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Week in Review

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10/31/2015

For the week 10/26-10/30

[Posted 11:30 PM ET, Friday]

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Edition 864

Washington and Wall Street

For some of us, it was one of the better weeks in Washington in some time.  Representative Paul D. Ryan of Wisconsin was elected speaker of the House, receiving a solid 236 votes (to 184 for Nancy Pelosi, plus 12 ‘others’) that included some of the hardline conservative members of the Freedom Caucus that had caused the ouster of John Boehner.  Ryan is the right man for the times, a highly talented member of Congress who is now second in line to the presidency.  Here’s hoping the Freedom Caucus gives him some space, which I think they will since he has promised to take their concerns about “process” seriously.

“We’re going to move forward.  We’re going to unify,” Ryan said during brief remarks on Wednesday.

Ryan benefits from his predecessor’s 'cleaning out the barn,' as Boehner himself put it, by negotiating an $80 billion bipartisan budget agreement that would increase spending for the military and some popular domestic programs, lift the debt ceiling and avert premium increases of as much as 50 percent for millions on Medicare right before an election.

But Ryan still faces a score of weighty decisions heading into 2016.  He has backed the Trans-Pacific Partnership trade pact, which still must get through Congress, and issues like cybersecurity and overhauling criminal justice laws will run up against presidential politics.  And you have various House committees, such as on Benghazi and the possible impeachment of IRS Commissioner John Koskinen (see below).

Ryan, though, can take the lead on tax reform, an issue he is an expert on, and maybe after all these years he is the one who can push it forward.

Billy House / Bloomberg

“Ryan inherits a party conference that’s divided over whether to cooperate with Democrats and the Obama administration to forge agreements such as the two-year budget deal passed Wednesday by the House, or instead use their power over the purse to try to force policy concessions from the president.

“ ‘Let’s be frank; the House is broken,’ Ryan said in a speech after taking the gavel from Democratic leader Nancy Pelosi to loud applause from lawmakers.  ‘We’re not solving problems, we’re adding to them, and I am not interested in laying blame.  We are not settling scores.  We are wiping the slate clean.’

“Reaching across the aisle, he urged Democrats and Republicans to work together, saying, ‘We will not always agree,’ but ‘if you have ideas, let’s hear them.’  He also cited the pressures felt by many working Americans.

“ ‘What a relief to them it would be if we finally got our act together,’ Ryan said.  ‘How reassuring it would be if we actually fixed the tax code, put patients in charge of their health care, grew our economy, strengthened our military, lifted people out of poverty, and paid down the debt.’”

While at first he balked for political expediency, Ryan did end up backing the bipartisan budget accord, which the Freedom Caucus blasted as a “fiscal monstrosity.”  Ryan conceded the secret process in which party leaders negotiated it “stinks.”

So early Friday morning, the Senate passed the budget deal, 64-35, with President Obama poised to sign it into law.  The debt ceiling is raised through March 2017, allowing the government to continue to borrow money to pay its bills, and it lifts budget caps on military and domestic programs by the aforementioned total of $80 billion over two years, which reduces the possibility of a government shutdown when current funding for federal agencies expires.

The increased spending, divided equally between military and domestic programs – would be offset by changes in Social Security to achieve $168 billion in long-term savings, though some voting against say the “savings” are nothing more than smoke and mirrors.

Senate Majority Leader Mitch McConnell said the bottom line is: “This is a fully-offset agreement that rejects tax hikes, secures long-term savings through entitlement reforms, and provides increased support for our military.”

Congress must still adopt spending bills for the two years, but the budget accord significantly reduces the risk of a shutdown by setting spending targets.

As expected, two presidential candidates – Rand Paul and Ted Cruz – were fiercely opposed.              

Meanwhile, there was a slew of economic data this week, as well as a Fed meeting.

We saw our first estimate of third quarter growth and the figure was 1.5%, a little less than expected and down from the 3.9% rate of the prior period, owing in large part to an inventory drawdown (after inventories surged in the second quarter).  But household spending grew a solid 3.2% in Q3 so the Fed will ignore the 1.5% number.  Bottom line, GDP continues to chug along at just a 2% clip...better one quarter, lower the next.

2015...Q3...1.5%
2015...Q2...3.9%
2015...Q1...0.6%
2014...Q4...2.1%
2014...Q3...4.3%
2014...Q2...4.6%
2014...Q1...-0.9%

The Atlanta Fed’s GDPNow prognosticator pegged Q3 GDP at 1.1% the day before the release.

Separately, September new-home sales fell a far greater than expected 11.5% to 468,000 annualized, when 550,000 was forecast.

September durable goods (big-ticket items) fell a greater than expected 1.2%, but the Chicago Purchasing Managers Index for October came in at a solid 56.2, the second best since January, when it was forecast to be at 49.8...so this was good.

Lastly, readings on personal income and consumption for September came in up just 0.1% on both, but August readings were strong.

As for the Federal Reserve’s Open Market Committee meeting, Chair Janet Yellen and her band of merry pranksters left the door open to an increase in short-term rates at the December 15-16 meeting as the Fed dropped previous warnings on global financial risks and economic developments from its accompanying statement.

The FOMC said there had been a slowing in the pace of job growth, but household spending and capital investment had remained solid.

But whether the Fed moves or not probably comes down to the two jobs reports we will see prior to their yearend confab.  Solidly positive, say 200,000+ in each, would put a ton of pressure on the Fed to act.  Two disappointing reports, or one good and one putrid, gives them cover to wait further.

As for stocks, heckuva rally in October, globally, as the S&P 500 rose 8.3%, the Dow Jones 8.5% and Nasdaq 9.5%, the best month for all three since October 2011.  Europe’s Stoxx 600 index had its best month since July 2009, up 8%, while Tokyo’s Nikkei rose 10%.

Europe and Asia

There were some eurozone data releases.  The Euro area unemployment rate for September was 10.8%, down from 10.9% in August and from 11.5% in September 2014.  [It’s 5.1% in the U.S.]  While still high, it’s the lowest since January 2012.

The lowest rates, as compiled by Eurostat, were recorded in Germany (4.5%...though the government pegs it at 6.4%), Czech Republic (4.8%) and the U.K. (5.3% in July), with the highest still in Greece (25.0% July) and Spain (21.6%).  Others...France (10.7%), Italy (11.8%...lowest since Jan. 2013 and good news for Prime Minister Renzi), Portugal (12.2%) and Ireland (9.4%).

The youth rates are still sky high in Greece (48.6%, July), Spain (46.7%) and Italy (40.5%).

On the inflation front, a flash estimate for euro area inflation in October pegs it at 0.0% on an annualized basis, not quite the ECB’s 2% target, though better than September’s -0.1% reading.

Spain’s economy posted its ninth straight quarter of positive GDP growth, though the pace of acceleration has slowed.  Overall the economy grew 3.4% over the last 12 months, according to preliminary figures from the national statistics bureau, with growth in the third quarter at 0.8%, down from 1.0% in Q2.  Record spending by foreign tourists has helped speed the country’s recovery from the double dip recession precipitated by the massive real estate bubble.

Growth in the U.K. for the third quarter was pegged at 0.5% over the second quarter, 2.0% on an annualized basis, slower than Q2’s 0.7% pace, according to the National Statistics Office, but far from a concern with wages still rising, which is propping up consumer spending.

And in Greece, there remains uncertainty after all on whether the Troika, the creditors – the European Commission, the European Central Bank, and the European Stability Mechanism – want to keep Greece afloat after it was revealed in a German newspaper that the government of Prime Minister Alexis Tsipras had followed through on only 14 of the 48 reforms he had agreed to in August for a third, 86bn euro, or $95 billion, bailout.

This weekend the IMF, which is not part of the bailout as yet, is examining the moves taken by Athens to date to see if it is complying before adding its own funds.  The IMF is still insisting some of Greece’s debt be forgiven, which Germany says is illegal.  Germany is the largest contributor to the bailout fund.

So will Greece reemerge as a serious issue?  Follow the credit markets for early clues.

On the migration front, Austria announced plans Wednesday to erect barriers along parts of its border, but insisted this was being done just to bring order to the flow of people entering the country.

Slovenia, the main migrant entry point to Austria, also said it was building a fence.  Germany’s Interior Minister Thomas de Maiziere announced it was taking steps to reduce the load, saying that while most Syrians will be accepted, many of the Afghans teeming across will be sent back.  Germany was also increasingly lashing out at Austria, accusing Vienna of sending hundreds of refugees across the border without any warning or supervision.

A record 83,600 streamed into Slovenia in 10 days; 58,000 of these then moving onto Austria (the rest were at Slovenian reception/registration centers), with the potential for 13,000 a day in the coming weeks.  This little place can’t handle that load.

Gideon Rachman / Financial Times

“At the beginning of this year, Angela Merkel had a good claim to be the most successful politician in the world.  The German chancellor had won three successive election victories.  She was the most dominant political figure in Europe and hugely popular at home.

“But the refugee crisis that has broken over Germany is likely to spell the end of the Merkel era.  With the country in line to receive more than a million asylum seekers this year alone, public anxiety is mounting – and so is criticism of Ms. Merkel, from within her own party.  Some of her close political allies acknowledge that it is now distinctly possible that the chancellor will have to leave office, before the next general election in 2017.  Even if she sees out a full term, the notion of a fourth Merkel administration, widely discussed a few months ago, now seems improbable.

“In some ways, all this is deeply unfair.  Ms. Merkel did not cause the Syrian civil war, or the troubles of Eritrea or Afghanistan. Her response to the plight of the millions of refugees displaced by conflict has been bold and compassionate. The chancellor has tried to live up to the best traditions of postwar Germany, including respect for human-rights and a determination to abide by international legal obligations.

“The trouble is that Ms. Merkel’s government has clearly lost control of the situation.  German officials publicly endorse the chancellor’s declaration that ‘We can do this.’  But there is panic just beneath the surface: costs are mounting, social services are creaking, Ms. Merkel’s poll ratings are falling and far-right violence is on the rise.  Der Spiegel, a news magazine, wrote this week that: ‘Germany these days is a place where people feel entirely uninhibited about expressing their hatred and xenophobia.’

“As the placid surface of German society is disturbed, so arguments about the positive economic and demographic impact of immigration are losing their impact.  Instead, fears about the long-term social and political effect of taking in so many newcomers – particularly from the imploding Middle East – are gaining ground....

“Regardless of the chancellor’s personal fate and reputation, the refugee crisis marks a turning point.  The decade after Ms. Merkel first came to power in 2005 now looks like a blessed period for Germany, in which the country was able to enjoy peace, prosperity and international respect, while keeping the troubles of the world at a safe distance.  That golden era is now over.”

Benjamin Weinthal / Jerusalem Post

“Germany’s security and intelligence agencies expressed alarm over the influx of refugees and migrants who harbor radical Islamic views and hatred of Jews, according to a Sunday report in Welt am Sonntag.

“According to a security document obtained by the paper and read by top-level agency personnel, ‘We are importing Islamic extremism, Arab anti-Semitism, national and ethnic conflicts of other peoples as well as a different societal and legal understanding.’

“The newspaper wrote that security sources warn that ‘the integration of hundreds of thousands of illegal migrants in Germany is no longer possible in light of the number and already existing parallel societies.’

“The term ‘parallel societies’ in Germany is frequently defined as insulated Muslim communities that have little or no contact with mainstream society.”

You could easily add these four paragraphs to Gideon Rachman’s op-ed.

Turning to Asia, in China, last weekend, an official with the People’s Bank of China talked of 6%-7% growth over the next 3-5 years, as the Communist Party’s Central Committee met for four days to establish the new Five-Year plan.

Then Premier Li Keqiang highlighted a minimum growth estimate for his country in the coming five years of 6.5% to meet the government’s goal of establishing a “moderately prosperous society.”  Li added the central bank should not adopt quantitative easing to flood the economy with too much money.

Overall, Li said: “The hard work of people up and down the country and the enormous potential of China’s economy gives us more confidence that we can overcome the various difficulties.”

But the deputy head of the China Iron & Steel Association said on Wednesday, demand is collapsing along with prices, banks are tightening lending and losses are stacking up.

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening.”

China’s mills produce about half of worldwide output and are battling against oversupply and falling prices as consumption shrinks for the first time in a generation amid the real estate slowdown.

In Japan, on Friday the benchmark Nikkei 225 index rose to a two-month high after the country’s central bank decided to keep its monetary easing policy steady. 

Forecasts for economic growth for the year to March 2016 were lowered to 1.2% from 1.7%, while the bank’s 2% inflation target was also pushed back by about six months.

Earlier on Friday, a string of domestic data showed Japan’s core consumer inflation number had fallen 0.1% in September from a year ago, while household spending fell 0.4% year-on-year and unemployment remained steady at 3.4% compared to August.

Street Bytes

--It was the fifth consecutive weekly gain for the major averages, though the gains were minimal as the rally is showing signs of fatigue.  The Dow Jones rose 0.1% to 17663, the S&P 500 added 0.2% and Nasdaq gained 0.4%.  Earnings and revenues remain down as reporting season comes to a close.

--U.S. Treasury Yields

6-mo. 0.22%  2-yr. 0.72%  10-yr. 2.14%  30-yr. 2.92%

--Deutsche Bank announced that as part of its sweeping strategic overhaul it will exit 10 countries and cut 9,000 jobs.  Plus, it will slash the number of consultants advising the bank by 6,000, and another 20,000 through selling its Postbank subsidiary and a separate operation; so, in total, 35,000.

Most of Deutsche’s cutbacks will come in Latin America, where it is ceasing operations in Argentina, Chile, Peru, Mexico and Uruguay, while shifting its trading operation in Brazil elsewhere.

In Europe, it’s withdrawing from Denmark, Finland and Norway.

--Apple sold 48 million iPhones in its fiscal fourth quarter, boosted by an 87 percent jump in sales in China from the same period a year ago, as the company beat earnings expectations, reporting $1.96 a share.

Overall revenues rose 22 percent to $51.5bn in the quarter, though this figure would have been 8 percentage points higher without the impact of a strong dollar, Apple said.

Back to China, while the year-over-year sales growth for all products was actually 99 percent, they fell 5 percent quarter-on-quarter, owing to China’s slowdown, though CEO Tim Cook was dismissive of the issue.  “We continue to focus and invest heavily there.”

Apple is however increasingly reliant on iPhones, which account for 63 percent of revenues compared with 56 percent a year ago, and the company forecast it will only slightly surpass last year’s record of 74.5 million iPhones sold during the crucial holiday season.

The company forecast revenues of between $75.5bn-$77.5bn for the three months to December, implying year-on-year sales growth of 3-4 percent.  Gross margins will remain strong at 39-40 percent.

Apple does not break out sales figures for its Watch, which falls under the “other products” segment, including accessories such as iPods and Beats Headphones.  The division posted a sales jump of 61 percent over the prior year to $3bn.

But on the week the shares were unchanged.

--Shares in Alibaba Group Holding Ltd. posted a better-than-expected 32% rise in revenue with profit of $3.57 billion, which also beat the Street for the third quarter, though when you take out the impact of a revaluation of its stake in Alibaba Health, the company fell short.

The shares rose, though, largely on a nice increase in revenue from mobile gadgets.

--Pfizer and Allergan are in “friendly discussions” that would create the world’s largest drugmaker with a market capitalization of more than $300 billion, though discussions are still in the preliminary stage.

If a deal was completed, the combined entity would be larger than Johnson & Johnson, which has a market cap of about $277bn.

Allergan is best known as the maker of Botox, but a deal would allow Pfizer to complete a “tax inversion” that would slash its U.S. corporate tax bill, Allergan being headquartered in Ireland, where it paid an effective tax rate of 4.8 percent last year compared to Pfizer’s 25.5 percent.

Last year, Pfizer attempted a takeover of London-listed AstraZeneca, but was forced to withdraw in the face of opposition from British politicians and company management.

--ExxonMobil and Chevron both reported big drops in third-quarter profits because of plunging crude, but, both handily beat earnings expectations and the share price rose in each case.

Chevron, however, said it was cutting capital spending and operating costs, and would slash between 6,000 and 7,000 jobs from its 64,700-strong workforce, a cut of up to 11 percent.

Both companies benefited from the strength of their refining divisions, which were boosted by higher margins as the price of crude fell further than that of refined products such as petrol and jet fuel.

Exxon’s total production was up 2 percent, as new projects in Canada, Indonesia, west Africa and the U.S. offset steep falls in gas output in the U.S. and Europe.

Chevron’s production was down 1 percent, with capital spending down 13 percent for the first nine months.  Exxon’s cap-ex was down 16 percent for the same period.

--BP said on Tuesday that its profit in the third quarter fell to $46 million, compared with $1.3 billion a year earlier.  CEO Robert W. Dudley said in a statement, “We are now in action to rebalance our financial framework in this new price environment.”

The company is basing its outlook on $60 oil through 2017.

--Royal Dutch Shell reported a pre-tax loss of more than $9bn after shelving several major projects, including a drilling campaign in the Arctic and another in Canada’s oil sands.

The massive loss ($7.4bn post tax) compares to an $8.1bn profit during the same period in 2014.

--Mexico’s state-owned energy company Pemex reported net losses of nearly $9.9bn for the September quarter, Pemex’s 12th straight quarterly loss.

In addition to the double whammy of falling prices and lower production, the slide in Mexico’s peso against the U.S. dollar took its toll.

But the company is also being hit by sky-high government tax bills as Pemex looks for revenues.

--The International Monetary Fund issued a report this week that concluded if oil stays around $50 a barrel, most countries in the Middle East such as Saudi Arabia will run out of cash in five years or less.  Low oil prices will wipe out an estimated $360 billion from the region this year alone, the IMF said.

Huge budget surpluses are quickly swinging to massive deficits.

The IMF estimates Saudi Arabia needs to sell oil at $106 to balance its budget, which wouldn’t be an issue in the short term as they just tap into their rainy day funds, but these funds are rapidly running dry already.

At the same time, the Saudis can’t slash social spending too much without taking a big political gamble.  [CNN.com]

--U.S. natural gas prices slumped to their lowest levels since 2012 this week, $2.00 per million British thermal units, before rebounding to $2.32 at week’s end.  2012 saw an extraordinarily mild winter which crushed demand and the forecast for this winter is increasingly looking the same due to El Nino.

In fact this coming week will see well-above temps across a wide part of the country.

--Shares in Twitter fell sharply after its latest set of results showed a slowing in user growth as well as a forecast that missed analyst expectations.

As analysts at Nomura argue, the three- to five-year outlook is muted: “It is difficult for investors to look past the empirical results at hand: third quarter monthly active user results and 4Q revenue and earnings guidance were both below Wall Street estimates owing to tepid user growth and a decelerating monetization.

“While investors are hopeful that restructured leadership can engineer a revival via new products like Moments, as long as Twitter user growth remains stalled, it will be difficult for revenue to reaccelerate, muting the 3-5 year growth outlook.”  [Financial Times]

User growth was just 8% over year ago levels to 320 million and marked Twitter’s slowest pace as a public company.  Revenue growth was 58%, but this has been falling since the second quarter of 2014 and the company said fourth-quarter revenue would be in a range of $695 million to $710 million, well below analysts’ current forecast of $740 million.

--Shares of LinkedIn soared 11% after the company handily beat on both the top and bottom line for the quarter.  The company also issued solid guidance for the current quarter.  LinkedIn earned $0.78 per share, $0.33 better than consensus, while revenues rose 37.2% to $779.6 million vs. the $756 million analysts’ expected.

--IBM disclosed the SEC is conducting an investigation related to the company’s revenue recognition.  An IBM spokesman said in a statement, that in cooperating with the SEC, “We are confident that the results and information we report have been appropriate and consistent with GAAP.”

Last week, IBM cut its full-year profit forecast and reported its 14th straight quarter of falling sales.

The SEC has had issues in the past with IBM’s revenue recognition, including a probe of revenue from offsite cloud services, but opted not to recommend any enforcement action.

--Starbucks reported earnings in-line with estimates, while revenue was also as forecast, $4.9 billion for the quarter.  Global comp sales increased a very solid 7%, driven by a 3% increase in traffic.  China/Asia Pacific comp sales rose 9%. [I saw other reports with slightly different figures, but I’m running with these from the original release.]

Starbucks’ current earnings forecast falls shorts of the Street’s expectations as the company spends more on labor and technology.  Regarding the former, Starbucks has been offering college-tuition benefits while boosting wages. 

--United Parcel Service Inc. posted third-quarter net profit of $1.26 billion, with revenue falling slightly vs. a year ago; both short of the Street’s expectations and the shares fell in response.

CEO David Abney said in a statement, “Third-quarter results reflect strong progress on our long-term initiatives despite uneven economic conditions.”

Taking out the impact of the strong dollar, revenue would have risen 1.8%.

The company expects to deliver more than 630 million packages this holiday season, an increase of more than 10% from last year.

--Shares in diesel engine maker Cummins Inc. cratered after the company reported profits that missed expectations, while announcing it would lay off up to 2,000 amid global weakness that continues to weigh on sales.  Sales in “key end markets” Brazil and China are “at multi-year lows” and there is no sign that these markets will rebound in the short term, according to CEO Tom Linebarger.  “Given the uncertainty in the global economy, we expect challenging conditions to persist for some time,” he said.

--Merck & Co. boosted its earnings guidance for the year, even though sales fell 5% in the recent quarter due to currency headwinds.  While its arthritis treatment Remicade was hit by low-cost competition in Europe, it’s Type 2 diabetes treatment Januvia posted a 10% sales increase.

--Besieged Valeant Pharmaceuticals International Inc. tried to reassure shareholders that its accounting and disclosures were sound, but after a tumultuous week that saw the shares plunge 35%, CEO J. Michael Pearson told analysts on a Monday call the company had found “no evidence whatsoever” of illegal activity, following allegations of fraud by a short-seller.

But by week’s end, Valeant cut its relationship with Philidor Rx Services LLC, a specialty pharmacy company that handles insurance issues and fills prescriptions for Valeant drugs.  Earlier, CVS/Caremark and others cut their own ties to Philidor.

Then hedge-fund manager Bill Ackman held a conference call for nearly four hours Friday to defend his own $4 billion investment in the company and Valeant shares cratered another 16% to $93.80, down from its Oct. 16 high of $177.50.

The short seller who helped precipitate the crisis, Andrew Left, tweeted during the call that he was going to release information Monday that he said would show Valeant was “dirtier than anyone has reported.”  That sent the shares lower.

--Walgreens is buying Rite Aid for more than $9.4 billion in a move that will significantly bolster its influence with drug makers and pharmacy benefit managers.  But the feds may be concerned with anti-trust matters and greatly reduced competition.

Walgreens had previously acquired Duane Reade, USA Drugs and Kerr Drugs to grow to more than 8,200 stores with revenue of $76 billion last year. 

Buying Rite Aid would give it an additional 4,600 stores in 31 states.  Friday, Walgreens said it was willing to give up 1,000  locations to satisfy the government.

--Ford Motor Co. earned $1.9 billion in net income in the third quarter, more than double last year’s profits as strong U.S. results offset weakness elsewhere, such as in China, Russia and Brazil.  At least volumes in Western Europe have rebounded from a collapse associated with the financial crisis, though Ford has yet to return to profitability there.

The company warned, though, that fourth-quarter profitability will be impacted by higher seasonal costs as well as payouts related to a new contract with the United Auto Workers.

Overall, third-quarter revenue rose 9% to $38.1 billion.

--The fallout from the diesel emission scandal began to have an impact on Volkswagen in the third quarter as the automaker swung to a net loss of over $1.8 billion; largely due to a $7.5bn charge VW said it would take to cover the costs of the crisis.

The gloom is expected to be far more widespread in the current quarter.

Revenue did rise 5.3% vs. a year ago, because the news didn’t hit until mid-September.

--GM issued another recall, 1.4 million vehicles, including 1.3 million in the United States, because oil dripping on hot engine components continues to cause fires despite three earlier recalls.

The company announced it was aware of 1,345 fires in vehicles repaired before, resulting in 19 injuries described as minor.  The models impacted are all over 10 years old, including the 1997-2004 Pontiac Grand Prix and 2000-4 Chevrolet Impala.

Separately GM and the United Auto Workers struck a tentative labor deal, avoiding a strike.  Details aren’t available yet, but the deal covers 52,600 union-represented members at GM.

Previously, the UAW reached an agreement with Fiat Chrysler, but it was voted down by its 40,000 UAW workers.  UAW President Dennis Williams then secured a favorable vote the second time around after winning higher wages and firmer investment commitments.

GM has outlined plans for $5.4 billion in U.S. investments in recent months. [Christina Rogers and Gautham Nagesh / Wall Street Journal]

The UAW’s negotiations with Ford remain.  Bigger profits in the industry mean better deals for workers, and this is good.

--Toyota returned to the top slot in global vehicle sales after releasing figures for the first nine months of the year.  Toyota sold 7.5 million in the first three quarters of 2015, beating Volkswagen’s 7.43 million and General Motors’ 7.2 million.

VW had been ahead of Toyota for the first half of 2015.

--Northrup Grumman Corp. won an intense four-year competition to build the nation’s new fleet of long-range stealth bombers, besting a team from Boeing and Lockheed Martin Corp. to build 80 to 100 of the aircraft over the next decade for an estimated $60 billion.  This should result in thousands of jobs in Southern California.

--As a loyal (and frankly huge) customer of Staples, I can’t help but note the passing of the office supplies chain’s founder, Thomas Stemberg, 66.

Stemberg had been a New England grocery executive but left after a dispute with his bosses.  One day, driving around the Boston area searching unsuccessfully for printer ribbon in 1985 on the Fourth of July weekend, with the stores closed, he came up with the idea for Staples.

From this idea came a chain with sales of $22.5 billion and 83,000 employees last year.

--Shares in GoPro tanked 17 percent on Thursday as the wearable-camera maker came out with weaker-than-expected sales and profit guidance for the fourth quarter.  As in the company now forecasts sales of $500m to $550m, vs. initial projections of $677m.  GoPro also forecast earnings would be substantially lower.  The shares closed the week at $25.00, just $1 above its IPO price and down from a high of $87.50.

--Heineken reported 5%+ organic growth in beer volumes for the recent quarter, more than doubling estimates, thanks to “strong volume in Europe supported by favorable summer weather” and growth in the Americas and Asia Pacific region.  Total revenues for the quarter were up 8%.  Very impressive.

--According to a study from consulting firm AECOM, conducted for the New York Road Runners club, the New York City Marathon (Sunday) generates $415 million in commerce.  The race last year drew 50,530 finishers from 130 countries.  The $415 million reflects the overall direct spending by participants, visitors and guests, plus the ripple effect.

--CNBC had 14 million viewers for its Republican debate on Wednesday, easily a record for the network.  Typically CNBC averages about 343,000 viewers in prime time.  Lots of coverage on this fiasco down below.

--While Macy’s is among those opening their stores early on Thanksgiving, outdoor retailer REI picked up some valuable publicity by declaring war on Black Friday, saying it will be closed the day after Thanksgiving, and will pay its 12,000 employees as though it were a regular workday, “so they can do what they love most – be outside.”

REI (Recreational Equipment, Inc.), though, is a private company and it’s easier to make such a move when you are.

Foreign Affairs

Iran/Russia/ISIS/Syria/Iraq: Talks began in Vienna among international foreign ministers in a bid to find a political solution to the conflict in Syria.

Saudi Foreign Minister Abdel al-Jubeir said Iran must accept the removal of President Bashar al-Assad as part of any solution, with Iran being at the talks for the first time; other parties including the U.S., Turkey, Russia, other Gulf Arab nations, as well as the UK, France, Germany, Egypt, Lebanon and the EU.

Iran’s Quds newspaper sees Iran’s invitation to the talks as U.S. “acknowledgement of Iran’s influential position in resolving the Syrian crisis.”

Saudi Arabia’s Al-jazirah warned of “more Iranian political and military expansion” should Assad remain in power, leading to Tehran “[reshaping] everything for its own benefits.”

Lebanese daily Al-Nahar speculates the U.S.’s “sudden decision” to invite Iran to the talks “reflects changes that occurred because of the Russian military intervention.”

In a speech ahead of the talks, U.S. Secretary of State John Kerry said: “At the end of the day, nothing would do more to bolster the fight against Daesh [ISIS] than a political transition that sidelines Assad so that we can unite more of the country against extremism.”

But Kerry stressed that the U.S. and Russia also shared “common ground,” arguing both want “a united, secular Syria.”  [BBC News]

So I wanted to open in this haphazard fashion because the talks are now center stage, but the crisis is worse than ever.  I said back in 2012...2012...it was “over.”  Over in terms of finding a solution, due in large part to U.S. inaction.  Since then, more than 230,000 of the 250,000+ total deaths in the war have occurred, with 11 million displaced, four million of whom have fled abroad, including increasing numbers to Europe.

Basically, the Saudis and most Western powers see Bashar al-Assad as an obstacle, while the Russians and Iranians see him as a partner.  Is there any way the two sides compromise?  The Saudis sure as heck don’t want to, but the U.S. is clearly sending out signals it is willing to see Assad stay for a short length of time during any transition in leadership.

That’s the outline.  But here’s how tragically farcical it all is....

Gen. Joseph F. Dunford Jr., chairman of the Joint Chiefs of Staff, indicated that Russian bombing and Iranian-backed forces have helped give Assad and his overstretched forces an advantage.

