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10/10/2015

For the week 10/5-10/9

[Posted 11:00 PM ET, Friday]

Edition 861

Note: If you haven’t already done so, click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.  I can’t expand without your support.

Washington and Wall Street

Before I address the dysfunction in Congress, a few notes on Wall Street and the Federal Reserve.  Stocks rallied strongly this week, both here and abroad, even though the World Bank and the International Monetary Fund were reducing their projections of global growth the balance of 2015 and 2016.  In the U.S., the rally was fueled by short-covering after the first market correction in four years, as well as the growing belief the Fed will not hike interest rates in December.  [October is definitely off the table at this point.]

In their meeting last month, the just-released minutes of same reveal that Fed policymakers warned that negative developments overseas may have increased the risks to America’s growth and inflation outlook, as the committee agreed to wait for further economic evidence before pulling the trigger on higher rates.

So while members of the Open Market Committee had previously expressed the opinion that a slowdown in China and stock market volatility would have only a small impact on the U.S. recovery, the majority clearly want to wait for stronger evidence the economy has not deteriorated.

The minutes read: “Participants anticipated that the recent global developments would likely put further downward pressure on inflation in the near term.  Compared with their previous forecasts, more now saw the risks to inflation as tilted to the downside.”

That’s the key. The Fed wants to see rising prices.

“A number of participants noted that eliminating slack along such broader dimensions might require a temporary decline in the unemployment rate below its longer-run normal level, and that this development could speed the return of inflation to 2 percent,” the minutes said.

Speaking from Peru in a CNN International interview at a Group of 20 meeting of industrialized nations, Fed Vice Chair Stanley Fischer said the word from his counterparts abroad was “please do it,” raise rates.

“And we will do it, probably, at some point, but we’re not going to do it at a time that is not suitable for the United States economy.”

In an interview with CNBC, also on Friday, New York Fed President William C. Dudley said he still expects a rate hike this year, provided his outlook for inflation and growth stays on track, though he hastened to add his view was “not a commitment.”

Meanwhile, the U.S., Japan and 10 other Pacific Rim economies (not including China) reached agreement on the largest trade pact of the past two decades, a big win for both President Obama and Japanese Prime Minister Shinzo Abe.

The Trans-Pacific Partnership (TPP) covers some 40 percent of the global economy and will create a new Pacific economic bloc with reduced trade barriers.  Everything from beef and dairy products, to textiles and data, as well as new labor and environmental rules and standards, will come into play.

For Obama it’s part of his administration’s “pivot” to Asia. For Abe, it represents his “third arrow” of economic reforms that he has been pursuing since he came into office in 2012.

But Obama is going to face a tough fight in Congress, particularly from his own party, while Republican presidential candidates such as Donald Trump have argued against TPP.  [I get into Hillary Clinton’s flip-flop on the issue down below.]

Opponents see the pact as mostly a giveaway to business and argue it would encourage further export of manufacturing jobs to low-wage nations like Vietnam, while spreading American standards for patent protections to other countries, which could limit competition and lead to higher prices for pharmaceuticals and other high-value products.  But far more as the details emerge. For now it’s clear the American farmer is a big winner.

But speaking of Congress, last week I said of House Majority Leader, and possible future Speaker, Kevin McCarthy (R-Calif.), that he “could not have been more of an idiot when he told Fox News host Sean Hannity: ‘Everybody thought Hillary Clinton was unbeatable, right? But we put together a Benghazi special committee, a select committee.  What are her numbers today? Her numbers are dropping.  Why?  Because she’s un-trustable.  But no one would have known any of that had happened had we not fought.’”

This was after the select committee’s chairman, Rep. Trey Gowdy (R-S.C.), had maintained its work was a strictly neutral examination of the events of Sept. 11, 2012, “but there was McCarthy, boasting it was really about taking down Clinton,” I wrote.

Well, McCarthy’s massive gaffe clearly was the deciding factor in his sudden announcement on Thursday that he was pulling out of a caucus vote for Speaker.  As McCarthy put it, there are 247 members, the GOP’s largest House majority since 1929-30 – but he was going to have to struggle to gain even 218 (a majority of the 435 members in the House), and even had he done so, it would not have been enough to then lead effectively, with a solid minority among the Republicans, the Freedom Caucus, comprising up to 40 members, having a different agenda than the majority of their fellow Republicans.

Editorial / Wall Street Journal

“The refuseniks in the Freedom Caucus told Mr. McCarthy he was contaminated by his years as Mr. Boehner’s leadership deputy and they would never vote for him, despite his efforts at accommodation. Their horse is Daniel Webster of Florida, who is unknown outside of his district and might have 40 votes at most.

“The rebels don’t have nearly enough support to stand up their own man, but they can blow up all House business and decapitate the leadership of their own party. The danger is that having deposed Mr. Boehner and now Mr. McCarthy, they will refuse to back anyone who won’t meet their demands.

“The refuseniks belong to the larger conservative sub-movement that blames ‘the Republican establishment’ for all the country’s problems, not President Obama, Hillary Clinton or bad policy choices that can be reversed with someone else in the White House. The listless economy, the failure to repeal ObamaCare or secure the border – all these disappointments supposedly can be blamed on GOP leaders who don’t fight hard enough.”

So what are the alternatives?  There is but one...Paul Ryan.  But he has said repeatedly he doesn’t want the job, and no wonder.

Wall Street Journal:

“If the only way to become and remain Speaker is to capitulate to the impossible demands of a rump minority, then you’re being set up to fail.....

“The Wisconsin Republican says he prefers to remain at the tax-writing Ways and Means Committee, but he won’t return as Chairman if Republicans lose the House.  The contagion that took out Mr. McCarthy will continue to spread, and don’t be surprised if Mr. Ryan concludes he must make his own personal sacrifice to stop it.”

New York Republican Rep. Peter King said the hardline conservatives are “blackmailing the (GOP) caucus” and “hijacking the Congress.”

“These guys are off on their own and we can’t allow this to go on,” he said on CNN.  “It’s bad enough they brought down a speaker.  It’s even worse they brought down the person who’s the choice for speaker. We have to get this behind us.”

The timetable couldn’t be worse, with a November debt-ceiling deadline looming, let alone the new Dec. 11 deadline for either coming up with  a budget Congress and the president can agree on, or approving a further continuing resolution to fund government into 2016.  Barring this, the government is facing a shutdown.

Personally, I’m hoping Paul Ryan can be convinced to take the job, knowing he would only do so if given the appropriate powers to effectively wield the gavel and help elect a Republican president in 2016.

Europe and Asia

As alluded to above the World Bank and International Monetary Fund issued one of their periodic updates and the WB is cutting growth for the Asia Pacific for this year to 6.5% from a previous 6.7% estimate, and to 6.4% next year, also from a 6.7% projection.  Ex-China, growth in the region is only expected to be 4.6%.

The World Bank sees China growth at 6.9% in 2015, 6.7% next year, after earlier forecasting 7.1% and 7.0%, respectively).

The International Monetary Fund cut its global growth rate to 3.1% for this year, after previously pegging it at 3.3%, while it sees 3.6% growth in 2016, down from a recent 3.8% estimate, as emerging market growth will decline a fifth consecutive year..  The IMF left China at 6.8% for 2015, but just 6.3% next year.

Japan is forecast to grow 0.6% this year, just 1.0% next, while the United States is now expected to grow 2.6% in 2015, 2.8% in 2016.

The euro area will see growth of 1.5% this year, 1.6% next.  [One more...Brazil is expected to contract 3.0% in 2015 and another 1.0% in ‘16.]

Sticking with Asia, China just concluded its Golden Week holiday, Oct. 1-7, and this is always a key one for retail sales, people spending more over the holidays than they do otherwise.  The Ministry of Commerce said sales for the period rose 11%, which sounds good, but it’s down from the 12.1% pace during last year’s Golden Week, so yet another indicator of a slowing economy.

In Japan, August exports rose 3.1% year-over-year, but this was down from July’s strong 7.6% rise.  Machine orders, a key proxy for capital expenditures, fell 3.5% in August, yoy, when a 3.5% increase had been expected.

Turning to Europe, just a few notes on the economy.  The retail PMI for the eurozone, as reported by Markit, was 51.9 in September vs. August’s 51.4 reading, a fifth straight increase.  Italy’s 51.7 was a 68-month high.

Germany reported some poor figures last week.  Industrial production fell 1.2% in August from July.  Factory orders were off 1.8% in August, while exports in the month cratered 5.2% over July.  And now you’ll have the impact of the VW scandal in future data points.

France, on the other hand, seems to be turning the corner after years of stagnation.  Industrial production in August was up 1.6% year-over-year, a solid figure.

Britain saw factory output rise 1% in August from July, up 1.9% yoy.

On the migrant front, the latest national opinion poll in Germany published on Friday shows growing discontent over Chancellor Angela Merkel’s open-door policy.  According to ZDF Barometer, 51 percent of Germans now say that the country cannot manage the inflows, compared with 40 percent two weeks ago.  The percentage of those saying the policies will succeed has dropped from 57 percent to 40 percent.  This mood change is exactly as I have been calling it for weeks and months.

The polls reflect the reality of the situation, where German officials now estimate that the 800,000 figure they’ve been using for the number of refugees crossing into the country this year could end up being as many as 1.5 million (possibly 900,00 between October and December), with more coming next year.

Earlier in the week, Merkel, who grew up in communist East Germany, said, “We eastern Europeans – I’m counting myself as an eastern European – we have seen that isolation doesn’t help.  The refugees won’t be stopped if we just build fences and I’ve lived behind a fence for long enough.

“Those who can consider themselves lucky that they have lived to see the end of the Cold War now think that one can completely stay out of certain developments of globalization.  It just strikes me as somehow very weird.”

The chancellor dismissed critics such as Hungarian leader Victor Orban and Slovak Prime Minister Robert Fico, who have attacked Merkel for throwing open Germany’s borders to Syrian refugees, thus triggering the surge that threatens Europe’s “Christian values.” 

Merkel responded: “It’s not acceptable that we have free movement of goods and of people, but that some countries say ‘this we can’t do, and that we can’t, and we can’t take in Syrians, because we’re not ready yet.’

Merkel took over refugee policy from her interior minister, Thomas de Maiziere, who has been calling on the government to restrict the flows.

But on Friday, Horst Seehofer, the leader of Bavaria, where most of the unprecedented wave is arriving, called for refugees to be sent back to Austria from the German frontier.  “We must send back refugees,” he said.

Critics such as Seehofer say that Merkel’s policy and rhetoric has left local officials overwhelmed, imposed soaring costs, and led to a rightwing backlash.

In Austria, Vienna’s socialist mayor is about to become the first political casualty of the crisis as Austria loses its grip on its capital for the first time since World War II.  The natives are increasingly restive, frustrated by rising rents and stagnant wages, and now the hordes. Migrants have overwhelmed the city and it’s no wonder voters are beginning to flock to the anti-immigrant Freedom Party to stop the surge.

I love Vienna and have been there a number of times, though not in about seven years, and I read a staggering figure this week.  The migrant population makes up 40 percent of the city’s inhabitants!  If you lived there would you like this?  I sure as hell wouldn’t...and I’m sorry if that offends you.

Senior British politician Theresa May said this week that Britain “must have an immigration system that allows us to control who comes to our country.  When immigration is too high...it’s impossible to build a cohesive society.”  [Sydney Morning Herald...Ms. May was echoing former Aussie leader John Howard.]

European Council President Donald Tusk said on Tuesday that the European Union must regain control over its external borders.

“For all refugees,” Tusk told the European Parliament in Strasbourg, “easy access to Europe and the lack of external borders have become a magnet attracting them to us.”

“A potential victory of Assad’s regime is more likely today because of Iran and Russia’s engagement in Syria, and will result in the next migratory wave.  According to Turkish estimates, another three million potential refugees may come from Aleppo and its neighborhood,” Tusk said. 

He continued: “Europe without its external borders will become a breeding ground for fear in each and every one of us. And this will lead us, sooner than later, to a political catastrophe.”

As the crisis increasingly pits east against west, north versus south, wealthier nations against the poorer ones, Tusk added “our internal disagreements and mutual recriminations only help our opponents.”

“We are slowly becoming witnesses to the birth of a new form of political pressure, and some even call it a kind of a new hybrid war, in which migratory waves have become a tool, a weapon against neighbors. This requires particular sensitivity and responsibility on our side.”

It’s too late.  The genie is out of the bottle.  Extremists are on the rise.

And who knows what evil lurks among the masses flooding in? This week FBI Director James Comey was among those testifying before Congress that ISIS easily could be infiltrating the refugee population and the U.S. has no good way to detect them.  Weeks earlier in Rome, Pope Francis said the same thing.

One more...the United Nations announced that 400,000 refugees and migrants had arrived in Greece this year after crossing the Mediterranean.  131,000 had reached Italy thus far in 2015.  Overall, 168,000 crossed the Mediterranean in September, the highest monthly figure ever recorded and almost five times the volume of a year earlier.  [Rick Gladstone / New York Times]

Street Bytes

--The Dow Jones surged 3.7% to 17084, its best week since February, while the S&P 500 advanced 3.3%, its best performance since last December.  Nasdaq rose 2.6%.  The S&P is up 7.9% since the August low.

But now its earnings season, with the big banks reporting this coming week, and the bottom line will be down 4% to 5% as projected by various folks, while revenues will be down again, 3.4%, according to FactSet.

Once again, however, it’s all about guidance.  Is there any optimism whatsoever expressed in the accompanying statements by multinationals in particular?

--U.S. Treasury Yields

6-mo. 0.07%  2-yr. 0.64%  10-yr. 2.09%  30-yr. 2.92%

For the record, the October Fed meeting is the 27th and 28th; December’s is the 15th and 16th.  Regarding the latter, just a reminder to leave some snickerdoodles out for Santa, as well as a cold domestic.  Place a post-it, today, on your bathroom mirror, as I do here in the home office.

--Deutsche Bank announced it would pay no dividend at all this year after reporting exceptional costs of over $8 billion in the third quarter.  Remember how I mentioned ‘goodwill’ in terms of VW last week?  Deutsche Bank blamed a large part of the loss on a goodwill write-off at its investment bank, while setting aside $1.3 billion to deal with the continuing slew of litigation.

JPMorgan is estimating Deutsche will cut 10,000 jobs from its main operations, plus another 15,000 after an expected sale of its retail subsidiary Postbank.

--New Volkswagen CEO Matthias Muller said the company was preparing to slash expenses to help pay for the costs resulting from the diesel emissions scandal.  Muller said VW would need to “save massively to manage the consequences of the crisis” and to preserve the carmakers “good” credit rating.

“Therefore we have initiated a further review of all planned investments,” he added.  “Anything that is not absolutely necessary will be cancelled or postponed. And that’s why we will be intensifying our efficiency program.  To be clear: this will not be painless.”

VW employs almost 600,000 workers.

Wolfgang Munchau / Financial Times

“Most scandals blow over.  Some blow up. Volkswagen will be of the latter kind. The penalties and damages resulting from VW’s manipulation of emissions tests could easily add up to more than 100bn euro ($112bn). The total economic costs would be a multiple of that, more than what Germany would ever have faced from a Greek exit from the eurozone.

“More importantly, the Volkswagen scandal has the potential to unhinge the German economic model. It has been over-reliant on the car industry, just as the car industry has been over-reliant on diesel technology.

“For its part, Berlin mollycoddles the industry and represents its interests abroad.  The ‘VW law’ in effect protects the company against a hostile takeover. And it was a former VW director, Peter Hartz, who wrote the labor reforms of the previous decade.

“In return, the industry contributes to the stability of regional employment. And the voting rules in the supervisory board ensure that production could be shifted out of Germany only with the explicit consent of the trade unions.  It other words, it cannot.

“In terms of macroeconomic risk management, this is a silly strategy – similar to the UK’s over-reliance on the financial sector. Such strategies work well until they do not work at all.”

--Dell and EMC are in merger talks...a PC maker and a data-storage company.

EMC is worth about $50bn, over half of which is comprised of its stake in virtualization software company VMware.

But to secure EMC, it’s expected a debt package could top $40 billion to fund the acquisition and credit markets these days are more than a bit unsettled, especially for mergers.  Dell and its bankers are anxious to put the financing together before credit tightens further.

A combined Dell-EMC would encompass computing, networking and storage – both hardware and software that would be able to compete with the likes of IBM and Hewlett-Packard.

VMware, which has software designed to make corporate data centers more efficient, is the key to the transaction.  EMC currently owns 80% of it and to help finance the deal, Dell could sell off shares in VMware while retaining a controlling stake.  [There is also talk of a tracking stock for VM.]

Dell, of course, went private a number of years ago.

--Fiat Chrysler reached a tentative agreement with the United Automobile Workers on a new contract, thus averting a strike.  The deal is subject to approval by a vote of 36,000 hourly workers and 4,000 salaried union members.  Currently more than 40 percent of Fiat Chrysler’s hourly workers are considered entry-level and make $9 to $12 an hour less than veteran employees earning $28.  The disagreement had been over the mechanism for moving up to top-wage status, and the tentative deal raises the maximum pay of newer hires to $29 an hour, as reported by the Wall Street Journal.

But the four-year contract would allow Fiat Chrysler time to close the gap between newer and veteran workers’ pay, phasing in raises over an eight-year period.

UAW President Dennis Williams will now push for similar deals with Ford and GM, which are both operating under contract extensions.

According to the Labor Department, the average U.S. auto worker earns about $27.50 an hour today, down from an hourly rate of $29 a decade ago.

At the same time, profit-sharing has soared and workers are earning very nice bonus checks each January.

--Monsanto Co. announced it was slashing 2,600 jobs and restructuring operations to cut costs as the commodity markets slump; Monsanto being one of the world’s largest seed and agrichemical companies.

Monsanto said it expected low prices for agricultural products to squeeze results well into 2016, and that it would exit the sugar cane business.

--SABMiller, the second-biggest brewer in the world, has now spurned three offers from Anheuser-Busch InBev, which last upped the amount it was willing to pay for SAB to $104 billion.

Apparently the real stumbling block is the Santo Domingo family of Colombia, which owns 14 percent of SAB through selling its own brewer to SABMiller a decade ago.  It doesn’t feel like it’s getting fair value for its holdings.

It’s also getting a little hostile and all I want to be able to do is drink my domestic in peace...please, no violence!  [SAB owns Grolsch, by the way, so when my personal fortunes change, I promise to switch to premium.  Nothing says ‘premium’ like Grolsch’s heavy bottle.]

--PepsiCo Inc.’s profit fell 73% due to a charge related to its Venezuelan operation while revenue fell 5.2% in the third quarter owing to the stronger dollar, but U.S. sales were strong and the company expects solid profits going forward.

Gatorade sports drinks and Lipton teas fueled a 10% rise in noncarbonated beverages, offsetting a 2% decline in carbonated drinks, including a 6.5% drop in diet soda (the new formula for which is getting panned big time).

--Alcoa launched the third-quarter earnings season by missing expectations badly on profits, but revenue of $5.6 billion was roughly in line.

--Bond titan Bill Gross filed a lawsuit against the company he co-founded, PIMCO, and parent Allianz SE for $200 million, claiming he was ousted by underlings “driven by a lust for power, greed, and a desire to improve their own financial position...at the expense of investors and decency.”  Specifically, he claims a “cabal” of executives wanted a slice of the bonus he was leaving behind.

Gross claims he was an advocate for lower fees and sticking to PIMCO’s traditional, lower-risk bond investments, but he was pushed out by other executives seeking to expand into riskier assets and higher-fee products.

Gross was expecting a bonus of about $250 million for 2014, though he left on Sept. 26 of last year and because he departed days before the third quarter ended, PIMCO refused to pay him a proportionate amount, according to the complaint.

Gross has said anything he was awarded if successful would be donated to charity.

--New York’s state comptroller says Wall Street profits in New York City hit $11.3 billion during the first half of 2015, higher than in the past three years.  What’s good is that the Street added jobs in 2014 for the first time since 2011.

Comptroller Thomas DiNapoli said his analysis show Wall Street accounted for 174,000 jobs in August, and was on pace to add another 4,500 for 2015 overall.

But the securities industry remains 9% smaller than it was before the 2008 financial crisis.

DiNapoli said the average salary, including bonus, rose 14% last year to a record $404,800.  [Crain’s New York Business / Associated Press]

--Shares in Tesla were slammed this week when analysts at Baird, and then others, cut the stock’s rating and lowered the price target, citing concerns about the automaker’s ability to ramp up production for its Model X vehicle, as well as concerns that Model X orders could be canceled because the vehicle is more expensive than first thought.  The base price is $93,000, but will end up somewhere between $120,000 and $130,000 with various options.

--Yum Brands, operator of KFC, Taco Bell and the Pizza Hut chains, saw its shares crater anew ($83 to $69) after warning the recovery in its critical Chinese market (which generates over half of its sales) was not happening as quickly as the company had hoped.

KFC’s nearly 5,000 restaurants in China did at least report quarterly sales growth for the first time since a food safety scandal a year ago hit it hard, but same-store sales were up just 3%.

Pizza Hut’s same-store sales fell 1%.

Yum now expects full-year same-store sales will fall by a “low-single-digit” percentage in China, after earlier predicting “a strong second half of the year.”  Ergo, the company has officially lost all credibility.

But at least Taco Bell’s same-store sales rose 4% in the U.S.  I wish we had a Taco Bell in my building...then I’d be working out of there alllll day and night.

--DuPont CEO Ellen Kullman announced she will retire Oct. 16, which was rather abrupt and a move that could augur a breakup of the chemical and seed giant.  The company slashed its profit forecast and is accelerating cost-cutting plans.

Ms. Kullman totally mishandled a battle with activist investor Nelson Peltz, rebuffing his attempts at changes designed to increase shareholder value.

Yes, Kullman defeated Peltz’s efforts to win board seats this past spring, but he retained his stake in the company and made her life difficult.

I’m on Peltz’s side on this one (and I normally hate activist investors).  But DuPont does have a difficult position in that the agricultural economy is being squeezed by lower prices that are forcing cutbacks on seed, fertilizer and equipment.

Current board member Edward Breen is interim CEO and chairman.  Breen was responsible for the turnaround of Tyco International.

--Speaking of Nelson Peltz, his Trian Fund Management has taken a $2.5 billion stake in General Electric.  Peltz and fellow Trian executive Ed Garden have a longstanding relationship with GE CEO Jeff Immelt and at least for now, Trian seems to favor Immelt’s ongoing efforts to return the company to its industrial roots, including a $2.5 billion sale this week of GE’s corporate aircraft financing unit to Global Jet Capital.

--Update: Since my last WIR, Walmart quantified the number of employees it was laying off from its headquarters in Bentonville, Ark., 450.

--Glencore, the commodities giant with a ton of debt, dramatically announced it was slashing its annual production of zinc by more than a third, which will result in 1,600 job losses at mines in Australia and Peru, for starters.

“The main reason for the reduction is to preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources,” the company said in a statement.

Once prices have recovered, Glencore can restart production.* The cuts equate to 6% of all production outside China.

*I have no idea what zinc is priced at, but I did just see it had its steepest advance on the Glencore news, Friday, in recorded history.  [Bloomberg News]

--Jack Dorsey was formally named CEO of Twitter, though he will also continue to run Square, a payments start-up, with the latter preparing for an initial public offering that could come before the end of the year.  Twitter shares rallied, including on news of new product initiatives.

But then after the market closed on Friday, they were trading lower on a report the company is planning job cuts this coming week.  The company has 4,100 employees around the world.

I’m assuming my morning and afternoon market tweets are not part of the cost-cutting.

--Shares in Pure Storage, which makes storage systems for data centers using flash technology, saw its IPO disappoint and finish below its $17 offering price the very first day, and then for the week, closing at $16.60.  The IPO market has been miserable since Labor Day.

--Macy’s is launching a pilot program where it will host 300-square-foot shops from Best Buy in 10 of its stores, sales being sluggish for both retail giants.  I kind of like this idea.  Way back I went to Macy’s for virtually everything.  The Short Hills Mall store nearby is where I bought all the furniture I have to this day.  I purchased a lot of the larger electronics products there too.  Then at least this particular location downsized and stuck largely to clothing and appliances.  Furniture and electronics was out.

Actually, Macy’s is also now featuring Men’s Warehouse and Bluemercury shop-in-shop programs, the latter a cosmetics company that Macy’s purchased earlier this year. 

Meanwhile, it’s still early, but I saw where one retail analyst told Crain’s New York Business that traffic at brick-and-mortar stores this coming holiday season could fall 7%.

The National Retail Federation, though, released its holiday season forecast for sales and it expects them to rise 3.7% this year vs. a 4.1% gain last year.

The 10-year average is just 2.5%.

Holiday sales represent nearly a fifth of the retail industry’s annual sales of $3.2 trillion.

The NRF expects online sales to increase 6% to 8%, which would compare to 5.8% growth last year.

--The A&P grocery store chain will be laying off as many as 13,000 workers by Thanksgiving as the 156-year-old grocer heads toward liquidation, according to the New York Post.  The toll is higher than expected because fewer stores are being bought by rivals.

--Malaysia and Indonesia have been dealing with the worst smog on record.  The fog-like grey smoke is caused by slash and burn techniques used to clear Indonesian forests and for weeks it’s caused serious health problems, flight delays and school closures in the area, including Singapore.

Singapore was forced to cancel a World Cup swim meet, while Malaysia canceled a marathon where 30,000 had signed up.  Malaysia also ordered its schools closed for two days, as the education minister said the haze is beyond Malaysia’s control.  Monitoring stations in Kuala Lumpur registered “hazardous” levels.

A 1997 smog outbreak resulted in an estimated $9 billion in economic damages and this episode should prove far worse.

Indonesia has deployed 20,000 troops and police to fight the fires.

[Separately, Malaysian Prime Minister Najib Razak is fighting for his political life owing to a massive corruption scandal and questions on the handling of at least $700 million that was allegedly paid from overseas into a bank account in his name.  Najib says the money came from an unnamed Middle Eastern donor.  A large, heavily indebted investment fund, 1MDB, is part of the scandal.]

--Finally, we note the passing of Paul Prudhomme, the chef who put Cajun cooking on the national stage when, in 1979, he and his wife opened K-Paul’s Louisiana Kitchen on Chartres Street in the French Quarter of New Orleans.  It became an instant success and Prudhomme rode the celebrity chef wave of the ‘80s and ‘90s.  His blackened redfish dish became a national craze and threatened the redfish population in the Gulf of Mexico.

Ah yes, “down-and-dirty Cajun” cuisine.  Paul Prudhomme was 75. 

Foreign Affairs

Syria/Russia/Iran/ISIS/Iraq: Remember when it was ‘just’ Syria/ISIS/Iraq?  Thanks to the new Russia-Iran alliance to prop up Syrian President Bashar Assad, as you’ve seen the last few weeks, the conflict has exploded in complexity.

NATO warned Russia against escalating its campaign in Syria as tensions rose between Moscow and Ankara.  Russia has continuously violated Turkish airspace.  Secretary General Jens Stoltenberg said on Thursday that the main targets of Russia’s air and cruise-missile strikes aren’t the Islamic State terrorist group, but members of more moderate forces opposed to Syrian President Bashar al-Assad.

Four Russian cruise missiles intended for Syria landed in Iran, with any damage and casualties unknown at this point.  [Food for thought for Toronto and Montreal.  When Putin launches a few nukes towards the U.S., they may end up hitting residents there instead.]

Turkish President Recep Tayyip Erdogan warned Russia trade ties could suffer, and that Moscow could find itself frozen out in the construction of a $20 billion nuclear plant on the Mediterranean and lose its No. 1 natural gas consumer.

“We can’t accept the existing situation,” Erdogan said.  “If necessary, Turkey can obtain gas from very different places. Russia should think well.”

British Defense Secretary Michael Fallon said, “Russia is making a very serious situation in Syria much more dangerous.”

But U.S. Defense Secretary Ash Carter continued to criticize Russia’s “unprofessional” conduct, as if Putin cares, citing Moscow fired the barrage of over 20 cruise missiles with no advance notice, plus Russia had never fired the new Kalibr missiles that were used.  Carter warned, “In coming days, the Russians will begin to suffer casualties.”

Ruth Pollard / Sydney Morning Herald

“At this point, it appears Russia is intent on targeting opposition groups who are fighting to overthrow the regime of Bashar Assad.

“Its airstrikes have been concentrated on Idlib and Aleppo – where a coalition of groups are fighting alongside al-Qaeda affiliated Jabhat al-Nusra – as well as other rebels, including the Free Syrian Army and brigades supported by the U.S. and its allies in the provinces of Homs and Hama....

“In the medium term, Russia may seek to shore up Assad’s control over his coastal heartland of Latakia, as well as the capital, Damascus, creating in effect a ‘state within a state’ well away from IS, an analyst said.

“In a rare statement, Syria’s army Chief of Staff, Lieutenant General Ali Abdullah Ayoub, confirmed a major military operation was under way that included ‘wide-ranging attacks to deal with the terrorist groups, and to liberate the areas which had suffered from the terrorist rule and crimes,’ he was quoted as saying by state media.

“For Syria’s army, the term ‘terrorists’ covers all groups fighting to overthrow Assad, including so-called ‘moderate opposition forces’ as well as the militant groups such as Jabhat al-Nusra and Islamic State.”

Karen DeYoung / Washington Post

“The current internal administration debate is largely the same one that has kept the administration out of significant intervention in Syria’s civil war for the past four years.  On one side, Russia’s involvement has strengthened the winning argument that the United States should avoid direct involvement in yet another Middle East conflict and should continue directing its resources toward countering forces such as the Islamic State that pose a direct threat to U.S. national security.

“On the other side, the argument is that it makes no strategic sense for the United States to concede Russian dominance of the situation: If Russia succeeds in keeping Assad in power, the problems in the West caused by both the Syrian war and militant expansion will only get worse.

“Putin’s strategy is that ‘you accept our terms’ on Assad ‘and then we step back and let you solve your own problems’ in Syria, said Igor Sutyagin, a Russian-studies expert at London’s Royal United Services Institute.  ‘If you don’t, we create a complete mess...increasing the influx of refugees into Europe, and your life gets more difficult.’”

One thing is for sure, Russia and Iran’s stepped up involvement will indeed lead to new waves of migrants to Europe and the countries bordering Syria and Iraq. Well over half of Syria’s population of 22 million has been displaced.

Among the other news items of the week in this theater....

--It was announced on Friday that the U.S. is scrapping the $500 million program to train and equip Syrian rebels after the White House concluded it was having little impact (like try zero).

--Iranian state television reported a senior commander in Iran’s powerful Revolutionary Guard was killed in Syria, Gen. Hossein Hamedani, killed outside of Aleppo while “carrying out an advisory mission.”  Early reports said ISIS was responsible.

Heck, even I have known of this guy, a veteran commander who played an important role in the 1980-88 Iran/Iraq war.  Big blow.

--French fighter jets fired airstrikes on the ISIS stronghold of Raqqa, targeting foreign fighters plotting attacks in Europe, according to France’s defense minister, Jean-Yves Le Drian, who added his voice to those criticizing Russia’s stepped-up campaign, saying “80 to 90 percent” of its actions do not target the Islamic State group.

--From the Los Angeles Times: “(The) far larger U.S.-led coalition arrayed against Islamic State militants has launched more than 7,200 airstrikes in Iraq and Syria since August 2014, and only a few are known to have caused civilian casualties.  The Kunduz bombing, which killed 22 people, was one of the worst such incidents by U.S. forces in 14 years of war in Afghanistan.

“Russia has launched 112 airstrikes in the last week, and human rights groups have reported multiple civilian casualties, including three damaged medical facilities.”  [That’s the very definition of “indiscriminate bombing,” sports fans.]

--Meanwhile, our ‘great’ friends in Iraq are urging Russia to launch airstrikes against ISIS in their country, at least Iraq’s Shiite politicians are calling for this, which would only escalate things further between Moscow and Washington.  Prime Minister Haider al-Abadi did say that while he welcomed Russian strikes, they had to be coordinated with the U.S.-led coalition’s existing air campaign.

--More than 40 Syrian insurgent groups have called on regional states to forge an alliance against Russia and Iran in Syria, accusing Moscow of occupying the country and targeting civilians.

--Lastly, ISIS blew up another monument in the ancient city of Palmyra, the Arch of Triumph, thought to have been built about 2,000 years ago, which was “pulverized” by the militants controlling the city.

Syrian antiquities chief Maamoun Abdulkarim confirmed the news and told Reuters that if IS remains in control of Palmyra, “the city is doomed.” 

Did you see pictures of the Arch?  It was beautiful.  Its destruction should make you sick to your stomach.

Condoleezza Rice and Robert M. Gates / Washington Post

“One can hear the disbelief in capitals from Washington to London to Berlin to Ankara and beyond. How can Vladimir Putin, with a sinking economy and a second-rate military, continually dictate the course of geopolitical events? Whether it’s in Ukraine or Syria, the Russian president seems always to have the upper hand.

“Sometimes the reaction is derision: This is a sign of weakness.  Or smugness: He will regret the decision to intervene.  Russia cannot possibly succeed.  Or alarm: This will make an already bad situation worse.  And, finally, resignation: Perhaps the Russians can be brought along to help stabilize the situation, and we could use help fighting the Islamic State.

“The fact is that Putin is playing a weak hand extraordinarily well because he knows exactly what he wants to do.  He is not stabilizing the situation according to our definition of stability.  He is defending Russia’s interest by keeping Syrian President Bashar al-Assad in power.  This is not about the Islamic State.  Any insurgent group that opposes Russian interests is a terrorist organization to Moscow.  We saw this behavior in Ukraine, and now we’re seeing it even more aggressively – with bombing runs and cruise missile strikes – in Syria.

“Putin is not a sentimental man, and if Assad becomes a liability, Putin will gladly move on to a substitute acceptable to Moscow.  But for now, the Russians believe that they (and the Iranians) can save Assad.  President Obama and Secretary of State John F. Kerry say that there is no military solution to the Syrian crisis.  That is true, but Moscow understands that diplomacy follows the facts on the ground, not the other way around.  Russia and Iran are creating favorable facts. Once this military intervention has run its course, expect a peace proposal from Moscow that reflects its interests, including securing the Russian military base at Tartus....

“So what can we do?

“First, we must reject the argument that Putin is simply reacting to world disorder.  Putin, this argument would suggest, is just trying to hold together the Middle East state system in response to the chaos engendered by U.S. overreach in Iraq, Libya and beyond....

“(Putin) as the defender of international stability?  Don’t go there.

“Second, we have to create our own facts on the ground. No-fly zones and safe harbors for populations are not ‘half-baked’ ideas.  They worked before (protecting the Kurds for 12 years under Saddam Hussein’s reign of terror) and warrant serious consideration.  We will continue to have refugees until people are safe.  Moreover, providing robust support for Kurdish forces, Sunni tribes and what’s left of the Iraqi special forces is not ‘mumbo-jumbo.’  It might just salvage our current, failing strategy.  A serious commitment to these steps would also solidify our relationship with Turkey, which is reeling from the implications of Moscow’s intervention....

“Finally, we need to see Putin for who he is. Stop saying that we want to better understand Russian motives. The Russians know their objective very well: Secure their interests in the Middle East by any means necessary. What’s not clear about that?”

John R. Bolton / The Weekly Standard

“Well before Latakia, Russia was already testing U.S. vulnerabilities. Putin’s successful February visit with President Abdel Fattah al-Sisi in Cairo led directly to substantial military sales to Egypt, the first since the 1970s, sending a powerful signal of regional realignment. And Moscow is certainly not complaining about Sisi’s suppression of the Muslim Brotherhood.

“Most visibly threatening, Russia is selling Iran its S-300 air defense system (not to mention other advanced weapons and nuclear reactors when sanctions disappear because of the Vienna nuclear deal).  Once deployed, the S-300 will end any prospect of Israel preemptively striking Iran’s nuclear-weapons program.

“Obama, faced with Russia’s assertive faits accomplis, remains lost in a post-Vienna ideological rapture, unable or unwilling to see the consequences of his passivity and disinterest.  Expressing ‘concern’ over Russia’s new Latakia base joins a lengthening list of Obama ‘concerns’ that elicit only his rhetoric, nothing more.”

Editorial / Wall Street Journal

“Another day, another Mideast surprise for the Obama Administration.  Russian warplanes twice violated Turkish – meaning NATO – airspace over the weekend, a provocation that ‘does not look like an accident,’ according to NATO General Secretary Jens Stoltenberg.  What will the U.S. do if Russia shoots down a Turkish jet, thereby testing NATO’s Article 5 provision that an attack on one Alliance member is an attack on all of them?....

“The danger is that every unanswered incursion and provocation tempts the Moscow-Tehran-Damascus axis to further test U.S. limits. What happens when Bashar Assad resumes using sarin gas against his own people, using Russian air power as protection against potential reprisals while blaming the attacks on ISIS?....

“It would be nice to think that Susan Rice and her team at the U.S. National Security Council are doing some kind of serious contingency planning in the event Moscow decides to pick a bigger fight or truly blunders.  Mr. Obama has made it clear he won’t get drawn into a proxy war in Syria, which may be read as the final betrayal of the U.S.-supported forces now being bombed by Russia.  Sounding similarly hollow are the Administration’s promises that it will continue to oppose Iran’s regional bids despite the nuclear deal.

“In 1947, as Britain’s status as a global power was coming to an end, then-Chancellor of the Exchequer Hugh Dalton warned that his government was ‘drifting in a state of semi-animation, toward the rapids.’  For the Obama Presidency, the rapids are in earshot.”

Editorial / Washington Post

“It is tempting, as we say, to believe that this must end badly for the Russians.  ‘They want this quagmire? Welcome to it!’  And perhaps they will be bogged down and targeted at home by terrorists; we can’t foresee the future. Certainly U.S. officials are right that Russia’s actions will not be helpful to Syria.  More and more Sunnis, seeing they have no protection elsewhere, will gravitate to the Islamic State as their only refuge. Radicalization will increase, and the prospects of a negotiated solution will recede.

“But that is not Mr. Putin’s concern.  Already he has forced the West to change its tune on Mr. Assad; he has to go, but ‘it doesn’t have to be done on day one, or month one, or whatever,’ Mr. Kerry now says.  Europeans, desperate for anything to end their refugee crisis, are wondering whether Russia might not offer a better bet than the United States.  Mr. Putin has broken out of the isolation Mr. Obama tried to impose for Russia’s illegal dismemberment of Ukraine. And Russia’s lesson is not lost on people all over the world who might attempt to democratize their authoritarian countries: You cannot count on the United States, but your dictator can count on Russia.

“Two things always have been true about Syria. First, there have been no good or easy policy options; and second, with time and inaction, the options become worse and harder. Today there are still things Mr. Obama could do: Carve out safe zones. Destroy the helicopter fleet Mr. Assad uses for his war crimes.  Provide aid to the battle-hardened force of 25,000 fighters, mostly Kurdish, that, as Post columnist David Ignatius has reported, is ready to attack the Islamic State’s capital of Raqqa.  As Russia deploys more air defenses to bolster the Assad regime, some of these options, too, will narrow and disappear. What will not disappear is the humanitarian catastrophe Syria represents, nor the national security threat emanating from its ruins.”

Stephen F. Hayes / The Weekly Standard

“It has become perhaps the defining characteristic of the Obama administration’s foreign and national security policy – a stubborn insistence on seeing the world not as it is but as the president wishes it to be.

“Al Qaeda was said to be on the run, even as it strengthened.  ISIS was alleged to be junior varsity terrorists, even as it amassed territory.  Iran was treated as a diplomatic partner, even as its leaders shouted ‘Death to America.’  China was feted at a state dinner, even as it escalated cyberattacks against the United States. Russia was said to want peace, even as it made war. And on it goes.

“Historians may well record the last day of September in the seventh year of the Obama presidency as the nadir of the Obama administration’s foreign policy, a day that illustrated the weakness and self-delusion of the administration perhaps better than any other. Unfortunately, the consequences of this weakness and self-delusion won’t end with the exit of this president.  They will pose a challenge to the next president the magnitude of which we haven’t seen in a long time.”

Iran, part II: Supreme Leader Ayatollah Ali Khamenei, who previously said there would be no more talks with the United States after the nuclear deal, issued an outright ban on Wednesday against further negotiations between the two.

Such a statement directly contradicts those made by Iranian President Hassan Rohani, who says his government is ready to hold talks with the United States on how to resolve the conflict in Syria.

Khamenei was quoted as saying on his website: “Negotiations with the United States open gates to their economic, cultural, political and security influence.  Even during the nuclear negotiations they tried to harm our national interests.” 

In an address to Revolutionary Guards commanders, Khamenei said talks with the United States brought only disadvantages to Iran.

“We are in a critical situation now as the enemies are trying to change the mentality of our officials and our people on the revolution and our national interests.”  [Jerusalem Post]

Israel: Violence has escalated rapidly between Palestinians and Israelis, with attacks killing four Israelis and a number of Palestinians in the West Bank, including east Jerusalem.

But it was outrageous the other day when UN Secretary General Ban Ki-Moon condemned the killings of Palestinians without mention of the Israeli terror victims!

Palestinian terrorists shot dead an Israeli couple in front of their four children a week ago, Thursday, and then last weekend, a Palestinian terrorist murdered two Jewish men and wounded a mother and son in the Old City of Jerusalem in a stabbing spree, before he was shot dead by police.

Prime Minister Benjamin Netanyahu pledged “a fight to the death” against what he called “Palestinian terror” as clashes spread after the attacks.

[Friday, six Palestinians were killed in the Gaza Strip as protesters approached the border fence.  Hamas called for an escalation of the confrontations.  I saw seven deaths as I go to post, but not sure on the accuracy.]

Afghanistan: A senior U.S. general admitted a medical facility “was mistakenly struck” in an air attack that killed 22 patients and medical staffers in northern Afghanistan.  Gen. John F. Campbell, who commands U.S. and allied forces in Afghanistan, said the U.S. gunship that struck the hospital run by Doctors Without Borders in the city of Kunduz acted in response to a request from Afghan troops facing a Taliban attack.  But Campbell told the Senate Armed Services Committee, the U.S. ultimately bore responsibility. “We would never intentionally target a protected medical facility.”

U.S. forces were helping the Afghan government retake Kunduz after it shockingly fell to the Taliban in a surprise attack, the first such Afghan city to fall to the Taliban since the war began in 2001.

But it’s still not clear if the medical facility was mistakenly hit because the pilot mistook it for another target or whether they intended to strike the building, not knowing it was a hospital.

Doctors Without Borders called the attack deliberate and that it needed to be investigated as a war crime.  Among the 22 killed were 12 staffers and 10 patients, including three children.

It didn’t help that there were about three different U.S. versions before Campbell’s supposedly definitive one.

Since the attack, Doctors Without Borders left Kunduz.  President Obama offered his “deepest condolences,” and said he expected a “full accounting of the facts.”

I’m biting my tongue on certain aspects of the story that emerged in the first 24 hours but are now being ignored.  Just not worth it for me to discuss them.

Russia, part II: Many of us worry about the Baltics and what seems inevitable...a move by Putin on one or two of them, Latvia or Lithuania.

Regarding the former, Jeffrey Gedmin, writing in The Weekly Standard, had the following:

“Latvia has a Russia problem, at home and abroad. Two-thirds of ethnic Latvians see Russia as a threat, and the greatest fear is Putin’s influence through the back door of Harmony (Ed. a leading opposition party that seeks to represent the country’s Russian-speaking population) and the country’s large ethnic Russian population. A majority of ethnic Russians may be fence sitters...convinced there are two sides to the story and plenty of blame to share among America, NATO, and Russia for current tensions.  That’s hardly good news.  But serious trouble may be brewing.  FSB (the renamed KGB) presence is increasing, as it has been throughout the Baltics the last several years.  Russian money is flowing into businesses and organized crime, into the pockets of politicians and the media.  And Moscow never misses an opportunity to criticize the Latvian government for alleged human rights violations of ethnic Russians. Latvian officials estimate that as many as 5-8 percent of the country’s Russians are now radicalized. Viktor Gushchin, an ethnic Russian historian, calls Latvia a ‘xenophobic and Russophobic state built on Nazi principles.’  Such rhetoric sounds eerily similar to the language Moscow used in justifying its intervention in Ukraine.”

China: U.S. authorities have concluded that three state-owned Chinese companies benefited from trade secrets stolen in a Chinese military hack on U.S. companies.  The companies are Chinalco, the biggest aluminum company in China, Baosteel, a large steelmaker, and SNPTC, a nuclear power company.

The Obama administration has threatened sanctions on companies involved in such hacks, but to include them in sanctions would clearly represent an escalation given their importance to the Chinese economy, vs. the 2014 indictments of five People’s Liberation Army officers involved in cyberattacks. 

The U.S. victims named in the PLA hack were Westinghouse Electric, U.S. subsidiaries of SolarWorld, US Steel, Allegheny Technologies and Alcoa. [Financial Times]

Separately, a senior U.S. official told the Financial Times that the U.S. is preparing to send warships close to China’s artificial islands in the South China Sea as a signal to Beijing that Washington does not recognize Chinese territorial claims over the area.

The ships are to sail inside the 12-nautical mile zones that China claims as territory around some of the islands it has been constructing in the Spratly chain.  The move is to take place within weeks.

And on a related matter, the South China Morning Post reported that China successfully launched its first Long March 6 rocket late last month with a multi-payload of 20 small satellites, according to the People’s Liberation Army’s mouthpiece, the PLA Daily. China thus is the third country with such technology, after Russia and the United States.

According to a specialist from Shanghai University, “The launch will send a message to the U.S. that the PLA now is capable of breaking its ballistic missile defense system in Asia, because...the multi-payload technology can also be used on the DF-41 [long-range nuclear missile].”

Now who wants a beer?

Meanwhile, on the health front, according to a study conducted by scientists from Oxford University, the Chinese Academy of Medical Sciences and the Chinese Center for Disease Control, a third of all men currently under the age of 20 in China will eventually die prematurely if they do not give up smoking.

The research, published in The Lancet medical journal, says two-thirds of men in China now start to smoke before 20.  Around half of those will die from the habit, the study concludes.

One in three cigarettes smoked globally is in China, but while more than half of Chinese men smoke, only 2.4% of Chinese women do.

A new Greenpeace study of 31 mainland cities, however, finds people are more likely to die from PM2.5 (fine particulates that can lodge deep inside a person’s lungs) than smoking, and the study didn’t even include the worst offending cities in Hebei province.

The official mortality rate of smoking – recorded in 2012 as about 70 in every 100,000 deaths, is at least less than the 100 out of every 100,000 deaths blamed on PM2.5.

Finally, you know how last week I referred to a disturbing piece from the New York Times on how the few aides surrounding President Xi Jinping refuse to make themselves available to their western counterparts, and are inaccessible to the press?

This week, Emily Smith of the New York Post wrote some of the following:

“Chinese President Xi Jinping was in no mood to grant favors at his White House state dinner – not even for Mark Zuckerberg’s unborn baby.

“Among the many tech and media titans who were invited, a few who came to kiss Xi’s ring at the Sept. 25 dinner hosted by President Obama and First Lady Michelle also asked for something in return.

“Zuckerberg spoke to Xi in Mandarin and asked if he would do him and wife Priscilla the honor of giving the baby she is expecting an honorary Chinese name.

“Xi’s terse reply: ‘No.’ While a spokesperson for Zuckerberg told us, ‘This was not correct,’ a second source insisted that Xi did decline to nominate a name for the Facebook founder’s unborn baby girl and politely added that it would be ‘too much responsibility.’”

Those Commies are such warm people, aren’t they?

Portugal: Ordinarily I would have put this up above in the Euro market segment but it fits in better here this week.  Prime Minister Pedro Passos Coelho’s party won the parliamentary election last weekend as his alliance took 38.3 percent of the vote, but it appears he’ll have to lead a minority center-right government in his second term.

Coelho, after four years of austerity from which Portugal has been emerging in fine shape, nonetheless has seen his popularity fall due to his tough policies.  His party controls only 104 seats in the 230-seat parliament compared with 136 previously. So now he’ll have to make major concessions to attract the opposition Socialists to form a coalition.

In terms of the tone set for the likes of Greece, Spain and Italy, this bears watching.

Random Musings

--Last week I said I didn’t have time to delve into much of President Obama’s Oct. 2 press conference, so here is a snippet that left me incredulous.

Q: Thank you, Mr. President.  You just said that you reject President Putin’s approach to Syria and his attacks on moderate opposition forces.  You said it was a recipe for disaster.  But what are you willing to do to stop President Putin and protect moderate opposition fighters?  Would you consider imposing sanctions against Russia?  Would you go so far as to equip moderate rebels with anti-aircraft weapons to protect them from Russian air attacks? And how do you respond to critics who say Putin is outsmarting you, that he took a measure of you in Ukraine and he felt he could get away with it?

The President: Yes, I’ve heard it all before.  I’ve got to say I’m always struck by the degree to which not just critics but I think people buy this narrative.

Let’s think about this.  So when I came into office seven and a half years ago [Ed. six and a half], America had precipitated the worst financial crisis in history, dragged the entire world into a massive recession.  We were involved in two wars with almost no coalition support.  [Ed. false] U.S. – world opinion about the United States was at a nadir – we were just barely above Russia at that time, and I think potentially slightly below China’s.  And we were shedding 800,000 jobs a month, and so on and so forth.

And today, we’re the strongest large advanced economy in the world – probably one of the few bright spots in the world economy. Our approval ratings have gone up.  We are more active on more international issues and forge international responses to everything from Ebola to countering ISIL.

---

“Our approval ratings (around the world) have gone up”?  What planet is Obama is living on?

Editorial / New York Post

“Just three years ago, President Obama famously ridiculed GOP opponent Mitt Romney’s statement that Russia remained America’s main geopolitical foe by taunting: ‘The 1980s are calling to ask for their foreign policy back.’

“Four years before that, Obama stood at Berlin’s Brandenburg Gate to declare that once he became president, all people would join him around a global campfire, hold  hands and put an end to the world’s evils and miseries.

“Well, seven years into Obama’s presidency, the promised worldwide Kumbaya is instead global chaos – caused in large measure by his willful retreat from America’s position of leadership.

“Washington’s traditional allies increasingly feel abandoned, its enemies emboldened. The United States isn’t even leading from behind – it’s cowering in weakness.

“And no one is taking better advantage of this than Vladimir Putin, now storming headlong into the yawning chasm of American retreat and reasserting Russia’s global influence and power – just as Mitt Romney said....

“Equally eager to open America’s arms to longtime adversaries, this president has begun new relationships with Iran (all but giving Tehran a direct path to a nuclear arsenal) and Cuba without any concessions in return – even on such basic issues as human rights....

“Obama chose Berlin as the place to call on all nations to join him in ‘tearing down the walls’ to ‘remake the world.’  But his soaring rhetoric was followed by indecision, hesitation and outright appeasement.

“America’s allies are calling, Mr. President. They want Ronald Reagan’s assertive foreign policy of the 1980s back.

“They want an America that leads – not retreats.”

--Hillary Clinton has long supported the 12-nation Trans-Pacific Partnership, including in her 2014 memoir, “Hard Choices.”  But Wednesday, she told PBS’ “NewsHour,” “As of today, I am not in favor of what I have learned about it,” as Hillary feels the heat from socialist Sen. Bernie Sanders, who has long opposed the trade deal, calling it “disastrous.”

The Democrats debate next Tuesday in Las Vegas and while Gov. Martin O’Malley polls only about one percent, he will hammer her on this flip-flop.

The thing is Clinton made her statement without having actually seen the details, but she said TPP failed to meet “the high bar” she had set.  You just know how ticked off the Obama administration must be.  On Nov. 17, 2012, in a speech in Singapore, Clinton praised the “far-reaching new trade agreement” that sought to “lower barriers, raise standards and drive long-term growth across the region.”

Two days earlier in Australia, she said the TPP “sets the gold standard in trade agreements to open, free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field.”  [James S. Robbins / USA TODAY]

Clinton and Obama also disagree on an issue I am fond of, the establishment of a no-fly zone in Syria.  Clinton as secretary of state had discussed one with allies and favors it today.  The position of the Obama administration has remained the same...no.  Or as White House press secretary Josh Earnest recently put it:

“It raises a whole set of logistical questions about how exactly – what would be enforced, what sort of resources would be used to actually protect that area.  So that’s why, at this point, we’ve indicated that that’s not something that we’re considering right now.”  [New York Times]

--Hillary’s email issues now include a second private technology company, which probably opens a new avenue for investigators interested in recovering emails deleted by her.

--Poll numbers....

According to a new Wall Street Journal/NBC News/Marist Pool, Donald Trump leads Ben Carson in Iowa, 24% to 19%, with Carly Fiorina far behind in third at 8% and Jeb Bush 7%.  [Trump had 29% a month earlier.]

In New Hampshire, Trump leads with 21%, ahead of Fiorina’s 16%, followed by Bush at 11%, and Marco Rubio and Carson with 10% each.  [Trump polled 28% a month earlier here.  Fiorina had been at just 6%.]  Distressingly for my man John Kasich, his support has declined from 12% to 6%.

On the Democratic side, Clinton leads Sanders 47-36 in Iowa, but if Biden is added to the race, it’s Clinton 33, Sanders 28, Biden 22.

In New Hampshire, Sanders still leads 48-39, but with Biden it’s 42% for Sanders, Hillary 28%, Biden 18%.

The latest Quinnipiac University Swing State Poll....registered Republicans.

Florida: Trump 28%, Carson 16%, Rubio 14%, Bush 12%, Fiorina 7%

Ohio: Trump 23% Carson 18%, Kasich 13%, Cruz 11%, Fiorina 10%, Rubio 7%, Bush 4%

Pennsylvania: Trump 23%, Carson 17%, Rubio 12%, Fiorina 8%

Registered Democrats...with Biden

Florida: Clinton 43%, Biden 19%, Sanders 19%

Ohio: Clinton 40%, Biden 21%, Sanders 19%

Pennsylvania: Clinton 36%, Biden 25%, Sanders 19%.

But in general election matchups, Biden defeats Carson 45-42 in Florida; loses to Carson 46-42 in Ohio; and Carson wins in Pennsylvania 47-42.

Biden defeats Trump 52-38 in Florida, 49-38 in Ohio, and 50-40 in Pennsylvania; whereas Clinton only defeats Trump by one to five points in the three.

So further ammunition for Biden supporters as he gathers with family this weekend to decide.

--George F. Will / Washington Post

“As the IRS cover-up of its and (Lois Lerner’s) malfeasance continues, the Republicans’ new House leaders should exercise (its constitutional power): ‘The House...shall have the sole power of impeachment.’  The current IRS director, John Koskinen, has earned this attention.

“The Constitution’s framers, knowing that executive officers might not monitor themselves, provided the impeachment recourse to bolster the separation of powers. Federal officials can be impeached for dereliction of duty (as in Koskinen’s failure to disclose the disappearance of e-mails germane to a congressional investigation); for failure to comply (as in Koskinen’s noncompliance with a preservation order pertaining to an investigation); and for breach of trust (as in Koskinen’s refusal to testify accurately and keep promises made to Congress).

“Rep. Jason Chaffetz (R-Utah), chairman of the Oversight and Government Reform Committee, says the IRS has ‘lied to Congress’ and ‘destroyed documents under subpoena.’  He accuses Koskinen of ‘lies, obfuscation and deceit’: ‘He assured us he would comply with a congressional subpoena seeking Lois Lerner’s emails.  Not only did he fail to keep that promise, we later learned he did not look in earnest for the information.’....

“Even if, as Koskinenen says, he did not intentionally mislead Congress, he did not subsequently do his legal duty to correct the record in a timely manner. Even if he has not committed a crime such as perjury, he has a duty higher than merely avoiding criminality.

“If the House votes to impeach, the Senate trial will not produce a two-thirds majority needed for conviction: Democrats are not ingrates.  Impeachment would, however, test the mainstream media’s ability to continue ignoring this five-year-old scandal and would demonstrate to dissatisfied Republican voters that control of Congress can have gratifying consequences.”

--The Justice Department is preparing to release 6,000 drug offenders from federal prisons nationwide in an effort to reduce overcrowding and provide relief to those who received unduly harsh sentences over the past three decades.  About two-thirds of them will go to halfway houses and home confinement before being put on supervised release.  Foreign citizens being released will be immediately deported, officials told the Washington Post.

This action follows the recommendations of the U.S. Sentencing Commission – an independent agency that sets sentencing policies for federal crimes.  I have no problem with these efforts that eventually could result in 46,000 being granted early release, as long as they aren’t dealers.

--Peter Whoriskey / Washington Post

“U.S. dietary guidelines have long recommended that people steer clear of whole milk, and for decades, Americans have obeyed.  Whole milk sales shrunk. It was banned from school lunch programs.  Purchases of low-fat dairy climbed.

“ ‘Replace whole milk and full-fat milk products with fat-free or low-fat choices,’ says the Dietary Guidelines for Americans, the federal government’s influential advice book, citing the role of dairy fat in heart disease.

“Whether this massive shift in eating habits has made anyone healthier is an open question among scientists, however.  In fact, research published in recent years indicates that the opposite might be true: millions might have been better off had they stuck with whole milk.

“Scientists who tallied diet and health records for several thousand patients over ten years found, for example, that contrary to the government advice, people who consumed more milk had lower incidence of heart disease....

“This year, as the ‘Dietary Guidelines for Americans’ undergoes one of its periodic updates, the federal bureaucrats writing them must confront what may be the most controversial and weighty question in all nutrition: does the consumption of so-called saturated fats – the ones characteristic of meat and dairy products – contribute to heart disease?”

It’s very complicated and Mr. Whoriskey’s piece is rather lengthy, but you’ll be hearing a lot more on this topic in the coming months.  The American Heart Association, for example, says the evidence from the dangers of saturated fats “arises from these two ideas: Consuming saturated fats raises levels of so-called ‘bad’ cholesterol in the blood, and that higher levels of ‘bad’ cholesterol, in turn, raises risks of heart disease.”

--A new analysis published in the journal Circulation finds that 30 minutes of exercise a day probably isn’t enough.  After researchers reviewed 12 studies involving over 370,000 men and women over a mean follow-up time of 15 years, those exercising 30 minutes had “modest reductions” in heart failure risk, but those who exercised twice and four times as much had “a substantial risk reduction” of 20 percent and 35 percent, respectively.

Wow, two hours of activity a day?  For me that would be a half-marathon, just jogging.  I don’t think so.  [Washington Post]

But don’t despair if you don’t have this kind of time.  30 minutes is still better than nothing, and other studies show short intense bursts of activity can be beneficial as well.

--Meanwhile, in Antarctica, a recent safety audit released by the National Science Foundation Office of the Inspector General said there is too much alcohol being consumed at U.S. research bases.

About 3,200 people participate yearly at three research stations in the land of the cold and the conclusion was there should be more breathalyzer tests because while workers are prohibited from drinking on the job, evidence says otherwise.  [Fox News]

These folks are setting a bad example for the penguins, for starters.

--WIRED magazine had a blurb on the best seafood, given that “pollution means supposedly clean water is actually a soup of plastic fragments.”

“Our favorite responsible option: mussels. These tasty bivalves are a consistently ethical choice.  They’re filter feeders, which means the farmed versions don’t use fish protein as food, and ‘they’ve been shown to actually help clean water,’ says Santi Roberts, science manager for the Monterey Bay Aquarium’s Seafood Watch program.”  Plus, “they don’t sequester as much mercury as other ocean critters.”

--The Trans-Pacific Partnership trade deal is supposed to have strong wildlife protections that go a long way toward ending illegal trade in certain animals and plants, such as rhino horns and ivory.

--The Nobel Peace Prize went to the Tunisian National Dialogue Quartet for its role in helping the country transition to democracy after the 2011 revolution.  German Chancellor Merkel and Pope Francis were among those cited, along with four Tunisian organizations that helped establish an inclusive constitutional system.

--California became the fifth state to allow so-called assisted suicide, following Oregon, Washington, Montana and Vermont.  Gov. Jerry Brown, a former Jesuit seminary student, signed a measure allowing physicians to prescribe lethal doses of drugs to terminally ill patients who want to hasten their deaths.

Brown noted, “In the end, I was left to reflect on what I would want in the face of my own life.  I do not know what I would do if I were dying in prolonged and excruciating pain. I am certain, however, that it would be a comfort to be able to consider the options afforded by this bill.  And I wouldn’t deny that right to others.”

I agree with Gov. Brown.

--My heart goes out to the people of South Carolina for the immense suffering they are going through with the historic rainfalls and flooding.  According to statistics compiled by the National Oceanic and Atmospheric Administration, a three-day, 1,000-year rainfall event – one that, on average, could be expected about every 1,000 years – would have meant 17.1 inches for Charleston County, which reported in some sections, such as Mount Pleasant, northeast of the city, 24 inches in three days.  Rainfall totals in much of the Myrtle Beach area were 20-24 inches.  Columbia received over 11 inches in two days.

South Carolina’s roads and bridges were a disaster waiting to happen before this event.  It’s going to take months and months to fully repair the damage and that will have a major impact on commerce.

It was all just so freakish that the rain kept training over a relatively narrow area, from the coast, thru Columbia, and on into Spartanburg/Greenville.  I’m heading to the Charleston area in December and very curious to see if the road to Kiawah is still the mess I envision it being.  Detour alternatives, for example, are severely limited.

--Finally, thoughts and prayers for the families of the 33 who died aboard the El Faro cargo ship in what appears to be such a senseless tragedy, even if it was a mechanical issue that may have prevented the ship from escaping Hurricane Joaquin’s path. The crew was comprised of 28 Americans and five Polish citizens.

---

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

God bless America.

---

Gold closed at $1156
Oil $49.63...highest weekly close since 7/17

Returns for the week 10/5-10/9

Dow Jones  +3.7%  [17084]
S&P 500  +3.3%  [2014]
S&P MidCap  +4.1%
Russell 2000  +4.6%
Nasdaq  +2.6%  [4830]

Returns for the period 1/1/15-10/9/15

Dow Jones  -4.1%
S&P 500  -2.1%
S&P MidCap  -0.7%
Russell 2000  -3.3%
Nasdaq  +2.0%

Bulls  30.2...up from 24.7 low...remember, contrarian indicator
Bears  34.4  [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore



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Week in Review

10/10/2015

For the week 10/5-10/9

[Posted 11:00 PM ET, Friday]

Edition 861

Note: If you haven’t already done so, click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.  I can’t expand without your support.

Washington and Wall Street

Before I address the dysfunction in Congress, a few notes on Wall Street and the Federal Reserve.  Stocks rallied strongly this week, both here and abroad, even though the World Bank and the International Monetary Fund were reducing their projections of global growth the balance of 2015 and 2016.  In the U.S., the rally was fueled by short-covering after the first market correction in four years, as well as the growing belief the Fed will not hike interest rates in December.  [October is definitely off the table at this point.]

In their meeting last month, the just-released minutes of same reveal that Fed policymakers warned that negative developments overseas may have increased the risks to America’s growth and inflation outlook, as the committee agreed to wait for further economic evidence before pulling the trigger on higher rates.

So while members of the Open Market Committee had previously expressed the opinion that a slowdown in China and stock market volatility would have only a small impact on the U.S. recovery, the majority clearly want to wait for stronger evidence the economy has not deteriorated.

The minutes read: “Participants anticipated that the recent global developments would likely put further downward pressure on inflation in the near term.  Compared with their previous forecasts, more now saw the risks to inflation as tilted to the downside.”

That’s the key. The Fed wants to see rising prices.

“A number of participants noted that eliminating slack along such broader dimensions might require a temporary decline in the unemployment rate below its longer-run normal level, and that this development could speed the return of inflation to 2 percent,” the minutes said.

Speaking from Peru in a CNN International interview at a Group of 20 meeting of industrialized nations, Fed Vice Chair Stanley Fischer said the word from his counterparts abroad was “please do it,” raise rates.

“And we will do it, probably, at some point, but we’re not going to do it at a time that is not suitable for the United States economy.”

In an interview with CNBC, also on Friday, New York Fed President William C. Dudley said he still expects a rate hike this year, provided his outlook for inflation and growth stays on track, though he hastened to add his view was “not a commitment.”

Meanwhile, the U.S., Japan and 10 other Pacific Rim economies (not including China) reached agreement on the largest trade pact of the past two decades, a big win for both President Obama and Japanese Prime Minister Shinzo Abe.

The Trans-Pacific Partnership (TPP) covers some 40 percent of the global economy and will create a new Pacific economic bloc with reduced trade barriers.  Everything from beef and dairy products, to textiles and data, as well as new labor and environmental rules and standards, will come into play.

For Obama it’s part of his administration’s “pivot” to Asia. For Abe, it represents his “third arrow” of economic reforms that he has been pursuing since he came into office in 2012.

But Obama is going to face a tough fight in Congress, particularly from his own party, while Republican presidential candidates such as Donald Trump have argued against TPP.  [I get into Hillary Clinton’s flip-flop on the issue down below.]

Opponents see the pact as mostly a giveaway to business and argue it would encourage further export of manufacturing jobs to low-wage nations like Vietnam, while spreading American standards for patent protections to other countries, which could limit competition and lead to higher prices for pharmaceuticals and other high-value products.  But far more as the details emerge. For now it’s clear the American farmer is a big winner.

But speaking of Congress, last week I said of House Majority Leader, and possible future Speaker, Kevin McCarthy (R-Calif.), that he “could not have been more of an idiot when he told Fox News host Sean Hannity: ‘Everybody thought Hillary Clinton was unbeatable, right? But we put together a Benghazi special committee, a select committee.  What are her numbers today? Her numbers are dropping.  Why?  Because she’s un-trustable.  But no one would have known any of that had happened had we not fought.’”

This was after the select committee’s chairman, Rep. Trey Gowdy (R-S.C.), had maintained its work was a strictly neutral examination of the events of Sept. 11, 2012, “but there was McCarthy, boasting it was really about taking down Clinton,” I wrote.

Well, McCarthy’s massive gaffe clearly was the deciding factor in his sudden announcement on Thursday that he was pulling out of a caucus vote for Speaker.  As McCarthy put it, there are 247 members, the GOP’s largest House majority since 1929-30 – but he was going to have to struggle to gain even 218 (a majority of the 435 members in the House), and even had he done so, it would not have been enough to then lead effectively, with a solid minority among the Republicans, the Freedom Caucus, comprising up to 40 members, having a different agenda than the majority of their fellow Republicans.

Editorial / Wall Street Journal

“The refuseniks in the Freedom Caucus told Mr. McCarthy he was contaminated by his years as Mr. Boehner’s leadership deputy and they would never vote for him, despite his efforts at accommodation. Their horse is Daniel Webster of Florida, who is unknown outside of his district and might have 40 votes at most.

“The rebels don’t have nearly enough support to stand up their own man, but they can blow up all House business and decapitate the leadership of their own party. The danger is that having deposed Mr. Boehner and now Mr. McCarthy, they will refuse to back anyone who won’t meet their demands.

“The refuseniks belong to the larger conservative sub-movement that blames ‘the Republican establishment’ for all the country’s problems, not President Obama, Hillary Clinton or bad policy choices that can be reversed with someone else in the White House. The listless economy, the failure to repeal ObamaCare or secure the border – all these disappointments supposedly can be blamed on GOP leaders who don’t fight hard enough.”

So what are the alternatives?  There is but one...Paul Ryan.  But he has said repeatedly he doesn’t want the job, and no wonder.

Wall Street Journal:

“If the only way to become and remain Speaker is to capitulate to the impossible demands of a rump minority, then you’re being set up to fail.....

“The Wisconsin Republican says he prefers to remain at the tax-writing Ways and Means Committee, but he won’t return as Chairman if Republicans lose the House.  The contagion that took out Mr. McCarthy will continue to spread, and don’t be surprised if Mr. Ryan concludes he must make his own personal sacrifice to stop it.”

New York Republican Rep. Peter King said the hardline conservatives are “blackmailing the (GOP) caucus” and “hijacking the Congress.”

“These guys are off on their own and we can’t allow this to go on,” he said on CNN.  “It’s bad enough they brought down a speaker.  It’s even worse they brought down the person who’s the choice for speaker. We have to get this behind us.”

The timetable couldn’t be worse, with a November debt-ceiling deadline looming, let alone the new Dec. 11 deadline for either coming up with  a budget Congress and the president can agree on, or approving a further continuing resolution to fund government into 2016.  Barring this, the government is facing a shutdown.

Personally, I’m hoping Paul Ryan can be convinced to take the job, knowing he would only do so if given the appropriate powers to effectively wield the gavel and help elect a Republican president in 2016.

Europe and Asia

As alluded to above the World Bank and International Monetary Fund issued one of their periodic updates and the WB is cutting growth for the Asia Pacific for this year to 6.5% from a previous 6.7% estimate, and to 6.4% next year, also from a 6.7% projection.  Ex-China, growth in the region is only expected to be 4.6%.

The World Bank sees China growth at 6.9% in 2015, 6.7% next year, after earlier forecasting 7.1% and 7.0%, respectively).

The International Monetary Fund cut its global growth rate to 3.1% for this year, after previously pegging it at 3.3%, while it sees 3.6% growth in 2016, down from a recent 3.8% estimate, as emerging market growth will decline a fifth consecutive year..  The IMF left China at 6.8% for 2015, but just 6.3% next year.

Japan is forecast to grow 0.6% this year, just 1.0% next, while the United States is now expected to grow 2.6% in 2015, 2.8% in 2016.

The euro area will see growth of 1.5% this year, 1.6% next.  [One more...Brazil is expected to contract 3.0% in 2015 and another 1.0% in ‘16.]

Sticking with Asia, China just concluded its Golden Week holiday, Oct. 1-7, and this is always a key one for retail sales, people spending more over the holidays than they do otherwise.  The Ministry of Commerce said sales for the period rose 11%, which sounds good, but it’s down from the 12.1% pace during last year’s Golden Week, so yet another indicator of a slowing economy.

In Japan, August exports rose 3.1% year-over-year, but this was down from July’s strong 7.6% rise.  Machine orders, a key proxy for capital expenditures, fell 3.5% in August, yoy, when a 3.5% increase had been expected.

Turning to Europe, just a few notes on the economy.  The retail PMI for the eurozone, as reported by Markit, was 51.9 in September vs. August’s 51.4 reading, a fifth straight increase.  Italy’s 51.7 was a 68-month high.

Germany reported some poor figures last week.  Industrial production fell 1.2% in August from July.  Factory orders were off 1.8% in August, while exports in the month cratered 5.2% over July.  And now you’ll have the impact of the VW scandal in future data points.

France, on the other hand, seems to be turning the corner after years of stagnation.  Industrial production in August was up 1.6% year-over-year, a solid figure.

Britain saw factory output rise 1% in August from July, up 1.9% yoy.

On the migrant front, the latest national opinion poll in Germany published on Friday shows growing discontent over Chancellor Angela Merkel’s open-door policy.  According to ZDF Barometer, 51 percent of Germans now say that the country cannot manage the inflows, compared with 40 percent two weeks ago.  The percentage of those saying the policies will succeed has dropped from 57 percent to 40 percent.  This mood change is exactly as I have been calling it for weeks and months.

The polls reflect the reality of the situation, where German officials now estimate that the 800,000 figure they’ve been using for the number of refugees crossing into the country this year could end up being as many as 1.5 million (possibly 900,00 between October and December), with more coming next year.

Earlier in the week, Merkel, who grew up in communist East Germany, said, “We eastern Europeans – I’m counting myself as an eastern European – we have seen that isolation doesn’t help.  The refugees won’t be stopped if we just build fences and I’ve lived behind a fence for long enough.

“Those who can consider themselves lucky that they have lived to see the end of the Cold War now think that one can completely stay out of certain developments of globalization.  It just strikes me as somehow very weird.”

The chancellor dismissed critics such as Hungarian leader Victor Orban and Slovak Prime Minister Robert Fico, who have attacked Merkel for throwing open Germany’s borders to Syrian refugees, thus triggering the surge that threatens Europe’s “Christian values.” 

Merkel responded: “It’s not acceptable that we have free movement of goods and of people, but that some countries say ‘this we can’t do, and that we can’t, and we can’t take in Syrians, because we’re not ready yet.’

Merkel took over refugee policy from her interior minister, Thomas de Maiziere, who has been calling on the government to restrict the flows.

But on Friday, Horst Seehofer, the leader of Bavaria, where most of the unprecedented wave is arriving, called for refugees to be sent back to Austria from the German frontier.  “We must send back refugees,” he said.

Critics such as Seehofer say that Merkel’s policy and rhetoric has left local officials overwhelmed, imposed soaring costs, and led to a rightwing backlash.

In Austria, Vienna’s socialist mayor is about to become the first political casualty of the crisis as Austria loses its grip on its capital for the first time since World War II.  The natives are increasingly restive, frustrated by rising rents and stagnant wages, and now the hordes. Migrants have overwhelmed the city and it’s no wonder voters are beginning to flock to the anti-immigrant Freedom Party to stop the surge.

I love Vienna and have been there a number of times, though not in about seven years, and I read a staggering figure this week.  The migrant population makes up 40 percent of the city’s inhabitants!  If you lived there would you like this?  I sure as hell wouldn’t...and I’m sorry if that offends you.

Senior British politician Theresa May said this week that Britain “must have an immigration system that allows us to control who comes to our country.  When immigration is too high...it’s impossible to build a cohesive society.”  [Sydney Morning Herald...Ms. May was echoing former Aussie leader John Howard.]

European Council President Donald Tusk said on Tuesday that the European Union must regain control over its external borders.

“For all refugees,” Tusk told the European Parliament in Strasbourg, “easy access to Europe and the lack of external borders have become a magnet attracting them to us.”

“A potential victory of Assad’s regime is more likely today because of Iran and Russia’s engagement in Syria, and will result in the next migratory wave.  According to Turkish estimates, another three million potential refugees may come from Aleppo and its neighborhood,” Tusk said. 

He continued: “Europe without its external borders will become a breeding ground for fear in each and every one of us. And this will lead us, sooner than later, to a political catastrophe.”

As the crisis increasingly pits east against west, north versus south, wealthier nations against the poorer ones, Tusk added “our internal disagreements and mutual recriminations only help our opponents.”

“We are slowly becoming witnesses to the birth of a new form of political pressure, and some even call it a kind of a new hybrid war, in which migratory waves have become a tool, a weapon against neighbors. This requires particular sensitivity and responsibility on our side.”

It’s too late.  The genie is out of the bottle.  Extremists are on the rise.

And who knows what evil lurks among the masses flooding in? This week FBI Director James Comey was among those testifying before Congress that ISIS easily could be infiltrating the refugee population and the U.S. has no good way to detect them.  Weeks earlier in Rome, Pope Francis said the same thing.

One more...the United Nations announced that 400,000 refugees and migrants had arrived in Greece this year after crossing the Mediterranean.  131,000 had reached Italy thus far in 2015.  Overall, 168,000 crossed the Mediterranean in September, the highest monthly figure ever recorded and almost five times the volume of a year earlier.  [Rick Gladstone / New York Times]

Street Bytes

--The Dow Jones surged 3.7% to 17084, its best week since February, while the S&P 500 advanced 3.3%, its best performance since last December.  Nasdaq rose 2.6%.  The S&P is up 7.9% since the August low.

But now its earnings season, with the big banks reporting this coming week, and the bottom line will be down 4% to 5% as projected by various folks, while revenues will be down again, 3.4%, according to FactSet.

Once again, however, it’s all about guidance.  Is there any optimism whatsoever expressed in the accompanying statements by multinationals in particular?

--U.S. Treasury Yields

6-mo. 0.07%  2-yr. 0.64%  10-yr. 2.09%  30-yr. 2.92%

For the record, the October Fed meeting is the 27th and 28th; December’s is the 15th and 16th.  Regarding the latter, just a reminder to leave some snickerdoodles out for Santa, as well as a cold domestic.  Place a post-it, today, on your bathroom mirror, as I do here in the home office.

--Deutsche Bank announced it would pay no dividend at all this year after reporting exceptional costs of over $8 billion in the third quarter.  Remember how I mentioned ‘goodwill’ in terms of VW last week?  Deutsche Bank blamed a large part of the loss on a goodwill write-off at its investment bank, while setting aside $1.3 billion to deal with the continuing slew of litigation.

JPMorgan is estimating Deutsche will cut 10,000 jobs from its main operations, plus another 15,000 after an expected sale of its retail subsidiary Postbank.

--New Volkswagen CEO Matthias Muller said the company was preparing to slash expenses to help pay for the costs resulting from the diesel emissions scandal.  Muller said VW would need to “save massively to manage the consequences of the crisis” and to preserve the carmakers “good” credit rating.

“Therefore we have initiated a further review of all planned investments,” he added.  “Anything that is not absolutely necessary will be cancelled or postponed. And that’s why we will be intensifying our efficiency program.  To be clear: this will not be painless.”

VW employs almost 600,000 workers.

Wolfgang Munchau / Financial Times

“Most scandals blow over.  Some blow up. Volkswagen will be of the latter kind. The penalties and damages resulting from VW’s manipulation of emissions tests could easily add up to more than 100bn euro ($112bn). The total economic costs would be a multiple of that, more than what Germany would ever have faced from a Greek exit from the eurozone.

“More importantly, the Volkswagen scandal has the potential to unhinge the German economic model. It has been over-reliant on the car industry, just as the car industry has been over-reliant on diesel technology.

“For its part, Berlin mollycoddles the industry and represents its interests abroad.  The ‘VW law’ in effect protects the company against a hostile takeover. And it was a former VW director, Peter Hartz, who wrote the labor reforms of the previous decade.

“In return, the industry contributes to the stability of regional employment. And the voting rules in the supervisory board ensure that production could be shifted out of Germany only with the explicit consent of the trade unions.  It other words, it cannot.

“In terms of macroeconomic risk management, this is a silly strategy – similar to the UK’s over-reliance on the financial sector. Such strategies work well until they do not work at all.”

--Dell and EMC are in merger talks...a PC maker and a data-storage company.

EMC is worth about $50bn, over half of which is comprised of its stake in virtualization software company VMware.

But to secure EMC, it’s expected a debt package could top $40 billion to fund the acquisition and credit markets these days are more than a bit unsettled, especially for mergers.  Dell and its bankers are anxious to put the financing together before credit tightens further.

A combined Dell-EMC would encompass computing, networking and storage – both hardware and software that would be able to compete with the likes of IBM and Hewlett-Packard.

VMware, which has software designed to make corporate data centers more efficient, is the key to the transaction.  EMC currently owns 80% of it and to help finance the deal, Dell could sell off shares in VMware while retaining a controlling stake.  [There is also talk of a tracking stock for VM.]

Dell, of course, went private a number of years ago.

--Fiat Chrysler reached a tentative agreement with the United Automobile Workers on a new contract, thus averting a strike.  The deal is subject to approval by a vote of 36,000 hourly workers and 4,000 salaried union members.  Currently more than 40 percent of Fiat Chrysler’s hourly workers are considered entry-level and make $9 to $12 an hour less than veteran employees earning $28.  The disagreement had been over the mechanism for moving up to top-wage status, and the tentative deal raises the maximum pay of newer hires to $29 an hour, as reported by the Wall Street Journal.

But the four-year contract would allow Fiat Chrysler time to close the gap between newer and veteran workers’ pay, phasing in raises over an eight-year period.

UAW President Dennis Williams will now push for similar deals with Ford and GM, which are both operating under contract extensions.

According to the Labor Department, the average U.S. auto worker earns about $27.50 an hour today, down from an hourly rate of $29 a decade ago.

At the same time, profit-sharing has soared and workers are earning very nice bonus checks each January.

--Monsanto Co. announced it was slashing 2,600 jobs and restructuring operations to cut costs as the commodity markets slump; Monsanto being one of the world’s largest seed and agrichemical companies.

Monsanto said it expected low prices for agricultural products to squeeze results well into 2016, and that it would exit the sugar cane business.

--SABMiller, the second-biggest brewer in the world, has now spurned three offers from Anheuser-Busch InBev, which last upped the amount it was willing to pay for SAB to $104 billion.

Apparently the real stumbling block is the Santo Domingo family of Colombia, which owns 14 percent of SAB through selling its own brewer to SABMiller a decade ago.  It doesn’t feel like it’s getting fair value for its holdings.

It’s also getting a little hostile and all I want to be able to do is drink my domestic in peace...please, no violence!  [SAB owns Grolsch, by the way, so when my personal fortunes change, I promise to switch to premium.  Nothing says ‘premium’ like Grolsch’s heavy bottle.]

--PepsiCo Inc.’s profit fell 73% due to a charge related to its Venezuelan operation while revenue fell 5.2% in the third quarter owing to the stronger dollar, but U.S. sales were strong and the company expects solid profits going forward.

Gatorade sports drinks and Lipton teas fueled a 10% rise in noncarbonated beverages, offsetting a 2% decline in carbonated drinks, including a 6.5% drop in diet soda (the new formula for which is getting panned big time).

--Alcoa launched the third-quarter earnings season by missing expectations badly on profits, but revenue of $5.6 billion was roughly in line.

--Bond titan Bill Gross filed a lawsuit against the company he co-founded, PIMCO, and parent Allianz SE for $200 million, claiming he was ousted by underlings “driven by a lust for power, greed, and a desire to improve their own financial position...at the expense of investors and decency.”  Specifically, he claims a “cabal” of executives wanted a slice of the bonus he was leaving behind.

Gross claims he was an advocate for lower fees and sticking to PIMCO’s traditional, lower-risk bond investments, but he was pushed out by other executives seeking to expand into riskier assets and higher-fee products.

Gross was expecting a bonus of about $250 million for 2014, though he left on Sept. 26 of last year and because he departed days before the third quarter ended, PIMCO refused to pay him a proportionate amount, according to the complaint.

Gross has said anything he was awarded if successful would be donated to charity.

--New York’s state comptroller says Wall Street profits in New York City hit $11.3 billion during the first half of 2015, higher than in the past three years.  What’s good is that the Street added jobs in 2014 for the first time since 2011.

Comptroller Thomas DiNapoli said his analysis show Wall Street accounted for 174,000 jobs in August, and was on pace to add another 4,500 for 2015 overall.

But the securities industry remains 9% smaller than it was before the 2008 financial crisis.

DiNapoli said the average salary, including bonus, rose 14% last year to a record $404,800.  [Crain’s New York Business / Associated Press]

--Shares in Tesla were slammed this week when analysts at Baird, and then others, cut the stock’s rating and lowered the price target, citing concerns about the automaker’s ability to ramp up production for its Model X vehicle, as well as concerns that Model X orders could be canceled because the vehicle is more expensive than first thought.  The base price is $93,000, but will end up somewhere between $120,000 and $130,000 with various options.

--Yum Brands, operator of KFC, Taco Bell and the Pizza Hut chains, saw its shares crater anew ($83 to $69) after warning the recovery in its critical Chinese market (which generates over half of its sales) was not happening as quickly as the company had hoped.

KFC’s nearly 5,000 restaurants in China did at least report quarterly sales growth for the first time since a food safety scandal a year ago hit it hard, but same-store sales were up just 3%.

Pizza Hut’s same-store sales fell 1%.

Yum now expects full-year same-store sales will fall by a “low-single-digit” percentage in China, after earlier predicting “a strong second half of the year.”  Ergo, the company has officially lost all credibility.

But at least Taco Bell’s same-store sales rose 4% in the U.S.  I wish we had a Taco Bell in my building...then I’d be working out of there alllll day and night.

--DuPont CEO Ellen Kullman announced she will retire Oct. 16, which was rather abrupt and a move that could augur a breakup of the chemical and seed giant.  The company slashed its profit forecast and is accelerating cost-cutting plans.

Ms. Kullman totally mishandled a battle with activist investor Nelson Peltz, rebuffing his attempts at changes designed to increase shareholder value.

Yes, Kullman defeated Peltz’s efforts to win board seats this past spring, but he retained his stake in the company and made her life difficult.

I’m on Peltz’s side on this one (and I normally hate activist investors).  But DuPont does have a difficult position in that the agricultural economy is being squeezed by lower prices that are forcing cutbacks on seed, fertilizer and equipment.

Current board member Edward Breen is interim CEO and chairman.  Breen was responsible for the turnaround of Tyco International.

--Speaking of Nelson Peltz, his Trian Fund Management has taken a $2.5 billion stake in General Electric.  Peltz and fellow Trian executive Ed Garden have a longstanding relationship with GE CEO Jeff Immelt and at least for now, Trian seems to favor Immelt’s ongoing efforts to return the company to its industrial roots, including a $2.5 billion sale this week of GE’s corporate aircraft financing unit to Global Jet Capital.

--Update: Since my last WIR, Walmart quantified the number of employees it was laying off from its headquarters in Bentonville, Ark., 450.

--Glencore, the commodities giant with a ton of debt, dramatically announced it was slashing its annual production of zinc by more than a third, which will result in 1,600 job losses at mines in Australia and Peru, for starters.

“The main reason for the reduction is to preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources,” the company said in a statement.

Once prices have recovered, Glencore can restart production.* The cuts equate to 6% of all production outside China.

*I have no idea what zinc is priced at, but I did just see it had its steepest advance on the Glencore news, Friday, in recorded history.  [Bloomberg News]

--Jack Dorsey was formally named CEO of Twitter, though he will also continue to run Square, a payments start-up, with the latter preparing for an initial public offering that could come before the end of the year.  Twitter shares rallied, including on news of new product initiatives.

But then after the market closed on Friday, they were trading lower on a report the company is planning job cuts this coming week.  The company has 4,100 employees around the world.

I’m assuming my morning and afternoon market tweets are not part of the cost-cutting.

--Shares in Pure Storage, which makes storage systems for data centers using flash technology, saw its IPO disappoint and finish below its $17 offering price the very first day, and then for the week, closing at $16.60.  The IPO market has been miserable since Labor Day.

--Macy’s is launching a pilot program where it will host 300-square-foot shops from Best Buy in 10 of its stores, sales being sluggish for both retail giants.  I kind of like this idea.  Way back I went to Macy’s for virtually everything.  The Short Hills Mall store nearby is where I bought all the furniture I have to this day.  I purchased a lot of the larger electronics products there too.  Then at least this particular location downsized and stuck largely to clothing and appliances.  Furniture and electronics was out.

Actually, Macy’s is also now featuring Men’s Warehouse and Bluemercury shop-in-shop programs, the latter a cosmetics company that Macy’s purchased earlier this year. 

Meanwhile, it’s still early, but I saw where one retail analyst told Crain’s New York Business that traffic at brick-and-mortar stores this coming holiday season could fall 7%.

The National Retail Federation, though, released its holiday season forecast for sales and it expects them to rise 3.7% this year vs. a 4.1% gain last year.

The 10-year average is just 2.5%.

Holiday sales represent nearly a fifth of the retail industry’s annual sales of $3.2 trillion.

The NRF expects online sales to increase 6% to 8%, which would compare to 5.8% growth last year.

--The A&P grocery store chain will be laying off as many as 13,000 workers by Thanksgiving as the 156-year-old grocer heads toward liquidation, according to the New York Post.  The toll is higher than expected because fewer stores are being bought by rivals.

--Malaysia and Indonesia have been dealing with the worst smog on record.  The fog-like grey smoke is caused by slash and burn techniques used to clear Indonesian forests and for weeks it’s caused serious health problems, flight delays and school closures in the area, including Singapore.

Singapore was forced to cancel a World Cup swim meet, while Malaysia canceled a marathon where 30,000 had signed up.  Malaysia also ordered its schools closed for two days, as the education minister said the haze is beyond Malaysia’s control.  Monitoring stations in Kuala Lumpur registered “hazardous” levels.

A 1997 smog outbreak resulted in an estimated $9 billion in economic damages and this episode should prove far worse.

Indonesia has deployed 20,000 troops and police to fight the fires.

[Separately, Malaysian Prime Minister Najib Razak is fighting for his political life owing to a massive corruption scandal and questions on the handling of at least $700 million that was allegedly paid from overseas into a bank account in his name.  Najib says the money came from an unnamed Middle Eastern donor.  A large, heavily indebted investment fund, 1MDB, is part of the scandal.]

--Finally, we note the passing of Paul Prudhomme, the chef who put Cajun cooking on the national stage when, in 1979, he and his wife opened K-Paul’s Louisiana Kitchen on Chartres Street in the French Quarter of New Orleans.  It became an instant success and Prudhomme rode the celebrity chef wave of the ‘80s and ‘90s.  His blackened redfish dish became a national craze and threatened the redfish population in the Gulf of Mexico.

Ah yes, “down-and-dirty Cajun” cuisine.  Paul Prudhomme was 75. 

Foreign Affairs

Syria/Russia/Iran/ISIS/Iraq: Remember when it was ‘just’ Syria/ISIS/Iraq?  Thanks to the new Russia-Iran alliance to prop up Syrian President Bashar Assad, as you’ve seen the last few weeks, the conflict has exploded in complexity.

NATO warned Russia against escalating its campaign in Syria as tensions rose between Moscow and Ankara.  Russia has continuously violated Turkish airspace.  Secretary General Jens Stoltenberg said on Thursday that the main targets of Russia’s air and cruise-missile strikes aren’t the Islamic State terrorist group, but members of more moderate forces opposed to Syrian President Bashar al-Assad.

Four Russian cruise missiles intended for Syria landed in Iran, with any damage and casualties unknown at this point.  [Food for thought for Toronto and Montreal.  When Putin launches a few nukes towards the U.S., they may end up hitting residents there instead.]

Turkish President Recep Tayyip Erdogan warned Russia trade ties could suffer, and that Moscow could find itself frozen out in the construction of a $20 billion nuclear plant on the Mediterranean and lose its No. 1 natural gas consumer.

“We can’t accept the existing situation,” Erdogan said.  “If necessary, Turkey can obtain gas from very different places. Russia should think well.”

British Defense Secretary Michael Fallon said, “Russia is making a very serious situation in Syria much more dangerous.”

But U.S. Defense Secretary Ash Carter continued to criticize Russia’s “unprofessional” conduct, as if Putin cares, citing Moscow fired the barrage of over 20 cruise missiles with no advance notice, plus Russia had never fired the new Kalibr missiles that were used.  Carter warned, “In coming days, the Russians will begin to suffer casualties.”

Ruth Pollard / Sydney Morning Herald

“At this point, it appears Russia is intent on targeting opposition groups who are fighting to overthrow the regime of Bashar Assad.

“Its airstrikes have been concentrated on Idlib and Aleppo – where a coalition of groups are fighting alongside al-Qaeda affiliated Jabhat al-Nusra – as well as other rebels, including the Free Syrian Army and brigades supported by the U.S. and its allies in the provinces of Homs and Hama....

“In the medium term, Russia may seek to shore up Assad’s control over his coastal heartland of Latakia, as well as the capital, Damascus, creating in effect a ‘state within a state’ well away from IS, an analyst said.

“In a rare statement, Syria’s army Chief of Staff, Lieutenant General Ali Abdullah Ayoub, confirmed a major military operation was under way that included ‘wide-ranging attacks to deal with the terrorist groups, and to liberate the areas which had suffered from the terrorist rule and crimes,’ he was quoted as saying by state media.

“For Syria’s army, the term ‘terrorists’ covers all groups fighting to overthrow Assad, including so-called ‘moderate opposition forces’ as well as the militant groups such as Jabhat al-Nusra and Islamic State.”

Karen DeYoung / Washington Post

“The current internal administration debate is largely the same one that has kept the administration out of significant intervention in Syria’s civil war for the past four years.  On one side, Russia’s involvement has strengthened the winning argument that the United States should avoid direct involvement in yet another Middle East conflict and should continue directing its resources toward countering forces such as the Islamic State that pose a direct threat to U.S. national security.

“On the other side, the argument is that it makes no strategic sense for the United States to concede Russian dominance of the situation: If Russia succeeds in keeping Assad in power, the problems in the West caused by both the Syrian war and militant expansion will only get worse.

“Putin’s strategy is that ‘you accept our terms’ on Assad ‘and then we step back and let you solve your own problems’ in Syria, said Igor Sutyagin, a Russian-studies expert at London’s Royal United Services Institute.  ‘If you don’t, we create a complete mess...increasing the influx of refugees into Europe, and your life gets more difficult.’”

One thing is for sure, Russia and Iran’s stepped up involvement will indeed lead to new waves of migrants to Europe and the countries bordering Syria and Iraq. Well over half of Syria’s population of 22 million has been displaced.

Among the other news items of the week in this theater....

--It was announced on Friday that the U.S. is scrapping the $500 million program to train and equip Syrian rebels after the White House concluded it was having little impact (like try zero).

--Iranian state television reported a senior commander in Iran’s powerful Revolutionary Guard was killed in Syria, Gen. Hossein Hamedani, killed outside of Aleppo while “carrying out an advisory mission.”  Early reports said ISIS was responsible.

Heck, even I have known of this guy, a veteran commander who played an important role in the 1980-88 Iran/Iraq war.  Big blow.

--French fighter jets fired airstrikes on the ISIS stronghold of Raqqa, targeting foreign fighters plotting attacks in Europe, according to France’s defense minister, Jean-Yves Le Drian, who added his voice to those criticizing Russia’s stepped-up campaign, saying “80 to 90 percent” of its actions do not target the Islamic State group.

--From the Los Angeles Times: “(The) far larger U.S.-led coalition arrayed against Islamic State militants has launched more than 7,200 airstrikes in Iraq and Syria since August 2014, and only a few are known to have caused civilian casualties.  The Kunduz bombing, which killed 22 people, was one of the worst such incidents by U.S. forces in 14 years of war in Afghanistan.

“Russia has launched 112 airstrikes in the last week, and human rights groups have reported multiple civilian casualties, including three damaged medical facilities.”  [That’s the very definition of “indiscriminate bombing,” sports fans.]

--Meanwhile, our ‘great’ friends in Iraq are urging Russia to launch airstrikes against ISIS in their country, at least Iraq’s Shiite politicians are calling for this, which would only escalate things further between Moscow and Washington.  Prime Minister Haider al-Abadi did say that while he welcomed Russian strikes, they had to be coordinated with the U.S.-led coalition’s existing air campaign.

--More than 40 Syrian insurgent groups have called on regional states to forge an alliance against Russia and Iran in Syria, accusing Moscow of occupying the country and targeting civilians.

--Lastly, ISIS blew up another monument in the ancient city of Palmyra, the Arch of Triumph, thought to have been built about 2,000 years ago, which was “pulverized” by the militants controlling the city.

Syrian antiquities chief Maamoun Abdulkarim confirmed the news and told Reuters that if IS remains in control of Palmyra, “the city is doomed.” 

Did you see pictures of the Arch?  It was beautiful.  Its destruction should make you sick to your stomach.

Condoleezza Rice and Robert M. Gates / Washington Post

“One can hear the disbelief in capitals from Washington to London to Berlin to Ankara and beyond. How can Vladimir Putin, with a sinking economy and a second-rate military, continually dictate the course of geopolitical events? Whether it’s in Ukraine or Syria, the Russian president seems always to have the upper hand.

“Sometimes the reaction is derision: This is a sign of weakness.  Or smugness: He will regret the decision to intervene.  Russia cannot possibly succeed.  Or alarm: This will make an already bad situation worse.  And, finally, resignation: Perhaps the Russians can be brought along to help stabilize the situation, and we could use help fighting the Islamic State.

“The fact is that Putin is playing a weak hand extraordinarily well because he knows exactly what he wants to do.  He is not stabilizing the situation according to our definition of stability.  He is defending Russia’s interest by keeping Syrian President Bashar al-Assad in power.  This is not about the Islamic State.  Any insurgent group that opposes Russian interests is a terrorist organization to Moscow.  We saw this behavior in Ukraine, and now we’re seeing it even more aggressively – with bombing runs and cruise missile strikes – in Syria.

“Putin is not a sentimental man, and if Assad becomes a liability, Putin will gladly move on to a substitute acceptable to Moscow.  But for now, the Russians believe that they (and the Iranians) can save Assad.  President Obama and Secretary of State John F. Kerry say that there is no military solution to the Syrian crisis.  That is true, but Moscow understands that diplomacy follows the facts on the ground, not the other way around.  Russia and Iran are creating favorable facts. Once this military intervention has run its course, expect a peace proposal from Moscow that reflects its interests, including securing the Russian military base at Tartus....

“So what can we do?

“First, we must reject the argument that Putin is simply reacting to world disorder.  Putin, this argument would suggest, is just trying to hold together the Middle East state system in response to the chaos engendered by U.S. overreach in Iraq, Libya and beyond....

“(Putin) as the defender of international stability?  Don’t go there.

“Second, we have to create our own facts on the ground. No-fly zones and safe harbors for populations are not ‘half-baked’ ideas.  They worked before (protecting the Kurds for 12 years under Saddam Hussein’s reign of terror) and warrant serious consideration.  We will continue to have refugees until people are safe.  Moreover, providing robust support for Kurdish forces, Sunni tribes and what’s left of the Iraqi special forces is not ‘mumbo-jumbo.’  It might just salvage our current, failing strategy.  A serious commitment to these steps would also solidify our relationship with Turkey, which is reeling from the implications of Moscow’s intervention....

“Finally, we need to see Putin for who he is. Stop saying that we want to better understand Russian motives. The Russians know their objective very well: Secure their interests in the Middle East by any means necessary. What’s not clear about that?”

John R. Bolton / The Weekly Standard

“Well before Latakia, Russia was already testing U.S. vulnerabilities. Putin’s successful February visit with President Abdel Fattah al-Sisi in Cairo led directly to substantial military sales to Egypt, the first since the 1970s, sending a powerful signal of regional realignment. And Moscow is certainly not complaining about Sisi’s suppression of the Muslim Brotherhood.

“Most visibly threatening, Russia is selling Iran its S-300 air defense system (not to mention other advanced weapons and nuclear reactors when sanctions disappear because of the Vienna nuclear deal).  Once deployed, the S-300 will end any prospect of Israel preemptively striking Iran’s nuclear-weapons program.

“Obama, faced with Russia’s assertive faits accomplis, remains lost in a post-Vienna ideological rapture, unable or unwilling to see the consequences of his passivity and disinterest.  Expressing ‘concern’ over Russia’s new Latakia base joins a lengthening list of Obama ‘concerns’ that elicit only his rhetoric, nothing more.”

Editorial / Wall Street Journal

“Another day, another Mideast surprise for the Obama Administration.  Russian warplanes twice violated Turkish – meaning NATO – airspace over the weekend, a provocation that ‘does not look like an accident,’ according to NATO General Secretary Jens Stoltenberg.  What will the U.S. do if Russia shoots down a Turkish jet, thereby testing NATO’s Article 5 provision that an attack on one Alliance member is an attack on all of them?....

“The danger is that every unanswered incursion and provocation tempts the Moscow-Tehran-Damascus axis to further test U.S. limits. What happens when Bashar Assad resumes using sarin gas against his own people, using Russian air power as protection against potential reprisals while blaming the attacks on ISIS?....

“It would be nice to think that Susan Rice and her team at the U.S. National Security Council are doing some kind of serious contingency planning in the event Moscow decides to pick a bigger fight or truly blunders.  Mr. Obama has made it clear he won’t get drawn into a proxy war in Syria, which may be read as the final betrayal of the U.S.-supported forces now being bombed by Russia.  Sounding similarly hollow are the Administration’s promises that it will continue to oppose Iran’s regional bids despite the nuclear deal.

“In 1947, as Britain’s status as a global power was coming to an end, then-Chancellor of the Exchequer Hugh Dalton warned that his government was ‘drifting in a state of semi-animation, toward the rapids.’  For the Obama Presidency, the rapids are in earshot.”

Editorial / Washington Post

“It is tempting, as we say, to believe that this must end badly for the Russians.  ‘They want this quagmire? Welcome to it!’  And perhaps they will be bogged down and targeted at home by terrorists; we can’t foresee the future. Certainly U.S. officials are right that Russia’s actions will not be helpful to Syria.  More and more Sunnis, seeing they have no protection elsewhere, will gravitate to the Islamic State as their only refuge. Radicalization will increase, and the prospects of a negotiated solution will recede.

“But that is not Mr. Putin’s concern.  Already he has forced the West to change its tune on Mr. Assad; he has to go, but ‘it doesn’t have to be done on day one, or month one, or whatever,’ Mr. Kerry now says.  Europeans, desperate for anything to end their refugee crisis, are wondering whether Russia might not offer a better bet than the United States.  Mr. Putin has broken out of the isolation Mr. Obama tried to impose for Russia’s illegal dismemberment of Ukraine. And Russia’s lesson is not lost on people all over the world who might attempt to democratize their authoritarian countries: You cannot count on the United States, but your dictator can count on Russia.

“Two things always have been true about Syria. First, there have been no good or easy policy options; and second, with time and inaction, the options become worse and harder. Today there are still things Mr. Obama could do: Carve out safe zones. Destroy the helicopter fleet Mr. Assad uses for his war crimes.  Provide aid to the battle-hardened force of 25,000 fighters, mostly Kurdish, that, as Post columnist David Ignatius has reported, is ready to attack the Islamic State’s capital of Raqqa.  As Russia deploys more air defenses to bolster the Assad regime, some of these options, too, will narrow and disappear. What will not disappear is the humanitarian catastrophe Syria represents, nor the national security threat emanating from its ruins.”

Stephen F. Hayes / The Weekly Standard

“It has become perhaps the defining characteristic of the Obama administration’s foreign and national security policy – a stubborn insistence on seeing the world not as it is but as the president wishes it to be.

“Al Qaeda was said to be on the run, even as it strengthened.  ISIS was alleged to be junior varsity terrorists, even as it amassed territory.  Iran was treated as a diplomatic partner, even as its leaders shouted ‘Death to America.’  China was feted at a state dinner, even as it escalated cyberattacks against the United States. Russia was said to want peace, even as it made war. And on it goes.

“Historians may well record the last day of September in the seventh year of the Obama presidency as the nadir of the Obama administration’s foreign policy, a day that illustrated the weakness and self-delusion of the administration perhaps better than any other. Unfortunately, the consequences of this weakness and self-delusion won’t end with the exit of this president.  They will pose a challenge to the next president the magnitude of which we haven’t seen in a long time.”

Iran, part II: Supreme Leader Ayatollah Ali Khamenei, who previously said there would be no more talks with the United States after the nuclear deal, issued an outright ban on Wednesday against further negotiations between the two.

Such a statement directly contradicts those made by Iranian President Hassan Rohani, who says his government is ready to hold talks with the United States on how to resolve the conflict in Syria.

Khamenei was quoted as saying on his website: “Negotiations with the United States open gates to their economic, cultural, political and security influence.  Even during the nuclear negotiations they tried to harm our national interests.” 

In an address to Revolutionary Guards commanders, Khamenei said talks with the United States brought only disadvantages to Iran.

“We are in a critical situation now as the enemies are trying to change the mentality of our officials and our people on the revolution and our national interests.”  [Jerusalem Post]

Israel: Violence has escalated rapidly between Palestinians and Israelis, with attacks killing four Israelis and a number of Palestinians in the West Bank, including east Jerusalem.

But it was outrageous the other day when UN Secretary General Ban Ki-Moon condemned the killings of Palestinians without mention of the Israeli terror victims!

Palestinian terrorists shot dead an Israeli couple in front of their four children a week ago, Thursday, and then last weekend, a Palestinian terrorist murdered two Jewish men and wounded a mother and son in the Old City of Jerusalem in a stabbing spree, before he was shot dead by police.

Prime Minister Benjamin Netanyahu pledged “a fight to the death” against what he called “Palestinian terror” as clashes spread after the attacks.

[Friday, six Palestinians were killed in the Gaza Strip as protesters approached the border fence.  Hamas called for an escalation of the confrontations.  I saw seven deaths as I go to post, but not sure on the accuracy.]

Afghanistan: A senior U.S. general admitted a medical facility “was mistakenly struck” in an air attack that killed 22 patients and medical staffers in northern Afghanistan.  Gen. John F. Campbell, who commands U.S. and allied forces in Afghanistan, said the U.S. gunship that struck the hospital run by Doctors Without Borders in the city of Kunduz acted in response to a request from Afghan troops facing a Taliban attack.  But Campbell told the Senate Armed Services Committee, the U.S. ultimately bore responsibility. “We would never intentionally target a protected medical facility.”

U.S. forces were helping the Afghan government retake Kunduz after it shockingly fell to the Taliban in a surprise attack, the first such Afghan city to fall to the Taliban since the war began in 2001.

But it’s still not clear if the medical facility was mistakenly hit because the pilot mistook it for another target or whether they intended to strike the building, not knowing it was a hospital.

Doctors Without Borders called the attack deliberate and that it needed to be investigated as a war crime.  Among the 22 killed were 12 staffers and 10 patients, including three children.

It didn’t help that there were about three different U.S. versions before Campbell’s supposedly definitive one.

Since the attack, Doctors Without Borders left Kunduz.  President Obama offered his “deepest condolences,” and said he expected a “full accounting of the facts.”

I’m biting my tongue on certain aspects of the story that emerged in the first 24 hours but are now being ignored.  Just not worth it for me to discuss them.

Russia, part II: Many of us worry about the Baltics and what seems inevitable...a move by Putin on one or two of them, Latvia or Lithuania.

Regarding the former, Jeffrey Gedmin, writing in The Weekly Standard, had the following:

“Latvia has a Russia problem, at home and abroad. Two-thirds of ethnic Latvians see Russia as a threat, and the greatest fear is Putin’s influence through the back door of Harmony (Ed. a leading opposition party that seeks to represent the country’s Russian-speaking population) and the country’s large ethnic Russian population. A majority of ethnic Russians may be fence sitters...convinced there are two sides to the story and plenty of blame to share among America, NATO, and Russia for current tensions.  That’s hardly good news.  But serious trouble may be brewing.  FSB (the renamed KGB) presence is increasing, as it has been throughout the Baltics the last several years.  Russian money is flowing into businesses and organized crime, into the pockets of politicians and the media.  And Moscow never misses an opportunity to criticize the Latvian government for alleged human rights violations of ethnic Russians. Latvian officials estimate that as many as 5-8 percent of the country’s Russians are now radicalized. Viktor Gushchin, an ethnic Russian historian, calls Latvia a ‘xenophobic and Russophobic state built on Nazi principles.’  Such rhetoric sounds eerily similar to the language Moscow used in justifying its intervention in Ukraine.”

China: U.S. authorities have concluded that three state-owned Chinese companies benefited from trade secrets stolen in a Chinese military hack on U.S. companies.  The companies are Chinalco, the biggest aluminum company in China, Baosteel, a large steelmaker, and SNPTC, a nuclear power company.

The Obama administration has threatened sanctions on companies involved in such hacks, but to include them in sanctions would clearly represent an escalation given their importance to the Chinese economy, vs. the 2014 indictments of five People’s Liberation Army officers involved in cyberattacks. 

The U.S. victims named in the PLA hack were Westinghouse Electric, U.S. subsidiaries of SolarWorld, US Steel, Allegheny Technologies and Alcoa. [Financial Times]

Separately, a senior U.S. official told the Financial Times that the U.S. is preparing to send warships close to China’s artificial islands in the South China Sea as a signal to Beijing that Washington does not recognize Chinese territorial claims over the area.

The ships are to sail inside the 12-nautical mile zones that China claims as territory around some of the islands it has been constructing in the Spratly chain.  The move is to take place within weeks.

And on a related matter, the South China Morning Post reported that China successfully launched its first Long March 6 rocket late last month with a multi-payload of 20 small satellites, according to the People’s Liberation Army’s mouthpiece, the PLA Daily. China thus is the third country with such technology, after Russia and the United States.

According to a specialist from Shanghai University, “The launch will send a message to the U.S. that the PLA now is capable of breaking its ballistic missile defense system in Asia, because...the multi-payload technology can also be used on the DF-41 [long-range nuclear missile].”

Now who wants a beer?

Meanwhile, on the health front, according to a study conducted by scientists from Oxford University, the Chinese Academy of Medical Sciences and the Chinese Center for Disease Control, a third of all men currently under the age of 20 in China will eventually die prematurely if they do not give up smoking.

The research, published in The Lancet medical journal, says two-thirds of men in China now start to smoke before 20.  Around half of those will die from the habit, the study concludes.

One in three cigarettes smoked globally is in China, but while more than half of Chinese men smoke, only 2.4% of Chinese women do.

A new Greenpeace study of 31 mainland cities, however, finds people are more likely to die from PM2.5 (fine particulates that can lodge deep inside a person’s lungs) than smoking, and the study didn’t even include the worst offending cities in Hebei province.

The official mortality rate of smoking – recorded in 2012 as about 70 in every 100,000 deaths, is at least less than the 100 out of every 100,000 deaths blamed on PM2.5.

Finally, you know how last week I referred to a disturbing piece from the New York Times on how the few aides surrounding President Xi Jinping refuse to make themselves available to their western counterparts, and are inaccessible to the press?

This week, Emily Smith of the New York Post wrote some of the following:

“Chinese President Xi Jinping was in no mood to grant favors at his White House state dinner – not even for Mark Zuckerberg’s unborn baby.

“Among the many tech and media titans who were invited, a few who came to kiss Xi’s ring at the Sept. 25 dinner hosted by President Obama and First Lady Michelle also asked for something in return.

“Zuckerberg spoke to Xi in Mandarin and asked if he would do him and wife Priscilla the honor of giving the baby she is expecting an honorary Chinese name.

“Xi’s terse reply: ‘No.’ While a spokesperson for Zuckerberg told us, ‘This was not correct,’ a second source insisted that Xi did decline to nominate a name for the Facebook founder’s unborn baby girl and politely added that it would be ‘too much responsibility.’”

Those Commies are such warm people, aren’t they?

Portugal: Ordinarily I would have put this up above in the Euro market segment but it fits in better here this week.  Prime Minister Pedro Passos Coelho’s party won the parliamentary election last weekend as his alliance took 38.3 percent of the vote, but it appears he’ll have to lead a minority center-right government in his second term.

Coelho, after four years of austerity from which Portugal has been emerging in fine shape, nonetheless has seen his popularity fall due to his tough policies.  His party controls only 104 seats in the 230-seat parliament compared with 136 previously. So now he’ll have to make major concessions to attract the opposition Socialists to form a coalition.

In terms of the tone set for the likes of Greece, Spain and Italy, this bears watching.

Random Musings

--Last week I said I didn’t have time to delve into much of President Obama’s Oct. 2 press conference, so here is a snippet that left me incredulous.

Q: Thank you, Mr. President.  You just said that you reject President Putin’s approach to Syria and his attacks on moderate opposition forces.  You said it was a recipe for disaster.  But what are you willing to do to stop President Putin and protect moderate opposition fighters?  Would you consider imposing sanctions against Russia?  Would you go so far as to equip moderate rebels with anti-aircraft weapons to protect them from Russian air attacks? And how do you respond to critics who say Putin is outsmarting you, that he took a measure of you in Ukraine and he felt he could get away with it?

The President: Yes, I’ve heard it all before.  I’ve got to say I’m always struck by the degree to which not just critics but I think people buy this narrative.

Let’s think about this.  So when I came into office seven and a half years ago [Ed. six and a half], America had precipitated the worst financial crisis in history, dragged the entire world into a massive recession.  We were involved in two wars with almost no coalition support.  [Ed. false] U.S. – world opinion about the United States was at a nadir – we were just barely above Russia at that time, and I think potentially slightly below China’s.  And we were shedding 800,000 jobs a month, and so on and so forth.

And today, we’re the strongest large advanced economy in the world – probably one of the few bright spots in the world economy. Our approval ratings have gone up.  We are more active on more international issues and forge international responses to everything from Ebola to countering ISIL.

---

“Our approval ratings (around the world) have gone up”?  What planet is Obama is living on?

Editorial / New York Post

“Just three years ago, President Obama famously ridiculed GOP opponent Mitt Romney’s statement that Russia remained America’s main geopolitical foe by taunting: ‘The 1980s are calling to ask for their foreign policy back.’

“Four years before that, Obama stood at Berlin’s Brandenburg Gate to declare that once he became president, all people would join him around a global campfire, hold  hands and put an end to the world’s evils and miseries.

“Well, seven years into Obama’s presidency, the promised worldwide Kumbaya is instead global chaos – caused in large measure by his willful retreat from America’s position of leadership.

“Washington’s traditional allies increasingly feel abandoned, its enemies emboldened. The United States isn’t even leading from behind – it’s cowering in weakness.

“And no one is taking better advantage of this than Vladimir Putin, now storming headlong into the yawning chasm of American retreat and reasserting Russia’s global influence and power – just as Mitt Romney said....

“Equally eager to open America’s arms to longtime adversaries, this president has begun new relationships with Iran (all but giving Tehran a direct path to a nuclear arsenal) and Cuba without any concessions in return – even on such basic issues as human rights....

“Obama chose Berlin as the place to call on all nations to join him in ‘tearing down the walls’ to ‘remake the world.’  But his soaring rhetoric was followed by indecision, hesitation and outright appeasement.

“America’s allies are calling, Mr. President. They want Ronald Reagan’s assertive foreign policy of the 1980s back.

“They want an America that leads – not retreats.”

--Hillary Clinton has long supported the 12-nation Trans-Pacific Partnership, including in her 2014 memoir, “Hard Choices.”  But Wednesday, she told PBS’ “NewsHour,” “As of today, I am not in favor of what I have learned about it,” as Hillary feels the heat from socialist Sen. Bernie Sanders, who has long opposed the trade deal, calling it “disastrous.”

The Democrats debate next Tuesday in Las Vegas and while Gov. Martin O’Malley polls only about one percent, he will hammer her on this flip-flop.

The thing is Clinton made her statement without having actually seen the details, but she said TPP failed to meet “the high bar” she had set.  You just know how ticked off the Obama administration must be.  On Nov. 17, 2012, in a speech in Singapore, Clinton praised the “far-reaching new trade agreement” that sought to “lower barriers, raise standards and drive long-term growth across the region.”

Two days earlier in Australia, she said the TPP “sets the gold standard in trade agreements to open, free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field.”  [James S. Robbins / USA TODAY]

Clinton and Obama also disagree on an issue I am fond of, the establishment of a no-fly zone in Syria.  Clinton as secretary of state had discussed one with allies and favors it today.  The position of the Obama administration has remained the same...no.  Or as White House press secretary Josh Earnest recently put it:

“It raises a whole set of logistical questions about how exactly – what would be enforced, what sort of resources would be used to actually protect that area.  So that’s why, at this point, we’ve indicated that that’s not something that we’re considering right now.”  [New York Times]

--Hillary’s email issues now include a second private technology company, which probably opens a new avenue for investigators interested in recovering emails deleted by her.

--Poll numbers....

According to a new Wall Street Journal/NBC News/Marist Pool, Donald Trump leads Ben Carson in Iowa, 24% to 19%, with Carly Fiorina far behind in third at 8% and Jeb Bush 7%.  [Trump had 29% a month earlier.]

In New Hampshire, Trump leads with 21%, ahead of Fiorina’s 16%, followed by Bush at 11%, and Marco Rubio and Carson with 10% each.  [Trump polled 28% a month earlier here.  Fiorina had been at just 6%.]  Distressingly for my man John Kasich, his support has declined from 12% to 6%.

On the Democratic side, Clinton leads Sanders 47-36 in Iowa, but if Biden is added to the race, it’s Clinton 33, Sanders 28, Biden 22.

In New Hampshire, Sanders still leads 48-39, but with Biden it’s 42% for Sanders, Hillary 28%, Biden 18%.

The latest Quinnipiac University Swing State Poll....registered Republicans.

Florida: Trump 28%, Carson 16%, Rubio 14%, Bush 12%, Fiorina 7%

Ohio: Trump 23% Carson 18%, Kasich 13%, Cruz 11%, Fiorina 10%, Rubio 7%, Bush 4%

Pennsylvania: Trump 23%, Carson 17%, Rubio 12%, Fiorina 8%

Registered Democrats...with Biden

Florida: Clinton 43%, Biden 19%, Sanders 19%

Ohio: Clinton 40%, Biden 21%, Sanders 19%

Pennsylvania: Clinton 36%, Biden 25%, Sanders 19%.

But in general election matchups, Biden defeats Carson 45-42 in Florida; loses to Carson 46-42 in Ohio; and Carson wins in Pennsylvania 47-42.

Biden defeats Trump 52-38 in Florida, 49-38 in Ohio, and 50-40 in Pennsylvania; whereas Clinton only defeats Trump by one to five points in the three.

So further ammunition for Biden supporters as he gathers with family this weekend to decide.

--George F. Will / Washington Post

“As the IRS cover-up of its and (Lois Lerner’s) malfeasance continues, the Republicans’ new House leaders should exercise (its constitutional power): ‘The House...shall have the sole power of impeachment.’  The current IRS director, John Koskinen, has earned this attention.

“The Constitution’s framers, knowing that executive officers might not monitor themselves, provided the impeachment recourse to bolster the separation of powers. Federal officials can be impeached for dereliction of duty (as in Koskinen’s failure to disclose the disappearance of e-mails germane to a congressional investigation); for failure to comply (as in Koskinen’s noncompliance with a preservation order pertaining to an investigation); and for breach of trust (as in Koskinen’s refusal to testify accurately and keep promises made to Congress).

“Rep. Jason Chaffetz (R-Utah), chairman of the Oversight and Government Reform Committee, says the IRS has ‘lied to Congress’ and ‘destroyed documents under subpoena.’  He accuses Koskinen of ‘lies, obfuscation and deceit’: ‘He assured us he would comply with a congressional subpoena seeking Lois Lerner’s emails.  Not only did he fail to keep that promise, we later learned he did not look in earnest for the information.’....

“Even if, as Koskinenen says, he did not intentionally mislead Congress, he did not subsequently do his legal duty to correct the record in a timely manner. Even if he has not committed a crime such as perjury, he has a duty higher than merely avoiding criminality.

“If the House votes to impeach, the Senate trial will not produce a two-thirds majority needed for conviction: Democrats are not ingrates.  Impeachment would, however, test the mainstream media’s ability to continue ignoring this five-year-old scandal and would demonstrate to dissatisfied Republican voters that control of Congress can have gratifying consequences.”

--The Justice Department is preparing to release 6,000 drug offenders from federal prisons nationwide in an effort to reduce overcrowding and provide relief to those who received unduly harsh sentences over the past three decades.  About two-thirds of them will go to halfway houses and home confinement before being put on supervised release.  Foreign citizens being released will be immediately deported, officials told the Washington Post.

This action follows the recommendations of the U.S. Sentencing Commission – an independent agency that sets sentencing policies for federal crimes.  I have no problem with these efforts that eventually could result in 46,000 being granted early release, as long as they aren’t dealers.

--Peter Whoriskey / Washington Post

“U.S. dietary guidelines have long recommended that people steer clear of whole milk, and for decades, Americans have obeyed.  Whole milk sales shrunk. It was banned from school lunch programs.  Purchases of low-fat dairy climbed.

“ ‘Replace whole milk and full-fat milk products with fat-free or low-fat choices,’ says the Dietary Guidelines for Americans, the federal government’s influential advice book, citing the role of dairy fat in heart disease.

“Whether this massive shift in eating habits has made anyone healthier is an open question among scientists, however.  In fact, research published in recent years indicates that the opposite might be true: millions might have been better off had they stuck with whole milk.

“Scientists who tallied diet and health records for several thousand patients over ten years found, for example, that contrary to the government advice, people who consumed more milk had lower incidence of heart disease....

“This year, as the ‘Dietary Guidelines for Americans’ undergoes one of its periodic updates, the federal bureaucrats writing them must confront what may be the most controversial and weighty question in all nutrition: does the consumption of so-called saturated fats – the ones characteristic of meat and dairy products – contribute to heart disease?”

It’s very complicated and Mr. Whoriskey’s piece is rather lengthy, but you’ll be hearing a lot more on this topic in the coming months.  The American Heart Association, for example, says the evidence from the dangers of saturated fats “arises from these two ideas: Consuming saturated fats raises levels of so-called ‘bad’ cholesterol in the blood, and that higher levels of ‘bad’ cholesterol, in turn, raises risks of heart disease.”

--A new analysis published in the journal Circulation finds that 30 minutes of exercise a day probably isn’t enough.  After researchers reviewed 12 studies involving over 370,000 men and women over a mean follow-up time of 15 years, those exercising 30 minutes had “modest reductions” in heart failure risk, but those who exercised twice and four times as much had “a substantial risk reduction” of 20 percent and 35 percent, respectively.

Wow, two hours of activity a day?  For me that would be a half-marathon, just jogging.  I don’t think so.  [Washington Post]

But don’t despair if you don’t have this kind of time.  30 minutes is still better than nothing, and other studies show short intense bursts of activity can be beneficial as well.

--Meanwhile, in Antarctica, a recent safety audit released by the National Science Foundation Office of the Inspector General said there is too much alcohol being consumed at U.S. research bases.

About 3,200 people participate yearly at three research stations in the land of the cold and the conclusion was there should be more breathalyzer tests because while workers are prohibited from drinking on the job, evidence says otherwise.  [Fox News]

These folks are setting a bad example for the penguins, for starters.

--WIRED magazine had a blurb on the best seafood, given that “pollution means supposedly clean water is actually a soup of plastic fragments.”

“Our favorite responsible option: mussels. These tasty bivalves are a consistently ethical choice.  They’re filter feeders, which means the farmed versions don’t use fish protein as food, and ‘they’ve been shown to actually help clean water,’ says Santi Roberts, science manager for the Monterey Bay Aquarium’s Seafood Watch program.”  Plus, “they don’t sequester as much mercury as other ocean critters.”

--The Trans-Pacific Partnership trade deal is supposed to have strong wildlife protections that go a long way toward ending illegal trade in certain animals and plants, such as rhino horns and ivory.

--The Nobel Peace Prize went to the Tunisian National Dialogue Quartet for its role in helping the country transition to democracy after the 2011 revolution.  German Chancellor Merkel and Pope Francis were among those cited, along with four Tunisian organizations that helped establish an inclusive constitutional system.

--California became the fifth state to allow so-called assisted suicide, following Oregon, Washington, Montana and Vermont.  Gov. Jerry Brown, a former Jesuit seminary student, signed a measure allowing physicians to prescribe lethal doses of drugs to terminally ill patients who want to hasten their deaths.

Brown noted, “In the end, I was left to reflect on what I would want in the face of my own life.  I do not know what I would do if I were dying in prolonged and excruciating pain. I am certain, however, that it would be a comfort to be able to consider the options afforded by this bill.  And I wouldn’t deny that right to others.”

I agree with Gov. Brown.

--My heart goes out to the people of South Carolina for the immense suffering they are going through with the historic rainfalls and flooding.  According to statistics compiled by the National Oceanic and Atmospheric Administration, a three-day, 1,000-year rainfall event – one that, on average, could be expected about every 1,000 years – would have meant 17.1 inches for Charleston County, which reported in some sections, such as Mount Pleasant, northeast of the city, 24 inches in three days.  Rainfall totals in much of the Myrtle Beach area were 20-24 inches.  Columbia received over 11 inches in two days.

South Carolina’s roads and bridges were a disaster waiting to happen before this event.  It’s going to take months and months to fully repair the damage and that will have a major impact on commerce.

It was all just so freakish that the rain kept training over a relatively narrow area, from the coast, thru Columbia, and on into Spartanburg/Greenville.  I’m heading to the Charleston area in December and very curious to see if the road to Kiawah is still the mess I envision it being.  Detour alternatives, for example, are severely limited.

--Finally, thoughts and prayers for the families of the 33 who died aboard the El Faro cargo ship in what appears to be such a senseless tragedy, even if it was a mechanical issue that may have prevented the ship from escaping Hurricane Joaquin’s path. The crew was comprised of 28 Americans and five Polish citizens.

---

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

God bless America.

---

Gold closed at $1156
Oil $49.63...highest weekly close since 7/17

Returns for the week 10/5-10/9

Dow Jones  +3.7%  [17084]
S&P 500  +3.3%  [2014]
S&P MidCap  +4.1%
Russell 2000  +4.6%
Nasdaq  +2.6%  [4830]

Returns for the period 1/1/15-10/9/15

Dow Jones  -4.1%
S&P 500  -2.1%
S&P MidCap  -0.7%
Russell 2000  -3.3%
Nasdaq  +2.0%

Bulls  30.2...up from 24.7 low...remember, contrarian indicator
Bears  34.4  [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore