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04/16/2016

For the week 4/11-4/15

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has major costs.  If you haven’t already done so, please click on the gofundme link or send a check to PO Box 990, New Providence, NJ   07974.  It’s appreciated.

Edition 888

Washington and Wall Street

After a strong start to the week, stocks adopted a wait-and-see mode for Thursday and Friday as the market looks to Doha, Qatar, and a key oil producers’ meeting on Sunday (more on this below).

Traders are also awaiting the next meeting of the Federal Reserve’s Open Market Committee, April 26-27.  But given this week’s economic data it’s clear that once again the Fed won’t be budging on the rate front. 

Retail sales for March were a disappointing -0.3% vs. expectations of a 0.1% increase.  Ex-volatile autos and gas, sales were 0.1%, also less than expected.

And industrial production last month came in far worse than forecast, -0.6%.

On the inflation front, producer prices were -0.1% for March, ditto ex-food and energy.  Year-over-year, the PPI was -0.1%, +1.0% on core.

Consumer prices rose 0.1%, including on core, while yoy, the CPI was 0.9%, 2.2% ex-food and energy. The 2.2%, while above the Fed’s 2% target, isn’t for its preferred benchmark (the PCE) and it’s a tick down from February’s 2.3% reading.

The Atlanta Fed’s GDPNow indicator for first-quarter growth actually ticked up this week from 0.1% to 0.3%.

Meanwhile, the International Monetary Fund held its spring meeting in Washington and it reduced its outlook for global growth in 2016 from 3.4% to 3.2%, though it still sees 3.5% for 2017.  The U.S. is expected to grow only 1.9%, while the euro area is looking at 2.4% growth, with the UK up 1.9%.

Japan’s GDP projection is only 0.5% for the year, and then down to 0.1% in 2017 (when another hike in the sales tax is due), but the IMF ratcheted China up from 6.3% to 6.5%.

On a different topic, negative interest rates, which we see in many places worldwide, including in Japan and parts of Europe, a number of Wall Street titans weighed in.

BlackRock CEO Larry Fink, in a downbeat annual letter to his shareholders, said not enough attention was being given to the effect of negative rates on saving habits.

Mr. Fink said that low rates were preventing savers from getting the returns they needed to prepare for retirement, so they were increasingly being forced to divert money from current spending into savings.

“There has been plenty of discussion about how the extended period of low interest rates has contributed to inflation in asset prices,” he wrote.  “Not nearly enough attention has been paid to the toll these low rates – and now negative rates – are taking on the ability of investors to save and plan for the future.”

For example, a typical 35-year-old had to save more than three times as much to make the same retirement income when long-term interest rates were at 2 percent than when they were at 5 percent.

“This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending....A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending.”  [Financial Times]

Jose Vinals, the IMF’s top financial stability watchdog, said that while the economic benefits of the boost to demand from negative rates outweighed the potential costs, there were limits to how far into negative territory rates could go before they started encouraging companies and individuals to hoard cash.

In an interview with Barron’s, Bill Gross of Janus Capital said, “Lowering interest rates to near zero has produced negative consequences.  The best examples of this include the business models of insurance companies and pension funds.  Insurers have long-term liabilities and base their death benefits, and even health benefits, on earning a certain rate of interest on their premium dollars.  When the rate is zero or close to it, their model is destroyed....

“Now consider mom and pop and other people who read Barron’s.  They are saving for retirement and to put their kids through college. They might have depended on a historic 8%-like return from stocks and bonds.  Well, sorry.  When interest rates get to zero – and that isn’t the endpoint; they could go negative – savers are destroyed.  And savers are the bedrock of capitalism.  Savers allow investment, and investment produces growth.”

Europe and Asia

Just a few economic items for the eurozone.  Industrial production fell 0.8% in the EA19 in February over January, while inflation was revised up a tick in March from -0.1% to unchanged on an annualized basis.  It was -0.2% in February.

Germany’s annualized inflation rate in March was 0.1%, France -0.1%, Italy -0.2% and Spain -1.0%.

The European Automobile Manufacturers’ Association reported solid new passenger car registrations (sales), up 8.2% in the first quarter, though sales of VW branded vehicles slipped 0.5%.  Ford’s sales climbed 7.8%.

The European car market has now grown for 31 consecutive months and March sales, up 6% to 1.7m cars, were the highest since before the financial crisis, March 2007.

Italian bank stocks were all over the board this week.  Recall, last time I wrote the sector had soared at week’s end because of a rumored bailout plan that was to be announced Monday.  But the announced fund of 5bn euros was deemed far too little compared to the scope of the bad-loan issue (and with dubious details).  The largest banks in the country are also expected to hand over hundreds of millions of euros to create a backstop facility to bail out troubled smaller lenders.

In the UK, first-quarter GDP, according to a government think tank, will come in at 0.3% (quarter over quarter), half the pace recorded in Q4, so yet another negative for Prime Minister David Cameron to deal with as the referendum on Brexit looms, June 23.

Back to the IMF’s meeting in Washington, Maurice Obstfeld, the fund’s chief economist, said there is a “real possibility” the UK could vote to leave the European Union.  Obstfeld said the political consensus “that once propelled the European project is fraying.”

Obstfeld also argued that the refugee crisis in Europe and recent terrorist attacks had combined with economic pressures to lead to a “rising tide of inward-looking nationalism.”

On the Greek bailout front, the government is aiming for an agreement with its creditors on the next tranche of emergency loans by the beginning of May, but German Finance Minister Wolfgang Schauble said that while a solution can be found, it will have nothing to do with debt forgiveness.  Greece “needs to do more” to return to a competitive economy, he said.

The biggest area of contention is no longer pension overhaul, but would seem to be the management of bad loans on bank balance sheets.

The first review of the country’s latest bailout was to have been wrapped up end of last year, but the IMF keeps disputing the effectiveness of Prime Minister Alexis Tsipras’ budget savings.

Nikos Pappas, Greece’s Minister of State, said, “The IMF asks for salary cuts in the public sector, lifting restrictions on layoffs, cuts to main pensions, measures that will kill the economy and kill the very usefulness of a debt cut, which by the way, they can’t even guarantee.  It’s like they’re asking us to jump from the fifth floor and they promise that someone will buy us ice cream.”

Yes, relations between the two sides haven’t gotten any better and Greece owes 10 billion euro it doesn’t have between June and July. 

And Greece has the migrant crisis to deal with, with further violence this week on the island of Lesbos as well as at the refugee camp on the border with Macedonia.  The number being sent back to Turkey, per the recent EU agreement, is minimal thus far because Greece has been very slow to process the applicants, which is leading to the frustration and violence.

Amnesty International cited the case of the Greek island of Chios, where there is just one official processing claims and he had processed only 10 of 833 filed.  [BBC News]

Italy’s Interior Ministry said more than 16,000 people made the crossing from North Africa to Italy in the first three months of the year, some 6,000 more than in the same period last year.  Austria expects migrant arrivals to Italy by sea to nearly double this year to 300,000, with most crossing late spring and into the summer when the Mediterranean is calmer.

Austria and Italy are attempting to strengthen cooperation and controls at their shared border during the expected surge.  A new fence, that Vienna prefers to describe as a “border management system,” is being built to allow Austrian officials to have more control over passengers and vehicles travelling through the Brenner Pass.  The above figure of 300,000 is what Austria is fearful of.  There has been speculation that Syrians, Iraqis and Afghans may use the route through Italy to Austria and points north after finding the route from Turkey to Greece all but closed.

The Brenner Pass is just south of Innsbruck, Austria, so imagine how the character of that Alpine city has been changing.

Germany has seen a slump in the number of people arriving to seek asylum after several Balkan states tightened their borders.  20,000 applied in March; last December it was 120,000.

German Chancellor Angela Merkel said the focus was on integrating the more than one million who arrived in 2015. 

Finally, UK Prime Minister Cameron did a good job defending himself in front of lawmakers following the Panama Papers leak and the disclosure he once had an interest in an offshore investment trust set up by his late father.

Cameron published details of the taxes he’s paid since 2009 after a week of negative headlines.

---

A big week on the data front for China.  First, the National Bureau of Statistics reported that consumer prices rose 2.3% year-over-year in March, the same pace as February, with non-food prices up just 1.0%, which is considered the core here.  Food prices rose a solid 7.6%, with pork up 28.4% and fresh veggies up 35.8%.  Food comprised 1.5 of the 2.3% rise in CPI.

But producer prices fell yet again, down 4.3% in March yoy, though this compared favorably with February’s 4.9% decline.  The PPI has been in deflation mode since March 2012, but if you look at March over February, the PPI was actually up 0.5%.

Exports rose a solid 11.5% in dollar terms in March vs. year ago levels, far better than expected and a major positive.  Exports to the U.S. rose 9% and to the European Union 17.9%.  But shipments to Brazil cratered 39.4% in yet another example of that sick economy.

Imports, though, fell a 17th straight month, down 7.6%.

Shipments of steel rose 3.0%, a positive.

Auto sales rose 8.8% last month, year-over-year, also encouraging.

Industrial production in March increased 6.8% yoy, bringing year-to-date growth of 5.8% (when you smooth out the impact of the Lunar New Year holiday in February).

Retail sales were up 10.5% in March, 10.3% year-to-date, in line with expectations.

Fixed asset investment rose 10.7% in March.  This key metric appears to have bottomed in December.  During the boom, FAI growth was often in the 20% range, though this was a sign of a bubble.

Finally, electricity consumption was up 3.2% in the first quarter, up significantly over year ago levels.  National electricity consumption in March rose 5.6% yoy.

So...all the above is part of the GDP calculation in one form or another and wouldn’t you know, first-quarter GDP came in at an annual rate of 6.7%, conveniently in line with the government’s 6.5%-6.7% previously forecasted range for all of 2016.  This compares with 6.8% in the fourth quarter.

Whether you agree with the figure(s) or not, one thing seems clear.  The Chinese economy has stabilized, witness the above IMF revised forecast of 6.5% vs. their earlier estimate of 6.3%.

Eswar Prasad, economics professor at Cornell University and former China head of the IMF, wrote on Friday, “This fresh batch of macroeconomic data paints a picture of an economy that has lost some growth momentum but lives to fight another day.  Recent data appear to repudiate the excessively pessimistic views about China’s economy that were rampant in financial markets earlier this year, although there is still plenty of ammunition for pessimists to maintain their negative outlook.”  [Financial Times]

The main issue for pessimists is China’s massive debt problem, particularly on the corporate side.

Turning to Japan, it releases important trade data next Tuesday as we look for clues that the economy has tipped back into recession in the first quarter.

Producer prices fell 3.8% in March year-over-year.

Street Bytes

--The Dow Jones rose 1.8% to 17897, while the S&P 500 added 1.6% and Nasdaq advanced 1.8%.  Earnings begin to roll through in earnest the next two weeks.

--U.S. Treasury Yields

6-mo. 0.36%  2-yr. 0.73%  10-yr. 1.75%  30-yr. 2.56%

Treasuries barely moved on the week.

Fitch Ratings affirmed the United States’ AAA credit rating and stable outlook, although it cautioned on the federal debt and deficit outlook.

The deficit bottomed last year in 2015 to 2.5% of GDP and is expected to rise to 2.9% in fiscal 2016, and then creep higher in succeeding years, especially if government borrowing costs rise.

The most immediate issue is to restore the social security system, with the ‘trust fund’ currently projected to run dry in 2029 as payments outpace contributions.

--J.P. Morgan Chase reported earnings that beat expectations, ditto revenue, though EPS was at $1.35 vs. $1.45 for last year.  Global investment banking net revenues were down 24 percent from the same period a year ago; trading down 11%.

CEO Jamie Dimon, however, pointed to a stronger tone on the consumer banking side, with that division posting a 4 percent net rise in revenues.

--Bank of America Corp. suffered a 13% drop in first-quarter earnings, with revenue falling 7%.  It fell or remained flat in three of the four main operating units, with trading revenue down 16%.

BAC did report loan growth of 3%, and the bank cut expenses by 6%.

--Wells Fargo & Co.’s first-quarter profit fell nearly 6%, with revenue rising 4.3%, better than expected.  Total loans were up 10%.

--Citigroup reported profits had dropped 27% from a year ago, though this was better than expected. Revenues were down across all divisions – retail 6%, fixed income 11%, equities 19%, investment banking 27%.

--Separately, five big U.S. banks [Wells Fargo, JPMorgan, Bank of America, BNY Mellon and State Street] failed to deliver adequate “living wills,” a key part of post-financial crisis reforms; failing to show how they would wind themselves up in another crisis.

The living wills are designed to prevent another round of bailouts and regulators (the Federal Reserve and FDIC) ordered the banks to fix their deficiencies by Oct. 1, 2016, or face further regulations, including higher capital, leverage and/or liquidity requirements.

The weaknesses, as determined by the regulators, included how a bank determines when to enter bankruptcy and bankruptcy procedures; like how it would parcel out capital to its operating units ahead of declaring it.

The Fed and FDIC disagreed on Goldman Sachs and Morgan Stanley.  One accepted while the other rejected Goldman’s plan, and then the two did the opposite with regards to Morgan Stanley.  Both regulators accepted Citigroup’s living will while noting deficiencies.

--Nomura is exiting most of its European equities business, as reported by the Financial Times, resulting in the loss of more than 500 jobs.  Royal Bank of Scotland is cutting 600 jobs across its NatWest branch network in its latest attempt to slash costs, after RBS axed 1,600 in February and March.

--Meanwhile, Wells Fargo, Bank of America and JPMorgan Chase have each taken $500m hits on their energy portfolios and warned of more pain to come.

Wells announced Thursday it was pumping up its reserves for energy losses to $1.7bn from $1.2bn at the end of the fourth quarter, while BAC and JPM are adding $525m and $529m, respectively. 

--Related to the above...the Doha meeting of oil producers in Qatar on Sunday is critical, with doubts persisting whether holding the line on production will be enough, seeing as the countries are already at record production levels.  That hardly seems like a way to rebalance output.

But crude prices rose for much of the week, closing above $40 on West Texas Intermediate ($40.36) for the first time since early December amid speculation a deal freezing output at January levels would be achieved.  However, Saudi Arabia has said it will not participate in an agreement to do so unless Iran does and no way Tehran is agreeing to one.

As for the fundamentals, U.S. crude oil inventories climbed sharply last week, in a reversal of the prior one, as reported by the Energy Department.

But a piece in the Wall Street Journal by Bill Spindle noted, “Increasingly, the low price of oil is doing the work for the world’s big producers by knocking down production across the globe, according to traders and industry officials.”

Energy Aspects, a London-based consultancy, revised its estimates for non-OPEC production declines this year to 700,000 barrels a day from 200,000 to 300,000 in earlier forecasts.

