Week in Review

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Week in Review

09/26/2015

For the week 9/21-9/25

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Edition 859

Washington and Wall Street

What an extraordinary week. Under brilliant sunshine in Washington on Wednesday morning, President Obama greeted Pope Francis at the White House and proclaimed, “What a beautiful day the Lord has made.” For Obama it was all downhill from there.

Chinese President Xi Jinping wanted a state visit and all the pomp and circumstance that this entails, despite the fact China is an enemy of our country, only he was upstaged by Pope Francis, the man of peace, who delivered a stirring address to a joint session of Congress. And when Xi arrived at the White House on Friday morning, he had to compete not only with Francis’ address to the U.N. General Assembly, but also with the sudden resignation of House Speaker John Boehner.

And while the summit between Obama and Xi was, as predicted, a real tension convention, separately, Russian President Vladimir Putin was continuing to move heavy arms and more troops into Syria, forcing President Obama to meet him in New York this coming Monday, which is the last thing Obama wanted at this point in time.

Meanwhile, in a speech on Thursday, Federal Reserve Chair Janet Yellen said that while the Open Market Committee is monitoring the risk of an overseas slowdown hitting U.S. growth, it did not expect this to have a significant effect on the path for U.S. monetary policy.

While Yellen argued that tumbling energy prices and the 15 percent rise in the U.S. dollar, which hit import prices, had been a drag on inflation, she expected inflation to return to a 2 percent rate over the next several years. So the “prudent strategy” was not to wait for the U.S. to hit full employment and for inflation to return to 2 percent before moving.

“Most FOMC participants, including myself, currently anticipate that achieving these conditions will probably entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter. But if the economy surprises us, our judgments about appropriate monetary policy will change,” Yellen said.

Following the Fed’s decision not to raise rates at its meeting a week earlier, many felt her comments during a press conference hinted at the Fed holding rates unchanged for the remainder of the year and by her remarks, Thursday, she was saying the Fed will not delay for much longer.

“The more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data.”

[Chair Yellen struggled throughout the long speech at UMass Amherst and was treated for dehydration after.]

So if Yellen is looking for more signs of growth to warrant a rate hike she received it on Friday with the final revision to second quarter GDP, 3.9%, but, coupled with the first quarter’s 0.6% rise, we are right at the 2.2% to 2.3% rate that we’ve basically been at for years. Hardly the 3% to 4% we should have been witnessing after such a deep recession. The Atlanta Fed’s GDPNow indicator is also at just 1.4% for the third quarter, while the consensus Wall Street forecast is about 2% or slightly higher.

In other economic news, August existing home sales came in less than expected but still solid, with the median price up 4.7% vs. Aug. 2014 at $228,700.

August new home sales were stronger than forecast, up 5.7% on an annualized basis to the highest level since Feb. 2008, with the median price up 0.3% year-over-year.

August durable goods, however, were not strong, down 2.0%, -1.0% ex-aircraft.

Meanwhile, the folks running the $38bn Harvard endowment are turning cautious. In its latest annual report, which showed investment returns fell to 5.8 percent in the year to June, Harvard Management CEO Stephen Blyth said, “We are proceeding with caution in several areas of the portfolio.

“We are being particularly discriminating about underwriting and return assumptions given current valuations.

“In addition, we have renewed focus on identifying public equity managers with demonstrable investment expertise on both the long and short sides of the market.”

Janus Capital Group’s Bill Gross said the Federal Reserve needs to raise interest rates as soon as possible, trading some near-term market losses for longer-term stability and a healthier financial system. Writing in his monthly investment outlook on Wednesday, Gross said:

“My advice to them is this: get off zero and get off quick.” It’s time to allow people in developed economies to save. 

Gross underscored that it’s not just giant pension funds and insurance companies that are suffering from low interest rates. Investors aren’t getting the 8 to 10 percent a year they’ve counted on to pay for education, health care, retirement or a vacation.

Finally, with the resignation of John Boehner, the word Friday night is House Republicans will not shut down the government and instead will target December for resolving a myriad of issues, from the Highway Transportation bill to Planned Parenthood and the debt ceiling. We’ll see. 

Europe and Asia

The Greek election turned out to be a mild surprise. The polls going into Sunday’s vote had Syriza in a dead heat with New Democracy, but instead Syriza ended up with 35.5% to New Democracy’s 28% (Fascist Golden Dawn was third at 7%). 

Coupled with the 50-seat bonus that goes to the party with the most votes, Syriza ended up with 144 seats in the 300-seat parliament and to gain a majority, Syriza once again formed a coalition with the right-wing Independent Greeks party, which polled less than 4%. Many, such as the head of the European parliament, Martin Schulz, openly wondered why because this smaller party is led by a wacko (that’s me, not Mr. Schulz).

So Alexis Tsipras remains prime minister, after a brief intermission, and many of us find it strange that the Greek people have re-elected a government that came to power on an anti-austerity platform, but is now in charge of implementing harsh terms for a third bailout that result in even further hardship.

“I feel vindicated because the Greek people have a clear mandate to carry on fighting inside and outside our country to uphold the pride of our people,” Tsipras told supporters.

“In Europe today, Greece and the Greek people are synonymous with resistance and dignity, and this struggle will be continued together for another four years.”

One thing is for sure. Tsipras has proven to be a heckuva political operator. But if the government doesn’t implement the terms set forth by the creditors, the bailout funds will dry up. Period. Plus he has the migration crisis to deal with.

There is another big vote this weekend in Europe, in Catalonia, which could put the region on a path towards secession, but I’ll comment next time after the results roll in.

As for the eurozone economy, European Central Bank President Mario Draghi confounded expectations when he said the ECB needed more time to assess if it will have to beef up its 1 trillion euro asset-buying (quantitative easing) program.

“More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature and to assess the driving forces behind the drop in the international price of commodities and behind the recent episodes of severe financial turbulence.”

The ECB is forecasting a CPI for the eurozone of 1.1% in 2016; 1.7% in 2017. The last reading was just 0.2% annualized for August.

Meanwhile, Markit released flash readings for September and the eurozone manufacturing PMI was 52.0 vs. 52.3 in August, while the services reading came in at 54.0 vs. 54.4.

The flash manufacturing reading in France was 51.9 vs. 48.4 in August, an 18-month high, while the manufacturing PMI in Germany was 52.5 for September vs. 53.3 in August.

Germany’s factory-gate, or producer prices, fell a 25th consecutive month in August, down 1.7% year-over-year.

