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08/08/2015

For the week 8/3-8/7

[Posted 11:00 PM ET, Friday]

Edition 852

Wall Street and Washington

Between the first Republican debate (covered below) and President Obama’s speech defending his Iran nuclear deal on Wednesday, this was a most political week, prior to Washington writ large taking the rest of the month off.

I watched President Obama’s speech at American University and it was utterly disgraceful.

Obama sought to channel President John F. Kennedy, who back in 1963, also at American Univ., gave a speech on relations with the Soviet Union, just eight months after the Cuban missile crisis, for the purposes of reaching a nuclear test-ban treaty. JFK’s speech was about diplomacy. President Obama’s was about slamming his opponents and bringing up the same straw man he has employed throughout his presidency...it’s my way or war.

I discuss at length the Iran issue as well below, but I can’t help but start with the following. Since virtually day one of Obama’s first term I have decried his foreign policy agenda and what I saw on Wednesday was a president more obnoxious than ever. Dangerously so, for the United States and our allies, as some of us have been witnessing a president over just the past few months in particular who is even more divorced from reality than ever. That said....

William McGurn / Wall Street Journal

“One year ago this month, newsman James Foley was forced to his knees somewhere in the desert hills of Syria and beheaded. Within a month, Barack Obama had vowed to ‘degrade and ultimately destroy’ Islamic State, which had carried out and filmed the murder. Islamic State has since moved on to even more spectacular barbarities – throwing gay men to their death from tall buildings, burning prisoners alive, drowning other imprisoned men in cages – that barely get a mention.

“Two Augusts earlier, President Obama had made a similar promise when he laid down a ‘red line’ with Syria’s Bashar Assad over chemical weapons. President Obama’s threat notwithstanding, Mr. Assad would shortly turn these weapons on women and children. He remains in power still.

“Meanwhile, the last American combat troops pulled out of Iraq in 2011; we started withdrawing our troops from Afghanistan at about the same time; and we are about to become partners with Iran over nuclear weapons. We are less liked in the region than when Mr. Obama took office; we have managed to unite the Saudis and the Israelis against us; and we behold a Middle East as menacing and volatile as it’s ever been....

“(Yet the) truth is, Mr. Obama has largely succeeded in what he set out to do. His priority was never about winning in Afghanistan or standing up a strong government in Iraq or any of the other tough-sounding things he has thought he needed to say to make his foreign policy sound less dovish than it is. The reality is that the Obama foreign policy has been dominated by one overarching goal: getting America the heck out of Iraq and Afghanistan no matter what....

“So it’s also no coincidence that when the president has issued some hawkish declaration of resolve...it’s typically been about promising decisive action tomorrow as a way of not doing anything today.

“Indeed, far from being the incomprehensible muddle his critics see, Mr. Obama’s foreign policy choices betray a disconcerting consistency.”

Related to the above, in announcing his Clean Power Plan and sweeping curbs on carbon pollution on Monday, Obama said the following:

“Over the past six and a half years, we’ve taken on some of the toughest challenges of our time – rebuilding our economy after a devastating recession, to ending our wars in Iraq and Afghanistan and bringing almost all of our troops home, to strengthening our security through tough and principled diplomacy. But I am convinced that no challenge poses a greater threat to our future and future generations than a changing climate.”

Some of us would beg to differ, but you see again just how much the president wants us to believe his legacy is really tied to getting out of Iraq and Afghanistan, regardless of where the region goes from here....and the hundreds and hundreds of thousands who have now died on his watch. [One reliable source I read this week said the toll in Syria alone is now over 300,000. I’ll stick with 230,000+...which is more than bad enough.]

On a different topic, but related to foreign policy, negotiations on the Trans-Pacific Partnership trade deal deadlocked over a small number of sticking points, including over access to agriculture. While bilateral talks will resume soon, the deal was supposed to be finalized by now, meaning the further delay will push the U.S. ratification fight into 2016, the election year, forcing the likes of Hillary Clinton to take a stand, which she has avoided doing thus far.

Canada is refusing to open its poultry and dairy markets, while Chile is demanding a short window of protection for U.S. pharmaceutical giants; two examples of the kinds of issues remaining.

Turning to the market and the economy....the big news was Friday’s employment report for July, 215,000 jobs created, in line with expectations, with June revised up to 231,000. The unemployment rate held steady at 5.3% vs. 6.2% a year ago.

Average hourly earnings rose 0.2%, 2.1% year over year, with the labor participation rate still at the lowest level since 1977, 62.6%, while U6, the underemployment rate, continued to tick down to 10.4%, its lowest level since June 2008. The average workweek rose 0.1 hour to 34.6 hours in July.

All in all a solid if far from spectacular report that, coupled with similar data in September (the August report), should allow the Federal Reserve to finally hike the funds rate 25 basis points (1/4-point) off the zero level.

Earlier this week, Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, told the Wall Street Journal that barring a deterioration in economic activity the central bank should raise rates in September. “The economy is in a state of readiness for beginning normalization.”

In other economic news, June personal income rose 0.4%, in line with expectations, while consumption rose 0.2%. June construction spending was short, up just 0.1%, while June factory orders rose a solid 1.8%.

The July ISM manufacturing reading was 52.7, less than expected, while the ISM services mark was 60.3, the highest in ten years and far exceeding projections. The new orders’ reading was 63.8. As Ronald Reagan would have said, ‘Not bad, not bad at all.’

Finally, gasoline prices at the pump continue to fall from a June peak, down 14 cents in one month, according to AAA. With a national average of $2.62, $2.00 gas could be around the corner as refineries switch to cheaper winter gasoline blends in September.

To paraphrase Robert Duval, I love the smell of winter gasoline blends in the morning. It smells like, victory.

Europe and Asia

The Athens stock market reopened after a five-week shutdown and the key barometer promptly fell 30%, before finishing Monday down 16%. For the week the Athens exchange fell 15% as bank stocks were crushed, while the purchasing managers’ index for Greece for July plunged from 46.9 to 30.2, its lowest reading ever. The PMI signaled not just virtually zero activity in manufacturing for the month, but also the steepest drop in factory employment during 16 years of collecting data.

The factories not only saw a record drop in orders and but they were unable to acquire the supplies and raw materials they needed for production with the banks frozen.

So while Greece and its creditors would appear to be making progress on a third bailout agreement by month’s end (a bridge loan perhaps being needed in the interim), it is going to take a long time for the Greek economy to return to any semblance of normalcy. And massive bank recapitalizations must take place first.

Additionally, when it comes to the creditors, it’s still all about pension reform and accelerating privatizations that the ruling Syriza-led government is loath to act on.

Prime Minister Alexis Tsipras plans to submit a bill to the Greek parliament by Aug. 14 approving the conditions attached to a loan facility from the European Stability Mechanism, with a vote following by Aug. 19, the day before Greece is to make a 3.2bn euro ($3.5bn) payment to the European Central Bank.

There was a slew of economic data this week for the eurozone as a whole, including Greece’s putrid PMI.

Markit reported the final eurozone PMI in July was 52.4 vs. 52.5 in June.

Germany’s was 51.8 last month, France’s 49.6 (50 being the dividing line between growth and contraction). 

Italy’s, though, came in at 55.3, a 51-mo. high, while Spain’s was 53.6, a 9-mo. low.

On the services side, the PMI for Italy was 52.4 vs. 53.4 in June; 59.7 in Spain vs. 56.1; and 53.8 vs. 53.7 in Germany.

In terms of figures on industrial production, Germany’s was down 1.4% in June over May, a surprise and up just 0.6% year over year. France’s industrial production was up the same 0.6% annualized.

But Spain’s was up 4.5% annualized in June, the best pace since 2010.

Non-euro U.K. saw industrial production rise 1.5% annualized in June, while a reading on the service sector came in at 57.4 in July vs. 58.5 in June, still very strong.

Euro retail sales were down 0.6% in June over May.

One other item on Spain, the Catalan regional government of Artur Mas has officially called early elections for Sept. 27 that he intends to use as a referendum on independence from Spain.

Mas said Spain’s decision not to allow the region to hold a referendum last year left him no choice but to call elections now and use them as a test of public opinion.

Mas’ ruling Convergence party and the region’s second party, the Republican Left of Catalonia, say they will unilaterally leave Spain if they obtain a majority, while Madrid has ruled out any possibility of secession.

Opinion polls show a slim majority of Catalan voters oppose independence. Catalonia’s capital is Barcelona and the region accounts for about one-fifth of the nation’s GDP, with Catalonia long complaining it doesn’t get its fair share in funding from Madrid.

On the immigration front, the British and French governments warned the world is facing a “global migration crisis.”

Writing in the Telegraph newspaper, Britain’s Home Secretary, Theresa May, and her French counterpart, Bernard Cazeneuve, warned would-be immigrants planning to make the “desperate” journey in search of a better life that Britain’s streets “are not paved with gold.”

Britain announced it was cutting the weekly cash allowances that support thousands of failed asylum seekers with families.

But May and Cazeneuve also demanded Greece, Italy and other European countries do more to stop the flow of migrants from Africa.

The crisis between Dover and Calais is causing huge losses in commerce and extensive delays for holidaymakers using the route.

In the Mediterranean, a boat with an estimated 600 migrants capsized off the coast of Libya, with about half dying, according to aid groups. Italy was coordinating a multinational rescue effort. An estimated 2,100 migrants have perished crossing the Mediterranean this year. About 188,000 have been rescued.

As for Greece, nearly 50,000 entered the country in just one month and 130,500 have arrived since the start of the year!...more than five times the figure at this point last year.

Turning to Asia...the Caixin (formerly HSBC) manufacturing PMI for China in July fell to 47.8, down from 49.4 in June, below 50 a fifth consecutive month. [The official Chinese govt. reading for manufacturing last month was 50.0 vs. 50.2.]

The services PMI was 53.8 vs. 51.8 in June.

Separately, according to Caixin (a Chinese financial magazine) and the Financial Times, who saw a closed-door speech by China’s banking regulator, the percentage of non-performing loans at Chinese banks rose 35% from a year earlier; an acceleration from the 22% annual rise in bad loans through the end of 2014.

In Japan, the manufacturing PMI for July was 51.2, up from 50.1 in June, while the services figure was the same 51.2 vs. 51.8 the prior month.

Some other relevant manufacturing PMIs in the region for July...

South Korea: 47.6 vs. 46.1 (June), and Taiwan: 47.1 vs. 46.3...both not good.

Street Bytes

--The Dow Jones has fallen seven straight sessions for the first time since Aug. 2011. With its loss of 1.8% this week, it is now down 2.5% for the year. The S&P 500 lost 1.3% and is up only 0.9% for 2015, while Nasdaq lost 1.6%.

A good example of today’s environment is industrial electrical equipment manufacturer Emerson Electric, which reported revenues that were down 13% year over year in the second quarter. It’s all about sluggish growth worldwide in capital spending due to falling oil prices and punk emerging market activity.

--U.S. Treasury Yields

6-mo. 0.21% 2-yr. 0.72% 10-yr. 2.16% 30-yr. 2.82%

The short end of the curve rose sharply on the expectations the Fed will move sooner than later.

--July was another strong month for U.S. auto sales, up 5.3% to 1.51 million vehicles, a pace set to exceed 17 million for the year for the first time since 2001, according to Autodata Corp.

GM sales rose 6.4%, riding a boom in truck and SUV sales, Ford Motor Co.’s increased 4.9% and Fiat Chrysler said its sales gained 6.2%. Nissan and Honda posted gains of nearly 8% each, while Toyota’s rose less than 1%, but this was off a strong July 2014.

With the average price of gas at the pump down $1 over the past year, demand for fuel-efficient vehicles is tumbling. Ford said its sales of its C-Max hybrid, for example, plunged 36% in July.

--America’s largest media companies were slammed this week after Walt Disney revised its growth outlook for ESPN and Discovery Communications missed revenue estimates.

Viewers are seeking better value for their cable and satellite packages, leading many to “cut the cord,” which will be the key term for the next few years as viewers seek online alternatives such as Netflix, or skinnier “bundles.”

Shares in Disney cratered 8.5% and Time Warner, 21st Century Fox and Discovery fell between 6 and 9 percent.

What triggered the sell-off was a fairly simple comment by Disney that, despite record profits, ESPN was experiencing “modest subscriber losses,” saying revenues from its cable and satellite partners would fall “a bit short” of expectations.

ESPN has dominated the cable business from the standpoint that it can charge premium fees from advertisers and distributors. It still has 92.9 million subs and distributors pay the network some $6.04 per sub per month – a figure slated to rise to $8.38 by 2018, according to SNL Kagan.

A day after the earnings release and conference call with analysts, CEO Bob Iger defended ESPN in an interview with CNBC, saying the sports network “ports well to any new platform whether that’s a smaller bundle, whether that’s an over the top package of programming or whether it’s a direct to consumer business.”

Iger added that Disney had invested in ESPN, which “gives (it) the ability to essentially manage through whatever disruption is going on.”

Nonetheless, this single change in tone by Iger and Disney hit the sector big time, as some wonder just how swift the change away from traditional television has become. [Matthew Garrahan and Eric Platt / Financial Times]

My attitude would be, yes, bundles are going to change, but the distribution companies will still find a way to make substantial revenues and generate strong profits.

Back to Disney, theme park profits grew 9 percent, and revenue rose 4 percent.

One other, Viacom shares fell by as much as 20%, as group revenues declined from $3.4bn to $3.1bn. Revenues from U.S. advertising fell 9% in the quarter.

--Shares in Apple have been struggling mightily recently after hitting a high of $134 in April. Analysts maintain the company’s future is more than solid but the market is concerned about iPhone deceleration and the slowdown in market share in China, among other items.

Well I’ve been saying it better be concerned about China, where Apple has staked much of its future growth. Relations between the U.S. and China continue to worsen and Beijing has every incentive to play the nationalism card. The Chinese can slam the door on all American product any time they want. And mark my words, they will...sooner than later. One military accident in the South China Sea, for example, and any U.S. multi-national with substantial business there will see its stock collapse.

--Twitter shares fell to an all-time low on Thursday, closing at $27.54, just slightly over its IPO price of $26 in November 2013. The first day closing price back then was $44.90 and its record high of $73.70 was set in December 2013.

Last week Twitter executives spoke of it taking “considerable” time to reignite user growth, which has been flat in two of the last four quarters in the U.S.

--Tesla Motors Inc.’s second-quarter loss grew to $184 million, compared with a loss of $62 million a year earlier. But ex-charges the loss was narrower. Revenue rose 24% to $955 million. 

The company delivered a record 11,532 vehicles in Q2, but Tesla downgraded its delivery forecast for all of this year to 50,000 to 55,000 of the Model S and Model X, the new SUV. Previously, CEO Elon Musk had talked about 55,000 but there are supply issues with the Model X and seeing as the vehicle was supposed to be ready a year ago, that’s rather inexcusable. 

The shares dropped $24 to $246 on Thursday, and then another $3.60 on Friday.

--After a decade of growth in China, BMW sales fell there last quarter. The carmaker said, “If conditions on the Chinese market become more challenging, we cannot rule out a possible effect on the BMW Group’s outlook.”

The company said there has been a shift towards lower-margin compact vehicles overall in China.

--Greenlight Capital, the hedge-fund firm led by David Einhorn, fell 6.1% in July, bringing losses in Greenlight’s main fund to 9% in 2015, according to an e-mail sent to clients and obtained by Bloomberg News. The fund has been hit by Greenlight’s positions in gold and oil. To be fair, the main hedge fund gained an average of 19% per year from its inception in May 1996 through the end of last year.

--Private-equity firm Carlyle Group LP split with the founders of its Vermillion commodity hedge-fund firm after the flagship fund saw assets plunge to less than $50 million from $2 billion.

Vermillion’s Viridian commodity fund lost 23% in 2014, leading to a wave of investor redemptions.

--Activist investor Bill Ackman’s Pershing Square Capital Management LP revealed it has built a $5.5 billion stake in Mondelez International Inc., the maker of brands such as Oreo cookies, Ritz crackers and Cadbury chocolates with revenues of $34 billion annually.

Ackman’s stake amounts to a whopping 7.5%, Ackman betting on Mondelez figuring out how to grow revenues faster and cut costs, or sell itself to a rival such as Kraft Heinz Co. The shares did nothing in response.

--Shares in Tyson Foods tumbled more than 7% after the meat processor warned of soaring cattle costs, combined with weaker export prospects as a result of the stronger dollar. Beef accounts for 42% of Tyson’s sales.

--Shares in Heineken, the world’s third-largest brewer, rose 5% after results for the first half of the year came in stronger than expected.

Sales in Western Europe were down 3%, but this was up against strong comparisons with 2014, when volumes rose 6.5% on the heels of the World Cup.

Volume growth in the first six months in the Asia-Pacific was up 6.1%.

--Sears Holdings Corp. said same-store sales slumped 10.6% last quarter, its second consecutive period of double-digit declines.

Sales at Sears stores fell 13.9% while those at Kmart were down 6.9%. This isn’t good, sports fans.

--Wendy’s revenues fell 3.2% in the quarter ended June 28 but this was due to its program of unloading company-owned restaurants to franchisees, which then allows for a more stable income stream based on franchisees’ royalty and rental fees.

In North America, same-restaurant sales increased 2.2%, beating analyst expectations.

--McDonald’s announced it was cutting 225 corporate jobs, 135 in its Oakbrook, Ill., headquarters.

--From the Los Angeles Times: “At least four men ticketed by Los Angeles International Airport police while driving for Uber’s low-cost car service have criminal convictions that would bar them from operating a taxi in Los Angeles, records show.

“The drivers have been convicted of child exploitation, identify theft, manslaughter and driving under the influence, according to court records. Each offense would make them ineligible for a Los Angeles taxi permit.”

Not good for Uber, seeing as the Los Angeles City Council is about to weigh in on whether to assert jurisdiction over a new permit process that would allow Uber and other app-based companies to legally pick up passengers at LAX; let alone raising questions about how Uber screens drivers.

--Tom Hayes, a 35-year-old former yen derivatives trader at UBS and Citigroup, was found guilty of eight counts of conspiring to rig Libor, the first conviction in the global scandal over the manipulation of benchmark interest rates. He was sentenced to 14 years in jail in a case that came three years after a then-record fine against Barclays sparked a global outcry.

“While at UBS, he generated about $260m in revenues over three years, attracting the interest of competitors including Lehman Brothers and Goldman Sachs, which both tried to recruit him. He left UBS for Citi at the end of 2009 after a dispute over pay. Citi fired him after less than a year, when they discovered he was trying to manipulate Libor.” [Lindsay Fortado and Caroline Binham / Financial Times]

--Wearable technology company Fitbit saw its revenue beat expectations in the second quarter and more than triple to $400 million, but margins fell due to higher spending on new products.

--According to Bloomberg, only 4% of the top students in the 2015 graduating class at Harvard Business School said they wanted to work at an investment bank.

--Forecasters at the Climate Prediction Center in College Park, Maryland, have increased the odds of a quiet hurricane season from 70% to 90% (90% chance of a below-normal season) due to a strengthening El Nino, which discourages tropical cyclones from forming. 

In a normal season, there are a dozen named tropical storms, half a dozen hurricanes and three major hurricanes. Now the Climate Prediction Center is saying six to 10 named storms, one to four of which could become hurricanes. Zero or one could reach “major” strength with winds of at least 111 mph. [Scott Dance / Baltimore Sun]

--Netflix Inc. is now offering as much as one year of paid time off to new mothers and fathers in what has to be the most generous parental leave policy in the U.S. New parents can literally be away as much as they want in the first 12 months after a child’s birth or adoption.

Netflix already lets employees take as much vacation as they want.

Seeing as I’ve taken one week off in 16 ½ years...it probably wouldn’t be prudent for me to comment.

--Puerto Rico defaulted on some of its debt for the first time in its history and I got a kick out of a New York Times story that said this “reverberated through the financial markets on Tuesday,” because it didn’t. As I’ve said for years this is a non-issue and, save for a few municipal bond funds and individual investors, it’s been a big whoopty-damn-do.

It’s also been so well-telegraphed that investors and portfolio managers have had more than enough time to adjust. 

Yes, it’s a big deal if you live in Puerto Rico, and more and more want to come here because of the awful situation the island’s finances are in, but there has never been a reason to lose sleep over this story.

--Super Bowl 50 is already attracting record advertising rates, with 30-second TV spots selling for a record $5 million, as noted by CBS President and CEO Les Moonves in an earnings call the other day. NBC raked in a record $4.5 million for 30 seconds last year. The game-time ads have been increasing $500,000 a year since at least 2012.

The Super Bowl is Feb. 7, 2016, in San Francisco.

Foreign Affairs

Iran: American voters oppose by a 57-28 percent margin the nuclear pact with Iran, according to a Quinnipiac University national poll. Republicans oppose it 86-3 and independents 55-29, while Democrats support it 52-32. Women, overall, oppose it 56-27.

Charles Krauthammer / Washington Post

“(The above mentioned Quinnipiac poll) is astonishing. The public generally gives the president deference on major treaties. Just a few weeks ago, a majority supported the deal.

“What happened? People learned what’s in it....

“Inspections? Everyone now knows that ‘anytime, anywhere’ – indispensable for a clandestine program in a country twice the size of Texas with a long history of hiding and cheating – has been changed to ‘You’ve got 24 days and then we’re coming in for a surprise visit.’ New York restaurants, observed Jackie Mason, get more intrusive inspections than the Iranian nuclear program.

“Snapback sanctions? Everyone knows that once the international sanctions are lifted, they are never coming back. Moreover, consider the illogic of President Obama’s argument. The theme of his American University speech Wednesday was that the only alternative to what he brought back from Vienna is war because sanctions – even the more severe sanctions that Congress has been demanding – will never deter the Iranians. But if sanctions don’t work, how can you argue that the Iranians will now be deterred from cheating by the threat of...sanctions? Snapback sanctions, mind you, that will inevitably be weaker and more loophole-ridden than the existing ones.

“And then came news of the secret side agreements between Iran and the International Atomic Energy Agency. These concern past nuclear activity and inspections of the Parchin military facility where Iran is suspected of having tested nuclear detonation devices.

“We don’t know what’s in these side deals. And we will never know, says the administration. It’s ‘standard practice,’ you see, for such IAEA agreements to remain secret.

“Well, this treaty is not standard practice. It’s the most important treaty of our time. Yet, Congress is asked to ratify this ‘historic diplomatic breakthrough’ (Obama) while being denied access to the heart of the inspection regime.

“Congress doesn’t know what’s in these side agreements, but Iran does. And just this past Monday, Ali Akbar Velayati, a top adviser to the supreme leader, declared that ‘entry into our military sites is absolutely forbidden.’

“One secret side deal could even allow Iran to provide its own soil samples (!) from Parchin. And now satellite imagery shows Iran bulldozing and sanitizing Parchin as we speak. The verification regime has turned comic.”

Editorial / New York Post

“President Obama made it explicit Wednesday for everyone to hear: Only hard-headed Israel, which apparently is intent on war, he said, is standing in the way of his dubious nuclear deal with Iran.

“ ‘This is such a strong deal,’ he said in a speech at American University, that ‘every nation in the world that has commented publicly, with the exception of the Israeli government, has expressed support.’

“He forgot one other opponent: the American people.

“No less than four different major national polls over the past week show rising public disapproval of his deal – by as much as 2-to-1 against. Americans plainly don’t buy Obama’s claim that no better deal was possible, and that rejecting this one guarantees ‘some sort of war.’

“Opposing the deal, the president claimed, puts Israeli Prime Minister Bibi Netanyahu in league with the same Iranian hardliners who threaten to destroy Israel and America.

“Not that Obama takes those threats all that seriously.

“ ‘Just because Iranian hardliners chant ‘Death to America,’ does not mean that that’s what all Iranians believe,’ he said.

“Well, the hardliners who believe it happen to run Iran’s government.”

Jose Maria Aznar (former president of Spain) / Wall Street Journal

“There is only one thing the ayatollahs in Tehran want more than a nuclear bomb: that is for their regime to survive.  Thanks to the agreement announced on July 14, they will get both. The deal will strengthen their tyrannical, revolutionary and fundamentalist regime, and they will have the bomb within a matter of years....

“The evil is in the nature of the regime itself, which believes that violence is a legitimate tool to achieve expansionist goals. The Obama administration says that pouring billions of dollars into Iran will tame its aspirations and moderate its behavior. But that argument is based in idle hope. It runs against all we know about the Islamic Republic since its founding in 1979, as well as our experience with other tyrannical regimes, like North Korea’s. Dictators do not dissolve when they are showered in money....

“President Obama presents a false dichotomy in suggesting that postponing Iran’s path to the bomb is the only way to avoid bloodshed now. There are effective alternatives that fall between this agreement and war....

“The Iranians didn’t come around to talking about their nuclear program after years of secret efforts because they suddenly lost interest. Sanctions worked....

“In Europe in the 1920s and 1930s many competent leaders made serious mistakes based on false assumptions. In America too, there have been moments – such as Jimmy Carter’s handling of Iran – when leaders have been plainly wrong. Politicians are not immune to making mistakes. But they can learn from history. Sooner or later the West will have to confront Iran – only later it will face an emboldened, better prepared, modernized and richer Iran that will do its best to attain the goals we’ve always tried to prevent.”

Back to Ali Akbar Velayati, the top adviser to Supreme Leader Khamenei, as noted in the Wall Street Journal he appeared on Al-Jazeera on July 31 and was asked about U.N. inspections of Iran’s military sites. Here was his response, according to Memri translation service:

“Regardless of how the P5+1 countries interpret the nuclear agreement, their entry into our military sites is absolutely forbidden. The entry of any foreigner, including IAEA inspectors or any other inspector, to the sensitive military sites of the Islamic Republic is forbidden, no matter what.”

Interviewer: “That’s final?”

Velayati: “Yes, final.”

Alan Dershowitz / Jerusalem Post

“President Obama, in his desperation to save his Iran deal, has taken to attacking its opponents in personal ways. He has accused critics of his deal of being the same republican war mongers who drove us into the ground war against Iraq and has warned that they would offer ‘overheated’ and often dishonest arguments. He has complained about the influence of lobbyists and money on the process of deciding this important issue, as if lobbying and money were not involved in other important matters before Congress.

“These types of ad hominem arguments are becoming less and less convincing as more Democratic members of Congress, more liberal supporters of the President, more nuclear experts and more foreign policy gurus are expressing deep concern, and sometimes strong opposition to the deal that is currently before Congress.

“I, myself, am a liberal Democrat who twice voted for President Obama and who was opposed to the invasion and occupation of Iraq. Part of the reason I was opposed was because I considered, and still consider, Iran a much greater threat to the security of the world and to the stability of the Middle East than Iraq ever was....I recognize some advantages in the (Iran) deal, but strongly believe that the disadvantages considerably outweigh them and that the risks of failure are considerable....

“The President would be well advised to stop attacking his critics and to start answering their hard questions with specific and credible answers.”

Thursday night, New York Democratic Sen. Chuck Schumer, a man set to take over the party leadership from Minority Leader Harry Reid, took a courageous stand, saying he will oppose Obama’s deal to limit Iran’s nuclear program.

“Advocates on both sides have strong cases for their point of view that cannot simply be dismissed,” Schumer said in a lengthy statement. “This has made evaluating the agreement a difficult and deliberate endeavor, and after deep study, careful thought and considerable soul-searching, I have decided I must oppose the agreement and will vote yes on a motion of disapproval.”

Aside from weeks of meetings with administration officials involved in the negotiations, Schumer has been meeting with former Sec. of State Henry Kissinger.

So far, 12 Senate Democrats and one Democratic-leaning independent, Senator Angus King of Maine, have announced their support for the deal. Two others, Bernie Sanders and Rhode Island Sen. Jack Reed, will also shortly announce their support.

But Obama needs 34 votes to sustain a promised veto of legislation disapproving the Iran deal, which Republican leaders in the House and Senate vow to pass in September.

As for the Iranian side, President Hassan Rouhani called the deal this week “more than what was imagined,” saying Iran would start implementing its terms by next month to speed up the process of sanctions removal.

“The lifting of the sanctions will start, the atmosphere will change, investment will come to the country, our hands will be untied to sell oil,” Rouhani said, adding the agreement placed no limits on Iran’s missile strength.

Iraq/ISIS/Syria: It is a travesty that the U.S. government has spent as much as $500 million training all of 60 rebels to fight the war in Syria and today, there is no confirmation just how many are still alive. The al-Qaeda-linked Nusra Front attacked Western-backed rebels in northern Syria last weekend and seeing as how the Nusra Front has a history of crushing those who receive support from the West, they likely inflated major damage.

“Division 30” is the name of the unit of U.S.-trained forces and the Obama administration was the last to learn the unit’s leader and several of his soldiers were captured by the Nusra Front as soon as they entered Syria. It can be safely assumed that virtually all of the 60 are already dead, captured or out of the fight.

Nice policy, Mr. Obama. Actually, the tragic farce of it all is that the administration announced it had decided to provide air cover to the group if they come under attack by the Assad regime, but after last weekend, what are we defending?

Meanwhile, Turkish President Erdogan is only adding to the murkiness of the situation in Syria as his air force bombs the Kurds, who have proved to be the most effective fighters against ISIS, which is only hurting the chances of a lasting settlement of the Kurdish question in Turkey, while weakening the fight against IS.

Saudi Arabia: At least 17 were killed at a mosque used by Saudi special forces, a probable IS terror attack.

On a lighter note, King Salman was forced to cut short a holiday on the French Riviera at his private villa because more than 100,000 signed a petition protesting the closure of the public beach down below.

Salman and his entourage of “1,000-strong” have moved on to Morocco. 1,000! [BBC News]

Israel: The Israeli people have long known, as has your editor, that a prime threat to the nation’s existence lies from within. Yitzhak Rabin, after all, was assassinated by an Israeli extremist, not some outside force.

This week, Israeli leaders proposed a series of new measures to curb “Jewish terrorism,” following a wave of extremist violence that left Israeli and Palestinian children dead in knife and arson attacks.

One Israeli teenager died after being stabbed by a Jewish extremist at a gay pride parade last week. And you had the lethal arson attack in a Palestinian village that resulted in a toddler being burned to death. [Did you see the perpetrator in this one, under arrest? He was laughing. I wanted to reach through the television screen and strangle the bastard myself.]

Defense Minister Moshe Yaalon said on Sunday that Israeli authorities should be allowed to employ the same heavy-handed measures against Israeli terrorism suspects as the state uses against Palestinian suspects in the occupied West Bank...including the ability to hold detainees for months, and sometimes years, in prison without presenting charges.

When Israeli President Reuven Rivlin spoke out against attacks by Jewish extremists, he said he felt shame that the violence had come “from my own people.” Rivlin was then deluged with death threats on social media, called a “traitor” and a “terrorist” on posts written in Hebrew. Despicable.

For his part, Prime Minister Netanyahu applauded Israeli leaders who condemned the extremists, while wondering why Palestinian leaders praise acts of terror on their side. [William Booth and Ruth Eglash / Washington Post]

China: At a Southeast Asian security summit, China’s foreign minister, Wang Yi, maintained his country had halted land-reclamation efforts in the South China Sea, but China has long claimed almost all of the area and says it has the right to build there.

The secretary general of the Association of Southeast Asian Nations (Asean), Le Luong Minh, said China’s expansionism in the South China Sea was “dangerous.”

Earlier, Sec. of State John Kerry met with his Chinese counterpart and encouraged China “to halt problematic actions,” according to a senior official on the scene, who spoke to the Wall Street Journal.

Philippines foreign secretary Albert Del Rosario condemned China’s activities.

“We see no let up on the unilateral and aggressive activities of our northern neighbor in the South China Sea,” he said. [Sydney Morning Herald]

Here’s the bottom line. The Chinese are lying, as usual. Construction on the artificial islands continues.

Separately, David E. Sanger of the New York Times reports: “The Obama administration has determined that it must retaliate against China for the theft of the personal information of more than 20 million Americans from the databases of the Office of Personnel management, but it is still struggling to decide what it can do without prompting an escalating cyberconflict.”

There is no sign a response will necessarily happen soon.

There have been two awful escalator accidents in China in recent weeks. One mother was carrying her two-year-old at a shopping mall when she “fell through the floorplate” and was ground up by the machinery, though she was able to push her son to safety before dying the worst death possible.

In Shanghai last weekend, a cleaner at a mall had his leg amputated after it became stuck in an escalator.

Russia: U.S. officials told NBC News that Russia launched a “sophisticated cyberattack” against the Pentagon’s Joint Staff unclassified email system, which has been shut down and taken offline for two weeks. The officials report that Russian hackers probably coordinated the cyberassault via encrypted accounts on social media.

The officials say it isn’t clear if the attack was sanctioned by the Kremlin, but, “It was clearly the work of a state actor,” the officials told NBC.

No classified information was seized or compromised.

On a different matter, Matthew Bodner / Moscow Times:

“The NATO military will reduce in September the number of planes patrolling Baltic skies on the lookout for Russian bombers by 50 percent amid a moderate decrease in Russian bomber and fighter jet incursions along alliance airspace in the region, a NATO representative told the Moscow Times on Wednesday.”

Regarding Ukraine, it is rapidly turning into a frozen conflict in the eastern part of the country, the Donbas region. As a professor at Rutgers University-Newark and commentator on Ukraine affairs, Alexander Motyl, told Defense One’s Brian Whitmore:

“Freezing the conflict is one of the better solutions for Ukraine and is actually bad for the Russians,” Motyl said. “The reason is that the Donbas enclave that is occupied by Russian and separatist troops is an economic mess. ...It is [to] Ukraine’s advantage to keep that out of its control for as long as possible and for as much as possible, and it is to Russia’s disadvantage to be responsible for it.’”

Brian Whitmore: “So if a deadlock favors Ukraine, then Russia understands that it has to break the deadlock. If Russia decided to issue passports to residents of the rebel-held territories in eastern Ukraine, it would change the nature of the conflict overnight.”

Clearly Moscow is also aggressively exploring ways to bring down the government in Kiev, though it doesn’t have a viable mouthpiece for effecting such a change, yet.

One other...the Kremlin formally staked a claim on Tuesday to a vast area of the Arctic Ocean, including the North Pole. It’s now up to a UN committee to rule on this and under a 1982 UN convention, the Law of the Sea, “a nation may claim an exclusive economic zone over the continental shelf abutting its shores. If the shelf extends far out to sea, so can the boundaries of the zone. The claim Russia lodged on Tuesday is based on that provision and argues that the shelf extends far north of the Eurasian land mass, out under the planet’s northern ice cap.

“Russia submitted a similar claim in 2002, but the United Nations rejected it for lack of scientific support. So this time, the Kremlin has offered new evidence collected by its research vessels....

“Denmark submitted an expanded claim of its own to the United Nations last year, seeking control of economic activity around the North Pole and asserting that the area is part of the continental shelf jutting north from Greenland, not Russia.” [Andrew E. Kramer / Sydney Morning Herald]

Meanwhile, the Obama administration filed a claim for the Island of Misfit Toys.

Afghanistan: A new U.N. report revealed civilian casualties in Afghanistan have reached their highest level since the body began keeping detailed records six years ago. Overall casualties (dead and wounded) hit a peak of 4,921 for the first six months of the year, up 1% from 2014. At least 70% were perpetrated by the Taliban.

At least eight were killed on Friday in a massive car bomb in Kabul that injured a staggering 400. The target was probably an army compound but the wreckage was concentrated in a commercial district where it was feared many were buried in the rubble. It’s thought the attack was the work of the Taliban.

North Korea: The government created a new time zone – Pyongyang Time – to cast off the legacy of “wicked Japanese imperialists,” with the new time zone to take effect Aug. 15 to mark the 70th anniversary of the end of World War II and the moment of the country’s independence from Japanese rule.

Since Japan colonized the country in 1910, North Korea’s clocks have been set to the same time as Japan and South Korea. The new time zone, 8:30 ahead of GMT, is a reversion to its pre-colonial past.

North and South Korea split into two sovereign nations following their 1945 liberation from the Japanese.

Malaysia: While the investigation into MH370 has been reinvigorated with the discovery of some parts of the aircraft on Reunion island, Malaysian Prime Minister Najib Razak is under extreme heat these days as the country’s anti-corruption body confirmed almost $1bn ($962 million) had been deposited into Najib’s personal bank account, the money being from a donor, though the identity of same has not yet been revealed. The Wall Street Journal first reported investigators had traced the deposits in early July.

Canada: Prime Minister Stephen Harper called federal elections for October 19. Harper’s Conservative party first took power in 2006 and has won two elections since then, but over the past two years, concerns over the economy and ethics issues have eroded some of his support. More on this in coming weeks, but the above-mentioned TPP trade deal is big in this vote.

Random Musings

--To determine the field for the first big debate, Fox News took an average of the five most recent national polls and the result was Donald Trump (23.4%), Jeb Bush (12.0%), Scott Walker (10.2%), Mike Huckabee (6.6%), Ben Carson (5.8%), Ted Cruz (5.4%), Marco Rubio (5.4%), Rand Paul (4.8%), Chris Christie (3.4%) and John Kasich (3.2%).

Rick Perry was the big one left out with 1.8%. The five polls were conducted by Bloomberg, CBS News, Fox News, Monmouth University and Quinnipiac University.

--The Monmouth national poll had Trump at 26%, followed by Bush at 12% and Walker at 11%.

--A new Wall Street Journal/NBC News survey (not included in the Fox debate tally) had Trump at 19% of GOP primary voters, followed by Scott Walker at 15%, Jeb Bush at 14% and Ben Carson 10% (slightly surprised he was fourth in this one). [Bush dropped from his 22% reading in the June WSJ/NBC poll.]

--In a WMU Granite State Poll, back in Feb. ’15, Clinton would beat Bush 51-39 in a hypothetical matchup in New Hampshire. Today it is 46-45 Bush.

Rand Paul trailed Clinton 50-40 in Feb. ’15, and today leads 45-43. Donald Trump trails Clinton 50-40. Scott Walker leads Clinton 45-43. Clinton leads Marco Rubio 44-43.

--In the aforementioned Wall Street Journal/NBC News poll, Hillary Clinton’s support among white women is declining. In June, 44% had a favorable view of her, compared to 43% who didn’t. In July, only 34% of white women saw her in a positive light, compared to 53% who had a negative impression of her.

In 2012, Obama lost white women voters by 14 points to Mitt Romney.

The numbers regarding Clinton are startling. “In the first three months of the year, suburban women by a margin of 18 points had a positive view of Mrs. Clinton. In July, those numbers took a dramatic turn for the worse. By a five-point margin, suburban women had a negative view of Mrs. Clinton.” [WSJ]

In July, among independents, both sexes had soured on her. Just 27% had a positive image, vs. 52% who had a negative view.

And then you have African-Americans. In June, by a margin of 81% to 3%, they had a positive view of Clinton. In July, it was only 66% positive, 15% negative. That’s potentially huge news for 2016 if she can’t garner anything close to what Obama did among this group.

But Clinton is still leading her closest Democratic challenger, Vermont Sen. Bernie Sanders, 59% to 25%. However, her figure is down from 75% in June.

--The Washington Post reported Donald Trump had a private phone conversation with Bill Clinton in late May, at the same time Trump was nearing a decision to run for the White House. Both Trump and Clinton associates told the Post, “Clinton encouraged Trump’s efforts to play a larger role in the Republican Party and offered his own views of the political landscape.” A Clinton aide, however, said 2016 was not specifically discussed “and that it was only a casual chat.”

The revelation came as many Republicans question Trump’s ties to Democrats.

--Trump is leading Chris Christie...in New Jersey... according to a Rutgers-Eagleton poll, 21% to 12%.

--David Brooks / New York Times

“We are now living in a time of economic anxiety and political alienation. Just three in 10 Americans believe that their views are represented in Washington, according to a CNN/ORC poll. Confidence in public institutions like schools, banks and churches is near historic lows, according to Gallup. Only 29 percent of Americans think the nation is on the right track, according to Rasmussen.

“This climate makes it hard for the establishment candidates who normally dominate our politics. Jeb Bush is swimming upstream. Hillary Clinton may win through sheer determination, but she’s not a natural fit for this moment. A career establishment figure like Joe Biden doesn’t stand a chance...

“On the other hand, bumper-car politicians thrive. Bernie Sanders is swimming with the tide. He’s a conviction politician comfortable with class conflict. Many people on the left have generalized, vague hunger for fundamental systemic change or at least the atmospherics of radical change.

“The Times are perfect for Donald Trump. He’s an outsider, which appeals to the alienated. He’s confrontational, which appeals to the frustrated. And, in a unique 21st-century wrinkle, he’s a narcissist who thinks he can solve every problem, which appeals to people who in challenging times don’t feel confident in their understanding of their surroundings and who crave leaders who seem to be....

“Never before have we experienced a moment with so much public alienation and so much private, assertive and fragile self-esteem. Trump is the perfect confluence of these trends. He won’t be president, but he’s not an aberration. He is deeply rooted in the currents of our time.”

--So we move on to the debate...Carly Fiorina cleaned up in the ‘B’ team undercard, which I just saw clips of, while in the main event, let’s just say, everyone has their own opinion.

Mine is that there were no losers...no one needs to slink away in shame.

But to me the four winners were John Kasich, Rand Paul, Marco Rubio, and Dr. Ben Carson.

In the case of Paul, he played well to his base, I imagine, though I need to add his actual campaign, behind the scenes, is a mess, witness the below story.

Most Americans should have come away with the impression Sen. Rubio deserves to be on the stage as much as anyone; Gov. Kasich is not only likeable, he’s incredibly qualified; and for those listening carefully, Ben Carson’s statement where he worked in Ukraine was very solid, and his closing statement was terrific.

The rest, again, didn’t really hurt themselves (yes, including Donald Trump), but I doubt many of you were rushing to the phone or the computer to contribute to their campaigns before going to bed.

Back to Fiorina, I’ve always been impressed when I’ve seen her appearances on the networks the past few months. It’s early. She’ll get her shot next debate. You never know.

A different take on Donald Trump...Jennifer Rubin / Washington Post:

“(Regarding the ‘A’ team), with the exception of Donald Trump, most showed themselves to be serious contenders and well-rehearsed. Trump started off with a refusal to pledge to support the nominee and got roundly booed. (Sen. Rand Paul, whose campaign is in total disarray, chose to jump in to attack Trump as buying all sorts of candidates.) Asked to disclose his information that the Mexican government was sending criminals across the border he repeated his assertion, but no facts. Responding to a question about sexist statements, he declared the country suffered from too much political correctness, drawing hisses when he said he wouldn’t be so nice to Megyn Kelly since she was not being so nice to him. His most egregious moments may have been his defense of a single-payer system and his insistence that he gave money to liberal Democrats who did what he told them to do. It was cringe-worthy, as was his defense of multiple bankruptcies and his attempt to justify his flip-flops on issues like abortion. His volume was high, his content low. If anyone thought there was a serious candidate beneath all that hair, they were disappointed. His bombast verged on self-parody, perhaps demonstrating that a blowhard entertainer isn’t the best bet for president. He showed that his downfall will ultimately be his own obnoxious personality and lack of sane policies.”

--Nice ratings for Fox...the debate drawing 24 million, the most ever for a primary debate. And kudos from every other network for the way Fox drew it up. Nice to see.

--The FBI is asking questions about the security of Hillary Clinton’s email server, which comes on the heels of requests from two government inspectors general for a Justice Department review of a “potential compromise of classified information” on Clinton’s email server.

--Last Friday the Clinton campaign staged a classic document dump and Bill and Hillary reported income of $139 million for the period 2007-2014.

Editorial / Wall Street Journal

“That’s a tad more than most of the ‘everyday Americans’ whom Mrs. Clinton claims to speak for, which may explain why an accompanying press release stressed that she and Bill had given $14,959,450 to charity.

“That’s wonderful, save for the small detail that her charity of choice was her own family. The couple donated all but $200,000 of their gifts since 2007 to the Clinton Family Foundation, which isn’t exactly the Little Sisters of the Poor.

“While the foundation does contribute to charitable causes, it also doubles as a vehicle to promote the first family’s political ambition and public profile. It spends an outsized portion of its money, for instance, picking up the travel and other expenses for the whole family....

“Foreign governments, unions, wealthy Democrats and corporations donated to the foundation knowing its political importance to the woman who could be the next U.S. president.

“The Clintons play by their own political rules, and taking a nearly $15 million tax write-off to assist their electoral ambitions is merely the latest.”

--A longtime ally and supporter of Sen. Rand Paul, Jesse Benton, has been indicted by a federal grand jury on charges he concealed payments made to a former Iowa state senator during the 2012 presidential campaign, when Benton was chairing former congressman Ron Paul’s campaign. It was part of an alleged endorsement-for-pay scheme. Two others, Ron Paul’s campaign manager and deputy national campaign manager, were also indicted. All three are accused of concealing their payments (more than $70,000), from the Federal Election Commission and the FBI.

Benton is heading a super PAC supporting Rand Paul’s current effort. The senator’s campaign said in a statement that he was “disappointed that the Obama justice department chose to release this just prior to the highly anticipated first Republican presidential debate...it certainly appears suspiciously timed and possibly, politically motivated.” [Washington Post]

--In the above-mentioned Quinnipiac survey, President Obama’s approval rating was 43%, 52% disapproval. That pretty much sucks.

Congress, though, only has a 17% approval rating.

On the issue of foreign policy, 39% approve of Obama’s foreign policy, 55% disapprove.

--In a different Quinnipiac University poll released Wednesday, New York City Mayor Bill de Blasio fares poorly. 47% of New York City voters polled said de Blasio doesn’t deserve a second term, while 41% believe he does. Only 44% approve of the job he’s doing (his lowest score yet), with 44% saying he’s doing a good job, the rest being undecided.

[58% of black voters say de Blasio deserves to be re-elected, but just 29% of white voters would give him another term.]

To add insult to injury, Comptroller Scott Stringer has a 54% job approval while Governor Andrew Cuomo’s has rebounded sharply to 58% (36% disapproval).

As Crain’s New York Business’ Greg David also points out, de Blasio’s falling numbers are even more troubling for him because the city’s economy is accelerating, not declining.

--True story...as in you can’t make this up. The New York Post reported that Gotham’s education system is so dysfunctional, they found out about an eleventh grade class where, this year, they were reading “The Three Little Pigs,” as in the students were taking turns reading lines from it.

--Kevin Rector / Baltimore Sun

“Baltimore State’s Attorney Marilyn J. Mosby recently derailed an initiative to bring together city leaders, law enforcement commanders, academics, public health officials and others to identify real-time homicide trends and develop targeted responses – the latest crime-fighting program to falter amid a dramatic spike in violence.

“After months of promising unprecedented transparency and collaboration with law enforcement partners, Mosby said she didn’t want to share information that others in the fledgling Baltimore Homicide Review Commission considered critical to success. She said providing information on ongoing cases could compromise investigations or jeopardize the safety of victims and witnesses.”

She needs to be removed immediately.

--In the wake of the Cecil the Lion killing, Delta, American, United and Air Canada announced they will no longer allow big-game trophies on their flights, but UPS said it will, noting it follows U.S. and international laws, not public opinion, in determining what it will and won’t ship. FedEx, in an e-mail to the Washington Post, said it “may accept legitimate shipments of parts for taxidermy purposes if they meet our shipping guidelines.”

--We note the passing of the great historian, Robert Conquest, 98. Conquest’s major works included “The Great Terror” (1968), which detailed Soviet totalitarianism and was the first and still definitive treatment of Stalin’s purges, the secret police and show trials. The book is featured prominently in my home library. Another major work, “Harvest of Sorrow” (1986), chronicled the “terror famines” that followed agricultural collectivization.

William Grimes / New York Times

“The scope of Stalin’s purges was laid out: seven million people arrested in the peak years, 1937 and 1938; one million executed; two million dead in the concentration camps. Mr. Conquest estimated the death toll for the Stalin era at no less than 20 million.” [Ed. That 20 million figure has largely remained the number used since ’68.]

As the Wall Street Journal editorialized:

“When sources inside Russia were few and most Kremlinologists were oblivious, these classics contributed immensely to understanding the nature of the Communist project. They also helped shape the response that won the Cold War; Reagan and Thatcher were among his readers.”

Conquest wrote in a Journal op-ed in 1992 that the lessons of the bloody 20th century “have not yet been learned, or not adequately so.”

--Supertyphoon Soudelor was the strongest storm on earth thus far in 2015 as at one point this week it had maximum sustained winds of 180 mph and gusts to 220 mph. I followed this one because of the severe damage it dealt the Northern Marianas island of Saipan, which I visited way back in 1996 as part of a trip to visit some Jesuit friends in the region, including on my beloved island of Yap (which is part of Micronesia). I’ll never forget meeting some of Father Gary’s parishioners on Saipan who described to me what it was like to be there when the Marines battled the Japanese on the island during World War II. [I toured Suicide Cliff, where the Japanese threw themselves over rather than be captured by the Americans...but as was later revealed in startling videos, around the time of my trip, sometimes holding babies.] So I wish the people on the island a rapid recovery, but it won’t be easy.

[About a year after I was there, Father Gary dropped dead serving Mass...heart attack. In that one day driving around with him, I saw he had the weight of the world on his shoulders, dealing with parishioners and their problems, many suffering from drug abuse, which was rampant on Saipan.]

--I’m very aware of the Planned Parenthood undercover videos, but for now I choose not to comment, though you can imagine where I come down. This will be part of the budget debate end of September, with some of the Republican presidential candidates choosing to highlight it, to say the least. 

--In New York City, 10 have died as a result of Legionnaires disease, one of the worst outbreaks since the famous Bellevue-Stratford Hotel (Philadelphia) case in 1976, where 34 succumbed; most having been attendees at an American Legion Convention. [Roughly ten years later, I was involved in marketing a private placement that involved a revamped multi-use facility where the Bellevue-Stratford stood. Note to Mark R. Did we sell that out? Drawing a blank.]

--In an extensive study of eating habits and the impact on health, as published this week in The BMJ, participants, who were enrolled in 2004-08 and then followed for a mean of 7.2 years, were asked to fill out a questionnaire that included general questions about health and diet including how often they ate spicy foods. Bottom line, those who ate spicy foods 1-2 times a week had a 10 percent lower risk of death than those who rarely or never ate them, and those who ate spicy stuff 3-7 times a week had a 14 percent lower risk of death.

As reported by the Washington Post’s Ariana Eunjung Cha, “Jun Lv, a professor in the department of epidemiology and biostatistics at Peking University; Lu Qi, an associate professor at Harvard’s School of Public Health; and their co-authors also wrote that their data shows that the associations they found for (diseases like cancer and heart disease) seem to be stronger for those who consumed fresh chili pepper than those who consumed dried chili, sauce or oil.”

Capsaicin appears to be the key ingredient, though further studies are needed.

--John Riggi died. He was 90. Riggi was head of the DeCavalcante crime family, New Jersey’s largest home-grown operation; though one considered a stepchild to New York’s five families. Riggi was, however, long thought to be the inspiration behind the character, Tony Soprano, though fans of Riggi would beg to differ. [He was.]

Why would I bring up his passing? Oh, I have stories. A certain loved one, for example, once had a chat around the kitchen table with Uncle John as part of said loved one’s attendance at our dear family friend’s birthday party.

I wish I could say more, but it wouldn’t be prudent; except I did later attend this same friend’s wake in Bernardsville, N.J., about five years ago, where Uncle John’s clan was in control. Uncle John, however, was in Butner, N.C., serving time for murder.

--Joseph Berger, writing in the New York Times magazine, “Searching for Jewish heritage in Poland,” had the following passage.

“Between two visits to Otwock, we traveled to Treblinka. It is a haunted place because nothing of the death camp remains, though a tiny museum has a model camp that explains how speedily all of its 900,000 victims were dispatched in gas chambers. What has taken the place of the actual camp resembles a kind of Stonehenge, a field of stone markers arrayed almost higgledy-piggledy like a ravaged cemetery, each marker bearing the name of a locality whose Jews were deported there.”

For new readers, I’ve written a few times of my own personal pilgrimage to Treblinka. I was staying in Warsaw in 1999...I had just started this site...and hired out a driver to take me hours away to this place. What I’ve written in the past was how spooky the final miles into Treblinka were. I distinctly remember older women, standing outside their doors along the road (part of which was over the railroad tracks that were used during Nazi times) and these women were not happy I was there. Treblinka was not a tourist destination like Auschwitz. At least in 1999, my driver and I were the only ones there.

All I could think was, you f’n women...you knew what was going on as the trains went in full...and came back out empty.

-- I also note the passing of a dear family friend, Stan Tannenbaum. Stan and his late wife, Pauline, were longtime friends of my parents, for as long as I’ve been alive, and we’ll never forget their kindness when they took us into their home for a lengthy spell the summer of 1965 when we were between houses. They had four boys and way back we had some good times, though Stevie once cleaned my clock flipping baseball cards off the basement stairs. [I did retain enough of my Mickey Mantle ones, however. That was always the ultimate card in my youth.]

Nothing better in life than good friends (and family) and Stan and Pauline were among the very best.

--Finally, ‘Peanuts’ creator Charles Schulz was a very complicated man. A very complicated, ‘principled’ man. Michael Cavna of the Washington Post recently wrote a terrific piece on a big event, 47 years ago, the introduction of Franklin, the first black character in a major cartoon strip.

It all came about because Harriet Glickman, a black schoolteacher in Burbank, Calif., decided to write a few cartoonists in the immediate aftermath of Dr. Martin Luther King Jr.’s assassination in April 1968.   Glickman, now 88, talked to Mr. Cavna and she described how amidst the pain, she just felt she had to write, having worked with kids, and with kids of her own, and knowing back in the day the power of comics among the young.

“And my feeling at the time was that I realized that black kids and white kids never saw themselves [depicted] together in the classroom,” says Glickman, noting that Morrie Turner’s diverse comic “Wee Pals” was still a budding feature.

So when she wrote Schulz, like the other cartoonists she tried to contact about introducing a black character, he was at first hesitant, though not because of the syndication angle (which was the issue with others), but rather because he wondered whether as a white creator, he “could write a black character without unintended condescension.” [Michael Cavna]

But Glickman wrote again, asking permission to share Schulz’ first response with African American friends of hers who were parents, he granted it (so different from today’s social media world), and two friends of Glickman then wrote Schulz separately, urging the integration of ‘Peanuts.’

Schulz then prepared strips introducing Franklin, son of a father who’s off in Vietnam, as this new “regular kid” who is playing at the beach and he told Glickman the story was set to begin July 31, 1968.

Glickman recounts: “Sparky faced a question from the head of the [United Feature] Syndicate...who said: ‘Are you sure you want to do this?’’ Glickman recounts. ‘If you know Sparky, you know what his response was.

“ ‘He said: ‘Either you run it the way I drew it, or I quit.’” [Michael Cavna]

Oh, Schulz heard from many in the South, editors, who said “Please don’t send us any more strips with black children in the classroom with white children.” [Glickman recounted]

Well, Schulz told them to go pound sand (my term). Recall, years earlier Schulz included Bible passages in “A Charlie Brown Christmas,” which many also criticized then.

As for Harriet Glickman, who had three children of her own, she told Michael Cavna, “Franklin was, and is, my fourth child.”

To paraphrase Linus, ‘And that’s why Charles Schulz is a great American, Charlie Brown.’

---

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

God bless America.
---

Gold closed at $1094
Oil $43.87...lowest weekly close since Feb. ’09...true

Returns for the week 8/3-8/7

Dow Jones -1.8% [17373]
S&P 500 -1.3% [2077]
S&P MidCap -1.0%
Russell 2000 -2.6%
Nasdaq -1.6% [5043]

Returns for the period 1/1/15-8/7/15

Dow Jones -2.5%
S&P 500 +0.9%
S&P MidCap +2.5%
Russell 2000 +0.2%
Nasdaq +6.5%

Bulls 42.2
Bears 17.5 [Source: Investors Intelligence]

Have a great week. Click on the Gofundme link above or on the home page if you haven’t already done so. Or send a check to PO Box 990, New Providence, NJ 07974.

Brian Trumbore



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Week in Review

08/08/2015

For the week 8/3-8/7

[Posted 11:00 PM ET, Friday]

Edition 852

Wall Street and Washington

Between the first Republican debate (covered below) and President Obama’s speech defending his Iran nuclear deal on Wednesday, this was a most political week, prior to Washington writ large taking the rest of the month off.

I watched President Obama’s speech at American University and it was utterly disgraceful.

Obama sought to channel President John F. Kennedy, who back in 1963, also at American Univ., gave a speech on relations with the Soviet Union, just eight months after the Cuban missile crisis, for the purposes of reaching a nuclear test-ban treaty. JFK’s speech was about diplomacy. President Obama’s was about slamming his opponents and bringing up the same straw man he has employed throughout his presidency...it’s my way or war.

I discuss at length the Iran issue as well below, but I can’t help but start with the following. Since virtually day one of Obama’s first term I have decried his foreign policy agenda and what I saw on Wednesday was a president more obnoxious than ever. Dangerously so, for the United States and our allies, as some of us have been witnessing a president over just the past few months in particular who is even more divorced from reality than ever. That said....

William McGurn / Wall Street Journal

“One year ago this month, newsman James Foley was forced to his knees somewhere in the desert hills of Syria and beheaded. Within a month, Barack Obama had vowed to ‘degrade and ultimately destroy’ Islamic State, which had carried out and filmed the murder. Islamic State has since moved on to even more spectacular barbarities – throwing gay men to their death from tall buildings, burning prisoners alive, drowning other imprisoned men in cages – that barely get a mention.

“Two Augusts earlier, President Obama had made a similar promise when he laid down a ‘red line’ with Syria’s Bashar Assad over chemical weapons. President Obama’s threat notwithstanding, Mr. Assad would shortly turn these weapons on women and children. He remains in power still.

“Meanwhile, the last American combat troops pulled out of Iraq in 2011; we started withdrawing our troops from Afghanistan at about the same time; and we are about to become partners with Iran over nuclear weapons. We are less liked in the region than when Mr. Obama took office; we have managed to unite the Saudis and the Israelis against us; and we behold a Middle East as menacing and volatile as it’s ever been....

“(Yet the) truth is, Mr. Obama has largely succeeded in what he set out to do. His priority was never about winning in Afghanistan or standing up a strong government in Iraq or any of the other tough-sounding things he has thought he needed to say to make his foreign policy sound less dovish than it is. The reality is that the Obama foreign policy has been dominated by one overarching goal: getting America the heck out of Iraq and Afghanistan no matter what....

“So it’s also no coincidence that when the president has issued some hawkish declaration of resolve...it’s typically been about promising decisive action tomorrow as a way of not doing anything today.

“Indeed, far from being the incomprehensible muddle his critics see, Mr. Obama’s foreign policy choices betray a disconcerting consistency.”

Related to the above, in announcing his Clean Power Plan and sweeping curbs on carbon pollution on Monday, Obama said the following:

“Over the past six and a half years, we’ve taken on some of the toughest challenges of our time – rebuilding our economy after a devastating recession, to ending our wars in Iraq and Afghanistan and bringing almost all of our troops home, to strengthening our security through tough and principled diplomacy. But I am convinced that no challenge poses a greater threat to our future and future generations than a changing climate.”

Some of us would beg to differ, but you see again just how much the president wants us to believe his legacy is really tied to getting out of Iraq and Afghanistan, regardless of where the region goes from here....and the hundreds and hundreds of thousands who have now died on his watch. [One reliable source I read this week said the toll in Syria alone is now over 300,000. I’ll stick with 230,000+...which is more than bad enough.]

On a different topic, but related to foreign policy, negotiations on the Trans-Pacific Partnership trade deal deadlocked over a small number of sticking points, including over access to agriculture. While bilateral talks will resume soon, the deal was supposed to be finalized by now, meaning the further delay will push the U.S. ratification fight into 2016, the election year, forcing the likes of Hillary Clinton to take a stand, which she has avoided doing thus far.

Canada is refusing to open its poultry and dairy markets, while Chile is demanding a short window of protection for U.S. pharmaceutical giants; two examples of the kinds of issues remaining.

Turning to the market and the economy....the big news was Friday’s employment report for July, 215,000 jobs created, in line with expectations, with June revised up to 231,000. The unemployment rate held steady at 5.3% vs. 6.2% a year ago.

Average hourly earnings rose 0.2%, 2.1% year over year, with the labor participation rate still at the lowest level since 1977, 62.6%, while U6, the underemployment rate, continued to tick down to 10.4%, its lowest level since June 2008. The average workweek rose 0.1 hour to 34.6 hours in July.

All in all a solid if far from spectacular report that, coupled with similar data in September (the August report), should allow the Federal Reserve to finally hike the funds rate 25 basis points (1/4-point) off the zero level.

Earlier this week, Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta, told the Wall Street Journal that barring a deterioration in economic activity the central bank should raise rates in September. “The economy is in a state of readiness for beginning normalization.”

In other economic news, June personal income rose 0.4%, in line with expectations, while consumption rose 0.2%. June construction spending was short, up just 0.1%, while June factory orders rose a solid 1.8%.

The July ISM manufacturing reading was 52.7, less than expected, while the ISM services mark was 60.3, the highest in ten years and far exceeding projections. The new orders’ reading was 63.8. As Ronald Reagan would have said, ‘Not bad, not bad at all.’

Finally, gasoline prices at the pump continue to fall from a June peak, down 14 cents in one month, according to AAA. With a national average of $2.62, $2.00 gas could be around the corner as refineries switch to cheaper winter gasoline blends in September.

To paraphrase Robert Duval, I love the smell of winter gasoline blends in the morning. It smells like, victory.

Europe and Asia

The Athens stock market reopened after a five-week shutdown and the key barometer promptly fell 30%, before finishing Monday down 16%. For the week the Athens exchange fell 15% as bank stocks were crushed, while the purchasing managers’ index for Greece for July plunged from 46.9 to 30.2, its lowest reading ever. The PMI signaled not just virtually zero activity in manufacturing for the month, but also the steepest drop in factory employment during 16 years of collecting data.

The factories not only saw a record drop in orders and but they were unable to acquire the supplies and raw materials they needed for production with the banks frozen.

So while Greece and its creditors would appear to be making progress on a third bailout agreement by month’s end (a bridge loan perhaps being needed in the interim), it is going to take a long time for the Greek economy to return to any semblance of normalcy. And massive bank recapitalizations must take place first.

Additionally, when it comes to the creditors, it’s still all about pension reform and accelerating privatizations that the ruling Syriza-led government is loath to act on.

Prime Minister Alexis Tsipras plans to submit a bill to the Greek parliament by Aug. 14 approving the conditions attached to a loan facility from the European Stability Mechanism, with a vote following by Aug. 19, the day before Greece is to make a 3.2bn euro ($3.5bn) payment to the European Central Bank.

There was a slew of economic data this week for the eurozone as a whole, including Greece’s putrid PMI.

Markit reported the final eurozone PMI in July was 52.4 vs. 52.5 in June.

Germany’s was 51.8 last month, France’s 49.6 (50 being the dividing line between growth and contraction). 

Italy’s, though, came in at 55.3, a 51-mo. high, while Spain’s was 53.6, a 9-mo. low.

On the services side, the PMI for Italy was 52.4 vs. 53.4 in June; 59.7 in Spain vs. 56.1; and 53.8 vs. 53.7 in Germany.

In terms of figures on industrial production, Germany’s was down 1.4% in June over May, a surprise and up just 0.6% year over year. France’s industrial production was up the same 0.6% annualized.

But Spain’s was up 4.5% annualized in June, the best pace since 2010.

Non-euro U.K. saw industrial production rise 1.5% annualized in June, while a reading on the service sector came in at 57.4 in July vs. 58.5 in June, still very strong.

Euro retail sales were down 0.6% in June over May.

One other item on Spain, the Catalan regional government of Artur Mas has officially called early elections for Sept. 27 that he intends to use as a referendum on independence from Spain.

Mas said Spain’s decision not to allow the region to hold a referendum last year left him no choice but to call elections now and use them as a test of public opinion.

Mas’ ruling Convergence party and the region’s second party, the Republican Left of Catalonia, say they will unilaterally leave Spain if they obtain a majority, while Madrid has ruled out any possibility of secession.

Opinion polls show a slim majority of Catalan voters oppose independence. Catalonia’s capital is Barcelona and the region accounts for about one-fifth of the nation’s GDP, with Catalonia long complaining it doesn’t get its fair share in funding from Madrid.

On the immigration front, the British and French governments warned the world is facing a “global migration crisis.”

Writing in the Telegraph newspaper, Britain’s Home Secretary, Theresa May, and her French counterpart, Bernard Cazeneuve, warned would-be immigrants planning to make the “desperate” journey in search of a better life that Britain’s streets “are not paved with gold.”

Britain announced it was cutting the weekly cash allowances that support thousands of failed asylum seekers with families.

But May and Cazeneuve also demanded Greece, Italy and other European countries do more to stop the flow of migrants from Africa.

The crisis between Dover and Calais is causing huge losses in commerce and extensive delays for holidaymakers using the route.

In the Mediterranean, a boat with an estimated 600 migrants capsized off the coast of Libya, with about half dying, according to aid groups. Italy was coordinating a multinational rescue effort. An estimated 2,100 migrants have perished crossing the Mediterranean this year. About 188,000 have been rescued.

As for Greece, nearly 50,000 entered the country in just one month and 130,500 have arrived since the start of the year!...more than five times the figure at this point last year.

Turning to Asia...the Caixin (formerly HSBC) manufacturing PMI for China in July fell to 47.8, down from 49.4 in June, below 50 a fifth consecutive month. [The official Chinese govt. reading for manufacturing last month was 50.0 vs. 50.2.]

The services PMI was 53.8 vs. 51.8 in June.

Separately, according to Caixin (a Chinese financial magazine) and the Financial Times, who saw a closed-door speech by China’s banking regulator, the percentage of non-performing loans at Chinese banks rose 35% from a year earlier; an acceleration from the 22% annual rise in bad loans through the end of 2014.

In Japan, the manufacturing PMI for July was 51.2, up from 50.1 in June, while the services figure was the same 51.2 vs. 51.8 the prior month.

Some other relevant manufacturing PMIs in the region for July...

South Korea: 47.6 vs. 46.1 (June), and Taiwan: 47.1 vs. 46.3...both not good.

Street Bytes

--The Dow Jones has fallen seven straight sessions for the first time since Aug. 2011. With its loss of 1.8% this week, it is now down 2.5% for the year. The S&P 500 lost 1.3% and is up only 0.9% for 2015, while Nasdaq lost 1.6%.

A good example of today’s environment is industrial electrical equipment manufacturer Emerson Electric, which reported revenues that were down 13% year over year in the second quarter. It’s all about sluggish growth worldwide in capital spending due to falling oil prices and punk emerging market activity.

--U.S. Treasury Yields

6-mo. 0.21% 2-yr. 0.72% 10-yr. 2.16% 30-yr. 2.82%

The short end of the curve rose sharply on the expectations the Fed will move sooner than later.

--July was another strong month for U.S. auto sales, up 5.3% to 1.51 million vehicles, a pace set to exceed 17 million for the year for the first time since 2001, according to Autodata Corp.

GM sales rose 6.4%, riding a boom in truck and SUV sales, Ford Motor Co.’s increased 4.9% and Fiat Chrysler said its sales gained 6.2%. Nissan and Honda posted gains of nearly 8% each, while Toyota’s rose less than 1%, but this was off a strong July 2014.

With the average price of gas at the pump down $1 over the past year, demand for fuel-efficient vehicles is tumbling. Ford said its sales of its C-Max hybrid, for example, plunged 36% in July.

--America’s largest media companies were slammed this week after Walt Disney revised its growth outlook for ESPN and Discovery Communications missed revenue estimates.

Viewers are seeking better value for their cable and satellite packages, leading many to “cut the cord,” which will be the key term for the next few years as viewers seek online alternatives such as Netflix, or skinnier “bundles.”

Shares in Disney cratered 8.5% and Time Warner, 21st Century Fox and Discovery fell between 6 and 9 percent.

What triggered the sell-off was a fairly simple comment by Disney that, despite record profits, ESPN was experiencing “modest subscriber losses,” saying revenues from its cable and satellite partners would fall “a bit short” of expectations.

ESPN has dominated the cable business from the standpoint that it can charge premium fees from advertisers and distributors. It still has 92.9 million subs and distributors pay the network some $6.04 per sub per month – a figure slated to rise to $8.38 by 2018, according to SNL Kagan.

A day after the earnings release and conference call with analysts, CEO Bob Iger defended ESPN in an interview with CNBC, saying the sports network “ports well to any new platform whether that’s a smaller bundle, whether that’s an over the top package of programming or whether it’s a direct to consumer business.”

Iger added that Disney had invested in ESPN, which “gives (it) the ability to essentially manage through whatever disruption is going on.”

Nonetheless, this single change in tone by Iger and Disney hit the sector big time, as some wonder just how swift the change away from traditional television has become. [Matthew Garrahan and Eric Platt / Financial Times]

My attitude would be, yes, bundles are going to change, but the distribution companies will still find a way to make substantial revenues and generate strong profits.

Back to Disney, theme park profits grew 9 percent, and revenue rose 4 percent.

One other, Viacom shares fell by as much as 20%, as group revenues declined from $3.4bn to $3.1bn. Revenues from U.S. advertising fell 9% in the quarter.

--Shares in Apple have been struggling mightily recently after hitting a high of $134 in April. Analysts maintain the company’s future is more than solid but the market is concerned about iPhone deceleration and the slowdown in market share in China, among other items.

Well I’ve been saying it better be concerned about China, where Apple has staked much of its future growth. Relations between the U.S. and China continue to worsen and Beijing has every incentive to play the nationalism card. The Chinese can slam the door on all American product any time they want. And mark my words, they will...sooner than later. One military accident in the South China Sea, for example, and any U.S. multi-national with substantial business there will see its stock collapse.

--Twitter shares fell to an all-time low on Thursday, closing at $27.54, just slightly over its IPO price of $26 in November 2013. The first day closing price back then was $44.90 and its record high of $73.70 was set in December 2013.

Last week Twitter executives spoke of it taking “considerable” time to reignite user growth, which has been flat in two of the last four quarters in the U.S.

--Tesla Motors Inc.’s second-quarter loss grew to $184 million, compared with a loss of $62 million a year earlier. But ex-charges the loss was narrower. Revenue rose 24% to $955 million. 

The company delivered a record 11,532 vehicles in Q2, but Tesla downgraded its delivery forecast for all of this year to 50,000 to 55,000 of the Model S and Model X, the new SUV. Previously, CEO Elon Musk had talked about 55,000 but there are supply issues with the Model X and seeing as the vehicle was supposed to be ready a year ago, that’s rather inexcusable. 

The shares dropped $24 to $246 on Thursday, and then another $3.60 on Friday.

--After a decade of growth in China, BMW sales fell there last quarter. The carmaker said, “If conditions on the Chinese market become more challenging, we cannot rule out a possible effect on the BMW Group’s outlook.”

The company said there has been a shift towards lower-margin compact vehicles overall in China.

--Greenlight Capital, the hedge-fund firm led by David Einhorn, fell 6.1% in July, bringing losses in Greenlight’s main fund to 9% in 2015, according to an e-mail sent to clients and obtained by Bloomberg News. The fund has been hit by Greenlight’s positions in gold and oil. To be fair, the main hedge fund gained an average of 19% per year from its inception in May 1996 through the end of last year.

--Private-equity firm Carlyle Group LP split with the founders of its Vermillion commodity hedge-fund firm after the flagship fund saw assets plunge to less than $50 million from $2 billion.

Vermillion’s Viridian commodity fund lost 23% in 2014, leading to a wave of investor redemptions.

--Activist investor Bill Ackman’s Pershing Square Capital Management LP revealed it has built a $5.5 billion stake in Mondelez International Inc., the maker of brands such as Oreo cookies, Ritz crackers and Cadbury chocolates with revenues of $34 billion annually.

Ackman’s stake amounts to a whopping 7.5%, Ackman betting on Mondelez figuring out how to grow revenues faster and cut costs, or sell itself to a rival such as Kraft Heinz Co. The shares did nothing in response.

--Shares in Tyson Foods tumbled more than 7% after the meat processor warned of soaring cattle costs, combined with weaker export prospects as a result of the stronger dollar. Beef accounts for 42% of Tyson’s sales.

--Shares in Heineken, the world’s third-largest brewer, rose 5% after results for the first half of the year came in stronger than expected.

Sales in Western Europe were down 3%, but this was up against strong comparisons with 2014, when volumes rose 6.5% on the heels of the World Cup.

Volume growth in the first six months in the Asia-Pacific was up 6.1%.

--Sears Holdings Corp. said same-store sales slumped 10.6% last quarter, its second consecutive period of double-digit declines.

Sales at Sears stores fell 13.9% while those at Kmart were down 6.9%. This isn’t good, sports fans.

--Wendy’s revenues fell 3.2% in the quarter ended June 28 but this was due to its program of unloading company-owned restaurants to franchisees, which then allows for a more stable income stream based on franchisees’ royalty and rental fees.

In North America, same-restaurant sales increased 2.2%, beating analyst expectations.

--McDonald’s announced it was cutting 225 corporate jobs, 135 in its Oakbrook, Ill., headquarters.

--From the Los Angeles Times: “At least four men ticketed by Los Angeles International Airport police while driving for Uber’s low-cost car service have criminal convictions that would bar them from operating a taxi in Los Angeles, records show.

“The drivers have been convicted of child exploitation, identify theft, manslaughter and driving under the influence, according to court records. Each offense would make them ineligible for a Los Angeles taxi permit.”

Not good for Uber, seeing as the Los Angeles City Council is about to weigh in on whether to assert jurisdiction over a new permit process that would allow Uber and other app-based companies to legally pick up passengers at LAX; let alone raising questions about how Uber screens drivers.

--Tom Hayes, a 35-year-old former yen derivatives trader at UBS and Citigroup, was found guilty of eight counts of conspiring to rig Libor, the first conviction in the global scandal over the manipulation of benchmark interest rates. He was sentenced to 14 years in jail in a case that came three years after a then-record fine against Barclays sparked a global outcry.

“While at UBS, he generated about $260m in revenues over three years, attracting the interest of competitors including Lehman Brothers and Goldman Sachs, which both tried to recruit him. He left UBS for Citi at the end of 2009 after a dispute over pay. Citi fired him after less than a year, when they discovered he was trying to manipulate Libor.” [Lindsay Fortado and Caroline Binham / Financial Times]

--Wearable technology company Fitbit saw its revenue beat expectations in the second quarter and more than triple to $400 million, but margins fell due to higher spending on new products.

--According to Bloomberg, only 4% of the top students in the 2015 graduating class at Harvard Business School said they wanted to work at an investment bank.

--Forecasters at the Climate Prediction Center in College Park, Maryland, have increased the odds of a quiet hurricane season from 70% to 90% (90% chance of a below-normal season) due to a strengthening El Nino, which discourages tropical cyclones from forming. 

In a normal season, there are a dozen named tropical storms, half a dozen hurricanes and three major hurricanes. Now the Climate Prediction Center is saying six to 10 named storms, one to four of which could become hurricanes. Zero or one could reach “major” strength with winds of at least 111 mph. [Scott Dance / Baltimore Sun]

--Netflix Inc. is now offering as much as one year of paid time off to new mothers and fathers in what has to be the most generous parental leave policy in the U.S. New parents can literally be away as much as they want in the first 12 months after a child’s birth or adoption.

Netflix already lets employees take as much vacation as they want.

Seeing as I’ve taken one week off in 16 ½ years...it probably wouldn’t be prudent for me to comment.

--Puerto Rico defaulted on some of its debt for the first time in its history and I got a kick out of a New York Times story that said this “reverberated through the financial markets on Tuesday,” because it didn’t. As I’ve said for years this is a non-issue and, save for a few municipal bond funds and individual investors, it’s been a big whoopty-damn-do.

It’s also been so well-telegraphed that investors and portfolio managers have had more than enough time to adjust. 

Yes, it’s a big deal if you live in Puerto Rico, and more and more want to come here because of the awful situation the island’s finances are in, but there has never been a reason to lose sleep over this story.

--Super Bowl 50 is already attracting record advertising rates, with 30-second TV spots selling for a record $5 million, as noted by CBS President and CEO Les Moonves in an earnings call the other day. NBC raked in a record $4.5 million for 30 seconds last year. The game-time ads have been increasing $500,000 a year since at least 2012.

The Super Bowl is Feb. 7, 2016, in San Francisco.

Foreign Affairs

Iran: American voters oppose by a 57-28 percent margin the nuclear pact with Iran, according to a Quinnipiac University national poll. Republicans oppose it 86-3 and independents 55-29, while Democrats support it 52-32. Women, overall, oppose it 56-27.

Charles Krauthammer / Washington Post

“(The above mentioned Quinnipiac poll) is astonishing. The public generally gives the president deference on major treaties. Just a few weeks ago, a majority supported the deal.

“What happened? People learned what’s in it....

“Inspections? Everyone now knows that ‘anytime, anywhere’ – indispensable for a clandestine program in a country twice the size of Texas with a long history of hiding and cheating – has been changed to ‘You’ve got 24 days and then we’re coming in for a surprise visit.’ New York restaurants, observed Jackie Mason, get more intrusive inspections than the Iranian nuclear program.

“Snapback sanctions? Everyone knows that once the international sanctions are lifted, they are never coming back. Moreover, consider the illogic of President Obama’s argument. The theme of his American University speech Wednesday was that the only alternative to what he brought back from Vienna is war because sanctions – even the more severe sanctions that Congress has been demanding – will never deter the Iranians. But if sanctions don’t work, how can you argue that the Iranians will now be deterred from cheating by the threat of...sanctions? Snapback sanctions, mind you, that will inevitably be weaker and more loophole-ridden than the existing ones.

“And then came news of the secret side agreements between Iran and the International Atomic Energy Agency. These concern past nuclear activity and inspections of the Parchin military facility where Iran is suspected of having tested nuclear detonation devices.

“We don’t know what’s in these side deals. And we will never know, says the administration. It’s ‘standard practice,’ you see, for such IAEA agreements to remain secret.

“Well, this treaty is not standard practice. It’s the most important treaty of our time. Yet, Congress is asked to ratify this ‘historic diplomatic breakthrough’ (Obama) while being denied access to the heart of the inspection regime.

“Congress doesn’t know what’s in these side agreements, but Iran does. And just this past Monday, Ali Akbar Velayati, a top adviser to the supreme leader, declared that ‘entry into our military sites is absolutely forbidden.’

“One secret side deal could even allow Iran to provide its own soil samples (!) from Parchin. And now satellite imagery shows Iran bulldozing and sanitizing Parchin as we speak. The verification regime has turned comic.”

Editorial / New York Post

“President Obama made it explicit Wednesday for everyone to hear: Only hard-headed Israel, which apparently is intent on war, he said, is standing in the way of his dubious nuclear deal with Iran.

“ ‘This is such a strong deal,’ he said in a speech at American University, that ‘every nation in the world that has commented publicly, with the exception of the Israeli government, has expressed support.’

“He forgot one other opponent: the American people.

“No less than four different major national polls over the past week show rising public disapproval of his deal – by as much as 2-to-1 against. Americans plainly don’t buy Obama’s claim that no better deal was possible, and that rejecting this one guarantees ‘some sort of war.’

“Opposing the deal, the president claimed, puts Israeli Prime Minister Bibi Netanyahu in league with the same Iranian hardliners who threaten to destroy Israel and America.

“Not that Obama takes those threats all that seriously.

“ ‘Just because Iranian hardliners chant ‘Death to America,’ does not mean that that’s what all Iranians believe,’ he said.

“Well, the hardliners who believe it happen to run Iran’s government.”

Jose Maria Aznar (former president of Spain) / Wall Street Journal

“There is only one thing the ayatollahs in Tehran want more than a nuclear bomb: that is for their regime to survive.  Thanks to the agreement announced on July 14, they will get both. The deal will strengthen their tyrannical, revolutionary and fundamentalist regime, and they will have the bomb within a matter of years....

“The evil is in the nature of the regime itself, which believes that violence is a legitimate tool to achieve expansionist goals. The Obama administration says that pouring billions of dollars into Iran will tame its aspirations and moderate its behavior. But that argument is based in idle hope. It runs against all we know about the Islamic Republic since its founding in 1979, as well as our experience with other tyrannical regimes, like North Korea’s. Dictators do not dissolve when they are showered in money....

“President Obama presents a false dichotomy in suggesting that postponing Iran’s path to the bomb is the only way to avoid bloodshed now. There are effective alternatives that fall between this agreement and war....

“The Iranians didn’t come around to talking about their nuclear program after years of secret efforts because they suddenly lost interest. Sanctions worked....

“In Europe in the 1920s and 1930s many competent leaders made serious mistakes based on false assumptions. In America too, there have been moments – such as Jimmy Carter’s handling of Iran – when leaders have been plainly wrong. Politicians are not immune to making mistakes. But they can learn from history. Sooner or later the West will have to confront Iran – only later it will face an emboldened, better prepared, modernized and richer Iran that will do its best to attain the goals we’ve always tried to prevent.”

Back to Ali Akbar Velayati, the top adviser to Supreme Leader Khamenei, as noted in the Wall Street Journal he appeared on Al-Jazeera on July 31 and was asked about U.N. inspections of Iran’s military sites. Here was his response, according to Memri translation service:

“Regardless of how the P5+1 countries interpret the nuclear agreement, their entry into our military sites is absolutely forbidden. The entry of any foreigner, including IAEA inspectors or any other inspector, to the sensitive military sites of the Islamic Republic is forbidden, no matter what.”

Interviewer: “That’s final?”

Velayati: “Yes, final.”

Alan Dershowitz / Jerusalem Post

“President Obama, in his desperation to save his Iran deal, has taken to attacking its opponents in personal ways. He has accused critics of his deal of being the same republican war mongers who drove us into the ground war against Iraq and has warned that they would offer ‘overheated’ and often dishonest arguments. He has complained about the influence of lobbyists and money on the process of deciding this important issue, as if lobbying and money were not involved in other important matters before Congress.

“These types of ad hominem arguments are becoming less and less convincing as more Democratic members of Congress, more liberal supporters of the President, more nuclear experts and more foreign policy gurus are expressing deep concern, and sometimes strong opposition to the deal that is currently before Congress.

“I, myself, am a liberal Democrat who twice voted for President Obama and who was opposed to the invasion and occupation of Iraq. Part of the reason I was opposed was because I considered, and still consider, Iran a much greater threat to the security of the world and to the stability of the Middle East than Iraq ever was....I recognize some advantages in the (Iran) deal, but strongly believe that the disadvantages considerably outweigh them and that the risks of failure are considerable....

“The President would be well advised to stop attacking his critics and to start answering their hard questions with specific and credible answers.”

Thursday night, New York Democratic Sen. Chuck Schumer, a man set to take over the party leadership from Minority Leader Harry Reid, took a courageous stand, saying he will oppose Obama’s deal to limit Iran’s nuclear program.

“Advocates on both sides have strong cases for their point of view that cannot simply be dismissed,” Schumer said in a lengthy statement. “This has made evaluating the agreement a difficult and deliberate endeavor, and after deep study, careful thought and considerable soul-searching, I have decided I must oppose the agreement and will vote yes on a motion of disapproval.”

Aside from weeks of meetings with administration officials involved in the negotiations, Schumer has been meeting with former Sec. of State Henry Kissinger.

So far, 12 Senate Democrats and one Democratic-leaning independent, Senator Angus King of Maine, have announced their support for the deal. Two others, Bernie Sanders and Rhode Island Sen. Jack Reed, will also shortly announce their support.

But Obama needs 34 votes to sustain a promised veto of legislation disapproving the Iran deal, which Republican leaders in the House and Senate vow to pass in September.

As for the Iranian side, President Hassan Rouhani called the deal this week “more than what was imagined,” saying Iran would start implementing its terms by next month to speed up the process of sanctions removal.

“The lifting of the sanctions will start, the atmosphere will change, investment will come to the country, our hands will be untied to sell oil,” Rouhani said, adding the agreement placed no limits on Iran’s missile strength.

Iraq/ISIS/Syria: It is a travesty that the U.S. government has spent as much as $500 million training all of 60 rebels to fight the war in Syria and today, there is no confirmation just how many are still alive. The al-Qaeda-linked Nusra Front attacked Western-backed rebels in northern Syria last weekend and seeing as how the Nusra Front has a history of crushing those who receive support from the West, they likely inflated major damage.

“Division 30” is the name of the unit of U.S.-trained forces and the Obama administration was the last to learn the unit’s leader and several of his soldiers were captured by the Nusra Front as soon as they entered Syria. It can be safely assumed that virtually all of the 60 are already dead, captured or out of the fight.

Nice policy, Mr. Obama. Actually, the tragic farce of it all is that the administration announced it had decided to provide air cover to the group if they come under attack by the Assad regime, but after last weekend, what are we defending?

Meanwhile, Turkish President Erdogan is only adding to the murkiness of the situation in Syria as his air force bombs the Kurds, who have proved to be the most effective fighters against ISIS, which is only hurting the chances of a lasting settlement of the Kurdish question in Turkey, while weakening the fight against IS.

Saudi Arabia: At least 17 were killed at a mosque used by Saudi special forces, a probable IS terror attack.

On a lighter note, King Salman was forced to cut short a holiday on the French Riviera at his private villa because more than 100,000 signed a petition protesting the closure of the public beach down below.

Salman and his entourage of “1,000-strong” have moved on to Morocco. 1,000! [BBC News]

Israel: The Israeli people have long known, as has your editor, that a prime threat to the nation’s existence lies from within. Yitzhak Rabin, after all, was assassinated by an Israeli extremist, not some outside force.

This week, Israeli leaders proposed a series of new measures to curb “Jewish terrorism,” following a wave of extremist violence that left Israeli and Palestinian children dead in knife and arson attacks.

One Israeli teenager died after being stabbed by a Jewish extremist at a gay pride parade last week. And you had the lethal arson attack in a Palestinian village that resulted in a toddler being burned to death. [Did you see the perpetrator in this one, under arrest? He was laughing. I wanted to reach through the television screen and strangle the bastard myself.]

Defense Minister Moshe Yaalon said on Sunday that Israeli authorities should be allowed to employ the same heavy-handed measures against Israeli terrorism suspects as the state uses against Palestinian suspects in the occupied West Bank...including the ability to hold detainees for months, and sometimes years, in prison without presenting charges.

When Israeli President Reuven Rivlin spoke out against attacks by Jewish extremists, he said he felt shame that the violence had come “from my own people.” Rivlin was then deluged with death threats on social media, called a “traitor” and a “terrorist” on posts written in Hebrew. Despicable.

For his part, Prime Minister Netanyahu applauded Israeli leaders who condemned the extremists, while wondering why Palestinian leaders praise acts of terror on their side. [William Booth and Ruth Eglash / Washington Post]

China: At a Southeast Asian security summit, China’s foreign minister, Wang Yi, maintained his country had halted land-reclamation efforts in the South China Sea, but China has long claimed almost all of the area and says it has the right to build there.

The secretary general of the Association of Southeast Asian Nations (Asean), Le Luong Minh, said China’s expansionism in the South China Sea was “dangerous.”

Earlier, Sec. of State John Kerry met with his Chinese counterpart and encouraged China “to halt problematic actions,” according to a senior official on the scene, who spoke to the Wall Street Journal.

Philippines foreign secretary Albert Del Rosario condemned China’s activities.

“We see no let up on the unilateral and aggressive activities of our northern neighbor in the South China Sea,” he said. [Sydney Morning Herald]

Here’s the bottom line. The Chinese are lying, as usual. Construction on the artificial islands continues.

Separately, David E. Sanger of the New York Times reports: “The Obama administration has determined that it must retaliate against China for the theft of the personal information of more than 20 million Americans from the databases of the Office of Personnel management, but it is still struggling to decide what it can do without prompting an escalating cyberconflict.”

There is no sign a response will necessarily happen soon.

There have been two awful escalator accidents in China in recent weeks. One mother was carrying her two-year-old at a shopping mall when she “fell through the floorplate” and was ground up by the machinery, though she was able to push her son to safety before dying the worst death possible.

In Shanghai last weekend, a cleaner at a mall had his leg amputated after it became stuck in an escalator.

Russia: U.S. officials told NBC News that Russia launched a “sophisticated cyberattack” against the Pentagon’s Joint Staff unclassified email system, which has been shut down and taken offline for two weeks. The officials report that Russian hackers probably coordinated the cyberassault via encrypted accounts on social media.

The officials say it isn’t clear if the attack was sanctioned by the Kremlin, but, “It was clearly the work of a state actor,” the officials told NBC.

No classified information was seized or compromised.

On a different matter, Matthew Bodner / Moscow Times:

“The NATO military will reduce in September the number of planes patrolling Baltic skies on the lookout for Russian bombers by 50 percent amid a moderate decrease in Russian bomber and fighter jet incursions along alliance airspace in the region, a NATO representative told the Moscow Times on Wednesday.”

Regarding Ukraine, it is rapidly turning into a frozen conflict in the eastern part of the country, the Donbas region. As a professor at Rutgers University-Newark and commentator on Ukraine affairs, Alexander Motyl, told Defense One’s Brian Whitmore:

“Freezing the conflict is one of the better solutions for Ukraine and is actually bad for the Russians,” Motyl said. “The reason is that the Donbas enclave that is occupied by Russian and separatist troops is an economic mess. ...It is [to] Ukraine’s advantage to keep that out of its control for as long as possible and for as much as possible, and it is to Russia’s disadvantage to be responsible for it.’”

Brian Whitmore: “So if a deadlock favors Ukraine, then Russia understands that it has to break the deadlock. If Russia decided to issue passports to residents of the rebel-held territories in eastern Ukraine, it would change the nature of the conflict overnight.”

Clearly Moscow is also aggressively exploring ways to bring down the government in Kiev, though it doesn’t have a viable mouthpiece for effecting such a change, yet.

One other...the Kremlin formally staked a claim on Tuesday to a vast area of the Arctic Ocean, including the North Pole. It’s now up to a UN committee to rule on this and under a 1982 UN convention, the Law of the Sea, “a nation may claim an exclusive economic zone over the continental shelf abutting its shores. If the shelf extends far out to sea, so can the boundaries of the zone. The claim Russia lodged on Tuesday is based on that provision and argues that the shelf extends far north of the Eurasian land mass, out under the planet’s northern ice cap.

“Russia submitted a similar claim in 2002, but the United Nations rejected it for lack of scientific support. So this time, the Kremlin has offered new evidence collected by its research vessels....

“Denmark submitted an expanded claim of its own to the United Nations last year, seeking control of economic activity around the North Pole and asserting that the area is part of the continental shelf jutting north from Greenland, not Russia.” [Andrew E. Kramer / Sydney Morning Herald]

Meanwhile, the Obama administration filed a claim for the Island of Misfit Toys.

Afghanistan: A new U.N. report revealed civilian casualties in Afghanistan have reached their highest level since the body began keeping detailed records six years ago. Overall casualties (dead and wounded) hit a peak of 4,921 for the first six months of the year, up 1% from 2014. At least 70% were perpetrated by the Taliban.

At least eight were killed on Friday in a massive car bomb in Kabul that injured a staggering 400. The target was probably an army compound but the wreckage was concentrated in a commercial district where it was feared many were buried in the rubble. It’s thought the attack was the work of the Taliban.

North Korea: The government created a new time zone – Pyongyang Time – to cast off the legacy of “wicked Japanese imperialists,” with the new time zone to take effect Aug. 15 to mark the 70th anniversary of the end of World War II and the moment of the country’s independence from Japanese rule.

Since Japan colonized the country in 1910, North Korea’s clocks have been set to the same time as Japan and South Korea. The new time zone, 8:30 ahead of GMT, is a reversion to its pre-colonial past.

North and South Korea split into two sovereign nations following their 1945 liberation from the Japanese.

Malaysia: While the investigation into MH370 has been reinvigorated with the discovery of some parts of the aircraft on Reunion island, Malaysian Prime Minister Najib Razak is under extreme heat these days as the country’s anti-corruption body confirmed almost $1bn ($962 million) had been deposited into Najib’s personal bank account, the money being from a donor, though the identity of same has not yet been revealed. The Wall Street Journal first reported investigators had traced the deposits in early July.

Canada: Prime Minister Stephen Harper called federal elections for October 19. Harper’s Conservative party first took power in 2006 and has won two elections since then, but over the past two years, concerns over the economy and ethics issues have eroded some of his support. More on this in coming weeks, but the above-mentioned TPP trade deal is big in this vote.

Random Musings

--To determine the field for the first big debate, Fox News took an average of the five most recent national polls and the result was Donald Trump (23.4%), Jeb Bush (12.0%), Scott Walker (10.2%), Mike Huckabee (6.6%), Ben Carson (5.8%), Ted Cruz (5.4%), Marco Rubio (5.4%), Rand Paul (4.8%), Chris Christie (3.4%) and John Kasich (3.2%).

Rick Perry was the big one left out with 1.8%. The five polls were conducted by Bloomberg, CBS News, Fox News, Monmouth University and Quinnipiac University.

--The Monmouth national poll had Trump at 26%, followed by Bush at 12% and Walker at 11%.

--A new Wall Street Journal/NBC News survey (not included in the Fox debate tally) had Trump at 19% of GOP primary voters, followed by Scott Walker at 15%, Jeb Bush at 14% and Ben Carson 10% (slightly surprised he was fourth in this one). [Bush dropped from his 22% reading in the June WSJ/NBC poll.]

--In a WMU Granite State Poll, back in Feb. ’15, Clinton would beat Bush 51-39 in a hypothetical matchup in New Hampshire. Today it is 46-45 Bush.

Rand Paul trailed Clinton 50-40 in Feb. ’15, and today leads 45-43. Donald Trump trails Clinton 50-40. Scott Walker leads Clinton 45-43. Clinton leads Marco Rubio 44-43.

--In the aforementioned Wall Street Journal/NBC News poll, Hillary Clinton’s support among white women is declining. In June, 44% had a favorable view of her, compared to 43% who didn’t. In July, only 34% of white women saw her in a positive light, compared to 53% who had a negative impression of her.

In 2012, Obama lost white women voters by 14 points to Mitt Romney.

The numbers regarding Clinton are startling. “In the first three months of the year, suburban women by a margin of 18 points had a positive view of Mrs. Clinton. In July, those numbers took a dramatic turn for the worse. By a five-point margin, suburban women had a negative view of Mrs. Clinton.” [WSJ]

In July, among independents, both sexes had soured on her. Just 27% had a positive image, vs. 52% who had a negative view.

And then you have African-Americans. In June, by a margin of 81% to 3%, they had a positive view of Clinton. In July, it was only 66% positive, 15% negative. That’s potentially huge news for 2016 if she can’t garner anything close to what Obama did among this group.

But Clinton is still leading her closest Democratic challenger, Vermont Sen. Bernie Sanders, 59% to 25%. However, her figure is down from 75% in June.

--The Washington Post reported Donald Trump had a private phone conversation with Bill Clinton in late May, at the same time Trump was nearing a decision to run for the White House. Both Trump and Clinton associates told the Post, “Clinton encouraged Trump’s efforts to play a larger role in the Republican Party and offered his own views of the political landscape.” A Clinton aide, however, said 2016 was not specifically discussed “and that it was only a casual chat.”

The revelation came as many Republicans question Trump’s ties to Democrats.

--Trump is leading Chris Christie...in New Jersey... according to a Rutgers-Eagleton poll, 21% to 12%.

--David Brooks / New York Times

“We are now living in a time of economic anxiety and political alienation. Just three in 10 Americans believe that their views are represented in Washington, according to a CNN/ORC poll. Confidence in public institutions like schools, banks and churches is near historic lows, according to Gallup. Only 29 percent of Americans think the nation is on the right track, according to Rasmussen.

“This climate makes it hard for the establishment candidates who normally dominate our politics. Jeb Bush is swimming upstream. Hillary Clinton may win through sheer determination, but she’s not a natural fit for this moment. A career establishment figure like Joe Biden doesn’t stand a chance...

“On the other hand, bumper-car politicians thrive. Bernie Sanders is swimming with the tide. He’s a conviction politician comfortable with class conflict. Many people on the left have generalized, vague hunger for fundamental systemic change or at least the atmospherics of radical change.

“The Times are perfect for Donald Trump. He’s an outsider, which appeals to the alienated. He’s confrontational, which appeals to the frustrated. And, in a unique 21st-century wrinkle, he’s a narcissist who thinks he can solve every problem, which appeals to people who in challenging times don’t feel confident in their understanding of their surroundings and who crave leaders who seem to be....

“Never before have we experienced a moment with so much public alienation and so much private, assertive and fragile self-esteem. Trump is the perfect confluence of these trends. He won’t be president, but he’s not an aberration. He is deeply rooted in the currents of our time.”

--So we move on to the debate...Carly Fiorina cleaned up in the ‘B’ team undercard, which I just saw clips of, while in the main event, let’s just say, everyone has their own opinion.

Mine is that there were no losers...no one needs to slink away in shame.

But to me the four winners were John Kasich, Rand Paul, Marco Rubio, and Dr. Ben Carson.

In the case of Paul, he played well to his base, I imagine, though I need to add his actual campaign, behind the scenes, is a mess, witness the below story.

Most Americans should have come away with the impression Sen. Rubio deserves to be on the stage as much as anyone; Gov. Kasich is not only likeable, he’s incredibly qualified; and for those listening carefully, Ben Carson’s statement where he worked in Ukraine was very solid, and his closing statement was terrific.

The rest, again, didn’t really hurt themselves (yes, including Donald Trump), but I doubt many of you were rushing to the phone or the computer to contribute to their campaigns before going to bed.

Back to Fiorina, I’ve always been impressed when I’ve seen her appearances on the networks the past few months. It’s early. She’ll get her shot next debate. You never know.

A different take on Donald Trump...Jennifer Rubin / Washington Post:

“(Regarding the ‘A’ team), with the exception of Donald Trump, most showed themselves to be serious contenders and well-rehearsed. Trump started off with a refusal to pledge to support the nominee and got roundly booed. (Sen. Rand Paul, whose campaign is in total disarray, chose to jump in to attack Trump as buying all sorts of candidates.) Asked to disclose his information that the Mexican government was sending criminals across the border he repeated his assertion, but no facts. Responding to a question about sexist statements, he declared the country suffered from too much political correctness, drawing hisses when he said he wouldn’t be so nice to Megyn Kelly since she was not being so nice to him. His most egregious moments may have been his defense of a single-payer system and his insistence that he gave money to liberal Democrats who did what he told them to do. It was cringe-worthy, as was his defense of multiple bankruptcies and his attempt to justify his flip-flops on issues like abortion. His volume was high, his content low. If anyone thought there was a serious candidate beneath all that hair, they were disappointed. His bombast verged on self-parody, perhaps demonstrating that a blowhard entertainer isn’t the best bet for president. He showed that his downfall will ultimately be his own obnoxious personality and lack of sane policies.”

--Nice ratings for Fox...the debate drawing 24 million, the most ever for a primary debate. And kudos from every other network for the way Fox drew it up. Nice to see.

--The FBI is asking questions about the security of Hillary Clinton’s email server, which comes on the heels of requests from two government inspectors general for a Justice Department review of a “potential compromise of classified information” on Clinton’s email server.

--Last Friday the Clinton campaign staged a classic document dump and Bill and Hillary reported income of $139 million for the period 2007-2014.

Editorial / Wall Street Journal

“That’s a tad more than most of the ‘everyday Americans’ whom Mrs. Clinton claims to speak for, which may explain why an accompanying press release stressed that she and Bill had given $14,959,450 to charity.

“That’s wonderful, save for the small detail that her charity of choice was her own family. The couple donated all but $200,000 of their gifts since 2007 to the Clinton Family Foundation, which isn’t exactly the Little Sisters of the Poor.

“While the foundation does contribute to charitable causes, it also doubles as a vehicle to promote the first family’s political ambition and public profile. It spends an outsized portion of its money, for instance, picking up the travel and other expenses for the whole family....

“Foreign governments, unions, wealthy Democrats and corporations donated to the foundation knowing its political importance to the woman who could be the next U.S. president.

“The Clintons play by their own political rules, and taking a nearly $15 million tax write-off to assist their electoral ambitions is merely the latest.”

--A longtime ally and supporter of Sen. Rand Paul, Jesse Benton, has been indicted by a federal grand jury on charges he concealed payments made to a former Iowa state senator during the 2012 presidential campaign, when Benton was chairing former congressman Ron Paul’s campaign. It was part of an alleged endorsement-for-pay scheme. Two others, Ron Paul’s campaign manager and deputy national campaign manager, were also indicted. All three are accused of concealing their payments (more than $70,000), from the Federal Election Commission and the FBI.

Benton is heading a super PAC supporting Rand Paul’s current effort. The senator’s campaign said in a statement that he was “disappointed that the Obama justice department chose to release this just prior to the highly anticipated first Republican presidential debate...it certainly appears suspiciously timed and possibly, politically motivated.” [Washington Post]

--In the above-mentioned Quinnipiac survey, President Obama’s approval rating was 43%, 52% disapproval. That pretty much sucks.

Congress, though, only has a 17% approval rating.

On the issue of foreign policy, 39% approve of Obama’s foreign policy, 55% disapprove.

--In a different Quinnipiac University poll released Wednesday, New York City Mayor Bill de Blasio fares poorly. 47% of New York City voters polled said de Blasio doesn’t deserve a second term, while 41% believe he does. Only 44% approve of the job he’s doing (his lowest score yet), with 44% saying he’s doing a good job, the rest being undecided.

[58% of black voters say de Blasio deserves to be re-elected, but just 29% of white voters would give him another term.]

To add insult to injury, Comptroller Scott Stringer has a 54% job approval while Governor Andrew Cuomo’s has rebounded sharply to 58% (36% disapproval).

As Crain’s New York Business’ Greg David also points out, de Blasio’s falling numbers are even more troubling for him because the city’s economy is accelerating, not declining.

--True story...as in you can’t make this up. The New York Post reported that Gotham’s education system is so dysfunctional, they found out about an eleventh grade class where, this year, they were reading “The Three Little Pigs,” as in the students were taking turns reading lines from it.

--Kevin Rector / Baltimore Sun

“Baltimore State’s Attorney Marilyn J. Mosby recently derailed an initiative to bring together city leaders, law enforcement commanders, academics, public health officials and others to identify real-time homicide trends and develop targeted responses – the latest crime-fighting program to falter amid a dramatic spike in violence.

“After months of promising unprecedented transparency and collaboration with law enforcement partners, Mosby said she didn’t want to share information that others in the fledgling Baltimore Homicide Review Commission considered critical to success. She said providing information on ongoing cases could compromise investigations or jeopardize the safety of victims and witnesses.”

She needs to be removed immediately.

--In the wake of the Cecil the Lion killing, Delta, American, United and Air Canada announced they will no longer allow big-game trophies on their flights, but UPS said it will, noting it follows U.S. and international laws, not public opinion, in determining what it will and won’t ship. FedEx, in an e-mail to the Washington Post, said it “may accept legitimate shipments of parts for taxidermy purposes if they meet our shipping guidelines.”

--We note the passing of the great historian, Robert Conquest, 98. Conquest’s major works included “The Great Terror” (1968), which detailed Soviet totalitarianism and was the first and still definitive treatment of Stalin’s purges, the secret police and show trials. The book is featured prominently in my home library. Another major work, “Harvest of Sorrow” (1986), chronicled the “terror famines” that followed agricultural collectivization.

William Grimes / New York Times

“The scope of Stalin’s purges was laid out: seven million people arrested in the peak years, 1937 and 1938; one million executed; two million dead in the concentration camps. Mr. Conquest estimated the death toll for the Stalin era at no less than 20 million.” [Ed. That 20 million figure has largely remained the number used since ’68.]

As the Wall Street Journal editorialized:

“When sources inside Russia were few and most Kremlinologists were oblivious, these classics contributed immensely to understanding the nature of the Communist project. They also helped shape the response that won the Cold War; Reagan and Thatcher were among his readers.”

Conquest wrote in a Journal op-ed in 1992 that the lessons of the bloody 20th century “have not yet been learned, or not adequately so.”

--Supertyphoon Soudelor was the strongest storm on earth thus far in 2015 as at one point this week it had maximum sustained winds of 180 mph and gusts to 220 mph. I followed this one because of the severe damage it dealt the Northern Marianas island of Saipan, which I visited way back in 1996 as part of a trip to visit some Jesuit friends in the region, including on my beloved island of Yap (which is part of Micronesia). I’ll never forget meeting some of Father Gary’s parishioners on Saipan who described to me what it was like to be there when the Marines battled the Japanese on the island during World War II. [I toured Suicide Cliff, where the Japanese threw themselves over rather than be captured by the Americans...but as was later revealed in startling videos, around the time of my trip, sometimes holding babies.] So I wish the people on the island a rapid recovery, but it won’t be easy.

[About a year after I was there, Father Gary dropped dead serving Mass...heart attack. In that one day driving around with him, I saw he had the weight of the world on his shoulders, dealing with parishioners and their problems, many suffering from drug abuse, which was rampant on Saipan.]

--I’m very aware of the Planned Parenthood undercover videos, but for now I choose not to comment, though you can imagine where I come down. This will be part of the budget debate end of September, with some of the Republican presidential candidates choosing to highlight it, to say the least. 

--In New York City, 10 have died as a result of Legionnaires disease, one of the worst outbreaks since the famous Bellevue-Stratford Hotel (Philadelphia) case in 1976, where 34 succumbed; most having been attendees at an American Legion Convention. [Roughly ten years later, I was involved in marketing a private placement that involved a revamped multi-use facility where the Bellevue-Stratford stood. Note to Mark R. Did we sell that out? Drawing a blank.]

--In an extensive study of eating habits and the impact on health, as published this week in The BMJ, participants, who were enrolled in 2004-08 and then followed for a mean of 7.2 years, were asked to fill out a questionnaire that included general questions about health and diet including how often they ate spicy foods. Bottom line, those who ate spicy foods 1-2 times a week had a 10 percent lower risk of death than those who rarely or never ate them, and those who ate spicy stuff 3-7 times a week had a 14 percent lower risk of death.

As reported by the Washington Post’s Ariana Eunjung Cha, “Jun Lv, a professor in the department of epidemiology and biostatistics at Peking University; Lu Qi, an associate professor at Harvard’s School of Public Health; and their co-authors also wrote that their data shows that the associations they found for (diseases like cancer and heart disease) seem to be stronger for those who consumed fresh chili pepper than those who consumed dried chili, sauce or oil.”

Capsaicin appears to be the key ingredient, though further studies are needed.

--John Riggi died. He was 90. Riggi was head of the DeCavalcante crime family, New Jersey’s largest home-grown operation; though one considered a stepchild to New York’s five families. Riggi was, however, long thought to be the inspiration behind the character, Tony Soprano, though fans of Riggi would beg to differ. [He was.]

Why would I bring up his passing? Oh, I have stories. A certain loved one, for example, once had a chat around the kitchen table with Uncle John as part of said loved one’s attendance at our dear family friend’s birthday party.

I wish I could say more, but it wouldn’t be prudent; except I did later attend this same friend’s wake in Bernardsville, N.J., about five years ago, where Uncle John’s clan was in control. Uncle John, however, was in Butner, N.C., serving time for murder.

--Joseph Berger, writing in the New York Times magazine, “Searching for Jewish heritage in Poland,” had the following passage.

“Between two visits to Otwock, we traveled to Treblinka. It is a haunted place because nothing of the death camp remains, though a tiny museum has a model camp that explains how speedily all of its 900,000 victims were dispatched in gas chambers. What has taken the place of the actual camp resembles a kind of Stonehenge, a field of stone markers arrayed almost higgledy-piggledy like a ravaged cemetery, each marker bearing the name of a locality whose Jews were deported there.”

For new readers, I’ve written a few times of my own personal pilgrimage to Treblinka. I was staying in Warsaw in 1999...I had just started this site...and hired out a driver to take me hours away to this place. What I’ve written in the past was how spooky the final miles into Treblinka were. I distinctly remember older women, standing outside their doors along the road (part of which was over the railroad tracks that were used during Nazi times) and these women were not happy I was there. Treblinka was not a tourist destination like Auschwitz. At least in 1999, my driver and I were the only ones there.

All I could think was, you f’n women...you knew what was going on as the trains went in full...and came back out empty.

-- I also note the passing of a dear family friend, Stan Tannenbaum. Stan and his late wife, Pauline, were longtime friends of my parents, for as long as I’ve been alive, and we’ll never forget their kindness when they took us into their home for a lengthy spell the summer of 1965 when we were between houses. They had four boys and way back we had some good times, though Stevie once cleaned my clock flipping baseball cards off the basement stairs. [I did retain enough of my Mickey Mantle ones, however. That was always the ultimate card in my youth.]

Nothing better in life than good friends (and family) and Stan and Pauline were among the very best.

--Finally, ‘Peanuts’ creator Charles Schulz was a very complicated man. A very complicated, ‘principled’ man. Michael Cavna of the Washington Post recently wrote a terrific piece on a big event, 47 years ago, the introduction of Franklin, the first black character in a major cartoon strip.

It all came about because Harriet Glickman, a black schoolteacher in Burbank, Calif., decided to write a few cartoonists in the immediate aftermath of Dr. Martin Luther King Jr.’s assassination in April 1968.   Glickman, now 88, talked to Mr. Cavna and she described how amidst the pain, she just felt she had to write, having worked with kids, and with kids of her own, and knowing back in the day the power of comics among the young.

“And my feeling at the time was that I realized that black kids and white kids never saw themselves [depicted] together in the classroom,” says Glickman, noting that Morrie Turner’s diverse comic “Wee Pals” was still a budding feature.

So when she wrote Schulz, like the other cartoonists she tried to contact about introducing a black character, he was at first hesitant, though not because of the syndication angle (which was the issue with others), but rather because he wondered whether as a white creator, he “could write a black character without unintended condescension.” [Michael Cavna]

But Glickman wrote again, asking permission to share Schulz’ first response with African American friends of hers who were parents, he granted it (so different from today’s social media world), and two friends of Glickman then wrote Schulz separately, urging the integration of ‘Peanuts.’

Schulz then prepared strips introducing Franklin, son of a father who’s off in Vietnam, as this new “regular kid” who is playing at the beach and he told Glickman the story was set to begin July 31, 1968.

Glickman recounts: “Sparky faced a question from the head of the [United Feature] Syndicate...who said: ‘Are you sure you want to do this?’’ Glickman recounts. ‘If you know Sparky, you know what his response was.

“ ‘He said: ‘Either you run it the way I drew it, or I quit.’” [Michael Cavna]

Oh, Schulz heard from many in the South, editors, who said “Please don’t send us any more strips with black children in the classroom with white children.” [Glickman recounted]

Well, Schulz told them to go pound sand (my term). Recall, years earlier Schulz included Bible passages in “A Charlie Brown Christmas,” which many also criticized then.

As for Harriet Glickman, who had three children of her own, she told Michael Cavna, “Franklin was, and is, my fourth child.”

To paraphrase Linus, ‘And that’s why Charles Schulz is a great American, Charlie Brown.’

---

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

God bless America.
---

Gold closed at $1094
Oil $43.87...lowest weekly close since Feb. ’09...true

Returns for the week 8/3-8/7

Dow Jones -1.8% [17373]
S&P 500 -1.3% [2077]
S&P MidCap -1.0%
Russell 2000 -2.6%
Nasdaq -1.6% [5043]

Returns for the period 1/1/15-8/7/15

Dow Jones -2.5%
S&P 500 +0.9%
S&P MidCap +2.5%
Russell 2000 +0.2%
Nasdaq +6.5%

Bulls 42.2
Bears 17.5 [Source: Investors Intelligence]

Have a great week. Click on the Gofundme link above or on the home page if you haven’t already done so. Or send a check to PO Box 990, New Providence, NJ 07974.

Brian Trumbore