But, again, OPEC producers are going full bore and Iran is increasing production.  It’s going to take an actual cut that, when combined with the reduced output from non-OPEC countries, would allow for bloated inventories to finally fall, the key to any sustained rally in prices.

Separately, the U.S. Energy Information Administration forecast U.S. output at 8.6 million barrels a day for 2016 vs. a multi-decade peak of 9.4 million barrels a day last year.

--National Oilwell Varco slashed its dividend 90 percent in another sign of the severe damage to the energy sector’s bottom line.  The oilfield equipment maker cut its quarterly dividend to 5 cents a share from 46 cents, while saying it expects first-quarter revenue to decline 20 percent.

--Peabody Energy, the nation’s largest coal company, filed for Chapter 11 bankruptcy protection as the coal industry deals with the fallout of low natural gas prices, costly regulations and China’s economic slowdown.

Peabody forecasted its own demise in March, warning depressed prices had placed it in danger.

The U.S. Energy Information Administration has projected 2016 coal production in the U.S. would decline 25% from 2014.  Some 50 coal companies have filed for bankruptcy, including Arch Coal, Patriot and Walter Energy.

But Peabody is looking to use the bankruptcy process to restructure and reduced its overall debt level rather than liquidate.

The EIA estimates that in 2015, coal and natural gas each represented 33% of U.S. electricity generation, but that the percentage for coal would decline to 20% by 2040.  However, that still represents a significant business for some.

As recently as 2008, coal was double the level of nat gas.

--On a related note, CSX Corp. reported revenue fell in the first quarter (ending March 25), with the volume of coal shipments for the railroad falling 31%.

CSX expects coal volume to decline more than 20% in 2016.  20% of CSX’s revenue last year came from coal versus an industry average of about 15%.  [Ezequiel Minaya / Wall Street Journal]

Overall revenue for the rail fell 14%.

It’s not just coal, but slower global trade and plunging commodity prices (as well as a strong dollar) plus lower domestic oil shipments that is hitting the rail business.

--Alcoa is seen as a bellwether for the health of U.S. industry and in reporting first-quarter earnings, the company saw overall revenues decline 15 percent, while revenues from selling aluminum specifically dropped 29 percent.

Alcoa revised its forecast for global aluminum market growth in 2016 down from 6 percent to 5 percent.

--In a hugely significant development, the U.S. Centers for Disease Control and Prevention has confirmed that the Zika virus causes severe birth defects, including microcephaly.  Dr. Tom Frieden, the head of the CDC, said the study “marks a turning point in the Zika outbreak.”

Heretofore, the cause and effect was more a theory, such as in the suspected cases in Brazil and Colombia.

Zika is an economic story, especially in light of the upcoming Olympic Games in Rio, and the rapid spread of Zika on Puerto Rico.

The CDC also said this week that the more it learns about the virus, the scarier it gets.  Now it’s been linked to a second autoimmune disorder.  First, it was associated with Guillain-Barre syndrome, a condition in which the immune system attacks the nervous system, causing paralysis.

Now scientists believe it can lead to a condition similar to multiple sclerosis, called acute disseminated encephalomyelitis, or ADEM, a swelling of the brain and spinal cord.

--As Ellen Nakashima of the Washington Post reported: “The FBI cracked a San Bernardino terrorist’s phone with the help of professional hackers who discovered and brought to the bureau at least one previously unknown software flaw, according to people familiar with the matter.

“The new information was then used to create a piece of hardware that helped the FBI to crack the iPhone’s four-digit personal identification number without triggering a security feature that would have erased all the data, the individuals said.

“The researchers, who typically keep a low profile, specialize in hunting for vulnerabilities in software and then in some cases selling them to the U.S. government. They were paid a one-time flat fee for the solution.”

So it’s about the shadowy world of hackers and security researchers who profit from finding holes in companies’ software or systems; the “white hats” (good guys) and “black hats” (not good guys...dirtballs...who use information to hack away and steal personal data).

--Facebook CEO Mark Zuckerberg is one very rich, intelligent guy.  He’s also incredibly naïve.

As he rolled out his “10-year plan” to connect the world, Zuckerberg, in an address to an audience of androids, said, “We are one global community. Whether we are welcoming a refugee fleeing war or an immigrant seeking opportunity, coming together to fight a global disease like Ebola or to address climate change.”

The theme of his speech to developers from around the world was, “give everyone the power to share anything with anyone,” positioning Facebook as a unifying force for good against the current political winds of divisiveness. Zuckerberg unveiled a plan to bring people together through technology that jumps borders and crosses cultures.  Cough cough.

“As I look around the world, I’m starting to see people and nations turning inward, against the idea of a connected world and a global community,” Zuckerberg said.  “I hear fearful voices calling for building walls and distancing people they label as ‘others.’  I hear them calling for blocking free expression, for slowing immigration, for reducing trade, and in some cases even for cutting access to the internet.”

“It takes courage to choose hope over fear,” he said.

Dear Mr. Zuckerberg.  While you are alluding to Donald Trump and his wall, and you know that Vladimir Putin and Xi Jinping are squelching debate in their countries and cracking down on Net access, just remember, I’ve been writing this column since you were 14.  I know that over 51% of the people in this world are dirtballs and the percentage grows by the year.  It’s the new Doomsday Clock, which is at 11:57 p.m., by the way, according to The Bulletin of Atomic Scientists Science and Security Board.

--Tesla Motors said it was recalling its Model X sport utility vehicles after testing revealed the backs of the car’s third-row seats could give way in a crash.  But Tesla stressed this was a voluntary move on its part and that the vehicle had no reports of accidents related to the problem and that the Model X had passed American crash tests.

That said, get it fixed.  Or just don’t put anyone in the third-row seats...unless you’re driving along and Vladimir Putin or Xi Jinping are trying to hitch a ride.  Go ahead, give ‘em a lift.

“Hi, Vladimir.  Why don’t you get in the third-row...that’s the most comfortable ride.”

--Shares in Under Armour dropped nearly 6 percent on Monday following golfer Jordan Spieth’s collapse in the final round of the Masters the day before.  Spieth signed a 10-year agreement to wear UA’s golf shoes and other clothes and it was only natural his debacle would have a short-term impact. [The shares recovered much of the loss by week’s end.]

Under Armour also has deals with basketball’s Stephen Curry and football’s Cam Newton, along with a sponsorship of my favorite Premier League team, Tottenham, but it’s not a stretch to say more Wall Streeters care about golf than basketball, for one, plus Cam Newton didn’t win the Super Bowl, let alone the fact he’s a jerk.

--Great news for blue crab fans.  I saw in the Baltimore Sun that the Chesapeake Bay blue crab population is larger than a year ago.  As reported by Scott Dance, “There are more than 550 million blue crabs (in the bay), an increase of more than a third over this time last year and one of the highest population counts of the past two decades.” [Fourth-highest in 20 years.]

Why the survey found “194 million spawning female crabs, up from 101 million last winter,” sports fans!  Yum yum.

[I’m not a craft beer guy, so I’d pair this with Shiner Bock; the premium domestic.]

Foreign Affairs

Iraq/ISIS/Syria/Russia/Turkey: A big battle is taking shape over Syria’s second city Aleppo, with Al-Nusra militants massing on a large scale as they look to cut off the road between Aleppo and Damascus.  Russia is expected to heavily support Syrian government forces.

What’s funny is that after Russia talked of a drawdown last month, this week Russian media reported a powerful new helicopter was seeing Syrian combat for the first time, so it begs the question, what pullout?  Russian military advisers are at the right hand of the Syrian army, while Russian special forces are on the front lines calling in airstrikes.  [Russia admitted one of its helicopters, I don’t believe one of the new ones, crashed near the Syrian city of Homs this week, killing two pilots.  It was not brought down by enemy fire, according to reports.]

Meanwhile, the Turkish army hit ISIS targets in northern Syria in response to cross-border rocket fire that hit a border town in southeastern Turkey.

As for peace talks in Geneva, an official from the opposition told Agence France Presse that the ceasefire in Syria “is about to collapse,” with “the use of barrel bombs (having) resumed.”

The truce does not include areas where ISIS and Al-Nusra Front are present.

The fate of President Assad remains a major sticking point.  The opposition wants a transitional authority with full powers, including Assad, while the regime talks of a government of national unity with just a few opponents and independents.  A huge difference.

Bassma Kodmani, a member of the High Negotiations Committee of the Syrian opposition, told Journal du Dimanche, President Obama had “let the Russians take all the cards in the game.”

[One update: ISIS did release more than 300 cement workers it abducted near Damascus after questioning them to find out who were Muslims and killing four who were members of the minority Druze sect, according to the Syrian Observatory for Human Rights.  The Druze, an offshoot of Shiite Islam, made up about 5 percent of Syria’s pre-war population.  Lebanon has a large Druze community, led by Walid Jumblatt, one of the more fascinating figures in the world.]

In Iraq, a piece in the Financial Times points out that while ISIS is on the run, the battles surrounding the cities they have taken and then abandoned have in most cases left little but rubble, with 3.3 million Iraqis being displaced.

And with Iraq facing an economic collapse and renewed sectarian bloodshed that could fuel the very resentments that led to ISIS to seize control of Sunni majority areas, any Iraqi army victories could quickly turn into practical defeats.

Zaid al-Ali, author of The Struggle for Iraq’s Future, told the FT: “The government needs to convince people that things will be better.  If they maintain the same systems then all this effort is purposeless and ISIS, or some newer version of it, will come back.”

Officials say Iraq needs $6bn to $10bn in loans just to cover the budget owing to cratering oil revenues.  The central government has yet to fund any reconstruction projects.  At the University of Tikrit, a city retaken from ISIS, 20,000 students are back in class but there is no equipment.

Josh Rogin / Bloomberg

“President Barack Obama said Sunday that his biggest mistake as president was failing to plan for the day after the fall of the Qaddafi regime in Libya. But as bad as Libya looks today, Syria is faring far worse, in part because of the Obama administration’s failings – which the president has not yet acknowledged.

“On Libya, Obama regrets not staying engaged ‘after what I think was the right thing to do in intervening,’ he said on ‘Fox News Sunday.’  It’s worth noting that at the time, the White House was proud of the approach it took during the 2011 Libya intervention, which centered around sharing the burden with European allies, avoiding the deployment of U.S. ground troops, and leaving the toppling of Qaddafi as well as the political and physical reconstruction to Libyans....

“The Libya intervention, which was heavily supported by Hillary Clinton when she was secretary of state, is now derided because five years on, Libya is still struggling to establish stability and democracy.  Militias have failed to yield power, a shaky unity government has yet to gain widespread legitimacy, and the Islamic State is expanding on the ground.

“But Libya is faring better than Syria, which is also five years into its Arab Spring revolution, only without a U.S. or NATO-led military intervention.  Whereas Libya may have as many as 6,000 Islamic State soldiers, in Syria there are 20,000 to 30,000 IS fighters, according to the CIA.  Human rights groups on the ground estimate as many as 50,000.

“More important, Syria and Iraq represent the Islamic State’s core, where they control major cities and from where they export their ideology and fighters to places like Libya.  Syria is also where terror operations in Europe are prepared; the attackers in Paris and Brussels were trained in Syria, not Libya....

“In Syria, the ongoing Geneva talks show few signs of solving the crisis.  Under the best scenario, President Bashar al-Assad would stay in power for as long as 18 more months until elections can be held, and he might stand in those elections.  A more realistic assessment is that the Assad regime will not concede any power and will continue attacks on civilians for years.

“When he decided to attack the Qaddafi regime in 2011, the reason President Obama gave was that intervention was necessary to prevent Qaddafi from perpetrating genocide against the civilians in Benghazi.

“ ‘If we waited one more day, Benghazi, a city nearly the size of Charlotte, could suffer a massacre that would have reverberated across the region and stained the conscience of the world,’ Obama said after he decided to attack.  ‘It was not in our national interest to let that happen.  I refused to let that happen.’

“Today, Libyan civilians are much better off than their Syrian counterparts.  The Assad regime’s campaign of airstrikes and starvation sieges has decimated cities larger than Benghazi.  At least 300,000 civilians have been killed.  Over 10,000 were tortured while in the custody of the regime.  Twelve million have been internally displaced.  Four million have fled Syria, flowing into neighboring countries and Europe, spreading destabilization well beyond Syria’s borders.  In Libya, about 1,500 people died as a result of the fighting last year.

“In his recent interview with The Atlantic, President Obama boasted about his resolve in avoiding more American involvement in the Syrian crisis....

“At various times, Obama and his aides have given several other reasons why Libya was a good place to intervene but Syria was not.  In Libya there was a United Nations and NATO agreement to attack.  Libya was a more manageable mission.  Qaddafi didn’t have strong backers in Russia and Iran.

“All these facts miss a larger point.  Syria is more important strategically and symbolically. Syria’s failure more directly impacts American national security interests and those of our allies, especially Turkey and Israel.  And rebuilding Syria someday will cost the international community hundreds of billions of dollars....

“In terms of what’s good for the U.S. national interest, the region, and the world, President Obama’s Libya policy, while imperfect, was hugely more successful than his Syria policy.  Even leading from behind to solve a problem is better than leading a policy that allows the problem to spiral dangerously out of control.”

Iran: Russia delivered the first batch of S-300 anti-aircraft missile systems to Tehran, according to Iran’s Foreign Ministry.  An $800 million S-300 delivery deal signed between Russia and Iran in 2007 was blocked by the Russian side in 2010 amid global sanctions against Tehran. A new contract with Iran was then signed in November after the Russian self-imposed delivery ban was lifted by decree of President Vladimir Putin in April last year.

Israel: Ahmed Yousef, a former advisor to Hamas Prime Minister Ismail Haniyeh, strongly criticized his movement, holding it responsible for the harsh situation inside the Gaza Strip.

In an article published last weekend, Youself called upon preachers to “stop deluding people that we are living in a reality of a utopia.

“Everyone is shocked because of the reality we are living in and people don’t stop talking about the pain and tragedy...

“We have waited 10 years to see the Virtuous City that some promised us,” Yousef said, referring to the decade-old rule of Hamas over the Gaza Strip.  “But unfortunately, conditions have worsened and the poor have become even more poor.

“We have terrified students, who were dreaming of getting a job, offering them a bleak future.  We drove these students to ride boats of death in the hope of living.”

Yousef in this last comment is referring to the scores of Palestinians who fled Gaza in boats for Europe.  [Jerusalem Post]

Separately, Israeli government officials are not happy with Bernie Sanders and his take on the Israeli-Palestinian crisis.  Sanders got particular heat for a comment he made a number of times, including in his interview with the New York Daily News, that the 2014 war with Gaza resulted in 10,000 Gazans being killed, when the true figure was under 1,500.  In his debate on Thursday with Hillary Clinton, Sanders did say 1,500.

North Korea / South Korea: Pyongyang failed in an attempt to launch a missile on the birthday of its founder, a day after South Korea warned a test of a missile capable of reaching Guam was imminent.  South Korea’s Defense Ministry said the missile exploded in the air shortly after takeoff.

Earlier, Kim Jong Un supervised a successful test of a new engine for an intercontinental ballistic missile (ICBM), according to state media.

“Dear Comrade Kim Jong Un said now we can mount an ever more powerful nuclear warhead on a new intercontinental ballistic rocket and put the den of evil in the United States, and all over the world, within our strike range,” the KCNA news agency said.

The Musudan missile has a range of 1,800 miles, making U.S. bases in Guam and Japan potential targets, though accuracy is another matter.

North Korea’s Kim Jong Un has recently said his country would test another nuclear device.

Editorial / Wall Street Journal

“Thirteen North Koreans defected to the South last week from China. That may not seem significant, especially since they were waitresses rather than high officials.  But in the secretive and topsy-turvy world of the Kim regime, this gutsy group defection suggests trouble in the workers’ paradise.

“The North Korean restaurant in Ningbo that employed the defectors is one of 130 that Pyongyang runs in China and 11 other countries to earn more than $10 million annually.  They attract customers not with the food, which is terrible and overpriced, but with a glimpse into the North’s totalitarian façade. Attractive waitresses sing and dance to kitschy ballads praising the Kim family....

“In February South Korea urged its citizens to stop patronizing North Korean restaurants abroad, part of a broader tightening of policy after the North’s latest nuclear and missile tests.  Soon reports circulated that the restaurants owed staff back wages and some shut down.

“It’s nonetheless surprising that a group of workers defected together, since North Koreans are encouraged to report on each other for disloyalty.  It’s also unusual that Chinese authorities allowed them to leave China for a third country instead of detaining and repatriating them to the North.

“It’s too early to say that Kim Jong Un’s hold on the Pyongyang elite is slipping as sanctions begin to bite. But this week South Korea disclosed that a senior colonel from Pyongyang’s powerful Reconnaissance General Bureau defected last year. Signs that the regime is under stress show that the North is not as self-sufficient as it likes to claim, and more pressure could bring it to its knees.”

On a totally different matter, South Korean voters handed President Park Geun-hye a stunning political setback by denying her conservative party a majority in the next National Assembly in elections held Thursday, so this will make it far more difficult for Park to push through controversial economic reforms, including plans to make it easier for companies to lay off workers.  And it’s an early blow when it comes to next year’s presidential race.

China: U.S. Defense Secretary Ash Carter scrubbed a planned visit to Beijing amid rising tensions between the U.S. and China over the disputed waters of the South China Sea.

Carter is currently traveling in Asia and was in the Philippines, finalizing a deal that will allow U.S. forces to be stationed there for the first time since 1992.* He is also heading to India, which has boosted defense ties with the U.S. in recent years.

The U.S. and China are at increasing odds over Beijing’s claims in the South China Sea, including the construction of artificial islands, with China saying it has “indisputable sovereignty” over all South China Sea islands and their surrounding waters, though Vietnam, Malaysia, Taiwan, Brunei and the Philippines all have competing claims.

President Xi Jinping pledged during a visit to Washington last September not to militarize the disputed Spratly Islands, but then went ahead and began to do so.

*The Philippines’ military suffered its largest single-day combat loss this year during the week when 18 soldiers were killed in fierce fighting with Abu Sayyaf extremists that also left five militants dead.

The large clash occurred on Basilan island, as government forces were deployed to kill or capture Abu Sayyaf commander Isnilon Hapilon, who has publicly pledged allegiance to ISIS and is wanted for his involvement in a number of terrorist attacks.  Washington has offered a $5 million reward for information leading to his capture and prosecution.  One of his sons was reportedly killed in the fighting.

The militants are believed to be holding 18 foreigners, including two Canadians and a Norwegian.

Sen. John McCain / Financial Times

“Admiral Harry Harris, the commander of U.S. Pacific Command, was recently asked in a Senate Armed Services Committee hearing about China’s strategic goals.  ‘China seeks hegemony in East Asia.  Simple as that,’ he responded.  Admiral Harris concluded: ‘China is clearly militarizing the South China Sea and you’d have to believe in the flat Earth to think otherwise.’

“But despite the Obama administration’s ‘three no’s’ – no reclamation of land, no militarization and no use of coercion – Beijing has pressed ahead with all three.  The administration’s aversion to risk has resulted in a policy that has failed to deter China’s pursuit of maritime hegemony, while confusing and alarming America’s regional allies and partners.

“It is time to change course as we enter a critical two-month period for U.S. policy in the Asia-Pacific region. The Permanent Court of Arbitration is expected to rule by early June in a case brought by the Philippines concerning China’s claims in disputed areas of the South China Sea.  Confronted with the possibility of an unfavorable ruling, China may use the coming months to secure its existing gains or pursue new forms of coercion to expand them. This could include further reclamation and militarization at strategic locations such as Scarborough Shoal, attempts to expel another country from a disputed territory or the declaration of an Air Defense Identification Zone (ADIZ) in all or part of the South China Sea....

“If China declares a South China Sea ADIZ, the U.S. must be prepared to challenge this claim immediately by flying military aircraft inside the area affected under normal procedures, including not filing a flight plan, radioing ahead or registering frequencies.

“It is also time for the U.S. to move beyond symbolic gestures and launch a robust ‘freedom of the seas campaign.’  It should increase the pace and scope of the Freedom of Navigation program to challenge China’s maritime claims, as well as the number of sailing days that U.S. warships spend in the South China Sea.  Joint patrols and exercises should be expanded and ocean surveillance patrols to gather intelligence throughout the western Pacific continued.

“Finally, given the shifting military balance, the U.S. needs to focus on enhancing its military posture across the region. Consistent with a recent Center for Strategic and International Studies report to Congress, it should deploy additional air, naval and ground forces forward to the region to reassure our allies.

“Over the past several years, China has acted less like a ‘responsible stakeholder’ in the rules-based order in the Asia-Pacific region and more like a bully.  Up to now, American policy has failed to adapt to the scale and velocity of the challenge we face.

“The potential threats China will pose in the South China Sea in the coming months demand a change of course that can reassure the region of America’s commitment and demonstrate to Beijing that its pursuit of maritime hegemony will be met with a determined response.”

On a totally different issue, according to a survey conducted by China’s Ministry of Water Resources, 80 percent of groundwater in the mainland’s major river basins is unsafe for human contact.

The ministry last year tested 2,103 wells in the basins of the Yangtze, Yellow River, Huai River and Hai River, finding that exploitation and pollution from industrial and agricultural emissions were the biggest threats to water standards.  [South China Morning Post]

Lastly, Lt. Edward Lin, a Taiwan-born U.S. Navy officer who became a naturalized U.S. citizen faces charges of espionage, attempted espionage and prostitution in a highly secretive case in which he has been accused of passing classified information on to China

Lin is assigned to the headquarters for the Patrol and Reconnaissance Group, which oversees maritime patrol aircraft such as the P-8A Poseidon and P-3C Orion spy planes and the MQ-4C Triton surveillance drone.

Just an educated guess, but China has to know all about our surveillance tactics in the South China Sea.

Russia: The Kremlin claimed it was observing all required safety measures when its fighter jets buzzed a U.S. warship in international waters of the Baltic Sea on Monday.

According to Russia’s defense ministry, the Su-24s “turned away in observance of all safety measures” after observing the USS Donald Cook.

The United States called Russia’s maneuvers, which were a simulation of a strafing run, “one of the most aggressive acts in recent memory.”

The two Russian jets flew over the U.S. destroyer about a dozen times, American officials said.  At one point they got as close as 30 feet and the U.S. would have been in its rights to shoot them down.

Through such provocations you can end up in a nuclear war, boys and girls.

Ukraine: Prime Minister Arseniy Yatsenyuk announced his resignation last Sunday and parliament speaker Volodymyr Groysman was elected to replace him by a 257-50 vote in parliament, which seems encouraging, but the 38-year-old (!) is expected to have a rocky time and is seen to be beholden to President Petro Poroshenko and his business cronies.

Ukraine desperately needs to enact economic reforms (including painful austerity measures) in order to secure further IMF support.  This country will become a big story again the second half of the year for all the wrong reasons.

France/Belgium: The man in the hat who accompanied the two suicide bombers who detonated their bags at Brussels Airport on March 22, was identified as Mohamed Abrini, who was detained last weekend in Brussels and charged with participation in the activities of the terrorist group.  He confessed he had been directly involved in the explosions at the airport, according to the prosecutor’s office.

Abrini then admitted the terror cell was initially planning another attack on France but decided to attack Brussels instead after the arrest of fellow suspect Salah Abdeslam.

Brazil: Impeachment proceedings against President Dilma Rousseff are barreling ahead after a congressional committee voted 38 to 27 to recommend impeachment over claims she manipulated government accounts to hide a growing deficit.

Sunday or Monday, April 17 or 18, the lower house will vote with a two-thirds majority out of 513 seats required to send the case to the Senate.  Rousseff has been losing coalition partners and a recent poll showed 300 of 342 needed to proceed in favor and 125 opposed, leaving 88 MPs still undecided or not stating their position.  [BBC News]

Rousseff is claiming her Vice President, Michel Temer, is one of the ringleaders of the “coup” attempt against her. But Temer has his own issues.

In fact, a Datafolha survey put support for Rousseff’s impeachment among Brazilian voters at 61%, while the same poll has support for Temer’s impeachment at 58%.

Random Musings

--Delegate race:

Republicans (1,237 needed for nomination)

Donald Trump 743
Ted Cruz 545
John Kasich 143

Democrats (2,383 needed for nomination)

Hillary Clinton 1,758 (including superdelegates)
Bernie Sanders 1,069

Last Saturday, Ted Cruz won all the delegates available in Colorado, which ticked The Donald off to no end, while Bernie Sanders won Wyoming’s caucuses, but failed to make any headway in the delegate count.

--But now it’s all about New York...Tues., April 19.  Some polls....

Republicans

Monmouth: Trump 52%, Kasich 25%, Cruz 17%
Quinnipiac: Trump 55, Kasich 20, Cruz 19
NBC/ Wall Street Journal/Marist: Trump 54, Kasich 25, Cruz 16
Siena: Trump 50, Kasich 27, Cruz 17
Fox News: Trump, 54, Kasich 22, Cruz 15

Democrats

Monmouth: Clinton 51%, Sanders 39%
Quinnipiac: Clinton 53, Sanders 40
NBC/WSJ/Marist: Clinton 57, Sanders 40
Siena: Clinton 52, Sanders 42
Fox News: Clinton 53, Sanders 37

April 26 sees primaries in Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island.

Fox News has Clinton leading Sanders 49-38 in Pennsylvania, while Trump leads 48-22 over Kasich, 20 percent for Cruz.

Monmouth has Trump leading Maryland, 47-27 (Kasich) - 19 (Cruz).

The month of May is then light, with the process culminating on June 7 in California and New Jersey, and a few others.

--In a CBS News national poll released on Thursday, Trump has the support of 42% of GOP primary voters, with Cruz at 29% and Kasich at 18%.  Trump had a 46-26 lead in the same poll March 16.

Nearly two-thirds of Trump’s supporters – 63 percent – said if he wins more delegates than any other candidate but does not get the GOP nomination, he should run as an independent.

A Fox News national poll had Trump at 45%, Cruz 27%, Kasich 25%. 

But on the Democratic side, Clinton led Sanders in this survey just 48-46.

--As for Thursday’s debate in Brooklyn between Hillary and Bernie, at times it was literally unlistenable.  [I can’t say unwatchable because I, err, watched it.]

John Podhoretz / New York Post

“To call the Democratic debate Thursday night a travesty would be an insult to serious travesties throughout history – because it was, save for an extraordinary back-and-forth on Israel, a series of hostile exchanges that were alternately pointless and stupid when they weren’t entirely disingenuous.

“Also, with the screaming they were doing, these two Social Security recipients came to look like they were battling over the last open seat on the board of the Del Boca Vista Condo Association. If they had been playing canasta, they would have accused each other of cheating and spilled their glasses of tea all over the card table in the game room.

“Why all the yelling?  Maybe that’s the only way they could hear each other. I mean, you wouldn’t believe the volume level at which my octogenarian parents play their TV.

“But seriously, folks. Bernie Sanders has won eight of the last nine Democratic contests, which gives him momentum and makes Hillary Clinton look bad. On the other hand, she’s all but got the nomination in the bag, and in the overall aggregate Democratic vote nationwide, she’s ahead of him 56 percent to 41 percent.  New York polls have her ahead by about 10 points.

“Still, she probably won because she’s ahead and didn’t make any big mistakes, and he said nothing that would expand his audience outward from the wildly enthusiastic leftists and kids who have kept his campaign chugging along.

“Sanders said he had no specific plan to break up the banks because it wouldn’t be appropriate for the government to come up with the details for their self-destruction.

“Please.

“Clinton said she was for a $15 minimum wage but that she was also for a $12 minimum wage but was really for a $15 minimum wage but also supported a $12 minimum wage.

“Please.

“Hillary said Bernie had no plan for Wall Street. He said she gave speeches for money.  She said Sanders was in the pocket of the National Rifle Association. He said he opposed suing gun companies because he wanted to protect small gun-shop owners in rural areas.

“He said he would pay for free college by imposing ‘a tax on Wall Street speculation,’ which takes the term ‘voodoo economics’ to a new level.  She said that when she was a senator, she gave Wall Street hell.....

“Now please excuse me. After watching this debate, I have to go get fitted for a hearing aid.”

--President Obama’s latest defense of Hillary Clinton’s email situation struck a nerve with some when he said in an interview with “Fox News Sunday,” “there’s classified and then there’s classified.”

As Julian Hattem of The Hill wrote:

“To advocates for government transparency, the remarks stunk of duplicity by suggesting that federal classification rules are arbitrary and don’t apply to the Democratic presidential front-runner....

“Conservatives saw new reasons to worry that the administration cannot be trusted to adequately investigate Clinton’s exclusive use of a private email server as secretary of State.

Ron Hosko, a former high-ranking FBI official, said: “It leaves you with a sense that he is reaching his thumb toward the scale.  I think it is, as I said, unnecessary and, from an investigators’ point of view, not at all beneficial.”

Obama said in the Fox interview: “There’s stuff that is really top-secret, top-secret, and there’s stuff that is being presented to the president or the secretary of State, that you might not want on the transom, or going out over the wire, but is basically stuff that you could get in open source.”

Editorial / Wall Street Journal

“President Obama chooses his words carefully, so it was startling on Sunday when he chose to opine on the Justice Department’s investigation into Hillary Clinton’s private email server.  All the more so in the way that he phrased his defense of the Democrat he wants to succeed him as President in January.

“On Fox News Sunday, host Chris Wallace rolled a clip from October of Mr. Obama saying that ‘I can tell you this is not a situation in which America’s national security was endangered.’  Mr. Wallace then cited the 2,000 or so emails we have since learned contained classified information, including 22 that included ‘top secret’ information, and he asked: ‘Can you still say flatly that she did not jeopardize America’s secrets?’

“(After an initial boilerplate response, including), ‘She would never intentionally put America in any kind of jeopardy,’ Wallace pressed further on the jeopardy angle, and Mr. Obama responded again: ‘I continue to believe that she has not jeopardized America’s national security.  Now what I’ve also said is that – and she has acknowledged – that there’s a carelessness, in terms of managing emails, that she has owned, and she recognizes.’

“Hold on there, big fella. That is one loaded apologia.  A more scrupulous President would have begged off the question by claiming that he can’t comment on an ongoing investigation in a department he supervises. So saying anything was bad enough.

“But even more notable was Mr. Obama’s use of the word ‘intentionally’ regarding Mrs. Clinton’s actions.  As a lawyer, the President knows that intent is often crucial to determining criminal liability. And he went out of his way – twice – to suggest that what Mrs. Clinton did wasn’t intentional but was mere ‘careless, in terms of managing emails.’

“Why would Mr. Obama discuss the emails in those terms? He certainly isn’t helping Attorney General Loretta Lynch or FBI Director James Comey, who must decide how to assess Mrs. Clinton’s actions.  If they now decide not to prosecute based on a judgment that Mrs. Clinton was merely careless, President Obama has opened them up to reasonable criticism that they were publicly steered by his comments.

“Mr. Obama was at pains to ‘guarantee’ to Fox’s Mr. Wallace that there will be ‘no political influence’ from the White House over the email probe. But if you’re trying to send a message to the FBI or Justice, it’s probably shrewder to do it publicly by apologizing for Mrs. Clinton’s ‘carelessness’ than it is to say something specific in a private meeting that could leak to the press.  Mr. Obama can say he never said a word to either one, while those two take the heat if they give Mrs. Clinton a legal pass.

“Our own view of the public email evidence is that Mrs. Clinton’s actions go far beyond mere ‘carelessness.’ She knew she was setting up a private server in violation of State Department policy, she did it deliberately to prevent her emails from becoming public if she ran for President, and she knew classified information was bound to travel over that server.

“As former Attorney General Michael Mukasey has written on these pages, ‘gross negligence’ in handling classified information related to national defense is enough for criminal liability.  That Mr. Obama would issue such a public defense, and use such legally potent words, suggests that there’s more culpability than he cares to admit.”

--Former President Bill Clinton said last weekend that he regretted his response to the chants of Black Lives Matter protesters at a rally in Philadelphia earlier, when he issued an aggressive defense of his administration’s impact on black families.  What a wimp.

Black Lives Matter has been critical of the 1994 crime bill, which created tougher penalties for nonviolent drug offenders, banned certain types of assault weapons and added 100,000 more police officers to American cities.  The group now says that legislation contributed to the high rates of incarceration in the black community and tensions between it and the police.

Both Hillary Clinton and Bernie Sanders supported the 1994 Violent Crime Control and Law Enforcement Act.

Earlier, Bill Clinton told the Philly audience: “I don’t know how you would characterize gang leaders who got 13-year-old kids hopped up on crack and sent them out on the street to murder other African-American children,” he said, waving a finger.  “Maybe you thought they were good citizens.  She didn’t,” he said of Hillary.

It was a great moment for Bill, only then he was forced to withdraw under pressure from the groups whose support his wife needs.

--What was Bernie Sanders thinking about in scheduling his Vatican trip?!  Unbelievably stupid.

--I have to admit I’m with Donald Trump when it comes to the whole caucus setup.  I wouldn’t go to one if New Jersey had it.  Just give me a vote...straight up. 

Trump had the following himself in an opinion piece for Friday’s Wall Street Journal.

“On Saturday, April 9, Colorado had an ‘election’ without voters. Delegates were chosen on behalf of a presidential nominee, yet the people of Colorado were not able to cast their ballots to say which nominee they preferred.

“A planned vote had been canceled. And one million Republicans in Colorado were sidelined.

“In recent days, something all too predictable has happened: Politicians furiously defended the system.  ‘These are the rules,’ we were told over and over again.  If the ‘rules’ can be used to block Coloradans from voting on whether they want better trade deals, or stronger borders, or an end to special-interest vote-buying in Congress – well, that’s just the system and we should enhance it.

“Let me ask America a question: How has the ‘system’ been working out for you and your family?

“I, for one, am not interested in defending a system that for decades has served the interests of political parties at the expense of the people.  Members of the club – the consultants, the pollsters, the politicians, the pundits and the special interests – grow rich and powerful while the American people grow poorer and more isolated....

“The only antidote to decades of ruinous rule by a small handful of elites is a bold infusion of popular will. On every major issue affecting this country, the people are right and the governing elite are wrong. The elites are wrong on taxes, on the size of government, on trade, on immigration, on foreign policy.

“Why should we trust the people who have made very wrong decision to substitute their will for America’s will in this presidential election?....

“What we are seeing now is not a proper use of the rules, but a flagrant abuse of the rules. Delegates are supposed to reflect the decision of voters, but the system is being rigged by party operatives with ‘double-agent’ delegates who reject the decision of voters....

“How have we gotten to the point where politicians defend a rigged delegate-selection process with more passion than they have ever defended America’s borders?

“Perhaps it is because politicians care more about securing their private club than about securing their country.”

--Donald Trump suffered an embarrassment when daughter Ivanka and son Eric filed to register as Republicans for the New York primary in time.  They did not know they needed to last October, which is a pathetically stupid state law.

--Joe Scarborough / Washington Post

“The 43rd president promised to end tyranny across the globe.  He instead engaged in a tragic military overreach that will complicate U.S. policy for years.  The 44th president has been so driven by his obsession to avoid the mistakes of his predecessor that he has summarized this grand geostrategic approach as ‘Don’t do stupid s---.’

“Though hard to believe, the current crop of candidates running for president may prove to be even worse than George W. Bush and Barack Obama.

“One possible nominee has promised to bomb America’s enemies ‘until the sand glows.’  Another proposed banning all Muslims from entering the United States.  Another was stumped by editorial board questions that a (Robert) Gates, (Zbigniew) Brzezinski or (Brent) Scowcroft would have swatted away without breaking a sweat.  And the other has been so reckless with America’s classified secrets that the State Department concluded that releasing some sent through her unsecured email server would cause grave damage to U.S. national security.

“Any one of these four candidates could go a long way in narrowing their credibility gap with foreign policy leaders by following the advice of Brzezinski and putting Gates on their presidential ticket. Though it is unlikely the former defense secretary and CIA chief would reenter the world of Washington politics, the situation we face is grim.  It would take the reemergence of a leader such as Robert Gates to signal to the world that America is ready once again to get serious about its indispensable role in the world.”

--WIR 4/2/16:

And then you had the situation involving Trump’s campaign manager Corey Lewandowski, who was charged with misdemeanor battery against reporter Michelle Fields, formerly of Breitbart News.

“Fields claims Lewandowski roughly grabbed her arm as she tried to question Trump at a recent event....

“But this particular charge against Lewandowski is bogus.”

Yup, score another one for your editor.  The battery charge was dropped and Fields would have to be an idiot to pursue it any further. 

--New York City’s Police Department is suddenly being swept up in a corruption scandal that Commissioner Bill Bratton admits is the worst since New York’s dark days of the early 1970s. 

That was the time of the Knapp Commission, which exposed rampant bribe-taking at all ranks of the department and led to criminal charges against dozens of cops.

This week, a fifth NYPD commander was demoted amid the widening probe into bosses trading favors for gifts.

Bratton claims his own Internal Affairs Bureau initiated the investigation in 2013 (actually it was under his predecessor Ray Kelly) and insisted he has been plugged in, even after the FBI got involved months later.

One troubling issue involves ex-NYPD Chief of Department Philip Banks, who abruptly quit in October 2014 rather than accept a promotion to the No. 2 job behind the commissioner.  He is now suspected of accepting gifts and travel from two businessmen at the heart of the scandal.

But....

Michael Goodwin / New York Post

“Forget for a minute the gift and cash scandal rocking the NYPD. Even the two shady Brooklyn businessmen who allegedly handed out the goodies are not the big fish.  And don’t be distracted by the arrest of a man accused of running a Ponzi scheme out of a failed restaurant that some of the cops frequented.

“Block all that out and keep your eyes where they belong – on Mayor de Blasio.  He’s the focus of the FBI and Preet Bharara’s federal prosecutors. Everyone and everything else is an important detail, but just a detail.

“The probers’ tips lead back to City Hall, and now the target is coming into clear view.  It looks as if the mayor’s three slush funds, the ones that good-government groups blasted as a ‘shadow government,’ have a bull’s-eye on them.

“The multimillion-dollar operation is tied to every sleazy deal you’ve read about since de Blasio took office.  It is the dirty doorway to all the other schemes and players.

“The funds raised at least $4.36 million from developers, unions, taxi medallion owners, carriage-horse opponents and wealthy liberal activists like George Soros.  In short, all those who wanted something big and valuable from de Blasio found their way to the back-room boiler operation and wrote a fat check....

“(An) added element is that de Blasio has been moving huge amounts of money among the three entities, creating a virtual shell game that, temporarily at least, conceals the donors, how much they gave and how the money is being spent.

“Ultimately, the issue is what, if any, favors the donors got in exchange for their cash....

“That’s what the feds want to know.  As I have said repeatedly, I believe a thorough probe will find corruption by the bushel.”

Mr. Goodwin has been all over this potential wrongdoing for months.  I’m just bringing it to light here now because it does appear as if it is about to blow.

--Mayor de Blasio’s approval rating fell to a new low, just 35%, according to a new Wall Street Journal/NBC News/Marist poll.  A majority of registered voters, 51%, believe New York City is headed in the wrong direction, a slight improvement from last fall when the figure was 55%.

Only 27% of white voters approve of de Blasio’s job performance; 49% of blacks; and 36% of Latino voters.

--According to Australia’s Bureau of Meteorology, there is a 50 percent chance La Nina is likely by their spring, which starts in September.  La Nina cools the equatorial Pacific Ocean, and other forecasters from Japan to the U.S. have been predicting a La Nina later this year as well.

More rain could fall across parts of Asia, Australia and Brazil, while the U.S. Great Plains, Rocky Mountains and Florida receive less.  Hurricane activity in the Atlantic could pick up.

--George F. Will / Washington Post...from Princeton, N.J.

“One of history’s most important battles happened here on a field you can walk across in less than half the 45 or so minutes the battle lasted. If George Washington’s audacity on Jan. 3, 1777, had not reversed the patriots’ retreat and routed the advancing British, the American Revolution might have been extinguished.

“Yet such is America’s neglect of some places that sustain its defining memories, the portion of the field over which Washington’s nation-saving charge passed is being bulldozed to make way for houses for faculty of the Institute for Advanced Study (IAS).  To understand the gravity of this utterly unnecessary desecration, you must understand the astonishingly underestimated Battle of Princeton.

“In December 1776, the Revolution was failing.  Britain had sent to America 36,000 troops – at that point, the largest European expeditionary force ever – to crush the rebellion before a French intervention on America’s behalf. Washington had been driven from Brooklyn Heights, then from Manhattan, then out of New York.  The nation barely existed as he retreated across New Jersey, into Pennsylvania.

“But from there, on Christmas night, he crossed the Delaware River ice floes for a successful 45-minute (at most) attack on Britain’s Hessian mercenaries at Trenton.  This was Washington’s first victory...Trenton would have been merely an evanescent triumph, however, were it not for what happened 10 days later. [Ed. I edited this last line slightly.]

“On Jan. 2, 1777, British Gen. Charles Cornwallis began marching 5,500 troops from Princeton to attack Washington’s slightly outnumbered forces at Trenton. Washington, leaving a few hundred soldiers to tend fires that tricked Cornwallis into thinking the patriot army was encamped, made a stealthy 14-mile night march to attack three British regiments remaining at Princeton. They collided on this field.

“The most lethal weapons in this war were bayonets. The British had them. Few Americans did, and they beat a panicked retreat from the advancing steel. By his personal bravery, Washington reversed this and led a charge. An unusually tall man sitting on a large white horse, he was a clear target riding as close to British lines as first base is to home plate. Biographer Ron Chernow writes that, at Princeton, Washington was a ‘warrior in the antique sense. The eighteenth-century battlefield was a compact space, its cramped contours defined by the short range of muskets and bayonet charges, giving generals a chance to inspire by their immediate presence.’

“When redcoats ran, the British aura of invincibility and the strategy of ‘securing territory and handing out pardons’ (Chernow) were shattered.  And the drift of American opinion toward defeatism halted.

“In his four-volume biography of Washington, James Thomas Flexner said: ‘The British historian George Trevelyan was to write concerning Trenton: ‘It may be doubted whether so small a number of men ever employed so short a space of time with greater and more lasting effects upon the history of the world.’  But such would not have been the result if Washington had not gone on to overwhelm Princeton.’”

But now this ground is on the verge of being desecrated forever.  The Civil War Trust has recently expanded its preservation activities to Revolutionary War sites and it needs your help in attempting to buy the land from the IAS.  IAS, writes Will, has already spurned a $4.5 million purchase offer from the CWT.

--The success of the hit musical “Hamilton” has provoked a wave of interest in the man who established the U.S. financial system and whose face graces the $10 bill.

We had been told that Hamilton was being replaced by a woman but now Treasury Secretary Jack Lew is facing a backlash from women’s rights activists over his remarks suggesting a possible change in plans.

In a recent interview on Charlie Rose, Lew said, “Alexander Hamilton is one of my heroes.  He’s not leaving our money. We’re going to put a woman on the face of our currency. And this is not just about the $10 bill.  This is about a whole series of bills. We’re going to be working on the 5, the 10, and the 20.”

This was never a good idea.  Ditch Andrew Jackson on the $20, or put him in rotation with a woman. 

Actually, having watched Ken Burns’ superb documentary on Jackie Robinson this week, put Rachel Robinson on the $20.  Rachel is one of the great women in American history.

Jackie Robinson crossed the color barrier today, April 15, 1947.

---

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

God bless America.

---

Gold $1233
Oil $40.36

Returns for the week 4/11-4/15

Dow Jones  +1.8%  [17897]
S&P 500  +1.6%  [2080]
S&P MidCap  +2.6%
Russell 2000  +3.1%
Nasdaq  +1.8%  [4938]

Returns for the period 1/1/16-4/15/16

Dow Jones  +2.7%
S&P 500  +1.8%
S&P MidCap  +4.7%
Russell 2000  -0.4%
Nasdaq  -1.4%

Bulls 41.2
Bears 27.8  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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-04/16/2016-      
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Week in Review

04/16/2016

For the week 4/11-4/15

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has major costs.  If you haven’t already done so, please click on the gofundme link or send a check to PO Box 990, New Providence, NJ   07974.  It’s appreciated.