As for the migration crisis, with everything else that was going on in the U.S., there wasn’t as much coverage of it, but you can be sure there was in Europe itself as European Union leaders reached agreement on measures to resettle 120,000 refugees across the continent, on top of an earlier agreed upon 40,000 from Italy and Greece. The heads of government of the 28 EU countries also pledged more than $1 billion toward improving conditions at camps for Syrian refugees in the Middle East, to discourage them from trekking to Europe.

Additionally, they agreed to improve facilities in Italy and Greece for registering and fingerprinting all the new arrivals.

But the plan was approved through a majority vote rather than the usual consensus, over the fierce opposition of four Eastern European countries – Hungary, Czech Republic, Slovakia and Romania. Finland abstained before eventually voting in favor; Poland and the Baltic states also held deep reservations.

Forget that the numbers don’t come remotely close to the reality of the situation; an estimated 480,000 refugees and migrants having entered Europe thus far this year, 309,000 via Greece. The EU plan runs roughshod over national sensitivities and democratic preferences and, as I’ve been writing for a long time now, will have far-reaching consequences for Europe’s future.

Slovakian Prime Minister Robert Fico proclaimed: “As long as I am prime minister, mandatory quotas will not be implemented on Slovak territory.”

Poland’s likely next prime minister Beata Syzdlo described the vote as a “scandal.”

This past week, between Monday and Wednesday, 20,000 migrants entered Croatia and Slovenia shut its border with them. Croatia then sent thousands back to Hungary, which after building a 109-mile fence on the border with Serbia, is now doing the same with its borders with Croatia and Romania.

Last Saturday, 11,000 crossed from Hungary to Austria, with another 7,000 on Sunday.

Germany talked of capping asylum numbers. German Interior Minister Thomas de Maiziere told Spiegel magazine, “We can’t host all the people from conflict areas and all poverty refugees who want to come to Europe and to Germany. The right way would be that we in the EU commit ourselves to fixed, generous quotas for the admission of refugees.”

Hungary took out full-page advertisements in local Lebanese newspapers that read: “Hungarians are hospitable, but the strongest possible action is taken against those who attempt to enter Hungary illegally.” Denmark took out similar ads earlier this month.

Turning to China, President Xi Jinping told U.S. business leaders in Seattle the Chinese economy was still “operating within the proper range” and defended Beijing’s intervention in the stock markets over the summer as necessary to “prevent massive panic.” 

But the Caixin preliminary manufacturing index for September came in at 47.0 (50 being the dividing line between growth and contraction), below expectations and August’s final reading of 47.3. 47.0 is the lowest in 6 ½ years, and the index has been in contraction mode since March.

In Japan, a flash reading on September manufacturing came in at 50.9 vs. 51.7 in August, but consumer prices fell back into deflation mode for the first time since April 2013 in a blow to Prime Minister Shinzo Abe’s economic stimulus efforts.

Core prices, excluding fresh food, were down by 0.1 percent compared with a year ago in August amid falling global energy prices. But if you exclude food and energy, which is the core metric here in the U.S., prices were up 0.8 percent year over year.

Street Bytes

--Stocks finished down a second straight week, though Nike's big day on Friday limited the losses on the Dow Jones, off 0.4% to 16314.  The S&P 500 fell 1.4% and Nasdaq was whacked to the tune of 2.9%.

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.69% 10-yr. 2.16% 30-yr. 2.96%

--There is no bigger business story in the world these days than the one at Volkswagen, where the CEO, Martin Winterkorn, was forced to resign less than a week after the emissions cheating scandal involving diesel cars erupted; one that has now spread far beyond the U.S.

VW acknowledged this week that 11 million of its vehicles worldwide were involved in a deception that allowed the vehicles to pass emissions tests even though they emitted nitrogen oxide that was 40 times U.S. federal standards.

Winterkorn said in a statement: “I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.”

Winterkorn added he took responsibility, but that he, personally, was “not aware of any wrong doing on my part.” It’s early, but most outside observers seem to agree.

It is all about software manipulation to defeat the test, and VW could be subject to fines of up to $18 billion from the EPA, plus criminal charges could be the result of a Justice Department probe. Thus far, VW has said it set aside more than $7 billion (or more than half its annual profits) to fix the issues and cover penalties and recall costs. It’s clear, though, the cost will be substantially more.

Those who bought the VW diesel cars are in a huge bind. They purchased the vehicles on the promise of an environmentally friendly car, but now how do you put a resale value on it?

And since the software manipulation was designed to show the fuel economy met standards, how will it change when VW fixes the problem and what will be the impact on performance?

Mike Jackson, CEO of No. 1 car dealer chain AutoNation Inc., told the Wall Street Journal: “All we’ve received so far are talking points from VW emphasizing that we tell customers this is not a safety issue. They tell us they will get back to us on how they will bring cars into compliance.”

There is no doubt this will have a gigantic (not too strong a word) on VW sales. You would have to be a fool to buy one today, not knowing all the details.

A Journal article talked about fuel economy on the impacted vehicles being rated at more than 40 miles a gallon for some diesel models, and that consumption could rise 5% to 7% at high speeds or other driving conditions “because components needed to clean emissions can dent engine performance.”

The class-action lawsuits are beginning to pile up already, and last I saw, at least 29 countries are launching investigations of their own.

For example, French Environmental Minister Segolene Royal said that because VW has taken advantage of tax incentives for diesel technology, “There’s a theft of public money in this fraud.”

On the other side of the argument, an editorial from the Wall Street Journal:

“Trouble is, engines that are designed to burn more efficiently – and therefore emit less carbon – release more NOx. They also have less oomph. EPA and CARB (California Air Resources Board) should fess up to this trade-off, and the wrongdoing involved ought to be precisely identified.

“The immediate upshot is that VW will have to recall the lemons to bring them in compliance with government rules. Any fix will likely cost several thousand dollars per vehicle, reduce performance and increase carbon emissions. Will drivers even want the government’s clean bill of health?

“VW deserves to pay for any intentional wrongdoing, but the rest of the industry and the country need to know whether this is the great deception that EPA alleges or the kind of well-known regulatory trade-off that is being harshly punished for the first time.”

Volkswagen’s diesel woes began after European regulators noticed discrepancies between emissions and performance test results and drivers’ real-world experiences.

Consumer Reports suspended “recommended” ratings on the automaker’s Jetta and Passat diesel-engine models after the EPA disclosed its allegations.