“The balance of forces right now are in Assad’s advantage,” Dunford told the Senate Armed Services Committee.  Then, in discussing U.S. efforts to find a reliable military partner in Syria, Dunford said, “No one is satisfied with our progress to date.”

Assad has clearly received a boost and he is in a stronger position than he’s been since the start of the crisis.

Defense Secretary Ashton Carter said Russia appears to be “doubling down” on its support for Assad.

In coming weeks, the Pentagon has said it plans to step up its campaign against ISIS, including combat forces.  At the least, President Obama’s most senior national security advisers are recommending U.S. troops be moved closer to the front lines in both Iraq and Syria.

And then on Friday, the White House released a statement:

“The President has authorized a small complement – fewer than 50 – of U.S. Special Operations Forces (SOF) to deploy to northern Syria, where they will help coordinate local ground forces and Coalition efforts to counter ISIL.”

More close air-support A-10 “Warthog” planes are on the way, as are an increase in F-15 fighter jets to Incirlik Airbase in Turkey.

Earlier, General Dunford said the U.S. would be “more aggressive” with air strikes aimed at destroying the oil enterprise operated by ISIS.

It was just in May that it appeared Assad was going to be forced to retreat to its core areas, including Damascus and territories west to coastal Latakia, the Alawite stronghold.  ISIS had overrun Palmyra and rebel forces were in Damascus’ suburbs.

But then the Russians got into the fight.  And now the U.S. has boots on the ground.  Far more on this decision next week.

Lastly, Iranian security forces arrested an Iranian-American businessman, Siamak Namazi, an executive with Crescent Petroleum Co., after he was visiting relatives in Tehran from his home base in Dubai.

Namazi had been promoting improved ties between the two countries.

He is the fourth Iranian-American to be detained by the regime in recent years, including Washington Post reporter Jason Rezaian, all having been accused of espionage and/or subversion.

Namazi’s friends told the Wall Street Journal, Iranian intelligence agents “ransacked his family home in Tehran and confiscated his computer, and have since been launching cyberattacks on some of his email contacts.”

As for the sanctions, Iranian President Rohani said he expected them to be lifted by year end.  As soon as Iran neuters its plutonium reactor at Arak; reduces its nuclear enrichment capacity and storage by removing scores of centrifuges, among other things; and increases transparency and access at its declared nuclear facilities, the agreement would be formally implemented, though the Obama administration has said this will take four to six months.

But Supreme Leader Ayatollah Ali Khamenei has said Iran will not begin implementation until the U.N.’s International Atomic Energy Agency declares an end to its investigation into Iran’s past nuclear work.  [Jerusalem Post]

On the battle front, the U.S. said Russian military aircraft hit another hospital while carrying out bombing raids in Syria.  Doctors Without Borders told Reuters on Thursday that air strikes in northern Syria had hit 12 hospitals, though it didn’t specify which nations carried out the bombings. The State Department said it has information it was Russian military aircraft in at least some of them.

The Saudis continue to give forces opposing Assad more sophisticated weapons to their Sunni brethren.

On Friday, Russia’s deputy foreign minister Sergei Ryabkov said that no country could use military force in Syria without first securing the agreement of the Syrian government, responding to the prospect of the United States launching a ground operation there.

“The question of using military force in any form without the agreement of Damascus is for us unacceptable,” TASS news agency quoted him as saying.

As for ISIS, this week they executed three people in Palmyra by binding them to three historic columns and blowing them up, a monitoring group said.

Finally, former British Prime Minister Tony Blair caught a lot of heat for giving a qualified apology for his role in the 2003 Iraq war, admitting he had not properly understood the chaos that would follow the ouster of Saddam Hussein and conceded it helped lead to the rise of ISIS. 

In comments to CNN last weekend, Blair said: “I apologize for some of the mistakes in planning and, certainly, our mistake in our understanding of what would happen once you removed the regime.”

Asked if the war was the “principal cause” of the rise of the Islamic State militant group, he replied: “I think there are elements of truth in that.”

“Of course you can’t say those of us who removed Saddam in 2003 bear no responsibility for the situation in 2015,” he said.

But he also said, “I find it hard to apologize for removing Saddam.  I think even from today in 2015, it is better that he’s not there than that he is there.”

Blair was accused by families of British soldiers killed in Iraq of using the CNN interview to “pre-empt” the publication of a report into the conflict by Sir John Chilcot that is due out in the coming months, a report first ordered by Gordon Brown way back in 2009.

Turkey: Turks go to the polls on Sunday in a re-run of the parliamentary elections of five months ago that ended up in a hung parliament.  This is seen as an attempt by President Recep Tayyip Erdogan to entrench himself in power, and it comes amid the chaos of the war in Syria, suicide-bombings at home, a renewed war against the Kurdish PKK guerrillas, assaults on the media, a war on an independent judiciary and a general sense of unease throughout the country.

Erdogan is looking to restore his Justice and Development (AK) party after it lost its majority in June, but rather than attempt to form a coalition government, he cracked down and called the re-vote, while squelching the peace process with the Kurds, whose pro-Kurdish People’s Democratic Party (HDP) has become a force.

For example, the Turkish military struck Kurdish fighters in Syria at least twice this week after they defied Ankara’s warning not to cross west of the Euphrates River.  Ankara is concerned the Kurdish YPG militia (similar to the PKK) will fuel separatist ambitions among Kurds in Turkey’s southeastern territories, but the U.S. has been supporting the YPG as an effective force in combating ISIS.

China: As I wrote last week, there was a growing groundswell of support for scrapping Beijing’s one-child policy and, sure enough, on Thursday, the government announced it was ending it after 36 years in a clear sign it is concerned over the demographics as the country ages and the birthrate collapses.  The birthrate has almost halved over the past 20 years.

So now a couple will be allowed to have two children.

The thing is, in many respects it’s already too late. China’s working age population fell 3.71 million in 2014, so it’s facing a crisis where it may not have enough workers both today and tomorrow. Experts said it would take two decades for babies born under the relaxed policy to have a significant effect on the workforce.

But an increase in births could have an economic impact as soon as mid-2016.  Think diapers and baby formula.

The one-child policy originally came about as a way to conserve resources at a time when widespread poverty would have worsened with unregulated population growth.

But while the Communist Party has said this led to 400 million fewer births, it also caused China’s average age to soar.

On the diplomatic front, China’s naval commander told his U.S. counterpart that a minor incident in the South China Sea could spark a war if the United States did not stop its “provocative acts,” such as in the other day when a U.S. warship sailed within 12 nautical miles, the limit under international maritime law, of one of Beijing’s man-made islands, though the limit does not extend to submerged features that have been artificially raised above sea level as is the case here.

Admiral Wu Shengli made the comments to U.S. chief of naval operations Admiral John Richardson during a video teleconference on Thursday, according to a Chinese naval statement.

“If the United States continues with these kinds of dangerous, provocative acts, there could well be a seriously pressing situation between frontline forces from both sides on the sea and in the air, or even a minor incident that sparks war,” a statement paraphrased Wu as saying.  [South China Morning Post]

At least the two sides are talking and the U.S. said it would follow protocols to avoid clashes, while a U.S. official said Richardson told Wu the U.S. would continue to sail wherever international law allows.

Meanwhile, President Xi Jinping concluded his state visit to Britain and the government of Prime Minister David Cameron rolled out the red carpet in a big way, far more than the United States did for Xi the other week.  London showed it was attempting to build another special relationship, a la its so-called one with the United States, and Cameron has been aggressive in cementing economic ties, including China’s role in a new British nuclear plant.

But many analysts hope Cameron doesn’t go too far and jeopardize Britain’s old ties with the United States or alienate other Western allies.  The special treatment accorded Xi has already drawn criticism in the West.  For example, the U.K.’s actions are undermining Washington’s interests in pushing China on human rights, respect for the rule of law, the South China Sea issue, etc.

Lastly, on a totally different topic, it’s kind of funny China’s Communist Party recently expressed its disdain for golf, barring its members from joining golf clubs, when this week the PGA Tour’s HSBC Champions, a World Golf Championship event, arrives in Shanghai, which as Golf World’s Geoff Shackleford wrote, “could make the tournament proceedings a tad awkward.”

Russia: NATO allies are mulling the deployment of 4,000 troops to countries bordering Russia in a bid to deter Moscow from future adventurism into the likes of Poland or the Baltics, a move that if it comes about would be greeted with fury by the Kremlin.

As first reported by the Irish Independent (before I saw an extensive Wall Street Journal piece on same), “One plan reportedly under consideration would see battalions of 800 to 1,000 troops deployed to Poland, Lithuania, Latvia, and Estonia.

“A less extensive plan would see a single battalion deployed to the region.”

All nations involved would have to agree to place their forces there under NATO command.

Germany, though, is said to be wary of making a large deployment that could provoke a response from Russia with the ceasefire in Ukraine holding.

Vladimir Putin has said in the past he considers NATO a security threat and a deployment would be seen in Moscow as a violation of a 1994 agreement forbidding troops in frontier lands.  But this is the same agreement Russia has constantly violated.

Separately, as first reported in the New York Times by David E. Sanger and Eric Schmitt:

“Russian submarines and spy ships are aggressively operating near the vital undersea cables that carry almost all global Internet communications, raising concerns among some American military and intelligence officials that the Russians might be planning to attack those lines in times of tension or conflict.

“The issue goes beyond old worries during the Cold War that the Russians would tap into the cables – a task American intelligence agencies also mastered decades ago. The alarm today is deeper: The ultimate Russian hack on the United States could involve severing the fiber-optic cables at some of their hardest-to-access locations to halt the instant communications on which the West’s governments, economies and citizens have grown dependent.”

Poland: The people woke up Monday morning to a new political order that will have ramifications for all of Europe.

Poland’s conservative opposition triumphed in Sunday’s parliamentary elections, with the Law and Justice party, or PiS, winning a majority, displacing the center-right Civic Platform party (PO).

The PiS positions itself as a defender of Poland’s Catholic roots and won based on its pledges to prioritize local companies over foreign ones while expanding programs for pensioners and workers.

But the party’s leader, Jaroslaw Kaczynski, is a fierce critic of Moscow, as well as Brussels and Berlin, so he’s a major Eurosceptic.  The PiS is also a strong opponent of increased immigration from outside the EU and Kaczynski is an outspoken admirer of Hungarian leader Viktor Orban.

Kaczynski is a former prime minister and twin brother of President Lech Kaczynski, who was killed in a 2010 plane crash.  Jaroslaw did not run as the party’s candidate for prime minister, though he is clearly the power behind the scenes.  The prime ministership will go to party veteran Beata Szydlo.

So here you have another example of Europe’s rightward shift, and in a rather startling development, none of the country’s left-wing or social democratic parties qualified for a seat in Parliament for the first time in Poland’s post-communist history.  [Rick Lyman / New York Times; BBC News]

Argentina: The reformist mayor of Buenos Aires, Mauricio Macri, will face the government-backed candidate, Daniel Scioli, in a run-off next month.  The center-right Macri, a market-friendly type, was supposed to lose by ten points but instead Scioli defeated him by only 37% to 34% and so the runoff, Nov. 22, will be tight and could spell the end for the ruling Peronist party.

Random Musings

--So let’s start with the Republican debate in Boulder, Co., on Wednesday.  Yes, my Mets were on in the World Series, but I watched the first hour of the debate and followed the game online in my attempt to multi-task, and then once the Royals took a 4-1 lead, I went back to the debate, so I feel like I saw at least 75% of it and am qualified to comment.

As I tweeted while watching it, the performance of the CNBC moderators, who I spend my weekday mornings watching, was “abhorrent” (Fox News commentator Charles Krauthammer described their performance as “appalling”) and at times the moderators lost total control.  [Nothing wrong with using a bell or buzzer to notify the participants they are out of time, CNBC.  Instead we got screeching from John, Becky and Carl as they tried to restore order.] 

Or as Ken Tucker put it on Yahoo.com:

“It’s never a good idea for the party host to hog all the hors d’oeuvres and monopolize the conversation, but that’s what CNBC did, in its lip-smacking, crumb-spillingly self-satisfied Republican debate on Wednesday night.  The network’s debate started late – the better to have its anchor team jabber over each other – and then proceeded to ask so many questions phrased to provoke squabbling that the first big hand of the night went to Ted Cruz for castigating the moderators for ‘trying to get people to tear into each other.’”

But Jeb Bush, who was under great pressure to have a strong debate, once again performed poorly, including this moment when he decided to confront his rival and former ally, Senator Marco Rubio.

“Marco, when you signed up for this, this was a six-year term – you should be showing up to work,” Bush said.  “I mean, literally, the Senate, what is it, like a French workweek?  You get like three days where you have to show up?”

Rubio pounced, noting that John McCain missed many votes in the Senate during his 2008 bid, and Rubio attributed the criticism to the fact Bush is struggling in the polls.

“The only reason you’re doing it now is because we’re running for the same position and someone has convinced you that attacking me is going to help you,” Rubio said.

As the New York Times commented: “Again and again, Mr. Rubio repelled attacks from his opponents and difficult questions from the moderators with ready responses that turned issues back on his interlocutors and prompted loud applause from the crowd.”

Ted Cruz also had a good night, attacking the CNBC moderators: “This is not a cage match. And you look at the questions – Donald Trump, are you a comic book villain? Ben Carson, can you do math?  John Kasich, will you insult two people over here?  Marco Rubio, why don’t you resign?  Jeb Bush, why have your numbers fallen?”  Mr. Cruz said.  “How about talking about the substantive issues people care about?”

Oh, and there was a question to Jeb Bush on fantasy football and potentially regulating it, to which Gov. Chris Christie jumped in: “Wait a second. We have $19 trillion in debt, we have people out of work, we have ISIS and al-Qaeda attacking us, and we’re talking about fantasy football?”

Jennifer Rubin / Washington Post

“The debate itself was chaotic, unruly and rife with inane questions. Candidates who attempted to ask questions were abruptly cut off.  Moderators did not drill down on economic matters, but instead went rifling through opposition research.  That said, rising above the fray is part of what a candidate must do.

“In that department Sen. Ted Cruz (R-Tex.) had a stellar response early on, slamming all the silly questions being asked.  Later, he gave a succinct description of his tax plan and heartfelt responses regarding single mothers and working women, decrying the Obama economy.  It was his best debate so far, but he did not dominate....

“Rubio had an outstanding night, perhaps dealing a fatal blow to his toughest rival for mainstream voters. He began by easily deflecting the moderator’s question regarding the Sun-Sentinel’s suggestion he resign and asking in effect if Rubio should wait his turn.  Rubio turned the question around, saying that America could not wait, that America had serious issues.  He also decried liberal media bias, pointing out that the Florida paper had not raised the same issue with Democratic senators.  He comfortably deflected a question about his tax plan, fending off interruptions to make the case his plan was helpful to the middle class....

