noted that the documents were previously unclassified and released in a ‘highly redacted’ form to satisfy a Freedom of Information Act (FOIA) request, but the unredacted version which remains classified suggests:

COVID-19 originated from a lab-related accident in Wuhan, China;
The CCP acted to prevent, and in fact obstructed, a fulsome investigation into these matters; and
A seamless relationship between the WIV and the Chinese People’s Liberation Army.

Wenstrup has requested a ‘staff level briefing’ by May 14, and notes that the briefing was previously requested on April 24 of this year, “with the goal of it occurring prior to the Select Subcommittee’s hearing with the President of EcoHealth Alliance, Inc. – and known WIV collaborator–Dr. Peter Daszak,” but that “the Department responded that it could not support a briefing on that timeline.

The highly redacted version of the letter can be seen below:

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

On the heels of Apple’s latest earnings report, the Wall Street Journal shared an article discussing how Apple became such an oversized investment of Warren Buffett’s company, Berkshire Hathaway. Given their success with Apple shares we think it is worth understanding the logic that drove Buffett to accumulate such a large position in Apple.

Unbeknownst to most, Todd Combs, a member of the Berkshire portfolio management team, is responsible for bringing Apple to Buffett’s attention. However, not all credit goes to Combs. Buffett presented Combs with a challenge that ultimately highlighted Apple’s value proposition. With this same challenge, we will take a stab at finding the next Apple.

The inspiration for our challenge and a few quotes in this article come from a Wall Street Journal article entitled Apple is Buffett’s Best Investment.

Berkshires Massive Stake Of Apple

Before finding the next Apple stock, it’s worth visualizing how Berkshire’s investment in Apple has grown over time as a percentage of Berkshire Hathaway and of Apple’s total shares outstanding.

The bar graph below compares Berkshire’s percentage ownership of Apple to that of the four largest mutual fund and ETF complexes. Berkshire had no position in Apple in 2015 and now holds over 5% of the company. Only Vanguard has a more significant position.

The following graphs plot the surge in the number of shares owned by Berkshire and the value of its shares.

The pie chart below shows that Apple comprises almost half of Berkshire’s portfolio. The next largest holding is Bank of America at 10%.

Buffett Doesn’t Like Tech

Ironically, when Berkshire started buying Apple shares, Warren Buffett had an aversion to technology stocks. When asked why, he said he didn’t invest in companies he didn’t understand. He now admits that was a mistake.

While it may have been a mistake not to buy more technology companies in the mid twenty-teens, Buffett was able to appreciate what Apple truly was. While it is classified as and widely considered a technology company, Buffett got his head around Apple by likening it to a consumer goods company. Per the aforementioned Wall Street Journal article:

Considering the stock, though, Buffett began to see it as a consumer-goods company with enviable, latent pricing power, rather than as a tech or an electronic-device maker, according to people who have spoken to him. The loyalty consumers had for Apple products, especially the iPhone, suggested to Buffett that they would be willing to pay much more for upgraded versions of the phone in the years ahead, a sure way to boost profits.

Todd Combs- The Unknown Mastermind

The Wall Street Journal article introduces Todd Combs, one of Berkshire Hathaway’s lesser-known portfolio managers. According to the article, around 2016, Buffett challenged Combs to find a stock that met specific criteria.

Among the stocks Combs found meeting the fundamental criteria and large enough for Berkshire to purchase was Apple. The rest is history. Since they started accumulating Apple in 2015, it has gained 650%, more than four times the S&P 500 over the same period.

Given Combs’ success, we thought it would be interesting to use the logic Buffett challenged Combs with and produce a similar scan. Let’s see if we can find the next Apple.  

Buffett’s Logic

The following paragraph from the WSJ article is the logic Buffett imparted to Combs, leading to their ownership of Apple.

This time, Buffett asked Combs to identify a stock in the S&P 500 that met three criteria.

The first: a reasonably cheap price/earnings multiple of no more than 15, based on the next 12 months’ projected earnings.

The stock also had to be one the managers were at least 90% sure would enjoy higher earnings over the next five years.

And they had to be at least 50% confident that the company’s earnings would grow by at least 7% annually for five years or longer.

What made the search a little more difficult was that the companies that met the criteria also had to have a market cap large enough so Berkshire could buy enough of to move the needle of its portfolio but not overly impact the demand for the stock.

The Combs Scan

In addition to the criteria in Buffett’s challenge, we added sales growth of at least 5% over the last five years. This helps us thin the list of companies to those already exhibiting strong top-line growth. We also removed financial, limited partnerships, REITs, and real estate stocks as their valuations and growth rates are not as easily comparable using traditional valuation metrics. Lastly, we disqualified Chinese companies due to the potential for political implications.

The following are the factors we used to screen for the next Apple.

Market cap > $50 billion

Price to Forward Earnings <15

Five-year expected earnings growth >5%

Sales growth in last five years > 5%

No financial, limited partnerships, REITs, real estate, or Chinese companies.

Many stocks meet the size, earnings, and sales growth criteria. But only two companies have cheap enough valuations to make the cut as shown below. 

Currently, Berkshire has 5.242 million shares of T-Mobile, which is .20% of the portfolio. T-Mobile met our criteria, but its 5-year expected earnings growth is slightly below Buffett’s 7% bogey.

Berkshire does not hold EOG but has other oil and gas exploration companies, including Occidental Petroleum and Chevron.

Summary

Warren Buffett is an investing legend and one of the wealthiest people in the world. He takes a value orientation with a long-term investment horizon.

The Berkshire Hathaway portfolio, which also owns private companies, has done exceptionally well versus the market, as shown below. However, he goes through prolonged periods of poor relative performance versus the market.

The graph shows that over the last 30 years, Berkshire’s price return has tripled that of the S&P 500.

However, there are four notable extended periods where he grossly underperformed the market.

Also of note is that Berkshire handily beat the market in the recession and drawdowns of the dot com bubble and financial crisis. Such attests to his value orientation.

Amid continuous and what seems like weekly turmoil at Boeing, which includes another whistleblower’s death, new probes by the Federal Aviation Administration, and a series of mid-air mishaps with various Boeing planes, a 787 cargo plane in Turkey suffered a landing gear malfunction, resulting in the plane landing on its nose. 

Daily Mail reports the Boeing 767 cargo plane took off from Paris’ Charles de Gaulle airport earlier this morning and was headed to Istanbul when the pilot realized a malfunction. 

Dramatic footage has been posted on X, showing the pilot landing on the main landing gear and keeping the nose of the plane up as long as possible because of the malfunctioning front landing gear.

A Boeing 767 cargo plane crash-landed at Istanbul airport with a loose landing gear

The plane belonging to the American postal company Fedex was on a flight from Paris. It landed only at the second attempt and “pecked” its nose into the runway. There were no casualties. pic.twitter.com/d1OsgUrxVq

— NEXTA (@nexta_tv) May 8, 2024

The plane’s nose then slammed onto the runway at Istanbul, eventually sliding to a stop. 

$BA

❖ A Boeing 767 cargo plane has crashed upon landing in Turkey this morning after its landing gear failed when it came in to land.

The flight, operated by American postal service FedEx, took off from Paris’ Charles de Gaulle airport early this morning and was headed for… pic.twitter.com/8jTUMF51jp

— *Walter Bloomberg (@DeItaone) May 8, 2024

Local authorities reported no casualties. However, this incident adds to the ongoing issues with Boeing planes.

After yesterday’s stellar 3Y auction kickstarted refunding week, moments ago the Treasury sold a 10Y paper in an auction that left a bit to be desired.

Starting at the top, the 10Y auction size rose from $39BN in April to a record-matching $42BN in May, and surpassing the record auction sizes sold during the peak of the covid crisis.

The high yield was 4.483%, down modestly from last month’s 4.56% but tailing the 4.473% When Issued by 1basis point, the third consecutive tail in a row.

The bid to cover rose from 2.336 to 2.486%, right on top of the 2.49% six-auction average.

The internals were also ok, with Indirects awarded 65.5%, up from 61.8%, if below the 66.1% recent average. And with Directs taking down 18.7%, modestly above the 17.0% recent average, Dealers were left with 15.7% of the auction, the lowest since February.

Overall, this was a solid if slightly soggy auction, where the biggest negative was the modest tail, although in retrospect, there have been 13 tails in the past 15 10Y auctions, so the top-line disappointment is now pretty much standard, and the fact that internals were an improvement from last month is probably why yields did not spike after the auction.

By John Gallagher of FreightWaves

Deaths resulting from large-truck crashes where newly licensed drivers are involved continue to rise, according to recent government data, but a proposed safety requirement that could help reduce those deaths will likely be delayed again.

The percentage of fatal large-truck and bus crashes involving new-entrant carriers climbed from 4.6% to 7.4% from 2017 to 2022, according to a snapshot of Federal Motor Carrier Safety Administration data taken at the end of 2023.

In 2022, those crashes resulted in 494 deaths and over $5.5 billion in costs.

“Unfortunately this trend continues among recent new-entrant program graduates,” said Kelly Stowe, an engineer with FMCSA, referring to the agency’s New Entrant Safety Assurance Program.

During FMCSA’s safety research forum on Thursday, Stowe presented a new internal agency analysis comparing crash rates for carriers that made it through the agency’s 18-month new-entrant program to crash rates of a control group of randomly selected established carriers of similar fleet size.

The data showed that motor carriers operating within 24 months of graduating from the new-entrant program had twice as many total crashes and nearly twice as many fatal crashes per 100 power units as established carriers.

“So even after completing [FMCSA’s] new-entrant program — which includes having to pass a safety audit — newer carriers are still getting in crashes at a higher frequency than more established carriers,” Stowe said. “If we can educate these carriers early on and make sure they understand the requirements and expectations before they begin operations, we can prevent some of these crashes from occurring.”

But Stowe acknowledged that despite the concerning trend, FMCSA has yet to establish a written proficiency exam, mandated by Congress in 2012, that must be passed before a motor carrier can be registered with the U.S. Department of Transportation. “The deadline for meeting this requirement was April 2014 — we’re 10 years late,” she said.

Stowe also noted that the timeline for a proposed rulemaking to establish the proficiency exam, which was scheduled to begin in July with publication in the Federal Register, “will likely slip. It’s a high-level work plan and it’s subject to change.”

While based on dated studies, there is evidence that such a requirement could significantly reduce injuries and fatalities involving new-entrant motor carrier crashes.

Stowe summarized findings from studies completed in 2006 and 2012 comparing companies undergoing training prior to receiving operating authority with control groups that did not.

Not only did trained-carrier drivers have much lower crash rates, but they also tended to “remain in business substantially longer,” Stowe said.

“We have an opportunity with this program to improve new-entrant motor carrier safety and hopefully carry those safety improvements over to the more established carrier population over time.”

Authored by Aldgra Fredly via The Epoch Times,

New York City Mayor Eric Adams has contributed $5,000 of his own money to a reward offered for information leading to the arrest and conviction of those responsible for vandalizing a World War I memorial.

The 107th United States Infantry monument, situated in Central Park on the Upper East Side, was vandalized during a protest on Monday. Social media footage shows anti-Israel protesters spray-painting the word “Gaza” on the base of the statue and burning an American flag.

#NOW 107th infantry War Soldier Memorial draped in Palestinian flag while American flag burns on the ground on 5th Ave in NYC during ‘DAY OF RAGE’ protest. pic.twitter.com/GAOyQoD130

— Oliya Scootercaster 🛴 (@ScooterCasterNY) May 7, 2024

Mr. Adams said on Tuesday that the state will offer a $15,000 reward, with $5,000 contributed by the mayor himself and another $10,000 by the New York Police Department (NYPD), for information leading to the arrest of the “cowards” who vandalized the memorial.

“We cannot remain silent when our symbols of freedom are desecrated by individuals who clearly hate our country and hate our way of life,” the mayor said during a press conference.

“We should not remain silent, because our silence gives the belief that everything is okay and it is not okay. Not only was this statue desecrated, but down the block, another statue was desecrated,” he added.

Mr. Adams, whose uncle died while serving in Vietnam at the age of 19, called the memorial vandalism a “painful” act and vowed to “treat this crime with the seriousness that it deserves.”

“I want to assure New Yorkers that our city will not tolerate chaos and disorder, even if those who are creating it claim to be doing so in the name of peace. We want [you] to bring your anger and passion to the protests, but don’t bring your hate, don’t bring your violence and don’t bring your disorder,” Mr. Adams said.

“We’re going to be swift with our response. We’re going to be swift with our actions, and we’re going to be swift to ensure those who attempt to bring disorder to the city would not accomplish their task,” he added.

Protestors also vandalized the monument honoring Union Army General William Tecumseh Sherman at Grand Army Plaza in Manhattan. The mayor’s office stated that NYC Parks is working with the Central Park Conservancy to finish cleaning the memorials.

The Veterans of Foreign Wars (VFW), the nation’s largest war veterans organization, affirmed in a May 1 statement that it supports “the rule of law in our country and those working to uphold it.”

“While those staging protests on college campuses across the country have the right to free speech and to peaceful assembly, they do not have the right to violently act out against others,” VFW National Commander Duane Sarmiento stated.

Hundreds of protesters marched from Hunter College on Monday and made their way to the Metropolitan Museum of Art where the Met Gala was taking place.

Crowd control police with anti-riot gear sent out warnings that protesters would be arrested if they kept blocking the middle of the street and didn’t move to the sidewalks.

By 8 p.m. there were still about 800 protesters present. They dispersed into smaller groups, the biggest group having about 200 people, and at about 9 p.m. the protest faded.

Police block entrances to the Met Gala in New York on May 6, 2024. (Enrico Trigoso/The Epoch Times)

Protesters said they were upset with Israel’s bombing of Gaza and civilian casualties there.

NYPD Deputy Commissioner Kaz Daughtry told The Epoch Times that at least 25 individuals were arrested following the protest, including one person “who was throwing eggs out the window at the officers.”

The deputy commissioner said the pro-Palestinian group tried to force its way into the Met Gala but police had fortified the area and did not let anyone in who did not have permission.

Despite the Biden administration repeatedly warning Israeli leadership in public against a full-scale Rafah invasion, President Biden actually greenlighted the IDF’s takeover of the Rafah border crossing, Axios has revealed. The report comes amid questions over whether Netanyahu has crossed Biden’s “red line” on Rafah.

The report insists that Israel hasn’t crossed that line, so long as the scope of the operation remains limited and does not result in mass civilian displacement and humanitarian catastrophe. Speaking of the Biden-Netanyahu phone call on Monday, a senor Israeli official told Axios, “Biden didn’t pull the hand break on the capture of the Rafah crossing during the call.” So far the IDF has focused on airstrikes and limited ground incursions in the city’s east, after dropping thousands of leaflets telling civilians to exit the area.

US private security contractors, via Associated Press

However, the US administration has taken the unprecedented step of withholding ammo and bomb shipments to Israel in order to send a ‘message’. 

An Israeli Haaretz report issued Tuesday has further revealed that there was actually some level of cooperation and coordination with Washington on an IDF tank unit’s takeover of Rafah crossing. This was reportedly to ensure no weapons for Hamas can pass into the Strip via the large crossing.

The US, Israel, and Egypt have agreed that a private American security firm will take control of Rafah Crossing and oversee it. As of Wednesday, the IDF has announced it reopened the crossing, and it is retaining full control for now.

“The parties agreed that a private American security company will assume management of the crossing after the IDF concludes its operation. Israel has also pledged not to damage the crossing’s facilities to ensure its continuous operation,” wrote Haaretz. However, “State Department spokesperson Matthew Miller said on Wednesday that he is not aware of Israel agreeing to transfer control of the crossing.”

This is also to exert leverage in negotiations. “Israel believes that Hamas’ loss of control over the Rafah crossing would be a significant setback for the group,” Haaretz noted. “It will not be able to collect taxes imposed on trucks and goods and will no longer be able to bring in weapons and other items banned from entering Gaza.”

Haaretz revealed limited details on the US defense firm in question and has not named it. It employs elite former US military personnel such as ex-special forces operators: 

As part of Israel’s efforts to win agreement for a Rafah operation, negotiations have been underway with a private company in the U.S. that specializes in assisting armies and governments around the world engaged in military conflicts. The company has operated in several African and Middle Eastern countries, guarding strategic sites like oil fields, airports, army bases and sensitive border crossings. It employs veterans of elite U.S. Army units.

Under the understandings between the three countries, when Israel has completed its limited operation in the border crossing area, the U.S. company will take responsibility for operating the facility. That includes monitoring goods arriving in the Gaza Strip from Egypt and preventing Hamas from re-establishing control of the crossing. According to the agreement, Israel and the U.S. will assist the company as necessary.

It the report is accurate, it would mean American military contractors would be put in harm’s way, and that US elite veterans could eventually enter a firefight with Palestinian militants.

You know what this conflict was missing? Private U.S. military contractors with no legal oversight.https://t.co/WmH5bLwC2A

— Jenn Williams (@jenn_ruth) May 7, 2024

US contractors on the ground would certainly also be seen as a key target for Hamas and other Palestinian militant groups (such as PIJ). Hamas has long warned that any foreign troops or military entity that enters the Gaza Strip will find itself under attack.

But there has yet to be any official government confirmation of the US contractor plan for Rafah crossing from either Washington or Tel Aviv, and time will tell if such a controversial plan comes to fruition. If it happens, this means American military contractors would be active in two major hot conflicts: Ukraine and Gaza (not to mention in eastern Syria and Iraq as well).

Authored by Ven Ram, Bloomberg cross-asset strategist,

Treasury yields at the back end of the curve may stay higher for longer if Neel Kashkari is right about the short-run neutral rate.

Core PCE has averaged 2.9% so far this year, above the 2.6% the Fed estimated in its March dot plot, which itself marked an upward revision. While the April jobs data was softer than forecast, the average jobless rate this year is just 3.8% – well below levels that the Fed reckons will be needed to bring the labor market back into balance.

The policy committee “has more work to do” if inflation is going to settle around 3%, Kashkari commented in his latest essay posted on the Fed Minneapolis website. 

For good measure, he has also penciled in a higher short-run neutral rate.

The neutral rate, where an economy is at full employment and inflation steady, is still elevated at 1.12%, based on the latest update of the Laubach-Williams model:

That compares with the Fed’s implicit assumption of a 60-basis point real neutral rate, based on its March summary of economic projections.

If core PCE were to bob around 3%, as Kashkari fears, and assuming the Laubach-Williams model provides a more realistic reading of the real neutral rate, the implied nominal policy rate would be north of 4% – making the current rate less restrictive.

This is why Kashkari remarked that there is the prospect of interest rates having to go higher, although he added that it isn’t the most likely scenario (note also that he doesn’t vote on monetary policy this year).

However marginal that prospect may look now, market pricing must reflect the possibility of such a scenario.

And at around 4.47%, Treasury 10-year yields are doing just that.

With so many factors sapping sentiment, longer-dated Treasuries will find it hard to rally just yet.

The severe manpower crisis of Ukraine’s armed forces continues to be on display, particularly after the recent decision of the government to deny embassy and consular services for Ukrainian men of fighting age who live abroad but refuse to come back home.

Ukraine’s parliament on Wednesday just once again upped the controversy and advanced a dramatic change in law and national policy. It passed a bill enabling select prisoners to be released in order to fight in the armed forces.

Via Associated Press

“The parliament has voted ‘yes,'” MP Olena Shuliak, head of Zelensky’s party, announced in a social media post. “The draft law opens the possibility for certain categories of prisoners who expressed a desire to defend their country to join the Defense Forces,” she said.

Ironically Moscow has previously come under international condemnation and mockery for just such a policy.

AFP and other international outlets acknowledged this as follows: “Long-opposed to the measure and having criticized Moscow’s mobilization of prisoners to fill its ranks, Kyiv has recently U-turned amid fresh Russian advances on the battlefield,” a report said.

The legislation still has to be signed by parliament’s chairperson and President Zelensky in order to come into force as an active policy. The bill includes the following reported stipulations and parameters:

Prisoners must volunteer
Only those with three or more years left on their sentence can apply
Those convicted of violent sexual crimes are not eligible
Former high-ranking officials and those guilty of “serious corruption” are not eligible
Prisoners who killed two or people are not eligible

One glaring aspect is that it appears literal murderers can possibly still go free if they join the army, so long as they killed no more than one person, based on the AFP’s reporting

The following unexpected and bizarre line is in the AFP report detailing the new Ukrainian bill:

Among those not eligible to serve include those found guilty of sexual violence, killing two or more people, serious corruption and former high-ranking officials, Shuliak said.

However, some conflicting information has emerged. The below is via a Ukrainian news source:

Shuliak told Ukrainska Pravda that the following will not be eligible to join the Armed Forces of Ukraine: those who have committed premeditated murder, rapists and paedophiles, corrupt officials, those who have committed crimes against the foundations of Ukraine’s national security, and those who have held a particularly responsible position, including MPs and ministers.

Meanwhile, Ukrainians living abroad are said to be outraged at the government’s efforts to lure them back to Ukraine by the denial of consular services. One 19-year old man living abroad told Al Jazeera the following:

“I support individual battalions in Ukraine with donations every month – this is my duty,” said Anton, who works as a waiter.

“But I don’t want to fight, as I don’t trust our government. They don’t care about people. And they don’t care if there’s a war going on, they’re corrupt and keep stealing the money that we pay for the army. Why go to war for a state who only wants to steal?” he said bitterly.

Another 35-year old man currently in Poland (where many Ukrainian families fled once the war began) told Al Jazeera as follows: “If the army could guarantee that my work would be aligned with my skills and knowledge, I would go back. I could help with drones and other technology. But getting a rifle and shooting would not be the most efficient way of utilizing my skills.”

Ukraine forces continue losing ground along front line positions in the east. Not only are they outgunned, but the more experienced fighters who have been in it from nearly the beginning are exhausted, with commanders having few options in terms of rotating in fresh battalions from the back.