Meanwhile, VW named Porsche chief Matthias Muller to run the entire company and is demanding resignations from some of the company’s top engineers.

The company’s shares fell 20% on Tuesday after tumbling 19% Monday, but stabilized some later and were down 34% for the week.

--On Thursday, shares in Caterpillar fell 6% as the world’s largest equipment maker warned 2015 sales were now expected to be $48bn and the company forecasts 2016 sales to be 5% lower.

Caterpillar also announced it would cut up to 10,000 jobs through 2018 as part of its ongoing restructuring and cost reduction plans.

The 2015 revenues will be the weakest since 2010’s $42.6 billion and down by more than 27% from the 2012 record of $65.9bn.

--Apple said it is taking steps to remove malicious code added to a number of apps commonly used on iPhones and iPads in China; what is thought to be the first large-scale attack on the company’s App Store.

The hackers had created a counterfeit version of Apple’s software for building iOS apps, which it persuaded developers to download.

Apps compiled using the software could then steal data about the users and send it to servers controlled by the hackers.

Cybersecurity firm Palo Alto Networks said on Friday that potentially hundreds of millions of users were impacted by the infected apps. The majority of people affected were in China. [David Lee / BBC]

But Apple doesn’t want me talking about this. It’s about the launch of the iPhone 6s and 6s Plus on Friday around the world. We’ll find out Monday just how good the weekend has been, but I’m guessing enthusiasm is muted.

Which wouldn’t be a good thing since Apple generates more than 60 percent of its revenue from the phone.

--Healthcare costs for American workers continue to surge, with the average deductible up nearly 9% in 2015 to more than $1,000, according to a survey from the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust.

The deductible that workers must pay has tripled from $303 in 2006 to $1,077 today; seven times faster than wages have risen in the same period. [Noam Levey / Los Angeles Times]

--Nike Inc. posted a 23% jump in quarterly profits as sales rose a solid 5% from a year earlier to $8.41 billion. Excluding the effects of currency fluctuations, Nike said global sales rose 14% in the quarter ended Aug. 31. Sales jumped 30% in China to $886 million. The stock surged 9% in response and is up over 40% the past 12 months.

--Groupon plans to cut 1,100 jobs globally as part of a reorganization. The cuts represent 10% of the company’s workforce.

--Bank of America survived a shareholder revolt by those opposed to its decision to recombine the roles of CEO and chairman, allowing Brian Moynihan to continue at the helm. 63% of votes cast were in favor of the board’s proposal.

--Goldman Sachs CEO Lloyd Blankfein revealed he is suffering from a “highly curable” form of lymphoma and will begin chemotherapy. Blankfein said he was feeling unwell for weeks and a biopsy revealed the cancer. He plans on working “substantially as normal” during his treatment, but will reduce his travel.

--France’s highest court has upheld the ban on Uber’s commercial lower-cost service, UberPop, in yet another setback for the company.

UberPop uses an app to connect clients with private car-owners, who charge for rides but do not have any training or a license.

--Biotech stocks suffered a big drop this week after Hillary Clinton said she would cap monthly spending on prescription drugs at $250 for chronically ill patients.

But before her comments there were growing signs Congress and the health insurance companies, as well as employers paying for the drugs, were looking for ways to contain the costs of the drugs.

A statement by the Clinton campaign read in part: “Every month, 90 percent of seniors and around half of all Americans take a prescription drug.”

I’ve never taken one in my life, quite frankly. #CoorsLight

--A U.S. drug company that faced a backlash after raising the price of a drug used by AIDS patients by over 5,000% has said it will now lower the price.

Martin Shkreli, the head of Turing Pharmaceuticals, said he would drop the price following the outcry, but did not say by how much.

Turing acquired the rights to Daraprim, which treats the disease toxoplasmosis and is typically taken for at least several weeks, in August. It then raised the cost of the drug from $13.50 to $750.

At first, Shkreli, a former hedge fund operator, defended the increase, saying the profits would help research new treatments. But others in the industry said this was a bunch of garbage, to which Shkreli offered his middle finger in a tweet. Just a real a-hole...and dirtball of the year candidate.

--Macy’s Inc. said it plans to hire roughly 85,000 seasonal workers for the coming holiday season, slightly lower than levels a year earlier. Most big retailers, such as Wal-Mart and Target, have announced they will hire the same amount as last year.

--Commercial airlines reported net income of $5.5 billion for the second quarter, the most profitable quarter since 2007, as the industry takes advantage of lower fuel costs and steady demand. Fee revenue is also up about 5%.

--The former owner of Peanut Corporation of America, Stewart Parnell, was sentenced to 28 years in prison for his role in a deadly salmonella outbreak, the stiffest punishment ever handed out to a producer in a foodborne illness case.

The outbreak in 2008 and 2009 killed nine Americans and sickened hundreds more, triggering one of the largest food recalls in U.S. history.

In the investigation, emails and records were revealed that showed food confirmed by lab tests to contain salmonella was shipped to customers anyway. Other batches that were never tested, were shipped with fake lab records saying the salmonella screenings were negative. Some emails were from Parnell who directed employees to “turn them loose” after samples tested positive.

--Imports to Russia have been plummeting as a deep recession cuts into the country’s buying power. The Netherlands, Britain and France saw sales to the country cut in half in the first eight months of the year. Germany and Italy saw exports to Russia fall around 40 percent.

Russian imports from the U.S. and Japan fell by over 40 percent, while those from China declined 34 percent. 

--According to Morningstar research, since Bill Gross’ departure from PIMCO Sept. 26, 2014, in the year since the PIMCO Total Return Fund he managed since has returned 1.71%, while the Janus fund he established has lost 2.5%.

More than $120 billion has flowed out of PIMCO since Gross’ departure, but the Janus fund has gained only $1.5 billion – including $700 million of Gross’ own money. [Financial Times / Los Angeles Times]

--Instagram revealed this week it has 400 million monthly users, up 100 million since the start of the year. Further, the Facebook-owned company said 75% of its audience resides outside the U.S. Instagrammers are sharing more than 80 million photos per day.

--A federal judge has ruled that Warner/Chappell Music does not hold a valid copyright claim to the “Happy Birthday to You” song; a stunning reversal of decades of copyright claims.

Warner has been enforcing its claim following the purchase of Birch Tree Group, the successor to Clayton F. Summy Co., which owned the original copyright. Royalties on the song bring in about $2 million a year for Warner, as reported by the Los Angeles Times.

Judge George H. King ruled Summy Co. had the rights only to specific arrangements of the music, not the actual song itself.

Up until now, Warner could charge anyone who wanted to sing or play “Happy Birthday to You” as part of a profit-making enterprise.

Foreign Affairs

Syria/ISIS/Iraq: Syrian government forces intensified their airstrikes on the ISIS-held ancient city of Palmyra, killing more than 100 people including civilians in recent days. Barrel bombs were among the weapons deployed.

Syrian forces also used newly arrived Russian warplanes to bombard ISIS fighters in Aleppo province in northern Syria, activists said on Thursday, in an attempt to break a siege on a nearby air base.

[We also learned this week that the al-Qaeda affiliate, the Nusra Front, killed 56 Syrian soldiers that had been captured at an air base, executed on the runway.]

Russia is rapidly bolstering its ally with military aid that U.S. officials say has included fighter jets, helicopter gunships, artillery and ground forces.

The Russian jets, according to the Syrian Observatory for Human Rights, are thus far being flown by Syrian pilots.

In his first testimony before Congress since a personal scandal ended his government career four years ago, General David Petraeus deconstructed the “revolutionary upheaval that is unparalleled in modern history” across Iraq, Syria and Iran as traditional states ebb or collapse. The dangers multiply, he said in remarks to the Senate armed services committee, if the U.S. remains “ineffective or absent in the face of the most egregious violations of the basic principles of the international order” (his emphasis).

“(Petraeus) urged a stronger airstrike and special forces response to mitigate the civil war and refugee crisis – or else ‘the fallout from the meltdown of Syria threatens to be with us for decades, and the longer it is permitted to continue, the more severe the damage will be.’

“These are the hard-won lessons of the civil-military surge that defeated al Qaeda in Iraq in 2007-08, and one of General Petraeus’ chief lieutenants in that effort is quitting in frustration: Former Marine four-star John Allen will end his year-long tour as the ‘special envoy’ who tried to assemble a global coalition against ISIS.

“General Allen had the credibility to prosecute a limited campaign against the would-be caliphate and an abiding moral obligation to the people under jihadist oppression. But he was micro-managed by the West Wing and National Security Council, which often overruled his requests for more resources and policy commitments, such as air-control teams on the battlefield to guide tactical bombing.

“The larger problem at the top of the chain of command is that the Middle East’s crises threaten to undermine not merely regional stability but also U.S. interests world-wide. ‘The principal winners, thus far, have been the most ruthless, revolutionary and anti-American elements in the region,’ as General Petraeus put it. They’ll continue to win until the U.S. changes strategy, or even articulates one.”

Amid the rapid Russian buildup, which is now reported to include surface-to-air missiles (which seemingly destroys the West’s option of imposing a “no-fly zone”), President Obama has agreed to meet with President Putin on Monday as part of the U.N. General Assembly in what is shaping up to be a high-stakes summit over the Syrian civil war. Putin called for it and Obama had resisted. Both will be addressing the General Assembly that day, as well as Chinese President Xi.

In his speech to the U.N., Putin is expected to bash the West for its failure to take down ISIS, and that the goal should be the eradication of Islamic State, not the ouster of Russia’s ally, Syrian President Assad.

Putin and Obama have not held formal talks since June 2013, and Monday’s meeting goes against Obama’s efforts to isolate the Russian leader. Instead, Putin is expected to call for the West to join a coalition including Russia, Syria and Iran to battle ISIS and work out a peace deal.

But White House press secretary Josh Earnest said Ukraine, not Syria, would be the “top item” on the agenda.

“Vladimir Putin’s Syria strategy is working better than perhaps even he had hoped. The Russian arms flowing into the Latakia military base in western Syria are already propping up his ally Bashar Assad’s teetering government. Now they’re ending the Russian President’s diplomatic isolation....

“ ‘Given the situations in Ukraine and Syria, despite our profound differences with Moscow, the President believes that it would be irresponsible not to test whether we can make progress through high-level engagement with the Russians,’ a senior administration official said on Thursday. Translation: Russia is blowing up Mr. Obama’s Syria and Iraq strategy, and he’d better see what the Kremlin strongman wants.

“Two weeks ago Mr. Obama dismissed Russia’s Syria incursion as ‘doomed to failure.’ Now Mr. Putin knows he can use the military facts he has established on the ground as leverage to make further strategic gains.

“Imagine his potential wish list. Perhaps he’ll ask Mr. Obama to join Russia and Iran in an alliance against Islamic State in Syria and Iraq. He already pulled a version of this in 2013 when he rescued Mr. Obama from his ‘red line’ over Mr. Assad’s chemical weapons use. That deal made it safe for Mr. Assad to unleash his barrel bombs without fear of U.S. attack. A similar deal now would further assist Mr. Assad while dismaying Arab members of Mr. Obama’s current coalition against ISIS and putting Iraq’s Sunni minority further under the thumb of Iran.

“If Mr. Obama won’t go that far, perhaps Mr. Putin will settle for the U.S. rolling back the sanctions it imposed on Russia after his Ukraine incursions. Rest assured Mr. Putin wants something – and he thinks he can get it.”

“At the root of what surely will be seen as the greatest failure of his presidency is Mr. Obama’s refusal to commit to a coherent plan for ending President Bashar al-Assad’s murderous assault on his own people. But this is not, as spokesman Josh Earnest contended, ‘something our critics will have to answer for.’ Had Mr. Obama accepted the recommendation of his national security team in 2012 to arm and train Syrian opposition forces, or the many proposals to create safe zones where civilians could be protected from the regime’s barbaric barrel bomb attacks, much of the subsequent carnage, not to mention the flood of refugees now pouring into Europe, could have been prevented.

“As it is, every consequence that Mr. Obama warned might come from U.S. intervention – including the rise of Islamic jihadists who now control much of Syria’s territory – has occurred in the absence of U.S. action. And the dangers are growing. Into the vacuum of American leadership has stepped Russian President Vladimir Putin....

“Mr. Putin’s scheme is another recipe for disaster. The Assad dictatorship has been the prime source of the humanitarian crisis, and its continued existence is what drives recruitment for extremist Sunni forces such as the Islamic State and al-Qaeda. To bolster the regime will swell the ranks of the extremists and intensify the war. The only winner will be Mr. Putin, who aims to restore Russia as a power in the Middle East at the expense of the United States.”

Finally, Israeli Prime Minister Benjamin Netanyahu traveled to Moscow for talks with Putin, Netanyahu fearing the Russian buildup in Syria threatened Israel.

“Over the last number of years, and even more so over the last few months, Iran and Syria are arming the radical Islamic terrorist organization Hizbullah with advanced weaponry that is directed at us, and has already been fired at us,” Netanyahu said alongside Putin.

Putin said in response that Russia’s actions in the region are “always very responsible.” [Jerusalem Post]

Iran: Tehran has stepped up cooperation with Moscow inside Syria as they move to safeguard Assad’s coastal stronghold. But as alluded to above, as Iran pours resources into Syria, its allies could be seeking to open a new front against Israel from within Syria, such as the Golan Heights.

Meanwhile, on the nuclear deal front, the International Atomic Energy Agency confirmed Monday that Iran had turned over samples the Iranians had taken themselves from the suspected nuclear site at Parchin, which IAEA inspectors haven’t been allowed to visit in a decade.

Iran did take IAEA director Yukiya Amano on a supervised tour of Parchin last Sunday and Amano said, “The agency can confirm the integrity of the sampling process and the authenticity of the samples.”

“(Amano) has to settle for whatever Iran provides him. He also isn’t about to say that the self-inspection process he recently endorsed has produced inadequate results – at least not if he wants to keep his job.

“We are a long way from the go-anywhere, look-at-anything inspections that President Obama promised during negotiations. The Parchin selfies are especially dangerous because they are likely to set a new arms-control precedent for inspecting contested military sites in the future.

“Gone are the kind of intrusive inspections that even Saddam Hussein had to tolerate until he kicked out inspectors. This is now the era of the selfie inspection, when rogue regimes provide their own samples, and inspectors-at-a-distance announce their gratitude for the cooperation.”

“The fact that Iran is taking its own soil samples shows that the verification scheme is an embarrassing charade, and yet another concession we can add to the pile of concessions that make up the dangerous Iran deal.”

The IAEA is to issue a report on Iran’s past program in December, which will play a role in helping to determine whether international sanctions against Iran are lifted under the broader agreement with the P5+1.

China: Hank Paulson, former U.S. Treasury secretary who is still closely involved in U.S.-China relations, told the Financial Times, “The biggest thing that companies want to know is what is happening with reforms. Is China looking to open things up just for the private sector in China, or is it for multinationals as well? I believe the reformers want to do the latter.”

But on Wednesday, when some tech titans such as Tim Cook of Apple, Satya Nadella of Microsoft and Mark Zuckerberg of Facebook, gathered near Seattle for what was promoted as a dialogue with Xi, instead they got a lecture from him. Hoped for discussions on cyberattacks and theft of their intellectual property by Chinese companies failed to materialize.

Xi reassured American corporate leaders on economic and business issues, including a determination to punish cyber criminals.

But China expert Jon Huntsman, former U.S. ambassador to China, said the other day: “In my 35 years following the U.S.-China relationship and participating in it I have never seen a time where the business community, the private sector component of the relationship, has been more despondent.”

Microsoft did announce an alliance whereby Baidu would be the default search engine in its new Windows 10 operating system in China, replacing its in-house Bing service, as part of Microsoft’s bid to counter rampant piracy of its software in China.

Xi and President Obama had a private dinner on Thursday at Blair House, next to the White House, before their public activities on Friday, which includes this evening’s state dinner.

“President Obama has lavished more personal attention on Chinese President Xi Jinping than on any other world leader over the past several years.

“But as Xi makes his first state visit to Washington, the romance is all but dead.

“Observers said there is little personal warmth, and even less trust, between Xi and Obama....

“Xi has aggressively sought to expand China’s influence in Asia, and his assertiveness has caught the Obama administration off guard, often making the White House appear indecisive in its responses.”

“Like wedding anniversaries, state visits by foreign leaders are occasions to celebrate the positive, and that’s what the Obama Administration will stress as Chinese President Xi Jinping tours the U.S. this week. Get ready for an announcement about arms-control in cyberspace, a progress report on a bilateral investment treaty, and bromides about mutual friendship....

“But it is now impossible to ignore that China is attempting to redefine its relationship to America and the rules of world order. Under Mr. Xi, Beijing sees itself as a strategic rival rather than a partner. Its foreign policy is increasingly aggressive, something lawless, a reality that’s become clear even to the Obama Administration. The U.S. needs to show that it will resist this behavior – even as it seeks to steer China’s leadership back toward global norms....

“For decades the U.S. has tread lightly in response to Beijing’s nationalist aggression while attempting to integrate China into the global economy. The goal was to coax it to become a responsible ‘stakeholder’ in the post-Cold War order. But it is increasingly clear that China has perceived this restraint as weakness it can exploit.

“The U.S. needs a more forceful response befitting a rival that wants to be a regional hegemon and eventually the world’s dominant power. This doesn’t mean setting on a path of hostility and war. Both countries have much to gain from cooperation. But this does mean pushing back firmly against predatory behavior, especially on national security....

“The goal is to reduce the chances of Chinese miscalculation by drawing clear lines against lawless behavior. The sooner Chinese leaders see there are costs to their aggression, the more likely they are to pull back.”

“For Chinese President Xi Jinping, the principal achievement of a summit meeting with President Obama may be the 21-gun salute he is due to receive on the White House lawn Friday. A greeting with full honors by the U.S. president is particularly important to the Chinese ruler at a time when he is still struggling to consolidate power in Beijing and show that he is capable of mastering a corruption-ridden bureaucracy and faltering economy.

“Having conceded that rare honor – China is the only non-democracy whose leaders have been treated to a state visit by his administration – Mr. Obama has a more difficult task. He must try to induce Mr. Xi to reconsider the aggressive policies he has embraced, ranging from unrelenting cyberespionage against U.S. agencies and companies to the construction of military airstrips in the South China Sea. For two years, U.S. protests on those issues have been ignored by the Chinese leadership. If this summit meeting does not change that, it’s easy to foresee a downward spiral in relations.

“When the two leaders met in California two years ago, Mr. Obama made cyberespionage a focus. But since then, China’s attacks have only escalated, including the stealing of millions of federal employee disclosure statements and the hacking of major technology companies. Like Vladimir Putin in Ukraine, Mr. Xi takes the brazen approach of denying his regime is responsible for the operations despite abundant proof to the contrary. To avoid disrupting the summit, Mr. Obama put on hold retaliatory measures against the Chinese entities involved. But he should make clear that they will go forward once Mr. Xi leaves town....

“The situation in the South China Sea is cause for even greater concern.... Beijing is literally paving the way for the use of force to advance its indefensible claim to waters considered territorial by numerous other countries... Mr. Obama must puncture Mr. Xi’s apparent conviction that his project will prompt nothing beyond rhetoric from the United States.”

Xi and Obama announced agreement on broad anti-hacking measures aimed at stopping the theft of corporate trade secrets, but the U.S. is far from convinced China is sincere.

“New technical specs about China’s new J-31 fighter, a plane designed to rival the American-made F-35 Joint Strike Fighter, popped up on a Chinese blog last week. So who has the advantage – the U.S. or China?

“China’s twin-engine design bears a striking resemblance to the single-jet F-35....

“Military experts say that while the J-31 looks like, and may even fly like, the F-35, it’s what’s under the hood and embedded in the skin that really matters. The U.S. has the better computer software...stealth coating, and engines technology – all critical attributes that make fifth-generation aircraft different than the military jets of last century.

“(But) exactly how long that advantage lasts is up for debate; senior Pentagon officials and experts believe American technology superiority is shrinking....

“China is suspected of stealing F-35 design data in 2009. U.S. officials have said classified information was not stolen in that breach, but in 2011 it emerged that China was building a multirole, stealth fighter of its own that could strike targets in the air and on the ground, like the F-35....

“(U.S.) companies are attempting to beef up their cybersecurity, but there is a gap in the security talent, said Justin Harvey, chief security officer for Fidelis Cybersecurity, a firm that works with the U.S. government and private industry....

“ ‘I think 90 percent of U.S. companies are not equipped to deal with cyber espionage,’ Harvey said.”

Finally, on the Issue of Japan’s passing of security bills that expand its military role overseas, China’s foreign ministry said it was an “unprecedented” step that breached its pacifist constitution that posed a major threat to regional security and was aimed at checking China’s rise.

Foreign Ministry spokesman Hong Lei said, “Japan’s recent military buildup and drastic changes to its military and security policies are out of step with the trend of the times featuring peace, development and cooperation.”

Russia: As if Ukraine and Syria weren’t enough, the Kremlin lashed out at U.S. plans to modernize 20 nuclear weapons stationed at a German airbase, with Putin spokesman Dmitry Peskov characterizing the move as a potential “violation of the strategic balance in Europe,” that would demand a Russian response.

The U.S. Air Force, according to a German television station citing a Pentagon budget document, will deploy modernized B61 nuclear bombs.

In response the Kremlin could deploy Iskander-M missiles to Kaliningrad, a Russian enclave in Eastern Europe that borders Poland and Lithuania.

“The Russian secret service ‘may well have been involved’ in the death in Britain of whistleblower Alexander Perepilichny, it was claimed at a pre-inquest hearing.

“A lawyer for Hermitage Capital – the investment fund that employed lawyer Sergei Magnitsky, who died in a Moscow jail – told the hearing in Woking ‘there is a very considerable amount of circumstantial evidence that this case was murder.’...

“The 44-year-old collapsed and died while jogging outside his home in Weybridge, Surrey in 2012. His death was originally attributed to natural causes but a pre-inquest review in May heard that traces of a rare chemical, which can be found in the poisonous plant gelsemium elegans, had been found in his stomach.

“Lawyers representing Hermitage have previously said Mr. Perepilichny may have been targeted in a ‘reprisal killing’ as he helped the firm uncover an alleged Russian multimillion-dollar money laundering operation.”

Magnitsky was jailed in 2008 for tax evasion and died the next year after being beaten and denied medical treatment. He had testified against Russian police officials and accused them of stealing $230 million in tax rebates.

Saudi Arabia: At least 717 people were killed in a stampede at Mina, near the holy city of Mecca, in the deadliest disaster at the annual Hajj pilgrimage in 25 years.

The stampede occurred as pilgrims were making their way to a ritual commemorating the Prophet Abraham’s “stoning of the devil.” The crowding has always been dangerous and the Saudis have improved crowd-control measures, but officials are blaming the crowds in part for not following the measures that had been put in place. In 1990, 1,400 died during a stampede in a crowded pedestrian tunnel in Mecca.

Iran’s Hajj organization said 43 Iranians were killed and it is blaming Saudi authorities, as the two countries battle for regional supremacy, including in the war in Yemen.

Just two weeks ago a crane collapsed on the Grand Mosque in Mecca, killing at least 107.

North Korea: South Korean President Park Geun Hye warned that North Korea would pay a price if it defies the United Nations and follows up on recent threats to conduct a fourth nuclear test or launch a long-range missile. In an interview with Bloomberg News before leaving Seoul for New York and the U.N. General Assembly, Park is trying to show she can be tough in dealing with Pyongyang, while at the same time promoting dialogue.

As for China, President Xi Jinping has refused to meet with Kim, while Park has held talks with Xi six times.

Malaysia: In a rare instance of specificity, authorities in Malaysia’s capital Kuala Lumpur have credible information about a planned terrorist attack in a popular market for tourists in the center of the city.

Malaysian police have been on high alert following the arrest of 10 suspected militants in multiple raids across the country in the past month. Governments from Australia to the United States have been warning their citizens to avoid the area. #ISIS

Nigeria: The government has been asserting that Boko Haram had been severely weakened, with President Buhari’s pledge to wipe out its last members within three months.

But Sunday, four explosions in quick succession killed more than 100 in an attack near the airport in Maiduguri, the capital of Borno State. Boko Haram lives.

Canada: A big election is set for Oct. 19 as Prime Minister Stephen Harper seeks a fourth term. But with the economy in recession due to the battered oil industry, it’s a three-way race with the populist New Democratic party at 30.9% in a recent poll, followed by Harper’s Conservatives at 29.8% and the Liberals with 29.3%. The Conservatives and Liberals have ruled Canada back and forth for the past century.

Random Musings

--I’ll have lots of commentary on the departure of John Boehner next week, especially as we see how the funding debate plays out. For now, political analyst Larry Sabato of the University of Virginia told the Financial Times the right wing of the Republican party had chalked up a major victory but “it will probably be a hollow one.”

He added: “A new speaker isn’t going to be able to do much more than Boehner in countering Obama. But a right-wing driven House can be a stake in the heart of Republican presidential ambitions. The more radical they seem, the less likely Americans are to put the entire federal government in GOP hands.”

House majority leader Kevin McCarthy is certainly a front-runner for the speakership. 

--In the latest Fox News national poll, Donald Trump is still on top with 26%, followed by Ben Carson at 18%. Carly Fiorina and Marco Rubio are next with 9% each. Jeb Bush is at just 7%. But Chris Christie ticked up a little to 5%, while John Kasich polled 4%.

After the August Fox News debate, Trump had 25%, while Carson was at 12%, Fiorina 5% and Rubio 4%. Bush was at 15% then.

On the Democratic side, Hilary Clinton is at 44%, a new low for her in this one and down 5 points since last month. She was at 61% in June. Bernie Sanders is at 30%, while Joe Biden polls 18%, up from 10% in August. Without Biden in the race, it’s 56-32 Clinton over Sanders.

In a new Bloomberg Politics poll, among likely Democratic voters, Clinton is the choice of 33%, but in this one, Joe Biden gets 25% while Sanders comes in at 24%.

Clinton’s favorability ratings have dropped 10 points since the last Bloomberg survey, from 48% to 38%.

[President Obama received a 46% job approval rating in this poll.]

The first post-second debate poll, a CNN/ORC national survey, had Trump at 24%, 8 points less than earlier in the month when a similar poll had him at 32%. Carly Fiorina was second with 15%, Carson was third at 14%, and then Rubio fourth at 11%. Jeb Bush was fifth at 9%.

65% of Republican voters view Ben Carson favorably in this one, compared with 10% unfavorably, while Rubio is second in the popularity contest at 57% favorably, 16% unfavorably. Trump’s split was 52-40.

Scott Walker, startlingly, received less than one-half of 1 percentage point in the CNN survey and the next day he dropped out. The one-time front-runner peaked too soon and was swallowed up by the Trump movement, as well as his own stupid policy statements.

On the Democratic side for the CNN survey, Clinton is backed by 42% of Democratic primary voters nationally, compared to 24% for Sanders and 22% for Biden. Here, Clinton improved from an early September poll that had her leading Sanders just 37-27, with Biden at 20%.

--In the aforementioned Bloomberg Politics poll, 72% of Americans think their country isn’t as great as it once was and more than a third prefer a presidential candidate without experience in public office. Among registered Republicans and Republican leaners, Trump is at 21%, Carson 16%, Bush 13%, Fiorina 11% and Rubio 8%.

--A CNN/WMUR poll of New Hampshire primary voters has Trump at 26%, while Carly Fiorina has surged into second with 16%. Marco Rubio is third at 9%, Ben Carson 8% and John Kasich and Jeb Bush 7%. [Cruz and Christie 5% apiece.]

So has Trump plateaued? We’ll see what the polls reveal after the next debate in about four weeks.

On the Democratic side in this survey, Bernie Sanders is trouncing Hillary 46-30 in N.H.

“They are running a presidential campaign decrying wage stagnation, income inequality and widespread economic malaise – as if they’ve not been in office for the past seven years.

“Their leading presidential candidate is 27 points underwater on the question of honesty and is under FBI investigation for possible mishandling of classified information.

“Her chief challenger is a 74-year-old socialist with a near-spotless record of invisibility in 25 years in Congress. The other three candidates can hardly be found at all.

“The only plausible alternative challenger, Joe Biden, has run and failed twice and, before tragedy struck (to which he has responded, one must say, with admirable restraint and courage), was for years a running national joke for his endless gaucheries and verbal pratfalls.

“For the GOP, this has all been a godsend, an opportunity to amplify the case being made every day by the Democrats themselves against their own stewardship. Instead, the Republicans spent the summer attacking each other – the festival of ad hominems interrupted only by spectacular attempts to alienate major parts of the citizenry.

“The latest example is Ben Carson, the mild-mannered, highly personable neurosurgeon and one of two highest-polling GOP candidates. He said on Sunday that a Muslim should not be president of the United States.

“His reason is that Islam is incompatible with the Constitution. On the contrary. Carson is incompatible with a Constitution that explicitly commands that ‘no religious test shall ever be required as a qualification to any office or public trust under the United States.’

“Ever. And it is no defense of Carson to say that he was not calling for legal disqualification of Muslims, just advocating that one should not vote for them. That defense misses the point: The Constitution is not just a legal document... It doesn’t just set limits to power; it expresses a national ethos. It doesn’t just tell you what you’re not allowed to do; it also suggests what you shouldn’t want to do....

“(Carson’s statement is) morally outrageous. And, in a general election, politically poisonous. It is certainly damaging to any party when one of its two front-runners denigrates, however thoughtlessly, the nation’s entire Muslim American community.”

--The FBI has retrieved some portion of the tens of thousands of emails once held on Hillary Clinton’s private server, according to various sources. Clinton has said she provided to the State Department all work-related messages and then deleted the data on the server, which included 30,000 emails she said were personal in nature.

Republican Sen. Charles Grassley (Iowa), upon learning that some of the emails have been recovered, called for an independent authority, besides the FBI, to review them to see if Clinton deleted any related to ongoing congressional investigations.

--Hillary Clinton came out as an opponent of the Keystone XL pipeline. In doing so, she is heaping pressure on the Obama administration to rule against it as well.

Speaking at a campaign event in Iowa, Clinton said: “I think it is imperative that we look at the Keystone pipeline as what I believe it is – a distraction from important work we have to do on climate change. And unfortunately from my perspective, one that interferes with our ability to move forward with all other issues. Therefore I oppose it.”

Of course in the past she strongly hinted that she was in support of it, and once again there is no talk of the importance of the pipeline to our relationship with our good friends to the north, Canada.

--Democratic Sen. Bernie Sanders was in the House chamber for Pope Francis’ speech and was beaming afterward, according to David Weigel of the Washington Post, because the pope had cited an American Catholic whom Sanders had plenty of praise for.

“The name Dorothy Day has not been used in the United States Congress terribly often,” he said. “She was a valiant fighter for workers, was very strong in her belief for social justice, and I think it was extraordinary that he cited her as one of the most important people in recent American history. This would be one of the very, very few times that somebody as radical as Dorothy Day was mentioned.”

--I said last time I wanted to wait 24 hours before commenting on Donald Trump and the man at one of his campaign events who said President Obama was a Muslim and “not even an American.” After I posted, the next day Trump tweeted, “Am I morally obligated to defend the president every time somebody says something bad or controversial about him? I don’t think so!”

“If someone made a nasty or controversial statement about me to the president, do you really think he would come to my rescue? No chance!”

“Christians need support in our country (and around the world), their religious liberty is at stake! Obama has been horrible, I will be great.”

--Citing that he was being treated “very unfairly,” Donald Trump said he’s done appearing on Fox News shows for the “foreseeable future.”

Fox said Trump only announced his boycott after a scheduled appearance on “The O’Reilly Factor” was canceled.

--For the archives: Appearing on “Meet the Press,” NBC’s Chuck Todd asked Dr. Ben Carson whether a president’s faith should matter. Carson replied that he would not “advocate that we put a Muslim in charge of this nation. I absolutely would not agree with that.” He tried to recover by saying he could support a Muslim if he denounced sharia law. In a subsequent interview with The Hill’s Jon Easley, Carson said he had been talking not about Islam generally but about sharia law specifically. “Obviously if a Muslim was running for president, there would be a lot more education about sharia, about taqiyya,” referring to Islam’s term for concealing one’s religion in the face of a credible threat.

--The U.S. will boost the number of refugees it accepts from around the world to 100,000 annually by 2017, up from the current 70,000, in an effort to help Europe cope with its migration crisis. Previously it was announced at least 10,000 Syrian refugees would be admitted to the U.S. next year.

Since 2011, the U.S. has taken in just 1,600 Syrians.

Secretary of State John Kerry said the move to 100,000 would be “in keeping with America’s best tradition as a land of second chances and a beacon of hope.”

--Addressing Congress, Pope Francis said the following on the topic of immigration.

“In recent centuries, millions of people came to this land to pursue their dream of building a future in freedom. We, the people of this continent, are not fearful of foreigners, because most of us were once foreigners. I say this to you as the son of immigrants, knowing that so many of you are also descended from immigrants. Tragically, the rights of those who were here long before us were not always respected. For those peoples and their nations, from the heart of American democracy, I wish to reaffirm my highest esteem and appreciation. Those first contacts were often turbulent and violent, but it is difficult to judge the past by the criteria of the present. Nonetheless, when the stranger in our midst appeals to us, we must not repeat the sins and the errors of the past. We must resolve now to live as nobly and as justly as possible, as we educate new generations not to turn their back on our ‘neighbors’ and everything around us. Building a nation calls us to recognize that we must constantly relate to others, rejecting a mindset of hostility in order to adopt one of reciprocal subsidiarity, in a constant effort to do our best. I am confident that we can do this.

“Our world is facing a refugee crisis of a magnitude not seen since the Second World War. This presents us with great challenges and many hard decisions. On this continent, too, thousands of persons are led to travel north in search of a better life for themselves and for their loved ones, in search of greater opportunities. Is this not what we want for our own children? We must not be taken aback by their numbers, but rather view them as persons, seeing their faces and listening to their stories, trying to respond as best we can to their situation. To respond in a way which is always humane, just and fraternal. We need to avoid a common temptation nowadays: to discard whatever proves troublesome. Let us remember the Golden Rule: ‘Do unto others as you would have them do unto you.’

“This Rule points us in a clear direction. Let us treat others with the same passion and compassion with which we want to be treated. Let us seek for others the same possibilities which we seek for ourselves.”

Pope Francis added: “Such understanding and respect call for a higher degree of wisdom, one which accepts transcendence, rejects the creation of an all-powerful elite, and recognizes that the full meaning of individual and collective life is found in selfless service to others and in the sage and respectful use of creation for the common good.”

--George Will / Washington Post...in opposition to the pope...

“Francis grew up around the rancid political culture of Peronist populism, the sterile redistributionism that has reduced his Argentina from the world’s 14th highest per-capita gross domestic product in 1900 to 63rd today. Francis’ agenda for the planet – ‘global regulatory norms’ – would globalize Argentina’s downward mobility.

“As the world spurns his church’s teachings about abortion, contraception, divorce, same-sex marriage and other matters, Francis jauntily makes his church congruent with the secular religion of ‘sustainability.’ Because this is hostile growth, it fits Francis’ seeming sympathy for medieval stasis, when his church ruled the roost, economic growth was essentially nonexistent and life expectancy was around 30.

“Francis’ fact-free flamboyance reduces him to a shepherd whose selectively reverent flock, genuflecting only at green altars, is tiny relative to the publicity it receives from media otherwise disdainful of his church. Secular people with anti-Catholic agendas drain his prestige, a dwindling asset, into promotion of policies inimical to the most vulnerable people and unrelated to what once was the papacy’s very different salvific mission.

“He stands against modernity, rationality, science and, ultimately, the spontaneous creativity of open societies in which people and their desires are not problems but previous resources. Americans cannot simultaneously honor him and celebrate their nation’s premises.”

--I got a kick out of Pope Francis saying the following at his White House welcoming ceremony.

“Mr. President, I find it encouraging that you are proposing an initiative for reducing air pollution.”

Since day one of the climate change debate, I’ve said it was being mislabeled...that it should be a debate over “global pollution,” which is something all can identify with rather than something more abstract. So Pope Francis is correct in heightening the direct use of the word “pollution.”

--In an interview for Golf Magazine, Donald Trump, on playing golf as president.

“I think a president should play golf, but you should only play with people where you can get something done. I don’t think you should play too much with your old friends, just to have a good time.

“What I’m saying is, had President Obama played with [House Speaker John] Boehner more and played with all the different people that he couldn’t deal with, it would have helped him, because some of the best deals I’ve ever made were made on the course. You become friends with people on the course much more so than you do over lunches or dinners. Golf is wonderful for a president to play, but it should be working golf.”

--Finally, it was a memorable moment when Pope Francis entered the halls of Congress and started out:

“I am most grateful for your invitation to address this Joint Session of Congress in ‘the land of the free and the home of the brave.’”

That elicited a rousing ovation that even had the four Supreme Court justices in attendance applauding, which they never, ever do in such moments.

We all needed a visitor from afar to give us a jolt of patriotism, to remind us this really is a pretty special place, warts and all. It was amazing to see...so simple, but so true.

---

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

Gold closed at $1145
Oil $45.70

Returns for the week 9/21-9/25

Dow Jones -0.4% [16314]
S&P 500 -1.4% [1931]
S&P MidCap -1.7%
Russell 2000 -3.5%
Nasdaq -2.9% [4686]

Returns for the period 1/1/15-9/25/15

Dow Jones -8.5%
S&P 500 -6.2%
S&P MidCap -4.4%
Russell 2000 -6.8%
Nasdaq -1.0%

Bulls 26.0...back to below March ’09 low.
Bears 30.2 [Source: Investors Intelligence]

*I forgot to thank Lynn and Mark R. for their support the other day.

Have a great week.

Brian Trumbore

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