“The biggest moment however came when Jeb tried to directly call out Rubio for his attendance record, saying he should resign if he did not show up for work. Rubio seized control.... In that exchange Bush suffered a severe blow, and Rubio demonstrated he could take a punch.  Bush practically disappeared from the debate after that....

“Winners: Rubio, Christie, Cruz.

“Losers: CNBC moderators, Bush, Carson and Trump.”

I disagree with Rubin’s take on Trump.  I thought he was fine.

John Podhoretz / New York Post

“Marco Rubio has been playing the long game as a presidential candidate – not getting into fights, not trying to shove himself into the daily news stories, just sticking to his themes and strengths.

“If his strategy is sound – and we won’t know until votes start getting cast – Wednesday night’s CNBC debate will mark the moment it began paying off big time....

“It wouldn’t be right to say that Rubio totally dominated – both Ted Cruz and Chris Christie made real splashes, too – but he put on quite a show.

“His extraordinary preparation and message discipline showed, as did his understanding of the Republican voting coalition.  Over the past few days he has been hammered by the Florida press in particular for missing Senate votes, and he knew he would get questioned on it – and when he was, in a tone of naked hostility by CNBC’s Carl Quintanilla, he pounced.”

And Rubio pounced on Bush.

“Bush seemed shaken by it; he had little energy in the answers he gave afterward and said nothing memorable or even interesting.  If Bush had been paying attention, he might have noticed that the way to get his mojo back would have been to attack the snide and inappropriate manner of CNBC’s three chief panelists.”

Later, writes Podhoretz, Rubio said:

“Last week Hillary Clinton went before a committee.  She admitted she had sent e-mails to her family saying ‘hey, this attack in Benghazi was caused by al-Qaeda-like elements.’  She spent over a week telling the families of those victims and the American people that it was because of a video. And yet, the mainstream media is going around saying it was the greatest week in Hillary Clinton’s campaign.  It was the week she got exposed as a liar...but she has her super-PAC helping her out – the American mainstream media.”

Podhoretz:

“Rubio might not be the Republican nominee.  But last night he gave it all he’s got, and what he’s got is pretty remarkable.”

Editorial / Wall Street Journal

“We have many friends at CNBC, but the three debate moderators lost control of the proceedings from the start and never regained it.  There is no surer applause line at a GOP debate than to attack the media, and the moderators walked into the trap with tendentious questions based on liberal talking points.”

Friday, Republican National Committee Chair Reince Priebus said the RNC was “suspending” its plans to partner with NBC News for a scheduled debate next February, though we’ll see if this sticks.

--Polls....

First the Republicans....

In a New York Times/CBS News national survey of Republican primary voters, Ben Carson for the first time dislodged Donald Trump from the top  spot, garnering 26% to Trump’s 22%.  Marco Rubio was third but just with 8%, followed by Jeb Bush and Carly Fiorina at 7% each.  Rand Paul, Ted Cruz, Mike Huckabee and John Kasich each received 4%.

A Monmouth University Poll of likely Iowa Republican caucusgoers had Carson with a 32-18 lead over Trump.  In August, this survey had the two tied at 23% each.  Ted Cruz and Marco Rubio are tied for third at 10%, with Jeb Bush at 8%.

But a CBS News/YouGov Battleground poll of likely Republican caucusgoers in Iowa has Trump and Carson tied at 27%, with Cruz at 12%, Rubio 9% and Bush at 6%.

In New Hampshire, CBS’ Battleground has it 38% Trump, 12% Carson, 8% Bush, and 7% for both Rubio and Fiorina.

In South Carolina, the same poll has Trump with another big lead, 40-23 over Carson.  Then you have to go down to 8% for Cruz, 7% Rubio, 6% Bush.

On the Democratic side, post-Biden’s exit for the first time, as well as post-Democratic debate....

Hillary Clinton soared to a 41-point lead in Iowa, according to the aforementioned Monmouth University poll...65% to 24%....but...the CBS’ Battleground survey has it 46-43 Clinton.  What gives?

In New Hampshire, the CBS/Battleground poll has Sanders leading Clinton 54-39.

But in South Carolina it’s 68-25 Clinton.

One thing that is interesting about all three states in the CBS survey is that no more than 1% of Democratic voters think Sanders can win the general election, while Clinton’s percentages in the three range from 10% to 27%.

--Frustrated presidential candidate Sen. Lindsey Graham: “On our side, you’ve got the No. 2 guy tried to kill someone at 14, and the No. 1 guy is high energy and crazy as hell.

“How am I losing to these people?  Just look at Donald Trump’s foreign policy. What is it?  What’s he going to do about ISIL?  What is it?  What is his game plan to destroy ISIL?  Does anybody know?”

Graham added, referring to Ben Carson and his appearance on “Meet the Press” where he recalled his hot-tempered childhood, “when I was 14 I tried to stab someone”... “And I’ve tried to murder no one ever, so this should move me up a little bit.”

Hang in there, Lindsey.

--Maureen Dowd, in her Sunday column for the New York Times, appropriately blasted Republicans on the House Benghazi committee, noting, “Hillary Clinton is never more alluring than when a bunch of pasty-faced nasty-tongued white men bully her,” but Ms. Dowd, who can be an equal opportunity basher, concluded with the following:

“The 11-hour hearing showcased the good Hillary, but there were occasional flashes of the bad.  She still doesn’t believe that setting up her own server was so wrong.  Even though the inspector general of government intelligence said that there was top secret information in her emails, she sticks with her parsing.  ‘There was nothing marked classified on my emails, either sent or received,’ she told (Rep. Jim) Jordan.

“She seemed oddly detached about (Ambassador) Stevens, testifying that he didn’t have her personal email or cell number, ‘but he had the 24-hour number of the State Operations in the State Department that can reach me 24/7.’

“There were no call logs of talks between Stevens and Clinton, and she said she could not remember if she ever spoke to him again after she swore him in in May.  ‘I was the boss of ambassadors in 270 countries,’ she explained.

“But Libya was the country where she was the midwife to chaos.  And she should have watched that baby like the Lady Hawk she is.”

Kyle Smith / New York Post

“In the bipartisan grandstanding of the latest Benghazi committee hearing last week, the mostly inept Republicans managed to extract one piece of information that will stick: that our murdered Libyan Ambassador Chris Stevens didn’t have Clinton’s e-mail address.

“Clinton stammered a bit as she confessed this, realizing that she was contradicting her earlier characterization of Stevens as someone she knew and respected, the personal anecdotes that suggested a close relationship and her statement that she had personally asked him to take the job.

“Clinton family retainers like Sidney Blumenthal, a notorious conspiracist who was barred from working in her State Department by the Obama administration, were able to reach her whenever they pleased – but men and women on the front lines of dangerous places had to go through depressing, labyrinthine bureaucratic channels.

“Stevens and his team requested more security for the doomed Benghazi compound 600 times. Clinton’s response: Sorry, I didn’t know.  Nobody told me.  Oops.”

If the Republicans come up with the right nominee, they will rip her to shreds on her foreign policy record in the debates.  The problem is, it can’t be too much of a massacre or there could be a backlash in how she was treated. 

--What a fiasco for the Pentagon...the 240-foot long blimp (JLENS) that broke loose from its moorings at Aberdeen Proving Grounds in Maryland and then drifted over northeast Pennsylvania. 

The aircraft is part of a Pentagon plan to create a safety net to hunt enemy drones and cruise missiles along the Eastern seaboard of the U.S. and among some in Congress, the project is a white elephant, costing about $2.55 billion, though the Pentagon issued differing numbers on the value of the blimp in question...at first saying it cost $1.3 billion (there are two of them...the other now grounded), but later reducing it to $250 million.

Raytheon is the manufacturer and demonstrated the radar could pick up multiple ballistic missiles back in 2012, but it’s ability to track other objects like drones is less clear.  In the spring, when a Florida man flew a gyrocopter from Pennsylvania to the steps of the U.S. Capital, NORAD declined repeated requests for information as to whether JLENS picked it up.  They now say the blimp(s) were down for software upgrades at the time.  [Patrick Tucker / Defense One]

--In a study conducted by the World Economic Forum, more than 1,000 young people, ages 20 to 30, from 125 countries, who are all active in the forum’s Global Shapers Community, average age of 28, 65% of Millennials said one of their top three goals in selecting a job was to make a difference in society, their city or country.

Asked about the top three issues that face the world, 56% named social and economic inequality, 42% climate change and environmental preservation, and 33% education.

Interestingly, the most admired figure among the Millennials was the late Nelson Mandela, followed by Pope Francis, with Elon Musk, CEO of Tesla and creator of SpaceX, third.  [Gregg Zoroya / USA TODAY]

Personally, I would have said golfer Jordan Spieth.

--According to the National Assessment of Educational Progress (NAEP), better known as the Nation’s Report Card, fourth-graders and eighth-graders across the United States lost ground on national mathematics tests this year, the first declines in scores since the federal government began administering the exams in 1990.

Reading scores also dropped for eighth-graders, while fourth-grade performance was stagnant compared with 2013, the last time students took the test.

Students at U.S. public and private schools have taken the NAEP every two years since the early 1990s and it is the most consistent measure of K-12 progress.

The 2015 scores show that 64 percent of fourth-graders and 66 percent of eighth-graders are not considered proficient in reading, while in math, 60 percent of fourth-graders and 67 percent of eighth-graders are not considered proficient.

I find these figures astounding, especially the reading scores.  I’m guessing my audience doesn’t include a lot of fourth-graders after seeing this data.  Plus I recognize for most Millennials, it’s too long.

Massachusetts, by the way, scored highest in three of the four tests.  Minnesota, New Hampshire and Vermont were also top performers.  New Mexico and Mississippi were among the lowest.  [Emma Brown / Washington Post]

So the results have stirred up the debate over standardized testing and the plusses and minuses of same.

Coincidentally, last weekend the White House said “the proliferation of testing – a problem they acknowledged they had a role in – is taking away too much valuable time that could be better spent on learning, teaching and fostering creativity in schools.  Obama recommended limiting standardized exams to no more than 2% of a student’s instructional time in the classroom.”  [Christopher Doering / USA TODAY]

--Also on the topic of education, I saw a piece Friday on NJ.com concerning Rider University, which announced it was slashing 13 majors and one minor and eliminating 20 jobs, including 14 full-time faculty members, to help close its deficit.

So here are some of the majors being eliminated next fall (juniors and seniors will be able to complete their majors; sophomores and freshmen will have to change or transfer): Art and art history, advertising, American studies, business education, French, geosciences, German, marine science, philosophy, piano and web design.

--Editorial / Wall Street Journal

“The IRS targeting and muzzling of conservative groups during the 2012 presidential campaign is an outrage for which almost no one  has been held accountable. Which brings us to the news that House Oversight Committee Chairman Jason Chaffetz introduced articles of impeachment on Tuesday against IRS Commissioner John Koskinen.

“Mr. Koskinen was not at the IRS during the targeting, but the former Freddie Mac executive has become the single greatest hurdle to public accountability. He was touted as a reformer in his 2013 confirmation hearings.  Instead he has helped the Administration stonewall Congress’ investigation.  Mr. Chaffetz’s four articles of impeachment assert that Mr. Koskinen ‘engaged in a pattern of conduct that is incompatible with his duties as an Officer of the United States.’....

“The last impeachment of a cabinet officer or agency head was War Secretary William Belknap in 1876. Then again, no Presidency in decades has treated Congress with the disdain that President Obama has.  With rare exceptions he has also refused to dismiss officials when they fail at their most basic obligations.  If the House votes to impeach Mr. Koskinen, the Senate then would need a two-thirds vote to convict in a trial, which is unlikely.

“Yet the exercise will have the salutary effect of reminding executive-branch officials that they are not a government unto themselves.  The U.S. Attorney refused to honor Congress’ contempt charge against (Lois) Lerner for refusing to testify, the Justice Department has closed its investigations into IRS targeting without prosecutions, and the press corps winks at abuses of power when conservatives are the targets.  With an executive who refuses to honor the normal separation of powers, Congress is obliged to use its authority to hold government accountable.”

--The World Health Organization published a report conclusively linking processed meats with colorectal cancer.  Bacon, ham, sausages and other smoked, cured or salted (processed) meats are “group 1” products with the highest likelihood to cause cancer, according to a “meta review” of scientific research by the International Agency for Research on Cancer. 

For example, the WHO’s report says 50g of processed meat a day – less than two slices of bacon – increased the chance of developing colorectal cancer by 18%.

Meanwhile, it said red meats were ‘probably carcinogenic’ but there was limited evidence.

The WHO did stress that meat also had health benefits.

So the study puts the likes of bacon and sausage in the same category as tobacco, alcohol and asbestos.  But this doesn’t mean a bacon sandwich is as bad as smoking and as Tim Hayward of the Financial Times reports:

“For all the hysterical coverage, eating behavior will not change because there is no clear message about the direct impact on the individual who is really, really enjoying sinking his teeth into (meat)....

“The global statistics do not identify whether it is the meat that is carcinogenic, the nitrates used in preservation, products of fermentation or smoke or salt.  Dietary fiber is known to reduce the incidence of colorectal cancers, so is a wholemeal bacon sarnie OK?  Is a Spanish Iberico ham, made purely of organic pork and salt, carcinogenic to the same degree as a supermarket sausage pumped with preservatives to eradicate the lethal bacteria that are a risk in intensive rearing?

“Finally, we have the numbers.  ‘In total, tobacco use is responsible for the death of about 1 in 10 adults worldwide,’ says the WHO, a figure including cardiovascular disease and chronic obstructive lung disease as well as lung cancer. Meanwhile, more than 200,000 die annually worldwide as a result of air pollution compared with about 34,000 who die from meat-related cancer.”

[One million deaths from cancer are caused by smoking and 600,000 attributed to alcohol each year.]

--Lastly, there have been some senseless tragedies in Europe the past few weeks, like the bus crash in France that killed 43 pensioners on a trip through wine country.

Friday night in Bucharest, Romania, at least 27 died in a nightclub fire where pyrotechnics were involved.  When the heck will the world learn...you can’t do this stuff indoors!  Our thoughts and prayers to the victims and their families.

---

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

God bless America.

---

Gold $1142
Oil $46.59

Returns for the week 10/26-10/30

Dow Jones  +0.1%  [17663]
S&P 500  +0.2%  [2079]
S&P MidCap  +0.3%
Russell 2000  -0.4%
Nasdaq  +0.4%  [5053]

Returns for the period 1/1/15-10/30/15

Dow Jones  -0.9%
S&P 500  +1.0%
S&P MidCap  -0.5%
Russell 2000  -3.6%
Nasdaq  +6.7%

Bulls  43.7
Bears  29.2  [Source: Investors Intelligence]

Have a great week. I appreciate your support.

C’mon, Mets!  Go American Pharoah!  [Reminder: 5:35 ET, Sat., NBC]

Brian Trumbore

 



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Week in Review

10/31/2015

For the week 10/26-10/30

[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. 

Edition 864

Washington and Wall Street

For some of us, it was one of the better weeks in Washington in some time.  Representative Paul D. Ryan of Wisconsin was elected speaker of the House, receiving a solid 236 votes (to 184 for Nancy Pelosi, plus 12 ‘others’) that included some of the hardline conservative members of the Freedom Caucus that had caused the ouster of John Boehner.  Ryan is the right man for the times, a highly talented member of Congress who is now second in line to the presidency.  Here’s hoping the Freedom Caucus gives him some space, which I think they will since he has promised to take their concerns about “process” seriously.

“We’re going to move forward.  We’re going to unify,” Ryan said during brief remarks on Wednesday.

Ryan benefits from his predecessor’s 'cleaning out the barn,' as Boehner himself put it, by negotiating an $80 billion bipartisan budget agreement that would increase spending for the military and some popular domestic programs, lift the debt ceiling and avert premium increases of as much as 50 percent for millions on Medicare right before an election.

But Ryan still faces a score of weighty decisions heading into 2016.  He has backed the Trans-Pacific Partnership trade pact, which still must get through Congress, and issues like cybersecurity and overhauling criminal justice laws will run up against presidential politics.  And you have various House committees, such as on Benghazi and the possible impeachment of IRS Commissioner John Koskinen (see below).

Ryan, though, can take the lead on tax reform, an issue he is an expert on, and maybe after all these years he is the one who can push it forward.

Billy House / Bloomberg

“Ryan inherits a party conference that’s divided over whether to cooperate with Democrats and the Obama administration to forge agreements such as the two-year budget deal passed Wednesday by the House, or instead use their power over the purse to try to force policy concessions from the president.

“ ‘Let’s be frank; the House is broken,’ Ryan said in a speech after taking the gavel from Democratic leader Nancy Pelosi to loud applause from lawmakers.  ‘We’re not solving problems, we’re adding to them, and I am not interested in laying blame.  We are not settling scores.  We are wiping the slate clean.’

“Reaching across the aisle, he urged Democrats and Republicans to work together, saying, ‘We will not always agree,’ but ‘if you have ideas, let’s hear them.’  He also cited the pressures felt by many working Americans.

“ ‘What a relief to them it would be if we finally got our act together,’ Ryan said.  ‘How reassuring it would be if we actually fixed the tax code, put patients in charge of their health care, grew our economy, strengthened our military, lifted people out of poverty, and paid down the debt.’”

While at first he balked for political expediency, Ryan did end up backing the bipartisan budget accord, which the Freedom Caucus blasted as a “fiscal monstrosity.”  Ryan conceded the secret process in which party leaders negotiated it “stinks.”

So early Friday morning, the Senate passed the budget deal, 64-35, with President Obama poised to sign it into law.  The debt ceiling is raised through March 2017, allowing the government to continue to borrow money to pay its bills, and it lifts budget caps on military and domestic programs by the aforementioned total of $80 billion over two years, which reduces the possibility of a government shutdown when current funding for federal agencies expires.

The increased spending, divided equally between military and domestic programs – would be offset by changes in Social Security to achieve $168 billion in long-term savings, though some voting against say the “savings” are nothing more than smoke and mirrors.

Senate Majority Leader Mitch McConnell said the bottom line is: “This is a fully-offset agreement that rejects tax hikes, secures long-term savings through entitlement reforms, and provides increased support for our military.”

Congress must still adopt spending bills for the two years, but the budget accord significantly reduces the risk of a shutdown by setting spending targets.

As expected, two presidential candidates – Rand Paul and Ted Cruz – were fiercely opposed.              

Meanwhile, there was a slew of economic data this week, as well as a Fed meeting.

We saw our first estimate of third quarter growth and the figure was 1.5%, a little less than expected and down from the 3.9% rate of the prior period, owing in large part to an inventory drawdown (after inventories surged in the second quarter).  But household spending grew a solid 3.2% in Q3 so the Fed will ignore the 1.5% number.  Bottom line, GDP continues to chug along at just a 2% clip...better one quarter, lower the next.

2015...Q3...1.5%
2015...Q2...3.9%
2015...Q1...0.6%
2014...Q4...2.1%
2014...Q3...4.3%
2014...Q2...4.6%
2014...Q1...-0.9%

The Atlanta Fed’s GDPNow prognosticator pegged Q3 GDP at 1.1% the day before the release.

Separately, September new-home sales fell a far greater than expected 11.5% to 468,000 annualized, when 550,000 was forecast.

September durable goods (big-ticket items) fell a greater than expected 1.2%, but the Chicago Purchasing Managers Index for October came in at a solid 56.2, the second best since January, when it was forecast to be at 49.8...so this was good.

Lastly, readings on personal income and consumption for September came in up just 0.1% on both, but August readings were strong.

As for the Federal Reserve’s Open Market Committee meeting, Chair Janet Yellen and her band of merry pranksters left the door open to an increase in short-term rates at the December 15-16 meeting as the Fed dropped previous warnings on global financial risks and economic developments from its accompanying statement.

The FOMC said there had been a slowing in the pace of job growth, but household spending and capital investment had remained solid.

But whether the Fed moves or not probably comes down to the two jobs reports we will see prior to their yearend confab.  Solidly positive, say 200,000+ in each, would put a ton of pressure on the Fed to act.  Two disappointing reports, or one good and one putrid, gives them cover to wait further.

As for stocks, heckuva rally in October, globally, as the S&P 500 rose 8.3%, the Dow Jones 8.5% and Nasdaq 9.5%, the best month for all three since October 2011.  Europe’s Stoxx 600 index had its best month since July 2009, up 8%, while Tokyo’s Nikkei rose 10%.

Europe and Asia

There were some eurozone data releases.  The Euro area unemployment rate for September was 10.8%, down from 10.9% in August and from 11.5% in September 2014.  [It’s 5.1% in the U.S.]  While still high, it’s the lowest since January 2012.

The lowest rates, as compiled by Eurostat, were recorded in Germany (4.5%...though the government pegs it at 6.4%), Czech Republic (4.8%) and the U.K. (5.3% in July), with the highest still in Greece (25.0% July) and Spain (21.6%).  Others...France (10.7%), Italy (11.8%...lowest since Jan. 2013 and good news for Prime Minister Renzi), Portugal (12.2%) and Ireland (9.4%).

The youth rates are still sky high in Greece (48.6%, July), Spain (46.7%) and Italy (40.5%).

On the inflation front, a flash estimate for euro area inflation in October pegs it at 0.0% on an annualized basis, not quite the ECB’s 2% target, though better than September’s -0.1% reading.

Spain’s economy posted its ninth straight quarter of positive GDP growth, though the pace of acceleration has slowed.  Overall the economy grew 3.4% over the last 12 months, according to preliminary figures from the national statistics bureau, with growth in the third quarter at 0.8%, down from 1.0% in Q2.  Record spending by foreign tourists has helped speed the country’s recovery from the double dip recession precipitated by the massive real estate bubble.

Growth in the U.K. for the third quarter was pegged at 0.5% over the second quarter, 2.0% on an annualized basis, slower than Q2’s 0.7% pace, according to the National Statistics Office, but far from a concern with wages still rising, which is propping up consumer spending.

And in Greece, there remains uncertainty after all on whether the Troika, the creditors – the European Commission, the European Central Bank, and the European Stability Mechanism – want to keep Greece afloat after it was revealed in a German newspaper that the government of Prime Minister Alexis Tsipras had followed through on only 14 of the 48 reforms he had agreed to in August for a third, 86bn euro, or $95 billion, bailout.

This weekend the IMF, which is not part of the bailout as yet, is examining the moves taken by Athens to date to see if it is complying before adding its own funds.  The IMF is still insisting some of Greece’s debt be forgiven, which Germany says is illegal.  Germany is the largest contributor to the bailout fund.

So will Greece reemerge as a serious issue?  Follow the credit markets for early clues.

On the migration front, Austria announced plans Wednesday to erect barriers along parts of its border, but insisted this was being done just to bring order to the flow of people entering the country.

Slovenia, the main migrant entry point to Austria, also said it was building a fence.  Germany’s Interior Minister Thomas de Maiziere announced it was taking steps to reduce the load, saying that while most Syrians will be accepted, many of the Afghans teeming across will be sent back.  Germany was also increasingly lashing out at Austria, accusing Vienna of sending hundreds of refugees across the border without any warning or supervision.

A record 83,600 streamed into Slovenia in 10 days; 58,000 of these then moving onto Austria (the rest were at Slovenian reception/registration centers), with the potential for 13,000 a day in the coming weeks.  This little place can’t handle that load.

Gideon Rachman / Financial Times

“At the beginning of this year, Angela Merkel had a good claim to be the most successful politician in the world.  The German chancellor had won three successive election victories.  She was the most dominant political figure in Europe and hugely popular at home.

“But the refugee crisis that has broken over Germany is likely to spell the end of the Merkel era.  With the country in line to receive more than a million asylum seekers this year alone, public anxiety is mounting – and so is criticism of Ms. Merkel, from within her own party.  Some of her close political allies acknowledge that it is now distinctly possible that the chancellor will have to leave office, before the next general election in 2017.  Even if she sees out a full term, the notion of a fourth Merkel administration, widely discussed a few months ago, now seems improbable.

“In some ways, all this is deeply unfair.  Ms. Merkel did not cause the Syrian civil war, or the troubles of Eritrea or Afghanistan. Her response to the plight of the millions of refugees displaced by conflict has been bold and compassionate. The chancellor has tried to live up to the best traditions of postwar Germany, including respect for human-rights and a determination to abide by international legal obligations.

“The trouble is that Ms. Merkel’s government has clearly lost control of the situation.  German officials publicly endorse the chancellor’s declaration that ‘We can do this.’  But there is panic just beneath the surface: costs are mounting, social services are creaking, Ms. Merkel’s poll ratings are falling and far-right violence is on the rise.  Der Spiegel, a news magazine, wrote this week that: ‘Germany these days is a place where people feel entirely uninhibited about expressing their hatred and xenophobia.’

“As the placid surface of German society is disturbed, so arguments about the positive economic and demographic impact of immigration are losing their impact.  Instead, fears about the long-term social and political effect of taking in so many newcomers – particularly from the imploding Middle East – are gaining ground....

“Regardless of the chancellor’s personal fate and reputation, the refugee crisis marks a turning point.  The decade after Ms. Merkel first came to power in 2005 now looks like a blessed period for Germany, in which the country was able to enjoy peace, prosperity and international respect, while keeping the troubles of the world at a safe distance.  That golden era is now over.”

Benjamin Weinthal / Jerusalem Post

“Germany’s security and intelligence agencies expressed alarm over the influx of refugees and migrants who harbor radical Islamic views and hatred of Jews, according to a Sunday report in Welt am Sonntag.

“According to a security document obtained by the paper and read by top-level agency personnel, ‘We are importing Islamic extremism, Arab anti-Semitism, national and ethnic conflicts of other peoples as well as a different societal and legal understanding.’

“The newspaper wrote that security sources warn that ‘the integration of hundreds of thousands of illegal migrants in Germany is no longer possible in light of the number and already existing parallel societies.’

“The term ‘parallel societies’ in Germany is frequently defined as insulated Muslim communities that have little or no contact with mainstream society.”

You could easily add these four paragraphs to Gideon Rachman’s op-ed.

Turning to Asia, in China, last weekend, an official with the People’s Bank of China talked of 6%-7% growth over the next 3-5 years, as the Communist Party’s Central Committee met for four days to establish the new Five-Year plan.

Then Premier Li Keqiang highlighted a minimum growth estimate for his country in the coming five years of 6.5% to meet the government’s goal of establishing a “moderately prosperous society.”  Li added the central bank should not adopt quantitative easing to flood the economy with too much money.

Overall, Li said: “The hard work of people up and down the country and the enormous potential of China’s economy gives us more confidence that we can overcome the various difficulties.”

But the deputy head of the China Iron & Steel Association said on Wednesday, demand is collapsing along with prices, banks are tightening lending and losses are stacking up.

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening.”

China’s mills produce about half of worldwide output and are battling against oversupply and falling prices as consumption shrinks for the first time in a generation amid the real estate slowdown.

In Japan, on Friday the benchmark Nikkei 225 index rose to a two-month high after the country’s central bank decided to keep its monetary easing policy steady. 

Forecasts for economic growth for the year to March 2016 were lowered to 1.2% from 1.7%, while the bank’s 2% inflation target was also pushed back by about six months.

Earlier on Friday, a string of domestic data showed Japan’s core consumer inflation number had fallen 0.1% in September from a year ago, while household spending fell 0.4% year-on-year and unemployment remained steady at 3.4% compared to August.

Street Bytes

--It was the fifth consecutive weekly gain for the major averages, though the gains were minimal as the rally is showing signs of fatigue.  The Dow Jones rose 0.1% to 17663, the S&P 500 added 0.2% and Nasdaq gained 0.4%.  Earnings and revenues remain down as reporting season comes to a close.

--U.S. Treasury Yields

6-mo. 0.22%  2-yr. 0.72%  10-yr. 2.14%  30-yr. 2.92%

--Deutsche Bank announced that as part of its sweeping strategic overhaul it will exit 10 countries and cut 9,000 jobs.  Plus, it will slash the number of consultants advising the bank by 6,000, and another 20,000 through selling its Postbank subsidiary and a separate operation; so, in total, 35,000.

Most of Deutsche’s cutbacks will come in Latin America, where it is ceasing operations in Argentina, Chile, Peru, Mexico and Uruguay, while shifting its trading operation in Brazil elsewhere.

In Europe, it’s withdrawing from Denmark, Finland and Norway.

--Apple sold 48 million iPhones in its fiscal fourth quarter, boosted by an 87 percent jump in sales in China from the same period a year ago, as the company beat earnings expectations, reporting $1.96 a share.

Overall revenues rose 22 percent to $51.5bn in the quarter, though this figure would have been 8 percentage points higher without the impact of a strong dollar, Apple said.

Back to China, while the year-over-year sales growth for all products was actually 99 percent, they fell 5 percent quarter-on-quarter, owing to China’s slowdown, though CEO Tim Cook was dismissive of the issue.  “We continue to focus and invest heavily there.”

Apple is however increasingly reliant on iPhones, which account for 63 percent of revenues compared with 56 percent a year ago, and the company forecast it will only slightly surpass last year’s record of 74.5 million iPhones sold during the crucial holiday season.

The company forecast revenues of between $75.5bn-$77.5bn for the three months to December, implying year-on-year sales growth of 3-4 percent.  Gross margins will remain strong at 39-40 percent.

Apple does not break out sales figures for its Watch, which falls under the “other products” segment, including accessories such as iPods and Beats Headphones.  The division posted a sales jump of 61 percent over the prior year to $3bn.

But on the week the shares were unchanged.

--Shares in Alibaba Group Holding Ltd. posted a better-than-expected 32% rise in revenue with profit of $3.57 billion, which also beat the Street for the third quarter, though when you take out the impact of a revaluation of its stake in Alibaba Health, the company fell short.

The shares rose, though, largely on a nice increase in revenue from mobile gadgets.

--Pfizer and Allergan are in “friendly discussions” that would create the world’s largest drugmaker with a market capitalization of more than $300 billion, though discussions are still in the preliminary stage.

If a deal was completed, the combined entity would be larger than Johnson & Johnson, which has a market cap of about $277bn.

Allergan is best known as the maker of Botox, but a deal would allow Pfizer to complete a “tax inversion” that would slash its U.S. corporate tax bill, Allergan being headquartered in Ireland, where it paid an effective tax rate of 4.8 percent last year compared to Pfizer’s 25.5 percent.

Last year, Pfizer attempted a takeover of London-listed AstraZeneca, but was forced to withdraw in the face of opposition from British politicians and company management.

--ExxonMobil and Chevron both reported big drops in third-quarter profits because of plunging crude, but, both handily beat earnings expectations and the share price rose in each case.

Chevron, however, said it was cutting capital spending and operating costs, and would slash between 6,000 and 7,000 jobs from its 64,700-strong workforce, a cut of up to 11 percent.

Both companies benefited from the strength of their refining divisions, which were boosted by higher margins as the price of crude fell further than that of refined products such as petrol and jet fuel.

Exxon’s total production was up 2 percent, as new projects in Canada, Indonesia, west Africa and the U.S. offset steep falls in gas output in the U.S. and Europe.

Chevron’s production was down 1 percent, with capital spending down 13 percent for the first nine months.  Exxon’s cap-ex was down 16 percent for the same period.

--BP said on Tuesday that its profit in the third quarter fell to $46 million, compared with $1.3 billion a year earlier.  CEO Robert W. Dudley said in a statement, “We are now in action to rebalance our financial framework in this new price environment.”

The company is basing its outlook on $60 oil through 2017.

--Royal Dutch Shell reported a pre-tax loss of more than $9bn after shelving several major projects, including a drilling campaign in the Arctic and another in Canada’s oil sands.

The massive loss ($7.4bn post tax) compares to an $8.1bn profit during the same period in 2014.

--Mexico’s state-owned energy company Pemex reported net losses of nearly $9.9bn for the September quarter, Pemex’s 12th straight quarterly loss.

In addition to the double whammy of falling prices and lower production, the slide in Mexico’s peso against the U.S. dollar took its toll.

But the company is also being hit by sky-high government tax bills as Pemex looks for revenues.

--The International Monetary Fund issued a report this week that concluded if oil stays around $50 a barrel, most countries in the Middle East such as Saudi Arabia will run out of cash in five years or less.  Low oil prices will wipe out an estimated $360 billion from the region this year alone, the IMF said.

Huge budget surpluses are quickly swinging to massive deficits.

The IMF estimates Saudi Arabia needs to sell oil at $106 to balance its budget, which wouldn’t be an issue in the short term as they just tap into their rainy day funds, but these funds are rapidly running dry already.

At the same time, the Saudis can’t slash social spending too much without taking a big political gamble.  [CNN.com]

--U.S. natural gas prices slumped to their lowest levels since 2012 this week, $2.00 per million British thermal units, before rebounding to $2.32 at week’s end.  2012 saw an extraordinarily mild winter which crushed demand and the forecast for this winter is increasingly looking the same due to El Nino.

In fact this coming week will see well-above temps across a wide part of the country.

--Shares in Twitter fell sharply after its latest set of results showed a slowing in user growth as well as a forecast that missed analyst expectations.

As analysts at Nomura argue, the three- to five-year outlook is muted: “It is difficult for investors to look past the empirical results at hand: third quarter monthly active user results and 4Q revenue and earnings guidance were both below Wall Street estimates owing to tepid user growth and a decelerating monetization.

“While investors are hopeful that restructured leadership can engineer a revival via new products like Moments, as long as Twitter user growth remains stalled, it will be difficult for revenue to reaccelerate, muting the 3-5 year growth outlook.”  [Financial Times]

User growth was just 8% over year ago levels to 320 million and marked Twitter’s slowest pace as a public company.  Revenue growth was 58%, but this has been falling since the second quarter of 2014 and the company said fourth-quarter revenue would be in a range of $695 million to $710 million, well below analysts’ current forecast of $740 million.

--Shares of LinkedIn soared 11% after the company handily beat on both the top and bottom line for the quarter.  The company also issued solid guidance for the current quarter.  LinkedIn earned $0.78 per share, $0.33 better than consensus, while revenues rose 37.2% to $779.6 million vs. the $756 million analysts’ expected.

--IBM disclosed the SEC is conducting an investigation related to the company’s revenue recognition.  An IBM spokesman said in a statement, that in cooperating with the SEC, “We are confident that the results and information we report have been appropriate and consistent with GAAP.”

Last week, IBM cut its full-year profit forecast and reported its 14th straight quarter of falling sales.

The SEC has had issues in the past with IBM’s revenue recognition, including a probe of revenue from offsite cloud services, but opted not to recommend any enforcement action.

--Starbucks reported earnings in-line with estimates, while revenue was also as forecast, $4.9 billion for the quarter.  Global comp sales increased a very solid 7%, driven by a 3% increase in traffic.  China/Asia Pacific comp sales rose 9%. [I saw other reports with slightly different figures, but I’m running with these from the original release.]

Starbucks’ current earnings forecast falls shorts of the Street’s expectations as the company spends more on labor and technology.  Regarding the former, Starbucks has been offering college-tuition benefits while boosting wages. 

--United Parcel Service Inc. posted third-quarter net profit of $1.26 billion, with revenue falling slightly vs. a year ago; both short of the Street’s expectations and the shares fell in response.

CEO David Abney said in a statement, “Third-quarter results reflect strong progress on our long-term initiatives despite uneven economic conditions.”

Taking out the impact of the strong dollar, revenue would have risen 1.8%.

The company expects to deliver more than 630 million packages this holiday season, an increase of more than 10% from last year.

--Shares in diesel engine maker Cummins Inc. cratered after the company reported profits that missed expectations, while announcing it would lay off up to 2,000 amid global weakness that continues to weigh on sales.  Sales in “key end markets” Brazil and China are “at multi-year lows” and there is no sign that these markets will rebound in the short term, according to CEO Tom Linebarger.  “Given the uncertainty in the global economy, we expect challenging conditions to persist for some time,” he said.

--Merck & Co. boosted its earnings guidance for the year, even though sales fell 5% in the recent quarter due to currency headwinds.  While its arthritis treatment Remicade was hit by low-cost competition in Europe, it’s Type 2 diabetes treatment Januvia posted a 10% sales increase.

--Besieged Valeant Pharmaceuticals International Inc. tried to reassure shareholders that its accounting and disclosures were sound, but after a tumultuous week that saw the shares plunge 35%, CEO J. Michael Pearson told analysts on a Monday call the company had found “no evidence whatsoever” of illegal activity, following allegations of fraud by a short-seller.

But by week’s end, Valeant cut its relationship with Philidor Rx Services LLC, a specialty pharmacy company that handles insurance issues and fills prescriptions for Valeant drugs.  Earlier, CVS/Caremark and others cut their own ties to Philidor.

Then hedge-fund manager Bill Ackman held a conference call for nearly four hours Friday to defend his own $4 billion investment in the company and Valeant shares cratered another 16% to $93.80, down from its Oct. 16 high of $177.50.

The short seller who helped precipitate the crisis, Andrew Left, tweeted during the call that he was going to release information Monday that he said would show Valeant was “dirtier than anyone has reported.”  That sent the shares lower.

--Walgreens is buying Rite Aid for more than $9.4 billion in a move that will significantly bolster its influence with drug makers and pharmacy benefit managers.  But the feds may be concerned with anti-trust matters and greatly reduced competition.

Walgreens had previously acquired Duane Reade, USA Drugs and Kerr Drugs to grow to more than 8,200 stores with revenue of $76 billion last year. 

Buying Rite Aid would give it an additional 4,600 stores in 31 states.  Friday, Walgreens said it was willing to give up 1,000  locations to satisfy the government.

--Ford Motor Co. earned $1.9 billion in net income in the third quarter, more than double last year’s profits as strong U.S. results offset weakness elsewhere, such as in China, Russia and Brazil.  At least volumes in Western Europe have rebounded from a collapse associated with the financial crisis, though Ford has yet to return to profitability there.

The company warned, though, that fourth-quarter profitability will be impacted by higher seasonal costs as well as payouts related to a new contract with the United Auto Workers.

Overall, third-quarter revenue rose 9% to $38.1 billion.

--The fallout from the diesel emission scandal began to have an impact on Volkswagen in the third quarter as the automaker swung to a net loss of over $1.8 billion; largely due to a $7.5bn charge VW said it would take to cover the costs of the crisis.

The gloom is expected to be far more widespread in the current quarter.

Revenue did rise 5.3% vs. a year ago, because the news didn’t hit until mid-September.

--GM issued another recall, 1.4 million vehicles, including 1.3 million in the United States, because oil dripping on hot engine components continues to cause fires despite three earlier recalls.

The company announced it was aware of 1,345 fires in vehicles repaired before, resulting in 19 injuries described as minor.  The models impacted are all over 10 years old, including the 1997-2004 Pontiac Grand Prix and 2000-4 Chevrolet Impala.

Separately GM and the United Auto Workers struck a tentative labor deal, avoiding a strike.  Details aren’t available yet, but the deal covers 52,600 union-represented members at GM.

Previously, the UAW reached an agreement with Fiat Chrysler, but it was voted down by its 40,000 UAW workers.  UAW President Dennis Williams then secured a favorable vote the second time around after winning higher wages and firmer investment commitments.

GM has outlined plans for $5.4 billion in U.S. investments in recent months. [Christina Rogers and Gautham Nagesh / Wall Street Journal]

The UAW’s negotiations with Ford remain.  Bigger profits in the industry mean better deals for workers, and this is good.

--Toyota returned to the top slot in global vehicle sales after releasing figures for the first nine months of the year.  Toyota sold 7.5 million in the first three quarters of 2015, beating Volkswagen’s 7.43 million and General Motors’ 7.2 million.

VW had been ahead of Toyota for the first half of 2015.

--Northrup Grumman Corp. won an intense four-year competition to build the nation’s new fleet of long-range stealth bombers, besting a team from Boeing and Lockheed Martin Corp. to build 80 to 100 of the aircraft over the next decade for an estimated $60 billion.  This should result in thousands of jobs in Southern California.

--As a loyal (and frankly huge) customer of Staples, I can’t help but note the passing of the office supplies chain’s founder, Thomas Stemberg, 66.

Stemberg had been a New England grocery executive but left after a dispute with his bosses.  One day, driving around the Boston area searching unsuccessfully for printer ribbon in 1985 on the Fourth of July weekend, with the stores closed, he came up with the idea for Staples.

From this idea came a chain with sales of $22.5 billion and 83,000 employees last year.

--Shares in GoPro tanked 17 percent on Thursday as the wearable-camera maker came out with weaker-than-expected sales and profit guidance for the fourth quarter.  As in the company now forecasts sales of $500m to $550m, vs. initial projections of $677m.  GoPro also forecast earnings would be substantially lower.  The shares closed the week at $25.00, just $1 above its IPO price and down from a high of $87.50.

--Heineken reported 5%+ organic growth in beer volumes for the recent quarter, more than doubling estimates, thanks to “strong volume in Europe supported by favorable summer weather” and growth in the Americas and Asia Pacific region.  Total revenues for the quarter were up 8%.  Very impressive.

--According to a study from consulting firm AECOM, conducted for the New York Road Runners club, the New York City Marathon (Sunday) generates $415 million in commerce.  The race last year drew 50,530 finishers from 130 countries.  The $415 million reflects the overall direct spending by participants, visitors and guests, plus the ripple effect.

--CNBC had 14 million viewers for its Republican debate on Wednesday, easily a record for the network.  Typically CNBC averages about 343,000 viewers in prime time.  Lots of coverage on this fiasco down below.

--While Macy’s is among those opening their stores early on Thanksgiving, outdoor retailer REI picked up some valuable publicity by declaring war on Black Friday, saying it will be closed the day after Thanksgiving, and will pay its 12,000 employees as though it were a regular workday, “so they can do what they love most – be outside.”

REI (Recreational Equipment, Inc.), though, is a private company and it’s easier to make such a move when you are.

Foreign Affairs

Iran/Russia/ISIS/Syria/Iraq: Talks began in Vienna among international foreign ministers in a bid to find a political solution to the conflict in Syria.

Saudi Foreign Minister Abdel al-Jubeir said Iran must accept the removal of President Bashar al-Assad as part of any solution, with Iran being at the talks for the first time; other parties including the U.S., Turkey, Russia, other Gulf Arab nations, as well as the UK, France, Germany, Egypt, Lebanon and the EU.

Iran’s Quds newspaper sees Iran’s invitation to the talks as U.S. “acknowledgement of Iran’s influential position in resolving the Syrian crisis.”

Saudi Arabia’s Al-jazirah warned of “more Iranian political and military expansion” should Assad remain in power, leading to Tehran “[reshaping] everything for its own benefits.”

Lebanese daily Al-Nahar speculates the U.S.’s “sudden decision” to invite Iran to the talks “reflects changes that occurred because of the Russian military intervention.”

In a speech ahead of the talks, U.S. Secretary of State John Kerry said: “At the end of the day, nothing would do more to bolster the fight against Daesh [ISIS] than a political transition that sidelines Assad so that we can unite more of the country against extremism.”

But Kerry stressed that the U.S. and Russia also shared “common ground,” arguing both want “a united, secular Syria.”  [BBC News]

So I wanted to open in this haphazard fashion because the talks are now center stage, but the crisis is worse than ever.  I said back in 2012...2012...it was “over.”  Over in terms of finding a solution, due in large part to U.S. inaction.  Since then, more than 230,000 of the 250,000+ total deaths in the war have occurred, with 11 million displaced, four million of whom have fled abroad, including increasing numbers to Europe.

Basically, the Saudis and most Western powers see Bashar al-Assad as an obstacle, while the Russians and Iranians see him as a partner.  Is there any way the two sides compromise?  The Saudis sure as heck don’t want to, but the U.S. is clearly sending out signals it is willing to see Assad stay for a short length of time during any transition in leadership.

That’s the outline.  But here’s how tragically farcical it all is....

Gen. Joseph F. Dunford Jr., chairman of the Joint Chiefs of Staff, indicated that Russian bombing and Iranian-backed forces have helped give Assad and his overstretched forces an advantage.

