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Week in Review

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10/20/2018

For the week 10/15-10/19

[Posted 11:45 PM ET]

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Edition 1,019

Warning:  I’ve said this a few times the past few months, but this is definitely the longest of my 1,019 missives (out of 1,020 weeks).  Save a tree....don’t print it.

The Trump Presidency is beyond overwhelming to cover, and, think about it, while we have American troops at risk in some global hot spots, we are not engaged in any wide-ranging conflict at the time.  Imagine if we were...or don’t.  You won’t be able to sleep.

Don’t give me “Well, President Trump is keeping the peace.”  The sands are shifting beneath our feet and I’m afraid it’s going to be like the recent Indonesian earthquake (and tsunami) where the land simply liquefied.  There one minute...gone the next.

And hopefully you’re not of the opinion that America no longer needs to be the world’s moral leader...the moral compass, the defender of human rights.

With the president’s slew of interviews this week, beginning with the devastating “60 Minutes” interview Trump did with Lesley Stahl, progressing through the AP sitdown, I can also assure you our leader didn’t make it through three sentences without telling a lie.

I was floored...and this after what we’ve heard since he announced he was running.

I’m just stating the facts.  I know the economy is great.  I’m happy for that.  I’m fully supporting my local Republican congressman.

But on some topics I’m too smart.  I don’t suffer fools gladly.  And we just can’t survive a leader, the ‘leader of the Free World,’ who is totally incapable of the truth.

Because of all the topics I felt compelled to cover in some depth down below, however, from China and trade, to earnings reports, to the death of Paul Allen, to Google’s treason, to Saudi Arabia and beyond...I have no time to begin to delve into all of President Trump’s whoppers in his various forums.

For now, just understand his telling us that Saudi Arabia is “spending $110 billion on military equipment and on things that create jobs” is a total crock of merde.

According to the Pentagon, if you stretch the terms, to include letters of intent, it might be as  much as $14.5 billion, but since Trump’s visit to the kingdom, where he says he secured this big order, about $4 billion is the total thus far.

That’s important.  The American public deserves to know.

And his constant refrain that when he took office America was going to war with North Korea is just not factual.  I loved how Lesley Stahl wasn’t having any of it.  “We were going to war?”

Trump retreated... “I think it was going to end up in war,” he said, before moving on.

Or Trump’s beyond inane comments on climate change. When Ms. Stahl opened up by questioning him on the topic, Trump said “something’s happening.”  He then said, “I’m not denying climate change.”

But then he said it will “change back,” even though his National Climate Assessment, approved by the White House last year, said there was no turning back.  Yet as Glenn Kessler of the Washington Post wrote, while Trump “said he did not know whether climate change was man-made...the same report said ‘there is no convincing alternative’ posed by the evidence.”

When asked whether North Korea is building more nuclear weapons, “Well, nobody really knows.  I mean, people are saying that.”

“People”...the president always falls back on “people are saying...,” “They say...”

What ‘people’?  I love how Lesley Stahl fought back during the climate change discussion and asked: “Who says that?  ‘They say’?”

Trump replied: “People say....”

Oh, and Trump continues to insist that Kim Jong Un committed to denuclearization, when the chubby little guy with the elevator heels that our president has fallen madly in love with has still done nothing more than sign a nonbinding statement of goals.

Yet Trump told Lesley Stahl: “And I will tell you that they’re closing up sites.”

No they aren’t.

But he has “a great chemistry (with Kim) and also with President Xi of China.”

No he doesn’t.

He spouts out China market figures that are just plain lies.  He says of the European Union: “Nobody treats us much worse than (the EU).”

And, of course, he knows more about NATO than Gen. Mattis, as he told us last Sunday night.  I spit up my Chex Mix on hearing this.

Trump refuses to acknowledge in any serious way the extent of Russian meddling in our elections (see below), while now blaming China when there simply is no equivalence.

Trump says ISIS has been “defeated.”  Again, see below.  Because of all the other news of the day, it’s getting lost that Islamic State may have just abducted a number of Americans in Syria.

We move on.....

Wall Street and Trade

President Trump told Fox Business television on Tuesday, “My biggest threat is the Fed because the Fed is raising rates too fast.  You look at the inflation numbers, they’re very low.”

But Fed Chairman Jerome Powell has so far brushed aside the president’s criticism, portraying the Fed’s actions as a necessary move to normalize monetary policy in an “extraordinary” economy and saying the Fed was sticking with its strategy of gradual rate increases.

After this week’s release of the Federal Open Market Committee’s minutes from its September meeting, there is indeed little doubt Powell and Co. are hiking rates again in December, and still plan on three more increases in 2019, to levels sufficient to slow down a fast-growing economy to prevent it from overheating, according to the minutes.

“A few participants expected that policy would need to become modestly restrictive for a time,” the minutes read. But, “A couple of participants indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.”

Earlier this month, Chairman Powell spooked the market when he said the following: “Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral. We’re a long way from neutral at this point, probably.”

Yes, President Trump is right that inflation isn’t an issue today, but that may not always be the case.

That said, as reflected in all the recent housing data, including today’s existing home sales report for September, down a sixth consecutive month, rising mortgage rates are definitely biting.

The existing home sales pace was down 3.4% over August, which was revised downward, and is down 4.1% over the past year.  Earlier, housing starts for last month were also down, 5.3% from August, according to the Census Bureau, though there was some influence in the number from Hurricane Florence.

September retail sales were up a disappointing 0.1%, -0.1% ex-autos, while September industrial production rose 0.3%.

The Atlanta Fed’s GDPNow projection for third-quarter growth is 3.9%.

Meanwhile, it was reported by the Labor Department on Tuesday that American employers had more than seven million unfilled jobs for the first time on record this summer, reflecting a historically tight labor market that is causing some businesses to struggle to find workers.

There was a seasonally adjusted 7.136 million job openings on the last business day of August, with available jobs that month outnumbering jobless Americans actively looking for work by 902,000, the largest such gap on record.

On the trade front, negotiators are warning that the fragile peace between the U.S. and EU is at risk of collapse this week after the Trump administration and European Commission accused each other of undermining a White House deal reached in July.

Commerce Secretary Wilbur Ross said President Trump’s “patience was not unlimited” after his EU counterpart accused Washington of dragging its feet in Brussels talks.

Ross has been at odds with EU trade commissioner Cecilia Malmstrom.

In July, in a handshake agreement between Trump and Jean-Claude Juncker, the European Commission president, the leaders agreed to work towards eliminating all trade barriers on non-automotive industrial goods.

Analysts have long been skeptical of the Trump-Juncker deal, arguing it was short on specifics and did little to deal with the biggest hazard to transatlantic trade: President Trump’s threat to impose tariffs on European carmakers, accusing the EU of treating U.S. car imports unfairly.

Ms. Malmstrom said, “We have not started negotiating yet,” and that the ball is in their court.

As for China, the two sides, at least at the senior level, have not been talking and while Presidents Trump and Xi Jinping are to meet next month at the G20 meeting in Buenos Aires, no one expects much out of it.

But that didn’t stop the Trump administration from taking more actions against China, among them being a proposal to withdraw from a 144-year-old postal treaty that allows China’s companies to ship small packages to the United States at a steeply discounted rate. The 1874 Universal Postal Union treaty sets fees that national postal services charge to deliver mail and small parcels to countries around the world.  But Trump’s trade adviser, Peter Navarro, sees the move as a way to thwart China and an opportunity to challenge the authority of international groups such as the World Trade Organization.

But the administration opted once again not to label China a currency manipulator despite President Trump’s repeated complaint that Beijing is weakening the renminbi.

The Treasury Department’s biannual currency exchange report, the fourth of Trump’s presidency, criticized China’s trade and currency practices, but did not conclude Beijing was improperly devaluing the renminbi.  Doing so would have increased tensions further.  Treasury Secretary Steven Mnuchin in a statement instead cited China’s lack of transparency on the issue.

Editorial / The Economist

“For the past quarter century America’s approach to China has been founded on a belief in convergence.  Political and economic integration would not just make China wealthier, they would also make it more liberal, pluralistic and democratic. There were crises, such as a face-off in the Taiwan Strait in 1996 or the downing of a spy-plane in 2001. But  America cleaved to the conviction that, with the right incentives, China would eventually join the world order as a ‘responsible stakeholder.’

“Today convergence is dead.  America has come to see China as a strategic rival – a malevolent actor and a rule-breaker. The Trump administration accuses it of interfering in America’s culture and politics, of stealing intellectual property and trading unfairly, and of seeking not just leadership in Asia, but also global dominance.  It condemns China’s record on human rights at home and an aggressive expansion abroad. This month Mike Pence, the vice-president, warned that China was engaged in a ‘whole-of-government’ offensive. His speech sounded ominously like an early bugle-call in a new cold war

“Do not presume that Mr. Pence and his boss, President Donald Trump, are alone. Democrats and Republicans are vying to outdo each other in bashing China. Not since the late 1940s has the mood among American businessfolk, diplomats and the armed forces swung so rapidly behind the idea that the United States faces a new ideological and strategic rival.

“At the same time, China is undergoing its own change of heart. Chinese strategists have long suspected that America has secretly wanted to block their country’s rise.  That is partly why China sought to minimize confrontation by ‘hiding its strengths and biding its time.’ For many Chinese the financial crisis of 2008 swept aside the need for humility.  It set America back while China thrived.  President Xi Jinping has since promoted his ‘Chinese Dream’ of a nation that stands tall in the world.  Many Chinese see America as a hypocrite that commits all the sins it accuses China of. The time to hide and bide is over.

“This is deeply alarming.  According to thinkers such as Graham Allison of Harvard University, history shows how hegemons like the United States and rising powers like China can become locked into a cycle of belligerent rivalry.

“America fears that time is on China’s side.  The Chinese economy is growing more than twice as fast as America’s, and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech.  Action that is merely daunting today – to stem the illegal acquisition of intellectual property, say, or to challenge China in the South China Sea – may be impossible tomorrow.  Like it or not, the new norms governing how the superpowers will treat each other are being established now.  Once expectations have been set, changing them again will be hard.  For the sake of mankind, China and America need to come to a peaceful understanding. But how?

Next week, part II.

Finally, on the federal budget deficit, the administration announced a $779 billion deficit for fiscal year 2018 (ending 9/30/18), a six-year high and a 17 percent jump from the prior year.

In response to the ballooning deficit, President Trump asked every cabinet secretary to take a 5 percent budget cut next year.

“Get rid of the fat, get rid of the waste,” Trump said.  “It’ll have a huge impact.”

Trump told reporters he had to spend money on the military last year because it was ‘falling apart’ and also had to splash money on some Democratic priorities to secure their votes.

The Treasury Department reported that spending outlays increased $127 billion from 2017 to 2018, while tax revenue remained nearly flat.

That’s because the GOP-led Congress passed Trump’s tax plan that slashed corporate income tax rates from 35 to 21 percent.  That meant corporate taxes collected dropped by 31 percent in one year, or $92 billion.

The U.S. national debt now tops $21 trillion.

Spending on interest on the public debt rose $65 billion to $521 billion.  Any long-time reader knows this is the figure I harp on...interest on the debt eventually impacts the spending side of the ledger...and Congress’ pet projects.

$39 billion more was spent on Social Security outlays.

As a share of GDP, the deficit totaled 3.9%, up from 3.5% a year earlier and the third consecutive increase.

The deficit increased by $70 billion less than anticipated in a report published in July, but it would have been even higher if not for shifts in the timing of certain payments, Treasury said.

Just a few key numbers....($ millions)

Individual income tax receipts for F2018 were $1,683,537 vs. $1,587,119 F2017

Corporate Income Taxes for F2018 were $204,733 vs. $297,048 F2017

Total receipts for F2018 were $3,328,745 vs. $3,314,894 in F2017

Total outlays for F2018 were $4,107,741 vs. $3,980,720 in F2017

Total deficit (-) for F2018 was $-778,996 vs. $-665,826 the prior year.

Interest on Treasury Debt Securities (Gross) was $521,553 vs. $456,955 the year before.

Europe and Asia

Just one eurozone-wide data point this week.  September inflation in the EA19 came in at an annual rate of 2.1% vs. 2.0% in August, and 1.5% a year ago.

Germany 2.2%, France 2.5%, Italy 1.5%, Spain 2.3%.

Eurobits....

Brexit: What a week...what a summit in Brussels as European leaders met with British Prime Minister Theresa May for what was to be a final decision on Brexit, with another ‘wrap-up’ summit in November to approve the details.

But prior to Brussels, last weekend, Mrs. May was preparing to walk away from a deal that would ensure a hard border never again emerges on the island of Ireland.

The prime minister said: The EU still requires a ‘backstop to the backstop’ – effectively an insurance policy for the insurance policy.

“And they want this to be the Northern Ireland-only solution that they had previously proposed.

“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom. And I am sure the whole house shares the government’s view on this.”

Tying Britain to the EU on customs would limit Mrs. May’s power to strike new trade deals around the world – a key goal of those who voted to leave the EU.

So when the summit occurred, Wednesday and Thursday, for 36 hours we received all kinds of differing opinions and degrees of optimism from the parties involved. To wit:

German Chancellor Angela Merkel said afterwards that a deal should still be achievable, adding at a post-summit news conference that the 27 leaders had agreed to reassemble to assess progress soon as sufficient progress had been made in talks, including on the key sticking point, the status of the border in Ireland.

Merkel added that she was no more or less optimistic following the summit than before.  “Where there is a will there is a way,” she told reporters.  “We agreed that when sufficient progress has been made we will meet again, but right now it isn’t clear when such a meeting can take place.”

So right there, Merkel is saying the leaders agreed to reassemble to assess progress, but clearly sufficient progress has not been made and, as of today, there are no plans for a November summit....though this can change.

But a key participant, Irish Prime Minister Leo Varadkar said Thursday, the EU would have “huge difficulties” agreeing to a United Kingdom-wide Irish border backstop* as it would expose the bloc’s single market to unfair competition.  Varadkar said some progress has been made in recent weeks “but certainly not the level of progress which we  could describe as decisive progress.”

*Again, the ‘backstop’ is an insurance policy to ensure there will be no return to a hard border (customs checks) if a future trade relationship is not in place in time.

Varadkar said 11 EU leaders spoke on Brexit after Prime Minster May left.  He showed them the front page of an Irish newspaper from the 1970s that recounted killings at a customs post in Ireland and Varadkar’s point was to show his fellow EU leaders that fears of extensive border checks between EU state Ireland and Britain’s province of Northern Ireland would risk reigniting sectarian violence were not exaggerated.  The European Parliament must not sign off on any agreement that undermined the single market and did not give Ireland what it needed in relation to the backstop, Varadkar added.

“Some people see Brexit as a storm.  Passing storm that may be very rough but then will pass.  But it’s not. What Brexit is it’s the political equivalent of climate change.  It’s permanent change,” he said.

[If you don’t remember, the conflict between the Republic of Ireland and Northern Ireland, aka “The Troubles,” resulted in 3,500 deaths...a majority of them civilians...a huge toll given the small populations of the two.]

Others who weighed in included French President Emmanuel Macron, who said it was now up to Theresa May to come back with new proposals that she can defend politically at home.  Negotiating a Brexit agreement had become a British political issue, Macron said during a news conference in Brussels.

“It’s now clearly up to the British prime minister and her staff to come back with a solution based on the necessary political compromise on the UK side.”

The EU’s Brexit negotiator, Michel Barnier, said, “Brexit must include a solid, all-weather backstop to avoid a hard border (between the Republic and Northern Ireland).”

It’s clear what the issue is.

So what of Theresa May and Britain?  Thursday, she expressed confidence a deal could be secured, saying the two sides were working hard to overcome the same hurdles.

It’s less than six months before Britain leaves the EU.

The prime minister said she was willing to consider an extension to the transition period...the period of time post-Brexit (March 29, 2019) that is to go through Dec. 31, 2020, during which a trade relationship is to be negotiated...by a few months.

Mrs. May described transition as an “implementation period,” and although she said the plan for an extension was being considered for inclusion in a deal, her intention was that it would in practice never have to be used.  “(We) are working to ensure we have that future relationship in place by the end of December 2020,” she said.  “In those circumstances there would be no need for any proposal of this sort.”

But extending the transition period means a longer period for the UK to be operating under EU rules and opponents in May’s own party are fuming about this.

So for now, as has been the case for the past year, really, the two sides are kicking the can down the road.

“We are all working, we’re intensifying the work on these issues that remain,” May told a news conference after the summit had ended.  “What I’ve had from leaders around the table...since I arrive here in Brussels yesterday is a very real sense that people want that deal to be done....

“I am confident that we can achieve that good deal.”

EU Council President Donald Tusk described the mood as being much better than the last summit, Salzburg, which ended in acrimony.  “What I feel today is that we are closer to the final solutions and the deal.”

Jean-Claude Juncker, EU Commission president, said: “It will be done.”

Today, British Foreign Secretary Jeremy Hunt claimed “all but one or two issues” on Brexit have been settled in exit talks, and urged a divided Conservative party to rally behind the prime minister in the final stage of negotiations.  Hunt admitted some Tory MPs were furious over May’s proposal that Britain’s transition out of the EU last “a few months” longer than the proposed end date of Dec. 2020.

Hunt confirmed that extending the transition into 2021 would cause “difficulties over payments and the common fisheries policy” – an admission that Britain could continue to make EU contributions and stay under its fishing rules.

The deadlock in talks in Brussels, Hunt said, was evidence of Mrs. May’s determination not to sign up to any deal that could see Northern Ireland split into a different customs zone to the rest of the UK.

So as I go to post, the bottom line is EU leaders have shelved plans for a special Brexit summit next month, and are awaiting Britain’s next move in a negotiation the could still take months to complete...but the two sides don’t have months!

Not to beat a dead horse, but all the sides have to get parliamentary approval once a deal is struck, the details in writing, long before March 29 of next year.

Italy: Following a statement by the European Commission on Thursday that Italy’s draft budget represented a “particularly serious non-compliance with the budgetary obligations laid down” in eurozone fiscal rules beefed up during the crisis, stock and bond markets across the continent were roiled.  It didn’t help that European Central Bank president Mario Draghi chimed in during a closed-door gathering of EU leaders that breaches of the crisis-era rules were dangerous. According to diplomats, Draghi told the leaders at the above-noted Brussels summit:

“There is no evidence that to undermine all the rules will lead to prosperity, but it will carry a high price tag for all actors.”

Rome’s draft budget envisages a deficit three times higher than an EU-mandated target, which was agreed to by the previous government in order to lower the government’s growing debt pile, the second highest in the eurozone behind only Greece.

The yield on the key 10-year bond hit a 4 ½-year high on Friday, 3.78%, before rallying on the EU’s extension until Monday of a new budget proposal, the yield tumbling back to 3.47%, amid optimism some kind of agreement could be reached palatable to both sides.

To be continued...

Germany: Chancellor Angela Merkel’s already fragile “grand coalition” was handed a stinging setback Sunday in state elections in Bavaria, as her conservative partner, the Christian Social Union that is aligned with Merkel and her Christian Democrats, saw its support slide to 37.3%, when just 15 years ago it captured 61% and has always won nearly 50% or more.

Merkel’s name was not on the ballot in Bavaria, but her pro-refugee policies certainly took center stage.

The Social Democrats, who share power with Merkel’s conservatives at the national level, saw their support in Bavaria tumble 11 points to 9.6% - their worst state election performance anywhere since World War II.

The far-right Alternative for Germany won 10.6%, which some saw as a slight disappointment (for the AfD, I hasten to add, not me, though AfD leaders seemed pleased with the result), but the pro-Europe Greens garnered 17.8% - double its share in the last election in Bavaria in 2013, further siphoning support from Merkel’s party.  This is interesting.

In another week, we have an important election in Hesse, home to the German financial capital of Frankfurt, and a drubbing of the conservatives there could lead to more  serious turbulence in the Berlin government.

Merkel hopes to be reelected as the leader of the conservatives at a party congress in December, but now there are growing doubts this will be the case.

Back in Bavaria, the current governor, Markus Soeder, is likely to stay in power, but he may have to partner with the Greens.

Turning to Asia, in China the National Bureau of Statistics released the reading on third-quarter GDP, 6.5%, down from the second quarter’s 6.7% and a tick shy of expectations. Yes, the figure is too cute by half but when looking at China’s questionable data, you are looking for trends and 6.5% is nonetheless the slowest rate since the global financial crisis in 2009 (specifically Q1 ’09).

The Chinese economy continues to lose steam amid increasing headwinds, not the least of which is rising trade tensions. 

Right before the GDP report was released, all manner of government officials were out pledging to step up stimulus and urging investors not to worry and the market rallied 2.6% today.

Separately, industrial production rose 5.8% year-over-year in September, retail sales were up 9.2%, and fixed asset investment (such as on major infrastructure projects) was up 5.4% for the first nine months of the year.

On the inflation front, September producer (factory-gate) prices rose 3.6% over the past 12 months vs. a 4.1% rate in August.

Consumer prices were up 2.5%, inside the government’s 3% target for 2018.  Core CPI rose 1.7%.

Meanwhile, S&P Global Ratings is warning that China’s local governments may have accumulated $5.8 trillion of off-balance sheet debt, or even more, suggesting further defaults are in store.

The culprit is local-government financing vehicles (LGFVs) that have been used to raise financing to fund infrastructure projects to support regional growth.

The central government, on the other hand, has been focused on reducing leverage in the financial system.

In Japan, consumer prices for last month rose 1% over a year ago, but ex-fresh food and energy were up only 0.4%, far below the government’s 2% target.

September exports were disappointing, down 1.2% year-over-year, the worst performance in nearly two years.  Imports to the U.S. declined 0.2%, as U.S.-bound auto exports, 143,000, are down 7% yoy.

Trump World

--Russians working for a close ally of President Vladimir Putin engaged in an elaborate campaign of “information warfare” to interfere with the midterm elections, federal prosecutors said on Friday in announcing they had charged one of them in the plot.

The woman, Elena Alekseevna Khusyaynova, 44, of St. Petersburg, was involved in an effort “to spread distrust towards candidates for U.S. political office and the U.S. political system,” prosecutors said.

Ms. Khusyaynova managed millions for a company owned by a Russian oligarch, Prigozhin, who was previously indicted on charges of interfering in the 2016 presidential election, to finance foreign influence activities directed at the United States.  Some of the money was spent on advertising on social media in the U.S., buying internet domain names and “promoting news postings on social networks.”

The conspirators “took extraordinary steps to make it appear that they were ordinary American political activists,” prosecutors wrote.

Incredibly, or not so much, when President Trump was told this afternoon about the indictment, he said it had nothing to do with his campaign, and then he blamed Obama and Hillary Clinton.

Ah, Mr. President?  This case is about the current midterms.

But I’m suggesting Pat Sajak and the “Wheel of Fortune” folks work Elena’s name into their show.

“Pat, I’d like to buy a vowel......Elena Alekseevna Khusyaynova!”

“That’s right!”

--Special Counsel Robert Mueller’s probe continues, only he seems to be honoring the unwritten rule to hold off on any important news so close to the midterms.  But with stories out that Paul Manafort has spent up to 50 hours with Mueller’s team, you can be sure we’ll learn a lot more by mid-November.

For now, U.S. prosecutors agreed to drop criminal charges against Manafort that a jury deadlocked on in August, as U.S. District Judge T.S. Ellis set a Feb. 8 date for the former Trump campaign manager’s sentencing on charges of bank fraud and filing false tax returns.

Prosecutors had initially favored waiting until Manafort finished cooperating with Mueller before addressing the remaining charges, but Judge Ellis rejected the timetable.  “I’m not willing to go on endlessly,” he said.

--President Trump is suggesting without evidence that Democrats or their allies are supporting a “caravan” of Central American migrants who are traveling north aiming to enter the United States.

The president has turned immigration into a leading issue for the midterm elections, and at a campaign rally in Missoula, Mont., he accused Democrats of supporting the migrants because they “figure everybody coming in is going to vote Democrat.”

Trump unveiled his stretch run campaign theme: “This will be an election of (Justice Brett) Kavanaugh, the caravan, law and order and common sense,” he said.

Or: “GOP creates jobs, Dems create mobs.”

Separately, at the same Missoula rally, Trump heaped praise on Republican Rep. Greg Gianforte, who pleaded guilty to misdemeanor assault after attacking a reporter in 2017.  “Any guy that can do a body slam, he’s my kind of guy,” the president said, to disturbing applause. “I shouldn’t say that – (but) there’s nothing to be embarrassed about...He’s a great guy, tough cookie.”

Trump’s comment was particularly pathetic given the focus on the murder of Jamal Khashoggi.  But then I guess I was brought up differently.

For their part, the Guardian newspaper, who employed the reporter assaulted by Rep. Gianforte, issued a statement upon hearing Trump’s comment.

“To celebrate an attack on a journalist who was simply doing his job is an attack on the First Amendment by someone who has taken an oath to defend it.”

Guardian U.S. editor John Mulholland added: “In the aftermath of the murder of Jamal Khashoggi, it runs the risk of inviting other assaults on journalists both here and across the world where they often face far greater threats.”

--Editorial / Wall Street Journal

“One thing Americans rightly hate about health care is that no one knows the true price of a service.  How much did your last X-ray cost?  Why are you suddenly paying more for a statin?  The Trump Administration tried to address this frustration this week with a new rule requiring price disclosure on prescription drugs, but its cure is worse than the problem.

“Health and Human Services has proposed a regulation that will force pharmaceutical companies to include the list price of a drug in television advertisements, and the rule applies to any drug paid for by Medicaid and Medicare that runs more than $35 a month. HHS says this is no different from forcing companies to disclose medical side effects and warnings, nothing but sensible transparency that might shame companies into lowering list prices.

“This is misleading political advertising.  Almost no one pays the ‘list’ price at the pharmacy after insurance and discounts. Nearly nine in 10 prescriptions are generic, an identical version of the product that is a fraction of the cost.   A unit of generic Prilosec costs about eight cents versus $3.31 for the branded heartburn medicine.  Medicaid patients have co-pays as low as a couple bucks, though they won’t know that from watching an ad that says the medicine costs $50 or $200 a month.

“The more important problems are legal.  One sleight of hand is that HHS is promulgating the rule through the Centers for Medicare and Medicaid Services, not the Food and Drug Administration, which regulates safety and efficacy disclosures in drug advertisements.

“HHS openly concedes in the rule that ‘Congress has not explicitly provided HHS with authority to compel the disclosure of list prices to the public.’ But it invokes sections of the Social Security Act that direct the agency to operate Medicaid and Medicare programs efficiently. That looks like a throwback to the Obama years: Select a desired policy and then hunt for a broad statute to justify it.

“Pharmaceutical companies will almost certainly challenge the rule as compelled speech that violates the First Amendment, and they’re right to do so....

“The Trump Administration is waddling into this debate so it can appear to be doing something – anything – about drug prices. Yet the White House’s policy blueprint offered many worthier ideas: cracking down on anti-competitive behavior from drug companies; reforming a dysfunctional Medicaid price system, and more.  Those reforms are better than its simplistic and probably illegal attack on Big Pharma’s advertising.”

Separately, according to a Fox News poll, Americans approve of ObamaCare by a 53-42 margin.  To tell you the truth, I don’t know how I feel.  Ask me when I see what my premiums are for next year.

--Stormy Daniels’ defamation lawsuit against President Trump was tossed out Monday – with a federal judge ordering the porn star to pay the president’s legal fees.

To which Trump tweeted:

“ ‘Federal Judge throws out Stormy Danials (sic) lawsuit versus Trump. Trump is entitled to full legal fees.’ @FoxNews Great, now I can go after Horseface and her 3rd rate lawyer in the Great State of Texas. She will confirm the letter she signed! She knows nothing about me, a total con!”

Daniels then tweeted, in part: “Game on, Tiny!”

--President Trump pressed for pastor Andrew Brunson’s return from house arrest in Turkey for good reason.  A Pew Research Center survey released Oct. 1 showed 67% of white evangelical Protestants approved of Mr. Trump’s performance, compared with 27% who disapproved. Overall, his approval rating with U.S. adults stood at 38% compared with 55% who disapproved.

--Other Trump Tweets....

“For the record, I have no financial interests in Saudi Arabia (or Russia, for that matter). Any suggestion that I have is just more FAKE NEWS (of which there is plenty)!”

“The crowds at my Rallies are far bigger than they have ever been before, including the 2016 election.  Never an empty seat in these large venues, many thousands of people watching screens outside.  Enthusiasm & Spirit is through the roof.  SOMETHING BIG IS HAPPENING – WATCH”

“When referring to the USA, I will always capitalize the word Country!”

[I won’t]

“Thank you to the Cherokee Nation for revealing that Elizabeth Warren, sometimes referred to as Pocahontas, is a complete and total Fraud!”

“Pocahontas (the bad version), sometimes referred to as Elizabeth Warren, is getting slammed. She took a bogus DNA test and it showed that she may be 1/1024, far less than the average American.  Now Cherokee Nation denies her, ‘DNA test is useless.’ Even they don’t want her.  Phony!”

[More on Sen. Warren down below.]

Street Bytes

--Stocks finished mixed on the week, the Dow Jones up just 0.4% to 25444, the S&P 500 was unchanged, and Nasdaq fell a third consecutive week, -0.6%.

Earnings have generally been strong, but we began to see weakness in some of the industrials... companies like Textron (aircraft, including Cessna business jets where the company talked of softness in orders), and Sealed Air Corp. (packaging...a leading indicator).

Plus you still have the uncertainty over whether the Fed is about to go too far, let alone trade tensions...while many sectors of the market just aren’t cheap.

We will learn a lot next week, specifically Thursday...Google, Amazon, Intel and Twitter.

--U.S. Treasury Yields

6-mo. 2.47%  2-yr. 2.90%  10-yr. 3.19% 30-yr. 3.38%

The 10-year has settled into a range of 3.15% to 3.25% the last three weeks.  If we see a breakout above the latter, look out stocks.

--Oil prices dropped sharply on another large increase in U.S. inventories of crude, sparking concerns that global demand for oil is starting to decline, ending the week at $69.37.

Oil had surged to a four-year high above $76 a barrel (West-Texas Intermediate...that which I quote each week down below) on worries that U.S. oil sanctions on Iran that take effect next month are creating a much tighter market in which supplies would struggle to meet strong demand.

But a recent three-week rise in inventories and fears of a global slowdown have led to the sentiment that supplies will be ample, despite the sanctions that will remove much of Iran’s supply.  The U.S. government’s Energy Information Administration weekly report revealed stockpiles of crude oil in the U.S. jumped by 6.5 million barrels last week to 416.4 million, the highest total since late June. 

The build in inventories was especially surprising given Hurricane Michael had forced offshore oil producers in the Gulf of Mexico to halt more than a third of their production for several days.

But as we’ve learned, sentiment can change on a dime and many are still bullish on oil prices, seeing that as much as 2 million barrels of Iranian oil exports could be removed when the U.S. sanctions take hold in a few weeks (Nov. 4).

Saudi Arabia has stated it intended to bridge the gap left by Iran, but the murder of Jamal Khashoggi has complicated matters, amid fears the Saudis could weaponize oil supply in response to any international sanctions that might be levied.

--As a result of the Khashoggi fiasco, more and more banking and corporate executives from around the world have been pulling out of Saudi Arabia’s Future Investment Initiative upcoming conference, with Treasury Secretary Mnuchin joining the list.

Global banks have been courting the Saudi government and Crown Prince Mohammed bin Salman, the public face of the kingdom’s effort to establish itself as a financial and investing hub.  Last year’s inaugural conference, dubbed “Davos in the Desert,” was well attended by Western executives.

So by not attending this year, no doubt many of the institutions will miss out on potentially lucrative deals involving the Saudi government over the coming years. That said, most of the companies are still sending a delegation.

--Goldman Sachs Group Inc. and Morgan Stanley reported sharply higher third-quarter earnings, profit rising 19% at Goldman, 20% at Morgan Stanley.  Both were buoyed by lower taxes, as well as strong deal-making revenue.

All of the six largest U.S. banks reported higher profits from a year ago.

Underwriting revenues surged 20% at Goldman, 33% at MS – as corporate clients tapped the markets to raise money, while continued consolidation in areas such as technology have pushed merger fees near all-time highs.

Morgan Stanley also announced its wealth management unit continued to rake in assets, while both banks reported strong trading results, though Goldman is restructuring itself to more closely resemble the likes of Morgan Stanley in its business makeup...to move away from such an historically large reliance on the trading division.

Bottom line, Goldman earned a profit of $2.52 billion for the quarter, MS $2.11 billion.

--Another of the Big Six banks, Bank of America, reported third quarter revenues grew 4% to $22.8bn, thanks to a solid performance from retail banking, with consumer loan growth of 6%.  Net income rose by 33 percent to $7.2bn.

A lower tax rate contributed significantly to the income growth.  The bank’s rate was 20 percent, compared to 29 percent in last year’s third quarter.

--As seemed imminent, Sears filed for bankruptcy on Monday, and in a last bid for survival, the company said it would close 142 unprofitable stores by year’s end (on top of 46 store closings announced in August), as it scrambles to avoid a liquidation that would end the iconic retailer’s 125-year run.

Hedge-fund tycoon, turned Sears Holdings’ chairman, and former CEO, Eddie Lampert, announced he is still trying to save 300 or so stores to operate beyond the holidays, out of about 700 that were operating as of Monday.

In a statement, he said: “As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers.

According to court papers, Sears handed over the keys and alarm codes to landlords for 217 already-shuttered properties on Monday.  The court documents revealed that Sears had been paying rent each month on these ‘ghost’ stores.

A day after the filing, Lampert addressed a solemn crowd of nearly 1,000 employees gathered at Sears Holdings Corp.’s headquarters, calling it the second most difficult speech of his life.  “The first was having to speak at my father’s funeral” at age 14, he said.

Lampert told his audience that the company needed to make “material progress” to avoid liquidation.

Lampert had made billions for investors and himself taking outsize bets, many of the contrarian variety, but when he took over Sears in 2005, he met his match in the economics of the modern retailing business.

Last year, Sears booked its seventh straight year of losses.  Sales fell to $16.7 billion, compared with $53 billion in 2006, the first full year of operations under Lampert.

Needless to say, Lampert’s reputation is shattered, after risking $billions through his fund, ESL Investments, and more than a decade of his life.

Lampert, 56, admitted in an interview last month, that Sears’ collapse took a toll on him professionally and personally.  “People have been trying to figure out why I haven’t given up or what’s in it for me,” he said. “I really believed this could be something special.”

Lampert said his biggest disappointment was in failing to capitalize on his early insight that e-commerce would be a game-changer.  ‘If we could play that game and play it well, we had a chance.”

Meanwhile, Sears is trying to reassure its vendors that they will get paid if they ship new merchandise to Sears stores, which is obviously critical if they are to be competitive during the holiday season.

Sears obtained $300 million debtor-in-possession financing from its lenders to fund its operations and an additional $300 million in financing is being negotiated – and will likely come from billionaire Lampert.  The company in court on Monday also claimed an additional $200 million in a reserve fund.

But vendors have heard the ‘we have financing’ story before with failing retailers.

Sears is the first major bankruptcy since Toys ‘R’ Us, which started out as a reorganization and spiraled into liquidation.  Toys ‘R’ Us vendors received just 22 cents on the dollar on the goods they shipped after the bankruptcy filing – when they were supposed to be made whole on any new merchandise.

David Lazarus / Los Angeles Times

“The irony is that Sears figured out shopping from home long before Amazon’s Jeff Bezos even was born.

“The company’s catalogs once were ubiquitous in American households, allowing consumers to browse merchandise from their living rooms – and pioneering the trust between a retailer and its customers that a century later would be the bedrock of e-commerce.

“You could even buy an entire house, delivered in pieces by train, from the Sears catalog.  Amazon hasn’t figured that one out yet....

“It’s easy to point at the various wrong turns the company made in recent years, the inability to develop a cogent online strategy, the increasingly unattractive stores.

“But that doesn’t diminish the extraordinary role Sears played in the commercial history of the United States.

“ ‘There’s a famous saying that you have to die before you’re finally recognized for your virtues,’ said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.

“ ‘The trust that Sears established with customers was crucial,’ he told me.

“ ‘They introduced ‘satisfaction guaranteed.’  If you’re not happy, you can easily return it.  That’s a very important part of what Amazon offers today.’”

But as Barbara E. Kahn, a professor at Penn’s Wharton School, told David Lazarus: “Sears was a part of the history and culture of America for a very long time. But unlike Amazon, they never learned how to maximize the customer experience.”

As Lazarus sums up: “Sears knew what it was doing.  And then it didn’t.”

There was a time after Lampert took over in 2005 that investors had confidence in him.  Sears’ stock hit a high of $133 in April 2007.  It’s about $0.46 today.

--Alcoa Corp. said higher U.S. aluminum prices from a tariff on imports and rising sales of the raw materials needed to make aluminum have helped boost revenue and allowed the company to up its outlook for the year.

Alcoa reported a 14% increase in third-quarter revenue thanks to the higher prices, and sharply higher sales of the aluminum oxide needed to make aluminum.  The company’s shares rose on the news.

But Alcoa’s heavy reliance on aluminum from foreign smelters, particularly those based in Canada, has limited its ability to profit from the 10% tariffs levied on imported aluminum in March.  Just 14% of the aluminum Alcoa produced last year came from its U.S. smelters.

Alcoa said it had paid $29 million in duties during the third quarter, mostly on the aluminum imported from Canada, but after deducting them out, the company had a net benefit of $27 million from the tariffs as a result of higher prices on aluminum it produced in the U.S.

--Siemens, the German engineering giant, was in line to win a big contract to supply power to Iraq, but then the Trump administration intervened on belief of U.S. rival General Electric, and, according to the Financial Times, GE got the deal reported to be worth $15bn.

It probably wasn’t a tough sell, seeing as the U.S. could remind the Iraqi government that 4,500 Americans had died in the country since the 2003 invasion to oust Saddam Hussein.

Should the deal formally be wrapped up, it be would be a piece of good news for GE’s troubled power division.  Official word is expected when the company reports third-quarter earnings on Oct. 30.

Conversely, this is a stinging defeat for Siemens, whose CEO has been personally courting outgoing Iraqi prime minister, Haider Al-Abadi, for months.

An adviser to Abadi, however, told Siemens a few weeks ago, “The U.S. government is holding a gun to our head,” the adviser, through another source, told the FT.

But this gets complicated.  You see, according to Michael Rubin of the American Enterprise Institute, Iraq needs Iranian gas for its electricity, and Iran is supplying 35 to 40 percent of Iraq’s power generation today.

The U.S. will continue to let Iraq receive this supply from Iran, despite the looming sanctions, which will really torque off Germany, because the U.S. ambassador there, Richard Grenell, has been warning German companies to cease doing business with Iran “immediately.”

--Netflix reported third-quarter earnings and subscriber growth that smashed Wall Street’s expectations.

The streaming giant said Tuesday that its subscriber base grew by nearly 7 million in the quarter, led by the addition of 5.9 million new users abroad and 1.09 million in the U.S.  Netflix, which expects to add another 9.4 million subscribers by the end of 2018, said its customer tally is 137.1 million.  By the end of the year, Netflix expects to expand that base to 146.5 million.

New customers have been lured in by returning seasons of “Orange is the New Black” and “Marvel’s Luke Cage,” as well as new shows such as “Ozark” and “Maniac.”

But CEO Reed Hastings told investors his company is in for a battle.  Next year, Disney, which bought the film and TV assets of Twenty-First Century Fox, is set to launch its streaming service, as is WarnerMedia, the amalgam of AT&T and Time Warner.  Meanwhile, Amazon and Apple keep ramping up their original content.

Netflix has said it expects to book content expenses of as much as $8 billion this year, with analysts estimating it will spend as much as $4 billion more on shows and movies this year that will be released in the future, bringing its total cash spent on content to some $12 billion, dwarfing its rivals.

So the share price soared to $386 in the aftermarket on the news, but then a bit of reality sunk in, as in Netflix still burns a ton of cash and the valuation is, shall we say, frothy, so the stock finished the week at $332! [Down from a 52-week high of $423.]

--IBM’s streak of revenue growth ended after three quarters, the computing giant reporting revenue fell 2.1% from a year earlier, snapping a brief return to growth after nearly six years of shrinking sales.

IBM has been urging patience for years, telling investors a turnaround was just around the corner, even as the company refocused on new lines of business that promised rapid growth.  And three quarters ago, IBM finally delivered year-on-year revenue growth.

But in its latest report, IBM fell short of its goal of getting more than 50% of its revenue from cloud computing, data analytics and other fast-growing businesses.

IBM calls this group ‘strategic imperatives’, and revenue here was $9.3 billion, less than 50% of total revenue, when three months ago, IBM said strategic-imperatives revenue totaled $10.1billion, or slightly more than half.

Ergo, flat growth in an environment where corporations are spending is rather disconcerting.

Profit fell 1.2% to $2.69 billion, though the company maintained its full-year guidance.

--Editorial / Washington Post

“Google announced last week that it would not compete for a $10 billion cloud-computing contract with the Pentagon, claiming the work would conflict with its corporate values. Yet somehow that ethical high-mindedness does not seem to come into play as the company plans to launch a censored search engine in China.

“Google’s development of a platform that complies with the Chinese regime’s restrictions on information access, dubbed Project Dragonfly, was first reported by the Intercept in August.  Since then, details have become available bit by bit, no thanks to the company itself.  Last week, the Intercept obtained a letter from Google chief executive Sundar Pichai to a bipartisan group of six senators in which he refused to answer specific questions about the engine but touted its ‘broad benefits.’ Google also says there are no concrete plans to launch what is still only an exploratory project – but the Intercept reports the company’s search engine chief said in a private meeting that he hoped for a rollout early next year.

“This lack of transparency further weakens Google’s claim to the moral high ground.  It took Google almost two months after the Intercept’s initial report even to acknowledge there was a Project Dragonfly, and Pichai finally confirmed the initiative Monday night.  Now executives seem to think they owe no concrete answers to anyone as long as the search engine remains a prototype.  But once that prototype has turned into a reality, it may be too late for criticism. Just as it was difficult for Google employees to know what they were working on when Dragonfly was still secret, now it is difficult for the public and Congress to have a say without all of the facts.

“They should try to have their say anyway.  Dragonfly defenders argue that Google’s involvement in China could actually open up the country. In reality, however, there is little room for technology companies to negotiate with the Chinese government over terms.  Either they cave in to China’s blacklisting strictures in full, or they stay out.  By reentering China with search, Google would be unlikely to provide consumers with services substantially better than those they already receive from Baidu and a censored version of Bing.  The company would only expose itself to requests for information on users from the Chinese government, setting the precedent for capitulation to authoritarian demands from other countries....

“Google says it has not yet decided on whether search in China is viable. All the more reason for people in the United States, from employees to members of Congress to everyday citizens, to speak up for what they believe. After all, Google’s potential customers in China do not enjoy that opportunity.”

--Twitter published an archive of 10 million tweets and media it says are from accounts it believes are potentially the product of Russian and Iranian state-backed information operations.

Twitter said 3,841 accounts were believed to be connected to the Russian Internet Research Agency, and 770 accounts believed to originate in Iran.

--United Continental Holdings Inc. boosted its profit outlook for the year as higher fares and cost cuts offset surging fuel prices in the third quarter.

The No. 3 U.S. carrier by traffic said growth at hubs in Denver, Chicago and Houston helped fuel a 6.1% increase in passenger-unit revenue, exceeding forecast.

United increased its profit outlook for all of 2018 for a third time this year and the shares rose in response.

Last week, Delta Air Lines had a similarly bullish earnings report.  Both airlines are profiting handsomely from an increase in business class travel.

--I don’t buy as much pizza from Domino’s as I used to (unless I see the two large pies for $5.99 deal), and it’s only the thin crust pizza when I do, but I admire the hell out of the company’s now years-long revamp that has seen the share price soar over the years.

The company posted far better-than-expected earnings for the third quarter this week, but the shares fell on less-than-expected revenue, though it was still up to $786 million, vs. $643.6 million the year before.

Domestic same store sales grew a very solid 6.3%, while international comp sales increased 3.3% during the quarter.

--A U.S. judge approved the settlement between the SEC, Tesla Inc. and CEO Elon Musk; Musk agreeing to pay a $20 million fine and step aside as Tesla’s chairman for three years to settle charges that could have forced his exit.  The company also accepted a $20 million fine, despite not being charged with fraud over Musk’s Aug. 7 tweet that promised to take the electric carmaker private at $420 a share.

Separately, Tesla introduced a new $45,000 version of its Model 3 sedan on its website, launching the car as U.S. tax breaks for  Tesla cars are about to decrease.  According to the website, the rear-wheel-drive model has a “mid-range” battery, a range of 260 miles, 50 miles less than the long-range battery that the more expensive Model 3 is equipped with. The new version has a delivery period of six to 10 weeks, according to the website, which would make customers eligible for the current $7,500 U.S. tax credit if they take delivery by the end of the year.

The tax credit for Tesla vehicles will drop by half on Jan. 1.  Although Tesla has promised a base-level version of the Model 3 priced at $35,000, so far it has only produced higher-cost versions starting at about $49,000.  Tesla has said that it would not manufacture the base-level version of the Model 3 this year.

--As reported by the Wall Street Journal: “Uber Technologies Inc. recently received proposals from Wall Street banks valuing the ride-hailing company at as much as $120 billion in an initial public offering that could take place early next year, according to people familiar with the matter.

“That eye-popping figure is nearly double Uber’s valuation in a fundraising round two months ago and more than General Motors, Ford and Fiat Chrysler are worth combined.”

Uber rival Lyft Inc. is also eyeing a debut in the first half of the year.  Lyft’s valuation is expected to top the $15.1 billion it sold shares at privately this year.

--DowDuPont Inc.’s agriculture unit is taking a $4.6 billion charge in the third quarter after the business lowered its long-term expectations on sales and profits.

The charge reflects the many challenges facing seed and pesticide makers, as five consecutive years of bumper crops have swelled storage bins and pushed down crop prices, forcing farmers to scale back spending. DowDuPont in August reported that its agricultural sales volume fell 5% over the first half of 2018, partly because farmers planted fewer acres.

--Invesco Ltd. agreed to buy rival Massachusetts Mutual Life Insurance Co.’s Oppenheimer Funds Inc. unit for $5.7 billion, strengthening Invesco’s position in some businesses that have proven resilient to the move toward passive investing, including international and emerging-markets stock funds, according to Invesco CEO Martin Flanagan.

--Microsoft co-founder Paul Allen died the other day from complications of non-Hodgkin’s lymphoma.  He was only 65.

Allen had revealed the disease’s return only two weeks ago, after previously being treated for it in 2009.  At the time he said he and his doctors were “optimistic” about treatment.

Microsoft co-founder Bill Gates said: “I am heartbroken by the passing of one of my oldest and dearest friends... Personal computing would not have existed without him.”

Gates added: “From our early days together at Lakeside School, through our partnership in the creation of Microsoft, to some of our joint philanthropic projects over the years, Paul was a true partner and dear friend.

“He deserved much more time, but his contributions to the world of technology and philanthropy will live on for generations to come.  I will miss him tremendously.”

Allen left the company in 1983, after his first diagnosis of the blood cancer Hodgkin’s disease, but recovered to become a successful venture capitalist with his media and communications investment firm, Vulcan, that he set up in 1986.

Allen, the owner of 42 U.S. patents, liked to cast himself as a technology visionary who drove Microsoft’s early success and saw the future of connected computing long before the Internet.

“I expect the personal computer to become the kind of thing that people carry with them, a companion that takes notes, does accounting, gives reminders, handles a thousand personal tasks...”

Allen wrote this in 1977 in a column in Personal Computing magazine.  The same year he outlined an early vision of what turned out to be the Internet to Microcomputer Interface magazine.

“What I do see is a home terminal that’s connected to a centralized network by phone lines, fiber optics or some other communication system,” he said.  “With that system you can perhaps put your car up for sale or look for a house in a different city or check out the price of asparagus at the nearest grocery market or check the price of a stock.”

He did have his share of investment failures, such as on a bad bet on cable company Charter Communications, which cost him $8 billion.

But I have to admit, I was really bummed over the news of Allen’s passing.  Over the years I have followed some of Allen’s philanthropic endeavors, including rather recently, his funding of the discovery of the site where the USS Indianapolis went down in the waning days of World War II in the Pacific.

I wrote the following in a Bar Chat column last spring, pertaining to Allen’s discovery of another U.S. ship.

Kudos to billionaire Paul Allen, who has a fascination with World War II and finding the burial places of U.S. ships / aircraft carriers that sunk during the war.  Allen and his crew’s latest discovery was the USS Lexington, which went down 500 miles northeast of Australia in the Coral Sea.  Allen found it the other day lying in water 1.8-miles deep.

The carrier was crippled during the Battle of the Coral Sea in May 1942 after being hit with bombs and torpedoes.  216 crew members were killed, but 2,735 were evacuated by another American warship, the USS Phelps.  The Lexington was then scuttled by the Phelps to prevent its possible capture by Japan.

A drone captured stunning photos of the carrier’s superstructure and guns, as well as some of its 35 aircraft, with the aircraft in remarkable condition.

U.S. Pacific Commander Harry Harris, whose father was rescued from the carrier, paid tribute to the ship and those killed fighting for “freedoms they won for all of us.”

650 Americans were killed in the four-day battle that broke the momentum of the Japanese Imperial Navy’s attacks on northern Australia.  Hundreds of Aussies had been killed in the city of Darwin in Japanese bombings.

Last year, Allen’s team discovered the wreck of the heavy cruiser USS Indianapolis – sunk by Japanese torpedoes in July 1945.

Actually, Allen hasn’t just been looking for U.S. ships. In 2015, he located the Japanese battleship Musashi in the sea off the Philippines.

Paul Allen said after the Lexington’s discovery: “As Americans, all of us owe a debt of gratitude to everyone who served and who continue to serve our country for their courage, persistence and sacrifice. To pay tribute to the USS Lexington and the brave men that served on her is an honor.”

It is estimated Allen donated more than $2bn to philanthropy throughout his life, including science, education and wildlife conservation causes.

Oh, he was reclusive.  Many said he was Howard Hughes-like.  But, boy, this man changed the world for the better.

Editorial / Wall Street Journal

“The obituaries for Paul Allen, who died this week at age 65, all describe him as a co-founder of Microsoft.  This is true as far as it goes, but it doesn’t begin to capture his larger impact.  His more famous Microsoft partner, Bill Gates, came closer to the truth when he said ‘personal computing would not have existed without him.’

“What Mr. Gates and Allen pulled off was not simply building an innovative new company.  They imagined and then built a new industry that brought computing power to the masses.  More than four decades after they wrote their first piece of software, people around the world have more computing power in their smartphones than the computers NASA used to put men on the moon.  It takes nothing away from Mr. Gates to say that on their team Allen was the visionary while his partner was more the practical businessman.

“In 1975, when they created the partnership known as Microsoft, they were two kids who had gone to high school together outside Seattle and dropped out of college. If you had asked people at the time which company would dominate computing in the decades to come, most would have answered IBM.  Instead Microsoft and Apple would dominate the desktop computer revolution.

“The late 1970s were also a time, not unlike our own, full of angst about whether America’s best days were over. Four years after Microsoft was founded, President Jimmy Carter would famously give his ‘malaise’ speech lamenting ‘the erosion of our confidence in the future.’  The reality is that the U.S. was in the early stages of a new era of entrepreneurship and economic progress.

“After a cancer diagnosis, Allen left Microsoft in 1983 but retained his ownership stake that made him a billionaire. He later became a philanthropist, investor and professional sports owner. But his willingness to take risks as a young man and see a future others didn’t was a signature contribution that should remind Americans that the future is still what creative individuals in a free society make it.”

--On Wednesday, Canada became the first major world economy to legalize recreational marijuana use, beginning a national experiment that will alter the country’s social, cultural and economic fabric.

The same day the government announced it was introducing legislation to make it easier for Canadians that have been convicted of possessing small amounts of marijuana to obtain a pardon.  It’s not blanket amnesty, but as a government minister said, “a matter of basic fairness.”

Worries, though, persist over the readiness of the nation’s police forces to tackle drug impaired driving.

[Uruguay was the first to legalize possession and use of recreational cannabis.]

--StarKist Co. agreed to plead guilty to a felony price fixing charge as part of a broad collusion investigation of the canned tuna industry, the U.S. Dept. of Justice announced Thursday.

StarKist faces up to a $100 million fine when it is sentenced.  Prosecutors allege that the industry’s top three companies conspired between 2010 and 2013 to keep prices artificially high.

I have never trusted Charlie Tuna, the spokesfish for StarKist.  Very shady character.  Reminds me of a mob boss.

Meanwhile, last year Bumble Bee Foods (Bumble Bee the official tuna of StocksandNews) pleaded guilty to the same charge and paid a $25 million fine, $111 million less than prosecutors said it should have been because they were afraid of putting the struggling company out of business.

--According to an annual report on college pricing trends issued by the College Board, which administers the SAT and the Advanced Placement program, “Tuition prices continue to grow at a moderate rate by historical standards,” said co-author of the study, Jennifer Ma.  “The institutional grant aid has been expanding dramatically in (recent) years.”

Nationwide, the average net cost for full-time students enrolled at public four-year colleges is projected to be $14,880 for tuition, fees, room and board for the 2018-19 academic year, down $30 from last year. The full price, before deducting grant aid and tax benefits, is an average of $21,370.

At private nonprofit four-year colleges, the average net cost is projected to be $27,290, up $130.  The published price is $48,510, on average, with the student getting $21,220, on average, in grants and tax benefits, according to the report.

As grants increase, student loans are declining...from $127.7 billion in inflation-adjusted dollars in 2010-11, to $105.5bn last year.

--ABC’s spinoff of the axed “Roseanne” show, “The Conners,” opened Tuesday night to 10.5 million viewers, making it the season’s most-watched new series, and it beat the biggest competition that night, “This Is Us” (with 8.86 million viewers for the night) and “The Voice” (8.8 million).

But, for ABC, the audience for “The Conners” ranked far below that of last winter’s “Roseanne” reboot premiere, which had a whopping 18.4 million viewers.

So the producers had to deal with Barr’s exit and they killed her character off, via an opioid overdose.

Barr had blamed her bigoted social media posts that got her fired on sleeping pills.

--Beer lovers can relax. A new study predicting a global beer shortage brought on by global warming doesn’t account for all factors.

A study published in the journal Nature Plants, noted that global warming would lead to more severe droughts and heat extremes that would reduce the production of barley, beer’s main ingredient, researchers estimating annual barley yields could fall from 3 percent to 17 percent, which would result in a reduction in the U.S. of 900 million gallons of  beer – about 9 billion bottles.

But we have been assured by the Brewers Association that growers of barley are already at work addressing changes that global warming can bring about.

Barley production has been migrating north with Canada now accounting for 70 percent of North American yields, up from 50 percent in 1985, they say.

And barley crop yields have risen about 17 percent every 11 years, the BA says.

Yes, I’m relaxing. 

Foreign Affairs

Saudi Arabia / Turkey:

Turkish officials have maintained they believe Saudi journalist Jamal Khashoggi was murdered and his body removed, the Turks saying they have an audio recording indicating he was killed inside the Saudi consulate in Istanbul, the body dismembered.

According to reports from Turkey, a team of 15 Saudi agents, some with ties to Crown Prince Mohammed bin Salman (MBS), was waiting for Khashoggi inside the Saudi consulate the moment he arrived, at about 1:15 p.m. on Oct. 2.

“After he was shown into the office of the Saudi consul, Mohammad al-Otaibi, the agents seized Mr. Khashoggi almost immediately and began to beat and torture him, eventually cutting off his fingers,” a senior Turkish official told the New York Times, details that first emerged in a pro-Turkish government daily newspaper Yeni Safak.

“Horrendous tortures were committed on Khashoggi, who came to the consulate for documents,” the Yeni Safak account said.

“As they cut off Mr. Khashoggi’s head and dismembered his body, a doctor of forensics who had been brought along for the dissection and disposal had some advice for the others, according to the senior Turkish official.

“Listen to music, he told them, as he put on headphones himself. That was what he did to ease the tension when doing such work, the official said, describing the contents of the audio recording.”  [Carlotta Gall and David D. Kirkpatrick / New York Times]

Saudi Arabia has consistently denied the allegations, but they are headed towards acknowledging it was a botched interrogation, and/or blaming a key advisor to MBS.  President Trump, after talking to King Salman, said “rogue killers” could be responsible, parroting the line the Saudis clearly wanted him to.

Tuesday, President Trump had given Saudi Arabia the benefit of the doubt, even as U.S. lawmakers pointed the finger at the Saudi leadership and Secretary of State Mike Pompeo, sent by Trump to address the crisis, discussed the affair with Salman and MBS on a visit to Riyadh.

Pompeo then traveled to Turkey for talks with leaders on the investigation into Khashoggi’s disappearance.

The secretary said after his brief meetings with King Salman and the Crown Prince that the Saudis had committed to conducting a full investigation.  But when asked whether they said Khashoggi was alive or dead, Pompeo said: “They didn’t talk about any of the facts.”

On Wednesday, Turkish President Erdogan, in talks with Pompeo in Ankara, said Saudi officials were cooperating.

“He made clear that the Saudis had cooperated with the investigation that the Turks are engaged in and that they’re going to share information that they learn with the Saudis as well,” Pompeo told reporters aboard his plan after he left Turkey.

“There have been a couple of delays but they seemed pretty confident that the Saudis would permit them to do the things they need to do to complete their thorough and complete investigation,” he said.

There has been mounting criticism of the Crown Prince owing to some of his moves, including Riyadh’s involvement in the Yemen war, the arrest of women activists, and a diplomatic row with Canada.  And then this.

Sen. Lindsey Graham (R-S.C.), who has been carrying Trump’s water for months now, including during the Brett Kavanaugh confirmation hearings, called Prince Mohammed “a wrecking ball” and accused him of ordering Khashoggi’s murder. Graham called MBS a “rogue crown prince” who is jeopardizing relations with the United States.

“Nothing happens in Saudi Arabia without MBS knowing it,” he said in an interview with Fox News.  “I’ve been their biggest defender on the floor of the United States Senate,” Graham said.  “This guy is a wrecking ball.  He had this guy murdered in a consulate in Turkey and to expect me to ignore it.  I feel used and abused. The MBS figure is to me toxic.  He can never be a world leader on the world stage....I would suspend arms sales as long as he is in charge.”

Graham added: “I know what I’m going to do.  I’m going to sanction the hell out of Saudi Arabia... This guy’s gotta go.”

---

So all the above was leading up to a flurry of news releases tonight.

Saudi Arabia admitted Jamal Khashoggi died in the Saudi consulate in Istanbul after a fight with people he met there, state media reported.  “The investigations are still underway and 18 Saudi nationals have been arrested,” a statement from the Saudi public prosecutor said, adding Royal court adviser Saud al-Qahtani and deputy intelligence chief Ahmed Asiri have been removed from their positions.

We then learned Saudi King Salman had ordered the restructuring of the command of the general intelligence agency under the supervision of Crown Prince Mohammed bin Salman, the official Saudi press agency said.

The White House said it had seen the announcement of Saudi Arabia’s probe and would continue to press for “justice that is timely, transparent, and in accordance with all due process.”

Sen. Lindsey Graham on hearing the Saudi explanation.  “To say that I am skeptical of the new Saudi narrative about Mr. Khashoggi is an understatement.

“First we were told Mr. Khashoggi supposedly left the consulate and there was blanket denial of any Saudi involvement.  Now, a fight breaks out and he’s killed in the consulate, all without knowledge of the Crown Prince,” Graham tweeted.   “It’s hard to find this latest ‘explanation’ as credible,” he added.

President Trump, on the campaign trail tonight, said the Saudi explanation was credible and a “good first step.”  He also said he prefers that any sanctions against Riyadh not include canceling big defense orders.  I want to throw up.

A Saudi official told Reuters that MBS had no knowledge of the specific operation.  “There were no orders for them to kill him or even specifically kidnap him,” said the source, speaking on condition of anonymity and adding that there was a standing order to bring critics of the kingdom back to the country.

“MBS had no knowledge of this specific operation and certainly did not order a kidnapping or murder of anybody.  He will have been aware of the general instruction to tell people to come back,” the source said.  The source told Reuters the whereabouts of Khashoggi’s body were unclear after it was handed over to a “local cooperator” but there was no sign of it at the consulate.

You may stop laughing.  Meanwhile, a good man has been chopped to pieces and his body parts are probably either in a forest, or dumped into the Sea of Marmara.

This is insane.

Opinion....

David Ignatius / Washington Post

“Saudi Arabia must conduct a serious, no-holds-barred investigation of the apparent gruesome murder of Post contributing columnist Jamal Khashoggi.  The kingdom’s relationship with the United States, and its access to global financial markets, hangs in the balance.

“But in the meantime, the Senate and House intelligence committees should begin an urgent oversight investigation of what U.S. spy agencies knew about threats against Khashoggi – and also into their broader reporting and analysis on Saudi Arabia and its headstrong crown prince, Mohammed bin Salman.

“This congressional inquiry should focus first on the intelligence agencies’ ‘duty to warn’ Khashoggi about any lethal threat, because his U.S. residency qualified him as a ‘U.S. person’ for whom such a warning was required. It should look, too, for any hint that U.S. intelligence about MBS, as the crown prince is known, has been skewed by the Trump White House for political reasons.  And the investigation should examine the larger problem of U.S. visibility into the kingdom, which has too often been a black hole for our spy agencies.

“A congressional inquiry would blunt an apparent White House effort to put a lid on Saudi-related information. Sen. Bob Corker (R-Tenn.) complained Wednesday: ‘I suppose they don’t want us to see the intel.’

“The bottom line: Saudi Arabia is at an existential tipping point. The United States urgently needs to understand how the kingdom got into this grisly mess, and where it’s going.”

Editorial / Wall Street Journal

“Treasury Secretary Steven Mnuchin made a prudent decision Thursday to drop out of Saudi Arabia’s investment conference next week. By now the list of withdrawals from Crown Prince Mohammed bin Salman’s showcase event is long, including IMF chief Christine Lagarde, but that is the right message for the world to send to Riyadh.

“Saudi journalist Jamal Khashoggi, last seen entering the Saudi consulate in Istanbul, is presumed dead. Since October 2, that presumption has been based almost entirely on leaks from the government of Turkey, whose President Recep Tayyip Erdogan has his own complicated regional agendas.

“Against this backdrop, the stakes are high for the U.S. in managing its relationship with an important, longtime ally in the Middle East. The Trump Administration’s handling of the issue to date has been inconsistent and confusing.  Mr. Trump has bounced from initially threatening severe consequences to elevating U.S. commercial contracts and briefly aligning himself with a presumption of innocence for the Saudis, comparing them to Brett Kavanaugh.  His ability to maintain support in Congress for an appropriate response wasn’t helped by Secretary of State Mike Pompeo’s cheery photo-op with the Crown Prince.

“With Thursday’s announcement by Secretary Mnuchin, the Administration is moving toward firmer footing.  After briefing Mr. Trump about his visit to Riyadh, Mr. Pompeo said the Saudis would be given ‘a few more days’ to produce a satisfactory explanation of the Khashoggi disappearance. Vice President Mike Pence said Thursday that if Mr. Khashoggi was murdered, it would be ‘an affront to the free and independent press around the world.’

“In remarks to reporters later, President Trump said it looks to him as if Mr. Khashoggi is dead, and in that case the consequences would have to be ‘very severe.’ Those consequences could include sanctions under the Magnitsky Act for Saudi officials identified as complicit in this catastrophic fiasco.

“The burden now is on the Saudi government, most pointedly the Crown Prince, to recognize there is no way forward other than a full public accounting, and soon. As for the U.S., Trump officials need to speak to American values as well as American interests.”

Josh Rogin / Washington Post

“Saudi Arabia’s apparent killing of journalist Jamal Khashoggi – and the Trump administration’s haphazard response – is an unmistakable sign that U.S. foreign policy has swung too far away from its roots in promoting American values abroad. Readjusting President Trump’s ‘America First’ ideology to include the promotion of democratic values is needed to prevent gross human-rights violations such as this, and to win the greater struggle against the expansion of authoritarian influence worldwide.

Khashoggi’s disappearance is not just the latest sign the Saudi regime under Crown Prince Mohammed bin Salman, commonly known as MBS, is exporting its brutality beyond its borders.  It also shows the authoritarian model championed by Vladimir Putin’s Russia and Xi Jinping’s China is on the march and directly harming U.S. interests. The Trump administration now faces a crisis in its relationship with a key ally, and complications in all of its other policies regarding the Middle East.

“To understand how U.S. policy failed in the Khashoggi case, we must grasp the larger context.  MBS is following Putin’s foreign policy script: concentrating power, bullying neighbors, killing critics abroad and pushing the limits of aggression to test whether the world will push back....

“When the authoritarian expansion model seems preferable to the Western-led liberal world order, the United States loses out. Russia’s interference in Europe undermines the transatlantic alliance.  China’s military takeover of the South China Sea challenges U.S. leadership in Asia.  Saudi Arabia’s actions risk U.S. plans to confront Iran, to work toward Israeli-Palestinian peace and to fight extremism.

“ ‘America First’ is a popular policy that responds to the American public’s weariness after 15 years of mismanaged overseas intervention.  But it is becoming increasingly clear that a one-sided focus on principles of realism, pragmatism and nonintervention are not always the right way to advance U.S. interests and goals.

“The Trump team is now learning the hard way what happens when you signal that authoritarian regimes – even allies – can do whatever they want.  It emboldens bad actors to do things the American people and their representatives in Congress just can’t ignore, such as killing journalists on foreign soil.

“Many argue that the United States can’t afford to break ties with Saudi Arabia.  The United States has invested too much in the Saudi alliance to give it up now, the argument goes. If you owe the bank $1,000, the bank owns you, but if you owe the bank $1 million, you own the bank.  The Saudis think they have us where they want us.  MBS would love the Washington debate to be between those who want to end the alliance altogether and those who want to give them a pass – since he is sure that Americans will always end up choosing the latter.

“That’s a false choice.  In fact, there is a middle ground Washington must pursue.  We must take this moment as an opportunity to reset the U.S.-Saudi relationship – with some new rules. We need more intensive engagement with the Saudis, not a wholesale rupture of relations, and that engagement should be with all of Saudi society, not just the crown prince.  Then we need to make sure MBS and any other leaders flirting with the Putin model understand that the United States will advocate vigorously for our interests and our values, because in the long run they are inextricably linked....

“There are signs that even a skeptical Trump is coming around to realizing values promotion as useful. The new China policy announced by Vice President Pence this month is strong on human rights and rule of law, because the administration realized these are arguments that work to our advantage.

“Just governments that respect the rights of their people, limit their own power, permit dissent and open their societies make better allies. This is the message Khashoggi sent in his final column for The Post, a plea for international support for basic freedoms inside Saudi Arabia.  His story shows why the Trump administration can’t succeed overseas unless it finds a way to incorporate American values into ‘America First.’”

Jamal Khashoggi / Washington Post...his last words....

“I was recently online looking at the 2018 ‘Freedom in the World’ report published by Freedom House and came to a grave realization. There is only one country in the Arab world that has been classified as ‘free.’ That nation is Tunisia.  Jordan, Morocco and Kuwait come second, with a classification of ‘partly free.’ The rest of the countries in the Arab world are classified as ‘not free.’

“As a result, Arabs living in these countries are either uninformed or misinformed.  They are unable to adequately address, much less publicly discuss, matters that affect the region and their day-to-day lives.  A state-run narrative dominates the public psyche, and while many do not believe it, a large majority of the population falls victim to this false narrative. Sadly, this situation is unlikely to change.

“The Arab world was ripe with hope during the spring of 2011.  Journalists, academics and the general population were brimming with expectations of a bright and free Arab society within their respective countries.  They expected to be emancipated from the hegemony of their governments and the consistent interventions and censorship of information.  These expectations were quickly shattered; these societies either fell back to the old status quo or faced even harsher conditions than before.

“My dear friend, the prominent Saudi writer Saleh al-Shehi, wrote one of the most famous columns ever published in the Saudi press.  He unfortunately is now serving an unwarranted five-year prison sentence for supposed comments contrary to the Saudi establishment.  The Egyptian government’s seizure of the entire print run of a newspaper, al-Masry al Youm, did not enrage or provoke a reaction from colleagues.  These actions no longer carry the consequence of a backlash from the international community. Instead, these actions may trigger condemnation quickly followed by silence.

“As a result, Arab governments have been given free rein to continue silencing the media at an increasing rate. There was a time when journalists believed the Internet would liberate information from the censorship and control associated with print media. But these governments, whose very existence relies on the control of information, have aggressively blocked the Internet.  They have also arrested local reporters and pressured advertisers to harm the revenue of specific publications....

“The Arab world is facing its own version of an Iron Curtain, imposed not by external actors but through domestic forces vying for power. During the Cold War, Radio Free Europe, which grew over the years into a critical institution, played an important role in fostering and sustaining the hope of freedom.  Arabs need something similar....

“The Arab world needs a modern version of the old transnational media so citizens can be informed about global events.  More important, we need to provide a platform for Arab voices.  We suffer from poverty, mismanagement and poor education. Through the creation of an independent international forum, isolated from the influence of nationalist governments spreading hate through propaganda, ordinary people in the Arab world would be able to address the structural problems their societies face.”

Iran: David E. Sanger / New York Times

“White House officials are worried that the apparent killing of the dissident journal Jamal Khashoggi, and Saudi Arabia’s changing account of his fate, could derail a showdown with Iran and jeopardize plans to enlist Saudi help to avoid disrupting the oil market.

“Officials said the dilemma comes at a fraught moment for the Trump administration, which is expected to reimpose harsh sanctions against Iran on Nov. 5, with the intent of cutting off all Iranian oil exports.

“But to make the strategy work, the administration is counting on its relationship with the Saudis to keep global oil flowing without spiking prices, and to work together on a new policy to contain Iran in the Persian Gulf....

“Part of the problem is optics, officials said: Saudi Arabia looks like a brutal ally, including by leading a deadly military campaign in Yemen, just as President Trump and Mr. Pompeo have been casting Iran as the region’s bully....

“On Nov. 5, the administration is expected to announce that any company that does business with Iran – buying oil, financing projects or investing in the country – will be prohibited from doing business in the United States, including clearing transactions in dollars. It would present a common front with the Saudis, and cast Iran as the source of almost all instability in the Middle East.

“That argument, officials have acknowledged, is now in jeopardy.”

Syria: A day after militants missed a deadline under a demilitarization deal in the region, Russia said the deal was still going forward, the agreement between Moscow and Ankara giving “radical fighters” until Monday to leave a horseshoe-shaped buffer around the last major opposition stronghold in the country.

But by Tuesday, the militant heavyweight Hayat Tahrir al-Sham (HTS) pledged to continue fighting – despite not having taken an explicit position on the deal.

Under the deal, the militants’ departure would pave the way for patrols of the zone by its Russian and Turkish sponsors.

Russia and Turkey then announced they plan to give more time for the implementation of their de-escalation deal, a “great relief” for an area of 3 million civilians, UN humanitarian adviser Jan Egeland told reporters Thursday.  We’ll see how HTS responds.

Meanwhile, last weekend, hundreds of people were taken by ISIS fighters from a displacement camp in east Syria during a militant counterattack against advancing U.S.-backed forces, according to the Syrian Observatory for Human Rights.

A number of fighters of the Kurdish-led Syrian Democratic Forces (SDF) died trying to defend the camp in a battle that lasted several hours, the Britain-based activist group said.

The U.S.-backed SDF launched a major assault on Sept. 10 on the small stretch of the Euphrates Valley around the town of Hajin where they estimate some 3,000 militants are holed up.

But they have sustained heavy casualties in the operation being conducted with U.S.-led air support.

Thursday, President Putin said Islamic State had indeed detained several U.S. nationals south of the Euphrates River in Syria.  Putin added that ISIS had seized nearly 700 hostages and issued an ultimatum promising to execute 10 people every day.

Speaking in the Black Sea resort city of Sochi, Putin said the hostages included several U.S. and European nationals, adding that ISIS was expanding its control in territory controlled by U.S. and U.S.-backed forces.

At week’s end, I haven’t seen if ISIS was carrying through with its ultimatum.

Afghanistan: This weekend was to see nationwide parliamentary elections in the country, but the vote has been delayed in Kandahar after a devastating assassination of a powerful local police chief, Gen. Abdul Raziq, who was shot dead by a rogue bodyguard affiliated with the governor’s security detail, not Raziq’s.

The Taliban claimed the attack, which came after a high-level security meeting.  U.S. commander of Afghanistan’s NATO-led force, Gen. Scott Miller, narrowly escaped unhurt.

The local intelligence head was also killed and the governor, Zalmay Wesa, was critically injured. Three Americans were hurt.

Raziq was widely considered to be an indispensable security chief with influence across critical areas of southern Afghanistan, in the Taliban heartland.  He was valued by American commanders as a fierce ally against the insurgents, and survived dozens of attempts on his life.

Gen. Miller, who pulled his sidearm upon hearing the gunfire, said today that he did not believe he was the target of the attack.  He said he was heading to his helicopter to return to Kabul when the gunman opened fire.  The Taliban has said both Raziq and Miller were targets, however, Afghan security officials said they believe the attacker deliberately avoided killing Miller.

“They didn’t want repercussions from the U.S. and the international community.  It was a pure warning for Miller that they can hit him if they want to,” an Afghan official told Reuters.

Further complicating matters, Afghanistan said Pakistan was involved in the planning of the attack, Raziq a fierce critic of Pakistan and its intelligence service, which Afghan officials regularly accuse of supporting Taliban operations, a charge Islamabad denies.  Today, the chief of the Pakistan army staff issued a statement condemning the Kandahar violence.

Elections will continue across most of the rest of Afghanistan on Saturday.  But security forces are already stretched thin, with more than 50,000 personnel being deployed for polling day.

China: Various developments this week....

--Defense Secretary Jim Mattis held talks Thursday with China’s defense minister at a defense summit in Singapore, against a backdrop of growing tensions over trade and disputes including over the South China Sea and the military buildup taking place in one of the world’s most important shipping lanes.  Taiwan was also a topic of discussion.  Nothing was resolved.

Two U.S. B-52 bombers flew over the South China Sea this week, in a move that no doubt inflamed tensions prior to the meeting between Mattis and his counterpart in Singapore.

As for Taiwan, it held two days of war games on its east coast this week, simulating an attack by the People’s Liberation Army  in the wake of Beijing’s intensifying saber-rattling.

Fighter jets, helicopters and a large number of troops were mobilized to fight the simulated invasion, which mimicked an attempt by warplanes from the PLA’s Liaoning aircraft carrier group to destroy its military bases on the east coast, defense officials said.

It’s been speculated the drills were in preparation for a large-scale operation the United States is planning for the South China Sea and Taiwan Strait in November to challenge Beijing’s growing assertiveness in the region.

--Chris Buckley / New York Times

“Under mounting international criticism, China on Tuesday presented its most extensive defense yet of its sweeping campaign to detain and indoctrinate Muslim minorities, with a senior official describing the widespread internment camps in the far west as humane and legal job-training centers....

“Hundreds of thousands have been held in the camps – one estimate says a million – and former inmates who have fled abroad have described them as virtual prisons that engage in harsh brainwashing.

“But the chairman of Xinjiang’s government, Shohrat Zakir, himself an ethnic Uighur, called the camps a lawful defense against terrorism in remarks published by the official Xinhua news agency.  He said the facilities gave Uighurs and other Muslim minorities training in job skills, Chinese language and the law.

“The camps were ‘an effective measure that Xinjiang has explored to eliminate the conditions and soil nurturing terrorism and extremism and prevent violent terrorist crimes,’ Mr. Zakir said.  ‘Since they have opened, they have won the widespread acceptance and wholehearted support of the public in Xinjiang of every ethnicity.’”

Zakir didn’t acknowledge the numbers in the camps but  appeared to acknowledge some were being held against their will.

--Patrick Tucker / Defense News

“China’s lunar probes may one day threaten critical U.S. satellites, said one of the military’s top experts on space threats.

“ ‘We’ve seen [reports] in open press...that say the Chinese have a relay satellite flying around...the flipside of the moon.  That’s very telling to us,’ Jeff Gossel, the senior intelligence engineer in the Space and Missile Analysis  Group at the Air Force’s National Air and Space Intelligence Center, said at an Air Force Association event on Friday.

“In May, China launched the Cheng’e 4 lunar relay satellite on an unusual trajectory: a lunar swing-by that pulled the satellite in a wide arc before settling it into a ‘parking orbit’ at Lagrangian 2 on the moon’s far side.

“The Chinese government has said the mission is part of a four-stage plan to build a moon base....

“But Gossel said putting the satellite at L2 could also enable Chinese attack spacecraft to zoom past the moon – about a quarter-million miles away – and then sneak up on critical U.S. intelligence and communications satellites in geosynchronous orbit, just 28,300 miles up – as occurred in the 2011 apocalypse-themed film ‘Melancholia.’

“ ‘You could fly some sort of a weapon around the moon and it comes back – it could literally come at [objects] in GEO...and we would never know because there is nothing watching in that direction,’ he said. ‘Why do you need a relay satellite flying around L2?  So you can communicate with something that’s going to land on the other side of the moon – or so you can fly around the other side of the moon? And what would that mean for our assets at GEO?’”

Yet another reason to sleep with one eye open, just as we do here at StocksandNews.

North Korea: The two Koreas agreed on Monday to begin reconnecting rail and road links, another step in an improving relationship in spite of U.S. concerns that the rapid North-South thaw could undermine efforts to press North Korea to give up its nuclear weapons.

The agreement on transport links came during talks in the border village of Panmunjom aimed at following up on the third summit this year between South Korea’s President Moon Jae-in and North Korea’s Kim Jong Un last month.

Also this week, North Korea, South Korea and the United Nations Command held their first three-way meeting to discuss demilitarizing the border between the two Koreas.  Part of an earlier agreement between President Moon and Kim Jong Un was a pact that included halting military exercises, a no-fly zone near their border and the gradual removal of landmines and guard posts with the DMZ.

Russia: Opposition leader Alexei Navalnay was released this week from his latest stint in jail and immediately accepted a duel challenge issued by the head of the National Guard troops.

National Guard director Viktor Zolotov, a former Putin bodyguard, promised to pound Navalny into a “juicy steak” last month, as punishment for Navalny’s videos exposing alleged corruption by Russia’s top government officials, including Zolotov himself.  Navalny was in prison at the time for violating protest rules.

“I accept your challenge and, as is customary, choose the place and the weapon,” Navalny told Zolotov in a video address published on YouTube Thursday.

“Our duel will take place as a debate live on Channel One or [Russia], or any other federal channel,” he said.

Navalny gave Zolotov a deadline of one week to accept or decline the terms of the offer.

I’d tell Navalny to stage it on like a Tuesday in early November, post-World Series but before college basketball gets cranking....just being selfish.

Separately, Russia had its own Columbine-type incident on Wednesday, as an 18-year-old student at a vocational college in Crimea, killed at least 17 and wounded dozens more.  The student entered the college carrying a rifle, gunning down fellow pupils before killing himself.  It was not deemed a terror attack.  But there were conflicting stories on whether explosives were also used, many students interviewed after saying they heard explosions, with photographs of the windows appearing to confirm this.

President Putin condemned the “tragedy.”

The incident comes 14 years after the Beslan school siege, where 334 people were killed in a three-day terror attack on a school in Russia’s Caucasus region.

Leon Aron / Wall Street Journal

“In the streets of more than 80 Russian cities, thousands of men and women have turned out for antigovernment rallies in the past few months. They aren’t the usual malcontents – the middle class, intelligentsia or students, but rabotyagi, blue-collar working stiffs. Both the cause of the rallies and their political context reveal the impoverishment of Russia and the fragility of Vladimir Putin’s regime, despite its outward appearance of toughness. The West, however, shouldn’t gloat; facing problems at home, Mr. Putin could create new problems abroad.

“The demonstrators are protesting Mr. Putin’s pension law, introduced in June. The law is meant to save the Russian treasury $15 billion a year by 2024 by gradually increasing the retirement age to 65 from 60 for men, and to 60 from 55 for women. At first glance, the reform doesn’t seem dramatic enough to stir such passions. Russian pensions are skimpy anyway, averaging around $220 a month. That’s barely above the Russian poverty line of $171 and among the lowest rates in Europe.

“Yet for millions of Russians, an extra five years of work is a hard blow. At $592 a month, the average Russian salary is puny. That’s why Russia today can have near-full employment, while 14% of the population, or 20 million Russians, are in poverty, as per official statistics.  Independent experts from the Higher School of Economics in Moscow estimated last year that 41% of Russians have trouble paying for clothing and food.  For many, the choice is between near-poverty while working or near-poverty while staying home.

“Life expectancy for Russian men is under 67, not even two full years past the new, higher-than-ever retirement age.  Many men fear they’ll literally be worked to death.  ‘With this pension reform, with everything pushed back, I feel like I’ll never get out,’ a railway worker said last month.

“The protest exposed a fissure in what might be called Mr. Putin’s contract with the Russian people: You stay out of politics and I’ll give you stability.  The contract held up in past tough times, most notably in 2008-09, when the Russian economy contracted almost 8% after oil prices fell. Then, difficulties could be blamed on external factors.  No such excuses exist today.  Incomes have declined for four consecutive years, and the pain is self-inflicted – Russians feel that Mr. Putin’s regime has stabbed them in the back.

“Hence Mr. Putin’s unprecedented nationally televised appeal on Aug. 29.  In 18 years in power, Mr. Putin had never made a plea for support for a specific policy like this. The speech was heartfelt, animated, cajoling – and not nearly enough.  According to Russian polls, 6% were in favor of the pension reform before the speech and 80% opposed it. After Mr. Putin had spoken, the numbers were 11% and 75%.

“Mr. Putin’s approval ratings – his regime’s only claim on legitimacy – have been steadily sliding, from 79% in May, before the reform was announced, to 67% in September....bad news in a country where Mr. Putin is effectively the only politician and no critic is ever allowed on television.

“Mr. Putin’s headache can quickly become the West’s.  At the end of 2013, when his ratings were his lowest in 13 years (and only 6 points below today’s), he boosted them with the outrageous Winter Olympics – doping en masse – followed by the seizure and annexation of Crimea and the war against Ukraine.  Since then, militarized patriotism has become the key to Mr. Putin’s popularity. Tens of millions of Russians have been swayed by his narrative: Russia is surrounded by enemies but not only will the president protect the Motherland, he will also restore Russian glory lost in the Soviet  collapse....

“Today, as pension reform threatens Mr. Putin’s support, it might be feeding time again. The obvious targets for engineering another Crimea or Ukraine are Narva and Latgale, the heavily Russian-speaking enclaves in Estonia and Latvia, respectively. In addition to unleashing a patriotic flood, Mr. Putin would undoubtedly hope to expose NATO as dithering and ineffectual. A risky step to be sure, but in Mr. Putin’s political calculus, foreign adventurism may be less perilous than domestic turmoil.”

Brazil:  The presidential run-off is Oct. 28, and far-right candidate Jair Bolsonaro extended his lead over his leftist rival Fernando Haddad in an election poll released Thursday.  The Datafolha survey, published by Globo TV, had Bolsonaro at 59% to Haddad’s 41%.

An earlier Ibope poll had the exact same 59-41 margin.

Random Musings

--Presidential tracking polls....

Gallup: 44% approval of Trump’s job performance, 51% disapproval (40/56 three weeks earlier); 88% Republicans, 36% Independents.
Rasmussen: 47% approval, 52% disapproval.

--A new ABC News/Washington Post national survey gives President Trump a 41% approval rating (up five points from the last survey in August), and Democrats a 53-42 edge in the generic ballot for the House.

But, and this is significant, the share of voters who say they prefer the next Congress to be in Democratic hands as a way of providing a check on Trump has fallen from 60 percent in August to 54 percent today, while the percentage who say they want a Congress controlled by Republicans to help support the president’s agenda has risen from 34 percent to 41 percent. 

Women favor Democratic House candidates by a 59-37 margin, while men split about evenly, with 48% favoring Republican House candidates and 46% favoring Democrats.

For the first time in the ABC/WP survey, Trump receives a net favorable rating when it comes to his handling of the economy, 49-46.  That’s important.

But when you break the individual House districts down, the number that are true tossups appears to be going down, from 66 a while ago, to, according to the ABC/WaPo folks, 46-47.

And you also clearly have House races going one way, and the Senate another.  As in Republicans should be confident they are maintaining control of the latter.  But the House can still easily switch hands.  In a Monmouth University poll of a key House district that I’ve told you starts a block away from me, but isn’t my district, the Democratic challenger, Mikie Sherrill, has a 4-point lead over the Republican Jay Webber, in the race to fill Republican Rodney Frelinghuysen’s seat, the district being in Republican hands since...forever....

I still maintain this one, NJ-11, and my own, NJ-7 (incumbent Republican Leonard Lance vs. Democratic challenger Tom Malinowski) will very early in the evening on Nov. 6 tell you everything about what will go on later across the country.

NJ-7, according to FiveThirtyEight, is too close to call.

Meanwhile, also in my state, Republicans realize they have a chance to take down Democratic incumbent Bob Menendez, with polls showing challenger Bob Hugin down by 7-9 points (another, which I believe is an outlier, has a dead heat).

But Hugin has begun running a totally dishonest ad on Menendez and his legal issues, which are many as it is, but the charge in the specific ad (consorting with underage prostitutes) was dismissed in the probe of the senator’s other illicit activities. This could backfire on Hugin.  [If Hugin was going to do this, I would not have allowed Menendez time to fight back.]  But this will be a fascinating race to watch Election Night.

--In a CNN poll of potential 2020 Democratic presidential nominees, former Vice President Joe Biden was the leader of the pack at 33 percent, followed by Sen. Bernie Sanders at 13 percent, the only other candidate in double figures.

Sen. Kamala Harris (Calif.) garnered 9 percent, and Sen. Elizabeth Warren (Mass.) was at 8 percent.

New Jersey Sen. Cory Booker was tied for fifth at 5 percent with former Secretary of State John Kerry. 

It truly is amazing what a lightweight field this is...save for Biden.

--Sunday, Sen. Elizabeth Warren (D-Mass.) released a six-page genetic data report, which showed “strong evidence” Warren had a  Native American ancestor dating back six to 10 generations.  That generational range suggests Warren is between 1/64th and 1/1,024th Native American.   Those results fit with an 1894 document uncovered by the New England Genealogical Society that suggested her great-great-grandmother, O.C. Sarah Smith, was at least partially Native American.

But the results, accompanied by a slickly produced mini-documentary put out by Warren, detailing the search, and findings, only triggered further attacks from President Trump and other Republican critics.

“Now that her claims of being of Indian heritage have turned out to be a scam and a lie, Elizabeth Warren should apologize for perpetrating this fraud against the American Public,” Trump tweeted Tuesday.

Some Democrats criticized the timing of Warren’s release.

But in an interview with the Boston Globe’s editorial board, Sen. Warren defended the timing, just ahead of the midterm elections, telling the Globe Tuesday that she went public as soon as possible to begin deflecting the constant taunting from the president and her Senate challengers.

“I have an election,” Warren said.  “Donald Trump goes in front of crowds multiple times a week to attack me.  Both of my opponents have made the same attack.  I got this analysis back, and I made it public.”

When asked by the Globe if she made a mistake identifying herself as Native American as a law professor, Warren expressed regret but stopped short of admitting error.

“There’s a distinction between citizenship and ancestry. I wish I had been more mindful of that distinction.”

The Leadership of the Cherokee Nation, however, criticized Warren for her move.

“Using a DNA test to lay claim to any connection to the Cherokee Nation for any tribal nation, even vaguely, is inappropriate and wrong,” Chuck Hoskin Jr., the secretary of state for the Cherokee Nation, said in a statement after Warren’s result went public.  Other Indian leaders, however, voiced support.

Warren’s Republican challenger on Nov. 6, Geoff Diehl, has largely avoided the issue.

An in-depth Globe review of Warren’s professional history, including interviews with 31 professors on the Harvard Law hiring committee who offered her a job in 1993, found that Warren was viewed as a white woman by the hiring committees at every institution that employed her.

Kathleen Parker / Washington Post

“Now that the DNA is out of the bag, Sen. Elizabeth Warren can put her Native American heritage down for a nap – maybe.

“After 2 ½ years of being mocked by Donald Trump as ‘Pocahontas”...Warren had her DNA tested. The results released Monday showed ‘strong evidence’ that she is, indeed, a little bit Native American, possibly going back six to 10 generations....

“She had to do it.  As long as Trump breathed, Warren would be viewed by many as the caricature he had drawn.  If Trump knows anything, it’s branding – and he had painted a big P (not for ‘president’) in the middle of Warren’s forehead.  His reaction upon hearing the news?  ‘Who cares?’

“Indeed. But, of course, Trump did care, and loved the Pocahontas moniker so much that he couldn’t stop using it – over and over and over. Others also cared because Warren had listed herself as a minority in an Association of American Law Schools directory....

“There’s nothing sinister about repeating family lore that there might be Native American blood in the lineage going way back. And, until recently, there was virtually no way to prove or disprove it....

“Native American leaders didn’t exactly embrace Warren’s announcement....

“Poor Warren. All she wanted to do was defend her mother’s honor, and she has only gone and made things worse.  It seems she has no one with whom to celebrate her proud heritage.

“Ahem. As it turns out, I’m not busy,  and, I, too, am part Native American, according to the genetic-testing company 23andMe – a whopping 1 percent.  I’m also part Viking, as well as Neanderthal, but probably so are you.

“Which is to say, this is all fun and interesting – but also ridiculous.  ‘What’s your sign?’ may soon morph into ‘What’s your DNA?’  It will be nice if someday we no longer find it necessary to segregate ourselves according to our long-ago lineage. We are, after all, descended from the same source, and our differences, while interesting, are largely inconsequential.

“You’d never know it by our politics, which daily vacillates between the surreal and the absurd. In that vein, it’s hard to imagine what could top a celebrity game-show president causing a brilliant, scholarly woman to test her DNA so that he would stop teasing her and she could run for president.

“I’ve got an idea: Kathleen Parker for president on the Viking ticket.”

Daniel Henninger / Wall Street Journal

“The conventional wisdom is that the DNA report backfired and may damage Ms. Warren’s standing as a possible presidential nominee, providing fodder for ridicule from Kamala Harris, Cory Booker and Joe Biden. I  doubt it.

“Ms. Warren understands that the conventional wisdom about what works in politics died with the Trump presidency.  She has elevated herself as Mr. Trump’s most visible opponent.  Political celebrity, a straight-line function of little more than exposure, is the coin of the realm, no matter how tarnished.

“The most ambitious politicians are becoming increasingly cynical about the reality of inhabiting a world defined by social media and biased press spin.  You play the game.  Elizabeth Warren – who incidentally has created a formidable nationwide political machine – is playing it.

“Former Obama campaign manager Jim Messina criticized the timing of the Warren DNA release as pushing the Democrats off message in the run-up to the midterm elections.  Possibly, but consider some other messaging this week.

“After winning a federal court case with porn star Stormy Daniels, the president caller her ‘Horseface’ on Twitter. Then he analogized the Saudi Arabia mess to Brett Kavanaugh. One may ask: In which direction do statements like these move the needle among independent voters and undecided women in what has become the most nationalized midterm in memory? The answer may be found in another Trumpism: ‘We’ll find out.’  During the Kavanaugh hearings, one wondered why Sens. Harris, Booker and Blumenthal, among others, went so over the top so often. Perhaps it was because over-the-top looks like it works now in politics, and much else.

“None of these national politicians – Mr. Trump, Ms. Warren or the other Democrats – makes any attempt now to broaden their appeal. Left or right, they have a laserlike focus on their bases. This looks like the future of American politics: Play to a base jacked up by social media, hold it with scheduled feedings of red meat and simply force the rest of the bewildered electorate to sort it out and choose between two poles.

“An analogy to data analytics in baseball comes to mind. Striking out a lot no longer matters if a player’s vertical launch angle off the bat produces enough home runs.  In the 2016 GOP primaries, the Donald, despite routine verbal whiffs, had great launch angle.  His competition did not.

“Ms. Warren and others have seen the new reality. Critics can be made virtually irrelevant if they hit their base hard and often enough.  Nothing so exciting or animating exists in the middle anymore, which is bad news for moderates such as Mike Bloomberg or John Kasich.

“Personally, I don’t understand Elizabeth Warren’s appeal at all, with or without whatever is located on chromosome 10. But come 2020, that won’t matter.”

--Someone tell Hillary Clinton to, err, you know, shut up...at least you should feel this way if you’re a Democrat.

Clinton said Sunday that her husband’s presidential affair with Monica Lewinsky wasn’t an abuse of power – because the then-22-year-old White House intern “was an adult.”

Staggering...stunning...especially given the current #MeToo movement Hillary has championed.

--A Quinnipiac University poll of likely voters in New York has Gov. Andrew Cuomo comfortably ahead of his Republican challenger Marc Molinaro by a 58-35 margin in Cuomo’s reelection bid.

I normally wouldn’t mention the above, seeing as this is no surprise, but it’s always instructive how the poll breaks down.  Voters in New York City favor Cuomo 77-13.  Voters ‘upstate’ go for Molinaro 52-41.

--The death toll from Hurricane Michael has risen to 35, 25 in Florida, including a firefighter killed by a falling tree while helping clear debris.  Florida Agriculture Commissioner Adam Putnam said some $3 billion in timber was also lost, as pulp mills, sawmills and other production facilities were hit hard in 11 of the top timber-producing counties.  And officials are worried the downed trees can present a fire hazard.

Then we have Tyndall Air Force Base.

Editorial / Wall Street Journal

“Hurricane Michael did terrible damage in Florida last week, and that may include some of the world’s most capable military aircraft left in its path. But why can’t Air Force F-22 jet fighters, of all things, escape a storm? Answer: They lack the parts to be operational and so were stuck in hangars to take a beating.

“Air Force Secretary Heather Wilson said Sunday that the damage to an unspecified number of F-22s on Tyndall Air Force Base was ‘less that we feared.’ But maintenance professionals will have to conduct a detailed assessment before the Air Force can say with certainty that the planes will fly again.  Press reports estimate that at least a dozen planes were left on the base due to maintenance and safety issues.

“Welcome to a fighting force damaged by bad political decisions and misguided priorities.  Of the Air Force’s 186 F-22s, only about 80 are ‘mission capable,’ according to a July analysis from the Government Accountability Office. The average across the Air Force in 2017 was that about 7 in 10 planes were mission capable, which is still too low for meeting increasing demands....

“Ripping out parts from planes that work, or ‘cannibalizing,’ is now common practice in military aviation.

“Then there’s scale, or lack thereof. The Air Force in the 1990s planned for about 650 F-22s, which were designed to replace the F-15. That number fell to about 380 over time, according to GAO, but in 2009 President Obama and Defense Secretary Bob Gates convinced Congress to shut down the production line.

“At the time Messrs. Obama and Gates argued that the U.S. had to focus on defeating unconventional enemies (Islamic State), whereas the F-22 is designed for air dominance against conventional national forces, which could also be handled by the new F-35.

“This now looks like a mistake, as Russia and China improve their military technology and the F-35 continues to have a cascade of problems.  The Pentagon last week grounded the entire F-35 fleet for a fuel tube issue, though most were cleared to fly again as of Monday....

“The larger mistake of the Obama years was cutting defense willy-nilly to pay for entitlements and other priorities, which meant military units in all branches were crunched for training, flight hours and maintenance. Budget uncertainty through ‘continuing resolutions’ from Congress compounded the pain.

“Republicans in Congress and the Trump Administration this year accepted Democratic demands to spend more on income transfers to get a bump in defense spending that included some $47 billion to get planes flying. But Democrats are promising to cut defense again if they win the House.  They pretend that a vote for free health care is affordable, but damaged planes on the tarmac is one more lesson that more spending on entitlements eventually means too few planes that can fly.”

Back to Air Force Secretary Heather Wilson, she may claim the damage to aircraft on Tyndall was relatively light, but the fact is, as the Wall Street Journal reported on Monday:

“Every house had significant roof and siding damage, and some sustained more significant structural failures, Tyndall officials said on the base website. The flight line was devastated, hangars were stripped, its marina vanished and a drone runway sustained severe damage.  Numerous other structures, including Tyndall Elementary School, were in bad shape.”

Normal operations aren’t resuming anytime soon.

Tyndall officials do deserve credit for safely evacuating a staggering 11,000 people from the base and getting some planes aloft more than 48 hours before the storm.

There were no deaths or injuries, with 93 airmen riding out the storm on the base.

But this is a very serious issue to have a major base destroyed in such a fashion.  Sounds like a good ‘60 Minutes’ piece to me.

--Parts of the Florida Panhandle will be dealing with power issues for weeks to come, but on Puerto Rico, federal officials have spent $3 billion to end the longest blackout in U.S. history and return the island to pre-storm conditions.

It’s all patchwork thus far, but experts believe a total upgrade to the energy grid, to prevent future disasters like Hurricane Maria from taking the island down again, would cost $26 billion, and of course that money has not been approved as yet.  I can’t imagine it will.

--New York City marked its first weekend without a shooting in 25 years, police said Monday.

“We went Friday, Saturday, Sunday without any shootings and homicides,” New York Police Department chief James O’Neill told reporters.

The last time the most populous U.S. city of 8.5 million had a weekend without shootings was in 1993.

Every now and then you catch a break. The weekend of October 6-7 was “terrible,” in the words of the NYPD, with several shootings.

And the number of murders is on the rise again this year, after hitting a low in 2017 with 292 total – a record since the 1950s.  Though to be fair, it would seem Gotham might be headed to somewhere around 310-320 at worst. 

--If you hate leaf blowers as I do, you’ll like the following.

Adrienne Bernhard / Wall Street Journal

“Fumes, pollution and ruined Sunday mornings make leaf blowers a nuisance.  But they’re also dangerous. The emissions and fine particulate matter these devices kick up are hazardous to the health of both gardeners and homeowners. All for the sake of moving leaves from one corner of a lawn to another.

“As a teacher, I frequently hear the drone of leaf blowers from within my classroom. The noise is distracting enough while trying to discuss Bronte or Tolstoy, but outside, where I often eat lunch under the treetops, the nonstop noise seems to broadcast a dire warning: These pristine grounds come at a terrible price.

“Most leaf blowers use two-stroke engines – lightweight, compact, cheap sources of power for lawn mowers, tree trimmers and snowblowers.  The problem with these crude motors is that their intake and exhaust functions occur at the same time, meaning the fuel mixes with oil. A large share of the gasoline is then spewed out unburned, as an aerosol in the exhaust. Such fumes have been found to increase the risk of cancer, heart disease and asthma....

“Landscape associations and manufacturers insist these hyperpolluting lawn tools aren’t bothersome or harmful if used properly and protest that leaf blowers are necessary for the hard work of removing leaves and debris.  It’s true that dead leaves on a lawn don’t disintegrate, and a return to the rake doesn’t seem likely.

“Leafy trees and green lawns should no longer be our gold standard: We need to rethink our yards entirely.  Each fall, let leaves die on the ground, allow deciduous trees to generate new growth, and consider adding a rock garden with succulents or other ‘hardscapes’ that don’t require leaf upkeep, and also save water.  Outdoors, sustainable is beautiful.”

--I was reading an article on food safety in USA TODAY, and all the recent beef recalls, and the following blew me away.

“Unlike unprocessed produce or whole cuts of meat, ground beef is made up of bits and pieces from many different animals – each one with the potential to taint the whole batch.

“ ‘When you buy a chicken breast, how many animals is that?  One.  Ground beef?  As many as 400 animals in commercially processed beef,’ said Northeastern University food safety expert Darin Detwiler.  ‘Unless you buy steak from the grocer and grind it up yourself, you’re talking about Russian roulette.’

“If equipment isn’t cleared well between runs, the residue could contaminate the next production, too.

“The giant vats of mixed meat are just one part of the production process; multiple steps equals multiple potential problems.  Each point along the way – from the farm to the finished product – is a chance for pathogens to enter.

“Detwiler says the trouble can begin when the cows are still alive – on corporate farms, in confined spaces and walking around in fecal matter, which is how many pathogens are transmitted.”

Well, then the animals go to the slaughterhouse.  Bow your heads....

I think I’m going to continue to order my burgers ‘well-done,’ sports fans.  You might want to do the same.

--Finally, Marine Sgt. Maj. John Canley was awarded the Medal of Honor by President Trump for heroism in Vietnam 50 years ago.

It was at the bloody battle of Hue in 1968 when Canley took command of the undermanned Company A, First Battalion, First Marines, carrying countless wounded Marines to safety while taking shrapnel wounds and exposing himself to the enemy so that his Marines could seize a building.

“John raced straight into enemy fire over and over again, saving numerous American lives and defeating a large group of communist fighters,” Trump said at a ceremony at the White House.

“Despite sustaining serious injuries – very, very serious injuries – he continued to face down the enemy with no thought for his own safety,” Trump said.

The battle for control of Hue was one of the bloodiest of the war.  North Vietnamese soldiers and guerrillas had overrun the provincial capital during the Tet Offensive.  Canley and his Marines, outnumbered and outgunned, were sent to retake the city.  After the battle, legendary for its bloody house-to-hose fighting, Canley received the Navy Cross, two Bronze Stars and the Purple Heart.

Canley, African-American, said race wasn’t an issue.

“We didn’t have a race problem,” he said.  “We had a leadership problem.  Period.”

---

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

God bless America.

---

Gold $1230
Oil $69.37

Returns for the week 10/15-10/19

Dow Jones  +0.4%  [25444]
S&P 500  +0.02%  [2767]
S&P MidCap  +0.1%
Russell 2000  -0.3%
Nasdaq  -0.6%  [7449]

Returns for the period 1/1/18-10/19/18

Dow Jones  +2.9%
S&P 500  +3.5%
S&P MidCap  -1.5%
Russell 2000  +0.4%
Nasdaq  +7.9%

Bulls 51.9
Bears 18.3 [Two weeks earlier, 61.8 / 18.3...kind of fascinating ‘bear’ reading has varied virtually zero for months.]

Have a great week.

Brian Trumbore

 

 



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Week in Review

10/20/2018

For the week 10/15-10/19

[Posted 11:45 PM ET]

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.

Edition 1,019

Warning:  I’ve said this a few times the past few months, but this is definitely the longest of my 1,019 missives (out of 1,020 weeks).  Save a tree....don’t print it.

The Trump Presidency is beyond overwhelming to cover, and, think about it, while we have American troops at risk in some global hot spots, we are not engaged in any wide-ranging conflict at the time.  Imagine if we were...or don’t.  You won’t be able to sleep.

Don’t give me “Well, President Trump is keeping the peace.”  The sands are shifting beneath our feet and I’m afraid it’s going to be like the recent Indonesian earthquake (and tsunami) where the land simply liquefied.  There one minute...gone the next.

And hopefully you’re not of the opinion that America no longer needs to be the world’s moral leader...the moral compass, the defender of human rights.

With the president’s slew of interviews this week, beginning with the devastating “60 Minutes” interview Trump did with Lesley Stahl, progressing through the AP sitdown, I can also assure you our leader didn’t make it through three sentences without telling a lie.

I was floored...and this after what we’ve heard since he announced he was running.

I’m just stating the facts.  I know the economy is great.  I’m happy for that.  I’m fully supporting my local Republican congressman.

But on some topics I’m too smart.  I don’t suffer fools gladly.  And we just can’t survive a leader, the ‘leader of the Free World,’ who is totally incapable of the truth.

Because of all the topics I felt compelled to cover in some depth down below, however, from China and trade, to earnings reports, to the death of Paul Allen, to Google’s treason, to Saudi Arabia and beyond...I have no time to begin to delve into all of President Trump’s whoppers in his various forums.

For now, just understand his telling us that Saudi Arabia is “spending $110 billion on military equipment and on things that create jobs” is a total crock of merde.

According to the Pentagon, if you stretch the terms, to include letters of intent, it might be as  much as $14.5 billion, but since Trump’s visit to the kingdom, where he says he secured this big order, about $4 billion is the total thus far.

That’s important.  The American public deserves to know.

And his constant refrain that when he took office America was going to war with North Korea is just not factual.  I loved how Lesley Stahl wasn’t having any of it.  “We were going to war?”

Trump retreated... “I think it was going to end up in war,” he said, before moving on.

Or Trump’s beyond inane comments on climate change. When Ms. Stahl opened up by questioning him on the topic, Trump said “something’s happening.”  He then said, “I’m not denying climate change.”

But then he said it will “change back,” even though his National Climate Assessment, approved by the White House last year, said there was no turning back.  Yet as Glenn Kessler of the Washington Post wrote, while Trump “said he did not know whether climate change was man-made...the same report said ‘there is no convincing alternative’ posed by the evidence.”

When asked whether North Korea is building more nuclear weapons, “Well, nobody really knows.  I mean, people are saying that.”

“People”...the president always falls back on “people are saying...,” “They say...”

What ‘people’?  I love how Lesley Stahl fought back during the climate change discussion and asked: “Who says that?  ‘They say’?”

Trump replied: “People say....”

Oh, and Trump continues to insist that Kim Jong Un committed to denuclearization, when the chubby little guy with the elevator heels that our president has fallen madly in love with has still done nothing more than sign a nonbinding statement of goals.

Yet Trump told Lesley Stahl: “And I will tell you that they’re closing up sites.”

No they aren’t.

But he has “a great chemistry (with Kim) and also with President Xi of China.”

No he doesn’t.

He spouts out China market figures that are just plain lies.  He says of the European Union: “Nobody treats us much worse than (the EU).”

And, of course, he knows more about NATO than Gen. Mattis, as he told us last Sunday night.  I spit up my Chex Mix on hearing this.

Trump refuses to acknowledge in any serious way the extent of Russian meddling in our elections (see below), while now blaming China when there simply is no equivalence.

Trump says ISIS has been “defeated.”  Again, see below.  Because of all the other news of the day, it’s getting lost that Islamic State may have just abducted a number of Americans in Syria.

We move on.....

Wall Street and Trade

President Trump told Fox Business television on Tuesday, “My biggest threat is the Fed because the Fed is raising rates too fast.  You look at the inflation numbers, they’re very low.”

But Fed Chairman Jerome Powell has so far brushed aside the president’s criticism, portraying the Fed’s actions as a necessary move to normalize monetary policy in an “extraordinary” economy and saying the Fed was sticking with its strategy of gradual rate increases.

After this week’s release of the Federal Open Market Committee’s minutes from its September meeting, there is indeed little doubt Powell and Co. are hiking rates again in December, and still plan on three more increases in 2019, to levels sufficient to slow down a fast-growing economy to prevent it from overheating, according to the minutes.

“A few participants expected that policy would need to become modestly restrictive for a time,” the minutes read. But, “A couple of participants indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.”

Earlier this month, Chairman Powell spooked the market when he said the following: “Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral. We’re a long way from neutral at this point, probably.”

Yes, President Trump is right that inflation isn’t an issue today, but that may not always be the case.

That said, as reflected in all the recent housing data, including today’s existing home sales report for September, down a sixth consecutive month, rising mortgage rates are definitely biting.

The existing home sales pace was down 3.4% over August, which was revised downward, and is down 4.1% over the past year.  Earlier, housing starts for last month were also down, 5.3% from August, according to the Census Bureau, though there was some influence in the number from Hurricane Florence.

September retail sales were up a disappointing 0.1%, -0.1% ex-autos, while September industrial production rose 0.3%.

The Atlanta Fed’s GDPNow projection for third-quarter growth is 3.9%.

Meanwhile, it was reported by the Labor Department on Tuesday that American employers had more than seven million unfilled jobs for the first time on record this summer, reflecting a historically tight labor market that is causing some businesses to struggle to find workers.

There was a seasonally adjusted 7.136 million job openings on the last business day of August, with available jobs that month outnumbering jobless Americans actively looking for work by 902,000, the largest such gap on record.

On the trade front, negotiators are warning that the fragile peace between the U.S. and EU is at risk of collapse this week after the Trump administration and European Commission accused each other of undermining a White House deal reached in July.

Commerce Secretary Wilbur Ross said President Trump’s “patience was not unlimited” after his EU counterpart accused Washington of dragging its feet in Brussels talks.

Ross has been at odds with EU trade commissioner Cecilia Malmstrom.

In July, in a handshake agreement between Trump and Jean-Claude Juncker, the European Commission president, the leaders agreed to work towards eliminating all trade barriers on non-automotive industrial goods.

Analysts have long been skeptical of the Trump-Juncker deal, arguing it was short on specifics and did little to deal with the biggest hazard to transatlantic trade: President Trump’s threat to impose tariffs on European carmakers, accusing the EU of treating U.S. car imports unfairly.

Ms. Malmstrom said, “We have not started negotiating yet,” and that the ball is in their court.

As for China, the two sides, at least at the senior level, have not been talking and while Presidents Trump and Xi Jinping are to meet next month at the G20 meeting in Buenos Aires, no one expects much out of it.

But that didn’t stop the Trump administration from taking more actions against China, among them being a proposal to withdraw from a 144-year-old postal treaty that allows China’s companies to ship small packages to the United States at a steeply discounted rate. The 1874 Universal Postal Union treaty sets fees that national postal services charge to deliver mail and small parcels to countries around the world.  But Trump’s trade adviser, Peter Navarro, sees the move as a way to thwart China and an opportunity to challenge the authority of international groups such as the World Trade Organization.

But the administration opted once again not to label China a currency manipulator despite President Trump’s repeated complaint that Beijing is weakening the renminbi.

The Treasury Department’s biannual currency exchange report, the fourth of Trump’s presidency, criticized China’s trade and currency practices, but did not conclude Beijing was improperly devaluing the renminbi.  Doing so would have increased tensions further.  Treasury Secretary Steven Mnuchin in a statement instead cited China’s lack of transparency on the issue.

Editorial / The Economist

“For the past quarter century America’s approach to China has been founded on a belief in convergence.  Political and economic integration would not just make China wealthier, they would also make it more liberal, pluralistic and democratic. There were crises, such as a face-off in the Taiwan Strait in 1996 or the downing of a spy-plane in 2001. But  America cleaved to the conviction that, with the right incentives, China would eventually join the world order as a ‘responsible stakeholder.’

“Today convergence is dead.  America has come to see China as a strategic rival – a malevolent actor and a rule-breaker. The Trump administration accuses it of interfering in America’s culture and politics, of stealing intellectual property and trading unfairly, and of seeking not just leadership in Asia, but also global dominance.  It condemns China’s record on human rights at home and an aggressive expansion abroad. This month Mike Pence, the vice-president, warned that China was engaged in a ‘whole-of-government’ offensive. His speech sounded ominously like an early bugle-call in a new cold war

“Do not presume that Mr. Pence and his boss, President Donald Trump, are alone. Democrats and Republicans are vying to outdo each other in bashing China. Not since the late 1940s has the mood among American businessfolk, diplomats and the armed forces swung so rapidly behind the idea that the United States faces a new ideological and strategic rival.

“At the same time, China is undergoing its own change of heart. Chinese strategists have long suspected that America has secretly wanted to block their country’s rise.  That is partly why China sought to minimize confrontation by ‘hiding its strengths and biding its time.’ For many Chinese the financial crisis of 2008 swept aside the need for humility.  It set America back while China thrived.  President Xi Jinping has since promoted his ‘Chinese Dream’ of a nation that stands tall in the world.  Many Chinese see America as a hypocrite that commits all the sins it accuses China of. The time to hide and bide is over.

“This is deeply alarming.  According to thinkers such as Graham Allison of Harvard University, history shows how hegemons like the United States and rising powers like China can become locked into a cycle of belligerent rivalry.

“America fears that time is on China’s side.  The Chinese economy is growing more than twice as fast as America’s, and the state is pouring money into advanced technology, such as artificial intelligence, quantum computing and biotech.  Action that is merely daunting today – to stem the illegal acquisition of intellectual property, say, or to challenge China in the South China Sea – may be impossible tomorrow.  Like it or not, the new norms governing how the superpowers will treat each other are being established now.  Once expectations have been set, changing them again will be hard.  For the sake of mankind, China and America need to come to a peaceful understanding. But how?

Next week, part II.

Finally, on the federal budget deficit, the administration announced a $779 billion deficit for fiscal year 2018 (ending 9/30/18), a six-year high and a 17 percent jump from the prior year.

In response to the ballooning deficit, President Trump asked every cabinet secretary to take a 5 percent budget cut next year.

“Get rid of the fat, get rid of the waste,” Trump said.  “It’ll have a huge impact.”

Trump told reporters he had to spend money on the military last year because it was ‘falling apart’ and also had to splash money on some Democratic priorities to secure their votes.

The Treasury Department reported that spending outlays increased $127 billion from 2017 to 2018, while tax revenue remained nearly flat.

That’s because the GOP-led Congress passed Trump’s tax plan that slashed corporate income tax rates from 35 to 21 percent.  That meant corporate taxes collected dropped by 31 percent in one year, or $92 billion.

The U.S. national debt now tops $21 trillion.

Spending on interest on the public debt rose $65 billion to $521 billion.  Any long-time reader knows this is the figure I harp on...interest on the debt eventually impacts the spending side of the ledger...and Congress’ pet projects.

$39 billion more was spent on Social Security outlays.

As a share of GDP, the deficit totaled 3.9%, up from 3.5% a year earlier and the third consecutive increase.

The deficit increased by $70 billion less than anticipated in a report published in July, but it would have been even higher if not for shifts in the timing of certain payments, Treasury said.

Just a few key numbers....($ millions)

Individual income tax receipts for F2018 were $1,683,537 vs. $1,587,119 F2017

Corporate Income Taxes for F2018 were $204,733 vs. $297,048 F2017

Total receipts for F2018 were $3,328,745 vs. $3,314,894 in F2017

Total outlays for F2018 were $4,107,741 vs. $3,980,720 in F2017

Total deficit (-) for F2018 was $-778,996 vs. $-665,826 the prior year.

Interest on Treasury Debt Securities (Gross) was $521,553 vs. $456,955 the year before.

Europe and Asia

Just one eurozone-wide data point this week.  September inflation in the EA19 came in at an annual rate of 2.1% vs. 2.0% in August, and 1.5% a year ago.

Germany 2.2%, France 2.5%, Italy 1.5%, Spain 2.3%.

Eurobits....

Brexit: What a week...what a summit in Brussels as European leaders met with British Prime Minister Theresa May for what was to be a final decision on Brexit, with another ‘wrap-up’ summit in November to approve the details.

But prior to Brussels, last weekend, Mrs. May was preparing to walk away from a deal that would ensure a hard border never again emerges on the island of Ireland.

The prime minister said: The EU still requires a ‘backstop to the backstop’ – effectively an insurance policy for the insurance policy.

“And they want this to be the Northern Ireland-only solution that they had previously proposed.

“We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom. And I am sure the whole house shares the government’s view on this.”

Tying Britain to the EU on customs would limit Mrs. May’s power to strike new trade deals around the world – a key goal of those who voted to leave the EU.

So when the summit occurred, Wednesday and Thursday, for 36 hours we received all kinds of differing opinions and degrees of optimism from the parties involved. To wit:

German Chancellor Angela Merkel said afterwards that a deal should still be achievable, adding at a post-summit news conference that the 27 leaders had agreed to reassemble to assess progress soon as sufficient progress had been made in talks, including on the key sticking point, the status of the border in Ireland.

Merkel added that she was no more or less optimistic following the summit than before.  “Where there is a will there is a way,” she told reporters.  “We agreed that when sufficient progress has been made we will meet again, but right now it isn’t clear when such a meeting can take place.”

So right there, Merkel is saying the leaders agreed to reassemble to assess progress, but clearly sufficient progress has not been made and, as of today, there are no plans for a November summit....though this can change.

But a key participant, Irish Prime Minister Leo Varadkar said Thursday, the EU would have “huge difficulties” agreeing to a United Kingdom-wide Irish border backstop* as it would expose the bloc’s single market to unfair competition.  Varadkar said some progress has been made in recent weeks “but certainly not the level of progress which we  could describe as decisive progress.”

*Again, the ‘backstop’ is an insurance policy to ensure there will be no return to a hard border (customs checks) if a future trade relationship is not in place in time.

Varadkar said 11 EU leaders spoke on Brexit after Prime Minster May left.  He showed them the front page of an Irish newspaper from the 1970s that recounted killings at a customs post in Ireland and Varadkar’s point was to show his fellow EU leaders that fears of extensive border checks between EU state Ireland and Britain’s province of Northern Ireland would risk reigniting sectarian violence were not exaggerated.  The European Parliament must not sign off on any agreement that undermined the single market and did not give Ireland what it needed in relation to the backstop, Varadkar added.

“Some people see Brexit as a storm.  Passing storm that may be very rough but then will pass.  But it’s not. What Brexit is it’s the political equivalent of climate change.  It’s permanent change,” he said.

[If you don’t remember, the conflict between the Republic of Ireland and Northern Ireland, aka “The Troubles,” resulted in 3,500 deaths...a majority of them civilians...a huge toll given the small populations of the two.]

Others who weighed in included French President Emmanuel Macron, who said it was now up to Theresa May to come back with new proposals that she can defend politically at home.  Negotiating a Brexit agreement had become a British political issue, Macron said during a news conference in Brussels.

“It’s now clearly up to the British prime minister and her staff to come back with a solution based on the necessary political compromise on the UK side.”

The EU’s Brexit negotiator, Michel Barnier, said, “Brexit must include a solid, all-weather backstop to avoid a hard border (between the Republic and Northern Ireland).”

It’s clear what the issue is.

So what of Theresa May and Britain?  Thursday, she expressed confidence a deal could be secured, saying the two sides were working hard to overcome the same hurdles.

It’s less than six months before Britain leaves the EU.

The prime minister said she was willing to consider an extension to the transition period...the period of time post-Brexit (March 29, 2019) that is to go through Dec. 31, 2020, during which a trade relationship is to be negotiated...by a few months.

Mrs. May described transition as an “implementation period,” and although she said the plan for an extension was being considered for inclusion in a deal, her intention was that it would in practice never have to be used.  “(We) are working to ensure we have that future relationship in place by the end of December 2020,” she said.  “In those circumstances there would be no need for any proposal of this sort.”

But extending the transition period means a longer period for the UK to be operating under EU rules and opponents in May’s own party are fuming about this.

So for now, as has been the case for the past year, really, the two sides are kicking the can down the road.

“We are all working, we’re intensifying the work on these issues that remain,” May told a news conference after the summit had ended.  “What I’ve had from leaders around the table...since I arrive here in Brussels yesterday is a very real sense that people want that deal to be done....

“I am confident that we can achieve that good deal.”

EU Council President Donald Tusk described the mood as being much better than the last summit, Salzburg, which ended in acrimony.  “What I feel today is that we are closer to the final solutions and the deal.”

Jean-Claude Juncker, EU Commission president, said: “It will be done.”

Today, British Foreign Secretary Jeremy Hunt claimed “all but one or two issues” on Brexit have been settled in exit talks, and urged a divided Conservative party to rally behind the prime minister in the final stage of negotiations.  Hunt admitted some Tory MPs were furious over May’s proposal that Britain’s transition out of the EU last “a few months” longer than the proposed end date of Dec. 2020.

Hunt confirmed that extending the transition into 2021 would cause “difficulties over payments and the common fisheries policy” – an admission that Britain could continue to make EU contributions and stay under its fishing rules.

The deadlock in talks in Brussels, Hunt said, was evidence of Mrs. May’s determination not to sign up to any deal that could see Northern Ireland split into a different customs zone to the rest of the UK.

So as I go to post, the bottom line is EU leaders have shelved plans for a special Brexit summit next month, and are awaiting Britain’s next move in a negotiation the could still take months to complete...but the two sides don’t have months!

Not to beat a dead horse, but all the sides have to get parliamentary approval once a deal is struck, the details in writing, long before March 29 of next year.

Italy: Following a statement by the European Commission on Thursday that Italy’s draft budget represented a “particularly serious non-compliance with the budgetary obligations laid down” in eurozone fiscal rules beefed up during the crisis, stock and bond markets across the continent were roiled.  It didn’t help that European Central Bank president Mario Draghi chimed in during a closed-door gathering of EU leaders that breaches of the crisis-era rules were dangerous. According to diplomats, Draghi told the leaders at the above-noted Brussels summit:

“There is no evidence that to undermine all the rules will lead to prosperity, but it will carry a high price tag for all actors.”

Rome’s draft budget envisages a deficit three times higher than an EU-mandated target, which was agreed to by the previous government in order to lower the government’s growing debt pile, the second highest in the eurozone behind only Greece.

The yield on the key 10-year bond hit a 4 ½-year high on Friday, 3.78%, before rallying on the EU’s extension until Monday of a new budget proposal, the yield tumbling back to 3.47%, amid optimism some kind of agreement could be reached palatable to both sides.

To be continued...

Germany: Chancellor Angela Merkel’s already fragile “grand coalition” was handed a stinging setback Sunday in state elections in Bavaria, as her conservative partner, the Christian Social Union that is aligned with Merkel and her Christian Democrats, saw its support slide to 37.3%, when just 15 years ago it captured 61% and has always won nearly 50% or more.

Merkel’s name was not on the ballot in Bavaria, but her pro-refugee policies certainly took center stage.

The Social Democrats, who share power with Merkel’s conservatives at the national level, saw their support in Bavaria tumble 11 points to 9.6% - their worst state election performance anywhere since World War II.

The far-right Alternative for Germany won 10.6%, which some saw as a slight disappointment (for the AfD, I hasten to add, not me, though AfD leaders seemed pleased with the result), but the pro-Europe Greens garnered 17.8% - double its share in the last election in Bavaria in 2013, further siphoning support from Merkel’s party.  This is interesting.

In another week, we have an important election in Hesse, home to the German financial capital of Frankfurt, and a drubbing of the conservatives there could lead to more  serious turbulence in the Berlin government.

Merkel hopes to be reelected as the leader of the conservatives at a party congress in December, but now there are growing doubts this will be the case.

Back in Bavaria, the current governor, Markus Soeder, is likely to stay in power, but he may have to partner with the Greens.

Turning to Asia, in China the National Bureau of Statistics released the reading on third-quarter GDP, 6.5%, down from the second quarter’s 6.7% and a tick shy of expectations. Yes, the figure is too cute by half but when looking at China’s questionable data, you are looking for trends and 6.5% is nonetheless the slowest rate since the global financial crisis in 2009 (specifically Q1 ’09).

The Chinese economy continues to lose steam amid increasing headwinds, not the least of which is rising trade tensions. 

Right before the GDP report was released, all manner of government officials were out pledging to step up stimulus and urging investors not to worry and the market rallied 2.6% today.

Separately, industrial production rose 5.8% year-over-year in September, retail sales were up 9.2%, and fixed asset investment (such as on major infrastructure projects) was up 5.4% for the first nine months of the year.

On the inflation front, September producer (factory-gate) prices rose 3.6% over the past 12 months vs. a 4.1% rate in August.

Consumer prices were up 2.5%, inside the government’s 3% target for 2018.  Core CPI rose 1.7%.

Meanwhile, S&P Global Ratings is warning that China’s local governments may have accumulated $5.8 trillion of off-balance sheet debt, or even more, suggesting further defaults are in store.

The culprit is local-government financing vehicles (LGFVs) that have been used to raise financing to fund infrastructure projects to support regional growth.

The central government, on the other hand, has been focused on reducing leverage in the financial system.

In Japan, consumer prices for last month rose 1% over a year ago, but ex-fresh food and energy were up only 0.4%, far below the government’s 2% target.

September exports were disappointing, down 1.2% year-over-year, the worst performance in nearly two years.  Imports to the U.S. declined 0.2%, as U.S.-bound auto exports, 143,000, are down 7% yoy.

Trump World

--Russians working for a close ally of President Vladimir Putin engaged in an elaborate campaign of “information warfare” to interfere with the midterm elections, federal prosecutors said on Friday in announcing they had charged one of them in the plot.

The woman, Elena Alekseevna Khusyaynova, 44, of St. Petersburg, was involved in an effort “to spread distrust towards candidates for U.S. political office and the U.S. political system,” prosecutors said.

Ms. Khusyaynova managed millions for a company owned by a Russian oligarch, Prigozhin, who was previously indicted on charges of interfering in the 2016 presidential election, to finance foreign influence activities directed at the United States.  Some of the money was spent on advertising on social media in the U.S., buying internet domain names and “promoting news postings on social networks.”

The conspirators “took extraordinary steps to make it appear that they were ordinary American political activists,” prosecutors wrote.

Incredibly, or not so much, when President Trump was told this afternoon about the indictment, he said it had nothing to do with his campaign, and then he blamed Obama and Hillary Clinton.

Ah, Mr. President?  This case is about the current midterms.

But I’m suggesting Pat Sajak and the “Wheel of Fortune” folks work Elena’s name into their show.

“Pat, I’d like to buy a vowel......Elena Alekseevna Khusyaynova!”

“That’s right!”

--Special Counsel Robert Mueller’s probe continues, only he seems to be honoring the unwritten rule to hold off on any important news so close to the midterms.  But with stories out that Paul Manafort has spent up to 50 hours with Mueller’s team, you can be sure we’ll learn a lot more by mid-November.

For now, U.S. prosecutors agreed to drop criminal charges against Manafort that a jury deadlocked on in August, as U.S. District Judge T.S. Ellis set a Feb. 8 date for the former Trump campaign manager’s sentencing on charges of bank fraud and filing false tax returns.

Prosecutors had initially favored waiting until Manafort finished cooperating with Mueller before addressing the remaining charges, but Judge Ellis rejected the timetable.  “I’m not willing to go on endlessly,” he said.

--President Trump is suggesting without evidence that Democrats or their allies are supporting a “caravan” of Central American migrants who are traveling north aiming to enter the United States.

The president has turned immigration into a leading issue for the midterm elections, and at a campaign rally in Missoula, Mont., he accused Democrats of supporting the migrants because they “figure everybody coming in is going to vote Democrat.”

Trump unveiled his stretch run campaign theme: “This will be an election of (Justice Brett) Kavanaugh, the caravan, law and order and common sense,” he said.

Or: “GOP creates jobs, Dems create mobs.”

Separately, at the same Missoula rally, Trump heaped praise on Republican Rep. Greg Gianforte, who pleaded guilty to misdemeanor assault after attacking a reporter in 2017.  “Any guy that can do a body slam, he’s my kind of guy,” the president said, to disturbing applause. “I shouldn’t say that – (but) there’s nothing to be embarrassed about...He’s a great guy, tough cookie.”

Trump’s comment was particularly pathetic given the focus on the murder of Jamal Khashoggi.  But then I guess I was brought up differently.

For their part, the Guardian newspaper, who employed the reporter assaulted by Rep. Gianforte, issued a statement upon hearing Trump’s comment.

“To celebrate an attack on a journalist who was simply doing his job is an attack on the First Amendment by someone who has taken an oath to defend it.”

Guardian U.S. editor John Mulholland added: “In the aftermath of the murder of Jamal Khashoggi, it runs the risk of inviting other assaults on journalists both here and across the world where they often face far greater threats.”

--Editorial / Wall Street Journal

“One thing Americans rightly hate about health care is that no one knows the true price of a service.  How much did your last X-ray cost?  Why are you suddenly paying more for a statin?  The Trump Administration tried to address this frustration this week with a new rule requiring price disclosure on prescription drugs, but its cure is worse than the problem.

“Health and Human Services has proposed a regulation that will force pharmaceutical companies to include the list price of a drug in television advertisements, and the rule applies to any drug paid for by Medicaid and Medicare that runs more than $35 a month. HHS says this is no different from forcing companies to disclose medical side effects and warnings, nothing but sensible transparency that might shame companies into lowering list prices.

“This is misleading political advertising.  Almost no one pays the ‘list’ price at the pharmacy after insurance and discounts. Nearly nine in 10 prescriptions are generic, an identical version of the product that is a fraction of the cost.   A unit of generic Prilosec costs about eight cents versus $3.31 for the branded heartburn medicine.  Medicaid patients have co-pays as low as a couple bucks, though they won’t know that from watching an ad that says the medicine costs $50 or $200 a month.

“The more important problems are legal.  One sleight of hand is that HHS is promulgating the rule through the Centers for Medicare and Medicaid Services, not the Food and Drug Administration, which regulates safety and efficacy disclosures in drug advertisements.

“HHS openly concedes in the rule that ‘Congress has not explicitly provided HHS with authority to compel the disclosure of list prices to the public.’ But it invokes sections of the Social Security Act that direct the agency to operate Medicaid and Medicare programs efficiently. That looks like a throwback to the Obama years: Select a desired policy and then hunt for a broad statute to justify it.

“Pharmaceutical companies will almost certainly challenge the rule as compelled speech that violates the First Amendment, and they’re right to do so....

“The Trump Administration is waddling into this debate so it can appear to be doing something – anything – about drug prices. Yet the White House’s policy blueprint offered many worthier ideas: cracking down on anti-competitive behavior from drug companies; reforming a dysfunctional Medicaid price system, and more.  Those reforms are better than its simplistic and probably illegal attack on Big Pharma’s advertising.”

Separately, according to a Fox News poll, Americans approve of ObamaCare by a 53-42 margin.  To tell you the truth, I don’t know how I feel.  Ask me when I see what my premiums are for next year.

--Stormy Daniels’ defamation lawsuit against President Trump was tossed out Monday – with a federal judge ordering the porn star to pay the president’s legal fees.

To which Trump tweeted:

“ ‘Federal Judge throws out Stormy Danials (sic) lawsuit versus Trump. Trump is entitled to full legal fees.’ @FoxNews Great, now I can go after Horseface and her 3rd rate lawyer in the Great State of Texas. She will confirm the letter she signed! She knows nothing about me, a total con!”

Daniels then tweeted, in part: “Game on, Tiny!”

--President Trump pressed for pastor Andrew Brunson’s return from house arrest in Turkey for good reason.  A Pew Research Center survey released Oct. 1 showed 67% of white evangelical Protestants approved of Mr. Trump’s performance, compared with 27% who disapproved. Overall, his approval rating with U.S. adults stood at 38% compared with 55% who disapproved.

--Other Trump Tweets....

“For the record, I have no financial interests in Saudi Arabia (or Russia, for that matter). Any suggestion that I have is just more FAKE NEWS (of which there is plenty)!”

“The crowds at my Rallies are far bigger than they have ever been before, including the 2016 election.  Never an empty seat in these large venues, many thousands of people watching screens outside.  Enthusiasm & Spirit is through the roof.  SOMETHING BIG IS HAPPENING – WATCH”

“When referring to the USA, I will always capitalize the word Country!”

[I won’t]

“Thank you to the Cherokee Nation for revealing that Elizabeth Warren, sometimes referred to as Pocahontas, is a complete and total Fraud!”

“Pocahontas (the bad version), sometimes referred to as Elizabeth Warren, is getting slammed. She took a bogus DNA test and it showed that she may be 1/1024, far less than the average American.  Now Cherokee Nation denies her, ‘DNA test is useless.’ Even they don’t want her.  Phony!”

[More on Sen. Warren down below.]

Street Bytes

--Stocks finished mixed on the week, the Dow Jones up just 0.4% to 25444, the S&P 500 was unchanged, and Nasdaq fell a third consecutive week, -0.6%.

Earnings have generally been strong, but we began to see weakness in some of the industrials... companies like Textron (aircraft, including Cessna business jets where the company talked of softness in orders), and Sealed Air Corp. (packaging...a leading indicator).

Plus you still have the uncertainty over whether the Fed is about to go too far, let alone trade tensions...while many sectors of the market just aren’t cheap.

We will learn a lot next week, specifically Thursday...Google, Amazon, Intel and Twitter.

--U.S. Treasury Yields

6-mo. 2.47%  2-yr. 2.90%  10-yr. 3.19% 30-yr. 3.38%

The 10-year has settled into a range of 3.15% to 3.25% the last three weeks.  If we see a breakout above the latter, look out stocks.

--Oil prices dropped sharply on another large increase in U.S. inventories of crude, sparking concerns that global demand for oil is starting to decline, ending the week at $69.37.

Oil had surged to a four-year high above $76 a barrel (West-Texas Intermediate...that which I quote each week down below) on worries that U.S. oil sanctions on Iran that take effect next month are creating a much tighter market in which supplies would struggle to meet strong demand.

But a recent three-week rise in inventories and fears of a global slowdown have led to the sentiment that supplies will be ample, despite the sanctions that will remove much of Iran’s supply.  The U.S. government’s Energy Information Administration weekly report revealed stockpiles of crude oil in the U.S. jumped by 6.5 million barrels last week to 416.4 million, the highest total since late June. 

The build in inventories was especially surprising given Hurricane Michael had forced offshore oil producers in the Gulf of Mexico to halt more than a third of their production for several days.

But as we’ve learned, sentiment can change on a dime and many are still bullish on oil prices, seeing that as much as 2 million barrels of Iranian oil exports could be removed when the U.S. sanctions take hold in a few weeks (Nov. 4).

Saudi Arabia has stated it intended to bridge the gap left by Iran, but the murder of Jamal Khashoggi has complicated matters, amid fears the Saudis could weaponize oil supply in response to any international sanctions that might be levied.

--As a result of the Khashoggi fiasco, more and more banking and corporate executives from around the world have been pulling out of Saudi Arabia’s Future Investment Initiative upcoming conference, with Treasury Secretary Mnuchin joining the list.

Global banks have been courting the Saudi government and Crown Prince Mohammed bin Salman, the public face of the kingdom’s effort to establish itself as a financial and investing hub.  Last year’s inaugural conference, dubbed “Davos in the Desert,” was well attended by Western executives.

So by not attending this year, no doubt many of the institutions will miss out on potentially lucrative deals involving the Saudi government over the coming years. That said, most of the companies are still sending a delegation.

--Goldman Sachs Group Inc. and Morgan Stanley reported sharply higher third-quarter earnings, profit rising 19% at Goldman, 20% at Morgan Stanley.  Both were buoyed by lower taxes, as well as strong deal-making revenue.

All of the six largest U.S. banks reported higher profits from a year ago.

Underwriting revenues surged 20% at Goldman, 33% at MS – as corporate clients tapped the markets to raise money, while continued consolidation in areas such as technology have pushed merger fees near all-time highs.

Morgan Stanley also announced its wealth management unit continued to rake in assets, while both banks reported strong trading results, though Goldman is restructuring itself to more closely resemble the likes of Morgan Stanley in its business makeup...to move away from such an historically large reliance on the trading division.

Bottom line, Goldman earned a profit of $2.52 billion for the quarter, MS $2.11 billion.

--Another of the Big Six banks, Bank of America, reported third quarter revenues grew 4% to $22.8bn, thanks to a solid performance from retail banking, with consumer loan growth of 6%.  Net income rose by 33 percent to $7.2bn.

A lower tax rate contributed significantly to the income growth.  The bank’s rate was 20 percent, compared to 29 percent in last year’s third quarter.

--As seemed imminent, Sears filed for bankruptcy on Monday, and in a last bid for survival, the company said it would close 142 unprofitable stores by year’s end (on top of 46 store closings announced in August), as it scrambles to avoid a liquidation that would end the iconic retailer’s 125-year run.

Hedge-fund tycoon, turned Sears Holdings’ chairman, and former CEO, Eddie Lampert, announced he is still trying to save 300 or so stores to operate beyond the holidays, out of about 700 that were operating as of Monday.

In a statement, he said: “As we look toward the holiday season, Sears and Kmart stores remain open for business and our dedicated associates look forward to serving our members and customers.

According to court papers, Sears handed over the keys and alarm codes to landlords for 217 already-shuttered properties on Monday.  The court documents revealed that Sears had been paying rent each month on these ‘ghost’ stores.

A day after the filing, Lampert addressed a solemn crowd of nearly 1,000 employees gathered at Sears Holdings Corp.’s headquarters, calling it the second most difficult speech of his life.  “The first was having to speak at my father’s funeral” at age 14, he said.

Lampert told his audience that the company needed to make “material progress” to avoid liquidation.

Lampert had made billions for investors and himself taking outsize bets, many of the contrarian variety, but when he took over Sears in 2005, he met his match in the economics of the modern retailing business.

Last year, Sears booked its seventh straight year of losses.  Sales fell to $16.7 billion, compared with $53 billion in 2006, the first full year of operations under Lampert.

Needless to say, Lampert’s reputation is shattered, after risking $billions through his fund, ESL Investments, and more than a decade of his life.

Lampert, 56, admitted in an interview last month, that Sears’ collapse took a toll on him professionally and personally.  “People have been trying to figure out why I haven’t given up or what’s in it for me,” he said. “I really believed this could be something special.”

Lampert said his biggest disappointment was in failing to capitalize on his early insight that e-commerce would be a game-changer.  ‘If we could play that game and play it well, we had a chance.”

Meanwhile, Sears is trying to reassure its vendors that they will get paid if they ship new merchandise to Sears stores, which is obviously critical if they are to be competitive during the holiday season.

Sears obtained $300 million debtor-in-possession financing from its lenders to fund its operations and an additional $300 million in financing is being negotiated – and will likely come from billionaire Lampert.  The company in court on Monday also claimed an additional $200 million in a reserve fund.

But vendors have heard the ‘we have financing’ story before with failing retailers.

Sears is the first major bankruptcy since Toys ‘R’ Us, which started out as a reorganization and spiraled into liquidation.  Toys ‘R’ Us vendors received just 22 cents on the dollar on the goods they shipped after the bankruptcy filing – when they were supposed to be made whole on any new merchandise.

David Lazarus / Los Angeles Times

“The irony is that Sears figured out shopping from home long before Amazon’s Jeff Bezos even was born.

“The company’s catalogs once were ubiquitous in American households, allowing consumers to browse merchandise from their living rooms – and pioneering the trust between a retailer and its customers that a century later would be the bedrock of e-commerce.

“You could even buy an entire house, delivered in pieces by train, from the Sears catalog.  Amazon hasn’t figured that one out yet....

“It’s easy to point at the various wrong turns the company made in recent years, the inability to develop a cogent online strategy, the increasingly unattractive stores.

“But that doesn’t diminish the extraordinary role Sears played in the commercial history of the United States.

“ ‘There’s a famous saying that you have to die before you’re finally recognized for your virtues,’ said Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University.

“ ‘The trust that Sears established with customers was crucial,’ he told me.

“ ‘They introduced ‘satisfaction guaranteed.’  If you’re not happy, you can easily return it.  That’s a very important part of what Amazon offers today.’”

But as Barbara E. Kahn, a professor at Penn’s Wharton School, told David Lazarus: “Sears was a part of the history and culture of America for a very long time. But unlike Amazon, they never learned how to maximize the customer experience.”

As Lazarus sums up: “Sears knew what it was doing.  And then it didn’t.”

There was a time after Lampert took over in 2005 that investors had confidence in him.  Sears’ stock hit a high of $133 in April 2007.  It’s about $0.46 today.

--Alcoa Corp. said higher U.S. aluminum prices from a tariff on imports and rising sales of the raw materials needed to make aluminum have helped boost revenue and allowed the company to up its outlook for the year.

Alcoa reported a 14% increase in third-quarter revenue thanks to the higher prices, and sharply higher sales of the aluminum oxide needed to make aluminum.  The company’s shares rose on the news.

But Alcoa’s heavy reliance on aluminum from foreign smelters, particularly those based in Canada, has limited its ability to profit from the 10% tariffs levied on imported aluminum in March.  Just 14% of the aluminum Alcoa produced last year came from its U.S. smelters.

Alcoa said it had paid $29 million in duties during the third quarter, mostly on the aluminum imported from Canada, but after deducting them out, the company had a net benefit of $27 million from the tariffs as a result of higher prices on aluminum it produced in the U.S.

--Siemens, the German engineering giant, was in line to win a big contract to supply power to Iraq, but then the Trump administration intervened on belief of U.S. rival General Electric, and, according to the Financial Times, GE got the deal reported to be worth $15bn.

It probably wasn’t a tough sell, seeing as the U.S. could remind the Iraqi government that 4,500 Americans had died in the country since the 2003 invasion to oust Saddam Hussein.

Should the deal formally be wrapped up, it be would be a piece of good news for GE’s troubled power division.  Official word is expected when the company reports third-quarter earnings on Oct. 30.

Conversely, this is a stinging defeat for Siemens, whose CEO has been personally courting outgoing Iraqi prime minister, Haider Al-Abadi, for months.

An adviser to Abadi, however, told Siemens a few weeks ago, “The U.S. government is holding a gun to our head,” the adviser, through another source, told the FT.

But this gets complicated.  You see, according to Michael Rubin of the American Enterprise Institute, Iraq needs Iranian gas for its electricity, and Iran is supplying 35 to 40 percent of Iraq’s power generation today.

The U.S. will continue to let Iraq receive this supply from Iran, despite the looming sanctions, which will really torque off Germany, because the U.S. ambassador there, Richard Grenell, has been warning German companies to cease doing business with Iran “immediately.”

--Netflix reported third-quarter earnings and subscriber growth that smashed Wall Street’s expectations.

The streaming giant said Tuesday that its subscriber base grew by nearly 7 million in the quarter, led by the addition of 5.9 million new users abroad and 1.09 million in the U.S.  Netflix, which expects to add another 9.4 million subscribers by the end of 2018, said its customer tally is 137.1 million.  By the end of the year, Netflix expects to expand that base to 146.5 million.

New customers have been lured in by returning seasons of “Orange is the New Black” and “Marvel’s Luke Cage,” as well as new shows such as “Ozark” and “Maniac.”

But CEO Reed Hastings told investors his company is in for a battle.  Next year, Disney, which bought the film and TV assets of Twenty-First Century Fox, is set to launch its streaming service, as is WarnerMedia, the amalgam of AT&T and Time Warner.  Meanwhile, Amazon and Apple keep ramping up their original content.

Netflix has said it expects to book content expenses of as much as $8 billion this year, with analysts estimating it will spend as much as $4 billion more on shows and movies this year that will be released in the future, bringing its total cash spent on content to some $12 billion, dwarfing its rivals.

So the share price soared to $386 in the aftermarket on the news, but then a bit of reality sunk in, as in Netflix still burns a ton of cash and the valuation is, shall we say, frothy, so the stock finished the week at $332! [Down from a 52-week high of $423.]

--IBM’s streak of revenue growth ended after three quarters, the computing giant reporting revenue fell 2.1% from a year earlier, snapping a brief return to growth after nearly six years of shrinking sales.

IBM has been urging patience for years, telling investors a turnaround was just around the corner, even as the company refocused on new lines of business that promised rapid growth.  And three quarters ago, IBM finally delivered year-on-year revenue growth.

But in its latest report, IBM fell short of its goal of getting more than 50% of its revenue from cloud computing, data analytics and other fast-growing businesses.

IBM calls this group ‘strategic imperatives’, and revenue here was $9.3 billion, less than 50% of total revenue, when three months ago, IBM said strategic-imperatives revenue totaled $10.1billion, or slightly more than half.

Ergo, flat growth in an environment where corporations are spending is rather disconcerting.

Profit fell 1.2% to $2.69 billion, though the company maintained its full-year guidance.

--Editorial / Washington Post

“Google announced last week that it would not compete for a $10 billion cloud-computing contract with the Pentagon, claiming the work would conflict with its corporate values. Yet somehow that ethical high-mindedness does not seem to come into play as the company plans to launch a censored search engine in China.

“Google’s development of a platform that complies with the Chinese regime’s restrictions on information access, dubbed Project Dragonfly, was first reported by the Intercept in August.  Since then, details have become available bit by bit, no thanks to the company itself.  Last week, the Intercept obtained a letter from Google chief executive Sundar Pichai to a bipartisan group of six senators in which he refused to answer specific questions about the engine but touted its ‘broad benefits.’ Google also says there are no concrete plans to launch what is still only an exploratory project – but the Intercept reports the company’s search engine chief said in a private meeting that he hoped for a rollout early next year.

“This lack of transparency further weakens Google’s claim to the moral high ground.  It took Google almost two months after the Intercept’s initial report even to acknowledge there was a Project Dragonfly, and Pichai finally confirmed the initiative Monday night.  Now executives seem to think they owe no concrete answers to anyone as long as the search engine remains a prototype.  But once that prototype has turned into a reality, it may be too late for criticism. Just as it was difficult for Google employees to know what they were working on when Dragonfly was still secret, now it is difficult for the public and Congress to have a say without all of the facts.

“They should try to have their say anyway.  Dragonfly defenders argue that Google’s involvement in China could actually open up the country. In reality, however, there is little room for technology companies to negotiate with the Chinese government over terms.  Either they cave in to China’s blacklisting strictures in full, or they stay out.  By reentering China with search, Google would be unlikely to provide consumers with services substantially better than those they already receive from Baidu and a censored version of Bing.  The company would only expose itself to requests for information on users from the Chinese government, setting the precedent for capitulation to authoritarian demands from other countries....

“Google says it has not yet decided on whether search in China is viable. All the more reason for people in the United States, from employees to members of Congress to everyday citizens, to speak up for what they believe. After all, Google’s potential customers in China do not enjoy that opportunity.”

--Twitter published an archive of 10 million tweets and media it says are from accounts it believes are potentially the product of Russian and Iranian state-backed information operations.

Twitter said 3,841 accounts were believed to be connected to the Russian Internet Research Agency, and 770 accounts believed to originate in Iran.

--United Continental Holdings Inc. boosted its profit outlook for the year as higher fares and cost cuts offset surging fuel prices in the third quarter.

The No. 3 U.S. carrier by traffic said growth at hubs in Denver, Chicago and Houston helped fuel a 6.1% increase in passenger-unit revenue, exceeding forecast.

United increased its profit outlook for all of 2018 for a third time this year and the shares rose in response.

Last week, Delta Air Lines had a similarly bullish earnings report.  Both airlines are profiting handsomely from an increase in business class travel.

--I don’t buy as much pizza from Domino’s as I used to (unless I see the two large pies for $5.99 deal), and it’s only the thin crust pizza when I do, but I admire the hell out of the company’s now years-long revamp that has seen the share price soar over the years.

The company posted far better-than-expected earnings for the third quarter this week, but the shares fell on less-than-expected revenue, though it was still up to $786 million, vs. $643.6 million the year before.

Domestic same store sales grew a very solid 6.3%, while international comp sales increased 3.3% during the quarter.

--A U.S. judge approved the settlement between the SEC, Tesla Inc. and CEO Elon Musk; Musk agreeing to pay a $20 million fine and step aside as Tesla’s chairman for three years to settle charges that could have forced his exit.  The company also accepted a $20 million fine, despite not being charged with fraud over Musk’s Aug. 7 tweet that promised to take the electric carmaker private at $420 a share.

Separately, Tesla introduced a new $45,000 version of its Model 3 sedan on its website, launching the car as U.S. tax breaks for  Tesla cars are about to decrease.  According to the website, the rear-wheel-drive model has a “mid-range” battery, a range of 260 miles, 50 miles less than the long-range battery that the more expensive Model 3 is equipped with. The new version has a delivery period of six to 10 weeks, according to the website, which would make customers eligible for the current $7,500 U.S. tax credit if they take delivery by the end of the year.

The tax credit for Tesla vehicles will drop by half on Jan. 1.  Although Tesla has promised a base-level version of the Model 3 priced at $35,000, so far it has only produced higher-cost versions starting at about $49,000.  Tesla has said that it would not manufacture the base-level version of the Model 3 this year.

--As reported by the Wall Street Journal: “Uber Technologies Inc. recently received proposals from Wall Street banks valuing the ride-hailing company at as much as $120 billion in an initial public offering that could take place early next year, according to people familiar with the matter.

“That eye-popping figure is nearly double Uber’s valuation in a fundraising round two months ago and more than General Motors, Ford and Fiat Chrysler are worth combined.”

Uber rival Lyft Inc. is also eyeing a debut in the first half of the year.  Lyft’s valuation is expected to top the $15.1 billion it sold shares at privately this year.

--DowDuPont Inc.’s agriculture unit is taking a $4.6 billion charge in the third quarter after the business lowered its long-term expectations on sales and profits.

The charge reflects the many challenges facing seed and pesticide makers, as five consecutive years of bumper crops have swelled storage bins and pushed down crop prices, forcing farmers to scale back spending. DowDuPont in August reported that its agricultural sales volume fell 5% over the first half of 2018, partly because farmers planted fewer acres.

--Invesco Ltd. agreed to buy rival Massachusetts Mutual Life Insurance Co.’s Oppenheimer Funds Inc. unit for $5.7 billion, strengthening Invesco’s position in some businesses that have proven resilient to the move toward passive investing, including international and emerging-markets stock funds, according to Invesco CEO Martin Flanagan.

--Microsoft co-founder Paul Allen died the other day from complications of non-Hodgkin’s lymphoma.  He was only 65.

Allen had revealed the disease’s return only two weeks ago, after previously being treated for it in 2009.  At the time he said he and his doctors were “optimistic” about treatment.

Microsoft co-founder Bill Gates said: “I am heartbroken by the passing of one of my oldest and dearest friends... Personal computing would not have existed without him.”

Gates added: “From our early days together at Lakeside School, through our partnership in the creation of Microsoft, to some of our joint philanthropic projects over the years, Paul was a true partner and dear friend.

“He deserved much more time, but his contributions to the world of technology and philanthropy will live on for generations to come.  I will miss him tremendously.”

Allen left the company in 1983, after his first diagnosis of the blood cancer Hodgkin’s disease, but recovered to become a successful venture capitalist with his media and communications investment firm, Vulcan, that he set up in 1986.

Allen, the owner of 42 U.S. patents, liked to cast himself as a technology visionary who drove Microsoft’s early success and saw the future of connected computing long before the Internet.

“I expect the personal computer to become the kind of thing that people carry with them, a companion that takes notes, does accounting, gives reminders, handles a thousand personal tasks...”

Allen wrote this in 1977 in a column in Personal Computing magazine.  The same year he outlined an early vision of what turned out to be the Internet to Microcomputer Interface magazine.

“What I do see is a home terminal that’s connected to a centralized network by phone lines, fiber optics or some other communication system,” he said.  “With that system you can perhaps put your car up for sale or look for a house in a different city or check out the price of asparagus at the nearest grocery market or check the price of a stock.”

He did have his share of investment failures, such as on a bad bet on cable company Charter Communications, which cost him $8 billion.

But I have to admit, I was really bummed over the news of Allen’s passing.  Over the years I have followed some of Allen’s philanthropic endeavors, including rather recently, his funding of the discovery of the site where the USS Indianapolis went down in the waning days of World War II in the Pacific.

I wrote the following in a Bar Chat column last spring, pertaining to Allen’s discovery of another U.S. ship.

Kudos to billionaire Paul Allen, who has a fascination with World War II and finding the burial places of U.S. ships / aircraft carriers that sunk during the war.  Allen and his crew’s latest discovery was the USS Lexington, which went down 500 miles northeast of Australia in the Coral Sea.  Allen found it the other day lying in water 1.8-miles deep.

The carrier was crippled during the Battle of the Coral Sea in May 1942 after being hit with bombs and torpedoes.  216 crew members were killed, but 2,735 were evacuated by another American warship, the USS Phelps.  The Lexington was then scuttled by the Phelps to prevent its possible capture by Japan.

A drone captured stunning photos of the carrier’s superstructure and guns, as well as some of its 35 aircraft, with the aircraft in remarkable condition.

U.S. Pacific Commander Harry Harris, whose father was rescued from the carrier, paid tribute to the ship and those killed fighting for “freedoms they won for all of us.”

650 Americans were killed in the four-day battle that broke the momentum of the Japanese Imperial Navy’s attacks on northern Australia.  Hundreds of Aussies had been killed in the city of Darwin in Japanese bombings.

Last year, Allen’s team discovered the wreck of the heavy cruiser USS Indianapolis – sunk by Japanese torpedoes in July 1945.

Actually, Allen hasn’t just been looking for U.S. ships. In 2015, he located the Japanese battleship Musashi in the sea off the Philippines.

Paul Allen said after the Lexington’s discovery: “As Americans, all of us owe a debt of gratitude to everyone who served and who continue to serve our country for their courage, persistence and sacrifice. To pay tribute to the USS Lexington and the brave men that served on her is an honor.”

It is estimated Allen donated more than $2bn to philanthropy throughout his life, including science, education and wildlife conservation causes.

Oh, he was reclusive.  Many said he was Howard Hughes-like.  But, boy, this man changed the world for the better.

Editorial / Wall Street Journal

“The obituaries for Paul Allen, who died this week at age 65, all describe him as a co-founder of Microsoft.  This is true as far as it goes, but it doesn’t begin to capture his larger impact.  His more famous Microsoft partner, Bill Gates, came closer to the truth when he said ‘personal computing would not have existed without him.’

“What Mr. Gates and Allen pulled off was not simply building an innovative new company.  They imagined and then built a new industry that brought computing power to the masses.  More than four decades after they wrote their first piece of software, people around the world have more computing power in their smartphones than the computers NASA used to put men on the moon.  It takes nothing away from Mr. Gates to say that on their team Allen was the visionary while his partner was more the practical businessman.

“In 1975, when they created the partnership known as Microsoft, they were two kids who had gone to high school together outside Seattle and dropped out of college. If you had asked people at the time which company would dominate computing in the decades to come, most would have answered IBM.  Instead Microsoft and Apple would dominate the desktop computer revolution.

“The late 1970s were also a time, not unlike our own, full of angst about whether America’s best days were over. Four years after Microsoft was founded, President Jimmy Carter would famously give his ‘malaise’ speech lamenting ‘the erosion of our confidence in the future.’  The reality is that the U.S. was in the early stages of a new era of entrepreneurship and economic progress.

“After a cancer diagnosis, Allen left Microsoft in 1983 but retained his ownership stake that made him a billionaire. He later became a philanthropist, investor and professional sports owner. But his willingness to take risks as a young man and see a future others didn’t was a signature contribution that should remind Americans that the future is still what creative individuals in a free society make it.”

--On Wednesday, Canada became the first major world economy to legalize recreational marijuana use, beginning a national experiment that will alter the country’s social, cultural and economic fabric.

The same day the government announced it was introducing legislation to make it easier for Canadians that have been convicted of possessing small amounts of marijuana to obtain a pardon.  It’s not blanket amnesty, but as a government minister said, “a matter of basic fairness.”

Worries, though, persist over the readiness of the nation’s police forces to tackle drug impaired driving.

[Uruguay was the first to legalize possession and use of recreational cannabis.]

--StarKist Co. agreed to plead guilty to a felony price fixing charge as part of a broad collusion investigation of the canned tuna industry, the U.S. Dept. of Justice announced Thursday.

StarKist faces up to a $100 million fine when it is sentenced.  Prosecutors allege that the industry’s top three companies conspired between 2010 and 2013 to keep prices artificially high.

I have never trusted Charlie Tuna, the spokesfish for StarKist.  Very shady character.  Reminds me of a mob boss.

Meanwhile, last year Bumble Bee Foods (Bumble Bee the official tuna of StocksandNews) pleaded guilty to the same charge and paid a $25 million fine, $111 million less than prosecutors said it should have been because they were afraid of putting the struggling company out of business.

--According to an annual report on college pricing trends issued by the College Board, which administers the SAT and the Advanced Placement program, “Tuition prices continue to grow at a moderate rate by historical standards,” said co-author of the study, Jennifer Ma.  “The institutional grant aid has been expanding dramatically in (recent) years.”

Nationwide, the average net cost for full-time students enrolled at public four-year colleges is projected to be $14,880 for tuition, fees, room and board for the 2018-19 academic year, down $30 from last year. The full price, before deducting grant aid and tax benefits, is an average of $21,370.

At private nonprofit four-year colleges, the average net cost is projected to be $27,290, up $130.  The published price is $48,510, on average, with the student getting $21,220, on average, in grants and tax benefits, according to the report.

As grants increase, student loans are declining...from $127.7 billion in inflation-adjusted dollars in 2010-11, to $105.5bn last year.

--ABC’s spinoff of the axed “Roseanne” show, “The Conners,” opened Tuesday night to 10.5 million viewers, making it the season’s most-watched new series, and it beat the biggest competition that night, “This Is Us” (with 8.86 million viewers for the night) and “The Voice” (8.8 million).

But, for ABC, the audience for “The Conners” ranked far below that of last winter’s “Roseanne” reboot premiere, which had a whopping 18.4 million viewers.

So the producers had to deal with Barr’s exit and they killed her character off, via an opioid overdose.

Barr had blamed her bigoted social media posts that got her fired on sleeping pills.

--Beer lovers can relax. A new study predicting a global beer shortage brought on by global warming doesn’t account for all factors.

A study published in the journal Nature Plants, noted that global warming would lead to more severe droughts and heat extremes that would reduce the production of barley, beer’s main ingredient, researchers estimating annual barley yields could fall from 3 percent to 17 percent, which would result in a reduction in the U.S. of 900 million gallons of  beer – about 9 billion bottles.

But we have been assured by the Brewers Association that growers of barley are already at work addressing changes that global warming can bring about.

Barley production has been migrating north with Canada now accounting for 70 percent of North American yields, up from 50 percent in 1985, they say.

And barley crop yields have risen about 17 percent every 11 years, the BA says.

Yes, I’m relaxing. 

Foreign Affairs

Saudi Arabia / Turkey:

Turkish officials have maintained they believe Saudi journalist Jamal Khashoggi was murdered and his body removed, the Turks saying they have an audio recording indicating he was killed inside the Saudi consulate in Istanbul, the body dismembered.

According to reports from Turkey, a team of 15 Saudi agents, some with ties to Crown Prince Mohammed bin Salman (MBS), was waiting for Khashoggi inside the Saudi consulate the moment he arrived, at about 1:15 p.m. on Oct. 2.

“After he was shown into the office of the Saudi consul, Mohammad al-Otaibi, the agents seized Mr. Khashoggi almost immediately and began to beat and torture him, eventually cutting off his fingers,” a senior Turkish official told the New York Times, details that first emerged in a pro-Turkish government daily newspaper Yeni Safak.

“Horrendous tortures were committed on Khashoggi, who came to the consulate for documents,” the Yeni Safak account said.

“As they cut off Mr. Khashoggi’s head and dismembered his body, a doctor of forensics who had been brought along for the dissection and disposal had some advice for the others, according to the senior Turkish official.

“Listen to music, he told them, as he put on headphones himself. That was what he did to ease the tension when doing such work, the official said, describing the contents of the audio recording.”  [Carlotta Gall and David D. Kirkpatrick / New York Times]

Saudi Arabia has consistently denied the allegations, but they are headed towards acknowledging it was a botched interrogation, and/or blaming a key advisor to MBS.  President Trump, after talking to King Salman, said “rogue killers” could be responsible, parroting the line the Saudis clearly wanted him to.

Tuesday, President Trump had given Saudi Arabia the benefit of the doubt, even as U.S. lawmakers pointed the finger at the Saudi leadership and Secretary of State Mike Pompeo, sent by Trump to address the crisis, discussed the affair with Salman and MBS on a visit to Riyadh.

Pompeo then traveled to Turkey for talks with leaders on the investigation into Khashoggi’s disappearance.

The secretary said after his brief meetings with King Salman and the Crown Prince that the Saudis had committed to conducting a full investigation.  But when asked whether they said Khashoggi was alive or dead, Pompeo said: “They didn’t talk about any of the facts.”

On Wednesday, Turkish President Erdogan, in talks with Pompeo in Ankara, said Saudi officials were cooperating.

“He made clear that the Saudis had cooperated with the investigation that the Turks are engaged in and that they’re going to share information that they learn with the Saudis as well,” Pompeo told reporters aboard his plan after he left Turkey.

“There have been a couple of delays but they seemed pretty confident that the Saudis would permit them to do the things they need to do to complete their thorough and complete investigation,” he said.

There has been mounting criticism of the Crown Prince owing to some of his moves, including Riyadh’s involvement in the Yemen war, the arrest of women activists, and a diplomatic row with Canada.  And then this.

Sen. Lindsey Graham (R-S.C.), who has been carrying Trump’s water for months now, including during the Brett Kavanaugh confirmation hearings, called Prince Mohammed “a wrecking ball” and accused him of ordering Khashoggi’s murder. Graham called MBS a “rogue crown prince” who is jeopardizing relations with the United States.

“Nothing happens in Saudi Arabia without MBS knowing it,” he said in an interview with Fox News.  “I’ve been their biggest defender on the floor of the United States Senate,” Graham said.  “This guy is a wrecking ball.  He had this guy murdered in a consulate in Turkey and to expect me to ignore it.  I feel used and abused. The MBS figure is to me toxic.  He can never be a world leader on the world stage....I would suspend arms sales as long as he is in charge.”

Graham added: “I know what I’m going to do.  I’m going to sanction the hell out of Saudi Arabia... This guy’s gotta go.”

---

So all the above was leading up to a flurry of news releases tonight.

Saudi Arabia admitted Jamal Khashoggi died in the Saudi consulate in Istanbul after a fight with people he met there, state media reported.  “The investigations are still underway and 18 Saudi nationals have been arrested,” a statement from the Saudi public prosecutor said, adding Royal court adviser Saud al-Qahtani and deputy intelligence chief Ahmed Asiri have been removed from their positions.

We then learned Saudi King Salman had ordered the restructuring of the command of the general intelligence agency under the supervision of Crown Prince Mohammed bin Salman, the official Saudi press agency said.

The White House said it had seen the announcement of Saudi Arabia’s probe and would continue to press for “justice that is timely, transparent, and in accordance with all due process.”

Sen. Lindsey Graham on hearing the Saudi explanation.  “To say that I am skeptical of the new Saudi narrative about Mr. Khashoggi is an understatement.

“First we were told Mr. Khashoggi supposedly left the consulate and there was blanket denial of any Saudi involvement.  Now, a fight breaks out and he’s killed in the consulate, all without knowledge of the Crown Prince,” Graham tweeted.   “It’s hard to find this latest ‘explanation’ as credible,” he added.

President Trump, on the campaign trail tonight, said the Saudi explanation was credible and a “good first step.”  He also said he prefers that any sanctions against Riyadh not include canceling big defense orders.  I want to throw up.

A Saudi official told Reuters that MBS had no knowledge of the specific operation.  “There were no orders for them to kill him or even specifically kidnap him,” said the source, speaking on condition of anonymity and adding that there was a standing order to bring critics of the kingdom back to the country.

“MBS had no knowledge of this specific operation and certainly did not order a kidnapping or murder of anybody.  He will have been aware of the general instruction to tell people to come back,” the source said.  The source told Reuters the whereabouts of Khashoggi’s body were unclear after it was handed over to a “local cooperator” but there was no sign of it at the consulate.

You may stop laughing.  Meanwhile, a good man has been chopped to pieces and his body parts are probably either in a forest, or dumped into the Sea of Marmara.

This is insane.

Opinion....

David Ignatius / Washington Post

“Saudi Arabia must conduct a serious, no-holds-barred investigation of the apparent gruesome murder of Post contributing columnist Jamal Khashoggi.  The kingdom’s relationship with the United States, and its access to global financial markets, hangs in the balance.

“But in the meantime, the Senate and House intelligence committees should begin an urgent oversight investigation of what U.S. spy agencies knew about threats against Khashoggi – and also into their broader reporting and analysis on Saudi Arabia and its headstrong crown prince, Mohammed bin Salman.

“This congressional inquiry should focus first on the intelligence agencies’ ‘duty to warn’ Khashoggi about any lethal threat, because his U.S. residency qualified him as a ‘U.S. person’ for whom such a warning was required. It should look, too, for any hint that U.S. intelligence about MBS, as the crown prince is known, has been skewed by the Trump White House for political reasons.  And the investigation should examine the larger problem of U.S. visibility into the kingdom, which has too often been a black hole for our spy agencies.

“A congressional inquiry would blunt an apparent White House effort to put a lid on Saudi-related information. Sen. Bob Corker (R-Tenn.) complained Wednesday: ‘I suppose they don’t want us to see the intel.’

“The bottom line: Saudi Arabia is at an existential tipping point. The United States urgently needs to understand how the kingdom got into this grisly mess, and where it’s going.”

Editorial / Wall Street Journal

“Treasury Secretary Steven Mnuchin made a prudent decision Thursday to drop out of Saudi Arabia’s investment conference next week. By now the list of withdrawals from Crown Prince Mohammed bin Salman’s showcase event is long, including IMF chief Christine Lagarde, but that is the right message for the world to send to Riyadh.

“Saudi journalist Jamal Khashoggi, last seen entering the Saudi consulate in Istanbul, is presumed dead. Since October 2, that presumption has been based almost entirely on leaks from the government of Turkey, whose President Recep Tayyip Erdogan has his own complicated regional agendas.

“Against this backdrop, the stakes are high for the U.S. in managing its relationship with an important, longtime ally in the Middle East. The Trump Administration’s handling of the issue to date has been inconsistent and confusing.  Mr. Trump has bounced from initially threatening severe consequences to elevating U.S. commercial contracts and briefly aligning himself with a presumption of innocence for the Saudis, comparing them to Brett Kavanaugh.  His ability to maintain support in Congress for an appropriate response wasn’t helped by Secretary of State Mike Pompeo’s cheery photo-op with the Crown Prince.

“With Thursday’s announcement by Secretary Mnuchin, the Administration is moving toward firmer footing.  After briefing Mr. Trump about his visit to Riyadh, Mr. Pompeo said the Saudis would be given ‘a few more days’ to produce a satisfactory explanation of the Khashoggi disappearance. Vice President Mike Pence said Thursday that if Mr. Khashoggi was murdered, it would be ‘an affront to the free and independent press around the world.’

“In remarks to reporters later, President Trump said it looks to him as if Mr. Khashoggi is dead, and in that case the consequences would have to be ‘very severe.’ Those consequences could include sanctions under the Magnitsky Act for Saudi officials identified as complicit in this catastrophic fiasco.

“The burden now is on the Saudi government, most pointedly the Crown Prince, to recognize there is no way forward other than a full public accounting, and soon. As for the U.S., Trump officials need to speak to American values as well as American interests.”

Josh Rogin / Washington Post

“Saudi Arabia’s apparent killing of journalist Jamal Khashoggi – and the Trump administration’s haphazard response – is an unmistakable sign that U.S. foreign policy has swung too far away from its roots in promoting American values abroad. Readjusting President Trump’s ‘America First’ ideology to include the promotion of democratic values is needed to prevent gross human-rights violations such as this, and to win the greater struggle against the expansion of authoritarian influence worldwide.

Khashoggi’s disappearance is not just the latest sign the Saudi regime under Crown Prince Mohammed bin Salman, commonly known as MBS, is exporting its brutality beyond its borders.  It also shows the authoritarian model championed by Vladimir Putin’s Russia and Xi Jinping’s China is on the march and directly harming U.S. interests. The Trump administration now faces a crisis in its relationship with a key ally, and complications in all of its other policies regarding the Middle East.

“To understand how U.S. policy failed in the Khashoggi case, we must grasp the larger context.  MBS is following Putin’s foreign policy script: concentrating power, bullying neighbors, killing critics abroad and pushing the limits of aggression to test whether the world will push back....

“When the authoritarian expansion model seems preferable to the Western-led liberal world order, the United States loses out. Russia’s interference in Europe undermines the transatlantic alliance.  China’s military takeover of the South China Sea challenges U.S. leadership in Asia.  Saudi Arabia’s actions risk U.S. plans to confront Iran, to work toward Israeli-Palestinian peace and to fight extremism.

“ ‘America First’ is a popular policy that responds to the American public’s weariness after 15 years of mismanaged overseas intervention.  But it is becoming increasingly clear that a one-sided focus on principles of realism, pragmatism and nonintervention are not always the right way to advance U.S. interests and goals.

“The Trump team is now learning the hard way what happens when you signal that authoritarian regimes – even allies – can do whatever they want.  It emboldens bad actors to do things the American people and their representatives in Congress just can’t ignore, such as killing journalists on foreign soil.

“Many argue that the United States can’t afford to break ties with Saudi Arabia.  The United States has invested too much in the Saudi alliance to give it up now, the argument goes. If you owe the bank $1,000, the bank owns you, but if you owe the bank $1 million, you own the bank.  The Saudis think they have us where they want us.  MBS would love the Washington debate to be between those who want to end the alliance altogether and those who want to give them a pass – since he is sure that Americans will always end up choosing the latter.

“That’s a false choice.  In fact, there is a middle ground Washington must pursue.  We must take this moment as an opportunity to reset the U.S.-Saudi relationship – with some new rules. We need more intensive engagement with the Saudis, not a wholesale rupture of relations, and that engagement should be with all of Saudi society, not just the crown prince.  Then we need to make sure MBS and any other leaders flirting with the Putin model understand that the United States will advocate vigorously for our interests and our values, because in the long run they are inextricably linked....

“There are signs that even a skeptical Trump is coming around to realizing values promotion as useful. The new China policy announced by Vice President Pence this month is strong on human rights and rule of law, because the administration realized these are arguments that work to our advantage.

“Just governments that respect the rights of their people, limit their own power, permit dissent and open their societies make better allies. This is the message Khashoggi sent in his final column for The Post, a plea for international support for basic freedoms inside Saudi Arabia.  His story shows why the Trump administration can’t succeed overseas unless it finds a way to incorporate American values into ‘America First.’”

Jamal Khashoggi / Washington Post...his last words....

“I was recently online looking at the 2018 ‘Freedom in the World’ report published by Freedom House and came to a grave realization. There is only one country in the Arab world that has been classified as ‘free.’ That nation is Tunisia.  Jordan, Morocco and Kuwait come second, with a classification of ‘partly free.’ The rest of the countries in the Arab world are classified as ‘not free.’

“As a result, Arabs living in these countries are either uninformed or misinformed.  They are unable to adequately address, much less publicly discuss, matters that affect the region and their day-to-day lives.  A state-run narrative dominates the public psyche, and while many do not believe it, a large majority of the population falls victim to this false narrative. Sadly, this situation is unlikely to change.

“The Arab world was ripe with hope during the spring of 2011.  Journalists, academics and the general population were brimming with expectations of a bright and free Arab society within their respective countries.  They expected to be emancipated from the hegemony of their governments and the consistent interventions and censorship of information.  These expectations were quickly shattered; these societies either fell back to the old status quo or faced even harsher conditions than before.

“My dear friend, the prominent Saudi writer Saleh al-Shehi, wrote one of the most famous columns ever published in the Saudi press.  He unfortunately is now serving an unwarranted five-year prison sentence for supposed comments contrary to the Saudi establishment.  The Egyptian government’s seizure of the entire print run of a newspaper, al-Masry al Youm, did not enrage or provoke a reaction from colleagues.  These actions no longer carry the consequence of a backlash from the international community. Instead, these actions may trigger condemnation quickly followed by silence.

“As a result, Arab governments have been given free rein to continue silencing the media at an increasing rate. There was a time when journalists believed the Internet would liberate information from the censorship and control associated with print media. But these governments, whose very existence relies on the control of information, have aggressively blocked the Internet.  They have also arrested local reporters and pressured advertisers to harm the revenue of specific publications....

“The Arab world is facing its own version of an Iron Curtain, imposed not by external actors but through domestic forces vying for power. During the Cold War, Radio Free Europe, which grew over the years into a critical institution, played an important role in fostering and sustaining the hope of freedom.  Arabs need something similar....

“The Arab world needs a modern version of the old transnational media so citizens can be informed about global events.  More important, we need to provide a platform for Arab voices.  We suffer from poverty, mismanagement and poor education. Through the creation of an independent international forum, isolated from the influence of nationalist governments spreading hate through propaganda, ordinary people in the Arab world would be able to address the structural problems their societies face.”

Iran: David E. Sanger / New York Times

“White House officials are worried that the apparent killing of the dissident journal Jamal Khashoggi, and Saudi Arabia’s changing account of his fate, could derail a showdown with Iran and jeopardize plans to enlist Saudi help to avoid disrupting the oil market.

“Officials said the dilemma comes at a fraught moment for the Trump administration, which is expected to reimpose harsh sanctions against Iran on Nov. 5, with the intent of cutting off all Iranian oil exports.

“But to make the strategy work, the administration is counting on its relationship with the Saudis to keep global oil flowing without spiking prices, and to work together on a new policy to contain Iran in the Persian Gulf....

“Part of the problem is optics, officials said: Saudi Arabia looks like a brutal ally, including by leading a deadly military campaign in Yemen, just as President Trump and Mr. Pompeo have been casting Iran as the region’s bully....

“On Nov. 5, the administration is expected to announce that any company that does business with Iran – buying oil, financing projects or investing in the country – will be prohibited from doing business in the United States, including clearing transactions in dollars. It would present a common front with the Saudis, and cast Iran as the source of almost all instability in the Middle East.

“That argument, officials have acknowledged, is now in jeopardy.”

Syria: A day after militants missed a deadline under a demilitarization deal in the region, Russia said the deal was still going forward, the agreement between Moscow and Ankara giving “radical fighters” until Monday to leave a horseshoe-shaped buffer around the last major opposition stronghold in the country.

But by Tuesday, the militant heavyweight Hayat Tahrir al-Sham (HTS) pledged to continue fighting – despite not having taken an explicit position on the deal.

Under the deal, the militants’ departure would pave the way for patrols of the zone by its Russian and Turkish sponsors.

Russia and Turkey then announced they plan to give more time for the implementation of their de-escalation deal, a “great relief” for an area of 3 million civilians, UN humanitarian adviser Jan Egeland told reporters Thursday.  We’ll see how HTS responds.

Meanwhile, last weekend, hundreds of people were taken by ISIS fighters from a displacement camp in east Syria during a militant counterattack against advancing U.S.-backed forces, according to the Syrian Observatory for Human Rights.

A number of fighters of the Kurdish-led Syrian Democratic Forces (SDF) died trying to defend the camp in a battle that lasted several hours, the Britain-based activist group said.

The U.S.-backed SDF launched a major assault on Sept. 10 on the small stretch of the Euphrates Valley around the town of Hajin where they estimate some 3,000 militants are holed up.

But they have sustained heavy casualties in the operation being conducted with U.S.-led air support.

Thursday, President Putin said Islamic State had indeed detained several U.S. nationals south of the Euphrates River in Syria.  Putin added that ISIS had seized nearly 700 hostages and issued an ultimatum promising to execute 10 people every day.

Speaking in the Black Sea resort city of Sochi, Putin said the hostages included several U.S. and European nationals, adding that ISIS was expanding its control in territory controlled by U.S. and U.S.-backed forces.

At week’s end, I haven’t seen if ISIS was carrying through with its ultimatum.

Afghanistan: This weekend was to see nationwide parliamentary elections in the country, but the vote has been delayed in Kandahar after a devastating assassination of a powerful local police chief, Gen. Abdul Raziq, who was shot dead by a rogue bodyguard affiliated with the governor’s security detail, not Raziq’s.

The Taliban claimed the attack, which came after a high-level security meeting.  U.S. commander of Afghanistan’s NATO-led force, Gen. Scott Miller, narrowly escaped unhurt.

The local intelligence head was also killed and the governor, Zalmay Wesa, was critically injured. Three Americans were hurt.

Raziq was widely considered to be an indispensable security chief with influence across critical areas of southern Afghanistan, in the Taliban heartland.  He was valued by American commanders as a fierce ally against the insurgents, and survived dozens of attempts on his life.

Gen. Miller, who pulled his sidearm upon hearing the gunfire, said today that he did not believe he was the target of the attack.  He said he was heading to his helicopter to return to Kabul when the gunman opened fire.  The Taliban has said both Raziq and Miller were targets, however, Afghan security officials said they believe the attacker deliberately avoided killing Miller.

“They didn’t want repercussions from the U.S. and the international community.  It was a pure warning for Miller that they can hit him if they want to,” an Afghan official told Reuters.

Further complicating matters, Afghanistan said Pakistan was involved in the planning of the attack, Raziq a fierce critic of Pakistan and its intelligence service, which Afghan officials regularly accuse of supporting Taliban operations, a charge Islamabad denies.  Today, the chief of the Pakistan army staff issued a statement condemning the Kandahar violence.

Elections will continue across most of the rest of Afghanistan on Saturday.  But security forces are already stretched thin, with more than 50,000 personnel being deployed for polling day.

China: Various developments this week....

--Defense Secretary Jim Mattis held talks Thursday with China’s defense minister at a defense summit in Singapore, against a backdrop of growing tensions over trade and disputes including over the South China Sea and the military buildup taking place in one of the world’s most important shipping lanes.  Taiwan was also a topic of discussion.  Nothing was resolved.

Two U.S. B-52 bombers flew over the South China Sea this week, in a move that no doubt inflamed tensions prior to the meeting between Mattis and his counterpart in Singapore.

As for Taiwan, it held two days of war games on its east coast this week, simulating an attack by the People’s Liberation Army  in the wake of Beijing’s intensifying saber-rattling.

Fighter jets, helicopters and a large number of troops were mobilized to fight the simulated invasion, which mimicked an attempt by warplanes from the PLA’s Liaoning aircraft carrier group to destroy its military bases on the east coast, defense officials said.

It’s been speculated the drills were in preparation for a large-scale operation the United States is planning for the South China Sea and Taiwan Strait in November to challenge Beijing’s growing assertiveness in the region.

--Chris Buckley / New York Times

“Under mounting international criticism, China on Tuesday presented its most extensive defense yet of its sweeping campaign to detain and indoctrinate Muslim minorities, with a senior official describing the widespread internment camps in the far west as humane and legal job-training centers....

“Hundreds of thousands have been held in the camps – one estimate says a million – and former inmates who have fled abroad have described them as virtual prisons that engage in harsh brainwashing.

“But the chairman of Xinjiang’s government, Shohrat Zakir, himself an ethnic Uighur, called the camps a lawful defense against terrorism in remarks published by the official Xinhua news agency.  He said the facilities gave Uighurs and other Muslim minorities training in job skills, Chinese language and the law.

“The camps were ‘an effective measure that Xinjiang has explored to eliminate the conditions and soil nurturing terrorism and extremism and prevent violent terrorist crimes,’ Mr. Zakir said.  ‘Since they have opened, they have won the widespread acceptance and wholehearted support of the public in Xinjiang of every ethnicity.’”

Zakir didn’t acknowledge the numbers in the camps but  appeared to acknowledge some were being held against their will.

--Patrick Tucker / Defense News

“China’s lunar probes may one day threaten critical U.S. satellites, said one of the military’s top experts on space threats.

“ ‘We’ve seen [reports] in open press...that say the Chinese have a relay satellite flying around...the flipside of the moon.  That’s very telling to us,’ Jeff Gossel, the senior intelligence engineer in the Space and Missile Analysis  Group at the Air Force’s National Air and Space Intelligence Center, said at an Air Force Association event on Friday.

“In May, China launched the Cheng’e 4 lunar relay satellite on an unusual trajectory: a lunar swing-by that pulled the satellite in a wide arc before settling it into a ‘parking orbit’ at Lagrangian 2 on the moon’s far side.

“The Chinese government has said the mission is part of a four-stage plan to build a moon base....

“But Gossel said putting the satellite at L2 could also enable Chinese attack spacecraft to zoom past the moon – about a quarter-million miles away – and then sneak up on critical U.S. intelligence and communications satellites in geosynchronous orbit, just 28,300 miles up – as occurred in the 2011 apocalypse-themed film ‘Melancholia.’

“ ‘You could fly some sort of a weapon around the moon and it comes back – it could literally come at [objects] in GEO...and we would never know because there is nothing watching in that direction,’ he said. ‘Why do you need a relay satellite flying around L2?  So you can communicate with something that’s going to land on the other side of the moon – or so you can fly around the other side of the moon? And what would that mean for our assets at GEO?’”

Yet another reason to sleep with one eye open, just as we do here at StocksandNews.

North Korea: The two Koreas agreed on Monday to begin reconnecting rail and road links, another step in an improving relationship in spite of U.S. concerns that the rapid North-South thaw could undermine efforts to press North Korea to give up its nuclear weapons.

The agreement on transport links came during talks in the border village of Panmunjom aimed at following up on the third summit this year between South Korea’s President Moon Jae-in and North Korea’s Kim Jong Un last month.

Also this week, North Korea, South Korea and the United Nations Command held their first three-way meeting to discuss demilitarizing the border between the two Koreas.  Part of an earlier agreement between President Moon and Kim Jong Un was a pact that included halting military exercises, a no-fly zone near their border and the gradual removal of landmines and guard posts with the DMZ.

Russia: Opposition leader Alexei Navalnay was released this week from his latest stint in jail and immediately accepted a duel challenge issued by the head of the National Guard troops.

National Guard director Viktor Zolotov, a former Putin bodyguard, promised to pound Navalny into a “juicy steak” last month, as punishment for Navalny’s videos exposing alleged corruption by Russia’s top government officials, including Zolotov himself.  Navalny was in prison at the time for violating protest rules.

“I accept your challenge and, as is customary, choose the place and the weapon,” Navalny told Zolotov in a video address published on YouTube Thursday.

“Our duel will take place as a debate live on Channel One or [Russia], or any other federal channel,” he said.

Navalny gave Zolotov a deadline of one week to accept or decline the terms of the offer.

I’d tell Navalny to stage it on like a Tuesday in early November, post-World Series but before college basketball gets cranking....just being selfish.

Separately, Russia had its own Columbine-type incident on Wednesday, as an 18-year-old student at a vocational college in Crimea, killed at least 17 and wounded dozens more.  The student entered the college carrying a rifle, gunning down fellow pupils before killing himself.  It was not deemed a terror attack.  But there were conflicting stories on whether explosives were also used, many students interviewed after saying they heard explosions, with photographs of the windows appearing to confirm this.

President Putin condemned the “tragedy.”

The incident comes 14 years after the Beslan school siege, where 334 people were killed in a three-day terror attack on a school in Russia’s Caucasus region.

Leon Aron / Wall Street Journal

“In the streets of more than 80 Russian cities, thousands of men and women have turned out for antigovernment rallies in the past few months. They aren’t the usual malcontents – the middle class, intelligentsia or students, but rabotyagi, blue-collar working stiffs. Both the cause of the rallies and their political context reveal the impoverishment of Russia and the fragility of Vladimir Putin’s regime, despite its outward appearance of toughness. The West, however, shouldn’t gloat; facing problems at home, Mr. Putin could create new problems abroad.

“The demonstrators are protesting Mr. Putin’s pension law, introduced in June. The law is meant to save the Russian treasury $15 billion a year by 2024 by gradually increasing the retirement age to 65 from 60 for men, and to 60 from 55 for women. At first glance, the reform doesn’t seem dramatic enough to stir such passions. Russian pensions are skimpy anyway, averaging around $220 a month. That’s barely above the Russian poverty line of $171 and among the lowest rates in Europe.

“Yet for millions of Russians, an extra five years of work is a hard blow. At $592 a month, the average Russian salary is puny. That’s why Russia today can have near-full employment, while 14% of the population, or 20 million Russians, are in poverty, as per official statistics.  Independent experts from the Higher School of Economics in Moscow estimated last year that 41% of Russians have trouble paying for clothing and food.  For many, the choice is between near-poverty while working or near-poverty while staying home.

“Life expectancy for Russian men is under 67, not even two full years past the new, higher-than-ever retirement age.  Many men fear they’ll literally be worked to death.  ‘With this pension reform, with everything pushed back, I feel like I’ll never get out,’ a railway worker said last month.

“The protest exposed a fissure in what might be called Mr. Putin’s contract with the Russian people: You stay out of politics and I’ll give you stability.  The contract held up in past tough times, most notably in 2008-09, when the Russian economy contracted almost 8% after oil prices fell. Then, difficulties could be blamed on external factors.  No such excuses exist today.  Incomes have declined for four consecutive years, and the pain is self-inflicted – Russians feel that Mr. Putin’s regime has stabbed them in the back.

“Hence Mr. Putin’s unprecedented nationally televised appeal on Aug. 29.  In 18 years in power, Mr. Putin had never made a plea for support for a specific policy like this. The speech was heartfelt, animated, cajoling – and not nearly enough.  According to Russian polls, 6% were in favor of the pension reform before the speech and 80% opposed it. After Mr. Putin had spoken, the numbers were 11% and 75%.

“Mr. Putin’s approval ratings – his regime’s only claim on legitimacy – have been steadily sliding, from 79% in May, before the reform was announced, to 67% in September....bad news in a country where Mr. Putin is effectively the only politician and no critic is ever allowed on television.

“Mr. Putin’s headache can quickly become the West’s.  At the end of 2013, when his ratings were his lowest in 13 years (and only 6 points below today’s), he boosted them with the outrageous Winter Olympics – doping en masse – followed by the seizure and annexation of Crimea and the war against Ukraine.  Since then, militarized patriotism has become the key to Mr. Putin’s popularity. Tens of millions of Russians have been swayed by his narrative: Russia is surrounded by enemies but not only will the president protect the Motherland, he will also restore Russian glory lost in the Soviet  collapse....

“Today, as pension reform threatens Mr. Putin’s support, it might be feeding time again. The obvious targets for engineering another Crimea or Ukraine are Narva and Latgale, the heavily Russian-speaking enclaves in Estonia and Latvia, respectively. In addition to unleashing a patriotic flood, Mr. Putin would undoubtedly hope to expose NATO as dithering and ineffectual. A risky step to be sure, but in Mr. Putin’s political calculus, foreign adventurism may be less perilous than domestic turmoil.”

Brazil:  The presidential run-off is Oct. 28, and far-right candidate Jair Bolsonaro extended his lead over his leftist rival Fernando Haddad in an election poll released Thursday.  The Datafolha survey, published by Globo TV, had Bolsonaro at 59% to Haddad’s 41%.

An earlier Ibope poll had the exact same 59-41 margin.

Random Musings

--Presidential tracking polls....

Gallup: 44% approval of Trump’s job performance, 51% disapproval (40/56 three weeks earlier); 88% Republicans, 36% Independents.
Rasmussen: 47% approval, 52% disapproval.

--A new ABC News/Washington Post national survey gives President Trump a 41% approval rating (up five points from the last survey in August), and Democrats a 53-42 edge in the generic ballot for the House.

But, and this is significant, the share of voters who say they prefer the next Congress to be in Democratic hands as a way of providing a check on Trump has fallen from 60 percent in August to 54 percent today, while the percentage who say they want a Congress controlled by Republicans to help support the president’s agenda has risen from 34 percent to 41 percent. 

Women favor Democratic House candidates by a 59-37 margin, while men split about evenly, with 48% favoring Republican House candidates and 46% favoring Democrats.

For the first time in the ABC/WP survey, Trump receives a net favorable rating when it comes to his handling of the economy, 49-46.  That’s important.

But when you break the individual House districts down, the number that are true tossups appears to be going down, from 66 a while ago, to, according to the ABC/WaPo folks, 46-47.

And you also clearly have House races going one way, and the Senate another.  As in Republicans should be confident they are maintaining control of the latter.  But the House can still easily switch hands.  In a Monmouth University poll of a key House district that I’ve told you starts a block away from me, but isn’t my district, the Democratic challenger, Mikie Sherrill, has a 4-point lead over the Republican Jay Webber, in the race to fill Republican Rodney Frelinghuysen’s seat, the district being in Republican hands since...forever....

I still maintain this one, NJ-11, and my own, NJ-7 (incumbent Republican Leonard Lance vs. Democratic challenger Tom Malinowski) will very early in the evening on Nov. 6 tell you everything about what will go on later across the country.

NJ-7, according to FiveThirtyEight, is too close to call.

Meanwhile, also in my state, Republicans realize they have a chance to take down Democratic incumbent Bob Menendez, with polls showing challenger Bob Hugin down by 7-9 points (another, which I believe is an outlier, has a dead heat).

But Hugin has begun running a totally dishonest ad on Menendez and his legal issues, which are many as it is, but the charge in the specific ad (consorting with underage prostitutes) was dismissed in the probe of the senator’s other illicit activities. This could backfire on Hugin.  [If Hugin was going to do this, I would not have allowed Menendez time to fight back.]  But this will be a fascinating race to watch Election Night.

--In a CNN poll of potential 2020 Democratic presidential nominees, former Vice President Joe Biden was the leader of the pack at 33 percent, followed by Sen. Bernie Sanders at 13 percent, the only other candidate in double figures.

Sen. Kamala Harris (Calif.) garnered 9 percent, and Sen. Elizabeth Warren (Mass.) was at 8 percent.

New Jersey Sen. Cory Booker was tied for fifth at 5 percent with former Secretary of State John Kerry. 

It truly is amazing what a lightweight field this is...save for Biden.

--Sunday, Sen. Elizabeth Warren (D-Mass.) released a six-page genetic data report, which showed “strong evidence” Warren had a  Native American ancestor dating back six to 10 generations.  That generational range suggests Warren is between 1/64th and 1/1,024th Native American.   Those results fit with an 1894 document uncovered by the New England Genealogical Society that suggested her great-great-grandmother, O.C. Sarah Smith, was at least partially Native American.

But the results, accompanied by a slickly produced mini-documentary put out by Warren, detailing the search, and findings, only triggered further attacks from President Trump and other Republican critics.

“Now that her claims of being of Indian heritage have turned out to be a scam and a lie, Elizabeth Warren should apologize for perpetrating this fraud against the American Public,” Trump tweeted Tuesday.

Some Democrats criticized the timing of Warren’s release.

But in an interview with the Boston Globe’s editorial board, Sen. Warren defended the timing, just ahead of the midterm elections, telling the Globe Tuesday that she went public as soon as possible to begin deflecting the constant taunting from the president and her Senate challengers.

“I have an election,” Warren said.  “Donald Trump goes in front of crowds multiple times a week to attack me.  Both of my opponents have made the same attack.  I got this analysis back, and I made it public.”

When asked by the Globe if she made a mistake identifying herself as Native American as a law professor, Warren expressed regret but stopped short of admitting error.

“There’s a distinction between citizenship and ancestry. I wish I had been more mindful of that distinction.”

The Leadership of the Cherokee Nation, however, criticized Warren for her move.

“Using a DNA test to lay claim to any connection to the Cherokee Nation for any tribal nation, even vaguely, is inappropriate and wrong,” Chuck Hoskin Jr., the secretary of state for the Cherokee Nation, said in a statement after Warren’s result went public.  Other Indian leaders, however, voiced support.

Warren’s Republican challenger on Nov. 6, Geoff Diehl, has largely avoided the issue.

An in-depth Globe review of Warren’s professional history, including interviews with 31 professors on the Harvard Law hiring committee who offered her a job in 1993, found that Warren was viewed as a white woman by the hiring committees at every institution that employed her.

Kathleen Parker / Washington Post

“Now that the DNA is out of the bag, Sen. Elizabeth Warren can put her Native American heritage down for a nap – maybe.

“After 2 ½ years of being mocked by Donald Trump as ‘Pocahontas”...Warren had her DNA tested. The results released Monday showed ‘strong evidence’ that she is, indeed, a little bit Native American, possibly going back six to 10 generations....

“She had to do it.  As long as Trump breathed, Warren would be viewed by many as the caricature he had drawn.  If Trump knows anything, it’s branding – and he had painted a big P (not for ‘president’) in the middle of Warren’s forehead.  His reaction upon hearing the news?  ‘Who cares?’

“Indeed. But, of course, Trump did care, and loved the Pocahontas moniker so much that he couldn’t stop using it – over and over and over. Others also cared because Warren had listed herself as a minority in an Association of American Law Schools directory....

“There’s nothing sinister about repeating family lore that there might be Native American blood in the lineage going way back. And, until recently, there was virtually no way to prove or disprove it....

“Native American leaders didn’t exactly embrace Warren’s announcement....

“Poor Warren. All she wanted to do was defend her mother’s honor, and she has only gone and made things worse.  It seems she has no one with whom to celebrate her proud heritage.

“Ahem. As it turns out, I’m not busy,  and, I, too, am part Native American, according to the genetic-testing company 23andMe – a whopping 1 percent.  I’m also part Viking, as well as Neanderthal, but probably so are you.

“Which is to say, this is all fun and interesting – but also ridiculous.  ‘What’s your sign?’ may soon morph into ‘What’s your DNA?’  It will be nice if someday we no longer find it necessary to segregate ourselves according to our long-ago lineage. We are, after all, descended from the same source, and our differences, while interesting, are largely inconsequential.

“You’d never know it by our politics, which daily vacillates between the surreal and the absurd. In that vein, it’s hard to imagine what could top a celebrity game-show president causing a brilliant, scholarly woman to test her DNA so that he would stop teasing her and she could run for president.

“I’ve got an idea: Kathleen Parker for president on the Viking ticket.”

Daniel Henninger / Wall Street Journal

“The conventional wisdom is that the DNA report backfired and may damage Ms. Warren’s standing as a possible presidential nominee, providing fodder for ridicule from Kamala Harris, Cory Booker and Joe Biden. I  doubt it.

“Ms. Warren understands that the conventional wisdom about what works in politics died with the Trump presidency.  She has elevated herself as Mr. Trump’s most visible opponent.  Political celebrity, a straight-line function of little more than exposure, is the coin of the realm, no matter how tarnished.

“The most ambitious politicians are becoming increasingly cynical about the reality of inhabiting a world defined by social media and biased press spin.  You play the game.  Elizabeth Warren – who incidentally has created a formidable nationwide political machine – is playing it.

“Former Obama campaign manager Jim Messina criticized the timing of the Warren DNA release as pushing the Democrats off message in the run-up to the midterm elections.  Possibly, but consider some other messaging this week.

“After winning a federal court case with porn star Stormy Daniels, the president caller her ‘Horseface’ on Twitter. Then he analogized the Saudi Arabia mess to Brett Kavanaugh. One may ask: In which direction do statements like these move the needle among independent voters and undecided women in what has become the most nationalized midterm in memory? The answer may be found in another Trumpism: ‘We’ll find out.’  During the Kavanaugh hearings, one wondered why Sens. Harris, Booker and Blumenthal, among others, went so over the top so often. Perhaps it was because over-the-top looks like it works now in politics, and much else.

“None of these national politicians – Mr. Trump, Ms. Warren or the other Democrats – makes any attempt now to broaden their appeal. Left or right, they have a laserlike focus on their bases. This looks like the future of American politics: Play to a base jacked up by social media, hold it with scheduled feedings of red meat and simply force the rest of the bewildered electorate to sort it out and choose between two poles.

“An analogy to data analytics in baseball comes to mind. Striking out a lot no longer matters if a player’s vertical launch angle off the bat produces enough home runs.  In the 2016 GOP primaries, the Donald, despite routine verbal whiffs, had great launch angle.  His competition did not.

“Ms. Warren and others have seen the new reality. Critics can be made virtually irrelevant if they hit their base hard and often enough.  Nothing so exciting or animating exists in the middle anymore, which is bad news for moderates such as Mike Bloomberg or John Kasich.

“Personally, I don’t understand Elizabeth Warren’s appeal at all, with or without whatever is located on chromosome 10. But come 2020, that won’t matter.”

--Someone tell Hillary Clinton to, err, you know, shut up...at least you should feel this way if you’re a Democrat.

Clinton said Sunday that her husband’s presidential affair with Monica Lewinsky wasn’t an abuse of power – because the then-22-year-old White House intern “was an adult.”

Staggering...stunning...especially given the current #MeToo movement Hillary has championed.

--A Quinnipiac University poll of likely voters in New York has Gov. Andrew Cuomo comfortably ahead of his Republican challenger Marc Molinaro by a 58-35 margin in Cuomo’s reelection bid.

I normally wouldn’t mention the above, seeing as this is no surprise, but it’s always instructive how the poll breaks down.  Voters in New York City favor Cuomo 77-13.  Voters ‘upstate’ go for Molinaro 52-41.

--The death toll from Hurricane Michael has risen to 35, 25 in Florida, including a firefighter killed by a falling tree while helping clear debris.  Florida Agriculture Commissioner Adam Putnam said some $3 billion in timber was also lost, as pulp mills, sawmills and other production facilities were hit hard in 11 of the top timber-producing counties.  And officials are worried the downed trees can present a fire hazard.

Then we have Tyndall Air Force Base.

Editorial / Wall Street Journal

“Hurricane Michael did terrible damage in Florida last week, and that may include some of the world’s most capable military aircraft left in its path. But why can’t Air Force F-22 jet fighters, of all things, escape a storm? Answer: They lack the parts to be operational and so were stuck in hangars to take a beating.

“Air Force Secretary Heather Wilson said Sunday that the damage to an unspecified number of F-22s on Tyndall Air Force Base was ‘less that we feared.’ But maintenance professionals will have to conduct a detailed assessment before the Air Force can say with certainty that the planes will fly again.  Press reports estimate that at least a dozen planes were left on the base due to maintenance and safety issues.

“Welcome to a fighting force damaged by bad political decisions and misguided priorities.  Of the Air Force’s 186 F-22s, only about 80 are ‘mission capable,’ according to a July analysis from the Government Accountability Office. The average across the Air Force in 2017 was that about 7 in 10 planes were mission capable, which is still too low for meeting increasing demands....

“Ripping out parts from planes that work, or ‘cannibalizing,’ is now common practice in military aviation.

“Then there’s scale, or lack thereof. The Air Force in the 1990s planned for about 650 F-22s, which were designed to replace the F-15. That number fell to about 380 over time, according to GAO, but in 2009 President Obama and Defense Secretary Bob Gates convinced Congress to shut down the production line.

“At the time Messrs. Obama and Gates argued that the U.S. had to focus on defeating unconventional enemies (Islamic State), whereas the F-22 is designed for air dominance against conventional national forces, which could also be handled by the new F-35.

“This now looks like a mistake, as Russia and China improve their military technology and the F-35 continues to have a cascade of problems.  The Pentagon last week grounded the entire F-35 fleet for a fuel tube issue, though most were cleared to fly again as of Monday....

“The larger mistake of the Obama years was cutting defense willy-nilly to pay for entitlements and other priorities, which meant military units in all branches were crunched for training, flight hours and maintenance. Budget uncertainty through ‘continuing resolutions’ from Congress compounded the pain.

“Republicans in Congress and the Trump Administration this year accepted Democratic demands to spend more on income transfers to get a bump in defense spending that included some $47 billion to get planes flying. But Democrats are promising to cut defense again if they win the House.  They pretend that a vote for free health care is affordable, but damaged planes on the tarmac is one more lesson that more spending on entitlements eventually means too few planes that can fly.”

Back to Air Force Secretary Heather Wilson, she may claim the damage to aircraft on Tyndall was relatively light, but the fact is, as the Wall Street Journal reported on Monday:

“Every house had significant roof and siding damage, and some sustained more significant structural failures, Tyndall officials said on the base website. The flight line was devastated, hangars were stripped, its marina vanished and a drone runway sustained severe damage.  Numerous other structures, including Tyndall Elementary School, were in bad shape.”

Normal operations aren’t resuming anytime soon.

Tyndall officials do deserve credit for safely evacuating a staggering 11,000 people from the base and getting some planes aloft more than 48 hours before the storm.

There were no deaths or injuries, with 93 airmen riding out the storm on the base.

But this is a very serious issue to have a major base destroyed in such a fashion.  Sounds like a good ‘60 Minutes’ piece to me.

--Parts of the Florida Panhandle will be dealing with power issues for weeks to come, but on Puerto Rico, federal officials have spent $3 billion to end the longest blackout in U.S. history and return the island to pre-storm conditions.

It’s all patchwork thus far, but experts believe a total upgrade to the energy grid, to prevent future disasters like Hurricane Maria from taking the island down again, would cost $26 billion, and of course that money has not been approved as yet.  I can’t imagine it will.

--New York City marked its first weekend without a shooting in 25 years, police said Monday.

“We went Friday, Saturday, Sunday without any shootings and homicides,” New York Police Department chief James O’Neill told reporters.

The last time the most populous U.S. city of 8.5 million had a weekend without shootings was in 1993.

Every now and then you catch a break. The weekend of October 6-7 was “terrible,” in the words of the NYPD, with several shootings.

And the number of murders is on the rise again this year, after hitting a low in 2017 with 292 total – a record since the 1950s.  Though to be fair, it would seem Gotham might be headed to somewhere around 310-320 at worst. 

--If you hate leaf blowers as I do, you’ll like the following.

Adrienne Bernhard / Wall Street Journal

“Fumes, pollution and ruined Sunday mornings make leaf blowers a nuisance.  But they’re also dangerous. The emissions and fine particulate matter these devices kick up are hazardous to the health of both gardeners and homeowners. All for the sake of moving leaves from one corner of a lawn to another.

“As a teacher, I frequently hear the drone of leaf blowers from within my classroom. The noise is distracting enough while trying to discuss Bronte or Tolstoy, but outside, where I often eat lunch under the treetops, the nonstop noise seems to broadcast a dire warning: These pristine grounds come at a terrible price.

“Most leaf blowers use two-stroke engines – lightweight, compact, cheap sources of power for lawn mowers, tree trimmers and snowblowers.  The problem with these crude motors is that their intake and exhaust functions occur at the same time, meaning the fuel mixes with oil. A large share of the gasoline is then spewed out unburned, as an aerosol in the exhaust. Such fumes have been found to increase the risk of cancer, heart disease and asthma....

“Landscape associations and manufacturers insist these hyperpolluting lawn tools aren’t bothersome or harmful if used properly and protest that leaf blowers are necessary for the hard work of removing leaves and debris.  It’s true that dead leaves on a lawn don’t disintegrate, and a return to the rake doesn’t seem likely.

“Leafy trees and green lawns should no longer be our gold standard: We need to rethink our yards entirely.  Each fall, let leaves die on the ground, allow deciduous trees to generate new growth, and consider adding a rock garden with succulents or other ‘hardscapes’ that don’t require leaf upkeep, and also save water.  Outdoors, sustainable is beautiful.”

--I was reading an article on food safety in USA TODAY, and all the recent beef recalls, and the following blew me away.

“Unlike unprocessed produce or whole cuts of meat, ground beef is made up of bits and pieces from many different animals – each one with the potential to taint the whole batch.

“ ‘When you buy a chicken breast, how many animals is that?  One.  Ground beef?  As many as 400 animals in commercially processed beef,’ said Northeastern University food safety expert Darin Detwiler.  ‘Unless you buy steak from the grocer and grind it up yourself, you’re talking about Russian roulette.’

“If equipment isn’t cleared well between runs, the residue could contaminate the next production, too.

“The giant vats of mixed meat are just one part of the production process; multiple steps equals multiple potential problems.  Each point along the way – from the farm to the finished product – is a chance for pathogens to enter.

“Detwiler says the trouble can begin when the cows are still alive – on corporate farms, in confined spaces and walking around in fecal matter, which is how many pathogens are transmitted.”

Well, then the animals go to the slaughterhouse.  Bow your heads....

I think I’m going to continue to order my burgers ‘well-done,’ sports fans.  You might want to do the same.

--Finally, Marine Sgt. Maj. John Canley was awarded the Medal of Honor by President Trump for heroism in Vietnam 50 years ago.

It was at the bloody battle of Hue in 1968 when Canley took command of the undermanned Company A, First Battalion, First Marines, carrying countless wounded Marines to safety while taking shrapnel wounds and exposing himself to the enemy so that his Marines could seize a building.

“John raced straight into enemy fire over and over again, saving numerous American lives and defeating a large group of communist fighters,” Trump said at a ceremony at the White House.

“Despite sustaining serious injuries – very, very serious injuries – he continued to face down the enemy with no thought for his own safety,” Trump said.

The battle for control of Hue was one of the bloodiest of the war.  North Vietnamese soldiers and guerrillas had overrun the provincial capital during the Tet Offensive.  Canley and his Marines, outnumbered and outgunned, were sent to retake the city.  After the battle, legendary for its bloody house-to-hose fighting, Canley received the Navy Cross, two Bronze Stars and the Purple Heart.

Canley, African-American, said race wasn’t an issue.

“We didn’t have a race problem,” he said.  “We had a leadership problem.  Period.”

---

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

God bless America.

---

Gold $1230
Oil $69.37

Returns for the week 10/15-10/19

Dow Jones  +0.4%  [25444]
S&P 500  +0.02%  [2767]
S&P MidCap  +0.1%
Russell 2000  -0.3%
Nasdaq  -0.6%  [7449]

Returns for the period 1/1/18-10/19/18

Dow Jones  +2.9%
S&P 500  +3.5%
S&P MidCap  -1.5%
Russell 2000  +0.4%
Nasdaq  +7.9%

Bulls 51.9
Bears 18.3 [Two weeks earlier, 61.8 / 18.3...kind of fascinating ‘bear’ reading has varied virtually zero for months.]

Have a great week.

Brian Trumbore