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Week in Review

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10/17/2015

For the week 10/12-10/16

[Posted 11:30 PM ET, Friday]

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.

I also have to note, I was watching a local news story today on a bear that walks upright, kind of cool yet sad, because it has an injured paw, and someone launched a gofundme campaign to get it to a shelter in upstate New York...and they have raised $22,000 thus far!

Some of you have been reading this column for a long, long time.  There’s a reason. 

I know one thing.  When you’ve been on a vacation for a week, and you were allowed to be untethered from the Net while you were away, this is the one source you would turn to so that when you went back  into the office upon your return, you wouldn’t sound like a fool.

I’ve been doing that for you.  Gratis.

Edition 862

Washington and Wall Street

Stocks continued to rally for a third straight week to the best levels in two months, amid the growing feeling the Federal Reserve is not going to raise interest rates this year after all. Various officials, including Washington-based Fed governor Daniel Tarullo, have expressed concerns about the health of the U.S. economy.  Tarullo told CNBC on Tuesday that “right now my expectation is – given where I think the economy would go – I wouldn’t expect it would be appropriate to raise rates” this year.  Tarullo said the economy doesn’t have much momentum in a “globally disinflationary environment” and officials should seek “tangible evidence” of a pickup in inflation before lifting rates.

A few weeks ago, Chair Janet Yellen said in a speech that she expected the Fed to lift rates before year end and that inflation is expected to rise after the transitory effects of cheap oil and a strong dollar pass. 

Fed governor Lael Brainard on Monday said “the risks to the near-term outlook for inflation appear to be tilted to the downside, given the persistently low level of core inflation and the recent decline in longer-run inflation compensation, as well as the deflationary cross currents emanating from abroad.  Brainard offered no timetable, but called for “waiting to see if the risks to the outlook diminish” before acting.  [Jon Hilsenrath and Ben Leubsdorf / Wall Street Journal]

This week saw the release of producer and consumer price data for the month of September and it confirmed current Fed thinking.  The PPI was -0.5%, -0.3% ex-food and energy, while for the 12 months, the PPI was -1.1%, up 0.8% on the core.  Consumer prices fell 0.2%, but were up 0.2% on core, while year over year, the CPI is unchanged, up 1.9% for the stuff we consume.

Separately, seasonally adjusted retail sales for the month rose just 0.1%, -0.3% ex-autos. Also, September industrial production fell 0.2%, the eighth monthly decline in nine months.

So all in all, I understand where the Fed is coming from, today, it’s only that they missed the boat long ago on raising rates.  As you see with the data below, there are indeed real deflationary fears in both Europe and Asia.

What will be interesting to see is the split at the next two Fed Open Market Committee meetings end of the month and in mid-December.  At the last confab, 13 of the 17 said they expected the first rate hike by the end of the year.

The Atlanta Fed’s prescient GDPNow indicator, by the way, is still pegging third-quarter GDP at just 0.9%.  In keeping with this, the Wall Street Journal’s Erica E. Phillips had a piece titled, “At U.S. Ports, Exports Are Coming Up Empty.”  To wit:

“One of the fastest-growing U.S. exports right now is air.

“Shipments of empty containers out of U.S. ports are surging this year, highlighting the impact China’s economic slowdown is having on U.S. exporters.”

For example, Long Beach’s containerized exports were down 8.2% this year through September, while at the Port of Los Angeles, the country’s largest single container port, the number of empty outbound containers in August was 21% more than the year before.

Meanwhile, earnings season is here, with a heavy calendar the next two weeks in particular, while this past one was ‘bank week.’  I detail the bigger reports down below, but it’s the same old story as past quarters.  There is simply no revenue growth.

Wal-Mart’s warning on eps for fiscal 2016 sent that stock plunging 10%, its biggest one-day percentage loss since January 1988.  For the world’s largest retailer it’s certainly not a great sign and other retailers fell in sympathy.  Consumers on the other hand can look forward to falling prices as Wal-Mart launches a price war against Amazon.  [More below.]

Finally, while there is nothing to report on the House leadership scene, with Speaker John Boehner likely to remain in control until end of the year, the Treasury Department said the federal debt ceiling will need to be raised by Nov. 3rd, which could precipitate a mini-crisis, though I’m guessing the real one is still Dec. 11 when a slew of issues, including the ongoing funding of government after the latest short-term extension, will reach a critical deadline.

At least Treasury reported the budget deficit narrowed to $439bn, or 2.5 percent of GDP, in the 12 months to the end of September, the fiscal year, from $483bn the prior one.  Government receipts rose by 8 percent, while spending was up 5 percent.

But, as you all know, the increase in spending was largely a result of larger outlays for Social Security, Medicare and Medicaid, and spending on these programs is forecast to rise markedly in coming years.

Europe and Asia

A fairly light week on the data front across the pond.  Euro area inflation in September came in at -0.1% annualized, vs. September 2014’s 0.3% pace.  August’s reading was 0.1%.

Prices in Spain for the month fell 1.1% (ann.), and they were down 0.2% in Germany.  France and Italy saw increases of just 0.1% and 0.2%, respectively.  [In the U.K., their inflation rate was -0.1%.]

Industrial production for the eurozone fell 0.5% in August over July, up just 0.9% year-over-year, all the above according to Eurostat.

None of this is good, even as European Central Bank President Mario Draghi said the ECB’s quantitative-easing program is working better than expected.   Speaking in an interview with a Greek publication on Saturday, Draghi said, “(While) it presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around, levels that we consider sufficiently close to 2 percent,” that is largely because of a drop in oil prices.

Draghi is pegging his optimism on a small uptick in loans to small business, but the slowdown in the emerging markets poses risks, he acknowledges, and Draghi said the ECB is ready to expand its asset-purchase program if needed.

One more economic tidbit...a positive one.  The unemployment rate in the U.K. fell to 5.4% in August, the lowest since June 2008, as average weekly wages rose 3%, which is very good.

On the migration front, Hungary announced it will seal its border with Croatia, beginning midnight Friday, cutting off a major migrant route into the EU for the second time in a month. The decision followed the failure of an EU summit in Brussels to agree on a joint task force to protect the external borders of the EU’s Schengen passport-free zone.

Last month, Hungary closed its border with Serbia, slowing the numbers entering via this route to a trickle.

So that sent the refugees into Croatia, where they headed to the border with Hungary, but the Budapest government, which has seen 380,000 migrants cross its border this year, said it can’t handle any more.

The migrants will now be forced to head towards Slovenia (beautiful country, great beer, cold people) in the hope of being able to pass into Austria and Germany from there, but this will lead to thousands being potentially stranded as the weather is beginning to turn wintry in this part of the world.

At the summit, EU states backed an action plan with Turkey, where many of the migrants reaching Europe pass through.  The leaders agreed to speed up visa liberalization talks for Turks if Ankara stems the flow to “re-energize” Turkey’s accession dialogue for EU membership.

But Turkey first and foremost needs aid, immediately, and it asked for $3.4 billion, something German Chancellor Angela Merkel said the EU states are considering.  Merkel is traveling to Turkey this weekend.

Turkey needs funds for building new refugee camps, particularly on the border with Syria that Europe knows would help keep many of the migrants there and not hoofing it to Europe.

So do it!  Give Turkey the aid it deserves.  Ditto the U.S.  Cough it up.

I am not a fan of Turkey’s Erdogan, but as I explained back in 2012 ad nauseam, we had our opportunity with the Turks, who were crying for our assistance in the early days of the Syrian civil war and President Obama chose to ignore him to the severe, historical detriment of Syria, Iraq, Turkey, Jordan, Lebanon, Israel and Europe...let alone the United States as the terror threat multiplies at light speed.

If we had established a no-fly zone and safe havens on the Turkish-Syrian border, as Erdogan wanted Washington’s assistance on, so much of what we are facing today would have been nipped in the bud, including, quite possibly, the emergence of ISIS.

But I’m tired of pointing this out.  John McCain and Lindsey Graham in the U.S. Senate were doing the same at the time.  And now look.

According to a European Union agency, Frontex, which coordinates border control, 710,000 migrants have crossed into the EU this year.

Lastly, municipal elections were held last weekend in Vienna, which as I wrote last time is facing a severe migrant crisis of its own.  Austria’s far-right Freedom Party lost to the ruling Social Democrats, who have led the city since 1945, but the Freedom Party came closer than ever to wresting control, receiving 31% to the Social Democrats’ 39.5%, though while the 31% is the highest the Freedom Party ever received here, the margin was greater than expected.

Turning to China, Monday (Sunday night here) is the big moment as the government releases third-quarter GDP, which analysts have pegged at 6.6% to 6.8%, while the official target is “around 7%.”  The lowest of 26 economists surveyed by Bloomberg is 6.4%.  We will also receive retail sales and investment data for the quarter next week

China released inflation data for the month of September and it was not good.  Producer, or factory gate, prices fell a whopping 5.9% year-over-year, the same rate as August, which is the worst since 2009, with September being the 43rd consecutive month of declines for the PPI.

Consumer prices were up an annualized 1.6%, according to the National Bureau of Statistics, with non-food prices up just 1.0%, well below the government’s 3.0% target.

Imports in September plunged 20.4% yoy, the 11th consecutive month of declines, while exports fell 3.7%; with both figures being somewhat better in yuan terms, but still poor.

Bottom line, especially with the factory gate data, there is still severe overcapacity in China, along with sluggish domestic demand.  More fiscal stimulus should be on the way.

There was some good news...according to the Automobile Manufacturers Association, September passenger car sales were up 3.3% year-over-year, due in part to the fact taxes on small cars were lowered.

Japan’s producer price index fell an annualized 3.9% in September, the fastest pace since Nov. 2009.

Street Bytes

--In finishing up a third straight week, the Dow Jones tacked on 0.8% to 17215, while the S&P 500 gained 0.9% and Nasdaq added 1.2%.

--U.S. Treasury Yields

6-mo. 0.07%  2-yr. 0.61%  10-yr. 2.03%  30-yr. 2.88%

--As noted above, shares in Wal-Mart fell 10% on Wednesday as management surprised investors by talking of a sharp drop in earnings next year and beyond, noting its prior pledge to raise wages and ongoing efforts to lift online sales.

The world’s largest retailer said profits could drop as much as 12% in fiscal 2017, which starts in February, owing largely to the wage hike.  For the first time the company specified it expected to spend an additional $1.2 billion on wages this fiscal year and another $1.5 billion in fiscal 2017.

CEO Doug McMillon said Wal-Mart is investing heavily in improving store efficiency and appearance before focusing on lower prices.  “You clean up your house before you invite people over,” he said.  [Especially the bathrooms, I would have added.  The other Saturday night, I was surprised very late by visitors, family, who needed to stay over and I was embarrassed said la sale de bains were rather messy, though they didn’t complain.]

Wal-Mart also said it was slowing down its store expansion plans and reducing capital-spending $1.4 billion next year over this year’s pace, though boosting its e-commerce infrastructure.

All in all, pretty miserable.

--Goldman Sachs’ profits fell 40 percent, missing the Street’s forecast, with CEO Lloyd Blankfein saying the investment bank had been wrongfooted by “challenging” conditions in emerging markets and “limited” client activity.  It’s the first time Goldman missed on the bottom line in four years.

Revenues at the key fixed-income, currencies and commodities (FICC) trading division continued to fall, off a full third, while overall revenues were $6.9 billion vs. $8.39bn a year ago.

Across the industry, FICC trading revenues have dropped in 17 of the past 22 quarters, “crimped by the U.S.’s Volcker rule – which prevents banks from trading independent of client demands or hedging requirements – and reduced market volumes.”  [Wall Street Journal]

--Citigroup beat Wall Street’s profit expectations, though revenue was in line with analysts’ forecasts and down vs. year ago levels.

CEO Michael Corbat, who has now been at the helm three years, said “Challenging environments have become the norm,” but Citi’s strategy of focusing on big cities and wealthy clients should allow it to weather any environment.

FICC revenue fell 16%, but stock trading revenue rose 31%.  Revenues at the key consumer bank fell 8%, with the biggest declines in Asia.

--Bank of America reported earnings that were better than expected, though revenues were down from a year earlier, sliding to $20.9 billion from $21.4bn.  FICC revenues fell 11% from a year earlier, though revenues rose 5% in the consumer banking business.

--JPMorgan Chase reported earnings that were a little below the Street’s expectations, with revenues falling 6.9% year-over-year.  FICC business was down 11%, but investment banking revenue rose 5%, and equity markets’ revenue was up 9%.

JPM continues to cut head count, reporting it shed 1,780 people to 235,700 in the last quarter.

--Jes Staley, who spent more than three decades at JPMorgan, is in line to become the new CEO at Barclays Plc.  The lender’s last American CEO, Robert Diamond, resigned just three years ago, and his replacement, British retail banker Antony Jenkins, was ousted in July.

--Streaming video darling Netflix saw its shares fall 9% the day after the company revealed weaker-than-expected U.S. subscriber growth. [And 2% more the following day, Friday.]  It also missed the Street’s earnings expectations, though sales rose 23% to $1.74bn, which was nonetheless short of projections as well.

The domestic subscriber count increased only 881,000, while international streaming subscribers rose 2.74 million. Analysts had expected net domestic additions of 1.19m, and international of 2.46m.

The company’s forecast on current quarter net domestic additions also falls short compared to estimates, though international is above.

At the same time, the very last line of the shareholder letter said: “We are likely to raise additional capital next year to fund our continued content investments,” which means don’t expect meaningful profits any time soon.

--Twitter quantified rumored job cuts, 336, or 8% of its workforce as CEO Jack Dorsey sought to fashion a “nimbler” team.

The company also hired Silicon Valley veteran Omid Kordestani as its new executive chairman, despite the fact he has tweeted just eight times in his 5 ½ years on Twitter, which I find kind of amusing. Kordestani was last at Google.

Separately, former Microsoft CEO Steve Ballmer said he had accumulated a 4% stake in Twitter.

--Europe’s largest software company, SAP, reported new cloud bookings, which it calls “the key measure for SAP’s sales success in the cloud,” increased by 102 percent last quarter, as SAP released preliminary results...full ones to come this Tuesday.

--In reporting earnings that were 48% below the equivalent period of 2014, the world’s largest oil services company, Schlumberger, warned the outlook for the industry was “increasingly challenging,” with the CEO adding the business environment in the third quarter had continued to deteriorate.

North American operations have seen a 47% drop in revenues since last year, while revenues in the rest of the world fell 27%.

And then the company announced plans to cut 20,000 jobs – about 15% of its workforce.

--Meanwhile, the International Energy Agency reported world oil supply held steady near 96.6m b/d in September as a drop in output from the U.S. and other producers outside of OPEC, was offset by increasing output from the cartel itself.

The IEA said, “High-cost supply – primarily non-OPEC – is being forced out.  Supply in the U.S. – which had been the motor of growth – is already sinking swiftly.”

U.S. year over year gains have eased to just 300,000 b/d from 1.6m b/d in early 2015.  That’s a slowdown, sports fans.  And that, unfortunately, leads to a ton of layoffs.

The IEA said a marked slowdown in demand growth next year, together with an anticipated increase in Iranian oil after sanctions are lifted, “are likely to keep the market oversupplied through 2016.”

OPEC, in its monthly oil market report, also steeply revised lower its estimates for output from non-OPEC countries – led by the U.S. 

--The takeover of SABMiller by AB InBev is on, a $104.2 billion merger that would be the fourth-largest in history, according to Dealogic.  The agreement would give AB InBev a dominant presence on every major continent and make it the world’s largest brewer with an estimated market share of 28% after divestitures, or nearly three times the size of its closest competitor, Heineken NV, according to beer industry tracker Plato Logic.  [Tripp Mickle / Wall Street Journal]

It is going to take a while to get all the necessary regulatory approvals, however, and the existing trends in the industry will continue, with beer consumption in developed markets expected to decline this year for the first time in 30 years, according to Plato Logic.  The growth is coming from Africa, where volumes are expected to rise by 2.5%.

Africa is a stronghold for SABMiller, with AB InBev CEO Carlos Brito saying it would be a “critical driver of future growth for the combined company.”

AB InBev has a 45% market share in the U.S. and it will have to sell SABMiller’s stake in MillerCoors LLC, a joint venture with Molson Coors Brewing Co.  There are other brands/joint ventures that will have to be sold off as well.

--Dell and EMC agreed to terms on their merger, the largest ever takeover in the technology sector at $65 billion that adds data storage to a business Michael Dell has been trying to expand beyond PCs.  Should the deal go through, Mr. Dell will run the combined business as chief executive and chairman.

--Intel Corp. said third-quarter earnings fell 6.3% with the continuing slowdown in demand for PCs, which remains the company’s biggest business.  Revenue in the client computing group, which includes PCs, fell 7.5%, while PC chip shipments declined 19%.  Other divisions such as the data center group exhibited solid growth.  Overall revenue decreased 0.6% from a year earlier.

--Delta Air Lines once again beat the Street, however, third quarter revenues fell 1% vs. the same period a year ago.  Net income jumped to $1.31 billion from $357 million.  Operating margins grew five points to 21% as Delta, like the other airlines, continues to benefit from the 50% drop in oil prices since last summer. Specifically for Delta, fuel expenses dropped 40% during Q3.

Delta did forecast a decline of 2.5-4.5 percent in the current quarter in terms of passenger unit revenue.

--Wynn Resorts Ltd. Chairman and CEO Steve Wynn was harshly critical of the Chinese government as he prepares to open a $4.1 billion resort in Macau next March.  In a conference call with analysts, Wynn said, “None of us are really clear on what our environment is going to be like going forward, and it makes planning and adjusting almost a mystical process,” he said, alluding to issues that are severely hampering Wynn’s efforts to hire and train workers as, for example, they haven’t been told how many gaming tables they’ll be allowed to have.

Beijing’s crackdown on corruption has led to gambling revenues in Macau plummeting 33% in September, the 16th month of decline.

But high-roller play in Las Vegas, by the way, is down as much as 50%, according to Wynn Resorts.

--General Motors Co. said its world-wide sales fell 3.1% in the third quarter.  Sales in North America rose 5.2% and 1.1% in Europe.  But they plunged 31% in South America and in GM’s Asia-Pacific, Africa and Middle East business unit, were off 10%, with the China unit posting a 4.2% decline.

--Volkswagen was ordered to recall 2.4 million cars in Germany by the country’s automotive watchdog as a result of the diesel emissions scandal; rejecting VW’s proposal that car owners could voluntarily bring their cars in for repair.  Meanwhile, Italian police raided VW offices in Verona and Lamborghini offices in Bologna.  Reports suggest Italian prosecutors were investigating alleged commercial fraud.

Investors received their first look on Friday at how VW’s woes impacted sales in the month of September and the automaker said global sales dipped 4 percent from the same month in 2014.

Sales in Western Europe, however, accelerated by 4.2 percent, and North America sales rose 1.9 percent.

The admission of cheating against the company in the U.S. came in the middle of the month, so October will be more of a true reflection of the state of VW.

--Shares in Burberry Group PLC fell sharply after the British fashion giant reported same-store sales growth of just 1% in the quarter, vs. 10% in the year ago period. The company is blaming reduced spending from Chinese consumers, both those traveling abroad as well as in the mainland and Hong Kong markets.  It was a similar story at Hugo Boss, which also blamed a slump in Asia on an earnings miss.

-Fortress Investment Group announced it was shutting down its beleaguered flagship macro fund run by Michael Novogratz after two down years, including a 17% decline for 2015. The fund has about $1.6 billion, which will be returned to investors, down from $8 billion before the financial crash of 2008.

Fortress, which has about $72 billion in assets under management, was the first U.S. alternative asset firm to go public in February of 2007.  Founders such as Novogratz benefited handsomely at the time, and he’ll do just fine on the back end as well, it would appear.

But Novogratz made a particularly bad call on China early this year, saying at a hedge fund conference that Chinese stocks “are going to enter one of the greatest bull markets ever seen...because the Chinese have gambling in their blood,” he said. A month later, the China market began its epic collapse.

[The Wall Street Journal is reporting Friday night, as I go to post, that Novogratz also lost big in Brazil, while there was a trade against the Swiss franc, placed earlier in the year but not by him, that cost the fund $150 million.]

I have a friend at Fortress who has been very kind to me and he had nothing to do with the above debacle.

--For the third time this decade, Social Security recipients won’t be receiving a cost-of-living adjustment.  The official calculation was down 0.4% from last year’s level in the third quarter, according to the Labor Department.  Over the past 40 years, the average benefit increase has been 4.1%.  The average monthly Social Security check is $1,224.

--Meanwhile, unless Congress and the Obama administration find compromise, about 30% of the roughly 52 million people enrolled in Medicare Part B, which covers outpatient care such as doctor’s visits, will see a 52% rise in their premiums for 2016.

--Various airlines such as Qantas and Singapore Air have begun talking of resurrecting long-haul flights, like in the case of the latter, Singapore to Newark, N.J., non-stop, 19 hours. Qantas is talking of a flight from Australia to Britain in two years, thanks to the new Boeing 787-9 Dreamliner, as well as the Airbus A350 aircraft that make such flights economical again. 

Qantas currently flies the longest route in the world, Sydney to Dallas-Fort Worth, a flight taking about 14 hours.

--A leading airline executive had a heart attack on Thursday and while it’s in the headlines, without details, or the impact on the company’s future management structure, I won’t comment.

--Angus Deaton, a British economist who currently hangs his hat at Princeton, is this year’s winner of the Nobel Prize in economics.  Deaton has published landmark findings on topics such as consumption, inequality and foreign aid.  Regarding this last area, he told the Financial Times this week  that excessive foreign aid can have unintended consequences, in that it can lead to corruption and create social tensions between the ruling elites and the public.

--Last week I wrote of the economic impact of the smoky haze in Southeast Asia.  The Indonesia-based Center for International Forestry Research now estimates the cost for the region at about $14 billion, compared with $9 billion for 1997’s similar event.

--Steve Jobs fans should check out my “Wall Street History” link.   His famous 2005 commencement speech at Stanford.

--With the heavy rains and mudslides in southern California at week’s end, we’re seeing the early rounds of what is now being called a massive El Nino (though this particular system is supposedly unrelated).  Bill Patzert, climatologist for NASA’s Jet Propulsion Laboratory, told the Los Angeles Times:

“There’s no longer a possibility that El Nino wimps out at this point. It’s too big to fail.  And the winter over North America is definitely not going to be normal.”

The National Weather Service’s Climate Prediction Center recently raised the odds of California receiving a wetter-than-average winter at more than 60%.  Just as importantly, the precipitation is expected to be statewide, including in the critical Sierra Nevada range.

--Danny Meyer, one of New York’s best known restaurant entrepreneurs, is ending tipping at his New York eateries. 

The drawback of tipping, says Mr. Meyer, is that plenty of employees at restaurants, including cooks and dishwashers, don’t enjoy the same perk, so prices will go up but Meyer claims “we will now have the ability to compensate all of our employees equitably, competitively, and professionally.”

Needless to say, this has waiters/waitresses across the region in a tizzy.  It’s going to be very interesting to see how this plays out.

--Americans are expected to spend $6.9 billion on Halloween this year, according to the National Retail Federation.  I’m sure my area is no different than yours and it’s amazing how elaborate some of the decorations have become in just the last few years.

But the level of spending is actually down from $8 billion in 2012, though still more than double a decade ago.

As one retail expert told the Los Angeles Times’ James F. Peltz, “Millennials are really into group costumes and activities.”  The success of the series “The Walking Dead” certainly doesn’t hurt either.

--Playboy said it would stop showing nudity starting with the March 2016 issue, marking the first time its “Playmates” won’t be naked since Hugh Hefner introduced the magazine in 1953.  It’s all about the easy availability of porn online.

“Times change,” Playboy Enterprises Inc., said in a statement.  The magazine, which has seen circulation drop to about 800,000 from a peak of 5.5 million, “will continue to publish sexy, seductive pictorials of the world’s most beautiful women,” only it will leave more to the imagination.  Now discuss amongst yourselves.  I am prohibited by the International Web Site Association from doing so. 

Note: Always look for the IWSA label for your assurance of Web quality.

Foreign Affairs

Iran/Syria/ISIS/Russia/Iraq: Among the developments the past week, thousands of Iranian troops have arrived in Syria to join the regime’s military forces and Hizbullah allies to launch ground attacks against insurgents in Aleppo, according to senior officials in the region.

Control of Aleppo city and the surrounding province in the area near the Turkish border is divided among the Syrian government, insurgents fighting Bashar al-Assad and ISIS, which controls some rural areas near Aleppo (where it has been making significant gains despite the air attacks).

Russia’s air campaign has bolstered Assad in a big way, while the U.S. struggles to adjust its support for Assad’s opponents.

But Russian President Vladimir Putin blasted the U.S. and others on Tuesday for their lack of cooperation with the Russian military campaign.  Speaking at a conference in Moscow, Putin said: “Recently, we have offered the Americans: ‘Give us objects that we shouldn’t target.’ Again, no answer,” he said. “It seems to me that some of our partners have mush for brains.”

Washington responds it’s a trust issue.  For starters, Russia could use the coordinates the U.S. would give them to target the groups the Americans are supporting.

Tuesday, Russia announced it had launched 88 airstrikes against ISIS, hitting 86 targets, but it labels all targets ISIL-related when in actuality it appears the bulk of its attacks are still against the groups threatening the regime and the Alawite stronghold of Latakia.

Separately, in an audio message, IS urged Muslims to launch a “holy war” against both Americans and Russians.

“Islamic youth everywhere, ignite jihad against the Russians and the Americans in their crusaders’ war against Muslims,” said Abu Mohammad al-Adnani, ISIL spokesman.

The Financial Times had an extensive piece on ISIL’s oil operation.

“Estimates by local traders and engineers put crude production in ISIS-held territory at about 34,000-40,000 bpd.  The oil is sold at the wellhead for between $20 and $45 a barrel, earning the militants an average of $1.5m a day.”

Iraq’s air force claimed it hit a convoy of Islamic State leader Abu Bakr al-Baghdadi, but there has been zero confirmation of this, nor his fate for months now.  A Twitter account that publishes statements from ISIS said “rumors” that the strike had hit him were false.

Finally, the Pentagon now estimates the ISIL death toll at 20,000, up from a reported 15,000 in July.

But despite the significant number of casualties and the airstrikes’ erosion of morale among ISIS fighters, the group continues to draw new fighters to Iraq and Syria.

Daniel Z. Katz / Wall Street Journal

“While all eyes are on Vladimir Putin’s machinations in Syria, deploying Russian fighters and troops, a potentially more dangerous Moscow effort in Iran is picking up steam. Media outlets are reporting that Russian S-300 surface-to-air missile systems may be delivered before the end of the year.

“The S-300 is considered ‘defensive’ and as such is not subject to United Nations sanctions.  Each system fielded creates a formidable shield against air attacks over a large area.  It operates as a battalion, at the center of which is a search radar that scans out to 180 miles and tracks up to 100 aircraft.  All components of the S-300 are mounted on trucks and mobile in minutes.

“Surrounding it are six ‘batteries,’ each composed of a guidance radar and up to eight launchers holding four missiles with a range of 90 miles.  Each battery can fire on six targets at the same time, allowing a full battalion to engage 36 aircraft simultaneously....

“What does this mean if Iran violates its nuclear agreement and the U.S. or its allies are forced to strike its nuclear facilities?  America has ways to defeat the system.  Its arsenal boasts 20 stealth bombers, over a hundred F-22 stealth fighters and a growing number of stealthy F-35s – all of which would be difficult for the S-300 to detect.  In addition, the U.S. operates over 100 jammer aircraft and possesses many missiles that can be fired from outside the range of the S-300.

“Still, the S-300 will be by far the most capable air-defense system fielded by Tehran and its deployment will increase the chances the U.S. will lose aircraft and pilots in any conflict.”

The S-300 doesn’t present an insurmountable barrier. “The Israelis are known experts in electronic warfare and their military authorities have stated that they can counter the system.

“The development is most threatening for America’s allies in the Gulf Cooperation Council, including Saudi Arabia, Kuwait and the United Arab Emirates....(None) of these air forces operate stealthy aircraft, and none have executed the complex mission of dismantling a modern air-defense network.

“The S-300 is not a ‘game-changer’ but is a significant step forward for Iran’s defenses and a likely harbinger of future improvements."

Iran, part II: On the nuclear deal front, Tehran has limited its cooperation with the United Nations’ International Atomic Energy Agency as the latter looks into Iran’s past nuclear work, a precondition for sanctions being removed.  So at the last minute, Iran has apparently stepped up cooperation as the probe was to conclude yesterday, with the IAEA then compiling a report to be released in mid-December that will then determine if the agreement can proceed.

Western diplomats have been pessimistic, saying Iran had tightly restricted access to key people and places, such as Parchin.

Meanwhile, on Wednesday, Iran’s powerful Guardian Council of clerics approved the nuclear pact, leaving final approval to Supreme Leader Ayatollah Ali Khamenei, with Iran’s parliament having also given its okay.  Next week the agreement will be formally “adopted” by Iran and the P5+1, which triggers action on the part of Iran to dismantle key parts of its nuclear infrastructure, though sanctions wouldn’t be lifted pending the U.N.’s report and confirmation Iran is complying.  Iran itself has been talking January for the lifting of sanctions.

But Britain, France, Germany, China and Russia have already been lifting various sanctions. Britain, for example, “has lifted the ban on 22 Iranian banks and companies blacklisted because of alleged involvement in deals linked to the nuclear issue,” as noted in a recent op-ed in the New York Post by Amir Taheri.

The sanctions regime is collapsing right before our very eyes.  Add it all up, as Taheri concludes, and “The Obama deal may end up as the biggest diplomatic scam in recent history.”

Then there’s the issue of Iran’s recent test of a long-range, surface-to-surface ballistic missile, which the United States is saying violated U.N. Security Council resolutions, though the White House insists this doesn’t impact implementation of the nuclear deal.

Finally, Iran’s judiciary on Monday announced that Jason Rezaian, the Washington Post’s Tehran correspondent, has been convicted.  He was on trial for “espionage.”

Rezaian and his wife, Yeganeh Salehi, a journalist, were arrested in July 2014.  Salehi was later released, but the regime has held Rezaian all this time in “a black hole,” as his brother, Ali, told the Wall Street Journal.  Rezaian, a U.S. citizen, has been denied the most basic of rights, including phone calls.

Editorial / Washington Post

“From its beginning, the case of Jason Rezaian has been a showcase for the opacity, the brazen disregard for the rule of law and, ultimately, the sheer cruelty of Iran’s Islamic regime. Its latest twist is no different.  On Sunday, Iranian state television reported that the 39-year-old Post reporter had been convicted in a trial that ended two months ago.  Convicted of what?  Punished with what sentence?  We don’t know: The court’s spokesman told state television he didn’t have ‘the verdict’s details.’  Nor, it appears, did Mr. Rezaian’s lawyer, who told the New York Times she had not been informed of the verdict and did not know whether Mr. Rezaian himself knew it....

“Iran has done extraordinary injury to Mr. Rezaian over the past 14 months.  But the longer it holds him, the more damage it does to its international standing.”

Israel: As the level of violence between Israelis and Palestinians grows, with fears of a new intifada, Israel has been sealing off violent Arab neighborhoods in east Jerusalem in an effort to quell the ongoing wave of terrorist attacks.  Prime Minister Benjamin Netanyahu told a special Knesset session on Tuesday that Israel is engaged in a “long struggle against terrorism” and that “a series of aggressive steps” are in order against those inciting violence.

“Israel will settle scores with those who are killing and those who are encouraging them,” Netanyahu said.  “Anyone who raises their hand against us will have their hand cut off.”

Netanyahu also called on Palestinian Authority President Mahmoud Abbas to “stop lying, and stop inciting.”  [Jerusalem Post]

Caroline B. Glick / Jerusalem Post

“All the Palestinian terrorist attacks that have been carried out in recent weeks share one common feature. All the terrorists believe that by attacking Jews they are protecting the Temple Mount from destruction.

“And why shouldn’t they believe this obscenity?  Everywhere they go, every time they turn on their televisions, read the paper, go to school or the mosque they are told that the Jews are destroying al-Aksa Mosque.  Al-Aksa, they are told, is in danger.  They must take up arms to defend it from the Jews, whatever the cost.

“One man stands at the center of this blood libel. The man who propagates this murderous lie and orchestrates the death and mayhem that is its bloody harvest is none other than the West’s favorite Palestinian moderate: PLO chief and Palestinian Authority Chairman Mahmoud Abbas.

“On September 16 Abbas gave a speech. It was broadcast on PA television and posted on his Facebook page. In it, he incited the Palestinians to kill Jews. In his words, ‘Al-Aksa Mosque is ours.

“ ‘They [the Jews] have no right to desecrate it with their filthy feet.  We won’t allow them to do so and we will do everything in our power to defend Jerusalem.’

“Abbas added, ‘We bless every drop of blood spilled for Jerusalem. This is clean and pure blood, blood that was spilled for God.  It is Allah’s will that every martyr will go to heaven and every wounded [terrorist] will receive God’s reward.’”

Unbelievably despicable.

Editorial / New York Post

“Does Team Obama want more Palestinian attacks on Israelis?  Secretary of State John Kerry sure gives that impression.

“Wednesday saw more bloodletting: An Arab stabbed a 70-year-old woman as she boarded a Jerusalem bus. Another pulled a knife on cops, who foiled the attack.

“That follows weeks of violence that’s left eight innocent Israelis dead and more injured, mostly in Jerusalem.  On Wednesday, Israel began deploying hundreds of troops to help thwart the violence.

“What’s fueled the terror is no secret: Palestinian groups have spread inflammatory lies claiming Israel is set to take over the Temple Mount, a site holy to both Muslims and Jews.

“Palestinian Authority chief Mahmoud Abbas called for blocking Israelis from ‘desecrating’ the site ‘with their filthy feet.’  He praised Muslims for harassing Jews there....

“Videos of Israeli forces fighting and sometimes killing the attackers have added gasoline to the fire.

“Israel, of course, has no intention of ‘taking over’ the Temple Mount. And if Washington wants to help quell the violence, it has an obvious response: Tell Abbas & Co. to cut it out – or face consequences.  Including, perhaps, a cutoff in U.S. funding.

“Alas, what did Kerry do? First he warned Israel to maintain the site’s status quo, lending credence to the lies.

“Then, on Tuesday, he actually suggested it was Israel’s fault: ‘There has been a massive increase in settlements over the course of the last years,’ he said.  ‘And there’s an increase in the violence because there’s this frustration that’s growing.’

“Ironically, on the day Kerry spoke, the left-wing newspaper Haaretz reported there’s been less settlement-building since Israeli Prime Minister Benjamin Netanyahu took office than under any of his predecessors since the Palestinian Authority’s birth in 1995.

“Meanwhile, the official U.S. position is that both sides must restore calm.  Both sides?

“Team Obama has long wanted Netanyahu gone.  But winking at Palestinian incitement – which, let’s be honest, isn’t all that far from OK’ing more bloodshed – is an appalling way to go about it.”

Personally, I’m sick of the whole “moral equivalency” angle being put forward, for years, when it comes to this conflict.  And I’m sick of how the Obama administration has treated Israel.

Next week my full thoughts, that I’ve been holding back on...on Israel, the Jews, and my friends. 

Afghanistan: President Obama had to concede his vow to bring troops home from Afghanistan before the end of his presidency would not be achieved, saying on Thursday that close to 10,000 will remain for the foreseeable future at a cost of as much as $15 billion a year.

Afghanistan’s new president, Ashraf Ghani, has also been eager to maintain a large U.S. presence.

Editorial / Wall Street Journal

“If there is a single element of consistency in President Obama’s foreign policy it is his desire to end and avoid U.S. military engagements. In 2011 he withdrew the final U.S. troops from Iraq.  He had planned to do the same in Afghanistan, but on Thursday the President hit the pause button. For now, 9,800 American boots will remain on Afghan soil.

“Mr. Obama is to be commended for changing his mind. He has been building a reputation for being impervious to counterargument, and here he listened to his generals.

“Senior officers earlier recommended that the U.S. keep up to 20,000 troops in Afghanistan, warning that a lesser number would put the fledgling Afghan army at risk from the Taliban.  Those warnings became reality last month when the Taliban overran Kunduz, a major city in northern Afghanistan.  With U.S. air support, the Afghans recaptured Kunduz, but Islamist fighters still threaten elsewhere....

“It is possible that what drove Mr. Obama’s decision was concern that an Afghanistan overrun by terrorists, as ISIS had done in western Iraq, would leave his foreign-policy reputation in tatters.  In a remarkably weary announcement Thursday, Mr. Obama said, ‘As you are all well aware, I do not support the idea of endless war.’

“The irony is that Mr. Obama is likely to bequeath ‘endless war’ in the Middle East and Afghanistan to his successor.  The central issue now is whether the Administration will do enough militarily in Afghanistan to ensure that the war inherited by the next President isn’t worse than it is today....

“The U.S. continues to have some 29,000 troops in South Korea, 62 years after this war with the North ended.  Their presence has kept the peace and allowed East Asia to flourish.  If instead Mr. Obama gives the Afghans inadequate support, ‘endless war’ will run deep into the next American presidency.”

Turkey: A horrific attack on a peace rally in the capital of Ankara killed at least 97 last Saturday in the nation’s worst terror attack, with Turkish officials saying the two suicide bombers responsible had fought in Syria and had connections to Islamic State.  By week’s end, I had not seen any formal claim of responsibility by ISIS for what is Turkey’s 9/11.

President Recep Tayyip Erdogan, facing a contentious election on November 1 (in essence a re-vote of a June election that led to a hung parliament), acknowledged security lapses in an attack that sparked massive public outrage.

Turkey, a NATO member that shares borders with Syria, Iraq and Iran, is convulsed in turmoil these days, whether it is Russian violations of its airspace, the ISIS presence, the ongoing battle with Kurdish separatists, the migrant crisis that has overwhelmed the government, and various economic issues that all add up to tremendous instability.

The demonstrators that were attacked were representative of the many issues faced as the crowd, mobilized by a coalition of Turkish trade unions, was comprised of Kurds and Leftist Turkish activists.

Saudi Arabia: The new toll in the deadliest tragedy ever to strike the annual haj pilgrimage rose on Wednesday to at least 1,621 people killed, with hundreds still missing! The Associated Press count is more than double Saudi Arabia’s official tally of 769 killed and 934 injured in the September 24 disaster in Mina, a few miles from the holy city of Mecca.  Saudi officials have not updated their total since Sept. 26.

China: Beijing is reacting angrily to a planned U.S. naval mission to skirt artificial islands China has constructed in the South China Sea.  In the latest escalation of rhetoric from China, a senior Chinese naval officer on Thursday warned the U.S. that the PLA would deliver a ‘head-on blow’ to any foreign forces ‘violating’ China’s sovereignty.  Writing in a Communist party mouthpiece, the Global Times, Rear Admiral Yang Yi said: “Safeguarding maritime rights calls for force and power.” [Financial Times]

Last week a senior U.S. official told the Financial Times that the U.S. navy would soon start “freedom of navigation activities” – sailing or flying within 12 nautical miles of the islands to challenge China’s claims.

30 percent of global trade passes through the South China Sea.

North Korea: Gee, that was quite a military parade in Pyongyang last weekend to mark the 70th anniversary of the Workers’ Party. Chinese President Xi Jinping sent his congratulations, saying he hoped to make joint efforts with North Korea “to maintain, consolidate and develop the friendship” between the countries “so as to play a positive and constructive role in maintaining regional as well as world peace.” Xi sent a senior envoy, Liu Yunshan, the Communist Party’s fifth-ranked leader, according to the South China Morning Post.

But while it was expected North Korea was going to launch a missile in celebration, or possibly conduct a fourth nuclear weapons test, nothing as yet.

Russia/Ukraine: After 15 months, a Dutch-led investigation into the downing of Malaysia Airlines Flight MH17 concluded it was indeed a Russian-made missile that was responsible, a Buk surface-to-air missile fired from an area controlled by the “separatist rebels,” though the report doesn’t blame a specific culprit.

But the findings also concluded the Ukrainian government should have closed the airspace over the embattled east where the country’s armed forces were battling the separatists, though the head of Ukraine’s air-traffic control service rejected this argument, saying “no one could imagine that such powerful equipment such as a Buk could be used against civil aircraft.”  [Wall Street Journal]

Russia described the report as politically motivated.

Separately, S&P estimates the Russian economy will contract 3.6 percent this year, worse than a prior forecast of down 2.6 percent.  2016 growth has been revised down from 1.9 percent to 0.3 percent.  68 percent of Russia’s total export revenues come from oil and natural gas sales.

Cameroon/Chad/Nigeria: President Obama announced that U.S. armed forces have been deployed to Cameroon to help fight against Islamist militants Boko Haram. The force will be 300 strong and will conduct airborne intelligence, surveillance, and reconnaissance operations.

Canada: The big national election is Monday, with the centrist Liberal Party gaining ground in the final days amid voter fatigue with Stephen Harper’s Conservative government.

Liberal Party leader Justin Trudeau, the 43-year-old son of long-serving Prime Minister Pierre Trudeau, has managed to overcome the formidable obstacle that he is too inexperienced, with Harper constantly saying Trudeau is “not ready” to govern.

But this is a three-party race, with the third, the New Democratic Party, polling around 20% and the likely coalition partner of the Liberal Party should it emerge victorious.

Random Musings

--I was watching the first six innings of the Mets-Dodgers playoff game in a bar, Tuesday night, and one of the TVs had the Democratic debate on so I caught some snippets in the closed-caption coverage, and then caught the highlights after the Mets game was over, so bottom line, I feel like I got the gist of it.  Yes, as pundits on both sides of the aisle have concluded, Hillary avoided a major gaffe, though her Keystone Pipeline decision explanation, “I never took a position on Keystone until I took a position on Keystone,” will be highlighted in every Republican campaign spot next summer and fall.

It otherwise seems as if her solid performance has blunted any real momentum there was for a Biden candidacy.  Clinton’s campaign chairman, John Podesta, said it was time for the vice president to reach a decision.

“She put in a tremendous debate performance tonight,” Podesta told the Washington Post, “and I think that she occupied a space in the party that showed that she was going to fight for this nomination, take the fight to the Republicans, put forward a program that people could really grab onto, believe in, and she was going to fight for the people she’s been fighting for all her life. If he wants to get in and challenge her, then he needs to do that, and that’s his right.”

The Post’s Dan Balz reports that the death of Joe Biden’s son, Beau, late last spring “shattered the entire Biden family.  Individually and collectively, they have been struggling to move forward.  Those who know the vice president say some days are better than others for him, as they are for various other family members.”

Balz adds: “But as with the issue of his family’s emotional readiness, there has never been real clarity on whether Clinton is truly damaged or temporarily weakened.  Democrats tracking Biden’s deliberations have predicted that he would not know the answer to that question by the time he has to make a final decision.  That’s all the more true after Tuesday’s debate....

“Biden has been a sympathetic figure through these weeks of deliberations, as a grieving father, as a working-class politician who speaks passionately for the middle class, as a politician equipped to serve as president.  His circumstances have earned him the time to deliberate, but in recent days, the patience of those in his party has begun to wane.

“Clinton long has said he should have the space to make whatever decision he thinks best.  What she did on the debate stage Tuesday night sent another signal that he cannot ignore.”

Edward Luce / Financial Times

“The focus on policy differences, rather than personality, played to Hillary Clinton’s strengths.  She made the most of it.  It was probably her best two hours since launching her campaign in April. She also had some unexpected help.  When asked about Mrs. Clinton’s use of a private email server, Bernie Sanders, her only real competitor, dismissed its salience altogether.  ‘The American people are sick and tired of hearing about your damn emails,’ he said.  ‘Let’s talk about the real issues.’

“For the most part that is what happened. The contrast with the tone of the Republican debates was glaring.

“Yet the Las Vegas debate is unlikely to produce any big shifts in the Democratic field.  Mrs. Clinton’s feisty performance will reduce Joe Biden’s temptation to enter the fray.  His implicit case has been as an insurance policy to an imploding Mrs. Clinton.  That prospect receded on Tuesday....

“Mrs. Clinton’s other big advantage on Tuesday was the presence of three egregiously substandard second-tier candidates – Lincoln Chafee, the former governor of Rhode Island, Martin O’Malley, the former governor of Maryland, and Jim Webb, the former Virginia senator.

“In contrast to Mrs. Clinton, Mr. Chafee and Mr. Webb appeared to have done no debate preparation at all.   It would be a surprise if either were still on the podium at the next debate in December....

“Mr. O’Malley will probably still be standing at the next debate.  But his attacks on Mrs. Clinton’s character missed the mark.  His case for a ‘new leadership’ sounded a pale echo on Barack Obama’s 2008 campaign theme....

“Which leaves Mr. Sanders.  True to form, the socialist from Vermont sparked a lively debate on the case against ‘casino capitalism’ and for putting Wall Street executives on trial. Others, including Mrs. Clinton, followed his cue. He declined several chances to attack Mrs. Clinton’s record of shifting positions. He even sidestepped her decision last week to come out against the Trans Pacific Partnership, a trade deal she had championed when secretary of state.

“Mrs. Clinton can count herself lucky.  Mr. Sanders’ contribution was oddly apolitical.  The effect will be to leave the race very much as it is.  Mrs. Clinton is likely to remain the frontrunner.  Mr. Sanders will continue to present a serious threat, particularly in the early states of Iowa and New Hampshire. And Mr. Biden’s choice now looks more vexing than it did on Monday.”

James S. Robbins / USA TODAY

“Hillary Clinton is going to win the Democratic nomination because her major challengers are unwilling to attack her where she is most vulnerable – the character question.

“The email issue is a specter hanging over Hillary Clinton’s candidacy and was the 900-lb. gorilla on the debate stage going in....

“The moment of drama came when other candidates were given the opportunity to weigh in on the issue. A well-considered blow deftly struck could have changed the course of the race.  Bernie Sanders led, saying his comment ‘may not be great politics, but I think the secretary is right. The American people are sick and tired of hearing about your damn emails.’  Hillary cackled with delight, knowing she had just won the debate.”

John Podhoretz / New York Post

“Throughout her presidential candidacy, Hillary Rodham Clinton has always been good on paper and lousy in life – until last night. She clobbered her Democratic challengers and reduced surging rival Bernie Sanders into a handshaking supporting player who defended her on her emails.

“As of now, she’s the Harlem Globetrotters, while Bernie and the other guys are the Washington Generals – the team that exists simply to lose and to give the Globetrotters a fake rival to dunk on.

“To say she did what she needed to do isn’t sufficient.  She may have just put the primary away.”

Jennifer Rubin / Washington Post

“Clinton should be pleased that she had no significant errors and a few good moments. However, the debate made clear just how problematic her foreign policy record is.  Sanders has his finger on the pulse of the left-wing Democratic base.  He likely reinforced that appeal, which may be critical in traditionally anti-interventionist Iowa.  One sensed, however, that he will need much more to topple Clinton – even further damaging revelations or some major slip on her part.  He offers no olive branch to moderates in the party, which both limits his appeal and intensifies the affection of left-leaning true-believers

“For now the dynamic of the race remains the same: Clinton is not seriously threatened at this point in the campaign.  Unless Biden enters or more damaging information emerges, she is the clear favorite for the nomination.  Republicans would be happy to face her – and her baggage.  That said, they would be foolish to underestimate her. She can appear polished, knowledgeable and reasonable.  They will need a competent, plausible nominee to beat her.

“Finally, kudos to the CNN moderator Anderson Copper and his colleagues. The questions were crisp, substantive and aggressive.  Given the debate’s length and lack of real fireworks, the audience is likely to be small*.  And that suits front-runner Clinton just fine.”

*Actually, the audience averaged 15.3 million viewers, according to Nielsen, far more than expectations.  Fox News had 24 million for its Aug. 6 Republican debate and CNN drew 22.9 million for the Sept. 16 GOP food fight.

Charles Krauthammer / Washington Post

“I repeat: Unless she’s indicted, Hillary Clinton will win the Democratic nomination.  I wrote that six weeks ago, amid fevered dreams of a Clinton collapse and a Joe Biden rescue.  That those were a mirage is all the more obvious after Tuesday’s debate. The reason, then as now, is simple: Clinton has no competition.

“She’s up against three ciphers and one endearing, gesticulating, slightly unmoored old man.  If Biden was ever thinking of getting into the race, he’d be crazy to do so now.  It’s over.”

An online poll for NBC News by Survey Monkey showed Clinton won the debate 56-33 over Sanders.

--The major polls....

A CBS News national survey taken Oct. 4-8 has Donald Trump at 27%, followed by Ben Carson at 21%.  Then it was all the way back to Ted Cruz at 9%, Marco Rubio 8%, and Jeb Bush and Carly Fiorina 6%.

On the Democratic side, Hillary Clinton gets 46% to Bernie Sanders 27% and Joe Biden’s 16%.  If Biden doesn’t enter, Hillary leads Bernie 56-32.

A new Fox News national poll, released prior to Tuesday’s Democratic debate,  has Clinton leading with 45%, Sanders second at 25% and Joe Biden at 19%.

In hypothetical matchups, however, Clinton trailed Ben Carson by 11 points and Donald Trump by 5 points.  Jeb Bush had a 4-point edge over Clinton, while Carly Fiorina is up by 3 points.

But Biden leads Trump by 13 points and tops Bush by 5 points.

On the Republican side, Trump remains on top with 24%, but Ben Carson is at 23%.  Ted Cruz comes in third with 10%, followed by Marco Rubio (9%), Jeb Bush (8%), and Carly Fiorina and Mike Huckabee at 5% each.

Carson has climbed 11 points in this particular survey since mid-August, while Trump basically held steady.

According to new CNN/ORC polls of likely Republican voters in the third and fourth states scheduled to hold nominating contests next year, South Carolina and Nevada, Trump gets 38% support in Nevada, with Carson in second at 22%.  Then in third you go all the way back to Carly Fiorina with just 8%, followed by Rubio with 7% and Bush with 6%.

In South Carolina, Trump doubles Carson’s support, 36% to 18%. Rubio is in third with 9%, followed by Fiorina at 7%, Bush at 6%, and Cruz and the state’s senior senator, Lindsey Graham, at 5%.

Trump’s lead in both states rests on perceptions he’s the best candidate to handle the economy (67% say so in Nevada, 59% in South Carolina, while no other candidate hits double-digits).

On the Democratic side of the CNN/ORC surveys, Clinton has the support of 50% of likely caucusgoers in Nevada, with Sanders at 34%, Biden at 12%.

Among those likely to vote in South Carolina’s primary, Clinton polls 49%, with Biden at 24% and Sanders at 18%.

If Biden doesn’t run, Clinton would lead Sanders in Nevada 58% to 36%, while in South Carolina, Hillary would destroy Bernie 70-20.

In South Carolina, 59% of black voters say they back Clinton, 27% say Biden and just 4% for Sanders.  Without Biden, blacks favor Clinton over Sanders, 84-7, and therein you see a huge hurdle for the Vermont senator.

Remember, Iowa, New Hampshire, Nevada and South Carolina are the only states permitted by both major parties to hold primaries or caucuses in February, with “Super Tuesday” set for March 1.

According to a Rutgers-Eagleton Poll of Republican and GOP-leaning voters in New Jersey, 32% support Trump, followed by 13% for both Ben Carson and Marco Rubio, while only 5% tab Gov. Christie.  54% of the state’s Republicans say Christie should end his campaign.

--Trump is hosting Saturday Night Live Nov. 7, which will be a huge plus for him.

--Chris Cillizza / Washington Post

“Here’s an exchange from Bernie Sanders’ appearance on ‘Meet the Press’ on Sunday:

Chuck Todd: Are you a capitalist? Bernie Sanders: No.  I’m a Democratic Socialist.

“And in those five words, Sanders showed why – no matter how much energy there is for him on the liberal left – he isn’t getting elected president.

“Why?  Because Democrat or Republican (or independent), capitalism remains a pretty popular concept – especially when compared to socialism.  A 2011 Pew Research Center survey showed that 50 percent of people had a favorable view of capitalism, while 40 percent had an unfavorable one.  On socialism, just three in 10 had a positive opinion, while 61 percent saw it in a negative light....

“In addition, a recent Gallup poll showed that half of Americans said they would not vote for a socialist. It was, in fact, the least acceptable characteristic tested, behind Muslim and atheist....

“Americans might be increasingly aware of the economic inequality in the country and increasingly suspicious of so-called vulture capitalism – all of which has helped fuel Sanders’ rise. But we are not electing someone who is an avowed socialist to the nation’s top political job.  Just ain’t happening.”

--Going back to House Majority Leader Kevin McCarthy’s exit from the Speaker race, for the record I wanted to include this account from the Washington Post I didn’t have a chance to add last time.

“At 8 a.m. (Oct. 8), there was another meeting with about 75 House members, a last sales pitch [Ed. for McCarthy as he sought the Speaker job].  It didn’t go well.

“ ‘The next election is the most vital one in recent history. If the liberal left keeps controlling the White House, we’re never going to retrieve the country we know and love,’ Rep. Dana Rohrabacher (R-Calif.) said he told McCarthy.  He was still stuck on the Benghazi comments.  [Ed. That the committee was primarily created to bring down Hillary Clinton.]  ‘Kevin, you just had a verbal blunder that has dramatically damaged our cause. I just cannot support you for speaker – just a few days after you said something so harmful to that cause.’

“As Rohrabacher recalled, McCarthy then stood up to speak.

‘ ‘I’ve learned from this mistake. I hope you all will forgive me,’ McCarthy said, according to Rohrabacher.  ‘I will make sure it doesn’t happen again.’

“Rohrabacher said he rose again.

“ ‘Kevin, you need to not be in this race,’ he said.”

I obviously took Rep. Rohrabacher’s side, calling McCarthy an “idiot” for the statement a week before he stepped down.

--Editorial / Wall Street Journal

“By liberal and media acclamation, ObamaCare is a glorious success, the political opposition is fading and the entitlement state has gained another permanent annex.  The reality, for anyone who cares to look, is different and suggests that ObamaCare is far more vulnerable than this conventional wisdom.

“As Exhibit A, note that participation on the federal and state insurance exchanges is badly trailing the original projections and declining over time.  About 11.7 million people joined ObamaCare during the open sign-up period last year.  But enrollment this summer slipped 15% to 9.9 million with ‘effectuated’ coverage, meaning enrollees who were up to date on their nominal share of the premium after subsidies.

“Some churn is inevitable, but the Congressional Budget Office estimated two years ago that some 13 million would participate in 2015, and its most recent revision in March of this year still pegged the figure at 11 million.  The CBO nonetheless now projects ObamaCare will more than double in size in 2016 to 21 million, and such a growth spurt is probably necessary to stabilize the insurance markets.

“But don’t count on the attrition problem going away given ObamaCare’s high and rising costs, as well as its low quality that is approaching Medicaid levels of coverage.  The plans simply don’t offer good value for the money.”

--Pauline Cafferkey is a Scottish nurse who about nine months ago was discharged from a London hospital – seemingly signaling her victory in beating Ebola.

But now she is back in the hospital with a rare relapse of the deadly virus, and she’s gotten worse, “critically ill,” as London’s Royal Free Hospital announced on Wednesday.

This is not good.

-- A New York City comptroller’s report on the awful prison at Rikers Island puts the annual cost per inmate at $112,665, a 17 percent increase over the previous year.  Overtime expenses increased by 41 percent for the same period.  The cost is double that of other large cities. The report also found 108 stabbings and slashings last year.

Remind me not to commit any major crimes in Gotham.  I’m more of an Allenwood guy, know what I’m sayin’?

--In a new study published in The New England Journal of Medicine and led by health authorities at the Food and Drug Administration and the Centers for Disease Control and Prevention, researchers found that injuries caused by dietary supplements “lead to more than 20,000 emergency room visits a year, many involving young adults with cardiovascular problems after taking supplements marketed for weight loss and energy enhancement,” as reported by Anahad O’Connor of the New York Times.

But only about 10 percent, or 2,150 cases yearly, “were serious enough to require hospitalization, the researchers found.”

“In comparison, prescription drugs are responsible for 30 times as many trips to the emergency room each year.”

But the problem with supplements such as pills to increase energy or enhance weight loss is they do not require FDA approval and “Medical experts say that these products can be particularly hazardous because they have potent effects on the body and are frequently adulterated with toxic chemicals.”

--This is a scary item...and hopefully a lesson to all.

From Alex Young / NJ.com

“Last week, Tony Harris, 50, posted a photo of his wife holding large stacks of cash on Facebook.  The caption said he misplaced $60,000 and hoped his wife didn’t spend it out shopping, according to Philly.com.

“On Monday night, three masked men between 17- and 19-years-old came into his home (in Philadelphia), according to police.  After a struggle, Harris was shot in the head. He died from his wound Tuesday morning...

“During the home invasion, the suspects kept demanding ‘the money,’ Philadelphia Magazine reports.  Police said they don’t believe there was any money, but the Facebook photo is part of their investigation.

“Harris’ nephew told Philly.com that the stacks of cash were actually just $1 bills with $20 bills on top to make it seem like more money.”

--Ah yes...the first news stories on flu shots and time for my annual statement: I haven’t had a flu shot in more than 30 years and have never gotten the flu in that time.  Colds?  Yes.  But not everyone should get the shot.

--Lastly, this has been a rough stretch for me.  I haven’t mentioned I had my fourth auto accident in less than two years almost three weeks ago...all four times while being stopped; the first three hit in the rear (at least two of the drivers being distracted), and then this last time, an 87-year-old woman, as I learned from the police report, failed to negotiate a left turn as I incredulously watched it unfold.  She barreled her SUV right into the front of my car.

Oh, once I figured out how to open the door (as it was smashed in a bit), I let her have every word in the book, with some folks in their homes across the way coming out to catch the action.  She immediately said she was sorry (both of us being unhurt), I called 911, the policewoman took our statements, my car was towed away (I still don’t have it back) and for a fourth time I am driving a rental through Enterprise...who I love...which is a big reason why I’m bringing this all up.  You guys rock, Enterprise.

But it took forever to get the police report so I could tell her insurance company, GEICO, to pick up my damn rental without question.  Finally, it seems they are doing that.  [The lady actually told GEICO I was at fault!]

This week, though, StocksandNews was once again under massive hack attack, three times on Thursday alone.  As opposed to the prior time a month or two ago (there have been about 20 incidents over the history of S&N), we haven’t firmly identified if it was Russians or Chinese.  

But at least our own Dr. Bortrum and I got in a round of golf this week at the local par-3.  Final scores didn’t matter, though he did start off blazing with the putter.

---

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

God bless America.

---

Gold $1177
Oil $47.26

Returns for the week 10/12-10/16

Dow Jones  +0.8%  [17215]
S&P 500  +0.9%  [2033]
S&P MidCap  -0.6%
Russell 2000  -0.3%
Nasdaq  +1.2%  [4886]

Returns for the period 1/1/15-10/16/15

Dow Jones  -3.4%
S&P 500  -1.25%
S&P MidCap  -1.25% [yes, identical]
Russell 2000  -3.5%
Nasdaq  +3.2%

Bulls 36.5...up from 24.7 in just two weeks
Bears 31.2  [Source: Investors Intelligence...the indicator has been acting as it should recently.]

Have a great week. 

Brian Trumbore



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Week in Review

10/17/2015

For the week 10/12-10/16

[Posted 11:30 PM ET, Friday]

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.

I also have to note, I was watching a local news story today on a bear that walks upright, kind of cool yet sad, because it has an injured paw, and someone launched a gofundme campaign to get it to a shelter in upstate New York...and they have raised $22,000 thus far!

Some of you have been reading this column for a long, long time.  There’s a reason. 

I know one thing.  When you’ve been on a vacation for a week, and you were allowed to be untethered from the Net while you were away, this is the one source you would turn to so that when you went back  into the office upon your return, you wouldn’t sound like a fool.

I’ve been doing that for you.  Gratis.

Edition 862

Washington and Wall Street

Stocks continued to rally for a third straight week to the best levels in two months, amid the growing feeling the Federal Reserve is not going to raise interest rates this year after all. Various officials, including Washington-based Fed governor Daniel Tarullo, have expressed concerns about the health of the U.S. economy.  Tarullo told CNBC on Tuesday that “right now my expectation is – given where I think the economy would go – I wouldn’t expect it would be appropriate to raise rates” this year.  Tarullo said the economy doesn’t have much momentum in a “globally disinflationary environment” and officials should seek “tangible evidence” of a pickup in inflation before lifting rates.

A few weeks ago, Chair Janet Yellen said in a speech that she expected the Fed to lift rates before year end and that inflation is expected to rise after the transitory effects of cheap oil and a strong dollar pass. 

Fed governor Lael Brainard on Monday said “the risks to the near-term outlook for inflation appear to be tilted to the downside, given the persistently low level of core inflation and the recent decline in longer-run inflation compensation, as well as the deflationary cross currents emanating from abroad.  Brainard offered no timetable, but called for “waiting to see if the risks to the outlook diminish” before acting.  [Jon Hilsenrath and Ben Leubsdorf / Wall Street Journal]

This week saw the release of producer and consumer price data for the month of September and it confirmed current Fed thinking.  The PPI was -0.5%, -0.3% ex-food and energy, while for the 12 months, the PPI was -1.1%, up 0.8% on the core.  Consumer prices fell 0.2%, but were up 0.2% on core, while year over year, the CPI is unchanged, up 1.9% for the stuff we consume.

Separately, seasonally adjusted retail sales for the month rose just 0.1%, -0.3% ex-autos. Also, September industrial production fell 0.2%, the eighth monthly decline in nine months.

So all in all, I understand where the Fed is coming from, today, it’s only that they missed the boat long ago on raising rates.  As you see with the data below, there are indeed real deflationary fears in both Europe and Asia.

What will be interesting to see is the split at the next two Fed Open Market Committee meetings end of the month and in mid-December.  At the last confab, 13 of the 17 said they expected the first rate hike by the end of the year.

The Atlanta Fed’s prescient GDPNow indicator, by the way, is still pegging third-quarter GDP at just 0.9%.  In keeping with this, the Wall Street Journal’s Erica E. Phillips had a piece titled, “At U.S. Ports, Exports Are Coming Up Empty.”  To wit:

“One of the fastest-growing U.S. exports right now is air.

“Shipments of empty containers out of U.S. ports are surging this year, highlighting the impact China’s economic slowdown is having on U.S. exporters.”

For example, Long Beach’s containerized exports were down 8.2% this year through September, while at the Port of Los Angeles, the country’s largest single container port, the number of empty outbound containers in August was 21% more than the year before.

Meanwhile, earnings season is here, with a heavy calendar the next two weeks in particular, while this past one was ‘bank week.’  I detail the bigger reports down below, but it’s the same old story as past quarters.  There is simply no revenue growth.

Wal-Mart’s warning on eps for fiscal 2016 sent that stock plunging 10%, its biggest one-day percentage loss since January 1988.  For the world’s largest retailer it’s certainly not a great sign and other retailers fell in sympathy.  Consumers on the other hand can look forward to falling prices as Wal-Mart launches a price war against Amazon.  [More below.]

Finally, while there is nothing to report on the House leadership scene, with Speaker John Boehner likely to remain in control until end of the year, the Treasury Department said the federal debt ceiling will need to be raised by Nov. 3rd, which could precipitate a mini-crisis, though I’m guessing the real one is still Dec. 11 when a slew of issues, including the ongoing funding of government after the latest short-term extension, will reach a critical deadline.

At least Treasury reported the budget deficit narrowed to $439bn, or 2.5 percent of GDP, in the 12 months to the end of September, the fiscal year, from $483bn the prior one.  Government receipts rose by 8 percent, while spending was up 5 percent.

But, as you all know, the increase in spending was largely a result of larger outlays for Social Security, Medicare and Medicaid, and spending on these programs is forecast to rise markedly in coming years.

Europe and Asia

A fairly light week on the data front across the pond.  Euro area inflation in September came in at -0.1% annualized, vs. September 2014’s 0.3% pace.  August’s reading was 0.1%.

Prices in Spain for the month fell 1.1% (ann.), and they were down 0.2% in Germany.  France and Italy saw increases of just 0.1% and 0.2%, respectively.  [In the U.K., their inflation rate was -0.1%.]

Industrial production for the eurozone fell 0.5% in August over July, up just 0.9% year-over-year, all the above according to Eurostat.

None of this is good, even as European Central Bank President Mario Draghi said the ECB’s quantitative-easing program is working better than expected.   Speaking in an interview with a Greek publication on Saturday, Draghi said, “(While) it presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around, levels that we consider sufficiently close to 2 percent,” that is largely because of a drop in oil prices.

Draghi is pegging his optimism on a small uptick in loans to small business, but the slowdown in the emerging markets poses risks, he acknowledges, and Draghi said the ECB is ready to expand its asset-purchase program if needed.

One more economic tidbit...a positive one.  The unemployment rate in the U.K. fell to 5.4% in August, the lowest since June 2008, as average weekly wages rose 3%, which is very good.

On the migration front, Hungary announced it will seal its border with Croatia, beginning midnight Friday, cutting off a major migrant route into the EU for the second time in a month. The decision followed the failure of an EU summit in Brussels to agree on a joint task force to protect the external borders of the EU’s Schengen passport-free zone.

Last month, Hungary closed its border with Serbia, slowing the numbers entering via this route to a trickle.

So that sent the refugees into Croatia, where they headed to the border with Hungary, but the Budapest government, which has seen 380,000 migrants cross its border this year, said it can’t handle any more.

The migrants will now be forced to head towards Slovenia (beautiful country, great beer, cold people) in the hope of being able to pass into Austria and Germany from there, but this will lead to thousands being potentially stranded as the weather is beginning to turn wintry in this part of the world.

At the summit, EU states backed an action plan with Turkey, where many of the migrants reaching Europe pass through.  The leaders agreed to speed up visa liberalization talks for Turks if Ankara stems the flow to “re-energize” Turkey’s accession dialogue for EU membership.

But Turkey first and foremost needs aid, immediately, and it asked for $3.4 billion, something German Chancellor Angela Merkel said the EU states are considering.  Merkel is traveling to Turkey this weekend.

Turkey needs funds for building new refugee camps, particularly on the border with Syria that Europe knows would help keep many of the migrants there and not hoofing it to Europe.

So do it!  Give Turkey the aid it deserves.  Ditto the U.S.  Cough it up.

I am not a fan of Turkey’s Erdogan, but as I explained back in 2012 ad nauseam, we had our opportunity with the Turks, who were crying for our assistance in the early days of the Syrian civil war and President Obama chose to ignore him to the severe, historical detriment of Syria, Iraq, Turkey, Jordan, Lebanon, Israel and Europe...let alone the United States as the terror threat multiplies at light speed.

If we had established a no-fly zone and safe havens on the Turkish-Syrian border, as Erdogan wanted Washington’s assistance on, so much of what we are facing today would have been nipped in the bud, including, quite possibly, the emergence of ISIS.

But I’m tired of pointing this out.  John McCain and Lindsey Graham in the U.S. Senate were doing the same at the time.  And now look.

According to a European Union agency, Frontex, which coordinates border control, 710,000 migrants have crossed into the EU this year.

Lastly, municipal elections were held last weekend in Vienna, which as I wrote last time is facing a severe migrant crisis of its own.  Austria’s far-right Freedom Party lost to the ruling Social Democrats, who have led the city since 1945, but the Freedom Party came closer than ever to wresting control, receiving 31% to the Social Democrats’ 39.5%, though while the 31% is the highest the Freedom Party ever received here, the margin was greater than expected.

Turning to China, Monday (Sunday night here) is the big moment as the government releases third-quarter GDP, which analysts have pegged at 6.6% to 6.8%, while the official target is “around 7%.”  The lowest of 26 economists surveyed by Bloomberg is 6.4%.  We will also receive retail sales and investment data for the quarter next week

China released inflation data for the month of September and it was not good.  Producer, or factory gate, prices fell a whopping 5.9% year-over-year, the same rate as August, which is the worst since 2009, with September being the 43rd consecutive month of declines for the PPI.

Consumer prices were up an annualized 1.6%, according to the National Bureau of Statistics, with non-food prices up just 1.0%, well below the government’s 3.0% target.

Imports in September plunged 20.4% yoy, the 11th consecutive month of declines, while exports fell 3.7%; with both figures being somewhat better in yuan terms, but still poor.

Bottom line, especially with the factory gate data, there is still severe overcapacity in China, along with sluggish domestic demand.  More fiscal stimulus should be on the way.

There was some good news...according to the Automobile Manufacturers Association, September passenger car sales were up 3.3% year-over-year, due in part to the fact taxes on small cars were lowered.

Japan’s producer price index fell an annualized 3.9% in September, the fastest pace since Nov. 2009.

Street Bytes

--In finishing up a third straight week, the Dow Jones tacked on 0.8% to 17215, while the S&P 500 gained 0.9% and Nasdaq added 1.2%.

--U.S. Treasury Yields

6-mo. 0.07%  2-yr. 0.61%  10-yr. 2.03%  30-yr. 2.88%

--As noted above, shares in Wal-Mart fell 10% on Wednesday as management surprised investors by talking of a sharp drop in earnings next year and beyond, noting its prior pledge to raise wages and ongoing efforts to lift online sales.

The world’s largest retailer said profits could drop as much as 12% in fiscal 2017, which starts in February, owing largely to the wage hike.  For the first time the company specified it expected to spend an additional $1.2 billion on wages this fiscal year and another $1.5 billion in fiscal 2017.

CEO Doug McMillon said Wal-Mart is investing heavily in improving store efficiency and appearance before focusing on lower prices.  “You clean up your house before you invite people over,” he said.  [Especially the bathrooms, I would have added.  The other Saturday night, I was surprised very late by visitors, family, who needed to stay over and I was embarrassed said la sale de bains were rather messy, though they didn’t complain.]

Wal-Mart also said it was slowing down its store expansion plans and reducing capital-spending $1.4 billion next year over this year’s pace, though boosting its e-commerce infrastructure.

All in all, pretty miserable.

--Goldman Sachs’ profits fell 40 percent, missing the Street’s forecast, with CEO Lloyd Blankfein saying the investment bank had been wrongfooted by “challenging” conditions in emerging markets and “limited” client activity.  It’s the first time Goldman missed on the bottom line in four years.

Revenues at the key fixed-income, currencies and commodities (FICC) trading division continued to fall, off a full third, while overall revenues were $6.9 billion vs. $8.39bn a year ago.

Across the industry, FICC trading revenues have dropped in 17 of the past 22 quarters, “crimped by the U.S.’s Volcker rule – which prevents banks from trading independent of client demands or hedging requirements – and reduced market volumes.”  [Wall Street Journal]

--Citigroup beat Wall Street’s profit expectations, though revenue was in line with analysts’ forecasts and down vs. year ago levels.

CEO Michael Corbat, who has now been at the helm three years, said “Challenging environments have become the norm,” but Citi’s strategy of focusing on big cities and wealthy clients should allow it to weather any environment.

FICC revenue fell 16%, but stock trading revenue rose 31%.  Revenues at the key consumer bank fell 8%, with the biggest declines in Asia.

--Bank of America reported earnings that were better than expected, though revenues were down from a year earlier, sliding to $20.9 billion from $21.4bn.  FICC revenues fell 11% from a year earlier, though revenues rose 5% in the consumer banking business.

--JPMorgan Chase reported earnings that were a little below the Street’s expectations, with revenues falling 6.9% year-over-year.  FICC business was down 11%, but investment banking revenue rose 5%, and equity markets’ revenue was up 9%.

JPM continues to cut head count, reporting it shed 1,780 people to 235,700 in the last quarter.

--Jes Staley, who spent more than three decades at JPMorgan, is in line to become the new CEO at Barclays Plc.  The lender’s last American CEO, Robert Diamond, resigned just three years ago, and his replacement, British retail banker Antony Jenkins, was ousted in July.

--Streaming video darling Netflix saw its shares fall 9% the day after the company revealed weaker-than-expected U.S. subscriber growth. [And 2% more the following day, Friday.]  It also missed the Street’s earnings expectations, though sales rose 23% to $1.74bn, which was nonetheless short of projections as well.

The domestic subscriber count increased only 881,000, while international streaming subscribers rose 2.74 million. Analysts had expected net domestic additions of 1.19m, and international of 2.46m.

The company’s forecast on current quarter net domestic additions also falls short compared to estimates, though international is above.

At the same time, the very last line of the shareholder letter said: “We are likely to raise additional capital next year to fund our continued content investments,” which means don’t expect meaningful profits any time soon.

--Twitter quantified rumored job cuts, 336, or 8% of its workforce as CEO Jack Dorsey sought to fashion a “nimbler” team.

The company also hired Silicon Valley veteran Omid Kordestani as its new executive chairman, despite the fact he has tweeted just eight times in his 5 ½ years on Twitter, which I find kind of amusing. Kordestani was last at Google.

Separately, former Microsoft CEO Steve Ballmer said he had accumulated a 4% stake in Twitter.

--Europe’s largest software company, SAP, reported new cloud bookings, which it calls “the key measure for SAP’s sales success in the cloud,” increased by 102 percent last quarter, as SAP released preliminary results...full ones to come this Tuesday.

--In reporting earnings that were 48% below the equivalent period of 2014, the world’s largest oil services company, Schlumberger, warned the outlook for the industry was “increasingly challenging,” with the CEO adding the business environment in the third quarter had continued to deteriorate.

North American operations have seen a 47% drop in revenues since last year, while revenues in the rest of the world fell 27%.

And then the company announced plans to cut 20,000 jobs – about 15% of its workforce.

--Meanwhile, the International Energy Agency reported world oil supply held steady near 96.6m b/d in September as a drop in output from the U.S. and other producers outside of OPEC, was offset by increasing output from the cartel itself.

The IEA said, “High-cost supply – primarily non-OPEC – is being forced out.  Supply in the U.S. – which had been the motor of growth – is already sinking swiftly.”

U.S. year over year gains have eased to just 300,000 b/d from 1.6m b/d in early 2015.  That’s a slowdown, sports fans.  And that, unfortunately, leads to a ton of layoffs.

The IEA said a marked slowdown in demand growth next year, together with an anticipated increase in Iranian oil after sanctions are lifted, “are likely to keep the market oversupplied through 2016.”

OPEC, in its monthly oil market report, also steeply revised lower its estimates for output from non-OPEC countries – led by the U.S. 

--The takeover of SABMiller by AB InBev is on, a $104.2 billion merger that would be the fourth-largest in history, according to Dealogic.  The agreement would give AB InBev a dominant presence on every major continent and make it the world’s largest brewer with an estimated market share of 28% after divestitures, or nearly three times the size of its closest competitor, Heineken NV, according to beer industry tracker Plato Logic.  [Tripp Mickle / Wall Street Journal]

It is going to take a while to get all the necessary regulatory approvals, however, and the existing trends in the industry will continue, with beer consumption in developed markets expected to decline this year for the first time in 30 years, according to Plato Logic.  The growth is coming from Africa, where volumes are expected to rise by 2.5%.

Africa is a stronghold for SABMiller, with AB InBev CEO Carlos Brito saying it would be a “critical driver of future growth for the combined company.”

AB InBev has a 45% market share in the U.S. and it will have to sell SABMiller’s stake in MillerCoors LLC, a joint venture with Molson Coors Brewing Co.  There are other brands/joint ventures that will have to be sold off as well.

--Dell and EMC agreed to terms on their merger, the largest ever takeover in the technology sector at $65 billion that adds data storage to a business Michael Dell has been trying to expand beyond PCs.  Should the deal go through, Mr. Dell will run the combined business as chief executive and chairman.

--Intel Corp. said third-quarter earnings fell 6.3% with the continuing slowdown in demand for PCs, which remains the company’s biggest business.  Revenue in the client computing group, which includes PCs, fell 7.5%, while PC chip shipments declined 19%.  Other divisions such as the data center group exhibited solid growth.  Overall revenue decreased 0.6% from a year earlier.

--Delta Air Lines once again beat the Street, however, third quarter revenues fell 1% vs. the same period a year ago.  Net income jumped to $1.31 billion from $357 million.  Operating margins grew five points to 21% as Delta, like the other airlines, continues to benefit from the 50% drop in oil prices since last summer. Specifically for Delta, fuel expenses dropped 40% during Q3.

Delta did forecast a decline of 2.5-4.5 percent in the current quarter in terms of passenger unit revenue.

--Wynn Resorts Ltd. Chairman and CEO Steve Wynn was harshly critical of the Chinese government as he prepares to open a $4.1 billion resort in Macau next March.  In a conference call with analysts, Wynn said, “None of us are really clear on what our environment is going to be like going forward, and it makes planning and adjusting almost a mystical process,” he said, alluding to issues that are severely hampering Wynn’s efforts to hire and train workers as, for example, they haven’t been told how many gaming tables they’ll be allowed to have.

Beijing’s crackdown on corruption has led to gambling revenues in Macau plummeting 33% in September, the 16th month of decline.

But high-roller play in Las Vegas, by the way, is down as much as 50%, according to Wynn Resorts.

--General Motors Co. said its world-wide sales fell 3.1% in the third quarter.  Sales in North America rose 5.2% and 1.1% in Europe.  But they plunged 31% in South America and in GM’s Asia-Pacific, Africa and Middle East business unit, were off 10%, with the China unit posting a 4.2% decline.

--Volkswagen was ordered to recall 2.4 million cars in Germany by the country’s automotive watchdog as a result of the diesel emissions scandal; rejecting VW’s proposal that car owners could voluntarily bring their cars in for repair.  Meanwhile, Italian police raided VW offices in Verona and Lamborghini offices in Bologna.  Reports suggest Italian prosecutors were investigating alleged commercial fraud.

Investors received their first look on Friday at how VW’s woes impacted sales in the month of September and the automaker said global sales dipped 4 percent from the same month in 2014.

Sales in Western Europe, however, accelerated by 4.2 percent, and North America sales rose 1.9 percent.

The admission of cheating against the company in the U.S. came in the middle of the month, so October will be more of a true reflection of the state of VW.

--Shares in Burberry Group PLC fell sharply after the British fashion giant reported same-store sales growth of just 1% in the quarter, vs. 10% in the year ago period. The company is blaming reduced spending from Chinese consumers, both those traveling abroad as well as in the mainland and Hong Kong markets.  It was a similar story at Hugo Boss, which also blamed a slump in Asia on an earnings miss.

-Fortress Investment Group announced it was shutting down its beleaguered flagship macro fund run by Michael Novogratz after two down years, including a 17% decline for 2015. The fund has about $1.6 billion, which will be returned to investors, down from $8 billion before the financial crash of 2008.

Fortress, which has about $72 billion in assets under management, was the first U.S. alternative asset firm to go public in February of 2007.  Founders such as Novogratz benefited handsomely at the time, and he’ll do just fine on the back end as well, it would appear.

But Novogratz made a particularly bad call on China early this year, saying at a hedge fund conference that Chinese stocks “are going to enter one of the greatest bull markets ever seen...because the Chinese have gambling in their blood,” he said. A month later, the China market began its epic collapse.

[The Wall Street Journal is reporting Friday night, as I go to post, that Novogratz also lost big in Brazil, while there was a trade against the Swiss franc, placed earlier in the year but not by him, that cost the fund $150 million.]

I have a friend at Fortress who has been very kind to me and he had nothing to do with the above debacle.

--For the third time this decade, Social Security recipients won’t be receiving a cost-of-living adjustment.  The official calculation was down 0.4% from last year’s level in the third quarter, according to the Labor Department.  Over the past 40 years, the average benefit increase has been 4.1%.  The average monthly Social Security check is $1,224.

--Meanwhile, unless Congress and the Obama administration find compromise, about 30% of the roughly 52 million people enrolled in Medicare Part B, which covers outpatient care such as doctor’s visits, will see a 52% rise in their premiums for 2016.

--Various airlines such as Qantas and Singapore Air have begun talking of resurrecting long-haul flights, like in the case of the latter, Singapore to Newark, N.J., non-stop, 19 hours. Qantas is talking of a flight from Australia to Britain in two years, thanks to the new Boeing 787-9 Dreamliner, as well as the Airbus A350 aircraft that make such flights economical again. 

Qantas currently flies the longest route in the world, Sydney to Dallas-Fort Worth, a flight taking about 14 hours.

--A leading airline executive had a heart attack on Thursday and while it’s in the headlines, without details, or the impact on the company’s future management structure, I won’t comment.

--Angus Deaton, a British economist who currently hangs his hat at Princeton, is this year’s winner of the Nobel Prize in economics.  Deaton has published landmark findings on topics such as consumption, inequality and foreign aid.  Regarding this last area, he told the Financial Times this week  that excessive foreign aid can have unintended consequences, in that it can lead to corruption and create social tensions between the ruling elites and the public.

--Last week I wrote of the economic impact of the smoky haze in Southeast Asia.  The Indonesia-based Center for International Forestry Research now estimates the cost for the region at about $14 billion, compared with $9 billion for 1997’s similar event.

--Steve Jobs fans should check out my “Wall Street History” link.   His famous 2005 commencement speech at Stanford.

--With the heavy rains and mudslides in southern California at week’s end, we’re seeing the early rounds of what is now being called a massive El Nino (though this particular system is supposedly unrelated).  Bill Patzert, climatologist for NASA’s Jet Propulsion Laboratory, told the Los Angeles Times:

“There’s no longer a possibility that El Nino wimps out at this point. It’s too big to fail.  And the winter over North America is definitely not going to be normal.”

The National Weather Service’s Climate Prediction Center recently raised the odds of California receiving a wetter-than-average winter at more than 60%.  Just as importantly, the precipitation is expected to be statewide, including in the critical Sierra Nevada range.

--Danny Meyer, one of New York’s best known restaurant entrepreneurs, is ending tipping at his New York eateries. 

The drawback of tipping, says Mr. Meyer, is that plenty of employees at restaurants, including cooks and dishwashers, don’t enjoy the same perk, so prices will go up but Meyer claims “we will now have the ability to compensate all of our employees equitably, competitively, and professionally.”

Needless to say, this has waiters/waitresses across the region in a tizzy.  It’s going to be very interesting to see how this plays out.

--Americans are expected to spend $6.9 billion on Halloween this year, according to the National Retail Federation.  I’m sure my area is no different than yours and it’s amazing how elaborate some of the decorations have become in just the last few years.

But the level of spending is actually down from $8 billion in 2012, though still more than double a decade ago.

As one retail expert told the Los Angeles Times’ James F. Peltz, “Millennials are really into group costumes and activities.”  The success of the series “The Walking Dead” certainly doesn’t hurt either.

--Playboy said it would stop showing nudity starting with the March 2016 issue, marking the first time its “Playmates” won’t be naked since Hugh Hefner introduced the magazine in 1953.  It’s all about the easy availability of porn online.

“Times change,” Playboy Enterprises Inc., said in a statement.  The magazine, which has seen circulation drop to about 800,000 from a peak of 5.5 million, “will continue to publish sexy, seductive pictorials of the world’s most beautiful women,” only it will leave more to the imagination.  Now discuss amongst yourselves.  I am prohibited by the International Web Site Association from doing so. 

Note: Always look for the IWSA label for your assurance of Web quality.

Foreign Affairs

Iran/Syria/ISIS/Russia/Iraq: Among the developments the past week, thousands of Iranian troops have arrived in Syria to join the regime’s military forces and Hizbullah allies to launch ground attacks against insurgents in Aleppo, according to senior officials in the region.

Control of Aleppo city and the surrounding province in the area near the Turkish border is divided among the Syrian government, insurgents fighting Bashar al-Assad and ISIS, which controls some rural areas near Aleppo (where it has been making significant gains despite the air attacks).

Russia’s air campaign has bolstered Assad in a big way, while the U.S. struggles to adjust its support for Assad’s opponents.

But Russian President Vladimir Putin blasted the U.S. and others on Tuesday for their lack of cooperation with the Russian military campaign.  Speaking at a conference in Moscow, Putin said: “Recently, we have offered the Americans: ‘Give us objects that we shouldn’t target.’ Again, no answer,” he said. “It seems to me that some of our partners have mush for brains.”

Washington responds it’s a trust issue.  For starters, Russia could use the coordinates the U.S. would give them to target the groups the Americans are supporting.

Tuesday, Russia announced it had launched 88 airstrikes against ISIS, hitting 86 targets, but it labels all targets ISIL-related when in actuality it appears the bulk of its attacks are still against the groups threatening the regime and the Alawite stronghold of Latakia.

Separately, in an audio message, IS urged Muslims to launch a “holy war” against both Americans and Russians.

“Islamic youth everywhere, ignite jihad against the Russians and the Americans in their crusaders’ war against Muslims,” said Abu Mohammad al-Adnani, ISIL spokesman.

The Financial Times had an extensive piece on ISIL’s oil operation.

“Estimates by local traders and engineers put crude production in ISIS-held territory at about 34,000-40,000 bpd.  The oil is sold at the wellhead for between $20 and $45 a barrel, earning the militants an average of $1.5m a day.”

Iraq’s air force claimed it hit a convoy of Islamic State leader Abu Bakr al-Baghdadi, but there has been zero confirmation of this, nor his fate for months now.  A Twitter account that publishes statements from ISIS said “rumors” that the strike had hit him were false.

Finally, the Pentagon now estimates the ISIL death toll at 20,000, up from a reported 15,000 in July.

But despite the significant number of casualties and the airstrikes’ erosion of morale among ISIS fighters, the group continues to draw new fighters to Iraq and Syria.

Daniel Z. Katz / Wall Street Journal

“While all eyes are on Vladimir Putin’s machinations in Syria, deploying Russian fighters and troops, a potentially more dangerous Moscow effort in Iran is picking up steam. Media outlets are reporting that Russian S-300 surface-to-air missile systems may be delivered before the end of the year.

“The S-300 is considered ‘defensive’ and as such is not subject to United Nations sanctions.  Each system fielded creates a formidable shield against air attacks over a large area.  It operates as a battalion, at the center of which is a search radar that scans out to 180 miles and tracks up to 100 aircraft.  All components of the S-300 are mounted on trucks and mobile in minutes.

“Surrounding it are six ‘batteries,’ each composed of a guidance radar and up to eight launchers holding four missiles with a range of 90 miles.  Each battery can fire on six targets at the same time, allowing a full battalion to engage 36 aircraft simultaneously....

“What does this mean if Iran violates its nuclear agreement and the U.S. or its allies are forced to strike its nuclear facilities?  America has ways to defeat the system.  Its arsenal boasts 20 stealth bombers, over a hundred F-22 stealth fighters and a growing number of stealthy F-35s – all of which would be difficult for the S-300 to detect.  In addition, the U.S. operates over 100 jammer aircraft and possesses many missiles that can be fired from outside the range of the S-300.

“Still, the S-300 will be by far the most capable air-defense system fielded by Tehran and its deployment will increase the chances the U.S. will lose aircraft and pilots in any conflict.”

The S-300 doesn’t present an insurmountable barrier. “The Israelis are known experts in electronic warfare and their military authorities have stated that they can counter the system.

“The development is most threatening for America’s allies in the Gulf Cooperation Council, including Saudi Arabia, Kuwait and the United Arab Emirates....(None) of these air forces operate stealthy aircraft, and none have executed the complex mission of dismantling a modern air-defense network.

“The S-300 is not a ‘game-changer’ but is a significant step forward for Iran’s defenses and a likely harbinger of future improvements."

Iran, part II: On the nuclear deal front, Tehran has limited its cooperation with the United Nations’ International Atomic Energy Agency as the latter looks into Iran’s past nuclear work, a precondition for sanctions being removed.  So at the last minute, Iran has apparently stepped up cooperation as the probe was to conclude yesterday, with the IAEA then compiling a report to be released in mid-December that will then determine if the agreement can proceed.

Western diplomats have been pessimistic, saying Iran had tightly restricted access to key people and places, such as Parchin.

Meanwhile, on Wednesday, Iran’s powerful Guardian Council of clerics approved the nuclear pact, leaving final approval to Supreme Leader Ayatollah Ali Khamenei, with Iran’s parliament having also given its okay.  Next week the agreement will be formally “adopted” by Iran and the P5+1, which triggers action on the part of Iran to dismantle key parts of its nuclear infrastructure, though sanctions wouldn’t be lifted pending the U.N.’s report and confirmation Iran is complying.  Iran itself has been talking January for the lifting of sanctions.

But Britain, France, Germany, China and Russia have already been lifting various sanctions. Britain, for example, “has lifted the ban on 22 Iranian banks and companies blacklisted because of alleged involvement in deals linked to the nuclear issue,” as noted in a recent op-ed in the New York Post by Amir Taheri.

The sanctions regime is collapsing right before our very eyes.  Add it all up, as Taheri concludes, and “The Obama deal may end up as the biggest diplomatic scam in recent history.”

Then there’s the issue of Iran’s recent test of a long-range, surface-to-surface ballistic missile, which the United States is saying violated U.N. Security Council resolutions, though the White House insists this doesn’t impact implementation of the nuclear deal.

Finally, Iran’s judiciary on Monday announced that Jason Rezaian, the Washington Post’s Tehran correspondent, has been convicted.  He was on trial for “espionage.”

Rezaian and his wife, Yeganeh Salehi, a journalist, were arrested in July 2014.  Salehi was later released, but the regime has held Rezaian all this time in “a black hole,” as his brother, Ali, told the Wall Street Journal.  Rezaian, a U.S. citizen, has been denied the most basic of rights, including phone calls.

Editorial / Washington Post

“From its beginning, the case of Jason Rezaian has been a showcase for the opacity, the brazen disregard for the rule of law and, ultimately, the sheer cruelty of Iran’s Islamic regime. Its latest twist is no different.  On Sunday, Iranian state television reported that the 39-year-old Post reporter had been convicted in a trial that ended two months ago.  Convicted of what?  Punished with what sentence?  We don’t know: The court’s spokesman told state television he didn’t have ‘the verdict’s details.’  Nor, it appears, did Mr. Rezaian’s lawyer, who told the New York Times she had not been informed of the verdict and did not know whether Mr. Rezaian himself knew it....

“Iran has done extraordinary injury to Mr. Rezaian over the past 14 months.  But the longer it holds him, the more damage it does to its international standing.”

Israel: As the level of violence between Israelis and Palestinians grows, with fears of a new intifada, Israel has been sealing off violent Arab neighborhoods in east Jerusalem in an effort to quell the ongoing wave of terrorist attacks.  Prime Minister Benjamin Netanyahu told a special Knesset session on Tuesday that Israel is engaged in a “long struggle against terrorism” and that “a series of aggressive steps” are in order against those inciting violence.

“Israel will settle scores with those who are killing and those who are encouraging them,” Netanyahu said.  “Anyone who raises their hand against us will have their hand cut off.”

Netanyahu also called on Palestinian Authority President Mahmoud Abbas to “stop lying, and stop inciting.”  [Jerusalem Post]

Caroline B. Glick / Jerusalem Post

“All the Palestinian terrorist attacks that have been carried out in recent weeks share one common feature. All the terrorists believe that by attacking Jews they are protecting the Temple Mount from destruction.

“And why shouldn’t they believe this obscenity?  Everywhere they go, every time they turn on their televisions, read the paper, go to school or the mosque they are told that the Jews are destroying al-Aksa Mosque.  Al-Aksa, they are told, is in danger.  They must take up arms to defend it from the Jews, whatever the cost.

“One man stands at the center of this blood libel. The man who propagates this murderous lie and orchestrates the death and mayhem that is its bloody harvest is none other than the West’s favorite Palestinian moderate: PLO chief and Palestinian Authority Chairman Mahmoud Abbas.

“On September 16 Abbas gave a speech. It was broadcast on PA television and posted on his Facebook page. In it, he incited the Palestinians to kill Jews. In his words, ‘Al-Aksa Mosque is ours.

“ ‘They [the Jews] have no right to desecrate it with their filthy feet.  We won’t allow them to do so and we will do everything in our power to defend Jerusalem.’

“Abbas added, ‘We bless every drop of blood spilled for Jerusalem. This is clean and pure blood, blood that was spilled for God.  It is Allah’s will that every martyr will go to heaven and every wounded [terrorist] will receive God’s reward.’”

Unbelievably despicable.

Editorial / New York Post

“Does Team Obama want more Palestinian attacks on Israelis?  Secretary of State John Kerry sure gives that impression.

“Wednesday saw more bloodletting: An Arab stabbed a 70-year-old woman as she boarded a Jerusalem bus. Another pulled a knife on cops, who foiled the attack.

“That follows weeks of violence that’s left eight innocent Israelis dead and more injured, mostly in Jerusalem.  On Wednesday, Israel began deploying hundreds of troops to help thwart the violence.

“What’s fueled the terror is no secret: Palestinian groups have spread inflammatory lies claiming Israel is set to take over the Temple Mount, a site holy to both Muslims and Jews.

“Palestinian Authority chief Mahmoud Abbas called for blocking Israelis from ‘desecrating’ the site ‘with their filthy feet.’  He praised Muslims for harassing Jews there....

“Videos of Israeli forces fighting and sometimes killing the attackers have added gasoline to the fire.

“Israel, of course, has no intention of ‘taking over’ the Temple Mount. And if Washington wants to help quell the violence, it has an obvious response: Tell Abbas & Co. to cut it out – or face consequences.  Including, perhaps, a cutoff in U.S. funding.

“Alas, what did Kerry do? First he warned Israel to maintain the site’s status quo, lending credence to the lies.

“Then, on Tuesday, he actually suggested it was Israel’s fault: ‘There has been a massive increase in settlements over the course of the last years,’ he said.  ‘And there’s an increase in the violence because there’s this frustration that’s growing.’

“Ironically, on the day Kerry spoke, the left-wing newspaper Haaretz reported there’s been less settlement-building since Israeli Prime Minister Benjamin Netanyahu took office than under any of his predecessors since the Palestinian Authority’s birth in 1995.

“Meanwhile, the official U.S. position is that both sides must restore calm.  Both sides?

“Team Obama has long wanted Netanyahu gone.  But winking at Palestinian incitement – which, let’s be honest, isn’t all that far from OK’ing more bloodshed – is an appalling way to go about it.”

Personally, I’m sick of the whole “moral equivalency” angle being put forward, for years, when it comes to this conflict.  And I’m sick of how the Obama administration has treated Israel.

Next week my full thoughts, that I’ve been holding back on...on Israel, the Jews, and my friends. 

Afghanistan: President Obama had to concede his vow to bring troops home from Afghanistan before the end of his presidency would not be achieved, saying on Thursday that close to 10,000 will remain for the foreseeable future at a cost of as much as $15 billion a year.

Afghanistan’s new president, Ashraf Ghani, has also been eager to maintain a large U.S. presence.

Editorial / Wall Street Journal

“If there is a single element of consistency in President Obama’s foreign policy it is his desire to end and avoid U.S. military engagements. In 2011 he withdrew the final U.S. troops from Iraq.  He had planned to do the same in Afghanistan, but on Thursday the President hit the pause button. For now, 9,800 American boots will remain on Afghan soil.

“Mr. Obama is to be commended for changing his mind. He has been building a reputation for being impervious to counterargument, and here he listened to his generals.

“Senior officers earlier recommended that the U.S. keep up to 20,000 troops in Afghanistan, warning that a lesser number would put the fledgling Afghan army at risk from the Taliban.  Those warnings became reality last month when the Taliban overran Kunduz, a major city in northern Afghanistan.  With U.S. air support, the Afghans recaptured Kunduz, but Islamist fighters still threaten elsewhere....

“It is possible that what drove Mr. Obama’s decision was concern that an Afghanistan overrun by terrorists, as ISIS had done in western Iraq, would leave his foreign-policy reputation in tatters.  In a remarkably weary announcement Thursday, Mr. Obama said, ‘As you are all well aware, I do not support the idea of endless war.’

“The irony is that Mr. Obama is likely to bequeath ‘endless war’ in the Middle East and Afghanistan to his successor.  The central issue now is whether the Administration will do enough militarily in Afghanistan to ensure that the war inherited by the next President isn’t worse than it is today....

“The U.S. continues to have some 29,000 troops in South Korea, 62 years after this war with the North ended.  Their presence has kept the peace and allowed East Asia to flourish.  If instead Mr. Obama gives the Afghans inadequate support, ‘endless war’ will run deep into the next American presidency.”

Turkey: A horrific attack on a peace rally in the capital of Ankara killed at least 97 last Saturday in the nation’s worst terror attack, with Turkish officials saying the two suicide bombers responsible had fought in Syria and had connections to Islamic State.  By week’s end, I had not seen any formal claim of responsibility by ISIS for what is Turkey’s 9/11.

President Recep Tayyip Erdogan, facing a contentious election on November 1 (in essence a re-vote of a June election that led to a hung parliament), acknowledged security lapses in an attack that sparked massive public outrage.

Turkey, a NATO member that shares borders with Syria, Iraq and Iran, is convulsed in turmoil these days, whether it is Russian violations of its airspace, the ISIS presence, the ongoing battle with Kurdish separatists, the migrant crisis that has overwhelmed the government, and various economic issues that all add up to tremendous instability.

The demonstrators that were attacked were representative of the many issues faced as the crowd, mobilized by a coalition of Turkish trade unions, was comprised of Kurds and Leftist Turkish activists.

Saudi Arabia: The new toll in the deadliest tragedy ever to strike the annual haj pilgrimage rose on Wednesday to at least 1,621 people killed, with hundreds still missing! The Associated Press count is more than double Saudi Arabia’s official tally of 769 killed and 934 injured in the September 24 disaster in Mina, a few miles from the holy city of Mecca.  Saudi officials have not updated their total since Sept. 26.

China: Beijing is reacting angrily to a planned U.S. naval mission to skirt artificial islands China has constructed in the South China Sea.  In the latest escalation of rhetoric from China, a senior Chinese naval officer on Thursday warned the U.S. that the PLA would deliver a ‘head-on blow’ to any foreign forces ‘violating’ China’s sovereignty.  Writing in a Communist party mouthpiece, the Global Times, Rear Admiral Yang Yi said: “Safeguarding maritime rights calls for force and power.” [Financial Times]

Last week a senior U.S. official told the Financial Times that the U.S. navy would soon start “freedom of navigation activities” – sailing or flying within 12 nautical miles of the islands to challenge China’s claims.

30 percent of global trade passes through the South China Sea.

North Korea: Gee, that was quite a military parade in Pyongyang last weekend to mark the 70th anniversary of the Workers’ Party. Chinese President Xi Jinping sent his congratulations, saying he hoped to make joint efforts with North Korea “to maintain, consolidate and develop the friendship” between the countries “so as to play a positive and constructive role in maintaining regional as well as world peace.” Xi sent a senior envoy, Liu Yunshan, the Communist Party’s fifth-ranked leader, according to the South China Morning Post.

But while it was expected North Korea was going to launch a missile in celebration, or possibly conduct a fourth nuclear weapons test, nothing as yet.

Russia/Ukraine: After 15 months, a Dutch-led investigation into the downing of Malaysia Airlines Flight MH17 concluded it was indeed a Russian-made missile that was responsible, a Buk surface-to-air missile fired from an area controlled by the “separatist rebels,” though the report doesn’t blame a specific culprit.

But the findings also concluded the Ukrainian government should have closed the airspace over the embattled east where the country’s armed forces were battling the separatists, though the head of Ukraine’s air-traffic control service rejected this argument, saying “no one could imagine that such powerful equipment such as a Buk could be used against civil aircraft.”  [Wall Street Journal]

Russia described the report as politically motivated.

Separately, S&P estimates the Russian economy will contract 3.6 percent this year, worse than a prior forecast of down 2.6 percent.  2016 growth has been revised down from 1.9 percent to 0.3 percent.  68 percent of Russia’s total export revenues come from oil and natural gas sales.

Cameroon/Chad/Nigeria: President Obama announced that U.S. armed forces have been deployed to Cameroon to help fight against Islamist militants Boko Haram. The force will be 300 strong and will conduct airborne intelligence, surveillance, and reconnaissance operations.

Canada: The big national election is Monday, with the centrist Liberal Party gaining ground in the final days amid voter fatigue with Stephen Harper’s Conservative government.

Liberal Party leader Justin Trudeau, the 43-year-old son of long-serving Prime Minister Pierre Trudeau, has managed to overcome the formidable obstacle that he is too inexperienced, with Harper constantly saying Trudeau is “not ready” to govern.

But this is a three-party race, with the third, the New Democratic Party, polling around 20% and the likely coalition partner of the Liberal Party should it emerge victorious.

Random Musings

--I was watching the first six innings of the Mets-Dodgers playoff game in a bar, Tuesday night, and one of the TVs had the Democratic debate on so I caught some snippets in the closed-caption coverage, and then caught the highlights after the Mets game was over, so bottom line, I feel like I got the gist of it.  Yes, as pundits on both sides of the aisle have concluded, Hillary avoided a major gaffe, though her Keystone Pipeline decision explanation, “I never took a position on Keystone until I took a position on Keystone,” will be highlighted in every Republican campaign spot next summer and fall.

It otherwise seems as if her solid performance has blunted any real momentum there was for a Biden candidacy.  Clinton’s campaign chairman, John Podesta, said it was time for the vice president to reach a decision.

“She put in a tremendous debate performance tonight,” Podesta told the Washington Post, “and I think that she occupied a space in the party that showed that she was going to fight for this nomination, take the fight to the Republicans, put forward a program that people could really grab onto, believe in, and she was going to fight for the people she’s been fighting for all her life. If he wants to get in and challenge her, then he needs to do that, and that’s his right.”

The Post’s Dan Balz reports that the death of Joe Biden’s son, Beau, late last spring “shattered the entire Biden family.  Individually and collectively, they have been struggling to move forward.  Those who know the vice president say some days are better than others for him, as they are for various other family members.”

Balz adds: “But as with the issue of his family’s emotional readiness, there has never been real clarity on whether Clinton is truly damaged or temporarily weakened.  Democrats tracking Biden’s deliberations have predicted that he would not know the answer to that question by the time he has to make a final decision.  That’s all the more true after Tuesday’s debate....

“Biden has been a sympathetic figure through these weeks of deliberations, as a grieving father, as a working-class politician who speaks passionately for the middle class, as a politician equipped to serve as president.  His circumstances have earned him the time to deliberate, but in recent days, the patience of those in his party has begun to wane.

“Clinton long has said he should have the space to make whatever decision he thinks best.  What she did on the debate stage Tuesday night sent another signal that he cannot ignore.”

Edward Luce / Financial Times

“The focus on policy differences, rather than personality, played to Hillary Clinton’s strengths.  She made the most of it.  It was probably her best two hours since launching her campaign in April. She also had some unexpected help.  When asked about Mrs. Clinton’s use of a private email server, Bernie Sanders, her only real competitor, dismissed its salience altogether.  ‘The American people are sick and tired of hearing about your damn emails,’ he said.  ‘Let’s talk about the real issues.’

“For the most part that is what happened. The contrast with the tone of the Republican debates was glaring.

“Yet the Las Vegas debate is unlikely to produce any big shifts in the Democratic field.  Mrs. Clinton’s feisty performance will reduce Joe Biden’s temptation to enter the fray.  His implicit case has been as an insurance policy to an imploding Mrs. Clinton.  That prospect receded on Tuesday....

“Mrs. Clinton’s other big advantage on Tuesday was the presence of three egregiously substandard second-tier candidates – Lincoln Chafee, the former governor of Rhode Island, Martin O’Malley, the former governor of Maryland, and Jim Webb, the former Virginia senator.

“In contrast to Mrs. Clinton, Mr. Chafee and Mr. Webb appeared to have done no debate preparation at all.   It would be a surprise if either were still on the podium at the next debate in December....

“Mr. O’Malley will probably still be standing at the next debate.  But his attacks on Mrs. Clinton’s character missed the mark.  His case for a ‘new leadership’ sounded a pale echo on Barack Obama’s 2008 campaign theme....

“Which leaves Mr. Sanders.  True to form, the socialist from Vermont sparked a lively debate on the case against ‘casino capitalism’ and for putting Wall Street executives on trial. Others, including Mrs. Clinton, followed his cue. He declined several chances to attack Mrs. Clinton’s record of shifting positions. He even sidestepped her decision last week to come out against the Trans Pacific Partnership, a trade deal she had championed when secretary of state.

“Mrs. Clinton can count herself lucky.  Mr. Sanders’ contribution was oddly apolitical.  The effect will be to leave the race very much as it is.  Mrs. Clinton is likely to remain the frontrunner.  Mr. Sanders will continue to present a serious threat, particularly in the early states of Iowa and New Hampshire. And Mr. Biden’s choice now looks more vexing than it did on Monday.”

James S. Robbins / USA TODAY

“Hillary Clinton is going to win the Democratic nomination because her major challengers are unwilling to attack her where she is most vulnerable – the character question.

“The email issue is a specter hanging over Hillary Clinton’s candidacy and was the 900-lb. gorilla on the debate stage going in....

“The moment of drama came when other candidates were given the opportunity to weigh in on the issue. A well-considered blow deftly struck could have changed the course of the race.  Bernie Sanders led, saying his comment ‘may not be great politics, but I think the secretary is right. The American people are sick and tired of hearing about your damn emails.’  Hillary cackled with delight, knowing she had just won the debate.”

John Podhoretz / New York Post

“Throughout her presidential candidacy, Hillary Rodham Clinton has always been good on paper and lousy in life – until last night. She clobbered her Democratic challengers and reduced surging rival Bernie Sanders into a handshaking supporting player who defended her on her emails.

“As of now, she’s the Harlem Globetrotters, while Bernie and the other guys are the Washington Generals – the team that exists simply to lose and to give the Globetrotters a fake rival to dunk on.

“To say she did what she needed to do isn’t sufficient.  She may have just put the primary away.”

Jennifer Rubin / Washington Post

“Clinton should be pleased that she had no significant errors and a few good moments. However, the debate made clear just how problematic her foreign policy record is.  Sanders has his finger on the pulse of the left-wing Democratic base.  He likely reinforced that appeal, which may be critical in traditionally anti-interventionist Iowa.  One sensed, however, that he will need much more to topple Clinton – even further damaging revelations or some major slip on her part.  He offers no olive branch to moderates in the party, which both limits his appeal and intensifies the affection of left-leaning true-believers

“For now the dynamic of the race remains the same: Clinton is not seriously threatened at this point in the campaign.  Unless Biden enters or more damaging information emerges, she is the clear favorite for the nomination.  Republicans would be happy to face her – and her baggage.  That said, they would be foolish to underestimate her. She can appear polished, knowledgeable and reasonable.  They will need a competent, plausible nominee to beat her.

“Finally, kudos to the CNN moderator Anderson Copper and his colleagues. The questions were crisp, substantive and aggressive.  Given the debate’s length and lack of real fireworks, the audience is likely to be small*.  And that suits front-runner Clinton just fine.”

*Actually, the audience averaged 15.3 million viewers, according to Nielsen, far more than expectations.  Fox News had 24 million for its Aug. 6 Republican debate and CNN drew 22.9 million for the Sept. 16 GOP food fight.

Charles Krauthammer / Washington Post

“I repeat: Unless she’s indicted, Hillary Clinton will win the Democratic nomination.  I wrote that six weeks ago, amid fevered dreams of a Clinton collapse and a Joe Biden rescue.  That those were a mirage is all the more obvious after Tuesday’s debate. The reason, then as now, is simple: Clinton has no competition.

“She’s up against three ciphers and one endearing, gesticulating, slightly unmoored old man.  If Biden was ever thinking of getting into the race, he’d be crazy to do so now.  It’s over.”

An online poll for NBC News by Survey Monkey showed Clinton won the debate 56-33 over Sanders.

--The major polls....

A CBS News national survey taken Oct. 4-8 has Donald Trump at 27%, followed by Ben Carson at 21%.  Then it was all the way back to Ted Cruz at 9%, Marco Rubio 8%, and Jeb Bush and Carly Fiorina 6%.

On the Democratic side, Hillary Clinton gets 46% to Bernie Sanders 27% and Joe Biden’s 16%.  If Biden doesn’t enter, Hillary leads Bernie 56-32.

A new Fox News national poll, released prior to Tuesday’s Democratic debate,  has Clinton leading with 45%, Sanders second at 25% and Joe Biden at 19%.

In hypothetical matchups, however, Clinton trailed Ben Carson by 11 points and Donald Trump by 5 points.  Jeb Bush had a 4-point edge over Clinton, while Carly Fiorina is up by 3 points.

But Biden leads Trump by 13 points and tops Bush by 5 points.

On the Republican side, Trump remains on top with 24%, but Ben Carson is at 23%.  Ted Cruz comes in third with 10%, followed by Marco Rubio (9%), Jeb Bush (8%), and Carly Fiorina and Mike Huckabee at 5% each.

Carson has climbed 11 points in this particular survey since mid-August, while Trump basically held steady.

According to new CNN/ORC polls of likely Republican voters in the third and fourth states scheduled to hold nominating contests next year, South Carolina and Nevada, Trump gets 38% support in Nevada, with Carson in second at 22%.  Then in third you go all the way back to Carly Fiorina with just 8%, followed by Rubio with 7% and Bush with 6%.

In South Carolina, Trump doubles Carson’s support, 36% to 18%. Rubio is in third with 9%, followed by Fiorina at 7%, Bush at 6%, and Cruz and the state’s senior senator, Lindsey Graham, at 5%.

Trump’s lead in both states rests on perceptions he’s the best candidate to handle the economy (67% say so in Nevada, 59% in South Carolina, while no other candidate hits double-digits).

On the Democratic side of the CNN/ORC surveys, Clinton has the support of 50% of likely caucusgoers in Nevada, with Sanders at 34%, Biden at 12%.

Among those likely to vote in South Carolina’s primary, Clinton polls 49%, with Biden at 24% and Sanders at 18%.

If Biden doesn’t run, Clinton would lead Sanders in Nevada 58% to 36%, while in South Carolina, Hillary would destroy Bernie 70-20.

In South Carolina, 59% of black voters say they back Clinton, 27% say Biden and just 4% for Sanders.  Without Biden, blacks favor Clinton over Sanders, 84-7, and therein you see a huge hurdle for the Vermont senator.

Remember, Iowa, New Hampshire, Nevada and South Carolina are the only states permitted by both major parties to hold primaries or caucuses in February, with “Super Tuesday” set for March 1.

According to a Rutgers-Eagleton Poll of Republican and GOP-leaning voters in New Jersey, 32% support Trump, followed by 13% for both Ben Carson and Marco Rubio, while only 5% tab Gov. Christie.  54% of the state’s Republicans say Christie should end his campaign.

--Trump is hosting Saturday Night Live Nov. 7, which will be a huge plus for him.

--Chris Cillizza / Washington Post

“Here’s an exchange from Bernie Sanders’ appearance on ‘Meet the Press’ on Sunday:

Chuck Todd: Are you a capitalist? Bernie Sanders: No.  I’m a Democratic Socialist.

“And in those five words, Sanders showed why – no matter how much energy there is for him on the liberal left – he isn’t getting elected president.

“Why?  Because Democrat or Republican (or independent), capitalism remains a pretty popular concept – especially when compared to socialism.  A 2011 Pew Research Center survey showed that 50 percent of people had a favorable view of capitalism, while 40 percent had an unfavorable one.  On socialism, just three in 10 had a positive opinion, while 61 percent saw it in a negative light....

“In addition, a recent Gallup poll showed that half of Americans said they would not vote for a socialist. It was, in fact, the least acceptable characteristic tested, behind Muslim and atheist....

“Americans might be increasingly aware of the economic inequality in the country and increasingly suspicious of so-called vulture capitalism – all of which has helped fuel Sanders’ rise. But we are not electing someone who is an avowed socialist to the nation’s top political job.  Just ain’t happening.”

--Going back to House Majority Leader Kevin McCarthy’s exit from the Speaker race, for the record I wanted to include this account from the Washington Post I didn’t have a chance to add last time.

“At 8 a.m. (Oct. 8), there was another meeting with about 75 House members, a last sales pitch [Ed. for McCarthy as he sought the Speaker job].  It didn’t go well.

“ ‘The next election is the most vital one in recent history. If the liberal left keeps controlling the White House, we’re never going to retrieve the country we know and love,’ Rep. Dana Rohrabacher (R-Calif.) said he told McCarthy.  He was still stuck on the Benghazi comments.  [Ed. That the committee was primarily created to bring down Hillary Clinton.]  ‘Kevin, you just had a verbal blunder that has dramatically damaged our cause. I just cannot support you for speaker – just a few days after you said something so harmful to that cause.’

“As Rohrabacher recalled, McCarthy then stood up to speak.

‘ ‘I’ve learned from this mistake. I hope you all will forgive me,’ McCarthy said, according to Rohrabacher.  ‘I will make sure it doesn’t happen again.’

“Rohrabacher said he rose again.

“ ‘Kevin, you need to not be in this race,’ he said.”

I obviously took Rep. Rohrabacher’s side, calling McCarthy an “idiot” for the statement a week before he stepped down.

--Editorial / Wall Street Journal

“By liberal and media acclamation, ObamaCare is a glorious success, the political opposition is fading and the entitlement state has gained another permanent annex.  The reality, for anyone who cares to look, is different and suggests that ObamaCare is far more vulnerable than this conventional wisdom.

“As Exhibit A, note that participation on the federal and state insurance exchanges is badly trailing the original projections and declining over time.  About 11.7 million people joined ObamaCare during the open sign-up period last year.  But enrollment this summer slipped 15% to 9.9 million with ‘effectuated’ coverage, meaning enrollees who were up to date on their nominal share of the premium after subsidies.

“Some churn is inevitable, but the Congressional Budget Office estimated two years ago that some 13 million would participate in 2015, and its most recent revision in March of this year still pegged the figure at 11 million.  The CBO nonetheless now projects ObamaCare will more than double in size in 2016 to 21 million, and such a growth spurt is probably necessary to stabilize the insurance markets.

“But don’t count on the attrition problem going away given ObamaCare’s high and rising costs, as well as its low quality that is approaching Medicaid levels of coverage.  The plans simply don’t offer good value for the money.”

--Pauline Cafferkey is a Scottish nurse who about nine months ago was discharged from a London hospital – seemingly signaling her victory in beating Ebola.

But now she is back in the hospital with a rare relapse of the deadly virus, and she’s gotten worse, “critically ill,” as London’s Royal Free Hospital announced on Wednesday.

This is not good.

-- A New York City comptroller’s report on the awful prison at Rikers Island puts the annual cost per inmate at $112,665, a 17 percent increase over the previous year.  Overtime expenses increased by 41 percent for the same period.  The cost is double that of other large cities. The report also found 108 stabbings and slashings last year.

Remind me not to commit any major crimes in Gotham.  I’m more of an Allenwood guy, know what I’m sayin’?

--In a new study published in The New England Journal of Medicine and led by health authorities at the Food and Drug Administration and the Centers for Disease Control and Prevention, researchers found that injuries caused by dietary supplements “lead to more than 20,000 emergency room visits a year, many involving young adults with cardiovascular problems after taking supplements marketed for weight loss and energy enhancement,” as reported by Anahad O’Connor of the New York Times.

But only about 10 percent, or 2,150 cases yearly, “were serious enough to require hospitalization, the researchers found.”

“In comparison, prescription drugs are responsible for 30 times as many trips to the emergency room each year.”

But the problem with supplements such as pills to increase energy or enhance weight loss is they do not require FDA approval and “Medical experts say that these products can be particularly hazardous because they have potent effects on the body and are frequently adulterated with toxic chemicals.”

--This is a scary item...and hopefully a lesson to all.

From Alex Young / NJ.com

“Last week, Tony Harris, 50, posted a photo of his wife holding large stacks of cash on Facebook.  The caption said he misplaced $60,000 and hoped his wife didn’t spend it out shopping, according to Philly.com.

“On Monday night, three masked men between 17- and 19-years-old came into his home (in Philadelphia), according to police.  After a struggle, Harris was shot in the head. He died from his wound Tuesday morning...

“During the home invasion, the suspects kept demanding ‘the money,’ Philadelphia Magazine reports.  Police said they don’t believe there was any money, but the Facebook photo is part of their investigation.

“Harris’ nephew told Philly.com that the stacks of cash were actually just $1 bills with $20 bills on top to make it seem like more money.”

--Ah yes...the first news stories on flu shots and time for my annual statement: I haven’t had a flu shot in more than 30 years and have never gotten the flu in that time.  Colds?  Yes.  But not everyone should get the shot.

--Lastly, this has been a rough stretch for me.  I haven’t mentioned I had my fourth auto accident in less than two years almost three weeks ago...all four times while being stopped; the first three hit in the rear (at least two of the drivers being distracted), and then this last time, an 87-year-old woman, as I learned from the police report, failed to negotiate a left turn as I incredulously watched it unfold.  She barreled her SUV right into the front of my car.

Oh, once I figured out how to open the door (as it was smashed in a bit), I let her have every word in the book, with some folks in their homes across the way coming out to catch the action.  She immediately said she was sorry (both of us being unhurt), I called 911, the policewoman took our statements, my car was towed away (I still don’t have it back) and for a fourth time I am driving a rental through Enterprise...who I love...which is a big reason why I’m bringing this all up.  You guys rock, Enterprise.

But it took forever to get the police report so I could tell her insurance company, GEICO, to pick up my damn rental without question.  Finally, it seems they are doing that.  [The lady actually told GEICO I was at fault!]

This week, though, StocksandNews was once again under massive hack attack, three times on Thursday alone.  As opposed to the prior time a month or two ago (there have been about 20 incidents over the history of S&N), we haven’t firmly identified if it was Russians or Chinese.  

But at least our own Dr. Bortrum and I got in a round of golf this week at the local par-3.  Final scores didn’t matter, though he did start off blazing with the putter.

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

God bless America.

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Gold $1177
Oil $47.26

Returns for the week 10/12-10/16

Dow Jones  +0.8%  [17215]
S&P 500  +0.9%  [2033]
S&P MidCap  -0.6%
Russell 2000  -0.3%
Nasdaq  +1.2%  [4886]

Returns for the period 1/1/15-10/16/15

Dow Jones  -3.4%
S&P 500  -1.25%
S&P MidCap  -1.25% [yes, identical]
Russell 2000  -3.5%
Nasdaq  +3.2%

Bulls 36.5...up from 24.7 in just two weeks
Bears 31.2  [Source: Investors Intelligence...the indicator has been acting as it should recently.]

Have a great week. 

Brian Trumbore