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Week in Review

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01/25/2020

For the week 1/20-1/24

[Posted 10:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs and your support is greatly appreciated.  Please click on the gofundme link, or send a check to PO Box 990, New Providence, NJ 07974.

Special thanks to Jeff B. for his ongoing support.

Edition 1,084

Just a word on the Wuhan crisis and the rapidly spreading coronavirus, of which I have much on the topic below.  From an economic standpoint, one of the scary aspects is the potential impact on this summer’s Tokyo Olympics.  If China can’t get a handle on the crisis soon, like within just a few weeks, Japan could be staring down the barrel of an economic catastrophe, which wouldn’t be good for anyone.

---

Reminder...results of the 2016 presidential election:

Michigan 47.5% to 47.3% for Donald Trump
Wisconsin 47.2% to 46.5% for Donald Trump
Pennsylvania 48.2% to 47.5% for Donald Trump

This is what the Senate impeachment trial was about this week.  Donald Trump is not going to be removed from office.  I’m on record as having favored “censure.”

Four Republican senators are not going to vote for more witnesses.

The Republican managers will have their say starting Saturday and the ‘base’ will rally further.

But what this is really all about is did the House managers move the needle just 1%?

The presidential election is all about the 20 percent or so in the middle.  Many of these folks may have told pollsters prior to the impeachment trial their minds were made up, at least to the extent of they were either voting for Donald Trump or they weren’t.  But in Michigan, Wisconsin and Pennsylvania, and maybe Florida and Arizona, did the House managers move any votes?

Once the Republicans have their say the initial polls should be fascinating.

On the other hand, the election is still a long way off.  So much can change, and as I’ve been saying for weeks, there is so much more to come before Americans enter the voting booth.  Maybe tonight’s breaking story of an audio tape apparently capturing President Trump calling in 2018 for the firing of then U.S. ambassador to Ukraine Marie Yovanovich, speaking at a small dinner with guests including Lev Parnas, is a moment that moves the needle once it comes out, Trump having told us this week he doesn’t know Parnas?  Maybe it is something else, like John Bolton speaking to “60 Minutes,” I’m just imagining.

Just 1%...that’s all it may take.

---

And so the House managers made an incredibly compelling case for removal.  Lead House manager Rep. Adam Schiff ended Thursday night’s arguments in the Senate trail by emotionally insisting that “right matters” and “we’re lost” if the truth is simply tossed aside.

Schiff pointed to the testimony of Lt. Col. Alex Vindman – who fled Ukraine with his family when he was 3, rose to become the top Ukraine expert on the National Security Council, and came forward to talk about what he knew about Trump’s abuses of power – as an example of someone who puts country before his personal interest.

Schiff quoted Vindman in his closing statement: “Here, right matters.  Here, right matters,” he said recounting the testimony.  “Well, let me tell you something, if right doesn’t matter – if right doesn’t matter, it doesn’t matter how good the Constitution is.  It doesn’t matter how brilliant the Framers were.  Doesn’t matter how good or bad our advocacy in this trial is.  Doesn’t matter how well written the oath of impartiality is.  If right doesn’t matter, we’re lost.  If the truth doesn’t matter, we’re lost.”

“If the truth doesn’t matter, we’re lost.  [The] framers couldn’t protect us from ourselves, if right and truth don’t matter.  And you know that what he did was not right.  That’s what they do in the old country, that [Lt.] Col. Vindman’s father came from.  Or the old country that my great-grandfather came from, or the old countries that your ancestors came from, or maybe you came from.

“But here, right is supposed to matter.  It’s what’s made us the greatest nation on earth.  No constitution can protect us if right doesn’t matter anymore.  And you know you can’t trust this president to do what’s right for this country.  You can trust he will do what’s right for Donald Trump.  He’ll do it now.  He’s done it before.  He’ll do it for the next several months.  He’ll do it in the election if he’s allowed to.  This is why if you find him guilty, you must find that he should be removed.  Because right matters.  Because right matters and the truth matters.  Otherwise, we are lost.”

But Republican Sen. Rob Portman (Ohio) was emblematic of his party’s stance on the impeachment trial.

“Some of the things (Trump did) are not appropriate.  That’s a very different question from removing someone from office who was duly elected in the middle of a presidential election.”

Sen. Bill Cassidy, R-La., said Schiff is saying there’s a “fight for facts” but “therefore we must remove now, because we can’t afford to wait eight (nine) months, we can’t trust the American people to do it, because they won’t have time to do it.”

Trump World

--A new CNN/SSRS poll has 51% of Americans saying the Senate should vote to convict President Trump and remove him from office, while 45% say the Senate should vote against conviction and removal.

69% say that the trial should feature testimony from new witnesses who did not testify in the House impeachment inquiry.  Among Republicans, 48% say they want new witnesses, while 44% say they do not.

58% say Trump abused the power of the presidency to obtain an improper personal political benefit and 57% say it is true that he obstructed the House of Representatives in its impeachment inquiry.

Overall, 89% of Democrats say he should be removed from office, while just 8% of Republicans feel the same way.  Among independents, 48% say the Senate should vote to remove him, while 46% say that they should not.

Among 15 battleground states decided by 8 points or less in 2016, 49% are on each side.

59% of women say the Senate should remove Trump, 42% of men agree.  86% of African Americans are for removal, but ‘just’ 65% of Hispanics and 42% among whites.

The polling was done after Lev Parnas, an associate of Trump’s attorney Rudy Giuliani, publicly implicated the president in the Ukrainian pressure campaign during a series of television interviews.

A new national Monmouth University poll has 57% saying the House managers should be able to present new evidence in the Senate trial to support the articles of impeachment.  Another 37% say that the managers should be limited to sharing only what was revealed during the initial impeachment inquiry.  Support for new evidence comes from 87% of Democrats, 56% of independents, but just 24% of Republicans.

53% of the American public approve of the House decision to impeach Trump, while 46% disapprove.

49% agree the Senate should now remove Trump office, while 48% say Trump should not be removed.

Separately, the Monmouth survey has just 37% of Americans believing the country is going in the right direction, 56% saying the country has gotten off on the wrong track.  The ratio was 28/62 in August.

Interestingly, House Speaker Nancy Pelosi’s approval rating has risen from 17% in November 2018 to 35% today.

In a new Pew Research Center survey, 51% say the outcome of the Senate trial should be Trump’s removal from office, while 46% say the result should lead to Trump remaining in office.  86% of Republicans and Republican-leaning independents say the trial should result in Trump remaining in office, while roughly the same share of Democrats and Democratic leanders (85%) think Trump should be removed.

63% of Americans say Trump has definitely or probably done things that are illegal, either during his time in office or while he was running for president.

Finally, a Reuters/Ipsos poll released Wednesday had 44% of adults in the U.S. saying Trump should be removed from office, another 15% say he should be reprimanded formally with a congressional censure, and 31% said the charges should be dismissed.

--President Trump said the head injuries suffered by American service members in an Iranian missile strike weren’t “very serious,” prompting outrage from some veterans’ advocates.

Speaking at a news conference in Davos, Trump said, “I heard that they had headaches, and a couple of other things.”

“No, I don’t consider them very serious injuries relative to other injuries that I’ve seen,” Trump said.  “I’ve seen people with no legs and no arms.”

I can forgive the president for initially reporting there were no injuries from the Iranian attack on U.S. bases in Iraq as part of the retaliation for the killing of Iranian Gen. Soleimani days earlier.

But not this incredible insensitivity.  [I’m biting my tongue on saying far worse.]

The Pentagon announced this afternoon that the number of those suffering from head injuries is up to 34; eight so serious they are being airlifted back to Walter Reed.

By the way, I had no idea that since 2000, according to the Pentagon’s Defense and Veterans Brain Injury Center, more than 408,000 American service members have suffered traumatic brain injuries.

--The Justice Department now believes it should have discontinued its secret surveillance of one-time Trump campaign adviser Carter Page far earlier that it did, according to a new court filing unsealed Thursday.

The Justice Department made that determination in a December letter to the secret court that oversees surveillance of suspected foreign spies, acknowledging it may have lacked probable cause to continue wiretapping in the last two of the four surveillance applications it sought against Mr. Page.

The Justice Department letter is classified, but is referenced in a new order declassified by the judge that heads the FISA court, James Boasberg, on Thursday.  The Justice Department said it would sequester all the material it collected against Mr. Page pending further internal review of the matter.

--Trump tweets:

“The Democrat House would not give us lawyers, or not one witness, but now demand that the Republican Senate produce the witnesses that the House never sought, or even asked for?  They had their chance, but pretended to rush.  Most unfair & corrupt hearing in Congressional history!”

“The Democrats & Shifty Schiff, whose presentation to the Senate was loaded with lies and misrepresentations, are refusing to state that the Obama Administration withheld aid from many countries including Ukraine, Pakistan, Philippines, Egypt, Honduras, & Mexico.  Witch Hunt!”

“The Democrats don’t want a Witness Trade because Shifty Schiff, the Biden’s, the fake Whistleblower (& his lawyer), the second Whistleblower (who vanished after I released the Transcripts), the so-called ‘informer’, & many other Democrat disasters, would be a BIG problem for them!”

“Democrats are going to destroy your Social Security.  I have totally left it alone, as promised, and will save it!”

[Not this way, Mr. President.]

“Crazy Bernie takes the lead in the Democratic Primaries, but it is looking more and more like the Dems will never allow him to win!  Will Sleepy Joe be able to stumble across the finish line?”

“Mini Mike Bloomberg is playing poker with his foolhardy and unsuspecting Democrat rivals.  He says that if he loses (he really means when!) in the primaries, he will spend money helping whoever the Democrat nominee is.  By doing this, he figures, they won’t hit him as hard....

“....during his hopeless ‘presidential’ campaign.  They will remain silent!  The fact is, when Mini loses, he will be spending very little of his money on these ‘clowns’ because he will consider himself to be the biggest clown of them all – and he will be right!”

“They are taking the Democratic Nomination away from Crazy Bernie, just like last time. Some things never change!”

“A massive 200 Billion Dollar Sea Wall, built around New York to protect it from rare storms, is a costly, foolish & environmentally unfriendly idea that, when needed, probably won’t work anyway.  It will also look terrible.  Sorry, you’ll just have to get your mops & buckets ready!”

“After having been treated unbelievably unfairly in the House, and then having to endure hour after hour of lies, fraud & deception by Shifty Schiff, Cryin’ Chuck Schumer & their crew, looks like my lawyers will be forced to start on Saturday, which is called Death Valley in T.V.”

--In an interview in Davos, President Trump was musing about Tesla’s Elon Musk and his erratic behavior at times.

“I was worried about him, because he’s one of our great geniuses, and we have to protect our genius,” Trump said of Musk.  “You know, we have to protect Thomas Edison, and we have to protect all of these people that came up with, originally, the lightbulb, and the wheel and all of these things.”

Ah yes, the inventor of the wheel.  How many of you know who it was?

Why it was Peter Wheeler, the famous inventor of the Bronze Age, who also happened to be the father of Sargon the Great.

Someone tell President Trump it wasn’t Henry Ford.

Wall Street and Trade, cont’d....

Just one economic tidbit for the U.S., but an important one.  December existing home sales came in at 5.54 million annualized, up 3.6% from November.  Additionally, sales were up 10.8% from a year ago (5.00 million in Dec. 2018). 

The median existing-home price rose 7.8% over the year to $274,500, while inventory fell to 3.0 months, which is all good.

The Atlanta GDPNow barometer for the fourth quarter was not revised this week, still just 1.8%.  But next week we get the first look at the real figure and it is destined to represent a third straight month below the administration’s much-ballyhooed 3%+ growth projections.

Meanwhile, the International Monetary Fund issued its latest World Economic Outlook and cites aggressive monetary policy and the détente in the U.S.-China trade war as reasons why global GDP should rise 3.3% in 2020, up from 2.9% in 2019.

But the IMF pegs U.S. growth at just 2.0% this year vs. 2.3% in 2019.

China is forecast to grow 6.0% this year, Japan just 0.7%.

The Euro Area is expected to grow only 1.3% in 2020, with Germany at 1.1%, France 1.3%, Italy 0.5% and the UK 1.4%.

The IMF noted that global trade growth slowed to 1% in 2019 from 3.7% in 2018.  But the IMF expects that to reverse this year with trade volumes rising 2.9% in 2020.

“On the positive side, market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on U.S.-China trade negotiations, and diminished fears of a no-deal Brexit,” the IMF said in its report.

The IMF characterized the signs of stabilization as “tentative,” saying that renewed trade tensions could “undermine the nascent bottoming out of global manufacturing and trade, leading global growth to fall short of the baseline.”

Much of the hope for the economy depends on the U.S.-China trade deal remaining intact, with no new tariff escalations.

So on the issue of Trade....

According to a monthly poll from agricultural trade publication Farm Journal released Sunday, 83% of farmers and ranchers approve of President Trump’s job performance.  It is the highest level of support for Trump among farmers since he took office, Farm Journal said.

The above is important because the “phase one” trade deal with China is largely not just about ag buys, but also the November election.

Respondents to the survey were concentrated mostly in Midwest states like Illinois, Iowa, Indiana and Nebraska.

American Farm Bureau President Zippy Duvall said in a statement following passage of the U.S.-Mexico-Canada Agreement, though related to the China deal the day before: “This trade agreement comes at a critical time for farmers and ranchers, increasing optimism that we’ll turn the corner in 2020.”

One thing we know about China’s agreed upon $40 billion in purchases of U.S. agriculture products each of the next two years, you will see large buys early this year and the White House will of course be playing this up.  The issue is what happens later in the year and then 2021, though we will have long gone to the voting booth.

Yet, it’s also worth noting that the price of soybeans, the key product for the ag portion of “phase one,” is lower today than when Donald Trump was elected president in November 2016, and lower than just a year ago, even losing ground since the phase one deal was announced. 

And understand, as I’ve been harping on regarding phase one, China has been building alternate trade relationships to the United States for some of its key exports.  As in Brazil and the U.S. are both major exporters of soybeans.

As in as of the 85 million tons of soybeans that China imported in 2019, 57 million tons were supplied by Brazil, according to research from Ken Morrison, formerly of Cargill Inc., the agriculture giant, who now writes a newsletter on the industry.

China could shift production temporarily away from Brazil to satisfy its U.S. requirements, but it won’t do so for long, and with Brazil having cheaper soybeans, the overall price U.S. farmers are going to receive will likely remain little changed.

It’s going to be interesting to see how this all plays out.  Chinese Vice Premier Liu He, who signed the trade deal with President Trump, said the deal would not affect “third parties’ interests,” apparently in reference to deals made with other suppliers of farm goods....like Brazil!

Oh, and by the way, in Davos, President Trump suddenly upped the $dollar amount in U.S. products China was going to buy in each of the next two years from the agreed-upon $200 billion to “$250 billion, closer to $300 billion.”

I don’t think so, sports fans. 

Greg Ip / Wall Street Journal

“A week after the U.S. and China reached a truce in their trade war, the two countries took to the world stage this week to blame each other for starting it.

“ ‘Before I was elected, China’s predatory practices were undermining trade for everyone – nobody did anything about it,’ President Trump said in a speech to global elites gathered at the World Economic Forum.  ‘America confronted the problem head on.’

“A few hours later, Han Zheng, vice premier of China, characterized the U.S., albeit not by name, as the rule breaker and China as the true guardian of the established world order.  ‘Despite the protectionist and unilateral moves by some countries, China will not stop pursuing higher quality opening up and will not follow their footsteps to move in the opposite direction of globalization.’”

So will the phase one deal reached last week turn out to be a watershed moment or not?

Greg Ip:

“There are two plausible outcomes.  The optimistic case is that China finally changes in the way American officials had hoped when it joined the WTO and takes a more Western-style approach to the economy and markets. The pessimistic case is that the integration of the Chinese and U.S. economies that followed accession comes undone.”

Separately, President Trump said he had good discussions with European officials in Davos this week on trade talks with the European Union, Trump having long accused the EU of gaining an unfair trade advantage.

But he still left open the possibility of imposing tariffs of as much as 25% on cars and car parts from Europe, using these threats as leverage in negotiations.

On the issue of the dispute over digital taxes between the U.S. and France, the two sides apparently agreed to a truce, meaning neither side will impose punitive tariffs this year, one of which threatened to do a number on the wine industry in the U.S., resulting in the potential loss of tens of thousands of jobs.

Europe and Asia

We had the release of the eurozone’s flash PMI data for January courtesy of IHS Markit.

The flash eurozone composite index was 50.9, unchanged from December (50 the dividing line between growth and contraction).

Manufacturing, 47.8 vs. 46.3 in December, a 9-month high.

Services 52.2, down from last month’s 52.8.

Germany: Comp 51.1; manufacturing 45.2; services 54.2.

France: Comp 51.5; manufacturing 51.0; services 51.7.

The UK’s flash composite index for January was 52.4, with manufacturing at 49.8 (9-month high), services 52.9 (16-month high).

Andrew Harker, IHS Markit:

“While the year may have changed, the performance of the eurozone economy was a familiar one in January.  Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum.

“The failure of growth to accelerate was in spite of some areas of positivity.  The service sector remained in expansion, while the worst of the manufacturing downturn looks to have passed and industry appears to be moving towards stabilization.  France and Germany continued to grow, while business confidence across the single-currency area jumped to a 16-month high.

“On the other hand, weakness was evident outside the ‘big-2’, with new orders unchanged and growth of business activity slowing to near-stagnation.”

Separately, Eurostat released the latest on eurozone debt levels, this time for the third quarter of 2019, 86.1% debt to GDP, which is measured against 87.1% in Q3 2018.

Germany 61.2%, France 100.5%, Italy 137.3%, Spain 97.9%, Netherlands 49.3%, and Greece 178.2%.  [UK 84.2%]

Brexit: Britain’s delayed and disputed Brexit bill has finally become law, removing the last obstacle to the UK exiting the European Union next week, Jan. 31.

The House of Commons announced Thursday that the Withdrawal Agreement Bill had received royal assent from Queen Elizabeth II, the final formality in the measure’s years-long journey.

The Queen’s assent came after the bill made its way through Parliament by getting approval from the House of Lords, which had had some final issues.

The European Parliament now has to approve the divorce deal before Jan. 31, which it will do, and then 3 ½ years after voters opted for Brexit in a June 2016 referendum, the UK will finally leave the bloc.

“At times it felt like we would never cross the Brexit finish line, but we’ve done it,” Prime Minister Boris Johnson said Thursday.

However....now comes the hard part, fashioning a trade deal with the EU in just 11 months, Boris Johnson having said he will not seek an extension on the transition period.

France: French unions are holding last-ditch strikes and protests around the country today as the government unveils a divisive bill redesigning the national retirement system.

[Earlier in the week, French energy workers cut power to Paris’ wholesale food market, the largest in the world, just to be assholes.]

Travelers faced renewed disruptions on regional trains and the Paris subway, and some schools and other public services faced walkouts.  But the transportation problems were not nearly as bad as they were at the start of the 50-day-old strike movement as the unions have been losing support and many striking workers simply needed to go back to work to pay the bills.

President Emmanuel Macron’s government is plowing ahead with its pension reform plan, where it will be debated in parliament for weeks, and months, though Macron’s centrist party has a large majority.

As noted before, the plan streamlines France’s 42 retirement systems into a single points-based system for all workers, public and private sector alike, while abolishing special provisions allowing certain workers to retire as early as their 50s.

But the government has backed down on plans to raise the age to receive a full pension from 62 to 64, and negotiated special deals with various sectors, including pilots and the police, who will still be able to retire earlier than others.

Macron has been arguing the old system was too outdated and costly for a country with a growing life expectancy.  Unions say the new system threatens their hard-won worker rights.

Italy: Luigi Di Maio stepped down on Wednesday as leader of Italy’s co-governing 5-Star movement, as it seeks to stem a wave of defections that threatens the government’s parliamentary majority.  While the move isn’t going to bring down the government, it underscores deep divisions within 5-Star and injects further uncertainty into Italy’s fractured political system.

Di Maio will remain foreign minister, while low-profile Vito Crimi will replace him as head of 5-Star.

5-Star won 33% of the vote in a national election in 2018, but since then its popularity has fallen sharply and recent polls put it at around 16%.

The move comes amid the ongoing surge of the right-wing League.  Should League win a key regional race in Emilia-Romagna Saturday, then the coalition government may indeed be in trouble.

League leader Matteo Salvini sparked widespread criticism in the Italian media after he rang the doorbell of a North African family in Bologna and asked: “Is your son a drug dealer?”

If the League is able to win Saturday’s vote (and it’s apparently razor tight), and then was able to get a new election, League could win, and Salvini would become prime minister.

Turning to Asia...with China’s Lunar New Year Holiday, Beijing combines the statistics for both January and February to smooth out distortions.

In Japan, the flash composite PMI reading for January was 51.1, vs. December’s 48.6, with manufacturing at 49.3, services 52.1.  It was the latter that moved the comp number.

Separately, Japan’s consumer price index for December was released and core-CPI (ex-fresh food, but including energy) was 0.7% year-over-year, while core-core (ex-fresh food and energy) was 0.9%, the fastest such reading since March 2016, but still well below the Bank of Japan’s long-sought 2% target.

Exports for December in Japan fell 6.3% from a year earlier, per the Ministry of Finance, in a sign weak external demand is keeping a lid on the export-reliant economy.  This compared with a 4.2% decrease expected by economists and followed a 7.9% decline in the previous month.

Exports to China, Japan’s largest trading partner, grew 0.8%.  Shipments to the U.S. fell 14.9% year-on-year – dragged down by autos, car parts and airplane motor engines, the MOF data showed.  Exports to Asia, which accounts for more than half of Japan’s overall shipments, declined 3.6%.

December’s overall decline was the 13th month in a row exports have fallen.

Bank of Japan Governor Haruhiko Kuroda said that while progress in U.S.-China trade talks and Brexit helped ease risk sentiment, uncertainty remains on trade relations between Washington and Beijing.

Lastly, South Korea reported GDP for 2019 was 2.0%, the slowest pace in 10 years, despite a surge in fourth-quarter activity helped by a boost from government spending.

Street Bytes

--Owing to the Wuhan crisis, stocks fell, with the Dow Jones down 1.2% to 28989, the S&P 500 off 1% and Nasdaq –0.8%, Nasdaq having hit a record-high on Thursday, 9402, before Friday’s dive.  It was also Nasdaq’s first down week in seven.

But next week is a biggie for earnings, with the likes of McDonald’s, Caterpillar and Boeing, as well as tech heavyweights Apple, Amazon, and Facebook, and also Tesla.  [I hate weeks like this, quite frankly, the editor smirked.]

--U.S. Treasury Yields

6-mo. 1.53%  2-yr. 1.49%  10-yr. 1.68%  30-yr. 2.13%

The yield on the 10-year is back to the lows of early October owing to a flight-to-safety with fears over the spreading coronavirus, yields plummeting anew all over the world, with the yield on the German 10-year, the bund, falling from –0.22% to –0.34%.  Italy’s 10-year yield fell from 1.37% to 1.23% despite their myriad of issues.

Next week the Federal Reserve’s Open Market Committee meets and while it will be holding the line on interest rates, the statement from the FOMC may offer a clue or two to whether the Fed intends to stand pat, or lower, the balance of the year.  The Wuhan virus may eventually have something to do with their decision.

--Oil prices were staggered by fears over the impact of the Wuhan virus on demand, which outweighed concerns over disruptions to Libya’s crude output.  Oversupply concerns also predominated after Saudi Arabia’s energy minister didn’t appear to be optimistic that the OPEC+ production cuts would be extended beyond March.  By week’s end the price of West Texas Intermediate had fallen to $54.37, down from $63 just three weeks ago.

Separately, the price of natural gas fell below $2 per million British thermal units to their lowest level in nearly four years, highlighting the impact of a persistent glut that is buffeting investors and producers.  And in case you haven’t noticed, this winter has been very temperate thus far which adds further to the oversupply of nat-gas.

The decline in prices has led to a call for the energy companies to curtail production as the shares in the producers have been hit hard.  That said, the U.S. Energy Information Administration predicts natural-gas production in the U.S. will rise by nearly 3% in 2020.

Cutbacks in the industry have begun, jobs will be lost.  Halliburton Co., for example, blamed a loss in 2019 on a decline in revenue that it blamed on diminished drilling onshore in North America, which in turn was due to low commodity prices, particularly for gas.  The company is the top provider of hydraulic fracturing and other services that help producers unearth oil and gas.

--In this week’s installment of “As Boeing Turns....,” United Airlines said on Wednesday that it does not expect the return of the troubled 737 MAX this summer, this coming after Boeing said earlier that it did not expect regulators to allow the MAX to take flight until June or July.

In the case of United, the airline announced that due to the lack of the MAX, its growth plans in Denver, Houston and Chicago are impacted.

Boeing’s new CEO, Dave Calhoun, said its recommendation that pilots ought to undergo simulator training underpinned a decision to push back the timeline for 737 MAX’s return to service.   And it’s the training following the aircraft’s return, whenever that is, that easily takes us to September before the MAX is a major component of an air carrier’s fleet again...let alone growth plans.

At least Dave Calhoun said he expected to resume MAX production “months” before its predicted mid-year return to service, production halted in January after the aircraft was grounded last March.  Just amazing how long this story is playing out.

--Meanwhile, United Airlines Holdings Inc. reported higher profit and stronger revenue for the fourth quarter, despite challenges from the grounding of the MAX.  Net profit rose to $641 million from $461 million a year earlier, with revenue climbing 3.8% to $10.89 billion.

United hasn’t disclosed the costs of the grounding of the MAX, while rivals American Airlines and Southwest have said it has cost them hundreds of millions of dollars.

--American Airlines announced a 19% increase in profit in 2019, despite the MAX challenges.

“We’ll continue to hold Boeing accountable for future financial damages to protect our company and our shareholders,” CEO Doug Parker said during a conference call.

Fourth-quarter profit still came in at $414 million owing to strong demand, compared with $325 million in the prior year.

--Southwest Airlines Co. CEO Gary Kelly said the grounding of the MAX will restrain the carrier’s expansion plans this year as Southwest expects to decrease capacity by 1.5% to 2.5% in the first quarter.  Last year it cut flying by 1.6%.

“Sitting here dog paddling for a year while our competitors grow right past us, it’s costing us this year six or seven million customers,” Kelly said on a call with analysts.  “Yeah, I’m worried about that.”

Southwest has more MAX jets than any other airline and it had planned to be operating 75 MAX aircraft by now, 10% of its fleet, while taking delivery on 38 more this year.  Instead, Kelly said the airline will have to put off retiring some older jets to make up for them.

Profit fell 21% in the fourth quarter to $514 million due in part to higher costs associated with the grounding.  Southwest said that included the impact of sharing compensation from Boeing with employees after striking a deal with the plane maker late last year.

--I discuss the Wuhan virus situation down below, but there was a negative impact on the shares of airlines, cruise and casino operators, and some luxury retailer stocks as investors tried to gauge the eventual impact, which is unknowable at this time.

And earlier in the week, picture the fear among flight attendants at Hong Kong’s Cathay Pacific Airways, let alone any other Chinese carrier.  The flight attendants’ union asked the airline to let crews wear face masks on all flights over fears of catching the coronavirus, having to deal with 300 passengers from numerous places on a single flight.  The airline quickly relented.

--A regulator barred former Wells Fargo & Co. CEO John Stumpf from the banking industry and fined him $17.5 million over the firm’s fake-accounts scandal, an extraordinary sanction for a top executive at a large bank.

Mr. Stumpf agreed to the lifetime ban in a settlement with the Office of the Comptroller of the Currency.  The firm’s former chief administrative officer and chief risk officer settled similar civil charges, and five other former executives, including the former consumer-bank chief, were also charged.

A lifetime ban on a CEO of a big bank is unprecedented in the megabank era that started in the 1990s.

Employees submitted many complaints about pervasive pressure and illegal sales activity to Mr. Stumpf’s office, but he didn’t respond to them, the agency said.

One employee wrote to the CEO’s office in 2013: “I was in the 1991 Gulf War....This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo.”

--Tesla displaced Volkswagen as the world’s second most valuable carmaker as the latest surge in the share price took the valuation to more than $100 billion.  It was just a little over a week earlier that in passing $81bn, Tesla had become the most valuable U.S. car company in history.

So now Tesla trails only Toyota.

This month Tesla said it had delivered more than 367,500 cars in 2019 – up 50% from the prior year, and investors are betting heavily on the new Shanghai factory to act as a springboard that would allow it to capture more of the Chinese market.

The thing is, Volkswagen delivered almost 11 million vehicles last year, while Toyota sold more than 9 million in the first 11 months of 2019.  Tesla also has yet to make an annual profit and there are a number of investigations out there into battery fires and unexpected acceleration.

If Tesla sustains the $100bn in market cap for both a month, and six-month average, it would unlock the first piece of a $2.6bn compensation package for Elon Musk.

Tesla was valued at about $55bn when the pay deal was approved.

--Intel Corp. posted strong fourth-quarter earnings as the chip maker benefited from an upswing in personal-computer shipments and robust demand for chips to power data centers.

Intel handily beat the Street’s estimates on both earnings and sales, the later rising to $20.21 billion.  The company benefited from bumper sales of high-margin products, including its most advanced processors for data centers.  That demand helped drive earnings significantly higher than Wall Street and Intel had projected.  The company also gave an upbeat outlook for the full year.

Despite the better-than-expected quarter, Intel is facing several challenges, including development difficulties with new processors, chip supply shortages, loss of market share to its main chip-making rival and turmoil from the U.S.-China trade war.

That said, the shares rose 8% in response to the good news.

--Netflix said it added 8.8 million subscribers in the fourth quarter of 2019, bringing its global total to 167.1 million, which was well above forecasts.

Fourth-quarter revenue grew 31% to $5.47 billion over the same period last year, while net income rose to $587 million, up from $133.9 million a year ago and easily topping projections.

For the year, Netflix reported net income of $1.87 billion, with sales up 27% to $20.2 billion.

But, the strong results were tempered by signs of a continued slowdown in the U.S. Netflix added only 423,000 customers in the quarter, well below forecasts for 600,000, bringing its total U.S. customer total to 61 million.

Netflix also said it would add fewer subscribers – 7 million – in the first quarter than the Street was expecting.  It’s all about competition, such as from Disney and Apple, and the effect of price increases; Netflix having upped the price on its standard subscription $2 to $12.99 a month.  It’s competitors are offering lower-priced services, with Disney+ starting at $6.99 a month, while Apple TV+ costs $4.99 a month.

--IBM reported a slight increase in quarterly revenue, ending a streak of falling sales and providing a first indication that CEO Ginni Rometty’s roughly $33 billion acquisition of Red Hat may help turn around Big Blue’s fortunes.

Fourth-quarter revenue rose 0.1% (‘how conveeenient’) to $21.78 billion after five straight quarters of year-over-year declines.  Adjusted net income fell by about 5% to $4.2 billion.

Rometty, member of Augusta National, cough cough, has been CEO since 2012 and throughout her first several years quarterly sales slid as IBM totally missed the changing IT spending priorities of customers, IBM slow to respond, such as in cloud-computing.

Buying Red Hat, IBM’s biggest acquisition in 108 years, represents a big bet for Rometty to finally deliver lasting top-line growth.  Red Hat sells support for open-source software that IBM expects more companies will use as they crunch more of their data in the cloud.

IBM said the fourth quarter was its strongest yet in the ‘stars’, with 21% growth to $6.8 billion of sales, and the company issued an upbeat outlook across its businesses for the current year.

--Johnson & Johnson said its profit and sales rose for the fourth quarter, owing to increased pharmaceutical and consumer-product sales.  Earnings fell just short of expectations, though net income of $4.01 billion compares with $3.03bn in the year-ago period.

U.S. sales rose 1.4% to $10.77 billion and international sales increased 2.1% to $9.97bn vs. a year ago.

J&J had strong sales growth for anti-inflammatory drug Stelara and cancer drug Darzalex.

Sales in the medical-device business fell 0.5% to $6.63bn due mostly to a decline in surgery products.

Over-the-counter medicine sales rose, but baby care products, including Johnson’s Baby Powder, posted a decline.  Yup, lots of bad publicity doesn’t help, which has resulted in lawsuits from about 100,000 plaintiffs over the safety and marketing of products including Baby Powder, as well as the issues on the opioid front.  At least the company has begun winning some of the powder suits, or have prior judgements significantly reduced.  No word on how the first episode of “Curb Your Enthusiasm” will impact sales.  [Had to sneak that in for those of you who watched it.]

--Procter & Gamble Co. posted another quarter of rising sales and profit as the marketing giant persuaded more consumers to upgrade to premium versions of Tide and Crest products.

The company said that organic sales, a measure that excludes currency moves and acquisitions, increased 5% from a year earlier in the fourth quarter, though this was down from 7% growth in the previous quarter.

P&G’s turnaround has been driven by higher prices, new products and a leaner portfolio of brands.  The company has shed mass-market beauty brands and led the industry in a move to raise prices to offset commodity costs and fatten profit margins.

The company said it is seeing improvements in its struggling Gillette razor business, and this doesn’t include my own return to the product this week. 

--A federal judge sentenced John Kapoor, the founder of the opioid manufacturer Insys Therapeutics, to 5 ½ years in prison Thursday for his role in a racketeering scheme that bribed doctors to prescribe a highly addictive opioid and misled insurers.

This case was a rare criminal inquiry into the practices of a drug company that aggressively sold painkillers while the nation was in the grip of a deadly opioid epidemic.

As reported by Katie Thomas of the New York Times: “Federal prosecutors have said that Insys, based in Arizona, embarked on an intensive marketing plan – including paying doctors for sham educational talks and luring others with lap dances – to sell its under-the-tongue fentanyl spray, Subsys, which was federally approved to treat patients with cancer.

“Doctors were urged to write prescriptions for a much wider pool of patients, and to mislead insurance companies so they would pay for the expensive medication.”

PBS’ “Frontline” has a new documentary on the case, just released, that you can easily find online.

--Union Pacific Corp. plans to cut nearly 3,000 workers this year as the company pushes ahead with a new operating procedure that runs fewer, longer trains.

The Omana, Neb., said it plans to reduce its average number of workers by around 8% in 2020 after reducing its staffing by 11% in 2019.

--Forensic experts hired by Jeff Bezos have concluded with “medium to high confidence” that a WhatsApp account used by Saudi Crown Prince Mohammed bin Salman (MBS) was directly involved in a 2018 hack of the Amazon founder’s phone.

A report on the hack says Bezos’ phone started surreptitiously sharing vast amounts of data immediately after receiving an apparently innocuous but encrypted video file from the prince’s WhatsApp account in May 2018.   The file was sent weeks after Bezos and MBS exchanged numbers at a dinner in Los Angeles during MBS’ ‘goodwill’ tour of the U.S., where the crown prince met a string of top executives and sought to attract investments to the kingdom.

But the relationship between Bezos and the prince soured after the gruesome murder of journalist Jamal Khashoggi in Istanbul, Khashoggi a regular contributor to the Washington Post, which is owned by Bezos.  Khashoggi used to employ his columns to criticize MBS’ autocratic leadership.  The Post then reported extensively on the murder case and the Saudi hit squad hired to kill Khashoggi.

The UN has been investigating and said MBS personally attempted to “intimidate” Bezos with a WhatsApp message implying he had incriminating information about the Amazon chief’s extramarital affair in the weeks after Khashoggi’s murder.

Officials from the UN said the Saudi crown prince appeared to have sent a suggestive message to Bezos’ personal iPhone in November 2018 to make The Washington Post owner tone down his paper’s critical coverage of the Saudi journalist’s death several weeks earlier.

The allegation suggests the de facto leader of Saudi Arabia was using private messages not only to hack the world’s richest man but also intimidate him as part of an attempt to cover up the truth of Khashoggi’s murder.

“The information we have received suggests the possible involvement of the crown prince in surveillance of Mr. Bezos, in an effort to influence, if not silence, reporting [in The Post] on Saudi Arabia,” said FTI Consulting.  The Saudi foreign minister called the claim “absurd” when confronted in Davos.

--The share of American workers in labor unions fell to a fresh record low last year, even as the ranks of unionized state-government employees rose.

The share of the workforce in labor unions to 10.3%, the lowest portion on record since 1983, the Labor Department said Wednesday.

In 2019, there were 14.6 million union members and 141.7 million total U.S. workers.  At the same time, median weekly pay for full-time union members was $1,095 last year versus $892 for nonmembers, according to the Labor Department.

Union membership in manufacturing fell to 8.6% in 2019, a record low.

--Moody’s cut Hong Kong’s credit rating, saying the government’s “slow” and ineffective response to months of protests has prompted it to reassess the Chinese territory’s institutional strengths and governance.

“The underlying drivers of the protests are certainly deep-seated and intractable,” Moody’s said.  “Nevertheless, the response by Hong Kong’s government to both political demands by parts of the population and broader concerns about living standards in [Hong Kong], housing costs and equality of economic opportunities has been notably slow, tentative and inconclusive.”

And then there’s the potential impact from Wuhan and the contagion spreading in HK, an incredibly scary thought.

--According to the Department of Agriculture, about 30.8 million acres of winter wheat was planted this season, down 1% from the year before and just a little over the 29.2 million acres that were seeded in 1909.

While farmers get more wheat from each acre than they did 111 years ago, the decline in planted acres is concurrent with Russia’s ascent as the world’s dominant supplier and Midwestern farmers’ turn to more profitable crops, like corn and soybeans.

--Finally, BlackRock CEO Larry Fink, is, how shall we put this, very “precious.”

Editorial / Wall Street Journal

“(Fink) is among the world’s most powerful investment managers, but it seems he longs for more influence.   To wit, he has assumed a role as self-styled conscience of the business world in telling CEOs how to run their companies.

“ ‘We believe that sustainability should be our new standard for investing,’ he wrote to clients in his annual letter this week.  He added that ‘all investors – and particularly the millions of our clients who are saving for long-term goals like retirement – must seriously consider sustainability in their investments.’

“Mr. Fink gets attention because BlackRock is the world’s largest asset manager, with some $7.43 trillion in client assets.  He is now threatening to vote against corporate directors and management if they don’t do what he says, and he is especially exercised about climate change. He is demanding that companies disclose climate risks, and wants to see their plans to operate under scenarios in which warming is limited to fewer than two degrees Celsius this century.

“Corporations in which BlackRock invests will also have to comply with the rules from a ‘Sustainability Accounting Standards Board’ on issues such as labor practices and workforce diversity.  ‘Disclosure should be a means to achieving a more sustainable and inclusive capitalism,’ Mr. Fink writes.

“Like his friends at the Business Roundtable, Mr. Fink is big on ‘stakeholder’ capitalism.  ‘Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders,’ he says. If he means serving employees, customers, suppliers and communities, he is merely saying what any successful company already does.  But our guess is that by stakeholders Mr. Fink really means regulators and politicians.

“The giveaway is that Mr. Fink says BlackRock will divest its actively managed funds from corporations that generate 25% or more of their revenues from coal production.  ‘We don’t yet know which predictions about the climate will be most accurate,’ Mr. Fink acknowledges, but ‘even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis.’

“He might be right, but then estimates of future temperature increases are based on climate models that have overstated warming to date.  Mr. Fink wants to make corporations plan for unknown temperature increases as well as climate regulations that are even less certain....

“BlackRock is a fiduciary and as such is legally obligated to act in its clients’ best interests.  This is ostensibly why BlackRock has voted against more than 80% of the climate resolutions on proxy ballots by activist shareholders.  But suddenly Mr. Fink is prioritizing the interests of liberal politicians and pressure groups.

“We can’t help but wonder if Mr. Fink, after a profitable life in business, is auditioning to be Treasury Secretary in, say, the Warren Presidency.  His ‘stakeholder’ notions sound similar to her plans to put American corporations further under the government’s thumb.

“CEOs who take Mr. Fink seriously might note that his political and moral importuning isn’t satisfying progressives.  ‘BlackRock will continue to be the world’s largest investor in coal, oil and gas,’ the Sierra Club said in response to Mr. Fink’s letter.

“Businesses will never be able to appease the climate absolutists. The best way they can prepare for climate risks and serve their stakeholders is to succeed as a business and create the wealth and broad prosperity that will make the world better able to adapt to whatever happens.  That’s real ‘sustainability.’”

Foreign Affairs

Iran / Iraq: As I noted above, President Trump said he did not consider the brain injuries suffered by 11 U.S. service members in Iran’s recent attack on a base in Iraq to be that serious.  But the military has moved more troops out of the region for potential injuries.  In a statement on Wednesday, U.S. Central Command said that more troops had been flown out of Iraq to Germany for medical evaluations following Iran’s Jan. 8 missile attack, after announcing the 11 injuries last week.  And then today the Pentagon hiked the figure to 34.

As for Iran, President Hassan Rouhani said on Wednesday that his country will never seek nuclear weapons, with or without a nuclear deal, as he called on European powers to avoid Washington’s mistake of violating Tehran’s 2015 nuclear deal with major powers.

“We have never sought nuclear weapons... With or without the nuclear deal we will never seek a nuclear weapon... The European powers will be responsible for the consequences of violating the pact,” said Rouhani.

Despite gradually rolling back on its commitments in terms of enriching uranium, Rouhani said Iran remained committed to the deal and could reverse its steps away from compliance if other parties fulfilled their obligations.

Rouhani seemed to be clarifying his earlier threats to quit the nuclear treaty if European countries referred Tehran to the UN Security Council after declaring it in violation of the pact.

Foreign Minister Javad Zarif said Monday: “If the Europeans continue their improper behavior or send Iran’s file to the Security Council, we will withdraw from the NPT (Non-Proliferation Treaty).”

British Prime Minister Boris Johnson and French President Emmanuel Macron reiterated their commitment on Sunday to the Iran nuclear deal and agreed a long-term framework was needed.

Robert Wood, U.S. disarmament ambassador, told reporters in Geneva: “We think that Iran needs to end its malign behavior* and sit down with the United States and negotiate an agreement that deals not only with the nuclear issue but also with the other issues that concern us like the ballistic missile proliferation and development and the malign activities around the world.”

*Last Sunday in Yemen, Iran-aligned Houthis launched a missile attack on a military training camp that killed at least 79 people!  The attack targeted a mosque in the camp as people gathered for prayer in the latest assault in the proxy war playing out in Yemen between Iran and Saudi Arabia.

As for the downing of Ukraine International Airlines Flight 752 on Jan. 8, Iran acknowledged Tuesday that its forces had fired two surface-to-air missiles at the plane, confirming for the first time that more than one missile was launched at the jet.

Separately, Defense One reports that between May and October, the Defense Department deployed about 14,000 more troops to the Persian Gulf region.  Immediately after the Soleimani strike, DOD shifted an additional 4,500 troops to the region.  These 18,500 personnel represent an almost 30 percent increase over the roughly 60,000 U.S. forces in U.S. Central Command.  The Pentagon also moved hardware and assets to the region, including an aircraft carrier strike group, B-52 bombers, early-warning aircraft and Patriot missile defense batteries.

Editorial / Army Times...on staying in Iraq....

“Why are American troops still in Iraq?

“After more than 4,500 troop deaths and trillions of dollars spent, why can’t we just declare victory and go home?....

“The reasons to pack up and leave Iraq are plentiful, but here is something to consider: If and when the U.S. leaves, it will create a vacuum that will surely be filled by Russia or China or both.

“This is not idle speculation.

“In December, Iran held joint naval exercises with Russia and China in the Indian Ocean, prompting a senior Iranian navy officer to declare that: ‘Today, the era of American free action in the region is over.’

“The Chinese ambassador recently met with Iraq’s prime minister and said that China would gladly provide military assistance if needed.

“And Russia has offered to sell to the Iraqis their S-400 air-defense systems, which are powerful and effective enough to keep most U.S. aircraft out of their airspace.

“Allowing China and Russia to fill the vacuum left by a U.S. withdrawal would be very bad for U.S. interests.

“For example, just a few years ago, the Russian military had limited combat experience.  But now, after six years of Russian military operations in Syria helping to bolster the Assad regime, the Russians have built out a cadre of combat-experienced field grade officers and non-commissioned officers, the backbone of any viable military.  The Russians have tested expeditionary logistics as well as tactics, techniques and procedures in a way only possible through war.

“The Chinese have no such experience.  Ceding Iraq (or even the entire Middle East) to China would do for them what it has done for the Russians by rapidly modernizing their professional military with real operational experience.  And a combat-experienced People’s Liberation Army is ultimately bad news for the U.S. military.  No one ever wants a fair fight.

“Moreover, turning over Iraq to Russia and China would give America’s two biggest global adversaries access to ports on the Persian Gulf as well as control of the land bridge from Iran to the Mediterranean.  The global dominance the U.S. has maintained for the past 30 years would end.

“The result would be more war rather than less.

“Don’t forget the reasons why the U.S. has sought influence in the U.S. Central Command region for the past several decades.  About 30 percent of the world’s energy resources flow through the Strait of Hormuz.  And it’s the world’s No. 1 source of transnational terrorism.

“There are compelling arguments to make that after 17 years of intractable conflict in Iraq – a nation where many don’t want us, in a region that remains hostile – it is long past time to bring our troops home and staunch the sacrifice of blood and treasure.

“Which places this nation’s political and military leaders in a terrible conundrum.

“The price to stay may be unsustainable.

“But the price of leaving may be even worse.”

Syria: The carnage continues.  Russian-led air strikes killed at least 40 on Tuesday in Idlib province in the northwest as part of a major assault backed by Iranian militias to clear out rebels that has sent tens of thousands of people fleeing toward the border with Turkey.  One family of eight was wiped out, including six children, according to the Syrian Observatory for Human Rights and Reuters.

As I noted before, a total of 350,000 in the region are now on the run, but consider another half million fled earlier to the safety of camps near the Turkish border.

But another three million remain trapped, according to the UN.  Moscow and Damascus deny accusations of indiscriminate bombing of civilians, saying they are fighting jihadist militants who they say have stepped up their attacks on civilians in Aleppo city in northern Syria.

A ceasefire brokered by Russia and Turkey collapsed two weeks ago.

Lebanon: A new government was formed on Tuesday led by Prime Minister Hassan Diab after the powerful Shiite group Hezbollah and its allies clinched an agreement over a cabinet that must address the economic crisis.

Lebanon has been without a government since October when Saad al-Hariri resigned as premier, prompting protests against the political elite seen as having caused the crisis through state corruption.

Diab described his team of 20 specialist ministers (backed by parties) as a technocratic “rescue team” that would work to achieve the goals of protesters. Diab’s first trip will be to the Gulf states seeking support.

Israel: Looking for a diversion from the impeachment trial, President Trump announced Thursday that he would release his long-awaited Middle East peace plan within days and invited both Israeli Prime Minister Benjamin Netanyahu and his rival, former army chief Benny Gantz, to the White House next week to discuss it.  With the bad blood between Netanyahu and Gantz ahead of another Israeli election in March, this could be interesting.

Netanyahu has been indicted on charges of bribery, fraud and breach of trust, which is kind of funny given Trump is on trial in the Senate on charges of high crimes and misdemeanors.

Gantz is only a political factor because he can say he hasn’t been indicted.  He’ll be in Washington with his opponent on the same day, Tuesday, the Israeli parliament begins debating whether to grant Netanyahu immunity.

Under the terms of the peace agreement (at least those that have been leaked), Israel would get to annex the strategically important Jordan Valley, making it the country’s new eastern border with Jordan, and Jerusalem would be under Israeli control, including the eastern part of the city, which Palestinians claim as their future capital.

Preconditions for a Palestinian state would be the demilitarization of Gaza, the disarming of Hamas, a cessation of financing terrorism, and a recognition of Israel as a Jewish state and of Jerusalem as its capital, according to reports.

Needless to say, if the leaks of the details are accurate, Palestinians will be outraged, as they already are.

President Trump told reporters Thursday that when it came to the Palestinians, “I’m sure they maybe will react negatively at first, but it’s actually very positive for them.”

No it isn’t.  [I am in no way a supporter of the Palestinians, just my educated observation.]

This ‘peace plan’ is going nowhere. 

Libya: Foreign powers agreed to a summit in Berlin on Sunday to shore up a shaky ceasefire in Libya, but the meeting was overshadowed by blockades of oilfields by forces loyal to commander Khalifa Haftar that threatened to cripple the country’s crude production, though as of today has had minimal impact.

Haftar, whose self-styled Libyan National Army (LNA) is bearing down on the capital, Tripoli, with the backing of Egypt, the United Arab Emirates, Russian mercenaries and African troops, did attend the one-day summit.

Turkey has rushed troops to Tripoli, as well as Turkish-backed fighters from Syria, to help Libya’s internationally recognized government.

Libya has had no stable central authority since dictator Muammar Gaddafi was overthrown by NATO-backed rebels in 2011.  For more than five years, it has had two rival governments, in the east and west, with streets controlled by armed groups.

China: Here’s what we know about the Wuhan virus today, as China ‘celebrates’ the Lunar New Year holiday, where the nation shuts down essentially for two weeks (one week formally), with hundreds of millions on the road.

China has locked down cities with nearly 40 million people, including 11 million in Wuhan, an unprecedented move to contain the outbreak, suspending most transport, including outgoing flights, with people being told not to leave.  In Wuhan (Hubei province), ground zero, a hospital capable of treating 1,000 patients is literally being built from scratch.

While China has announced 41 deaths thus far (as I go to post), over 1,200 infected, the coronavirus still does not appear to be as deadly as the 2003 Severe Acute Respiratory Syndrome (SARS) pandemic, which killed one in ten who caught it.  But it is “highly infectious.”  It is also adapting and mutating, according to China’s Center for Disease Control and Prevention.

Cases have been confirmed in South Korea, Japan, Vietnam, Thailand, Taiwan and Singapore in the region thus far.  And then elsewhere in the world, including a second case in the U.S. and a first case in France.

The World Health Organization, however, did not declare the outbreak to be a global health emergency when it met on Thursday, which would have stepped up the international response.  It could make such a declaration next week if the number of cases reported in China and elsewhere explodes, but for now the WHO said it was “a bit too early” to make an emergency declaration.

“Make no mistake, though, this is an emergency in China.  But it has not yet become a global health emergency. It may become one,” said WHO chief Tedros Adhanom Ghebreyesus.

The WHO emphasized that “National authorities and the World Health Organization will need to continue to monitor developments very closely.”

Early indications are that the virus was passed on to humans from snakes, and potentially badgers and rats.  Others say it may share the same bat-related ancestor as SARS.

Research teams in China, with U.S. cooperation, are working on a vaccine but by the time one became available, chances are it will have run its course, as was the case with SARS.

Tonight, President Trump tweeted:

“China has been working very hard to contain the Coronavirus.  The United States greatly appreciates their efforts and transparency.  It will all work out well.  In particular, on behalf of the American People, I want to thank President Xi!”

Oh brother.  China provided zero transparency early on.  Now it’s panic city for Beijing, because it’s episodes like this that, if handled poorly, can bring down the government.

I’ve always written in this space that the Communists understand the major threat to their rule would come from a revolt over “an environmental disaster.”  Well, the Wuhan crisis fits the bill.  For the sake of humanity, we do want the regime to succeed in containing the virus.

North Korea: Pyongyang said the United States ignored a deadline for nuclear talks and it no longer felt bound by its commitments, and may “seek a new path.”

Kim Jong Un had set a year-end deadline for denuclearization talks with the U.S. and disarmament ambassador Robert Wood voiced concern at Pyongyang’s latest remarks and said Washington hoped the North would return to the negotiating table.

Ju Yong Chol, a counselor at North Korea’s mission to the UN in Geneva, said that over the past two years, his country had halted nuclear tests and test firing of inter-continental ballistic missiles, “in order to build confidence with the United States.”

However, the U.S. had responded by conducting dozens of joint military exercises with South Korea and by imposing sanctions, he said.  “If the U.S. persists in such hostile policy there will never be the denuclearization of the peninsula,” he added.

Importantly, North Korea named a former army officer who led military and high-level dialogue between the two Koreas as its top diplomat, it was reported this week.  The move could change the course of the stalled nuclear negotiations.

Ri Son Gwon, the former chairman of the Committee for the Peaceful Reunification, replaced Ri Yong Ho as the foreign minister, as identified by South Korean media.  Pyongyang then formally confirmed his appointment today.

Pyongyang has yet to respond to Washington’s continued demands for more talks and instead stepped up tensions verbally and with weapons tests.

Russia: President Vladimir Putin intends to conduct a referendum on whether to approve amendments to the constitution that would change the balance of power in the country’s leadership, according to his spokesman Dmitry Peskov,

Russia’s lower house of parliament voted unanimously on Thursday to green-light the amendments, which seek to give more authority to parliament, the premiership and a leadership advisory body, the State Council.

The proposals, announced by Putin in his state of the nation speech last week, have prompted speculation that the long-time Russian leader is seeking to create increased options for retaining power after his current term ends in four years.

The draft legislation includes establishing a minimum wage and pension allocations based on the cost of living, aspects that could help to convince the populace to vote in favor.

Tuesday, Putin approved a new government, bringing in some fresh faces but retaining many senior ministers.  The new government included a new economy minister and a new first deputy prime minister, but the finance, foreign, defense, energy and agriculture ministers all kept their jobs.

Putin previously selected 53-year-old former tax chief Mikhail Mishustin to replace Dmitry Medvedev as his new prime minister.

Ukraine: Two Ukrainian soldiers were killed and 10 were wounded at the weekend in the eastern Donbass region, where a ceasefire is supposed to be in place.  At a four-way summit with the leaders of France and Germany last month the Russian and Ukrainian presidents, Vladimir Putin and Volodymyr Zelensky, had agreed to commit to the full and comprehensive implementation of same.

Random Musings

--Presidential tracking polls....

Gallup: 44% approve of President Trump’s job performance, 53% disapprove, 88% of Republicans, 37% of independents (Jan. 2-15).  A month ago the figures were 45/51, 89, 42...so a significant drop in independents supporting the president.  I have long pegged 38% as the key number come November.
Rasmussen: 49% approve, 49% disapprove (Jan. 24).

A new CNN/SSRS poll has Trump with a 43% approval rating, 53% disapproving.

A new Monmouth University national survey has the president also with a 43% job approval rating, with 52% disapproving.  [43/50 in December.]

A new Pew Research Center survey has just 40% approving of Trump’s handling of his job as president, while 58% say they disapprove.

--Not that it means anything, but for the record, the New York Times editorial board, rather than endorsing a single Democratic candidate for the nomination to go up against President Trump, picked two.

“Both the radical and realist models (of the party) warrant serious consideration.  If there were ever a time to be open to new ideas, it is now.  If there were ever a time to seek stability, now is it.

“That’s why we’re endorsing the most effective advocates for each approach.  They are Elizabeth Warren and Amy Klobuchar.

The Times says that the health of Bernie Sanders, who would be 79 when he assumed office, and after an October heart attack, is too serious a concern to ignore, while Biden is also simply too old.

--Democratic presidential candidate Mike Bloomberg took to the site of historic race riots in Tulsa, Okla., on Martin Luther King Jr. Day weekend to propose sweeping plans to redress the economic legacy of generations of discrimination against African-Americans.

In an initiative similar to calls for reparations for slavery, Bloomberg proposed $70 billion in investment in the country’s “100 most disadvantaged neighborhoods,” along with steps to create 1 million new black homeowners and 100,000 new black-owned businesses.

In his speech, Bloomberg said, “For hundreds of years, America systematically stole black lives, black freedom and black labor.

“Well, it’s past time to say enough – and to damn well do something about it.”

It was in 1921 that white mobs destroyed a thriving black Tulsa business district, killing about 300, in what came to be known as the Black Wall Street Massacre.  Bloomberg began his speech by conceding he’d been ignorant of the incident – exclaiming “How is it possible that high schools and colleges don’t teach this?”

Bloomberg, vying to make himself the leader on issues of importance to African Americans, said:

“The crimes against black Americans still echo across the centuries, and no law can wipe that slate clean.  Not here in Tulsa, or anywhere else. But I believe that this is a country where anything is possible.  And I believe that we have the power to build a future where color and capital are no longer related.”

--Editorial / Wall Street Journal

Anyone who thinks American politics will enter a new period of compromise when President Trump leaves the White House isn’t watching the Democratic presidential race.  The left is unloading on Joe Biden for the heresy of having once considered a bipartisan reform of Social Security.

“With the Iowa caucuses two weeks away, the Bernie Sanders campaign is rolling out oppo research showing that Mr. Biden once said he’d consider cost-of-living ‘adjustments’ in Social Security.  In Bernie-speak, this always means ‘cuts.’

“ ‘I think anyone who looks at the vice president’s record understands that time after time after time, Joe has talked about the need to cut Social Security,’ Mr. Sanders said.  His campaign also dug up a 1995 TV clip when Mr. Biden said on the Senate floor he supported freezing all spending, including Medicare and Social Security, during the era when budget deficits and spending mattered politically.

“Mr. Biden responded by claiming the Sanders campaign had doctored a separate video, which doesn’t seem to be true. But the Sanders campaign is doctoring fiscal reality, which is that Social Security can’t continue in its present form.  As early as this year Social Security benefits will exceed the amount collected in payroll taxes.  This means benefits will have to be paid out of trust-fund asset reserves set to run out in 2035.

“Mr. Sanders and Elizabeth Warren nonetheless want to increase Social Security benefits regardless of income even though benefits already increase automatically each year.  They also want to lift the cap ($137,700 this year) on income that is subject to the Social Security payroll tax.  Alas, under pressure from the left, Mr. Biden now wants to raise the cap too.  This would be a huge tax increase.

“It’s possible the Social Security attack will hurt Mr. Biden in Iowa, which has an older population than most states.  But the larger damage will be to the cause of fiscal compromise if a Democrat wins the White House.  Mr. Trump has little interest in reforming entitlements, and House Democrats would block him anyway.  The best chance at a bipartisan reform would be a Democrat like Mr. Biden or Michael Bloomberg working with a GOP Congress.

“Sooner or later some President is going to have to do it.  Meanwhile, we have the spectacle of 77- and 78-year-old candidates demanding higher taxes on millennial workers to pay for higher benefits for 78-year-olds.”

--In New York City, Brooklyn Borough President Eric Adams will be running to succeed Mayor Bill de Blasio in 2021.  He’s an interesting guy, an African American, former police officer, and not afraid to speak his mind.  Adams is way too liberal for my liking, but he’s different and kind of entertaining.

But he also exposed himself as a virulent racist when on Martin Luther King Jr. Day, he gave an explosive speech at the National Action Network’s MLK Day celebration in Harlem wherein he said to Gotham’s gentrifiers, “Go back to Iowa!  You go back to Ohio!”

“Folks are not only hijacking your apartments and displacing your living arrangements, they displace your conversations and said that things that are important to you are no longer important, and they decide what’s important and what’s not important.”

“New York City belongs to the people that [were] here and made New York City what it is.  I know I’m a New Yorker.  I protected this city. I have a right to put my voice in how this city is run.”

Yes, high rents and gentrification are likely to play a significant role in the 2021 mayoral race, but many were shocked at the explicitly racist tone.

But what also made this presentation kind of fascinating is that Adams, again, is Brooklyn Borough President, and who wants to replace him in that job?  None other than Bill de Blasio’s wife, Chirlane McCray (who if you aren’t from the area and don’t already know is African American).

And why is the Mayor pushing his wife for the job?  Because now that it’s apparent Bill de Blasio has no hopes for a national profile, including a highly visible position in any Democratic administration should that ever come to pass, he has no job.  The family no income, after next year.

But being Brooklyn Borough President comes with a salary of $179,000.

And that is why, boys and girls, Mayor de Blasio didn’t criticize the harsher points in Eric Adams’ speech.

--Under a Megxit deal announced by Queen Elizabeth II on Saturday, Meghan and Harry will “step back from Royal duties” and will no longer receive taxpayer cash.

In an official statement, the Queen said: “I want to thank them for all their dedicated work across this country, the Commonwealth and beyond, and am particularly proud of how Meghan has so quickly become one of the family.  It is my whole family’s hope that today’s agreement allows them to start building a happy and peaceful new life.”

“I am pleased that together we have found a constructive and supportive way forward for my grandson and his family,” the Queen said in her statement.  “Harry, Meghan and Archie will always be much loved members of my family.”

According to a Daily Mail poll, 80% of Britons want Harry and Meghan cut off from public support if they’re no longer playing the part of royals.

Prince Harry broke his silence Sunday, saying at a charity event in London, he had “no other option” but to step back from his royal duties.

“The decision that I have made for my wife and I to step back, is not one I made lightly.  It was so many months of talks after so many years of challenges,” the 35-year-old prince said.

“And I know I haven’t always gotten it right, but as far as this goes, there really was no other option,” said Harry, who professed his love for his country, saying: “The UK is my home and a place that I love.  That will never change.”

Harry said he and Meghan were “not walking away, and we certainly aren’t walking away from you.”

The Duke of Sussex said he’d hoped to “continue serving the Queen, the commonwealth, and my military associations,” but that without public funding, “unfortunately, that was not possible.”

“When I lost my mum 23 years ago, you took me under your wing,” Harry continued.  “You’ve looked out for me for so long, but the media is a powerful force, and my hope is one day our collective support for each other can be more powerful because this is so much bigger than just us.”

According to a report in The Sunday Times of London, the Queen is “very sad” that she has “barely seen” her great-grandson, baby Archie – and fears even less time with him after Megxit.  The Queen first met the baby two days after he was born, but has only seen him a handful of times since then.  That included missing him for the holidays during the Sussexes’ extended break in Canada – and she has not seen him in quite some time.

A source who knows the Queen told the Sunday Times, “She will be very sad to have barely seen Archie, and that he will miss out on growing up with his cousins and wider family.”

Prince William’s kids George, Louis and Charlotte – have only met the baby royal twice since his birth.

Prince Charles, who cherishes his role as “Grandpa Wales” to William’s kids – is said to be despondent at missing out on the same bond with Archie.

Harry and Meghan are reportedly eyeing a $27 million waterfront property in an exclusive enclave in Vancouver.

This amazingly naïve, now loathsome couple somehow believe the press will leave them alone while only their hand-selected PR staff follows them around at all their Hollywood A-List parties, snapping lovely photos, hand-picked by them as well.

Prime Minister Boris Johnson on Sunday said he believed that the whole of Britain would want to wish the very best to Harry and Meghan.

“I think the whole country will want to join in wishing them the very best for the future.”

No they won’t. 

--We note the passing of Jim Lehrer, 85, the co-host and later host of the nightly “PBS NewsHour” that for decades offered a thoughtful take on news.

For Lehrer, and his longtime partner Robert MacNeil, broadcast journalism was a service, an effort to educate the public on the events of the day.  Lehrer was also a frequent moderator for presidential debates, a record 12 to be exact.

Lehrer wrote in his 1992 memoir, “A Bus of My Own,” “We both believed the American people were not as stupid as some of the folks publishing and programming for them believed.”

“We were convinced they care about the significant matters of human events. ...And we were certain they could and would hang in there more than 35 seconds for information about those subjects if given a chance.”

Amen.

[I forgot that Jim Lehrer’s first novel, “Viva Max!”, was made into a movie I well remember as a kid starring Peter Ustinov and, among many others, Jonathan Winters.]

--China, one of the world’s biggest users of plastic, has unveiled a major plan to reduce single-use plastics across the country.

Non-degradable bags will be banned in major cities by the end of 2020 and in all cities and towns by 2022.

The restaurant industry will also be banned from using single-use straws by the end of 2020.

How much has China been struggling with its rubbish?  The country’s largest garbage dump – the size of around 100 football fields, we are told – is already full, 25 years ahead of schedule.

According to the online publication Our World in Data based at the University of Oxford, China produced 60 million tons of plastic waste in 2010, followed by the U.S. at 38 million.  [The research was published in 2018 and said the “relative global picture is similar in projections up to 2025”.]

From a recent issue of National Geographic, here are a few factoids.

1 million plastic beverage bottles are bought every minute around the world, with recycling rates remaining low.

Billions of plastic utensils are thrown away each year around the world.

1 billion toothbrushes will be discarded in the U.S. this year. There are biodegradable alternatives, but plastic toothbrushes prevail.

3 trillion cigarette butts are carelessly thrown away each year.  Their filters are made of plastic, which makes them a key source of plastic pollution.

--Finally, we note the tragedy in New South Wales, Australia; three firefighters from the United States dying as the large aircraft they were using to battle bush fires crashed, the cause not immediately known.  The C-130 Hercules carrying a load of fire retardant was operated by a Canadian company that helped battle last year’s California fires and has long worked in Australia.

The three victims were later identified as all having served in the U.S. military, representing the Air National Guard, the Marines, and the U.S. Air Force.

Previously, five other firefighters had died in New South Wales and the state of Victoria.

Having been to Australia a few times, I know these are truly our best allies in the world.  A beautiful, outrageously fun, kind, loving people.  You can be sure they will find a special way to honor our fellow citizens.

We need Australia in all the battles ahead, whether it’s the climate or the looming war with China.  There are over 200 American firefighters there today.  God watch over them.

---

Pray for the men and women of our armed forces...and all the fallen.

God bless America.

---

Gold $1570
Oil $54.37...lowest weekly close since Oct. 4

Returns for the week 1/20-1/24

Dow Jones  -1.2%  [28989]
S&P 500  -1.0%  [3295]
S&P MidCap  -1.5%
Russell 2000  -2.2%
Nasdaq  -0.8%  [9314]

Returns for the period 1/1/20-1/24/20

Dow Jones  +1.6%
S&P 500  +2.0%
S&P MidCap  +0.1%
Russell 2000  -0.4%
Nasdaq  +3.8%

Bulls 59.4...finally, nearing the ‘60’ danger level
Bears 17.9

Have a good week.

Brian Trumbore



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Week in Review

01/25/2020

For the week 1/20-1/24

[Posted 10:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs and your support is greatly appreciated.  Please click on the gofundme link, or send a check to PO Box 990, New Providence, NJ 07974.

Special thanks to Jeff B. for his ongoing support.

Edition 1,084

Just a word on the Wuhan crisis and the rapidly spreading coronavirus, of which I have much on the topic below.  From an economic standpoint, one of the scary aspects is the potential impact on this summer’s Tokyo Olympics.  If China can’t get a handle on the crisis soon, like within just a few weeks, Japan could be staring down the barrel of an economic catastrophe, which wouldn’t be good for anyone.

---

Reminder...results of the 2016 presidential election:

Michigan 47.5% to 47.3% for Donald Trump
Wisconsin 47.2% to 46.5% for Donald Trump
Pennsylvania 48.2% to 47.5% for Donald Trump

This is what the Senate impeachment trial was about this week.  Donald Trump is not going to be removed from office.  I’m on record as having favored “censure.”

Four Republican senators are not going to vote for more witnesses.

The Republican managers will have their say starting Saturday and the ‘base’ will rally further.

But what this is really all about is did the House managers move the needle just 1%?

The presidential election is all about the 20 percent or so in the middle.  Many of these folks may have told pollsters prior to the impeachment trial their minds were made up, at least to the extent of they were either voting for Donald Trump or they weren’t.  But in Michigan, Wisconsin and Pennsylvania, and maybe Florida and Arizona, did the House managers move any votes?

Once the Republicans have their say the initial polls should be fascinating.

On the other hand, the election is still a long way off.  So much can change, and as I’ve been saying for weeks, there is so much more to come before Americans enter the voting booth.  Maybe tonight’s breaking story of an audio tape apparently capturing President Trump calling in 2018 for the firing of then U.S. ambassador to Ukraine Marie Yovanovich, speaking at a small dinner with guests including Lev Parnas, is a moment that moves the needle once it comes out, Trump having told us this week he doesn’t know Parnas?  Maybe it is something else, like John Bolton speaking to “60 Minutes,” I’m just imagining.

Just 1%...that’s all it may take.

---

And so the House managers made an incredibly compelling case for removal.  Lead House manager Rep. Adam Schiff ended Thursday night’s arguments in the Senate trail by emotionally insisting that “right matters” and “we’re lost” if the truth is simply tossed aside.

Schiff pointed to the testimony of Lt. Col. Alex Vindman – who fled Ukraine with his family when he was 3, rose to become the top Ukraine expert on the National Security Council, and came forward to talk about what he knew about Trump’s abuses of power – as an example of someone who puts country before his personal interest.

Schiff quoted Vindman in his closing statement: “Here, right matters.  Here, right matters,” he said recounting the testimony.  “Well, let me tell you something, if right doesn’t matter – if right doesn’t matter, it doesn’t matter how good the Constitution is.  It doesn’t matter how brilliant the Framers were.  Doesn’t matter how good or bad our advocacy in this trial is.  Doesn’t matter how well written the oath of impartiality is.  If right doesn’t matter, we’re lost.  If the truth doesn’t matter, we’re lost.”

“If the truth doesn’t matter, we’re lost.  [The] framers couldn’t protect us from ourselves, if right and truth don’t matter.  And you know that what he did was not right.  That’s what they do in the old country, that [Lt.] Col. Vindman’s father came from.  Or the old country that my great-grandfather came from, or the old countries that your ancestors came from, or maybe you came from.

“But here, right is supposed to matter.  It’s what’s made us the greatest nation on earth.  No constitution can protect us if right doesn’t matter anymore.  And you know you can’t trust this president to do what’s right for this country.  You can trust he will do what’s right for Donald Trump.  He’ll do it now.  He’s done it before.  He’ll do it for the next several months.  He’ll do it in the election if he’s allowed to.  This is why if you find him guilty, you must find that he should be removed.  Because right matters.  Because right matters and the truth matters.  Otherwise, we are lost.”

But Republican Sen. Rob Portman (Ohio) was emblematic of his party’s stance on the impeachment trial.

“Some of the things (Trump did) are not appropriate.  That’s a very different question from removing someone from office who was duly elected in the middle of a presidential election.”

Sen. Bill Cassidy, R-La., said Schiff is saying there’s a “fight for facts” but “therefore we must remove now, because we can’t afford to wait eight (nine) months, we can’t trust the American people to do it, because they won’t have time to do it.”

Trump World

--A new CNN/SSRS poll has 51% of Americans saying the Senate should vote to convict President Trump and remove him from office, while 45% say the Senate should vote against conviction and removal.

69% say that the trial should feature testimony from new witnesses who did not testify in the House impeachment inquiry.  Among Republicans, 48% say they want new witnesses, while 44% say they do not.

58% say Trump abused the power of the presidency to obtain an improper personal political benefit and 57% say it is true that he obstructed the House of Representatives in its impeachment inquiry.

Overall, 89% of Democrats say he should be removed from office, while just 8% of Republicans feel the same way.  Among independents, 48% say the Senate should vote to remove him, while 46% say that they should not.

Among 15 battleground states decided by 8 points or less in 2016, 49% are on each side.

59% of women say the Senate should remove Trump, 42% of men agree.  86% of African Americans are for removal, but ‘just’ 65% of Hispanics and 42% among whites.

The polling was done after Lev Parnas, an associate of Trump’s attorney Rudy Giuliani, publicly implicated the president in the Ukrainian pressure campaign during a series of television interviews.

A new national Monmouth University poll has 57% saying the House managers should be able to present new evidence in the Senate trial to support the articles of impeachment.  Another 37% say that the managers should be limited to sharing only what was revealed during the initial impeachment inquiry.  Support for new evidence comes from 87% of Democrats, 56% of independents, but just 24% of Republicans.

53% of the American public approve of the House decision to impeach Trump, while 46% disapprove.

49% agree the Senate should now remove Trump office, while 48% say Trump should not be removed.

Separately, the Monmouth survey has just 37% of Americans believing the country is going in the right direction, 56% saying the country has gotten off on the wrong track.  The ratio was 28/62 in August.

Interestingly, House Speaker Nancy Pelosi’s approval rating has risen from 17% in November 2018 to 35% today.

In a new Pew Research Center survey, 51% say the outcome of the Senate trial should be Trump’s removal from office, while 46% say the result should lead to Trump remaining in office.  86% of Republicans and Republican-leaning independents say the trial should result in Trump remaining in office, while roughly the same share of Democrats and Democratic leanders (85%) think Trump should be removed.

63% of Americans say Trump has definitely or probably done things that are illegal, either during his time in office or while he was running for president.

Finally, a Reuters/Ipsos poll released Wednesday had 44% of adults in the U.S. saying Trump should be removed from office, another 15% say he should be reprimanded formally with a congressional censure, and 31% said the charges should be dismissed.

--President Trump said the head injuries suffered by American service members in an Iranian missile strike weren’t “very serious,” prompting outrage from some veterans’ advocates.

Speaking at a news conference in Davos, Trump said, “I heard that they had headaches, and a couple of other things.”

“No, I don’t consider them very serious injuries relative to other injuries that I’ve seen,” Trump said.  “I’ve seen people with no legs and no arms.”

I can forgive the president for initially reporting there were no injuries from the Iranian attack on U.S. bases in Iraq as part of the retaliation for the killing of Iranian Gen. Soleimani days earlier.

But not this incredible insensitivity.  [I’m biting my tongue on saying far worse.]

The Pentagon announced this afternoon that the number of those suffering from head injuries is up to 34; eight so serious they are being airlifted back to Walter Reed.

By the way, I had no idea that since 2000, according to the Pentagon’s Defense and Veterans Brain Injury Center, more than 408,000 American service members have suffered traumatic brain injuries.

--The Justice Department now believes it should have discontinued its secret surveillance of one-time Trump campaign adviser Carter Page far earlier that it did, according to a new court filing unsealed Thursday.

The Justice Department made that determination in a December letter to the secret court that oversees surveillance of suspected foreign spies, acknowledging it may have lacked probable cause to continue wiretapping in the last two of the four surveillance applications it sought against Mr. Page.

The Justice Department letter is classified, but is referenced in a new order declassified by the judge that heads the FISA court, James Boasberg, on Thursday.  The Justice Department said it would sequester all the material it collected against Mr. Page pending further internal review of the matter.

--Trump tweets:

“The Democrat House would not give us lawyers, or not one witness, but now demand that the Republican Senate produce the witnesses that the House never sought, or even asked for?  They had their chance, but pretended to rush.  Most unfair & corrupt hearing in Congressional history!”

“The Democrats & Shifty Schiff, whose presentation to the Senate was loaded with lies and misrepresentations, are refusing to state that the Obama Administration withheld aid from many countries including Ukraine, Pakistan, Philippines, Egypt, Honduras, & Mexico.  Witch Hunt!”

“The Democrats don’t want a Witness Trade because Shifty Schiff, the Biden’s, the fake Whistleblower (& his lawyer), the second Whistleblower (who vanished after I released the Transcripts), the so-called ‘informer’, & many other Democrat disasters, would be a BIG problem for them!”

“Democrats are going to destroy your Social Security.  I have totally left it alone, as promised, and will save it!”

[Not this way, Mr. President.]

“Crazy Bernie takes the lead in the Democratic Primaries, but it is looking more and more like the Dems will never allow him to win!  Will Sleepy Joe be able to stumble across the finish line?”

“Mini Mike Bloomberg is playing poker with his foolhardy and unsuspecting Democrat rivals.  He says that if he loses (he really means when!) in the primaries, he will spend money helping whoever the Democrat nominee is.  By doing this, he figures, they won’t hit him as hard....

“....during his hopeless ‘presidential’ campaign.  They will remain silent!  The fact is, when Mini loses, he will be spending very little of his money on these ‘clowns’ because he will consider himself to be the biggest clown of them all – and he will be right!”

“They are taking the Democratic Nomination away from Crazy Bernie, just like last time. Some things never change!”

“A massive 200 Billion Dollar Sea Wall, built around New York to protect it from rare storms, is a costly, foolish & environmentally unfriendly idea that, when needed, probably won’t work anyway.  It will also look terrible.  Sorry, you’ll just have to get your mops & buckets ready!”

“After having been treated unbelievably unfairly in the House, and then having to endure hour after hour of lies, fraud & deception by Shifty Schiff, Cryin’ Chuck Schumer & their crew, looks like my lawyers will be forced to start on Saturday, which is called Death Valley in T.V.”

--In an interview in Davos, President Trump was musing about Tesla’s Elon Musk and his erratic behavior at times.

“I was worried about him, because he’s one of our great geniuses, and we have to protect our genius,” Trump said of Musk.  “You know, we have to protect Thomas Edison, and we have to protect all of these people that came up with, originally, the lightbulb, and the wheel and all of these things.”

Ah yes, the inventor of the wheel.  How many of you know who it was?

Why it was Peter Wheeler, the famous inventor of the Bronze Age, who also happened to be the father of Sargon the Great.

Someone tell President Trump it wasn’t Henry Ford.

Wall Street and Trade, cont’d....

Just one economic tidbit for the U.S., but an important one.  December existing home sales came in at 5.54 million annualized, up 3.6% from November.  Additionally, sales were up 10.8% from a year ago (5.00 million in Dec. 2018). 

The median existing-home price rose 7.8% over the year to $274,500, while inventory fell to 3.0 months, which is all good.

The Atlanta GDPNow barometer for the fourth quarter was not revised this week, still just 1.8%.  But next week we get the first look at the real figure and it is destined to represent a third straight month below the administration’s much-ballyhooed 3%+ growth projections.

Meanwhile, the International Monetary Fund issued its latest World Economic Outlook and cites aggressive monetary policy and the détente in the U.S.-China trade war as reasons why global GDP should rise 3.3% in 2020, up from 2.9% in 2019.

But the IMF pegs U.S. growth at just 2.0% this year vs. 2.3% in 2019.

China is forecast to grow 6.0% this year, Japan just 0.7%.

The Euro Area is expected to grow only 1.3% in 2020, with Germany at 1.1%, France 1.3%, Italy 0.5% and the UK 1.4%.

The IMF noted that global trade growth slowed to 1% in 2019 from 3.7% in 2018.  But the IMF expects that to reverse this year with trade volumes rising 2.9% in 2020.

“On the positive side, market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on U.S.-China trade negotiations, and diminished fears of a no-deal Brexit,” the IMF said in its report.

The IMF characterized the signs of stabilization as “tentative,” saying that renewed trade tensions could “undermine the nascent bottoming out of global manufacturing and trade, leading global growth to fall short of the baseline.”

Much of the hope for the economy depends on the U.S.-China trade deal remaining intact, with no new tariff escalations.

So on the issue of Trade....

According to a monthly poll from agricultural trade publication Farm Journal released Sunday, 83% of farmers and ranchers approve of President Trump’s job performance.  It is the highest level of support for Trump among farmers since he took office, Farm Journal said.

The above is important because the “phase one” trade deal with China is largely not just about ag buys, but also the November election.

Respondents to the survey were concentrated mostly in Midwest states like Illinois, Iowa, Indiana and Nebraska.

American Farm Bureau President Zippy Duvall said in a statement following passage of the U.S.-Mexico-Canada Agreement, though related to the China deal the day before: “This trade agreement comes at a critical time for farmers and ranchers, increasing optimism that we’ll turn the corner in 2020.”

One thing we know about China’s agreed upon $40 billion in purchases of U.S. agriculture products each of the next two years, you will see large buys early this year and the White House will of course be playing this up.  The issue is what happens later in the year and then 2021, though we will have long gone to the voting booth.

Yet, it’s also worth noting that the price of soybeans, the key product for the ag portion of “phase one,” is lower today than when Donald Trump was elected president in November 2016, and lower than just a year ago, even losing ground since the phase one deal was announced. 

And understand, as I’ve been harping on regarding phase one, China has been building alternate trade relationships to the United States for some of its key exports.  As in Brazil and the U.S. are both major exporters of soybeans.

As in as of the 85 million tons of soybeans that China imported in 2019, 57 million tons were supplied by Brazil, according to research from Ken Morrison, formerly of Cargill Inc., the agriculture giant, who now writes a newsletter on the industry.

China could shift production temporarily away from Brazil to satisfy its U.S. requirements, but it won’t do so for long, and with Brazil having cheaper soybeans, the overall price U.S. farmers are going to receive will likely remain little changed.

It’s going to be interesting to see how this all plays out.  Chinese Vice Premier Liu He, who signed the trade deal with President Trump, said the deal would not affect “third parties’ interests,” apparently in reference to deals made with other suppliers of farm goods....like Brazil!

Oh, and by the way, in Davos, President Trump suddenly upped the $dollar amount in U.S. products China was going to buy in each of the next two years from the agreed-upon $200 billion to “$250 billion, closer to $300 billion.”

I don’t think so, sports fans. 

Greg Ip / Wall Street Journal

“A week after the U.S. and China reached a truce in their trade war, the two countries took to the world stage this week to blame each other for starting it.

“ ‘Before I was elected, China’s predatory practices were undermining trade for everyone – nobody did anything about it,’ President Trump said in a speech to global elites gathered at the World Economic Forum.  ‘America confronted the problem head on.’

“A few hours later, Han Zheng, vice premier of China, characterized the U.S., albeit not by name, as the rule breaker and China as the true guardian of the established world order.  ‘Despite the protectionist and unilateral moves by some countries, China will not stop pursuing higher quality opening up and will not follow their footsteps to move in the opposite direction of globalization.’”

So will the phase one deal reached last week turn out to be a watershed moment or not?

Greg Ip:

“There are two plausible outcomes.  The optimistic case is that China finally changes in the way American officials had hoped when it joined the WTO and takes a more Western-style approach to the economy and markets. The pessimistic case is that the integration of the Chinese and U.S. economies that followed accession comes undone.”

Separately, President Trump said he had good discussions with European officials in Davos this week on trade talks with the European Union, Trump having long accused the EU of gaining an unfair trade advantage.

But he still left open the possibility of imposing tariffs of as much as 25% on cars and car parts from Europe, using these threats as leverage in negotiations.

On the issue of the dispute over digital taxes between the U.S. and France, the two sides apparently agreed to a truce, meaning neither side will impose punitive tariffs this year, one of which threatened to do a number on the wine industry in the U.S., resulting in the potential loss of tens of thousands of jobs.

Europe and Asia

We had the release of the eurozone’s flash PMI data for January courtesy of IHS Markit.

The flash eurozone composite index was 50.9, unchanged from December (50 the dividing line between growth and contraction).

Manufacturing, 47.8 vs. 46.3 in December, a 9-month high.

Services 52.2, down from last month’s 52.8.

Germany: Comp 51.1; manufacturing 45.2; services 54.2.

France: Comp 51.5; manufacturing 51.0; services 51.7.

The UK’s flash composite index for January was 52.4, with manufacturing at 49.8 (9-month high), services 52.9 (16-month high).

Andrew Harker, IHS Markit:

“While the year may have changed, the performance of the eurozone economy was a familiar one in January.  Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum.

“The failure of growth to accelerate was in spite of some areas of positivity.  The service sector remained in expansion, while the worst of the manufacturing downturn looks to have passed and industry appears to be moving towards stabilization.  France and Germany continued to grow, while business confidence across the single-currency area jumped to a 16-month high.

“On the other hand, weakness was evident outside the ‘big-2’, with new orders unchanged and growth of business activity slowing to near-stagnation.”

Separately, Eurostat released the latest on eurozone debt levels, this time for the third quarter of 2019, 86.1% debt to GDP, which is measured against 87.1% in Q3 2018.

Germany 61.2%, France 100.5%, Italy 137.3%, Spain 97.9%, Netherlands 49.3%, and Greece 178.2%.  [UK 84.2%]

Brexit: Britain’s delayed and disputed Brexit bill has finally become law, removing the last obstacle to the UK exiting the European Union next week, Jan. 31.

The House of Commons announced Thursday that the Withdrawal Agreement Bill had received royal assent from Queen Elizabeth II, the final formality in the measure’s years-long journey.

The Queen’s assent came after the bill made its way through Parliament by getting approval from the House of Lords, which had had some final issues.

The European Parliament now has to approve the divorce deal before Jan. 31, which it will do, and then 3 ½ years after voters opted for Brexit in a June 2016 referendum, the UK will finally leave the bloc.

“At times it felt like we would never cross the Brexit finish line, but we’ve done it,” Prime Minister Boris Johnson said Thursday.

However....now comes the hard part, fashioning a trade deal with the EU in just 11 months, Boris Johnson having said he will not seek an extension on the transition period.

France: French unions are holding last-ditch strikes and protests around the country today as the government unveils a divisive bill redesigning the national retirement system.

[Earlier in the week, French energy workers cut power to Paris’ wholesale food market, the largest in the world, just to be assholes.]

Travelers faced renewed disruptions on regional trains and the Paris subway, and some schools and other public services faced walkouts.  But the transportation problems were not nearly as bad as they were at the start of the 50-day-old strike movement as the unions have been losing support and many striking workers simply needed to go back to work to pay the bills.

President Emmanuel Macron’s government is plowing ahead with its pension reform plan, where it will be debated in parliament for weeks, and months, though Macron’s centrist party has a large majority.

As noted before, the plan streamlines France’s 42 retirement systems into a single points-based system for all workers, public and private sector alike, while abolishing special provisions allowing certain workers to retire as early as their 50s.

But the government has backed down on plans to raise the age to receive a full pension from 62 to 64, and negotiated special deals with various sectors, including pilots and the police, who will still be able to retire earlier than others.

Macron has been arguing the old system was too outdated and costly for a country with a growing life expectancy.  Unions say the new system threatens their hard-won worker rights.

Italy: Luigi Di Maio stepped down on Wednesday as leader of Italy’s co-governing 5-Star movement, as it seeks to stem a wave of defections that threatens the government’s parliamentary majority.  While the move isn’t going to bring down the government, it underscores deep divisions within 5-Star and injects further uncertainty into Italy’s fractured political system.

Di Maio will remain foreign minister, while low-profile Vito Crimi will replace him as head of 5-Star.

5-Star won 33% of the vote in a national election in 2018, but since then its popularity has fallen sharply and recent polls put it at around 16%.

The move comes amid the ongoing surge of the right-wing League.  Should League win a key regional race in Emilia-Romagna Saturday, then the coalition government may indeed be in trouble.

League leader Matteo Salvini sparked widespread criticism in the Italian media after he rang the doorbell of a North African family in Bologna and asked: “Is your son a drug dealer?”

If the League is able to win Saturday’s vote (and it’s apparently razor tight), and then was able to get a new election, League could win, and Salvini would become prime minister.

Turning to Asia...with China’s Lunar New Year Holiday, Beijing combines the statistics for both January and February to smooth out distortions.

In Japan, the flash composite PMI reading for January was 51.1, vs. December’s 48.6, with manufacturing at 49.3, services 52.1.  It was the latter that moved the comp number.

Separately, Japan’s consumer price index for December was released and core-CPI (ex-fresh food, but including energy) was 0.7% year-over-year, while core-core (ex-fresh food and energy) was 0.9%, the fastest such reading since March 2016, but still well below the Bank of Japan’s long-sought 2% target.

Exports for December in Japan fell 6.3% from a year earlier, per the Ministry of Finance, in a sign weak external demand is keeping a lid on the export-reliant economy.  This compared with a 4.2% decrease expected by economists and followed a 7.9% decline in the previous month.

Exports to China, Japan’s largest trading partner, grew 0.8%.  Shipments to the U.S. fell 14.9% year-on-year – dragged down by autos, car parts and airplane motor engines, the MOF data showed.  Exports to Asia, which accounts for more than half of Japan’s overall shipments, declined 3.6%.

December’s overall decline was the 13th month in a row exports have fallen.

Bank of Japan Governor Haruhiko Kuroda said that while progress in U.S.-China trade talks and Brexit helped ease risk sentiment, uncertainty remains on trade relations between Washington and Beijing.

Lastly, South Korea reported GDP for 2019 was 2.0%, the slowest pace in 10 years, despite a surge in fourth-quarter activity helped by a boost from government spending.

Street Bytes

--Owing to the Wuhan crisis, stocks fell, with the Dow Jones down 1.2% to 28989, the S&P 500 off 1% and Nasdaq –0.8%, Nasdaq having hit a record-high on Thursday, 9402, before Friday’s dive.  It was also Nasdaq’s first down week in seven.

But next week is a biggie for earnings, with the likes of McDonald’s, Caterpillar and Boeing, as well as tech heavyweights Apple, Amazon, and Facebook, and also Tesla.  [I hate weeks like this, quite frankly, the editor smirked.]

--U.S. Treasury Yields

6-mo. 1.53%  2-yr. 1.49%  10-yr. 1.68%  30-yr. 2.13%

The yield on the 10-year is back to the lows of early October owing to a flight-to-safety with fears over the spreading coronavirus, yields plummeting anew all over the world, with the yield on the German 10-year, the bund, falling from –0.22% to –0.34%.  Italy’s 10-year yield fell from 1.37% to 1.23% despite their myriad of issues.

Next week the Federal Reserve’s Open Market Committee meets and while it will be holding the line on interest rates, the statement from the FOMC may offer a clue or two to whether the Fed intends to stand pat, or lower, the balance of the year.  The Wuhan virus may eventually have something to do with their decision.

--Oil prices were staggered by fears over the impact of the Wuhan virus on demand, which outweighed concerns over disruptions to Libya’s crude output.  Oversupply concerns also predominated after Saudi Arabia’s energy minister didn’t appear to be optimistic that the OPEC+ production cuts would be extended beyond March.  By week’s end the price of West Texas Intermediate had fallen to $54.37, down from $63 just three weeks ago.

Separately, the price of natural gas fell below $2 per million British thermal units to their lowest level in nearly four years, highlighting the impact of a persistent glut that is buffeting investors and producers.  And in case you haven’t noticed, this winter has been very temperate thus far which adds further to the oversupply of nat-gas.

The decline in prices has led to a call for the energy companies to curtail production as the shares in the producers have been hit hard.  That said, the U.S. Energy Information Administration predicts natural-gas production in the U.S. will rise by nearly 3% in 2020.

Cutbacks in the industry have begun, jobs will be lost.  Halliburton Co., for example, blamed a loss in 2019 on a decline in revenue that it blamed on diminished drilling onshore in North America, which in turn was due to low commodity prices, particularly for gas.  The company is the top provider of hydraulic fracturing and other services that help producers unearth oil and gas.

--In this week’s installment of “As Boeing Turns....,” United Airlines said on Wednesday that it does not expect the return of the troubled 737 MAX this summer, this coming after Boeing said earlier that it did not expect regulators to allow the MAX to take flight until June or July.

In the case of United, the airline announced that due to the lack of the MAX, its growth plans in Denver, Houston and Chicago are impacted.

Boeing’s new CEO, Dave Calhoun, said its recommendation that pilots ought to undergo simulator training underpinned a decision to push back the timeline for 737 MAX’s return to service.   And it’s the training following the aircraft’s return, whenever that is, that easily takes us to September before the MAX is a major component of an air carrier’s fleet again...let alone growth plans.

At least Dave Calhoun said he expected to resume MAX production “months” before its predicted mid-year return to service, production halted in January after the aircraft was grounded last March.  Just amazing how long this story is playing out.

--Meanwhile, United Airlines Holdings Inc. reported higher profit and stronger revenue for the fourth quarter, despite challenges from the grounding of the MAX.  Net profit rose to $641 million from $461 million a year earlier, with revenue climbing 3.8% to $10.89 billion.

United hasn’t disclosed the costs of the grounding of the MAX, while rivals American Airlines and Southwest have said it has cost them hundreds of millions of dollars.

--American Airlines announced a 19% increase in profit in 2019, despite the MAX challenges.

“We’ll continue to hold Boeing accountable for future financial damages to protect our company and our shareholders,” CEO Doug Parker said during a conference call.

Fourth-quarter profit still came in at $414 million owing to strong demand, compared with $325 million in the prior year.

--Southwest Airlines Co. CEO Gary Kelly said the grounding of the MAX will restrain the carrier’s expansion plans this year as Southwest expects to decrease capacity by 1.5% to 2.5% in the first quarter.  Last year it cut flying by 1.6%.

“Sitting here dog paddling for a year while our competitors grow right past us, it’s costing us this year six or seven million customers,” Kelly said on a call with analysts.  “Yeah, I’m worried about that.”

Southwest has more MAX jets than any other airline and it had planned to be operating 75 MAX aircraft by now, 10% of its fleet, while taking delivery on 38 more this year.  Instead, Kelly said the airline will have to put off retiring some older jets to make up for them.

Profit fell 21% in the fourth quarter to $514 million due in part to higher costs associated with the grounding.  Southwest said that included the impact of sharing compensation from Boeing with employees after striking a deal with the plane maker late last year.

--I discuss the Wuhan virus situation down below, but there was a negative impact on the shares of airlines, cruise and casino operators, and some luxury retailer stocks as investors tried to gauge the eventual impact, which is unknowable at this time.

And earlier in the week, picture the fear among flight attendants at Hong Kong’s Cathay Pacific Airways, let alone any other Chinese carrier.  The flight attendants’ union asked the airline to let crews wear face masks on all flights over fears of catching the coronavirus, having to deal with 300 passengers from numerous places on a single flight.  The airline quickly relented.

--A regulator barred former Wells Fargo & Co. CEO John Stumpf from the banking industry and fined him $17.5 million over the firm’s fake-accounts scandal, an extraordinary sanction for a top executive at a large bank.

Mr. Stumpf agreed to the lifetime ban in a settlement with the Office of the Comptroller of the Currency.  The firm’s former chief administrative officer and chief risk officer settled similar civil charges, and five other former executives, including the former consumer-bank chief, were also charged.

A lifetime ban on a CEO of a big bank is unprecedented in the megabank era that started in the 1990s.

Employees submitted many complaints about pervasive pressure and illegal sales activity to Mr. Stumpf’s office, but he didn’t respond to them, the agency said.

One employee wrote to the CEO’s office in 2013: “I was in the 1991 Gulf War....This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo.”

--Tesla displaced Volkswagen as the world’s second most valuable carmaker as the latest surge in the share price took the valuation to more than $100 billion.  It was just a little over a week earlier that in passing $81bn, Tesla had become the most valuable U.S. car company in history.

So now Tesla trails only Toyota.

This month Tesla said it had delivered more than 367,500 cars in 2019 – up 50% from the prior year, and investors are betting heavily on the new Shanghai factory to act as a springboard that would allow it to capture more of the Chinese market.

The thing is, Volkswagen delivered almost 11 million vehicles last year, while Toyota sold more than 9 million in the first 11 months of 2019.  Tesla also has yet to make an annual profit and there are a number of investigations out there into battery fires and unexpected acceleration.

If Tesla sustains the $100bn in market cap for both a month, and six-month average, it would unlock the first piece of a $2.6bn compensation package for Elon Musk.

Tesla was valued at about $55bn when the pay deal was approved.

--Intel Corp. posted strong fourth-quarter earnings as the chip maker benefited from an upswing in personal-computer shipments and robust demand for chips to power data centers.

Intel handily beat the Street’s estimates on both earnings and sales, the later rising to $20.21 billion.  The company benefited from bumper sales of high-margin products, including its most advanced processors for data centers.  That demand helped drive earnings significantly higher than Wall Street and Intel had projected.  The company also gave an upbeat outlook for the full year.

Despite the better-than-expected quarter, Intel is facing several challenges, including development difficulties with new processors, chip supply shortages, loss of market share to its main chip-making rival and turmoil from the U.S.-China trade war.

That said, the shares rose 8% in response to the good news.

--Netflix said it added 8.8 million subscribers in the fourth quarter of 2019, bringing its global total to 167.1 million, which was well above forecasts.

Fourth-quarter revenue grew 31% to $5.47 billion over the same period last year, while net income rose to $587 million, up from $133.9 million a year ago and easily topping projections.

For the year, Netflix reported net income of $1.87 billion, with sales up 27% to $20.2 billion.

But, the strong results were tempered by signs of a continued slowdown in the U.S. Netflix added only 423,000 customers in the quarter, well below forecasts for 600,000, bringing its total U.S. customer total to 61 million.

Netflix also said it would add fewer subscribers – 7 million – in the first quarter than the Street was expecting.  It’s all about competition, such as from Disney and Apple, and the effect of price increases; Netflix having upped the price on its standard subscription $2 to $12.99 a month.  It’s competitors are offering lower-priced services, with Disney+ starting at $6.99 a month, while Apple TV+ costs $4.99 a month.

--IBM reported a slight increase in quarterly revenue, ending a streak of falling sales and providing a first indication that CEO Ginni Rometty’s roughly $33 billion acquisition of Red Hat may help turn around Big Blue’s fortunes.

Fourth-quarter revenue rose 0.1% (‘how conveeenient’) to $21.78 billion after five straight quarters of year-over-year declines.  Adjusted net income fell by about 5% to $4.2 billion.

Rometty, member of Augusta National, cough cough, has been CEO since 2012 and throughout her first several years quarterly sales slid as IBM totally missed the changing IT spending priorities of customers, IBM slow to respond, such as in cloud-computing.

Buying Red Hat, IBM’s biggest acquisition in 108 years, represents a big bet for Rometty to finally deliver lasting top-line growth.  Red Hat sells support for open-source software that IBM expects more companies will use as they crunch more of their data in the cloud.

IBM said the fourth quarter was its strongest yet in the ‘stars’, with 21% growth to $6.8 billion of sales, and the company issued an upbeat outlook across its businesses for the current year.

--Johnson & Johnson said its profit and sales rose for the fourth quarter, owing to increased pharmaceutical and consumer-product sales.  Earnings fell just short of expectations, though net income of $4.01 billion compares with $3.03bn in the year-ago period.

U.S. sales rose 1.4% to $10.77 billion and international sales increased 2.1% to $9.97bn vs. a year ago.

J&J had strong sales growth for anti-inflammatory drug Stelara and cancer drug Darzalex.

Sales in the medical-device business fell 0.5% to $6.63bn due mostly to a decline in surgery products.

Over-the-counter medicine sales rose, but baby care products, including Johnson’s Baby Powder, posted a decline.  Yup, lots of bad publicity doesn’t help, which has resulted in lawsuits from about 100,000 plaintiffs over the safety and marketing of products including Baby Powder, as well as the issues on the opioid front.  At least the company has begun winning some of the powder suits, or have prior judgements significantly reduced.  No word on how the first episode of “Curb Your Enthusiasm” will impact sales.  [Had to sneak that in for those of you who watched it.]

--Procter & Gamble Co. posted another quarter of rising sales and profit as the marketing giant persuaded more consumers to upgrade to premium versions of Tide and Crest products.

The company said that organic sales, a measure that excludes currency moves and acquisitions, increased 5% from a year earlier in the fourth quarter, though this was down from 7% growth in the previous quarter.

P&G’s turnaround has been driven by higher prices, new products and a leaner portfolio of brands.  The company has shed mass-market beauty brands and led the industry in a move to raise prices to offset commodity costs and fatten profit margins.

The company said it is seeing improvements in its struggling Gillette razor business, and this doesn’t include my own return to the product this week. 

--A federal judge sentenced John Kapoor, the founder of the opioid manufacturer Insys Therapeutics, to 5 ½ years in prison Thursday for his role in a racketeering scheme that bribed doctors to prescribe a highly addictive opioid and misled insurers.

This case was a rare criminal inquiry into the practices of a drug company that aggressively sold painkillers while the nation was in the grip of a deadly opioid epidemic.

As reported by Katie Thomas of the New York Times: “Federal prosecutors have said that Insys, based in Arizona, embarked on an intensive marketing plan – including paying doctors for sham educational talks and luring others with lap dances – to sell its under-the-tongue fentanyl spray, Subsys, which was federally approved to treat patients with cancer.

“Doctors were urged to write prescriptions for a much wider pool of patients, and to mislead insurance companies so they would pay for the expensive medication.”

PBS’ “Frontline” has a new documentary on the case, just released, that you can easily find online.

--Union Pacific Corp. plans to cut nearly 3,000 workers this year as the company pushes ahead with a new operating procedure that runs fewer, longer trains.

The Omana, Neb., said it plans to reduce its average number of workers by around 8% in 2020 after reducing its staffing by 11% in 2019.

--Forensic experts hired by Jeff Bezos have concluded with “medium to high confidence” that a WhatsApp account used by Saudi Crown Prince Mohammed bin Salman (MBS) was directly involved in a 2018 hack of the Amazon founder’s phone.

A report on the hack says Bezos’ phone started surreptitiously sharing vast amounts of data immediately after receiving an apparently innocuous but encrypted video file from the prince’s WhatsApp account in May 2018.   The file was sent weeks after Bezos and MBS exchanged numbers at a dinner in Los Angeles during MBS’ ‘goodwill’ tour of the U.S., where the crown prince met a string of top executives and sought to attract investments to the kingdom.

But the relationship between Bezos and the prince soured after the gruesome murder of journalist Jamal Khashoggi in Istanbul, Khashoggi a regular contributor to the Washington Post, which is owned by Bezos.  Khashoggi used to employ his columns to criticize MBS’ autocratic leadership.  The Post then reported extensively on the murder case and the Saudi hit squad hired to kill Khashoggi.

The UN has been investigating and said MBS personally attempted to “intimidate” Bezos with a WhatsApp message implying he had incriminating information about the Amazon chief’s extramarital affair in the weeks after Khashoggi’s murder.

Officials from the UN said the Saudi crown prince appeared to have sent a suggestive message to Bezos’ personal iPhone in November 2018 to make The Washington Post owner tone down his paper’s critical coverage of the Saudi journalist’s death several weeks earlier.

The allegation suggests the de facto leader of Saudi Arabia was using private messages not only to hack the world’s richest man but also intimidate him as part of an attempt to cover up the truth of Khashoggi’s murder.

“The information we have received suggests the possible involvement of the crown prince in surveillance of Mr. Bezos, in an effort to influence, if not silence, reporting [in The Post] on Saudi Arabia,” said FTI Consulting.  The Saudi foreign minister called the claim “absurd” when confronted in Davos.

--The share of American workers in labor unions fell to a fresh record low last year, even as the ranks of unionized state-government employees rose.

The share of the workforce in labor unions to 10.3%, the lowest portion on record since 1983, the Labor Department said Wednesday.

In 2019, there were 14.6 million union members and 141.7 million total U.S. workers.  At the same time, median weekly pay for full-time union members was $1,095 last year versus $892 for nonmembers, according to the Labor Department.

Union membership in manufacturing fell to 8.6% in 2019, a record low.

--Moody’s cut Hong Kong’s credit rating, saying the government’s “slow” and ineffective response to months of protests has prompted it to reassess the Chinese territory’s institutional strengths and governance.

“The underlying drivers of the protests are certainly deep-seated and intractable,” Moody’s said.  “Nevertheless, the response by Hong Kong’s government to both political demands by parts of the population and broader concerns about living standards in [Hong Kong], housing costs and equality of economic opportunities has been notably slow, tentative and inconclusive.”

And then there’s the potential impact from Wuhan and the contagion spreading in HK, an incredibly scary thought.

--According to the Department of Agriculture, about 30.8 million acres of winter wheat was planted this season, down 1% from the year before and just a little over the 29.2 million acres that were seeded in 1909.

While farmers get more wheat from each acre than they did 111 years ago, the decline in planted acres is concurrent with Russia’s ascent as the world’s dominant supplier and Midwestern farmers’ turn to more profitable crops, like corn and soybeans.

--Finally, BlackRock CEO Larry Fink, is, how shall we put this, very “precious.”

Editorial / Wall Street Journal

“(Fink) is among the world’s most powerful investment managers, but it seems he longs for more influence.   To wit, he has assumed a role as self-styled conscience of the business world in telling CEOs how to run their companies.

“ ‘We believe that sustainability should be our new standard for investing,’ he wrote to clients in his annual letter this week.  He added that ‘all investors – and particularly the millions of our clients who are saving for long-term goals like retirement – must seriously consider sustainability in their investments.’

“Mr. Fink gets attention because BlackRock is the world’s largest asset manager, with some $7.43 trillion in client assets.  He is now threatening to vote against corporate directors and management if they don’t do what he says, and he is especially exercised about climate change. He is demanding that companies disclose climate risks, and wants to see their plans to operate under scenarios in which warming is limited to fewer than two degrees Celsius this century.

“Corporations in which BlackRock invests will also have to comply with the rules from a ‘Sustainability Accounting Standards Board’ on issues such as labor practices and workforce diversity.  ‘Disclosure should be a means to achieving a more sustainable and inclusive capitalism,’ Mr. Fink writes.

“Like his friends at the Business Roundtable, Mr. Fink is big on ‘stakeholder’ capitalism.  ‘Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders,’ he says. If he means serving employees, customers, suppliers and communities, he is merely saying what any successful company already does.  But our guess is that by stakeholders Mr. Fink really means regulators and politicians.

“The giveaway is that Mr. Fink says BlackRock will divest its actively managed funds from corporations that generate 25% or more of their revenues from coal production.  ‘We don’t yet know which predictions about the climate will be most accurate,’ Mr. Fink acknowledges, but ‘even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis.’

“He might be right, but then estimates of future temperature increases are based on climate models that have overstated warming to date.  Mr. Fink wants to make corporations plan for unknown temperature increases as well as climate regulations that are even less certain....

“BlackRock is a fiduciary and as such is legally obligated to act in its clients’ best interests.  This is ostensibly why BlackRock has voted against more than 80% of the climate resolutions on proxy ballots by activist shareholders.  But suddenly Mr. Fink is prioritizing the interests of liberal politicians and pressure groups.

“We can’t help but wonder if Mr. Fink, after a profitable life in business, is auditioning to be Treasury Secretary in, say, the Warren Presidency.  His ‘stakeholder’ notions sound similar to her plans to put American corporations further under the government’s thumb.

“CEOs who take Mr. Fink seriously might note that his political and moral importuning isn’t satisfying progressives.  ‘BlackRock will continue to be the world’s largest investor in coal, oil and gas,’ the Sierra Club said in response to Mr. Fink’s letter.

“Businesses will never be able to appease the climate absolutists. The best way they can prepare for climate risks and serve their stakeholders is to succeed as a business and create the wealth and broad prosperity that will make the world better able to adapt to whatever happens.  That’s real ‘sustainability.’”

Foreign Affairs

Iran / Iraq: As I noted above, President Trump said he did not consider the brain injuries suffered by 11 U.S. service members in Iran’s recent attack on a base in Iraq to be that serious.  But the military has moved more troops out of the region for potential injuries.  In a statement on Wednesday, U.S. Central Command said that more troops had been flown out of Iraq to Germany for medical evaluations following Iran’s Jan. 8 missile attack, after announcing the 11 injuries last week.  And then today the Pentagon hiked the figure to 34.

As for Iran, President Hassan Rouhani said on Wednesday that his country will never seek nuclear weapons, with or without a nuclear deal, as he called on European powers to avoid Washington’s mistake of violating Tehran’s 2015 nuclear deal with major powers.

“We have never sought nuclear weapons... With or without the nuclear deal we will never seek a nuclear weapon... The European powers will be responsible for the consequences of violating the pact,” said Rouhani.

Despite gradually rolling back on its commitments in terms of enriching uranium, Rouhani said Iran remained committed to the deal and could reverse its steps away from compliance if other parties fulfilled their obligations.

Rouhani seemed to be clarifying his earlier threats to quit the nuclear treaty if European countries referred Tehran to the UN Security Council after declaring it in violation of the pact.

Foreign Minister Javad Zarif said Monday: “If the Europeans continue their improper behavior or send Iran’s file to the Security Council, we will withdraw from the NPT (Non-Proliferation Treaty).”

British Prime Minister Boris Johnson and French President Emmanuel Macron reiterated their commitment on Sunday to the Iran nuclear deal and agreed a long-term framework was needed.

Robert Wood, U.S. disarmament ambassador, told reporters in Geneva: “We think that Iran needs to end its malign behavior* and sit down with the United States and negotiate an agreement that deals not only with the nuclear issue but also with the other issues that concern us like the ballistic missile proliferation and development and the malign activities around the world.”

*Last Sunday in Yemen, Iran-aligned Houthis launched a missile attack on a military training camp that killed at least 79 people!  The attack targeted a mosque in the camp as people gathered for prayer in the latest assault in the proxy war playing out in Yemen between Iran and Saudi Arabia.

As for the downing of Ukraine International Airlines Flight 752 on Jan. 8, Iran acknowledged Tuesday that its forces had fired two surface-to-air missiles at the plane, confirming for the first time that more than one missile was launched at the jet.

Separately, Defense One reports that between May and October, the Defense Department deployed about 14,000 more troops to the Persian Gulf region.  Immediately after the Soleimani strike, DOD shifted an additional 4,500 troops to the region.  These 18,500 personnel represent an almost 30 percent increase over the roughly 60,000 U.S. forces in U.S. Central Command.  The Pentagon also moved hardware and assets to the region, including an aircraft carrier strike group, B-52 bombers, early-warning aircraft and Patriot missile defense batteries.

Editorial / Army Times...on staying in Iraq....

“Why are American troops still in Iraq?

“After more than 4,500 troop deaths and trillions of dollars spent, why can’t we just declare victory and go home?....

“The reasons to pack up and leave Iraq are plentiful, but here is something to consider: If and when the U.S. leaves, it will create a vacuum that will surely be filled by Russia or China or both.

“This is not idle speculation.

“In December, Iran held joint naval exercises with Russia and China in the Indian Ocean, prompting a senior Iranian navy officer to declare that: ‘Today, the era of American free action in the region is over.’

“The Chinese ambassador recently met with Iraq’s prime minister and said that China would gladly provide military assistance if needed.

“And Russia has offered to sell to the Iraqis their S-400 air-defense systems, which are powerful and effective enough to keep most U.S. aircraft out of their airspace.

“Allowing China and Russia to fill the vacuum left by a U.S. withdrawal would be very bad for U.S. interests.

“For example, just a few years ago, the Russian military had limited combat experience.  But now, after six years of Russian military operations in Syria helping to bolster the Assad regime, the Russians have built out a cadre of combat-experienced field grade officers and non-commissioned officers, the backbone of any viable military.  The Russians have tested expeditionary logistics as well as tactics, techniques and procedures in a way only possible through war.

“The Chinese have no such experience.  Ceding Iraq (or even the entire Middle East) to China would do for them what it has done for the Russians by rapidly modernizing their professional military with real operational experience.  And a combat-experienced People’s Liberation Army is ultimately bad news for the U.S. military.  No one ever wants a fair fight.

“Moreover, turning over Iraq to Russia and China would give America’s two biggest global adversaries access to ports on the Persian Gulf as well as control of the land bridge from Iran to the Mediterranean.  The global dominance the U.S. has maintained for the past 30 years would end.

“The result would be more war rather than less.

“Don’t forget the reasons why the U.S. has sought influence in the U.S. Central Command region for the past several decades.  About 30 percent of the world’s energy resources flow through the Strait of Hormuz.  And it’s the world’s No. 1 source of transnational terrorism.

“There are compelling arguments to make that after 17 years of intractable conflict in Iraq – a nation where many don’t want us, in a region that remains hostile – it is long past time to bring our troops home and staunch the sacrifice of blood and treasure.

“Which places this nation’s political and military leaders in a terrible conundrum.

“The price to stay may be unsustainable.

“But the price of leaving may be even worse.”

Syria: The carnage continues.  Russian-led air strikes killed at least 40 on Tuesday in Idlib province in the northwest as part of a major assault backed by Iranian militias to clear out rebels that has sent tens of thousands of people fleeing toward the border with Turkey.  One family of eight was wiped out, including six children, according to the Syrian Observatory for Human Rights and Reuters.

As I noted before, a total of 350,000 in the region are now on the run, but consider another half million fled earlier to the safety of camps near the Turkish border.

But another three million remain trapped, according to the UN.  Moscow and Damascus deny accusations of indiscriminate bombing of civilians, saying they are fighting jihadist militants who they say have stepped up their attacks on civilians in Aleppo city in northern Syria.

A ceasefire brokered by Russia and Turkey collapsed two weeks ago.

Lebanon: A new government was formed on Tuesday led by Prime Minister Hassan Diab after the powerful Shiite group Hezbollah and its allies clinched an agreement over a cabinet that must address the economic crisis.

Lebanon has been without a government since October when Saad al-Hariri resigned as premier, prompting protests against the political elite seen as having caused the crisis through state corruption.

Diab described his team of 20 specialist ministers (backed by parties) as a technocratic “rescue team” that would work to achieve the goals of protesters. Diab’s first trip will be to the Gulf states seeking support.

Israel: Looking for a diversion from the impeachment trial, President Trump announced Thursday that he would release his long-awaited Middle East peace plan within days and invited both Israeli Prime Minister Benjamin Netanyahu and his rival, former army chief Benny Gantz, to the White House next week to discuss it.  With the bad blood between Netanyahu and Gantz ahead of another Israeli election in March, this could be interesting.

Netanyahu has been indicted on charges of bribery, fraud and breach of trust, which is kind of funny given Trump is on trial in the Senate on charges of high crimes and misdemeanors.

Gantz is only a political factor because he can say he hasn’t been indicted.  He’ll be in Washington with his opponent on the same day, Tuesday, the Israeli parliament begins debating whether to grant Netanyahu immunity.

Under the terms of the peace agreement (at least those that have been leaked), Israel would get to annex the strategically important Jordan Valley, making it the country’s new eastern border with Jordan, and Jerusalem would be under Israeli control, including the eastern part of the city, which Palestinians claim as their future capital.

Preconditions for a Palestinian state would be the demilitarization of Gaza, the disarming of Hamas, a cessation of financing terrorism, and a recognition of Israel as a Jewish state and of Jerusalem as its capital, according to reports.

Needless to say, if the leaks of the details are accurate, Palestinians will be outraged, as they already are.

President Trump told reporters Thursday that when it came to the Palestinians, “I’m sure they maybe will react negatively at first, but it’s actually very positive for them.”

No it isn’t.  [I am in no way a supporter of the Palestinians, just my educated observation.]

This ‘peace plan’ is going nowhere. 

Libya: Foreign powers agreed to a summit in Berlin on Sunday to shore up a shaky ceasefire in Libya, but the meeting was overshadowed by blockades of oilfields by forces loyal to commander Khalifa Haftar that threatened to cripple the country’s crude production, though as of today has had minimal impact.

Haftar, whose self-styled Libyan National Army (LNA) is bearing down on the capital, Tripoli, with the backing of Egypt, the United Arab Emirates, Russian mercenaries and African troops, did attend the one-day summit.

Turkey has rushed troops to Tripoli, as well as Turkish-backed fighters from Syria, to help Libya’s internationally recognized government.

Libya has had no stable central authority since dictator Muammar Gaddafi was overthrown by NATO-backed rebels in 2011.  For more than five years, it has had two rival governments, in the east and west, with streets controlled by armed groups.

China: Here’s what we know about the Wuhan virus today, as China ‘celebrates’ the Lunar New Year holiday, where the nation shuts down essentially for two weeks (one week formally), with hundreds of millions on the road.

China has locked down cities with nearly 40 million people, including 11 million in Wuhan, an unprecedented move to contain the outbreak, suspending most transport, including outgoing flights, with people being told not to leave.  In Wuhan (Hubei province), ground zero, a hospital capable of treating 1,000 patients is literally being built from scratch.

While China has announced 41 deaths thus far (as I go to post), over 1,200 infected, the coronavirus still does not appear to be as deadly as the 2003 Severe Acute Respiratory Syndrome (SARS) pandemic, which killed one in ten who caught it.  But it is “highly infectious.”  It is also adapting and mutating, according to China’s Center for Disease Control and Prevention.

Cases have been confirmed in South Korea, Japan, Vietnam, Thailand, Taiwan and Singapore in the region thus far.  And then elsewhere in the world, including a second case in the U.S. and a first case in France.

The World Health Organization, however, did not declare the outbreak to be a global health emergency when it met on Thursday, which would have stepped up the international response.  It could make such a declaration next week if the number of cases reported in China and elsewhere explodes, but for now the WHO said it was “a bit too early” to make an emergency declaration.

“Make no mistake, though, this is an emergency in China.  But it has not yet become a global health emergency. It may become one,” said WHO chief Tedros Adhanom Ghebreyesus.

The WHO emphasized that “National authorities and the World Health Organization will need to continue to monitor developments very closely.”

Early indications are that the virus was passed on to humans from snakes, and potentially badgers and rats.  Others say it may share the same bat-related ancestor as SARS.

Research teams in China, with U.S. cooperation, are working on a vaccine but by the time one became available, chances are it will have run its course, as was the case with SARS.

Tonight, President Trump tweeted:

“China has been working very hard to contain the Coronavirus.  The United States greatly appreciates their efforts and transparency.  It will all work out well.  In particular, on behalf of the American People, I want to thank President Xi!”

Oh brother.  China provided zero transparency early on.  Now it’s panic city for Beijing, because it’s episodes like this that, if handled poorly, can bring down the government.

I’ve always written in this space that the Communists understand the major threat to their rule would come from a revolt over “an environmental disaster.”  Well, the Wuhan crisis fits the bill.  For the sake of humanity, we do want the regime to succeed in containing the virus.

North Korea: Pyongyang said the United States ignored a deadline for nuclear talks and it no longer felt bound by its commitments, and may “seek a new path.”

Kim Jong Un had set a year-end deadline for denuclearization talks with the U.S. and disarmament ambassador Robert Wood voiced concern at Pyongyang’s latest remarks and said Washington hoped the North would return to the negotiating table.

Ju Yong Chol, a counselor at North Korea’s mission to the UN in Geneva, said that over the past two years, his country had halted nuclear tests and test firing of inter-continental ballistic missiles, “in order to build confidence with the United States.”

However, the U.S. had responded by conducting dozens of joint military exercises with South Korea and by imposing sanctions, he said.  “If the U.S. persists in such hostile policy there will never be the denuclearization of the peninsula,” he added.

Importantly, North Korea named a former army officer who led military and high-level dialogue between the two Koreas as its top diplomat, it was reported this week.  The move could change the course of the stalled nuclear negotiations.

Ri Son Gwon, the former chairman of the Committee for the Peaceful Reunification, replaced Ri Yong Ho as the foreign minister, as identified by South Korean media.  Pyongyang then formally confirmed his appointment today.

Pyongyang has yet to respond to Washington’s continued demands for more talks and instead stepped up tensions verbally and with weapons tests.

Russia: President Vladimir Putin intends to conduct a referendum on whether to approve amendments to the constitution that would change the balance of power in the country’s leadership, according to his spokesman Dmitry Peskov,

Russia’s lower house of parliament voted unanimously on Thursday to green-light the amendments, which seek to give more authority to parliament, the premiership and a leadership advisory body, the State Council.

The proposals, announced by Putin in his state of the nation speech last week, have prompted speculation that the long-time Russian leader is seeking to create increased options for retaining power after his current term ends in four years.

The draft legislation includes establishing a minimum wage and pension allocations based on the cost of living, aspects that could help to convince the populace to vote in favor.

Tuesday, Putin approved a new government, bringing in some fresh faces but retaining many senior ministers.  The new government included a new economy minister and a new first deputy prime minister, but the finance, foreign, defense, energy and agriculture ministers all kept their jobs.

Putin previously selected 53-year-old former tax chief Mikhail Mishustin to replace Dmitry Medvedev as his new prime minister.

Ukraine: Two Ukrainian soldiers were killed and 10 were wounded at the weekend in the eastern Donbass region, where a ceasefire is supposed to be in place.  At a four-way summit with the leaders of France and Germany last month the Russian and Ukrainian presidents, Vladimir Putin and Volodymyr Zelensky, had agreed to commit to the full and comprehensive implementation of same.

Random Musings

--Presidential tracking polls....

Gallup: 44% approve of President Trump’s job performance, 53% disapprove, 88% of Republicans, 37% of independents (Jan. 2-15).  A month ago the figures were 45/51, 89, 42...so a significant drop in independents supporting the president.  I have long pegged 38% as the key number come November.
Rasmussen: 49% approve, 49% disapprove (Jan. 24).

A new CNN/SSRS poll has Trump with a 43% approval rating, 53% disapproving.

A new Monmouth University national survey has the president also with a 43% job approval rating, with 52% disapproving.  [43/50 in December.]

A new Pew Research Center survey has just 40% approving of Trump’s handling of his job as president, while 58% say they disapprove.

--Not that it means anything, but for the record, the New York Times editorial board, rather than endorsing a single Democratic candidate for the nomination to go up against President Trump, picked two.

“Both the radical and realist models (of the party) warrant serious consideration.  If there were ever a time to be open to new ideas, it is now.  If there were ever a time to seek stability, now is it.

“That’s why we’re endorsing the most effective advocates for each approach.  They are Elizabeth Warren and Amy Klobuchar.

The Times says that the health of Bernie Sanders, who would be 79 when he assumed office, and after an October heart attack, is too serious a concern to ignore, while Biden is also simply too old.

--Democratic presidential candidate Mike Bloomberg took to the site of historic race riots in Tulsa, Okla., on Martin Luther King Jr. Day weekend to propose sweeping plans to redress the economic legacy of generations of discrimination against African-Americans.

In an initiative similar to calls for reparations for slavery, Bloomberg proposed $70 billion in investment in the country’s “100 most disadvantaged neighborhoods,” along with steps to create 1 million new black homeowners and 100,000 new black-owned businesses.

In his speech, Bloomberg said, “For hundreds of years, America systematically stole black lives, black freedom and black labor.

“Well, it’s past time to say enough – and to damn well do something about it.”

It was in 1921 that white mobs destroyed a thriving black Tulsa business district, killing about 300, in what came to be known as the Black Wall Street Massacre.  Bloomberg began his speech by conceding he’d been ignorant of the incident – exclaiming “How is it possible that high schools and colleges don’t teach this?”

Bloomberg, vying to make himself the leader on issues of importance to African Americans, said:

“The crimes against black Americans still echo across the centuries, and no law can wipe that slate clean.  Not here in Tulsa, or anywhere else. But I believe that this is a country where anything is possible.  And I believe that we have the power to build a future where color and capital are no longer related.”

--Editorial / Wall Street Journal

Anyone who thinks American politics will enter a new period of compromise when President Trump leaves the White House isn’t watching the Democratic presidential race.  The left is unloading on Joe Biden for the heresy of having once considered a bipartisan reform of Social Security.

“With the Iowa caucuses two weeks away, the Bernie Sanders campaign is rolling out oppo research showing that Mr. Biden once said he’d consider cost-of-living ‘adjustments’ in Social Security.  In Bernie-speak, this always means ‘cuts.’

“ ‘I think anyone who looks at the vice president’s record understands that time after time after time, Joe has talked about the need to cut Social Security,’ Mr. Sanders said.  His campaign also dug up a 1995 TV clip when Mr. Biden said on the Senate floor he supported freezing all spending, including Medicare and Social Security, during the era when budget deficits and spending mattered politically.

“Mr. Biden responded by claiming the Sanders campaign had doctored a separate video, which doesn’t seem to be true. But the Sanders campaign is doctoring fiscal reality, which is that Social Security can’t continue in its present form.  As early as this year Social Security benefits will exceed the amount collected in payroll taxes.  This means benefits will have to be paid out of trust-fund asset reserves set to run out in 2035.

“Mr. Sanders and Elizabeth Warren nonetheless want to increase Social Security benefits regardless of income even though benefits already increase automatically each year.  They also want to lift the cap ($137,700 this year) on income that is subject to the Social Security payroll tax.  Alas, under pressure from the left, Mr. Biden now wants to raise the cap too.  This would be a huge tax increase.

“It’s possible the Social Security attack will hurt Mr. Biden in Iowa, which has an older population than most states.  But the larger damage will be to the cause of fiscal compromise if a Democrat wins the White House.  Mr. Trump has little interest in reforming entitlements, and House Democrats would block him anyway.  The best chance at a bipartisan reform would be a Democrat like Mr. Biden or Michael Bloomberg working with a GOP Congress.

“Sooner or later some President is going to have to do it.  Meanwhile, we have the spectacle of 77- and 78-year-old candidates demanding higher taxes on millennial workers to pay for higher benefits for 78-year-olds.”

--In New York City, Brooklyn Borough President Eric Adams will be running to succeed Mayor Bill de Blasio in 2021.  He’s an interesting guy, an African American, former police officer, and not afraid to speak his mind.  Adams is way too liberal for my liking, but he’s different and kind of entertaining.

But he also exposed himself as a virulent racist when on Martin Luther King Jr. Day, he gave an explosive speech at the National Action Network’s MLK Day celebration in Harlem wherein he said to Gotham’s gentrifiers, “Go back to Iowa!  You go back to Ohio!”

“Folks are not only hijacking your apartments and displacing your living arrangements, they displace your conversations and said that things that are important to you are no longer important, and they decide what’s important and what’s not important.”

“New York City belongs to the people that [were] here and made New York City what it is.  I know I’m a New Yorker.  I protected this city. I have a right to put my voice in how this city is run.”

Yes, high rents and gentrification are likely to play a significant role in the 2021 mayoral race, but many were shocked at the explicitly racist tone.

But what also made this presentation kind of fascinating is that Adams, again, is Brooklyn Borough President, and who wants to replace him in that job?  None other than Bill de Blasio’s wife, Chirlane McCray (who if you aren’t from the area and don’t already know is African American).

And why is the Mayor pushing his wife for the job?  Because now that it’s apparent Bill de Blasio has no hopes for a national profile, including a highly visible position in any Democratic administration should that ever come to pass, he has no job.  The family no income, after next year.

But being Brooklyn Borough President comes with a salary of $179,000.

And that is why, boys and girls, Mayor de Blasio didn’t criticize the harsher points in Eric Adams’ speech.

--Under a Megxit deal announced by Queen Elizabeth II on Saturday, Meghan and Harry will “step back from Royal duties” and will no longer receive taxpayer cash.

In an official statement, the Queen said: “I want to thank them for all their dedicated work across this country, the Commonwealth and beyond, and am particularly proud of how Meghan has so quickly become one of the family.  It is my whole family’s hope that today’s agreement allows them to start building a happy and peaceful new life.”

“I am pleased that together we have found a constructive and supportive way forward for my grandson and his family,” the Queen said in her statement.  “Harry, Meghan and Archie will always be much loved members of my family.”

According to a Daily Mail poll, 80% of Britons want Harry and Meghan cut off from public support if they’re no longer playing the part of royals.

Prince Harry broke his silence Sunday, saying at a charity event in London, he had “no other option” but to step back from his royal duties.

“The decision that I have made for my wife and I to step back, is not one I made lightly.  It was so many months of talks after so many years of challenges,” the 35-year-old prince said.

“And I know I haven’t always gotten it right, but as far as this goes, there really was no other option,” said Harry, who professed his love for his country, saying: “The UK is my home and a place that I love.  That will never change.”

Harry said he and Meghan were “not walking away, and we certainly aren’t walking away from you.”

The Duke of Sussex said he’d hoped to “continue serving the Queen, the commonwealth, and my military associations,” but that without public funding, “unfortunately, that was not possible.”

“When I lost my mum 23 years ago, you took me under your wing,” Harry continued.  “You’ve looked out for me for so long, but the media is a powerful force, and my hope is one day our collective support for each other can be more powerful because this is so much bigger than just us.”

According to a report in The Sunday Times of London, the Queen is “very sad” that she has “barely seen” her great-grandson, baby Archie – and fears even less time with him after Megxit.  The Queen first met the baby two days after he was born, but has only seen him a handful of times since then.  That included missing him for the holidays during the Sussexes’ extended break in Canada – and she has not seen him in quite some time.

A source who knows the Queen told the Sunday Times, “She will be very sad to have barely seen Archie, and that he will miss out on growing up with his cousins and wider family.”

Prince William’s kids George, Louis and Charlotte – have only met the baby royal twice since his birth.

Prince Charles, who cherishes his role as “Grandpa Wales” to William’s kids – is said to be despondent at missing out on the same bond with Archie.

Harry and Meghan are reportedly eyeing a $27 million waterfront property in an exclusive enclave in Vancouver.

This amazingly naïve, now loathsome couple somehow believe the press will leave them alone while only their hand-selected PR staff follows them around at all their Hollywood A-List parties, snapping lovely photos, hand-picked by them as well.

Prime Minister Boris Johnson on Sunday said he believed that the whole of Britain would want to wish the very best to Harry and Meghan.

“I think the whole country will want to join in wishing them the very best for the future.”

No they won’t. 

--We note the passing of Jim Lehrer, 85, the co-host and later host of the nightly “PBS NewsHour” that for decades offered a thoughtful take on news.

For Lehrer, and his longtime partner Robert MacNeil, broadcast journalism was a service, an effort to educate the public on the events of the day.  Lehrer was also a frequent moderator for presidential debates, a record 12 to be exact.

Lehrer wrote in his 1992 memoir, “A Bus of My Own,” “We both believed the American people were not as stupid as some of the folks publishing and programming for them believed.”

“We were convinced they care about the significant matters of human events. ...And we were certain they could and would hang in there more than 35 seconds for information about those subjects if given a chance.”

Amen.

[I forgot that Jim Lehrer’s first novel, “Viva Max!”, was made into a movie I well remember as a kid starring Peter Ustinov and, among many others, Jonathan Winters.]

--China, one of the world’s biggest users of plastic, has unveiled a major plan to reduce single-use plastics across the country.

Non-degradable bags will be banned in major cities by the end of 2020 and in all cities and towns by 2022.

The restaurant industry will also be banned from using single-use straws by the end of 2020.

How much has China been struggling with its rubbish?  The country’s largest garbage dump – the size of around 100 football fields, we are told – is already full, 25 years ahead of schedule.

According to the online publication Our World in Data based at the University of Oxford, China produced 60 million tons of plastic waste in 2010, followed by the U.S. at 38 million.  [The research was published in 2018 and said the “relative global picture is similar in projections up to 2025”.]

From a recent issue of National Geographic, here are a few factoids.

1 million plastic beverage bottles are bought every minute around the world, with recycling rates remaining low.

Billions of plastic utensils are thrown away each year around the world.

1 billion toothbrushes will be discarded in the U.S. this year. There are biodegradable alternatives, but plastic toothbrushes prevail.

3 trillion cigarette butts are carelessly thrown away each year.  Their filters are made of plastic, which makes them a key source of plastic pollution.

--Finally, we note the tragedy in New South Wales, Australia; three firefighters from the United States dying as the large aircraft they were using to battle bush fires crashed, the cause not immediately known.  The C-130 Hercules carrying a load of fire retardant was operated by a Canadian company that helped battle last year’s California fires and has long worked in Australia.

The three victims were later identified as all having served in the U.S. military, representing the Air National Guard, the Marines, and the U.S. Air Force.

Previously, five other firefighters had died in New South Wales and the state of Victoria.

Having been to Australia a few times, I know these are truly our best allies in the world.  A beautiful, outrageously fun, kind, loving people.  You can be sure they will find a special way to honor our fellow citizens.

We need Australia in all the battles ahead, whether it’s the climate or the looming war with China.  There are over 200 American firefighters there today.  God watch over them.

---

Pray for the men and women of our armed forces...and all the fallen.

God bless America.

---

Gold $1570
Oil $54.37...lowest weekly close since Oct. 4

Returns for the week 1/20-1/24

Dow Jones  -1.2%  [28989]
S&P 500  -1.0%  [3295]
S&P MidCap  -1.5%
Russell 2000  -2.2%
Nasdaq  -0.8%  [9314]

Returns for the period 1/1/20-1/24/20

Dow Jones  +1.6%
S&P 500  +2.0%
S&P MidCap  +0.1%
Russell 2000  -0.4%
Nasdaq  +3.8%

Bulls 59.4...finally, nearing the ‘60’ danger level
Bears 17.9

Have a good week.

Brian Trumbore