“The balance of forces right now are in Assad’s advantage,” Dunford told the Senate Armed Services Committee.  Then, in discussing U.S. efforts to find a reliable military partner in Syria, Dunford said, “No one is satisfied with our progress to date.”

Assad has clearly received a boost and he is in a stronger position than he’s been since the start of the crisis.

Defense Secretary Ashton Carter said Russia appears to be “doubling down” on its support for Assad.

In coming weeks, the Pentagon has said it plans to step up its campaign against ISIS, including combat forces.  At the least, President Obama’s most senior national security advisers are recommending U.S. troops be moved closer to the front lines in both Iraq and Syria.

And then on Friday, the White House released a statement:

“The President has authorized a small complement – fewer than 50 – of U.S. Special Operations Forces (SOF) to deploy to northern Syria, where they will help coordinate local ground forces and Coalition efforts to counter ISIL.”

More close air-support A-10 “Warthog” planes are on the way, as are an increase in F-15 fighter jets to Incirlik Airbase in Turkey.

Earlier, General Dunford said the U.S. would be “more aggressive” with air strikes aimed at destroying the oil enterprise operated by ISIS.

It was just in May that it appeared Assad was going to be forced to retreat to its core areas, including Damascus and territories west to coastal Latakia, the Alawite stronghold.  ISIS had overrun Palmyra and rebel forces were in Damascus’ suburbs.

But then the Russians got into the fight.  And now the U.S. has boots on the ground.  Far more on this decision next week.

Lastly, Iranian security forces arrested an Iranian-American businessman, Siamak Namazi, an executive with Crescent Petroleum Co., after he was visiting relatives in Tehran from his home base in Dubai.

Namazi had been promoting improved ties between the two countries.

He is the fourth Iranian-American to be detained by the regime in recent years, including Washington Post reporter Jason Rezaian, all having been accused of espionage and/or subversion.

Namazi’s friends told the Wall Street Journal, Iranian intelligence agents “ransacked his family home in Tehran and confiscated his computer, and have since been launching cyberattacks on some of his email contacts.”

As for the sanctions, Iranian President Rohani said he expected them to be lifted by year end.  As soon as Iran neuters its plutonium reactor at Arak; reduces its nuclear enrichment capacity and storage by removing scores of centrifuges, among other things; and increases transparency and access at its declared nuclear facilities, the agreement would be formally implemented, though the Obama administration has said this will take four to six months.

But Supreme Leader Ayatollah Ali Khamenei has said Iran will not begin implementation until the U.N.’s International Atomic Energy Agency declares an end to its investigation into Iran’s past nuclear work.  [Jerusalem Post]

On the battle front, the U.S. said Russian military aircraft hit another hospital while carrying out bombing raids in Syria.  Doctors Without Borders told Reuters on Thursday that air strikes in northern Syria had hit 12 hospitals, though it didn’t specify which nations carried out the bombings. The State Department said it has information it was Russian military aircraft in at least some of them.

The Saudis continue to give forces opposing Assad more sophisticated weapons to their Sunni brethren.

On Friday, Russia’s deputy foreign minister Sergei Ryabkov said that no country could use military force in Syria without first securing the agreement of the Syrian government, responding to the prospect of the United States launching a ground operation there.

“The question of using military force in any form without the agreement of Damascus is for us unacceptable,” TASS news agency quoted him as saying.

As for ISIS, this week they executed three people in Palmyra by binding them to three historic columns and blowing them up, a monitoring group said.

Finally, former British Prime Minister Tony Blair caught a lot of heat for giving a qualified apology for his role in the 2003 Iraq war, admitting he had not properly understood the chaos that would follow the ouster of Saddam Hussein and conceded it helped lead to the rise of ISIS. 

In comments to CNN last weekend, Blair said: “I apologize for some of the mistakes in planning and, certainly, our mistake in our understanding of what would happen once you removed the regime.”

Asked if the war was the “principal cause” of the rise of the Islamic State militant group, he replied: “I think there are elements of truth in that.”

“Of course you can’t say those of us who removed Saddam in 2003 bear no responsibility for the situation in 2015,” he said.

But he also said, “I find it hard to apologize for removing Saddam.  I think even from today in 2015, it is better that he’s not there than that he is there.”

Blair was accused by families of British soldiers killed in Iraq of using the CNN interview to “pre-empt” the publication of a report into the conflict by Sir John Chilcot that is due out in the coming months, a report first ordered by Gordon Brown way back in 2009.

Turkey: Turks go to the polls on Sunday in a re-run of the parliamentary elections of five months ago that ended up in a hung parliament.  This is seen as an attempt by President Recep Tayyip Erdogan to entrench himself in power, and it comes amid the chaos of the war in Syria, suicide-bombings at home, a renewed war against the Kurdish PKK guerrillas, assaults on the media, a war on an independent judiciary and a general sense of unease throughout the country.

Erdogan is looking to restore his Justice and Development (AK) party after it lost its majority in June, but rather than attempt to form a coalition government, he cracked down and called the re-vote, while squelching the peace process with the Kurds, whose pro-Kurdish People’s Democratic Party (HDP) has become a force.

For example, the Turkish military struck Kurdish fighters in Syria at least twice this week after they defied Ankara’s warning not to cross west of the Euphrates River.  Ankara is concerned the Kurdish YPG militia (similar to the PKK) will fuel separatist ambitions among Kurds in Turkey’s southeastern territories, but the U.S. has been supporting the YPG as an effective force in combating ISIS.

China: As I wrote last week, there was a growing groundswell of support for scrapping Beijing’s one-child policy and, sure enough, on Thursday, the government announced it was ending it after 36 years in a clear sign it is concerned over the demographics as the country ages and the birthrate collapses.  The birthrate has almost halved over the past 20 years.

So now a couple will be allowed to have two children.

The thing is, in many respects it’s already too late. China’s working age population fell 3.71 million in 2014, so it’s facing a crisis where it may not have enough workers both today and tomorrow. Experts said it would take two decades for babies born under the relaxed policy to have a significant effect on the workforce.

But an increase in births could have an economic impact as soon as mid-2016.  Think diapers and baby formula.

The one-child policy originally came about as a way to conserve resources at a time when widespread poverty would have worsened with unregulated population growth.

But while the Communist Party has said this led to 400 million fewer births, it also caused China’s average age to soar.

On the diplomatic front, China’s naval commander told his U.S. counterpart that a minor incident in the South China Sea could spark a war if the United States did not stop its “provocative acts,” such as in the other day when a U.S. warship sailed within 12 nautical miles, the limit under international maritime law, of one of Beijing’s man-made islands, though the limit does not extend to submerged features that have been artificially raised above sea level as is the case here.

Admiral Wu Shengli made the comments to U.S. chief of naval operations Admiral John Richardson during a video teleconference on Thursday, according to a Chinese naval statement.

“If the United States continues with these kinds of dangerous, provocative acts, there could well be a seriously pressing situation between frontline forces from both sides on the sea and in the air, or even a minor incident that sparks war,” a statement paraphrased Wu as saying.  [South China Morning Post]

At least the two sides are talking and the U.S. said it would follow protocols to avoid clashes, while a U.S. official said Richardson told Wu the U.S. would continue to sail wherever international law allows.

Meanwhile, President Xi Jinping concluded his state visit to Britain and the government of Prime Minister David Cameron rolled out the red carpet in a big way, far more than the United States did for Xi the other week.  London showed it was attempting to build another special relationship, a la its so-called one with the United States, and Cameron has been aggressive in cementing economic ties, including China’s role in a new British nuclear plant.

But many analysts hope Cameron doesn’t go too far and jeopardize Britain’s old ties with the United States or alienate other Western allies.  The special treatment accorded Xi has already drawn criticism in the West.  For example, the U.K.’s actions are undermining Washington’s interests in pushing China on human rights, respect for the rule of law, the South China Sea issue, etc.

Lastly, on a totally different topic, it’s kind of funny China’s Communist Party recently expressed its disdain for golf, barring its members from joining golf clubs, when this week the PGA Tour’s HSBC Champions, a World Golf Championship event, arrives in Shanghai, which as Golf World’s Geoff Shackleford wrote, “could make the tournament proceedings a tad awkward.”

Russia: NATO allies are mulling the deployment of 4,000 troops to countries bordering Russia in a bid to deter Moscow from future adventurism into the likes of Poland or the Baltics, a move that if it comes about would be greeted with fury by the Kremlin.

As first reported by the Irish Independent (before I saw an extensive Wall Street Journal piece on same), “One plan reportedly under consideration would see battalions of 800 to 1,000 troops deployed to Poland, Lithuania, Latvia, and Estonia.

“A less extensive plan would see a single battalion deployed to the region.”

All nations involved would have to agree to place their forces there under NATO command.

Germany, though, is said to be wary of making a large deployment that could provoke a response from Russia with the ceasefire in Ukraine holding.

Vladimir Putin has said in the past he considers NATO a security threat and a deployment would be seen in Moscow as a violation of a 1994 agreement forbidding troops in frontier lands.  But this is the same agreement Russia has constantly violated.

Separately, as first reported in the New York Times by David E. Sanger and Eric Schmitt:

“Russian submarines and spy ships are aggressively operating near the vital undersea cables that carry almost all global Internet communications, raising concerns among some American military and intelligence officials that the Russians might be planning to attack those lines in times of tension or conflict.

“The issue goes beyond old worries during the Cold War that the Russians would tap into the cables – a task American intelligence agencies also mastered decades ago. The alarm today is deeper: The ultimate Russian hack on the United States could involve severing the fiber-optic cables at some of their hardest-to-access locations to halt the instant communications on which the West’s governments, economies and citizens have grown dependent.”

Poland: The people woke up Monday morning to a new political order that will have ramifications for all of Europe.

Poland’s conservative opposition triumphed in Sunday’s parliamentary elections, with the Law and Justice party, or PiS, winning a majority, displacing the center-right Civic Platform party (PO).

The PiS positions itself as a defender of Poland’s Catholic roots and won based on its pledges to prioritize local companies over foreign ones while expanding programs for pensioners and workers.

But the party’s leader, Jaroslaw Kaczynski, is a fierce critic of Moscow, as well as Brussels and Berlin, so he’s a major Eurosceptic.  The PiS is also a strong opponent of increased immigration from outside the EU and Kaczynski is an outspoken admirer of Hungarian leader Viktor Orban.

Kaczynski is a former prime minister and twin brother of President Lech Kaczynski, who was killed in a 2010 plane crash.  Jaroslaw did not run as the party’s candidate for prime minister, though he is clearly the power behind the scenes.  The prime ministership will go to party veteran Beata Szydlo.

So here you have another example of Europe’s rightward shift, and in a rather startling development, none of the country’s left-wing or social democratic parties qualified for a seat in Parliament for the first time in Poland’s post-communist history.  [Rick Lyman / New York Times; BBC News]

Argentina: The reformist mayor of Buenos Aires, Mauricio Macri, will face the government-backed candidate, Daniel Scioli, in a run-off next month.  The center-right Macri, a market-friendly type, was supposed to lose by ten points but instead Scioli defeated him by only 37% to 34% and so the runoff, Nov. 22, will be tight and could spell the end for the ruling Peronist party.

Random Musings

--So let’s start with the Republican debate in Boulder, Co., on Wednesday.  Yes, my Mets were on in the World Series, but I watched the first hour of the debate and followed the game online in my attempt to multi-task, and then once the Royals took a 4-1 lead, I went back to the debate, so I feel like I saw at least 75% of it and am qualified to comment.

As I tweeted while watching it, the performance of the CNBC moderators, who I spend my weekday mornings watching, was “abhorrent” (Fox News commentator Charles Krauthammer described their performance as “appalling”) and at times the moderators lost total control.  [Nothing wrong with using a bell or buzzer to notify the participants they are out of time, CNBC.  Instead we got screeching from John, Becky and Carl as they tried to restore order.] 

Or as Ken Tucker put it on Yahoo.com:

“It’s never a good idea for the party host to hog all the hors d’oeuvres and monopolize the conversation, but that’s what CNBC did, in its lip-smacking, crumb-spillingly self-satisfied Republican debate on Wednesday night.  The network’s debate started late – the better to have its anchor team jabber over each other – and then proceeded to ask so many questions phrased to provoke squabbling that the first big hand of the night went to Ted Cruz for castigating the moderators for ‘trying to get people to tear into each other.’”

But Jeb Bush, who was under great pressure to have a strong debate, once again performed poorly, including this moment when he decided to confront his rival and former ally, Senator Marco Rubio.

“Marco, when you signed up for this, this was a six-year term – you should be showing up to work,” Bush said.  “I mean, literally, the Senate, what is it, like a French workweek?  You get like three days where you have to show up?”

Rubio pounced, noting that John McCain missed many votes in the Senate during his 2008 bid, and Rubio attributed the criticism to the fact Bush is struggling in the polls.

“The only reason you’re doing it now is because we’re running for the same position and someone has convinced you that attacking me is going to help you,” Rubio said.

As the New York Times commented: “Again and again, Mr. Rubio repelled attacks from his opponents and difficult questions from the moderators with ready responses that turned issues back on his interlocutors and prompted loud applause from the crowd.”

Ted Cruz also had a good night, attacking the CNBC moderators: “This is not a cage match. And you look at the questions – Donald Trump, are you a comic book villain? Ben Carson, can you do math?  John Kasich, will you insult two people over here?  Marco Rubio, why don’t you resign?  Jeb Bush, why have your numbers fallen?”  Mr. Cruz said.  “How about talking about the substantive issues people care about?”

Oh, and there was a question to Jeb Bush on fantasy football and potentially regulating it, to which Gov. Chris Christie jumped in: “Wait a second. We have $19 trillion in debt, we have people out of work, we have ISIS and al-Qaeda attacking us, and we’re talking about fantasy football?”

Jennifer Rubin / Washington Post

“The debate itself was chaotic, unruly and rife with inane questions. Candidates who attempted to ask questions were abruptly cut off.  Moderators did not drill down on economic matters, but instead went rifling through opposition research.  That said, rising above the fray is part of what a candidate must do.

“In that department Sen. Ted Cruz (R-Tex.) had a stellar response early on, slamming all the silly questions being asked.  Later, he gave a succinct description of his tax plan and heartfelt responses regarding single mothers and working women, decrying the Obama economy.  It was his best debate so far, but he did not dominate....

“Rubio had an outstanding night, perhaps dealing a fatal blow to his toughest rival for mainstream voters. He began by easily deflecting the moderator’s question regarding the Sun-Sentinel’s suggestion he resign and asking in effect if Rubio should wait his turn.  Rubio turned the question around, saying that America could not wait, that America had serious issues.  He also decried liberal media bias, pointing out that the Florida paper had not raised the same issue with Democratic senators.  He comfortably deflected a question about his tax plan, fending off interruptions to make the case his plan was helpful to the middle class....

“The biggest moment however came when Jeb tried to directly call out Rubio for his attendance record, saying he should resign if he did not show up for work. Rubio seized control.... In that exchange Bush suffered a severe blow, and Rubio demonstrated he could take a punch.  Bush practically disappeared from the debate after that....

“Winners: Rubio, Christie, Cruz.

“Losers: CNBC moderators, Bush, Carson and Trump.”

I disagree with Rubin’s take on Trump.  I thought he was fine.

John Podhoretz / New York Post

“Marco Rubio has been playing the long game as a presidential candidate – not getting into fights, not trying to shove himself into the daily news stories, just sticking to his themes and strengths.

“If his strategy is sound – and we won’t know until votes start getting cast – Wednesday night’s CNBC debate will mark the moment it began paying off big time....

“It wouldn’t be right to say that Rubio totally dominated – both Ted Cruz and Chris Christie made real splashes, too – but he put on quite a show.

“His extraordinary preparation and message discipline showed, as did his understanding of the Republican voting coalition.  Over the past few days he has been hammered by the Florida press in particular for missing Senate votes, and he knew he would get questioned on it – and when he was, in a tone of naked hostility by CNBC’s Carl Quintanilla, he pounced.”

And Rubio pounced on Bush.

“Bush seemed shaken by it; he had little energy in the answers he gave afterward and said nothing memorable or even interesting.  If Bush had been paying attention, he might have noticed that the way to get his mojo back would have been to attack the snide and inappropriate manner of CNBC’s three chief panelists.”

Later, writes Podhoretz, Rubio said:

“Last week Hillary Clinton went before a committee.  She admitted she had sent e-mails to her family saying ‘hey, this attack in Benghazi was caused by al-Qaeda-like elements.’  She spent over a week telling the families of those victims and the American people that it was because of a video. And yet, the mainstream media is going around saying it was the greatest week in Hillary Clinton’s campaign.  It was the week she got exposed as a liar...but she has her super-PAC helping her out – the American mainstream media.”

Podhoretz:

“Rubio might not be the Republican nominee.  But last night he gave it all he’s got, and what he’s got is pretty remarkable.”

Editorial / Wall Street Journal

“We have many friends at CNBC, but the three debate moderators lost control of the proceedings from the start and never regained it.  There is no surer applause line at a GOP debate than to attack the media, and the moderators walked into the trap with tendentious questions based on liberal talking points.”

Friday, Republican National Committee Chair Reince Priebus said the RNC was “suspending” its plans to partner with NBC News for a scheduled debate next February, though we’ll see if this sticks.

--Polls....

First the Republicans....

In a New York Times/CBS News national survey of Republican primary voters, Ben Carson for the first time dislodged Donald Trump from the top  spot, garnering 26% to Trump’s 22%.  Marco Rubio was third but just with 8%, followed by Jeb Bush and Carly Fiorina at 7% each.  Rand Paul, Ted Cruz, Mike Huckabee and John Kasich each received 4%.

A Monmouth University Poll of likely Iowa Republican caucusgoers had Carson with a 32-18 lead over Trump.  In August, this survey had the two tied at 23% each.  Ted Cruz and Marco Rubio are tied for third at 10%, with Jeb Bush at 8%.

But a CBS News/YouGov Battleground poll of likely Republican caucusgoers in Iowa has Trump and Carson tied at 27%, with Cruz at 12%, Rubio 9% and Bush at 6%.

In New Hampshire, CBS’ Battleground has it 38% Trump, 12% Carson, 8% Bush, and 7% for both Rubio and Fiorina.

In South Carolina, the same poll has Trump with another big lead, 40-23 over Carson.  Then you have to go down to 8% for Cruz, 7% Rubio, 6% Bush.

On the Democratic side, post-Biden’s exit for the first time, as well as post-Democratic debate....

Hillary Clinton soared to a 41-point lead in Iowa, according to the aforementioned Monmouth University poll...65% to 24%....but...the CBS’ Battleground survey has it 46-43 Clinton.  What gives?

In New Hampshire, the CBS/Battleground poll has Sanders leading Clinton 54-39.

But in South Carolina it’s 68-25 Clinton.

One thing that is interesting about all three states in the CBS survey is that no more than 1% of Democratic voters think Sanders can win the general election, while Clinton’s percentages in the three range from 10% to 27%.

--Frustrated presidential candidate Sen. Lindsey Graham: “On our side, you’ve got the No. 2 guy tried to kill someone at 14, and the No. 1 guy is high energy and crazy as hell.

“How am I losing to these people?  Just look at Donald Trump’s foreign policy. What is it?  What’s he going to do about ISIL?  What is it?  What is his game plan to destroy ISIL?  Does anybody know?”

Graham added, referring to Ben Carson and his appearance on “Meet the Press” where he recalled his hot-tempered childhood, “when I was 14 I tried to stab someone”... “And I’ve tried to murder no one ever, so this should move me up a little bit.”

Hang in there, Lindsey.

--Maureen Dowd, in her Sunday column for the New York Times, appropriately blasted Republicans on the House Benghazi committee, noting, “Hillary Clinton is never more alluring than when a bunch of pasty-faced nasty-tongued white men bully her,” but Ms. Dowd, who can be an equal opportunity basher, concluded with the following:

“The 11-hour hearing showcased the good Hillary, but there were occasional flashes of the bad.  She still doesn’t believe that setting up her own server was so wrong.  Even though the inspector general of government intelligence said that there was top secret information in her emails, she sticks with her parsing.  ‘There was nothing marked classified on my emails, either sent or received,’ she told (Rep. Jim) Jordan.

“She seemed oddly detached about (Ambassador) Stevens, testifying that he didn’t have her personal email or cell number, ‘but he had the 24-hour number of the State Operations in the State Department that can reach me 24/7.’

“There were no call logs of talks between Stevens and Clinton, and she said she could not remember if she ever spoke to him again after she swore him in in May.  ‘I was the boss of ambassadors in 270 countries,’ she explained.

“But Libya was the country where she was the midwife to chaos.  And she should have watched that baby like the Lady Hawk she is.”

Kyle Smith / New York Post

“In the bipartisan grandstanding of the latest Benghazi committee hearing last week, the mostly inept Republicans managed to extract one piece of information that will stick: that our murdered Libyan Ambassador Chris Stevens didn’t have Clinton’s e-mail address.

“Clinton stammered a bit as she confessed this, realizing that she was contradicting her earlier characterization of Stevens as someone she knew and respected, the personal anecdotes that suggested a close relationship and her statement that she had personally asked him to take the job.

“Clinton family retainers like Sidney Blumenthal, a notorious conspiracist who was barred from working in her State Department by the Obama administration, were able to reach her whenever they pleased – but men and women on the front lines of dangerous places had to go through depressing, labyrinthine bureaucratic channels.

“Stevens and his team requested more security for the doomed Benghazi compound 600 times. Clinton’s response: Sorry, I didn’t know.  Nobody told me.  Oops.”

If the Republicans come up with the right nominee, they will rip her to shreds on her foreign policy record in the debates.  The problem is, it can’t be too much of a massacre or there could be a backlash in how she was treated. 

--What a fiasco for the Pentagon...the 240-foot long blimp (JLENS) that broke loose from its moorings at Aberdeen Proving Grounds in Maryland and then drifted over northeast Pennsylvania. 

The aircraft is part of a Pentagon plan to create a safety net to hunt enemy drones and cruise missiles along the Eastern seaboard of the U.S. and among some in Congress, the project is a white elephant, costing about $2.55 billion, though the Pentagon issued differing numbers on the value of the blimp in question...at first saying it cost $1.3 billion (there are two of them...the other now grounded), but later reducing it to $250 million.

Raytheon is the manufacturer and demonstrated the radar could pick up multiple ballistic missiles back in 2012, but it’s ability to track other objects like drones is less clear.  In the spring, when a Florida man flew a gyrocopter from Pennsylvania to the steps of the U.S. Capital, NORAD declined repeated requests for information as to whether JLENS picked it up.  They now say the blimp(s) were down for software upgrades at the time.  [Patrick Tucker / Defense One]

--In a study conducted by the World Economic Forum, more than 1,000 young people, ages 20 to 30, from 125 countries, who are all active in the forum’s Global Shapers Community, average age of 28, 65% of Millennials said one of their top three goals in selecting a job was to make a difference in society, their city or country.

Asked about the top three issues that face the world, 56% named social and economic inequality, 42% climate change and environmental preservation, and 33% education.

Interestingly, the most admired figure among the Millennials was the late Nelson Mandela, followed by Pope Francis, with Elon Musk, CEO of Tesla and creator of SpaceX, third.  [Gregg Zoroya / USA TODAY]

Personally, I would have said golfer Jordan Spieth.

--According to the National Assessment of Educational Progress (NAEP), better known as the Nation’s Report Card, fourth-graders and eighth-graders across the United States lost ground on national mathematics tests this year, the first declines in scores since the federal government began administering the exams in 1990.

Reading scores also dropped for eighth-graders, while fourth-grade performance was stagnant compared with 2013, the last time students took the test.

Students at U.S. public and private schools have taken the NAEP every two years since the early 1990s and it is the most consistent measure of K-12 progress.

The 2015 scores show that 64 percent of fourth-graders and 66 percent of eighth-graders are not considered proficient in reading, while in math, 60 percent of fourth-graders and 67 percent of eighth-graders are not considered proficient.

I find these figures astounding, especially the reading scores.  I’m guessing my audience doesn’t include a lot of fourth-graders after seeing this data.  Plus I recognize for most Millennials, it’s too long.

Massachusetts, by the way, scored highest in three of the four tests.  Minnesota, New Hampshire and Vermont were also top performers.  New Mexico and Mississippi were among the lowest.  [Emma Brown / Washington Post]

So the results have stirred up the debate over standardized testing and the plusses and minuses of same.

Coincidentally, last weekend the White House said “the proliferation of testing – a problem they acknowledged they had a role in – is taking away too much valuable time that could be better spent on learning, teaching and fostering creativity in schools.  Obama recommended limiting standardized exams to no more than 2% of a student’s instructional time in the classroom.”  [Christopher Doering / USA TODAY]

--Also on the topic of education, I saw a piece Friday on NJ.com concerning Rider University, which announced it was slashing 13 majors and one minor and eliminating 20 jobs, including 14 full-time faculty members, to help close its deficit.

So here are some of the majors being eliminated next fall (juniors and seniors will be able to complete their majors; sophomores and freshmen will have to change or transfer): Art and art history, advertising, American studies, business education, French, geosciences, German, marine science, philosophy, piano and web design.

--Editorial / Wall Street Journal

“The IRS targeting and muzzling of conservative groups during the 2012 presidential campaign is an outrage for which almost no one  has been held accountable. Which brings us to the news that House Oversight Committee Chairman Jason Chaffetz introduced articles of impeachment on Tuesday against IRS Commissioner John Koskinen.

“Mr. Koskinen was not at the IRS during the targeting, but the former Freddie Mac executive has become the single greatest hurdle to public accountability. He was touted as a reformer in his 2013 confirmation hearings.  Instead he has helped the Administration stonewall Congress’ investigation.  Mr. Chaffetz’s four articles of impeachment assert that Mr. Koskinen ‘engaged in a pattern of conduct that is incompatible with his duties as an Officer of the United States.’....

“The last impeachment of a cabinet officer or agency head was War Secretary William Belknap in 1876. Then again, no Presidency in decades has treated Congress with the disdain that President Obama has.  With rare exceptions he has also refused to dismiss officials when they fail at their most basic obligations.  If the House votes to impeach Mr. Koskinen, the Senate then would need a two-thirds vote to convict in a trial, which is unlikely.

“Yet the exercise will have the salutary effect of reminding executive-branch officials that they are not a government unto themselves.  The U.S. Attorney refused to honor Congress’ contempt charge against (Lois) Lerner for refusing to testify, the Justice Department has closed its investigations into IRS targeting without prosecutions, and the press corps winks at abuses of power when conservatives are the targets.  With an executive who refuses to honor the normal separation of powers, Congress is obliged to use its authority to hold government accountable.”

--The World Health Organization published a report conclusively linking processed meats with colorectal cancer.  Bacon, ham, sausages and other smoked, cured or salted (processed) meats are “group 1” products with the highest likelihood to cause cancer, according to a “meta review” of scientific research by the International Agency for Research on Cancer. 

For example, the WHO’s report says 50g of processed meat a day – less than two slices of bacon – increased the chance of developing colorectal cancer by 18%.

Meanwhile, it said red meats were ‘probably carcinogenic’ but there was limited evidence.

The WHO did stress that meat also had health benefits.

So the study puts the likes of bacon and sausage in the same category as tobacco, alcohol and asbestos.  But this doesn’t mean a bacon sandwich is as bad as smoking and as Tim Hayward of the Financial Times reports:

“For all the hysterical coverage, eating behavior will not change because there is no clear message about the direct impact on the individual who is really, really enjoying sinking his teeth into (meat)....

“The global statistics do not identify whether it is the meat that is carcinogenic, the nitrates used in preservation, products of fermentation or smoke or salt.  Dietary fiber is known to reduce the incidence of colorectal cancers, so is a wholemeal bacon sarnie OK?  Is a Spanish Iberico ham, made purely of organic pork and salt, carcinogenic to the same degree as a supermarket sausage pumped with preservatives to eradicate the lethal bacteria that are a risk in intensive rearing?

“Finally, we have the numbers.  ‘In total, tobacco use is responsible for the death of about 1 in 10 adults worldwide,’ says the WHO, a figure including cardiovascular disease and chronic obstructive lung disease as well as lung cancer. Meanwhile, more than 200,000 die annually worldwide as a result of air pollution compared with about 34,000 who die from meat-related cancer.”

[One million deaths from cancer are caused by smoking and 600,000 attributed to alcohol each year.]

--Lastly, there have been some senseless tragedies in Europe the past few weeks, like the bus crash in France that killed 43 pensioners on a trip through wine country.

Friday night in Bucharest, Romania, at least 27 died in a nightclub fire where pyrotechnics were involved.  When the heck will the world learn...you can’t do this stuff indoors!  Our thoughts and prayers to the victims and their families.

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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 $1142
Oil $46.59

Returns for the week 10/26-10/30

Dow Jones  +0.1%  [17663]
S&P 500  +0.2%  [2079]
S&P MidCap  +0.3%
Russell 2000  -0.4%
Nasdaq  +0.4%  [5053]

Returns for the period 1/1/15-10/30/15

Dow Jones  -0.9%
S&P 500  +1.0%
S&P MidCap  -0.5%
Russell 2000  -3.6%
Nasdaq  +6.7%

Bulls  43.7
Bears  29.2  [Source: Investors Intelligence]

Have a great week. I appreciate your support.

C’mon, Mets!  Go American Pharoah!  [Reminder: 5:35 ET, Sat., NBC]

Brian Trumbore