Edition 888

Washington and Wall Street

After a strong start to the week, stocks adopted a wait-and-see mode for Thursday and Friday as the market looks to Doha, Qatar, and a key oil producers’ meeting on Sunday (more on this below).

Traders are also awaiting the next meeting of the Federal Reserve’s Open Market Committee, April 26-27.  But given this week’s economic data it’s clear that once again the Fed won’t be budging on the rate front. 

Retail sales for March were a disappointing -0.3% vs. expectations of a 0.1% increase.  Ex-volatile autos and gas, sales were 0.1%, also less than expected.

And industrial production last month came in far worse than forecast, -0.6%.

On the inflation front, producer prices were -0.1% for March, ditto ex-food and energy.  Year-over-year, the PPI was -0.1%, +1.0% on core.

Consumer prices rose 0.1%, including on core, while yoy, the CPI was 0.9%, 2.2% ex-food and energy. The 2.2%, while above the Fed’s 2% target, isn’t for its preferred benchmark (the PCE) and it’s a tick down from February’s 2.3% reading.

The Atlanta Fed’s GDPNow indicator for first-quarter growth actually ticked up this week from 0.1% to 0.3%.

Meanwhile, the International Monetary Fund held its spring meeting in Washington and it reduced its outlook for global growth in 2016 from 3.4% to 3.2%, though it still sees 3.5% for 2017.  The U.S. is expected to grow only 1.9%, while the euro area is looking at 2.4% growth, with the UK up 1.9%.

Japan’s GDP projection is only 0.5% for the year, and then down to 0.1% in 2017 (when another hike in the sales tax is due), but the IMF ratcheted China up from 6.3% to 6.5%.

On a different topic, negative interest rates, which we see in many places worldwide, including in Japan and parts of Europe, a number of Wall Street titans weighed in.

BlackRock CEO Larry Fink, in a downbeat annual letter to his shareholders, said not enough attention was being given to the effect of negative rates on saving habits.

Mr. Fink said that low rates were preventing savers from getting the returns they needed to prepare for retirement, so they were increasingly being forced to divert money from current spending into savings.

“There has been plenty of discussion about how the extended period of low interest rates has contributed to inflation in asset prices,” he wrote.  “Not nearly enough attention has been paid to the toll these low rates – and now negative rates – are taking on the ability of investors to save and plan for the future.”

For example, a typical 35-year-old had to save more than three times as much to make the same retirement income when long-term interest rates were at 2 percent than when they were at 5 percent.

“This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending....A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending.”  [Financial Times]

Jose Vinals, the IMF’s top financial stability watchdog, said that while the economic benefits of the boost to demand from negative rates outweighed the potential costs, there were limits to how far into negative territory rates could go before they started encouraging companies and individuals to hoard cash.

In an interview with Barron’s, Bill Gross of Janus Capital said, “Lowering interest rates to near zero has produced negative consequences.  The best examples of this include the business models of insurance companies and pension funds.  Insurers have long-term liabilities and base their death benefits, and even health benefits, on earning a certain rate of interest on their premium dollars.  When the rate is zero or close to it, their model is destroyed....

“Now consider mom and pop and other people who read Barron’s.  They are saving for retirement and to put their kids through college. They might have depended on a historic 8%-like return from stocks and bonds.  Well, sorry.  When interest rates get to zero – and that isn’t the endpoint; they could go negative – savers are destroyed.  And savers are the bedrock of capitalism.  Savers allow investment, and investment produces growth.”

Europe and Asia

Just a few economic items for the eurozone.  Industrial production fell 0.8% in the EA19 in February over January, while inflation was revised up a tick in March from -0.1% to unchanged on an annualized basis.  It was -0.2% in February.

Germany’s annualized inflation rate in March was 0.1%, France -0.1%, Italy -0.2% and Spain -1.0%.

The European Automobile Manufacturers’ Association reported solid new passenger car registrations (sales), up 8.2% in the first quarter, though sales of VW branded vehicles slipped 0.5%.  Ford’s sales climbed 7.8%.

The European car market has now grown for 31 consecutive months and March sales, up 6% to 1.7m cars, were the highest since before the financial crisis, March 2007.

Italian bank stocks were all over the board this week.  Recall, last time I wrote the sector had soared at week’s end because of a rumored bailout plan that was to be announced Monday.  But the announced fund of 5bn euros was deemed far too little compared to the scope of the bad-loan issue (and with dubious details).  The largest banks in the country are also expected to hand over hundreds of millions of euros to create a backstop facility to bail out troubled smaller lenders.

In the UK, first-quarter GDP, according to a government think tank, will come in at 0.3% (quarter over quarter), half the pace recorded in Q4, so yet another negative for Prime Minister David Cameron to deal with as the referendum on Brexit looms, June 23.

Back to the IMF’s meeting in Washington, Maurice Obstfeld, the fund’s chief economist, said there is a “real possibility” the UK could vote to leave the European Union.  Obstfeld said the political consensus “that once propelled the European project is fraying.”

Obstfeld also argued that the refugee crisis in Europe and recent terrorist attacks had combined with economic pressures to lead to a “rising tide of inward-looking nationalism.”

On the Greek bailout front, the government is aiming for an agreement with its creditors on the next tranche of emergency loans by the beginning of May, but German Finance Minister Wolfgang Schauble said that while a solution can be found, it will have nothing to do with debt forgiveness.  Greece “needs to do more” to return to a competitive economy, he said.

The biggest area of contention is no longer pension overhaul, but would seem to be the management of bad loans on bank balance sheets.

The first review of the country’s latest bailout was to have been wrapped up end of last year, but the IMF keeps disputing the effectiveness of Prime Minister Alexis Tsipras’ budget savings.

Nikos Pappas, Greece’s Minister of State, said, “The IMF asks for salary cuts in the public sector, lifting restrictions on layoffs, cuts to main pensions, measures that will kill the economy and kill the very usefulness of a debt cut, which by the way, they can’t even guarantee.  It’s like they’re asking us to jump from the fifth floor and they promise that someone will buy us ice cream.”

Yes, relations between the two sides haven’t gotten any better and Greece owes 10 billion euro it doesn’t have between June and July. 

And Greece has the migrant crisis to deal with, with further violence this week on the island of Lesbos as well as at the refugee camp on the border with Macedonia.  The number being sent back to Turkey, per the recent EU agreement, is minimal thus far because Greece has been very slow to process the applicants, which is leading to the frustration and violence.

Amnesty International cited the case of the Greek island of Chios, where there is just one official processing claims and he had processed only 10 of 833 filed.  [BBC News]

Italy’s Interior Ministry said more than 16,000 people made the crossing from North Africa to Italy in the first three months of the year, some 6,000 more than in the same period last year.  Austria expects migrant arrivals to Italy by sea to nearly double this year to 300,000, with most crossing late spring and into the summer when the Mediterranean is calmer.

Austria and Italy are attempting to strengthen cooperation and controls at their shared border during the expected surge.  A new fence, that Vienna prefers to describe as a “border management system,” is being built to allow Austrian officials to have more control over passengers and vehicles travelling through the Brenner Pass.  The above figure of 300,000 is what Austria is fearful of.  There has been speculation that Syrians, Iraqis and Afghans may use the route through Italy to Austria and points north after finding the route from Turkey to Greece all but closed.

The Brenner Pass is just south of Innsbruck, Austria, so imagine how the character of that Alpine city has been changing.

Germany has seen a slump in the number of people arriving to seek asylum after several Balkan states tightened their borders.  20,000 applied in March; last December it was 120,000.

German Chancellor Angela Merkel said the focus was on integrating the more than one million who arrived in 2015. 

Finally, UK Prime Minister Cameron did a good job defending himself in front of lawmakers following the Panama Papers leak and the disclosure he once had an interest in an offshore investment trust set up by his late father.

Cameron published details of the taxes he’s paid since 2009 after a week of negative headlines.

---

A big week on the data front for China.  First, the National Bureau of Statistics reported that consumer prices rose 2.3% year-over-year in March, the same pace as February, with non-food prices up just 1.0%, which is considered the core here.  Food prices rose a solid 7.6%, with pork up 28.4% and fresh veggies up 35.8%.  Food comprised 1.5 of the 2.3% rise in CPI.

But producer prices fell yet again, down 4.3% in March yoy, though this compared favorably with February’s 4.9% decline.  The PPI has been in deflation mode since March 2012, but if you look at March over February, the PPI was actually up 0.5%.

Exports rose a solid 11.5% in dollar terms in March vs. year ago levels, far better than expected and a major positive.  Exports to the U.S. rose 9% and to the European Union 17.9%.  But shipments to Brazil cratered 39.4% in yet another example of that sick economy.

Imports, though, fell a 17th straight month, down 7.6%.

Shipments of steel rose 3.0%, a positive.

Auto sales rose 8.8% last month, year-over-year, also encouraging.

Industrial production in March increased 6.8% yoy, bringing year-to-date growth of 5.8% (when you smooth out the impact of the Lunar New Year holiday in February).

Retail sales were up 10.5% in March, 10.3% year-to-date, in line with expectations.

Fixed asset investment rose 10.7% in March.  This key metric appears to have bottomed in December.  During the boom, FAI growth was often in the 20% range, though this was a sign of a bubble.

Finally, electricity consumption was up 3.2% in the first quarter, up significantly over year ago levels.  National electricity consumption in March rose 5.6% yoy.

So...all the above is part of the GDP calculation in one form or another and wouldn’t you know, first-quarter GDP came in at an annual rate of 6.7%, conveniently in line with the government’s 6.5%-6.7% previously forecasted range for all of 2016.  This compares with 6.8% in the fourth quarter.

Whether you agree with the figure(s) or not, one thing seems clear.  The Chinese economy has stabilized, witness the above IMF revised forecast of 6.5% vs. their earlier estimate of 6.3%.

Eswar Prasad, economics professor at Cornell University and former China head of the IMF, wrote on Friday, “This fresh batch of macroeconomic data paints a picture of an economy that has lost some growth momentum but lives to fight another day.  Recent data appear to repudiate the excessively pessimistic views about China’s economy that were rampant in financial markets earlier this year, although there is still plenty of ammunition for pessimists to maintain their negative outlook.”  [Financial Times]

The main issue for pessimists is China’s massive debt problem, particularly on the corporate side.

Turning to Japan, it releases important trade data next Tuesday as we look for clues that the economy has tipped back into recession in the first quarter.

Producer prices fell 3.8% in March year-over-year.

Street Bytes

--The Dow Jones rose 1.8% to 17897, while the S&P 500 added 1.6% and Nasdaq advanced 1.8%.  Earnings begin to roll through in earnest the next two weeks.

--U.S. Treasury Yields

6-mo. 0.36%  2-yr. 0.73%  10-yr. 1.75%  30-yr. 2.56%

Treasuries barely moved on the week.

Fitch Ratings affirmed the United States’ AAA credit rating and stable outlook, although it cautioned on the federal debt and deficit outlook.

The deficit bottomed last year in 2015 to 2.5% of GDP and is expected to rise to 2.9% in fiscal 2016, and then creep higher in succeeding years, especially if government borrowing costs rise.

The most immediate issue is to restore the social security system, with the ‘trust fund’ currently projected to run dry in 2029 as payments outpace contributions.

--J.P. Morgan Chase reported earnings that beat expectations, ditto revenue, though EPS was at $1.35 vs. $1.45 for last year.  Global investment banking net revenues were down 24 percent from the same period a year ago; trading down 11%.

CEO Jamie Dimon, however, pointed to a stronger tone on the consumer banking side, with that division posting a 4 percent net rise in revenues.

--Bank of America Corp. suffered a 13% drop in first-quarter earnings, with revenue falling 7%.  It fell or remained flat in three of the four main operating units, with trading revenue down 16%.

BAC did report loan growth of 3%, and the bank cut expenses by 6%.

--Wells Fargo & Co.’s first-quarter profit fell nearly 6%, with revenue rising 4.3%, better than expected.  Total loans were up 10%.

--Citigroup reported profits had dropped 27% from a year ago, though this was better than expected. Revenues were down across all divisions – retail 6%, fixed income 11%, equities 19%, investment banking 27%.

--Separately, five big U.S. banks [Wells Fargo, JPMorgan, Bank of America, BNY Mellon and State Street] failed to deliver adequate “living wills,” a key part of post-financial crisis reforms; failing to show how they would wind themselves up in another crisis.

The living wills are designed to prevent another round of bailouts and regulators (the Federal Reserve and FDIC) ordered the banks to fix their deficiencies by Oct. 1, 2016, or face further regulations, including higher capital, leverage and/or liquidity requirements.

The weaknesses, as determined by the regulators, included how a bank determines when to enter bankruptcy and bankruptcy procedures; like how it would parcel out capital to its operating units ahead of declaring it.

The Fed and FDIC disagreed on Goldman Sachs and Morgan Stanley.  One accepted while the other rejected Goldman’s plan, and then the two did the opposite with regards to Morgan Stanley.  Both regulators accepted Citigroup’s living will while noting deficiencies.

--Nomura is exiting most of its European equities business, as reported by the Financial Times, resulting in the loss of more than 500 jobs.  Royal Bank of Scotland is cutting 600 jobs across its NatWest branch network in its latest attempt to slash costs, after RBS axed 1,600 in February and March.

--Meanwhile, Wells Fargo, Bank of America and JPMorgan Chase have each taken $500m hits on their energy portfolios and warned of more pain to come.

Wells announced Thursday it was pumping up its reserves for energy losses to $1.7bn from $1.2bn at the end of the fourth quarter, while BAC and JPM are adding $525m and $529m, respectively. 

--Related to the above...the Doha meeting of oil producers in Qatar on Sunday is critical, with doubts persisting whether holding the line on production will be enough, seeing as the countries are already at record production levels.  That hardly seems like a way to rebalance output.

But crude prices rose for much of the week, closing above $40 on West Texas Intermediate ($40.36) for the first time since early December amid speculation a deal freezing output at January levels would be achieved.  However, Saudi Arabia has said it will not participate in an agreement to do so unless Iran does and no way Tehran is agreeing to one.

As for the fundamentals, U.S. crude oil inventories climbed sharply last week, in a reversal of the prior one, as reported by the Energy Department.

But a piece in the Wall Street Journal by Bill Spindle noted, “Increasingly, the low price of oil is doing the work for the world’s big producers by knocking down production across the globe, according to traders and industry officials.”

Energy Aspects, a London-based consultancy, revised its estimates for non-OPEC production declines this year to 700,000 barrels a day from 200,000 to 300,000 in earlier forecasts.

But, again, OPEC producers are going full bore and Iran is increasing production.  It’s going to take an actual cut that, when combined with the reduced output from non-OPEC countries, would allow for bloated inventories to finally fall, the key to any sustained rally in prices.

Separately, the U.S. Energy Information Administration forecast U.S. output at 8.6 million barrels a day for 2016 vs. a multi-decade peak of 9.4 million barrels a day last year.

--National Oilwell Varco slashed its dividend 90 percent in another sign of the severe damage to the energy sector’s bottom line.  The oilfield equipment maker cut its quarterly dividend to 5 cents a share from 46 cents, while saying it expects first-quarter revenue to decline 20 percent.

--Peabody Energy, the nation’s largest coal company, filed for Chapter 11 bankruptcy protection as the coal industry deals with the fallout of low natural gas prices, costly regulations and China’s economic slowdown.

Peabody forecasted its own demise in March, warning depressed prices had placed it in danger.

The U.S. Energy Information Administration has projected 2016 coal production in the U.S. would decline 25% from 2014.  Some 50 coal companies have filed for bankruptcy, including Arch Coal, Patriot and Walter Energy.

But Peabody is looking to use the bankruptcy process to restructure and reduced its overall debt level rather than liquidate.

The EIA estimates that in 2015, coal and natural gas each represented 33% of U.S. electricity generation, but that the percentage for coal would decline to 20% by 2040.  However, that still represents a significant business for some.

As recently as 2008, coal was double the level of nat gas.

--On a related note, CSX Corp. reported revenue fell in the first quarter (ending March 25), with the volume of coal shipments for the railroad falling 31%.

CSX expects coal volume to decline more than 20% in 2016.  20% of CSX’s revenue last year came from coal versus an industry average of about 15%.  [Ezequiel Minaya / Wall Street Journal]

Overall revenue for the rail fell 14%.

It’s not just coal, but slower global trade and plunging commodity prices (as well as a strong dollar) plus lower domestic oil shipments that is hitting the rail business.

--Alcoa is seen as a bellwether for the health of U.S. industry and in reporting first-quarter earnings, the company saw overall revenues decline 15 percent, while revenues from selling aluminum specifically dropped 29 percent.

Alcoa revised its forecast for global aluminum market growth in 2016 down from 6 percent to 5 percent.

--In a hugely significant development, the U.S. Centers for Disease Control and Prevention has confirmed that the Zika virus causes severe birth defects, including microcephaly.  Dr. Tom Frieden, the head of the CDC, said the study “marks a turning point in the Zika outbreak.”

Heretofore, the cause and effect was more a theory, such as in the suspected cases in Brazil and Colombia.

Zika is an economic story, especially in light of the upcoming Olympic Games in Rio, and the rapid spread of Zika on Puerto Rico.

The CDC also said this week that the more it learns about the virus, the scarier it gets.  Now it’s been linked to a second autoimmune disorder.  First, it was associated with Guillain-Barre syndrome, a condition in which the immune system attacks the nervous system, causing paralysis.

Now scientists believe it can lead to a condition similar to multiple sclerosis, called acute disseminated encephalomyelitis, or ADEM, a swelling of the brain and spinal cord.

--As Ellen Nakashima of the Washington Post reported: “The FBI cracked a San Bernardino terrorist’s phone with the help of professional hackers who discovered and brought to the bureau at least one previously unknown software flaw, according to people familiar with the matter.

“The new information was then used to create a piece of hardware that helped the FBI to crack the iPhone’s four-digit personal identification number without triggering a security feature that would have erased all the data, the individuals said.

“The researchers, who typically keep a low profile, specialize in hunting for vulnerabilities in software and then in some cases selling them to the U.S. government. They were paid a one-time flat fee for the solution.”

So it’s about the shadowy world of hackers and security researchers who profit from finding holes in companies’ software or systems; the “white hats” (good guys) and “black hats” (not good guys...dirtballs...who use information to hack away and steal personal data).

--Facebook CEO Mark Zuckerberg is one very rich, intelligent guy.  He’s also incredibly naïve.

As he rolled out his “10-year plan” to connect the world, Zuckerberg, in an address to an audience of androids, said, “We are one global community. Whether we are welcoming a refugee fleeing war or an immigrant seeking opportunity, coming together to fight a global disease like Ebola or to address climate change.”

The theme of his speech to developers from around the world was, “give everyone the power to share anything with anyone,” positioning Facebook as a unifying force for good against the current political winds of divisiveness. Zuckerberg unveiled a plan to bring people together through technology that jumps borders and crosses cultures.  Cough cough.

“As I look around the world, I’m starting to see people and nations turning inward, against the idea of a connected world and a global community,” Zuckerberg said.  “I hear fearful voices calling for building walls and distancing people they label as ‘others.’  I hear them calling for blocking free expression, for slowing immigration, for reducing trade, and in some cases even for cutting access to the internet.”

“It takes courage to choose hope over fear,” he said.

Dear Mr. Zuckerberg.  While you are alluding to Donald Trump and his wall, and you know that Vladimir Putin and Xi Jinping are squelching debate in their countries and cracking down on Net access, just remember, I’ve been writing this column since you were 14.  I know that over 51% of the people in this world are dirtballs and the percentage grows by the year.  It’s the new Doomsday Clock, which is at 11:57 p.m., by the way, according to The Bulletin of Atomic Scientists Science and Security Board.

--Tesla Motors said it was recalling its Model X sport utility vehicles after testing revealed the backs of the car’s third-row seats could give way in a crash.  But Tesla stressed this was a voluntary move on its part and that the vehicle had no reports of accidents related to the problem and that the Model X had passed American crash tests.

That said, get it fixed.  Or just don’t put anyone in the third-row seats...unless you’re driving along and Vladimir Putin or Xi Jinping are trying to hitch a ride.  Go ahead, give ‘em a lift.

“Hi, Vladimir.  Why don’t you get in the third-row...that’s the most comfortable ride.”

--Shares in Under Armour dropped nearly 6 percent on Monday following golfer Jordan Spieth’s collapse in the final round of the Masters the day before.  Spieth signed a 10-year agreement to wear UA’s golf shoes and other clothes and it was only natural his debacle would have a short-term impact. [The shares recovered much of the loss by week’s end.]

Under Armour also has deals with basketball’s Stephen Curry and football’s Cam Newton, along with a sponsorship of my favorite Premier League team, Tottenham, but it’s not a stretch to say more Wall Streeters care about golf than basketball, for one, plus Cam Newton didn’t win the Super Bowl, let alone the fact he’s a jerk.

--Great news for blue crab fans.  I saw in the Baltimore Sun that the Chesapeake Bay blue crab population is larger than a year ago.  As reported by Scott Dance, “There are more than 550 million blue crabs (in the bay), an increase of more than a third over this time last year and one of the highest population counts of the past two decades.” [Fourth-highest in 20 years.]

Why the survey found “194 million spawning female crabs, up from 101 million last winter,” sports fans!  Yum yum.

[I’m not a craft beer guy, so I’d pair this with Shiner Bock; the premium domestic.]

Foreign Affairs

Iraq/ISIS/Syria/Russia/Turkey: A big battle is taking shape over Syria’s second city Aleppo, with Al-Nusra militants massing on a large scale as they look to cut off the road between Aleppo and Damascus.  Russia is expected to heavily support Syrian government forces.

What’s funny is that after Russia talked of a drawdown last month, this week Russian media reported a powerful new helicopter was seeing Syrian combat for the first time, so it begs the question, what pullout?  Russian military advisers are at the right hand of the Syrian army, while Russian special forces are on the front lines calling in airstrikes.  [Russia admitted one of its helicopters, I don’t believe one of the new ones, crashed near the Syrian city of Homs this week, killing two pilots.  It was not brought down by enemy fire, according to reports.]

Meanwhile, the Turkish army hit ISIS targets in northern Syria in response to cross-border rocket fire that hit a border town in southeastern Turkey.

As for peace talks in Geneva, an official from the opposition told Agence France Presse that the ceasefire in Syria “is about to collapse,” with “the use of barrel bombs (having) resumed.”

The truce does not include areas where ISIS and Al-Nusra Front are present.

The fate of President Assad remains a major sticking point.  The opposition wants a transitional authority with full powers, including Assad, while the regime talks of a government of national unity with just a few opponents and independents.  A huge difference.

Bassma Kodmani, a member of the High Negotiations Committee of the Syrian opposition, told Journal du Dimanche, President Obama had “let the Russians take all the cards in the game.”

[One update: ISIS did release more than 300 cement workers it abducted near Damascus after questioning them to find out who were Muslims and killing four who were members of the minority Druze sect, according to the Syrian Observatory for Human Rights.  The Druze, an offshoot of Shiite Islam, made up about 5 percent of Syria’s pre-war population.  Lebanon has a large Druze community, led by Walid Jumblatt, one of the more fascinating figures in the world.]

In Iraq, a piece in the Financial Times points out that while ISIS is on the run, the battles surrounding the cities they have taken and then abandoned have in most cases left little but rubble, with 3.3 million Iraqis being displaced.

And with Iraq facing an economic collapse and renewed sectarian bloodshed that could fuel the very resentments that led to ISIS to seize control of Sunni majority areas, any Iraqi army victories could quickly turn into practical defeats.

Zaid al-Ali, author of The Struggle for Iraq’s Future, told the FT: “The government needs to convince people that things will be better.  If they maintain the same systems then all this effort is purposeless and ISIS, or some newer version of it, will come back.”

Officials say Iraq needs $6bn to $10bn in loans just to cover the budget owing to cratering oil revenues.  The central government has yet to fund any reconstruction projects.  At the University of Tikrit, a city retaken from ISIS, 20,000 students are back in class but there is no equipment.

Josh Rogin / Bloomberg

“President Barack Obama said Sunday that his biggest mistake as president was failing to plan for the day after the fall of the Qaddafi regime in Libya. But as bad as Libya looks today, Syria is faring far worse, in part because of the Obama administration’s failings – which the president has not yet acknowledged.

“On Libya, Obama regrets not staying engaged ‘after what I think was the right thing to do in intervening,’ he said on ‘Fox News Sunday.’  It’s worth noting that at the time, the White House was proud of the approach it took during the 2011 Libya intervention, which centered around sharing the burden with European allies, avoiding the deployment of U.S. ground troops, and leaving the toppling of Qaddafi as well as the political and physical reconstruction to Libyans....

“The Libya intervention, which was heavily supported by Hillary Clinton when she was secretary of state, is now derided because five years on, Libya is still struggling to establish stability and democracy.  Militias have failed to yield power, a shaky unity government has yet to gain widespread legitimacy, and the Islamic State is expanding on the ground.

“But Libya is faring better than Syria, which is also five years into its Arab Spring revolution, only without a U.S. or NATO-led military intervention.  Whereas Libya may have as many as 6,000 Islamic State soldiers, in Syria there are 20,000 to 30,000 IS fighters, according to the CIA.  Human rights groups on the ground estimate as many as 50,000.

“More important, Syria and Iraq represent the Islamic State’s core, where they control major cities and from where they export their ideology and fighters to places like Libya.  Syria is also where terror operations in Europe are prepared; the attackers in Paris and Brussels were trained in Syria, not Libya....

“In Syria, the ongoing Geneva talks show few signs of solving the crisis.  Under the best scenario, President Bashar al-Assad would stay in power for as long as 18 more months until elections can be held, and he might stand in those elections.  A more realistic assessment is that the Assad regime will not concede any power and will continue attacks on civilians for years.

“When he decided to attack the Qaddafi regime in 2011, the reason President Obama gave was that intervention was necessary to prevent Qaddafi from perpetrating genocide against the civilians in Benghazi.

“ ‘If we waited one more day, Benghazi, a city nearly the size of Charlotte, could suffer a massacre that would have reverberated across the region and stained the conscience of the world,’ Obama said after he decided to attack.  ‘It was not in our national interest to let that happen.  I refused to let that happen.’

“Today, Libyan civilians are much better off than their Syrian counterparts.  The Assad regime’s campaign of airstrikes and starvation sieges has decimated cities larger than Benghazi.  At least 300,000 civilians have been killed.  Over 10,000 were tortured while in the custody of the regime.  Twelve million have been internally displaced.  Four million have fled Syria, flowing into neighboring countries and Europe, spreading destabilization well beyond Syria’s borders.  In Libya, about 1,500 people died as a result of the fighting last year.

“In his recent interview with The Atlantic, President Obama boasted about his resolve in avoiding more American involvement in the Syrian crisis....

“At various times, Obama and his aides have given several other reasons why Libya was a good place to intervene but Syria was not.  In Libya there was a United Nations and NATO agreement to attack.  Libya was a more manageable mission.  Qaddafi didn’t have strong backers in Russia and Iran.

“All these facts miss a larger point.  Syria is more important strategically and symbolically. Syria’s failure more directly impacts American national security interests and those of our allies, especially Turkey and Israel.  And rebuilding Syria someday will cost the international community hundreds of billions of dollars....

“In terms of what’s good for the U.S. national interest, the region, and the world, President Obama’s Libya policy, while imperfect, was hugely more successful than his Syria policy.  Even leading from behind to solve a problem is better than leading a policy that allows the problem to spiral dangerously out of control.”

Iran: Russia delivered the first batch of S-300 anti-aircraft missile systems to Tehran, according to Iran’s Foreign Ministry.  An $800 million S-300 delivery deal signed between Russia and Iran in 2007 was blocked by the Russian side in 2010 amid global sanctions against Tehran. A new contract with Iran was then signed in November after the Russian self-imposed delivery ban was lifted by decree of President Vladimir Putin in April last year.

Israel: Ahmed Yousef, a former advisor to Hamas Prime Minister Ismail Haniyeh, strongly criticized his movement, holding it responsible for the harsh situation inside the Gaza Strip.

In an article published last weekend, Youself called upon preachers to “stop deluding people that we are living in a reality of a utopia.

“Everyone is shocked because of the reality we are living in and people don’t stop talking about the pain and tragedy...

“We have waited 10 years to see the Virtuous City that some promised us,” Yousef said, referring to the decade-old rule of Hamas over the Gaza Strip.  “But unfortunately, conditions have worsened and the poor have become even more poor.

“We have terrified students, who were dreaming of getting a job, offering them a bleak future.  We drove these students to ride boats of death in the hope of living.”

Yousef in this last comment is referring to the scores of Palestinians who fled Gaza in boats for Europe.  [Jerusalem Post]

Separately, Israeli government officials are not happy with Bernie Sanders and his take on the Israeli-Palestinian crisis.  Sanders got particular heat for a comment he made a number of times, including in his interview with the New York Daily News, that the 2014 war with Gaza resulted in 10,000 Gazans being killed, when the true figure was under 1,500.  In his debate on Thursday with Hillary Clinton, Sanders did say 1,500.

North Korea / South Korea: Pyongyang failed in an attempt to launch a missile on the birthday of its founder, a day after South Korea warned a test of a missile capable of reaching Guam was imminent.  South Korea’s Defense Ministry said the missile exploded in the air shortly after takeoff.

Earlier, Kim Jong Un supervised a successful test of a new engine for an intercontinental ballistic missile (ICBM), according to state media.

“Dear Comrade Kim Jong Un said now we can mount an ever more powerful nuclear warhead on a new intercontinental ballistic rocket and put the den of evil in the United States, and all over the world, within our strike range,” the KCNA news agency said.

The Musudan missile has a range of 1,800 miles, making U.S. bases in Guam and Japan potential targets, though accuracy is another matter.

North Korea’s Kim Jong Un has recently said his country would test another nuclear device.

Editorial / Wall Street Journal

“Thirteen North Koreans defected to the South last week from China. That may not seem significant, especially since they were waitresses rather than high officials.  But in the secretive and topsy-turvy world of the Kim regime, this gutsy group defection suggests trouble in the workers’ paradise.

“The North Korean restaurant in Ningbo that employed the defectors is one of 130 that Pyongyang runs in China and 11 other countries to earn more than $10 million annually.  They attract customers not with the food, which is terrible and overpriced, but with a glimpse into the North’s totalitarian façade. Attractive waitresses sing and dance to kitschy ballads praising the Kim family....

“In February South Korea urged its citizens to stop patronizing North Korean restaurants abroad, part of a broader tightening of policy after the North’s latest nuclear and missile tests.  Soon reports circulated that the restaurants owed staff back wages and some shut down.

“It’s nonetheless surprising that a group of workers defected together, since North Koreans are encouraged to report on each other for disloyalty.  It’s also unusual that Chinese authorities allowed them to leave China for a third country instead of detaining and repatriating them to the North.

“It’s too early to say that Kim Jong Un’s hold on the Pyongyang elite is slipping as sanctions begin to bite. But this week South Korea disclosed that a senior colonel from Pyongyang’s powerful Reconnaissance General Bureau defected last year. Signs that the regime is under stress show that the North is not as self-sufficient as it likes to claim, and more pressure could bring it to its knees.”

On a totally different matter, South Korean voters handed President Park Geun-hye a stunning political setback by denying her conservative party a majority in the next National Assembly in elections held Thursday, so this will make it far more difficult for Park to push through controversial economic reforms, including plans to make it easier for companies to lay off workers.  And it’s an early blow when it comes to next year’s presidential race.

China: U.S. Defense Secretary Ash Carter scrubbed a planned visit to Beijing amid rising tensions between the U.S. and China over the disputed waters of the South China Sea.

Carter is currently traveling in Asia and was in the Philippines, finalizing a deal that will allow U.S. forces to be stationed there for the first time since 1992.* He is also heading to India, which has boosted defense ties with the U.S. in recent years.

The U.S. and China are at increasing odds over Beijing’s claims in the South China Sea, including the construction of artificial islands, with China saying it has “indisputable sovereignty” over all South China Sea islands and their surrounding waters, though Vietnam, Malaysia, Taiwan, Brunei and the Philippines all have competing claims.

President Xi Jinping pledged during a visit to Washington last September not to militarize the disputed Spratly Islands, but then went ahead and began to do so.

*The Philippines’ military suffered its largest single-day combat loss this year during the week when 18 soldiers were killed in fierce fighting with Abu Sayyaf extremists that also left five militants dead.

The large clash occurred on Basilan island, as government forces were deployed to kill or capture Abu Sayyaf commander Isnilon Hapilon, who has publicly pledged allegiance to ISIS and is wanted for his involvement in a number of terrorist attacks.  Washington has offered a $5 million reward for information leading to his capture and prosecution.  One of his sons was reportedly killed in the fighting.

The militants are believed to be holding 18 foreigners, including two Canadians and a Norwegian.

Sen. John McCain / Financial Times

“Admiral Harry Harris, the commander of U.S. Pacific Command, was recently asked in a Senate Armed Services Committee hearing about China’s strategic goals.  ‘China seeks hegemony in East Asia.  Simple as that,’ he responded.  Admiral Harris concluded: ‘China is clearly militarizing the South China Sea and you’d have to believe in the flat Earth to think otherwise.’

“But despite the Obama administration’s ‘three no’s’ – no reclamation of land, no militarization and no use of coercion – Beijing has pressed ahead with all three.  The administration’s aversion to risk has resulted in a policy that has failed to deter China’s pursuit of maritime hegemony, while confusing and alarming America’s regional allies and partners.

“It is time to change course as we enter a critical two-month period for U.S. policy in the Asia-Pacific region. The Permanent Court of Arbitration is expected to rule by early June in a case brought by the Philippines concerning China’s claims in disputed areas of the South China Sea.  Confronted with the possibility of an unfavorable ruling, China may use the coming months to secure its existing gains or pursue new forms of coercion to expand them. This could include further reclamation and militarization at strategic locations such as Scarborough Shoal, attempts to expel another country from a disputed territory or the declaration of an Air Defense Identification Zone (ADIZ) in all or part of the South China Sea....

“If China declares a South China Sea ADIZ, the U.S. must be prepared to challenge this claim immediately by flying military aircraft inside the area affected under normal procedures, including not filing a flight plan, radioing ahead or registering frequencies.

“It is also time for the U.S. to move beyond symbolic gestures and launch a robust ‘freedom of the seas campaign.’  It should increase the pace and scope of the Freedom of Navigation program to challenge China’s maritime claims, as well as the number of sailing days that U.S. warships spend in the South China Sea.  Joint patrols and exercises should be expanded and ocean surveillance patrols to gather intelligence throughout the western Pacific continued.

“Finally, given the shifting military balance, the U.S. needs to focus on enhancing its military posture across the region. Consistent with a recent Center for Strategic and International Studies report to Congress, it should deploy additional air, naval and ground forces forward to the region to reassure our allies.

“Over the past several years, China has acted less like a ‘responsible stakeholder’ in the rules-based order in the Asia-Pacific region and more like a bully.  Up to now, American policy has failed to adapt to the scale and velocity of the challenge we face.

“The potential threats China will pose in the South China Sea in the coming months demand a change of course that can reassure the region of America’s commitment and demonstrate to Beijing that its pursuit of maritime hegemony will be met with a determined response.”

On a totally different issue, according to a survey conducted by China’s Ministry of Water Resources, 80 percent of groundwater in the mainland’s major river basins is unsafe for human contact.

The ministry last year tested 2,103 wells in the basins of the Yangtze, Yellow River, Huai River and Hai River, finding that exploitation and pollution from industrial and agricultural emissions were the biggest threats to water standards.  [South China Morning Post]

Lastly, Lt. Edward Lin, a Taiwan-born U.S. Navy officer who became a naturalized U.S. citizen faces charges of espionage, attempted espionage and prostitution in a highly secretive case in which he has been accused of passing classified information on to China

Lin is assigned to the headquarters for the Patrol and Reconnaissance Group, which oversees maritime patrol aircraft such as the P-8A Poseidon and P-3C Orion spy planes and the MQ-4C Triton surveillance drone.

Just an educated guess, but China has to know all about our surveillance tactics in the South China Sea.

Russia: The Kremlin claimed it was observing all required safety measures when its fighter jets buzzed a U.S. warship in international waters of the Baltic Sea on Monday.

According to Russia’s defense ministry, the Su-24s “turned away in observance of all safety measures” after observing the USS Donald Cook.

The United States called Russia’s maneuvers, which were a simulation of a strafing run, “one of the most aggressive acts in recent memory.”

The two Russian jets flew over the U.S. destroyer about a dozen times, American officials said.  At one point they got as close as 30 feet and the U.S. would have been in its rights to shoot them down.

Through such provocations you can end up in a nuclear war, boys and girls.

Ukraine: Prime Minister Arseniy Yatsenyuk announced his resignation last Sunday and parliament speaker Volodymyr Groysman was elected to replace him by a 257-50 vote in parliament, which seems encouraging, but the 38-year-old (!) is expected to have a rocky time and is seen to be beholden to President Petro Poroshenko and his business cronies.

Ukraine desperately needs to enact economic reforms (including painful austerity measures) in order to secure further IMF support.  This country will become a big story again the second half of the year for all the wrong reasons.

France/Belgium: The man in the hat who accompanied the two suicide bombers who detonated their bags at Brussels Airport on March 22, was identified as Mohamed Abrini, who was detained last weekend in Brussels and charged with participation in the activities of the terrorist group.  He confessed he had been directly involved in the explosions at the airport, according to the prosecutor’s office.

Abrini then admitted the terror cell was initially planning another attack on France but decided to attack Brussels instead after the arrest of fellow suspect Salah Abdeslam.

Brazil: Impeachment proceedings against President Dilma Rousseff are barreling ahead after a congressional committee voted 38 to 27 to recommend impeachment over claims she manipulated government accounts to hide a growing deficit.

Sunday or Monday, April 17 or 18, the lower house will vote with a two-thirds majority out of 513 seats required to send the case to the Senate.  Rousseff has been losing coalition partners and a recent poll showed 300 of 342 needed to proceed in favor and 125 opposed, leaving 88 MPs still undecided or not stating their position.  [BBC News]

Rousseff is claiming her Vice President, Michel Temer, is one of the ringleaders of the “coup” attempt against her. But Temer has his own issues.

In fact, a Datafolha survey put support for Rousseff’s impeachment among Brazilian voters at 61%, while the same poll has support for Temer’s impeachment at 58%.

Random Musings

--Delegate race:

Republicans (1,237 needed for nomination)

Donald Trump 743
Ted Cruz 545
John Kasich 143

Democrats (2,383 needed for nomination)

Hillary Clinton 1,758 (including superdelegates)
Bernie Sanders 1,069

Last Saturday, Ted Cruz won all the delegates available in Colorado, which ticked The Donald off to no end, while Bernie Sanders won Wyoming’s caucuses, but failed to make any headway in the delegate count.

--But now it’s all about New York...Tues., April 19.  Some polls....

Republicans

Monmouth: Trump 52%, Kasich 25%, Cruz 17%
Quinnipiac: Trump 55, Kasich 20, Cruz 19
NBC/ Wall Street Journal/Marist: Trump 54, Kasich 25, Cruz 16
Siena: Trump 50, Kasich 27, Cruz 17
Fox News: Trump, 54, Kasich 22, Cruz 15

Democrats

Monmouth: Clinton 51%, Sanders 39%
Quinnipiac: Clinton 53, Sanders 40
NBC/WSJ/Marist: Clinton 57, Sanders 40
Siena: Clinton 52, Sanders 42
Fox News: Clinton 53, Sanders 37

April 26 sees primaries in Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island.

Fox News has Clinton leading Sanders 49-38 in Pennsylvania, while Trump leads 48-22 over Kasich, 20 percent for Cruz.

Monmouth has Trump leading Maryland, 47-27 (Kasich) - 19 (Cruz).

The month of May is then light, with the process culminating on June 7 in California and New Jersey, and a few others.

--In a CBS News national poll released on Thursday, Trump has the support of 42% of GOP primary voters, with Cruz at 29% and Kasich at 18%.  Trump had a 46-26 lead in the same poll March 16.

Nearly two-thirds of Trump’s supporters – 63 percent – said if he wins more delegates than any other candidate but does not get the GOP nomination, he should run as an independent.

A Fox News national poll had Trump at 45%, Cruz 27%, Kasich 25%. 

But on the Democratic side, Clinton led Sanders in this survey just 48-46.

--As for Thursday’s debate in Brooklyn between Hillary and Bernie, at times it was literally unlistenable.  [I can’t say unwatchable because I, err, watched it.]

John Podhoretz / New York Post

“To call the Democratic debate Thursday night a travesty would be an insult to serious travesties throughout history – because it was, save for an extraordinary back-and-forth on Israel, a series of hostile exchanges that were alternately pointless and stupid when they weren’t entirely disingenuous.

“Also, with the screaming they were doing, these two Social Security recipients came to look like they were battling over the last open seat on the board of the Del Boca Vista Condo Association. If they had been playing canasta, they would have accused each other of cheating and spilled their glasses of tea all over the card table in the game room.

“Why all the yelling?  Maybe that’s the only way they could hear each other. I mean, you wouldn’t believe the volume level at which my octogenarian parents play their TV.

“But seriously, folks. Bernie Sanders has won eight of the last nine Democratic contests, which gives him momentum and makes Hillary Clinton look bad. On the other hand, she’s all but got the nomination in the bag, and in the overall aggregate Democratic vote nationwide, she’s ahead of him 56 percent to 41 percent.  New York polls have her ahead by about 10 points.

“Still, she probably won because she’s ahead and didn’t make any big mistakes, and he said nothing that would expand his audience outward from the wildly enthusiastic leftists and kids who have kept his campaign chugging along.

“Sanders said he had no specific plan to break up the banks because it wouldn’t be appropriate for the government to come up with the details for their self-destruction.

“Please.

“Clinton said she was for a $15 minimum wage but that she was also for a $12 minimum wage but was really for a $15 minimum wage but also supported a $12 minimum wage.

“Please.

“Hillary said Bernie had no plan for Wall Street. He said she gave speeches for money.  She said Sanders was in the pocket of the National Rifle Association. He said he opposed suing gun companies because he wanted to protect small gun-shop owners in rural areas.

“He said he would pay for free college by imposing ‘a tax on Wall Street speculation,’ which takes the term ‘voodoo economics’ to a new level.  She said that when she was a senator, she gave Wall Street hell.....

“Now please excuse me. After watching this debate, I have to go get fitted for a hearing aid.”

--President Obama’s latest defense of Hillary Clinton’s email situation struck a nerve with some when he said in an interview with “Fox News Sunday,” “there’s classified and then there’s classified.”

As Julian Hattem of The Hill wrote:

“To advocates for government transparency, the remarks stunk of duplicity by suggesting that federal classification rules are arbitrary and don’t apply to the Democratic presidential front-runner....

“Conservatives saw new reasons to worry that the administration cannot be trusted to adequately investigate Clinton’s exclusive use of a private email server as secretary of State.

Ron Hosko, a former high-ranking FBI official, said: “It leaves you with a sense that he is reaching his thumb toward the scale.  I think it is, as I said, unnecessary and, from an investigators’ point of view, not at all beneficial.”

Obama said in the Fox interview: “There’s stuff that is really top-secret, top-secret, and there’s stuff that is being presented to the president or the secretary of State, that you might not want on the transom, or going out over the wire, but is basically stuff that you could get in open source.”

Editorial / Wall Street Journal

“President Obama chooses his words carefully, so it was startling on Sunday when he chose to opine on the Justice Department’s investigation into Hillary Clinton’s private email server.  All the more so in the way that he phrased his defense of the Democrat he wants to succeed him as President in January.

“On Fox News Sunday, host Chris Wallace rolled a clip from October of Mr. Obama saying that ‘I can tell you this is not a situation in which America’s national security was endangered.’  Mr. Wallace then cited the 2,000 or so emails we have since learned contained classified information, including 22 that included ‘top secret’ information, and he asked: ‘Can you still say flatly that she did not jeopardize America’s secrets?’

“(After an initial boilerplate response, including), ‘She would never intentionally put America in any kind of jeopardy,’ Wallace pressed further on the jeopardy angle, and Mr. Obama responded again: ‘I continue to believe that she has not jeopardized America’s national security.  Now what I’ve also said is that – and she has acknowledged – that there’s a carelessness, in terms of managing emails, that she has owned, and she recognizes.’

“Hold on there, big fella. That is one loaded apologia.  A more scrupulous President would have begged off the question by claiming that he can’t comment on an ongoing investigation in a department he supervises. So saying anything was bad enough.

“But even more notable was Mr. Obama’s use of the word ‘intentionally’ regarding Mrs. Clinton’s actions.  As a lawyer, the President knows that intent is often crucial to determining criminal liability. And he went out of his way – twice – to suggest that what Mrs. Clinton did wasn’t intentional but was mere ‘careless, in terms of managing emails.’

“Why would Mr. Obama discuss the emails in those terms? He certainly isn’t helping Attorney General Loretta Lynch or FBI Director James Comey, who must decide how to assess Mrs. Clinton’s actions.  If they now decide not to prosecute based on a judgment that Mrs. Clinton was merely careless, President Obama has opened them up to reasonable criticism that they were publicly steered by his comments.

“Mr. Obama was at pains to ‘guarantee’ to Fox’s Mr. Wallace that there will be ‘no political influence’ from the White House over the email probe. But if you’re trying to send a message to the FBI or Justice, it’s probably shrewder to do it publicly by apologizing for Mrs. Clinton’s ‘carelessness’ than it is to say something specific in a private meeting that could leak to the press.  Mr. Obama can say he never said a word to either one, while those two take the heat if they give Mrs. Clinton a legal pass.

“Our own view of the public email evidence is that Mrs. Clinton’s actions go far beyond mere ‘carelessness.’ She knew she was setting up a private server in violation of State Department policy, she did it deliberately to prevent her emails from becoming public if she ran for President, and she knew classified information was bound to travel over that server.

“As former Attorney General Michael Mukasey has written on these pages, ‘gross negligence’ in handling classified information related to national defense is enough for criminal liability.  That Mr. Obama would issue such a public defense, and use such legally potent words, suggests that there’s more culpability than he cares to admit.”

--Former President Bill Clinton said last weekend that he regretted his response to the chants of Black Lives Matter protesters at a rally in Philadelphia earlier, when he issued an aggressive defense of his administration’s impact on black families.  What a wimp.

Black Lives Matter has been critical of the 1994 crime bill, which created tougher penalties for nonviolent drug offenders, banned certain types of assault weapons and added 100,000 more police officers to American cities.  The group now says that legislation contributed to the high rates of incarceration in the black community and tensions between it and the police.

Both Hillary Clinton and Bernie Sanders supported the 1994 Violent Crime Control and Law Enforcement Act.

Earlier, Bill Clinton told the Philly audience: “I don’t know how you would characterize gang leaders who got 13-year-old kids hopped up on crack and sent them out on the street to murder other African-American children,” he said, waving a finger.  “Maybe you thought they were good citizens.  She didn’t,” he said of Hillary.

It was a great moment for Bill, only then he was forced to withdraw under pressure from the groups whose support his wife needs.

--What was Bernie Sanders thinking about in scheduling his Vatican trip?!  Unbelievably stupid.

--I have to admit I’m with Donald Trump when it comes to the whole caucus setup.  I wouldn’t go to one if New Jersey had it.  Just give me a vote...straight up. 

Trump had the following himself in an opinion piece for Friday’s Wall Street Journal.

“On Saturday, April 9, Colorado had an ‘election’ without voters. Delegates were chosen on behalf of a presidential nominee, yet the people of Colorado were not able to cast their ballots to say which nominee they preferred.

“A planned vote had been canceled. And one million Republicans in Colorado were sidelined.

“In recent days, something all too predictable has happened: Politicians furiously defended the system.  ‘These are the rules,’ we were told over and over again.  If the ‘rules’ can be used to block Coloradans from voting on whether they want better trade deals, or stronger borders, or an end to special-interest vote-buying in Congress – well, that’s just the system and we should enhance it.

“Let me ask America a question: How has the ‘system’ been working out for you and your family?

“I, for one, am not interested in defending a system that for decades has served the interests of political parties at the expense of the people.  Members of the club – the consultants, the pollsters, the politicians, the pundits and the special interests – grow rich and powerful while the American people grow poorer and more isolated....

“The only antidote to decades of ruinous rule by a small handful of elites is a bold infusion of popular will. On every major issue affecting this country, the people are right and the governing elite are wrong. The elites are wrong on taxes, on the size of government, on trade, on immigration, on foreign policy.

“Why should we trust the people who have made very wrong decision to substitute their will for America’s will in this presidential election?....

“What we are seeing now is not a proper use of the rules, but a flagrant abuse of the rules. Delegates are supposed to reflect the decision of voters, but the system is being rigged by party operatives with ‘double-agent’ delegates who reject the decision of voters....

“How have we gotten to the point where politicians defend a rigged delegate-selection process with more passion than they have ever defended America’s borders?

“Perhaps it is because politicians care more about securing their private club than about securing their country.”

--Donald Trump suffered an embarrassment when daughter Ivanka and son Eric filed to register as Republicans for the New York primary in time.  They did not know they needed to last October, which is a pathetically stupid state law.

--Joe Scarborough / Washington Post

“The 43rd president promised to end tyranny across the globe.  He instead engaged in a tragic military overreach that will complicate U.S. policy for years.  The 44th president has been so driven by his obsession to avoid the mistakes of his predecessor that he has summarized this grand geostrategic approach as ‘Don’t do stupid s---.’

“Though hard to believe, the current crop of candidates running for president may prove to be even worse than George W. Bush and Barack Obama.

“One possible nominee has promised to bomb America’s enemies ‘until the sand glows.’  Another proposed banning all Muslims from entering the United States.  Another was stumped by editorial board questions that a (Robert) Gates, (Zbigniew) Brzezinski or (Brent) Scowcroft would have swatted away without breaking a sweat.  And the other has been so reckless with America’s classified secrets that the State Department concluded that releasing some sent through her unsecured email server would cause grave damage to U.S. national security.

“Any one of these four candidates could go a long way in narrowing their credibility gap with foreign policy leaders by following the advice of Brzezinski and putting Gates on their presidential ticket. Though it is unlikely the former defense secretary and CIA chief would reenter the world of Washington politics, the situation we face is grim.  It would take the reemergence of a leader such as Robert Gates to signal to the world that America is ready once again to get serious about its indispensable role in the world.”

--WIR 4/2/16:

And then you had the situation involving Trump’s campaign manager Corey Lewandowski, who was charged with misdemeanor battery against reporter Michelle Fields, formerly of Breitbart News.

“Fields claims Lewandowski roughly grabbed her arm as she tried to question Trump at a recent event....

“But this particular charge against Lewandowski is bogus.”

Yup, score another one for your editor.  The battery charge was dropped and Fields would have to be an idiot to pursue it any further. 

--New York City’s Police Department is suddenly being swept up in a corruption scandal that Commissioner Bill Bratton admits is the worst since New York’s dark days of the early 1970s. 

That was the time of the Knapp Commission, which exposed rampant bribe-taking at all ranks of the department and led to criminal charges against dozens of cops.

This week, a fifth NYPD commander was demoted amid the widening probe into bosses trading favors for gifts.

Bratton claims his own Internal Affairs Bureau initiated the investigation in 2013 (actually it was under his predecessor Ray Kelly) and insisted he has been plugged in, even after the FBI got involved months later.

One troubling issue involves ex-NYPD Chief of Department Philip Banks, who abruptly quit in October 2014 rather than accept a promotion to the No. 2 job behind the commissioner.  He is now suspected of accepting gifts and travel from two businessmen at the heart of the scandal.

But....

Michael Goodwin / New York Post

“Forget for a minute the gift and cash scandal rocking the NYPD. Even the two shady Brooklyn businessmen who allegedly handed out the goodies are not the big fish.  And don’t be distracted by the arrest of a man accused of running a Ponzi scheme out of a failed restaurant that some of the cops frequented.

“Block all that out and keep your eyes where they belong – on Mayor de Blasio.  He’s the focus of the FBI and Preet Bharara’s federal prosecutors. Everyone and everything else is an important detail, but just a detail.

“The probers’ tips lead back to City Hall, and now the target is coming into clear view.  It looks as if the mayor’s three slush funds, the ones that good-government groups blasted as a ‘shadow government,’ have a bull’s-eye on them.

“The multimillion-dollar operation is tied to every sleazy deal you’ve read about since de Blasio took office.  It is the dirty doorway to all the other schemes and players.

“The funds raised at least $4.36 million from developers, unions, taxi medallion owners, carriage-horse opponents and wealthy liberal activists like George Soros.  In short, all those who wanted something big and valuable from de Blasio found their way to the back-room boiler operation and wrote a fat check....

“(An) added element is that de Blasio has been moving huge amounts of money among the three entities, creating a virtual shell game that, temporarily at least, conceals the donors, how much they gave and how the money is being spent.

“Ultimately, the issue is what, if any, favors the donors got in exchange for their cash....

“That’s what the feds want to know.  As I have said repeatedly, I believe a thorough probe will find corruption by the bushel.”

Mr. Goodwin has been all over this potential wrongdoing for months.  I’m just bringing it to light here now because it does appear as if it is about to blow.

--Mayor de Blasio’s approval rating fell to a new low, just 35%, according to a new Wall Street Journal/NBC News/Marist poll.  A majority of registered voters, 51%, believe New York City is headed in the wrong direction, a slight improvement from last fall when the figure was 55%.

Only 27% of white voters approve of de Blasio’s job performance; 49% of blacks; and 36% of Latino voters.

--According to Australia’s Bureau of Meteorology, there is a 50 percent chance La Nina is likely by their spring, which starts in September.  La Nina cools the equatorial Pacific Ocean, and other forecasters from Japan to the U.S. have been predicting a La Nina later this year as well.

More rain could fall across parts of Asia, Australia and Brazil, while the U.S. Great Plains, Rocky Mountains and Florida receive less.  Hurricane activity in the Atlantic could pick up.

--George F. Will / Washington Post...from Princeton, N.J.

“One of history’s most important battles happened here on a field you can walk across in less than half the 45 or so minutes the battle lasted. If George Washington’s audacity on Jan. 3, 1777, had not reversed the patriots’ retreat and routed the advancing British, the American Revolution might have been extinguished.

“Yet such is America’s neglect of some places that sustain its defining memories, the portion of the field over which Washington’s nation-saving charge passed is being bulldozed to make way for houses for faculty of the Institute for Advanced Study (IAS).  To understand the gravity of this utterly unnecessary desecration, you must understand the astonishingly underestimated Battle of Princeton.

“In December 1776, the Revolution was failing.  Britain had sent to America 36,000 troops – at that point, the largest European expeditionary force ever – to crush the rebellion before a French intervention on America’s behalf. Washington had been driven from Brooklyn Heights, then from Manhattan, then out of New York.  The nation barely existed as he retreated across New Jersey, into Pennsylvania.

“But from there, on Christmas night, he crossed the Delaware River ice floes for a successful 45-minute (at most) attack on Britain’s Hessian mercenaries at Trenton.  This was Washington’s first victory...Trenton would have been merely an evanescent triumph, however, were it not for what happened 10 days later. [Ed. I edited this last line slightly.]

“On Jan. 2, 1777, British Gen. Charles Cornwallis began marching 5,500 troops from Princeton to attack Washington’s slightly outnumbered forces at Trenton. Washington, leaving a few hundred soldiers to tend fires that tricked Cornwallis into thinking the patriot army was encamped, made a stealthy 14-mile night march to attack three British regiments remaining at Princeton. They collided on this field.

“The most lethal weapons in this war were bayonets. The British had them. Few Americans did, and they beat a panicked retreat from the advancing steel. By his personal bravery, Washington reversed this and led a charge. An unusually tall man sitting on a large white horse, he was a clear target riding as close to British lines as first base is to home plate. Biographer Ron Chernow writes that, at Princeton, Washington was a ‘warrior in the antique sense. The eighteenth-century battlefield was a compact space, its cramped contours defined by the short range of muskets and bayonet charges, giving generals a chance to inspire by their immediate presence.’

“When redcoats ran, the British aura of invincibility and the strategy of ‘securing territory and handing out pardons’ (Chernow) were shattered.  And the drift of American opinion toward defeatism halted.

“In his four-volume biography of Washington, James Thomas Flexner said: ‘The British historian George Trevelyan was to write concerning Trenton: ‘It may be doubted whether so small a number of men ever employed so short a space of time with greater and more lasting effects upon the history of the world.’  But such would not have been the result if Washington had not gone on to overwhelm Princeton.’”

But now this ground is on the verge of being desecrated forever.  The Civil War Trust has recently expanded its preservation activities to Revolutionary War sites and it needs your help in attempting to buy the land from the IAS.  IAS, writes Will, has already spurned a $4.5 million purchase offer from the CWT.

--The success of the hit musical “Hamilton” has provoked a wave of interest in the man who established the U.S. financial system and whose face graces the $10 bill.

We had been told that Hamilton was being replaced by a woman but now Treasury Secretary Jack Lew is facing a backlash from women’s rights activists over his remarks suggesting a possible change in plans.

In a recent interview on Charlie Rose, Lew said, “Alexander Hamilton is one of my heroes.  He’s not leaving our money. We’re going to put a woman on the face of our currency. And this is not just about the $10 bill.  This is about a whole series of bills. We’re going to be working on the 5, the 10, and the 20.”

This was never a good idea.  Ditch Andrew Jackson on the $20, or put him in rotation with a woman. 

Actually, having watched Ken Burns’ superb documentary on Jackie Robinson this week, put Rachel Robinson on the $20.  Rachel is one of the great women in American history.

Jackie Robinson crossed the color barrier today, April 15, 1947.

---

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

God bless America.

---

Gold $1233
Oil $40.36

Returns for the week 4/11-4/15

Dow Jones  +1.8%  [17897]
S&P 500  +1.6%  [2080]
S&P MidCap  +2.6%
Russell 2000  +3.1%
Nasdaq  +1.8%  [4938]

Returns for the period 1/1/16-4/15/16

Dow Jones  +2.7%
S&P 500  +1.8%
S&P MidCap  +4.7%
Russell 2000  -0.4%
Nasdaq  -1.4%

Bulls 41.2
Bears 27.8  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore