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Week in Review

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11/28/2015

For the week 11/23-11/27

[Posted 11:00 PM ET, Friday]

Note: If you haven’t already done so, please click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.

*Special thanks to Josh P., longtime reader who over the years has supplied me with some terrific information from the So. Cal area.  Thank you, JP.

And to Jim D. for his ongoing support.

Edition 868...for new readers, yes, 868 columns, one week off.

Wall Street and Washington

There was a slew of economic data this week, none of which should prevent the Federal Reserve from raising rates when it convenes Dec. 15-16, though the final key will be next Friday’s jobs report for November.

That said we had an upward revision to third-quarter GDP, from 1.5% to 2.1%, so the first three quarters of the year have seen....

Q1 0.6% (annualized)
Q2 3.9%
Q3 2.1%

Ergo, just another year of 2.0% to 2.5% growth. As former NBA star Derrick Coleman would have said, “Whoopty-damn-do.” 

At least the consumer spending portion of the GDP report was up 3% for the quarter, vs. up 3.6% for Q2, both decent.  Corporate profits for the quarter, however, were down 4.7% year-over-year, owing in no small part to the stronger dollar.

[Looking ahead to the current quarter, the Atlanta Fed’s GDPNow indicator currently pegs growth at 2.3%...more of the same.]

October existing home sales came in less than expected for October, down 3.4%, but this was off September’s pace, which was the second-highest total since 2007.  The median home price of $219,600 was up 5.8% year-over-year, which is not necessarily good for first-time home buyers, especially as mortgage rates are about to rise once the Fed acts.

October new home sales came in less than expected, an annualized pace of 495,000, which is up 4.9% from year ago levels.  Just so-so.

October durable goods (big-ticket items) were up a solid 3%, up 0.5% ex-transportation, which is also good. 

October personal income was up 0.4%, in line with expectations and pretty good; while October consumption was up a weaker than expected 0.1%.

A few weeks ago, Goldman Sachs’ chief U.S. strategist, David Kostin, said the average annual total return on the S&P 500 would be just 5% over the coming decade; 2% from dividends, 3% from price appreciation.  That’s hardly scintillating, though reflective of a global outlook that remains lackluster.  Add in a few more high-profile terror attacks and the outlook will turn decidedly moribund (that part is moi).

Robert Samuelson / Washington Post

“In the era of Pax Americana, history texts have emphasized diplomatic dramas and military conflicts. The more obscure reality is that military might has often been used to buy time for the economic logic of shared prosperity to work.

“But this approach to foreign policy has long suffered from two potentially crippling defects.

“One is unrealistic expectations that, when disappointed, backfire in popular discontent and, sometimes, protectionism.  The ideology of economic growth has presumed that growth can be, more or less, taken for granted.  Unfortunately, it can’t, and when growth stalls or falls, all the individuals and institutions that had uncritically banked on its permanence find their plans disrupted or destroyed.  Local and global politics are thrown into turmoil.  In the wake of the 2008-2009 financial crisis and the Great Recession, we are going through just such an episode now, whose long-range consequences are not yet clear.

“The second defect is more unnerving and dangerous. It is the true Achilles’ heel of American foreign policy: Significant blocs of humanity ignore or repudiate our faith in the power of shared prosperity. They put other values and goals first.  Nationalism is one obvious alternative – Putin’s Russia being a good example. The case of China is more complicated. Although it is obsessed with economic growth, it’s also indulging a nationalistic urge to reassert itself on the global stage.

“Less ambiguous is radical Islam, whether the Islamic State or other variations. We don’t speak the same language or, at any level, share the same goals.  Radical Islamists deny the legitimacy of the secular state and seem willing to do almost anything to weaken or destroy it.  Their moral code is completely disconnected from ours.  They are creatures of rigid religious dogma, fervor and fanaticism.  We are the secular state – creatures of messy modern democracies with their (at times) seemingly elastic moral standards.

“What’s happening is completely at variance with our post-World War II experience.  Even at the height of the Cold War – when people really feared nuclear annihilation – there was some self-restraint (based on mutual fear) and, perhaps more surprisingly, a common understanding of the terms of the contest.  There was an acknowledged competition between capitalism and communism.  Which could better satisfy the wants and needs of its citizens?  ‘We will bury you,’ bragged Nikita Khrushchev.

“In the end, the opposite occurred.  The Soviet bloc ultimately collapsed because it lost this competition, weakening its claim to any popular legitimacy as well as undermining its military strength. What makes the present struggle so threatening is that it’s not being waged on familiar grounds that play to our strengths – our ability to outproduce our opponents.  The battlefield has been selected by them, and it’s what makes today’s predicament so disorienting.”

Europe and Asia

This coming week is a big one for the eurozone as the European Central Bank is expected to further loosen monetary policy on Thursday, highlighting its divergence from the Federal Reserve, barring a surprise in the aforementioned U.S. jobs report.

ECB President Mario Draghi has unleashed “a relentless shower of dovish speeches” in recent weeks, as the Financial Times’ Joel Lewin put it.

But some of the data this past week wasn’t that weak, so it’s unclear just how much further easing is really necessary.  I mean when you look at the following, does the German two-year need to have a yield of minus 0.42%?!

As in Markit released flash readings on manufacturing and services, and the composite reading for the eurozone as a whole came in at 54.4 for November vs. 53.9 in October (50 being the dividing line between growth and contraction).  The manufacturing PMI was 52.8 vs. 52.3.

In Germany, the flash comp was 54.9 vs. 54.2 in October; 52.6 vs. 52.1 for manufacturing.  And in France, the comp was 51.3 vs. 52.6, with manufacturing at 50.8 vs. 50.6, though it’s hard to calculate the impact of the 11/13 Paris attacks on the data.

When you look at the impact of the terror attacks, what you see is a pile of evidence that it will be significant.  Both Britain and Ireland, to cite one small but meaningful example, are forbidding school trips to Paris for the time being, and there are clear signs French consumers have been shopping less; let alone the week-long shutdown you saw in Brussels, Belgium.

But for the eurozone as a whole, Chris Williamson, Chief Economist at Markit said:

“The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past  4 ½ years. The data are signaling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December....

“However, with recent comments from ECB chief Mario Draghi highlighting how the central bank remains disappointed with the strength of the upturn at this stage in the recovery, November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth.”

Euro Bits....

--Ahead of next month’s big election, Spain’s National Statistics Institute said GDP expanded 0.8% in the third quarter, over Q2, matching the initial forecast, with the government calling for 3.3% overall growth for this year and 3% next.

So Prime Minister Mariano Rajoy can tell the electorate the economy has now had nine straight quarters of growth, but voters just want change (and an end to austerity).

--Greece’s biggest public and private sector unions have scheduled a nationwide anti-austerity strike against pension reform on Dec. 3, the second one in under a month.

The government has passed legislation raising the retirement age, increasing health care contributions and scrapping most early retirement benefits.

The public sector union, ADEDY, described the move as “the final blow to social insurance.”

“Society, which has suffered brutally from the bailout, will overturn the austerity measures,” it said in a statement.  [Reuters]

So Greece could easily reemerge as an issue for the eurozone as a whole.  It doesn’t help that third-quarter GDP was revised to a decline of 0.9% from an initial -0.5% estimate.

--Portugal’s bond market rallied on news that the new socialist leader, Antonio Costa, who was installed as prime minister on Tuesday, may not totally retreat on many of the deficit-cutting measures taken by his center-right predecessor after the financial crisis.

But most see this as only a short-term positive and a new round of elections could still be in the offing next year.

--The growth forecast for the U.K. in 2016 was revised higher to 2.4% from an earlier government estimate of 2.3%.

Lastly, on the migration front, the number of refugees arriving in the European Union will no doubt decline rather significantly during the winter months, with November probably coming in around 130,000 (that’s me extrapolating some numbers I saw), vs. a record 220,500 in October, according to the U.N.

Hungary has only seen a trickle after Prime Minister Viktor Orban closed the country’s border with Croatia on Oct. 18. But that meant more flowed into Austria, which then means more into Germany as the next destination.  I get into some of the issues facing Chancellor Angela Merkel down below.

Turning to Asia, in China the Shanghai Composite stock index fell 5.5% on Friday after reports regulators were once again going after the country’s biggest brokerages, raising fears that the government’s desire to root out corruption could lead to a repeat of the market crash we had in the spring.

Adding to the gloom was a report that industrial profits fell by 4.6% in October.

Separately, Fitch maintained its sovereign rating for China’s debt at A+, but the ratings agency warned there is still a risk of a sharp and disruptive adjustment in the economy.

Fitch expects the growth rate to be 6.8% this year, but then fall to 6.3% in 2016 and 6% in 2017; the slowdown largely driven by a sharp drop-off in residential construction.  Fitch also warns of the “crystallization of losses in the financial system.”

Japan had a data dump this week, with household spending down a surprising 2.4% in October from a year earlier and weaker than a 0.4% decline in September.  Economists were calling for an unchanged mark last month.

But Japan’s jobless rate fell to its lowest rate in 20 years, 3.1%, down from 3.4% in September, but this comes courtesy of a shrinking labor force.

Meanwhile, headline inflation rose 0.3% in October from a year earlier, up from zero percent in September, though core inflation, which in Japan includes energy prices, but not food, was -0.1%; the third straight month of deflation for this figure.

One other...a flash reading on Japanese manufacturing from Markit came in at 52.8 for November vs. 52.7 in October.

Street Bytes

--Since I didn’t get a break this Thanksgiving holiday (I never do), I’m taking one now.  All you need to know is that over the four trading days, the S&P 500 was down 2 points, up 2 points, unchanged and up 1 point.

Up a single freakin’ point on the week to 2090.   The Dow Jones fell 0.1% to 17798, while Nasdaq added 0.4% to 5127.

Black Friday crowds were also apparently thinner.

--U.S. Treasury Yields

6-mo. 0.37%  2-yr. 0.92%  10-yr. 2.22%  30-yr. 3.00%

--Federal Reserve Governor Daniel Tarullo told Bloomberg News that large U.S. banks may have to endure tougher stress tests in the future; ergo, they would have to hold more capital to be allowed to pay out dividends to shareholders.  The Fed hasn’t decided just how it will toughen the exams. 

Last July the Fed assigned capital charges totaling more than $200 billion for eight of the biggest U.S. banks, to reduce risks they could pose to the financial system.  The extra capital requirements, or surcharges, range from 1% to 4.5% of banks’ risk-weighted assets.

Tarullo added requirements under Dodd-Frank on counterparty credit limits and executive pay could be completed early next year.  On the pay front the Act is intended to restrict compensation arrangements that might incentivize bankers to take undue risks.

Some banks continue to get in trouble for failing to remember to use a No. 2 pencil when taking the exam as well.

--There is an important OPEC meeting next week, with investors wondering if Saudi Arabia will change its policy any.   Film at eleven.

--You would think Pfizer’s takeover of Ireland-based Allergan – the largest “tax inversion” to avoid American taxes by reincorporating in a lower-tax country – would finally get Congress to act to reform our corporate tax code.  But don’t look for it coming to a theater near you anytime soon.

Good plans have been put forward, but it takes leadership.  Politicians of both parties decry such moves and want legislation prohibiting them instead of freakin’ reforming the code.

The Pfizer-Allergan merger is a $160bn deal that creates the world’s largest drugmaker, but while Pfizer is the larger company, it’s structured so that Allergan is the acquirer.  The merged company’s principal executive offices will be in Dublin, with an effective tax rate of 17% to 18%, well below Pfizer’s current 25.5%.*  [Los Angeles Times]

*Technically, Ireland’s top corporate tax rate is 12.5%, while the top rate in the U.S. is 35%.

--Drivers paid the lowest pump prices this holiday weekend since 2008, with the national average on the verge of falling below $2.00 per gallon by Christmas.  Today’s national average is $2.07 last I looked.  Every dollar saved is one domestic beer, I like to calculate.

--Shares in Deere & Co., the world’s largest seller of tractors and harvesting combines, rose on Wednesday after the company reported earnings and revenue declines weren’t as sharp as analysts had forecast, while the 2016 sales outlook met expectations.

Granted, these are still miserable figures, with sales estimated to be down 7% next year amid the ongoing slump in the farm sector.  For the year ended in October, sales fell 22% from the previous year, though first-quarter sales are expected to drop 11% from a year earlier.

For the quarter, total revenue decreased 25%, but the profit and earnings per share far exceeded the Street’s numbers.

--On a related note, the Agriculture Department said on Tuesday that net U.S. farm income will drop 38% this year to $55.9 billion, the lowest level in more than a decade.  Depressed crop prices and softening dairy and hog markets are to blame.

In 2013, U.S. farm income reached a record $123 billion.  It totaled $90.4 billion in 2014.

Corn prices have fallen more than 50% since peaking during the drought of 2012.

--As leaders from 140 countries gather in Paris this week for the latest summit on climate change, here’s the beginning of a piece by Michael Birnbaum in the Washington Post:

“In this traffic-packed Dutch city [Ed. Rotterdam], electric cars jostle for space at charging stations.  The oldest exhaust-spewing vehicles will soon be banned from the city center. Thanks to generous tax incentives, the share of electric vehicles has grown faster in the Netherlands than in nearly any other country in the world.

“But behind the green growth is a filthy secret: In a nation famous for its windmills, electricity is coming from  a far dirtier source. Three new coal-fired power plants, including two here on the Rotterdam harbor, are supplying much of the power to fuel the Netherlands’ electric-car boom.

“As the world tries to reduce greenhouse-gas emissions and combat climate change, policymakers have pinned hopes to electric cars, whose range and convenience are quickly improving. Alongside the boom has come a surging demand for power to charge the vehicles, which can consume as much electricity in a single charge as the average refrigerator does in a month and a half....

“In some cases (the electric-car jump) could be even worse than the overall climate impact of driving, experts say.”

[Coal-fired power plants generate 40% of the world’s electricity.]

“Amid the mixed picture for electric cars, some environmentalists say that money spent on them might be better directed elsewhere.

“ ‘The economics do not make sense to push more electric vehicles onto the market’ to improve the climate, said John DeCicco, a professor at the University of Michigan Energy Institute.  He said that attention might be better focused on making conventional combustion engines more efficient.”

Look at the huge strides the auto industry has made regarding this last point.  You ‘short’ Tesla stock at your own risk because its loyal supporters seem to always find a way to pump it back up, even when there is bad news, but this company is ridiculously overvalued....and even more overrated.

I’m souring on Elon Musk, after admitting to being a big admirer initially.  But more on him below.

--About two hours after I went to post last Friday night, it was announced the United Auto Workers had ratified contracts with General Motors and Ford Motor, following an agreement in October between union workers and Fiat Chrysler, the third of the Big Three.  G.M.’s skilled trades’ workers, about 8,500 of the 52,000 involved, initially rejected an October agreement, but both sides agreed to changes to protect seniority rights and some classifications.

The four-year agreement for both G.M. and Ford includes ratification bonuses of $10,000 and a path to top wages for entry-level employees, aside from raises for all workers.

I’ve tried to follow the course of these negotiations pretty closely and it seems all sides acted in good faith...and that’s good for America, gosh darnit!

Oh, some will bitch, but I think this protects most workers when the next down-cycle occurs, and in the meantime if the good times in the auto industry continue, let the profit-sharing bonuses flow.

--The two companies formed from Hewlett-Packard – Hewlett-Packard Enterprise, an IT operations company, and HP Inc., a maker of PCs and printers – disappointed with their guidance for the first quarter of 2016 in issuing their first earnings reports.

Revenue from both the PC and printer units fell 14% year-over-year in the most recent quarter, though it took market share among weak demand for the sector.

Revenue for the combined company declined 9% in the last quarter from the same period in 2014.  Same-old story across much of Corporate America. For all of 2015, revenues for the S&P 500 are set to decline 3.3%, according to FactSet, much of this due to the strong dollar.

--Tiffany & Co. said its full-year profit would fall more than it had initially forecast (again) owing to unfavorable exchange rates that are impacting tourists’ spending.  Tiffany joins the likes of Nordstrom and Macy’s in warning of economic uncertainty.

Tiffany generates nearly a quarter of its U.S. sales – and more than 40% of sales at its flagship Fifth Avenue store in Manhattan – from foreign visitors.  Spending from same in the U.S. was sharply lower during the third quarter and helped push sales in the Americas down by 7%.

Revenue at least rose 17% in Japan year over year, as the country reported an increase in tourism.

Same-store sales worldwide fell 6%.

--Walt Disney chose Friday, a quiet time in the markets, to announce it had lost 3m ESPN subscribers over the past year, ESPN having an October fiscal year, from 95m to 92m in that period.  So there are renewed fears viewers are choosing to “cut the cord.”

--I’ve said in the past there are some American companies I just like to see do well, such as McDonald’s.  Campbell Soup Co. is another and on Tuesday, Campbell raised its earnings guidance for the year, though it reduced its sales forecast, saying they are now expected to come in flat to down 1%.  Campbell has been slashing costs to improve the bottom line and it has introduced a variety of new products that include more organic ingredients, while pledging to remove high-fructose corn syrup from its foods.

I just wish they would eliminate salt and let us salt the food ourselves, though I recognize this is an impossibility.

Overall sales fell 2.3% in the quarter vs. year ago levels, with sales of Pepperidge Farm products increasing.  It seems we are buying more Goldfish crackers, though there is no health benefit from the fake fish themselves.

Anyway, anytime I feel like I may be coming down with a cold (November is my worst month it always seems), I turn to the goodness of Campbell’s Chicken Noodle Soup to knock it down. Works every time, sports fans.

--Back to McDonald’s, Lisa Fickenscher of the New York Post:

“The burger giants are back.

“For the first time in years, the Big Three fast-food burger chains – McDonald’s, Burger King and Wendy’s – are all on track to post same-store sales growth of at least 3 percent this quarter.  What’s more, that growth is coming at the expense of other big chains like Denny’s, IHOP and Cracker Barrel.”

McDonald’s all-day breakfast menu is working, even as the company tries to play down expectations.  And as I’ve seen in a number of articles in just the past week, it is indeed at the expense of Denny’s and IHOP.  I mean why take time at a sit down when you can get an Egg McMuffin anytime you want on the fly?

And as noted the other week, Wendy’s 4 for $4 has been a big hit as fast food restaurants take away from fast-casual “by shifting their pricing downwards,” according to Richard Adams, a former McDonald’s franchisee who has founded Franchise Equity Group.

--Costco is suffering from an E. Coli outbreak that ABC News said might be more serious than the one at Chipotle Mexican Grill.  Nineteen people in seven states have been sickened, with five suffering a form of kidney failure.  Tests performed by health officials, including the FDA, trace the E. coli to an onion and celery mix that was part of Costco chicken salads.

The source still hasn’t been found at Chipotle, by the way, as it deals with E. coli in six states, though the strain isn’t as dangerous as the Costco variant.

--Jeff Bezos has one-upped Elon Musk in the race to launch a rocket into space and return it safely to earth. Bezos’ Blue Origin did just that on Monday, while Musk’s SpaceX has failed to do so in several attempts thus far.

Blue Origin launched New Shepard, which rose to a height of 329,839 feet, carrying a crew capsule, which then separated and returned to earth separately from the rocket.

The rocket (named after Alan Shepard) landed just four feet from the center of the launch pad.

“Full reuse is a game changer, and we can’t wait to fuel up and fly again,” Bezos said, as this is indeed a game changer re efforts to bring down the costs.

Blue Origin had already been tapped to manufacture the new engine for United Launch Alliance’s Vulcan rockets, which are taking over critical tasks in the U.S. space program.

As for Musk, who can’t seem to manufacture safety belts on his Model S car properly, his SpaceX program suffered a setback in June when one of its Falcon 9 rockets (named after, err, a falcon) blew up shortly after take-off on a mission that was to restock the International Space Station, after which the astronauts on board were forced to till the artificial turf on the ISS in order to grow crops and prevent starvation.  [Just seeing if you’re paying attention.  One detail isn’t exactly true in the preceding.]

Back to Blue Origin, it is close to pursuing a “rigorous” test flight program as part of preparations for future space flights that will take six tourists at a time.

--Apple shareholders beware.  The company’s big growth market is China and I just read the following in the South China Morning Post on Thursday.

“Chinese smartphone maker Huawei, the world’s third-largest vendor, revealed its most advanced flagship smartphone in Shanghai on Thursday in what looks like a bold challenge to Apple’s iPhone 6.

“The seamlessly designed Mate 8, which is now available in mainland China, is of comparable size to the larger iPhone 6S but with an even bigger 6-inch FHD display.”

No surprise, but Richard Yu Chengdong, CEO of Huawei Consumer Business Group, said the Mate 8 is the superior smartphone in many ways.

“Huawei is set to be the fastest-growing major smartphone vendor this year after selling 27.4 million handsets in the third quarter,” he said.

“The latest quarter thus put it on course to offload 100 million smartphones this year, up 33 percent from 2014. Such growth would eclipse similar forecasts for top rivals like Apple and China’s Xiaomi and Lenovo Group.” [Hu Huifeng / SCMP]

--Speaking of the South China Morning Post, I was disturbed to see that Jack Ma, chairman of Internet giant Alibaba Group, is in talks to buy the great English-language newspaper based in Hong Kong that I have been a subscriber of for years.  No way the newspaper’s editorial independence would remain the same if this went through.  You all know how Hong Kong guarantees freedom of the press, but Ma “needs support from Beijing to continue his dominance of the Internet transactional world, and therefore he’s going to be careful in what he does in the publishing world,” said Andrew Collier, a former Beijing-based reporter for the newspaper who now has a financial research firm in Hong Kong.

Ma once said in a 2013 interview with the SCMP that the Chinese government’s move to suppress the 1989 student-led Tiananmen Square demonstrations was “the most correct decision” under the circumstances.  For those of you who forgot, hundreds died.  [Michael Forsythe / New York Times]

I have said since Alibaba’s IPO, I wouldn’t touch this stock.  Now more so.

--With the problems the daily fantasy sports industry is having, owing to state actions such as those of New York Attorney General Eric Schneiderman and his move to shut down DraftKings and FanDuel, Eielers Research wrote in a report the other day that “Some investors have informed us that secondary market valuations for FanDuel and DraftKings are roughly 50 percent below the last round given the legal uncertainties.”  [New York Post]

--Speaking of gambling, guess who is showing profits?  Atlantic City!  After dumping four casinos in 2014, the remaining eight resorts have seen increasing revenue and profits, according to a report this week by the state Division of Gaming Enforcement.

Sales and profits for the nine months ending Sept. 30 were also up, with the Golden Nugget seeing its bottom line rise 354% in the nine-month period vs. last year.  Only the Tropicana showed a decrease in profits.

This shocked me.  Hotel occupancy rates rose during the third quarter to 83% overall. Granted this was for the summer months, but 83% isn’t that shabby, by my way of thinking.

Revel, The Atlantic Club, Trump Plaza and Showboat all closed last year.  [Paul Milo / NJ.com]

Foreign Affairs

Iraq/Syria/ISIS/Russia/Iran/Turkey...the list keeps growing.  And the situation grows more complicated.

On Tuesday, Turkish fighter jets shot down a Russian SU-24 war plane near the Syrian border after supposedly being warned 10 times in the space of five minutes about violating Turkish airspace, according to the Turks, with Moscow saying its jet had not left Syrian air space.  One of the pilots was rescued, another was apparently killed by ground fire as he descended in his parachute.

Another Russian was killed in the search for the missing crew when an Mi-8 helicopter was hit by an antitank missile.  The pilot that escaped was picked up by the Syrian army.

It was the first time a NATO member’s armed forces have downed a Russian or Soviet military aircraft since the 1950s.

Russian President Vladimir Putin initially said the episode would have “serious consequences for Russian-Turkish relations,” calling the shooting down of a Russian jet a “stab in the back” by those who “abet” terrorism as he accused Turkey of aiding the Islamic State by helping it sell its oil.

Putin was also miffed Turkey reached out to NATO after the episode but not to Moscow.

Turkish President Recep Tayyip Erdogan told CNN: “I think if there is a party that needs to apologize, it is not us.  Those who violated our airspace are the ones who need to apologize.”

By Thursday, Russian Prime Minister Dmitry Medvedev called for tough sanctions against Turkey that could cut into more than $30 billion in trade ties between the two.  Police began deporting Turkish businessmen (39 at last count, saying they were in the country on tourist visas) and seizing products.  Russia also strongly hinted it could provide military aid to Turkey’s enemies, including the Kurds.

[Friday, Russian Foreign Minister Lavrov said visa-free travel with Turkey will be suspended January 1st.]

Moscow also announced on Thursday that it had deployed powerful S-400 ground-to-air missiles in Syria that can reach across the country and far into Turkey from the Russian air base in the province of Latakia on Syria’s Mediterranean coast.

By Friday, it was suspected Russia had bombed Turkish-backed rebel groups, again, such as the Turkmen, ethnic Turks, who have been fighting Assad.

The reaction and Russian attitudes towards Turkey are changing so quickly that the Washington Post reported, “Most Russian tour operators stopped selling travel packages to Turkey on Wednesday.”

But also on Friday, after meeting with President Hollande in Moscow, Putin said he wanted to work with France and the U.S. in fighting ISIS, though the issue of the fate of Assad is still undecided.  For his part, President Erdogan said he wanted to meet with Putin.

Back in Washington, on Tuesday, President Obama said after his meeting with French President Francois Hollande that Turkey had a right to defend its airspace, accusing Moscow of attacking moderate rebel groups rather than ISIS.  Obama, though discouraged “any kind of escalation.”

Turkey, along with the West, wants Syrian President Bashar al-Assad to step down as part of a political transition.  Hollande, in his meeting with Putin, said Assad “cannot play a role in the future of this country,” which Putin refuted.

“We all agree that it’s impossible to defeat terrorists in Syria without ground operations,” Putin said.  “There are no forces other than the Syrian government troops. Therefore Mr. Assad and his government are our natural allies in this.”

So to sum up...

Russia and Iran want to keep Assad in power and have provided him with military support, while Lebanon’s Hizbullah (which is backed by Iran) has supplied Assad with hardened soldiers that have been critical to Assad’s survival.

The U.S.-led coalition has launched airstrikes against ISIS the past year, albeit in a fairly minimal way, while the past two months, Russia has largely been bombing the rebels, not ISIS, who have been battling Assad’s forces; many of these militias the same ones being supported by the West.

The U.S. is aiding the Kurds, who are fighting ISIS, but Turkey has struck out at some of the same Kurdish factions that have been at war for decades against the Turks inside Turkey; a war that has claimed over 40,000 lives.

Turkey shoots down a Russian fighter jet that had strayed into Turkish airspace, ostensibly, it seems, for Russia bombing ethnic Turks (Turkmen) fighting against Assad in Syria right across the border.

On Thursday, Hollande said to Putin at the Kremlin, “I am in Moscow with you to figure out how we can act together in order to coordinate our actions to hit this terrorist group and look for political solutions for Syria.”

In London, British Prime Minister David Cameron has been arguing his case in Parliament that it’s time to target ISIS in Syria, saying it posed a “fundamental threat” to the U.K. and Britain and they can’t afford to “wait until an attack takes place here.”

Cameron told Parliament that if Britain won’t act “when our friend and ally France has been struck in this way, then our allies in the world can be forgiven for asking: If not now, when?”  [Andrew Roth / Washington Post]

But the bottom line is the West wants Assad out, Russia and Iran want him to stay.  Russian Foreign Minister Sergei Lavrov said the other day that Assad “represents the interests of a significant part of Syrian society...so no peaceful solution can be found without his participation.”

Peace talks that are being held in Vienna will go nowhere with such hardened attitudes.

Philip Stephens / Financial Times

“I wonder what happened to Vladimir Putin the grandmaster?  I had given up counting the commentaries casting the Russian president as a daring, decisive foil to a collection of feeble, vacillating leaders in the world’s advanced democracies. The hyperbole was always just that.  Now we are catching a glimpse of Russia’s real vulnerability.

“By any measure, Mr. Putin has lost some of his shine.  Moscow’s military gambit in Syria was widely hailed as a game-changer – the sort of bold chess opening that U.S. President Barack Obama would never risk.  By committing forces the Russian leader had positioned himself at the center of any international effort to end the civil war....Banished from polite diplomatic society after the invasion of Ukraine, the scowling figure in the shadows was suddenly back at the top table.

“Television images of sleek Russian warplanes and submerged submarines raining fire on Syrian rebels burnished the president’s self-image as the leader of a great patriotic revival.  Who said Russia was no longer a superpower?  We have short memories....

“The lionization of Mr. Putin came before terrorists affiliated with the self-styled Islamic State planted the bomb that killed nearly 220 Russian holidaymakers on a flight home from the Egyptian resort of Sharm el-Sheikh; the murders were claimed as a reprisal for Moscow’s Syrian intervention.  And it was before this week’s downing by Turkish warplanes of a Russian jet, said to have strayed across the Syrian border into Turkey’s airspace. And it was before Ukrainian saboteurs – with or without the collusion of Kiev – turned off the lights in Russian-occupied Crimea by blowing up power-supply lines. [Ed. more on this below.]....

“The unforgivable mistake would be to accept any crossover from Syria to Ukraine.  Mr. Putin will want to trade cooperation in Syria for Western concessions in Ukraine. That way lies ruin. European leaders tempted to ease sanctions should recall that they successfully separated the Iran nuclear deal from the dispute about Ukraine.  And no one should forget that Russia, every bit as much as the West, has an interest in the defeat of violent Islamist extremism.

“Syria has left everyone in a hole. The U.S. and Europe misread the conflict almost from the outset. Mr. Putin, the decisive tactician, has shown himself a poor strategist.  If a deal is still possible then everyone should be ready to seize the moment, but no one should imagine that the Russian president has given up his revanchist worldview.”

Editorial / Wall Street Journal

“Mr. Putin may (be) testing NATO cohesion. Turkish President Recep Tayyip Erdogan is an impulsive leader who has alienated his allies with his autocratic instincts and Islamist sympathies. If Russia continues to prick Turkey and NATO fails to support Ankara, it will expose the hollowness of NATO’s Article 5 collective-defense obligations.

“The Obama Administration failed to invoke Article 5 on France’s behalf after the Paris massacre. And on Tuesday President Obama said that while Turkey had the right to defend its airspace, his priority is to ‘discourage any escalation.’  But what if Mr. Putin retaliates against Turkey?  Mr. Obama should have said that the U.S. will stand with its NATO partner.

“At his Tuesday press conference with French President Francois Hollande, Mr. Obama also said his visit to Paris later this month for a global-warming summit would be ‘a powerful rebuke to the terrorists.’ We can only imagine what Mr. Putin makes of that.”

On the Syrian refugee issue, Charles Krauthammer / Washington Post

“The Syrian refugee debate has become a national embarrassment.  It begins with a president, desperate to deflect attention from the collapse of his foreign policy, retreating to his one safe zone – ad hominem attacks on critics, this time for lack of compassion toward Syrian widows and orphans.

“This, without a glimmer of acknowledgment of his own responsibility for these unfortunate souls becoming widowed and orphaned, displaced and homeless, in the first place. A quarter-million deaths ago, when Bashar al-Assad began making war on his own people, he unleashed his air force and helicopters. They dropped high explosives, nail-filled barrel bombs and even chemical weapons on helpless civilians.  President Obama lifted not a finger.

“In the earliest days, we could have stopped the slaughter: cratered Assad’s airfields, taken out his planes, grounded his helicopters and created a nationwide no-fly zone.  (We successfully maintained one over Kurdistan for 12 years between 1991 and 2003.)

“At the time, Assad was teetering. His national security headquarters had been penetrated and bombed. High-level aides were defecting. Military officers were forming a Free Syrian Army.

“Against the advice of his top civilian and military aides, Obama refused to intervene.  The widows and orphans he now so ostentatiously champions are the product of his coldhearted refusal to do anything that might sully his peacemaking image.”

Mr. Krauthammer posted this Thursday night for Friday’s paper.  I of course have said it was over in 2012...it was about Obama’s reelection back then which Krauthammer fails to mention.

You know: Bin Laden is dead...G.M. is alive.

By the way, the U.N. is now estimating 7.6 million Syrians have been displaced, on top of the 4 million+ refugee count.

The Washington Post’s Liz Sly and Alice Martins did a piece on the costs of the war and the damage to date “is estimated at a staggering $270 billion – and rebuilding could run to more than $300 billion...more than 10 times the amount spent by the United States on reconstruction in Iraq, with few discernible results.”

Lars Bromley, who analyzes satellite imagery for the United Nations, told the Post that “Aleppo is by far the most devastated thing any of us have ever seen. I call it Stalingrad.”

Remember Kobane, where there was a months-long campaign to oust ISIS from the Syrian-Turkish border city?  The cost to rebuild there alone is estimated at $6 billion, though people have begun to move back.

In other developments in both Syria and Iraq, ISIS has claimed responsibility for a number of attacks in the past ten days in Baghdad that have killed at least 29.

Iraqi forces cut ISIS’ last supply line into the western city of Ramadi, taking a key bridge that apparently means Iraqi forces have the city surrounded.  Ramadi, the capital of Anbar province, fell to ISIS in May, which was a huge blow to the Iraqi government.

The Syrian army and allied militia (read Hizbullah), backed by Russian airstrikes, took control of two towns in western Syria after heavy battles with ISIS fighters, as reported by the Daily Star.  The towns are close to roads that link the ISIS-held city of Palmyra to western cities.  The government’s goal is to eventually retake Palmyra.

The U.S. accused Syria of buying oil from ISIS and imposed sanctions on a Syrian businessman said to be at the center of the trade.  As noted above, Russia accuses the Turks of buying the same oil.

And in Iran, Supreme Leader Ayatollah Ali Khamenei told visiting President Vladimir Putin that the U.S. had “no right” to remove Assad, adding: “Americans have a long-term plan to dominate Syria and then expand their control over the region to compensate for their historical absence in western Asia. This road map is a threat to all nations, in particular Iran and Russia.”

For Putin it was his first visit to Tehran in eight years and he held two hours of talks with Khamenei.

But Iran is concerned Putin just wants to strike a deal with the West over Ukraine; a deal that would involve the departure of Assad.

There were also reports this week that Putin had sent large numbers of Russian ground troops into Syria, though the Kuwaiti story hasn’t been verified, according to the Jerusalem Post.

Lastly, Iran sentenced detained Washington Post journalist Jason Rezaian to an unspecified prison term following his conviction last month on charges including espionage, Iranian state television reported last Sunday.

France/Belgium: Brussels was on lockdown and at its highest state of alert since last Friday evening, with authorities lifting it on Thursday, even though Salah Abdeslam, the most wanted man in Europe for his role in the Paris attacks, still said to be in Belgium, had not yet been captured or neutralized.

Bizarrely, Belgian Prime Minister Charles Michel maintained the highest security threat level even as schools and the metro reopened in Brussels on Wednesday.

Tons of people have been arrested in both Belgium and France since the Paris attacks, but no one feels any safer.

As two Danish tourists in Brussels put it when interviewed by the BBC at one of the city’s famous chocolatiers, one of the few that opened: “We can admit we’re scared. We were told by the hotel manager not to come here, but we thought we’d take a chance.  Buy presents for the family and leave quickly.”

Belgium’s government has been under fire, but it was just elected in October and has been rolling back previous plans to actually reduce spending on the national intelligence budget.

As reported by the Financial Times’ Jim Brunsden: “More Belgian nationals have travelled to fight alongside ISIS in Iraq and Syria than any other European country, on a per capita basis.  Much of the early recruiting of so-called ‘foreign fighters’ was organized by a cell called Sharia4Belgium based in the Flemish capital of Antwerp.”

The government has faced criticism for not going after the cell.

Meanwhile, I warned years ago about the dangers at Europe’s thousands of Christmas markets (some 2,500 in Germany alone), and last weekend, the Wall Street Journal’s Ruth Bender had a piece titled “Paris Attacks Cast Shadow Over Europe’s Christmas Markets.”

The police presence has been heightened, but as I saw firsthand in Cologne and Berlin there are so many ways to enter the markets and as one Berliner put it perfectly, “There are a lot of dark spots, you never know who will hang about there.  If I end up going, I will only do so during daylight.”

Separately, the debate over the “Schengen area,” the passport-free travel zone made up of 26 European countries, including 22 EU states, continues to heat up.

Wolfgang Munchau / Financial Times

“Last week it became clear the security network that supposedly operates quietly and efficiently in the background of Schengen is not working. The death of Abdelhamid Abaaoud during a police raid on the Paris suburb of Saint-Denis was at one level a big success. The police got the suspected terrorist who coordinated this and other attacks.  On another level his death was also a nasty shock.  What does it say about Schengen if one of the world’s most wanted criminals was able to move freely between Syria, France and Belgium? That was not supposed to be possible.

“There are, in principle, two fixes. Repair Schengen; or revert to national systems. Both work. The first would be economically efficient but is politically hard to do. The second is politically easier to do, but would constitute a spending shock of macroeconomic scale for many countries....

“The problem with Schengen is that within a few weeks it has lost its biggest asset – the trust of the population.  President Francois Hollande clearly did not trust the system.  Why else has he reimposed border controls?....

“Before the attacks, (the borders) were almost invisible.  On the train from Brussels to Paris, you would be hard pressed to notice when you changed countries. On the motorway, a derelict frontier post would have reminded you that there was once a border, followed by a country sign encircled by the twelve EU stars. Schengen turned the Molenbeek district of Brussels and Saint Denis in northern Paris into adjacent neighborhoods. The terrorists led the life of commuters, living in Brussels and working in Paris.

“Since we are not going to fix Schengen, let us return to national border controls. It will be very expensive, especially for France, which has yet to build up a fully functional domestic security service....

“The overriding goal has to be to preserve one of the most important common goods the EU can provide to its citizens: a modern and professional level of internal security.  Schengen cannot deliver this.  But the member states still can, and should be allowed to do this.”

Meanwhile, in French politics, Nicolas Sarkozy is taking advantage of the moment to tack to the right and to bring back “eternal France.”

In his first political rally since the attacks in Paris, the former French president told supporters that multiculturalism is what has made Western democracies vulnerable to Islamist extremists.

“France is not a supermarket, it’s a whole,” Sarkozy said.  “There is no French identity, no happy identity in a multicultural society.”

As reported by Anne-Sylvaine Chassany of the Financial Times:

“For Mr. Sarkozy reviving la France de toujours  goes well beyond emergency powers for the police or tough border checks, as instigated by socialist president Francois Hollande. It means everything from fighting ‘cultural conformism’ caused by unbridled globalization to restoring homework, standards and discipline to schools.

“Squeezed between a rebounding Mr. Hollande and a resurgent National Front (FN), the anti-immigration party led by Marine Le Pen, Mr. Sarkozy has opted to veer to the right.  It is a strategy reminiscent of his presidential campaign in 2012, when he was defeated by Mr. Hollande.”

Next weekend sees the first round of regional elections in which Le Pen is expected to make a historic breakthrough and secure at least one region.  Should the FN do so, it once again leaves Sarkozy in the wilderness, 18 months before the next presidential poll.

Hollande’s approval ratings, by the way, have surged between 7 and 17 points post-attacks.  But this can be short-lived.

Finally, a CNN report was incredibly disturbing; that being the infiltration of Paris’ transportation system by the likes of ISIS.  Supposedly, for example, Charles de Gaulle Airport is a beehive of activity of terrorists.

Russia/Ukraine: Last weekend, unknown perpetrators blew up pylons carrying power lines from Ukraine to Crimea. Russian authorities declared a state of emergency as nearly 2 million Crimeans were left relying on generators, with the Russia-appointed Prime Minister Sergei Aksyonov calling the destruction “a terrorist act.”

Since annexing Crimea in 2014, Russia has been working on a power “bridge” from its southern Krasnodar region to Crimea, but this isn’t expected to be completed until 2018.

Parts of Ukraine were also left without power with the attack.

A group called the Civil Blockade of Crimea, which includes Crimean Tatar activists, prevented Ukrainian officials from conducting repairs following the explosions, demanding a tougher line be taken against Moscow.

The Crimean Tatars opposed Russia’s annexation of the peninsula, having been persecuted during the Soviet era.

In a tit-for-tat move, Russia’s gas giant Gazprom claimed it had stopped supplying gas to Ukraine due to lack of payments, but Ukraine said it could buy all the gas it needed from Europe for the upcoming winter.

Russia has also proposed halting coal supplies to Ukraine in response to the Crimean power outage.

Also on Wednesday, Ukrainian Prime Minister Arseniy Yatseniuk said his country was closing its airspace to all Russian civilian passenger airlines.

Earlier, the government in Kiev banned cargo trucks from entering Crimea.

Tunisia: I’ve said this before but this is one country I truly feel sorry for.  Tunisia was the birthplace of the Arab Spring and while the rest of the region’s experiments with revolution have gone bad, Tunisia made all the right moves and held a peaceful, democratic election.

But Islamic extremists, including ISIS, have had their way and an ISIS suicide attack on a bus in Tunis carrying members of the presidential guard killed at least 12 this week.

Tunisia is believed to be the biggest exporter of jihadis, with an estimated 3,000 of its nationals fighting in Iraq and Syria.

The government immediately called a curfew and a state of emergency for the next 30 days.

Earlier this year, terrorists staged a series of attacks that killed 60, crippling the vital tourism industry.

Thankfully, President Essebsi was not on the bus.  He easily could have been.

The U.S. is negotiating with Tunisia on a loan guarantee and this is a case where a large loan is more than warranted.

Mali: In the wake of the recent terrorist attack in Mali’s capital that claimed 20 lives, Germany is dispatching up to 650 soldiers to join a French-led peacekeeping operation that helps Paris focus its own military resources on fighting Islamist terrorism elsewhere.  Germany already had 200 troops in Mali.

Germany: Separately, Chancellor Angela Merkel marked ten years in office last weekend, but her poll numbers and that of her party have been plummeting on the heels of her response to the migrant crisis and the Paris attacks.

Support for Merkel’s conservatives is down to 37 percent, while the anti-immigrant Alternative for Germany (AfD), is surging.

Merkel’s own popularity has taken a big hit, with her approval rating falling from 75 percent last April to 49 percent today.

The head of her Bavarian sister party has been Merkel’s harshest critic as Bavaria takes in the bulk of the refugees.

But Merkel is saved, thus far, by good feelings on the economy, with 82 percent of Germans describing it as good or very good.

The next federal election isn’t slated until fall 2017, but three state elections in the spring could be decisive in whether Merkel decides to run again or leave after what will be a 12-year run as chancellor.  [Irish Independent]

Afghanistan: A U.S. military investigation has concluded the crew of an American gunship that attacked a hospital in Kunduz last month run by Doctors Without Borders, killing 30, misidentified the target, confusing it with a Taliban stronghold.

“This was a tragic and avoidable accident caused primarily by human error,” Gen. John Campbell, the top U.S. commander for Afghanistan, said at a news conference in Kabul on Wednesday.

Several American personnel involved in the decision have been suspended and could face further disciplinary action.

But the coordinates and call for airstrikes started with the Afghans, as first reported, so this raises serious questions about the reliability of our Afghan partners.

An official with Doctors Without Borders said, “It is shocking that an attack can be carried out when U.S. forces have neither eyes on a target nor access to a no-strike list, and have malfunctioning communications systems.” DWB continues to call for an independent investigation, as does Human Rights Watch.

Bangladesh: In yet another example of the impact of ISIS and terror, Annie Gowen of the Washington Post had a story on how “life in Bangladesh’s crowded capital (of Dhaka) has changed significantly since a string of terrorist attacks this year, including shootings claimed by the Islamic State that left two foreigners dead and a third, an Italian missionary, seriously wounded.

“Many have stopped walking or bicycling to work in favor of company cars.  An international AIDS conference was postponed and other events canceled.... Aid organizations from Japan and Australia have begun quietly sending their workers and volunteers home.

“Those who remain have been buying groceries online and going home before dark.  The U.S. Embassy is no longer permitting its personnel and their families to be in most public places, including thoroughfares, sidewalks and large gatherings, including those held at international hotels.”

Now that’s depressing.  And this doesn’t include the four bloggers that have been killed for their secular writings on faith and culture.

In Ms. Gowen’s words, “Fears that the security situation in Bangladesh is spiraling out of control intensified in recent days, when the Islamic State asserted responsibility online for attacks on (the) three foreigners, a Shiite religious procession and a police checkpoint.”

The government is acting like ISIS isn’t a threat, but instead is going after the political opposition, jailing some of its top leaders.

Bangladesh is rapidly becoming both a failed state and safe haven for ISIS. 

Honduras: Police here on Wednesday said that 15 people had been killed in two attacks within a span of 12 hours. Seven were shot to death in the capital, Tegucigalpa, and eight bus drivers were killed in the northern city of San Pedro Sula, victims of extortion gangs.  Drivers, for example, are required to pay a weekly amount to the gangs.

Argentina: But there was some potential good news this week.  Marucio Macri, the center-right mayor of Buenos Aires, won the presidential election last Sunday, marking a big change in his country, or “the change of an epoch,” as he told his supporters.

“It is here, it is now, let’s go Argentina!” he roared.

Macri defeated the government-backed candidate, Daniel Scioli, by a 52-48 margin.

Scioli was gracious in defeat.  “May God illuminate Macri so that this change is a winning one.”

The victory brings to an end a 12-year run by outgoing leftist president Cristina Fernandez, and her late husband and predecessor, Nestor Kirchner.

Hopefully, Macri’s win helps lead to major changes in Brazil and Venezuela as well.

Random Musings

--Lots of new polls this week.  On the Republican side...

In a Fox New national poll, Donald Trump leads with 28%, followed by Ben Carson at 18% with Ted  Cruz and Marco Rubio tied for third at 14%.  Jeb Bush lags way back in fifth at just 5%.

A Washington Post/ABC News national poll had Trump at 32%, Carson 22%.  Rubio, at 11%, is the only other candidate in double figures, with Cruz fourth at 8%, and Bush at 6%.

In a Quinnipiac University poll of likely Republican Caucus participants in Iowa, Trump gets 25%, with Cruz vaulting up to 23%, while Carson falls to 18%.  Rubio is at 13%, with Rand Paul in fifth at 5%, Jeb Bush 4% and Carly Fiorina 3%.

CBS News/YouGov did a series of battleground state polls and Trump is way in front....

Iowa: Trump 30%, Cruz 21%, Carson 19%, Rubio 11%, Bush 5%.

New Hampshire: Trump 32%, Rubio 13%, Carson 10%, Cruz 10%, Kasich 8%, Bush, Fiorina, Paul 6%, Christie 5%.

South Carolina: Trump 35%, Carson 19%, Rubio 16%, Cruz 13%, Bush 5%, Graham 3%.

[All of the above CBS surveys were taken Nov. 15-19 among likely Republican voters.]

A Suffolk University/Boston Globe poll of New Hampshire voters found Trump was leading at 22%, followed by Rubio at 11% and Carson 10%, with Cruz and John Kasich at 9%, Bush at 8%. 

On the Democratic side.....

In the Fox News national poll, Hillary Clinton leads Bernie Sanders 55-32, with Martin O’Malley at 3%.  But she trails all the leading Republican candidates in head to head matchups, with Rubio faring best at 50-42.

In the Washington Post/ABC News national survey, Clinton leads Sanders 60% to 34% among registered Democrats and Democratic-leaning independents; a big rebound for her since her low point of 42% in September, during the height of the debate over her emails.

In the aforementioned Quinnipiac poll of Iowa caucusgoers, Clinton leads Sanders 51-42, with O’Malley at 4%, virtually unchanged from an October 23 survey that had Clinton leading 51-40.

As for President Obama, in the Fox News poll, his job approval has fallen to just 40%, with 54% disapproving.  This compares to a 45-50 split back on Nov. 1-3, so you see the probable impact of the Paris attacks and the president’s weak initial response.

--An Associated Press analysis of public disclosure forms and records reveals Hillary Clinton and her hubby, Bill, have made at least $35 million in a 15-year period, specifically giving 164 speeches to financial services, real estate and insurance companies after leaving the White House in 2001, which is fodder for Sanders, who has accused Hillary of being too cozy with Wall Street.

The Clintons made $millions giving speeches to other groups, but in terms of the financial industry, the couple made $26 million from 109 appearances sponsored by banks, insurance companies, hedge funds, private equity firms and real estate businesses after the 2008 economic crisis, with Hillary serving as secretary of state for most of that time.

--Michael Gerson / Washington Post

“The presidential candidate who has consistently led the Republican field for four months, Donald Trump, has proposed: to forcibly expel 11 million people from the country, requiring a massive apparatus of enforcement, courts and concentration camps; to rewrite or reinterpret the 14th Amendment to end the Civil War-era Republican principle of birthright citizenship; to build a 2,000-mile wall on our southern border while forcing Mexico to pay the cost.  He has characterized undocumented Mexican immigrants as rapists and murderers, and opposed the speaking of Spanish in the United States.

“Republican candidates have proposed: to favor the admission of Christian over Muslim refugees from the Middle East; to ‘send home’ Syrian refugees, mainly women and children, into a war zone; to ‘strongly consider’ the shutting down of suspicious mosques; to compile a database of Muslims and (perhaps) force them to carry special identification showing their religion.  They have compared Syrian refugees to ‘rabid dogs,’ ruled out the possibility of a Muslim president and warned that Muslim immigration to the United States is really ‘colonization.’

“There are, of course, Republican presidential hopefuls who have vigorously opposed each of these proposals, arguments and stereotypes.  But Trump has, so far, set the terms of the primary debate and dragged other candidates in the direction of ethnic and religious exclusion.  One effect has been the legitimization of even more extreme views – signaling that it is okay to give voice to sentiments and attitudes that, in previous times, people would have been too embarrassed to share in public.  So in Tennessee, the chairman of the state legislature’s GOP caucus has called for the mobilization of the National Guard to round up Syrian refugees and put them in camps....

“Vin Weber, a prominent GOP strategist, told me that many Republicans remain in ‘denial mode’ about the possibility of Trump’s nomination.  ‘How can you be the leader in national polls,’ Weber says, ‘and in the early states, and maybe even in money, and be counted out?’ In spite of saturation media coverage, Weber thinks the Trump effect on the GOP is ‘understated.’....

“(Trump’s) message comes in the context of a long period of political pessimism – more than 10 years in which polls have generally found more than 60 percent of Americans believing that their country is on the wrong track. There has been an angry decline in respect for most social institutions, including government. This has left some Americans more open to radical political answers – more prepared, in Weber’s words, ‘to roll the dice on the future of the country.’”

Editorial / Washington Post

“The growing ugliness of Donald Trump’s campaign poses a challenge to us all. We have seen the likes of him before, in the United States and elsewhere: narcissistic bullies who rise to prominence by spreading lies, appealing to fears and stoking hatred. Such people are dangerous.

“Like many Americans, our first inclination was to ignore Mr. Trump. The Huffington Post, you may recall, announced that it would feature him in its Entertainment section, not in its coverage of politics.  He was a buffoon, a disseminator of ludicrous rumors about President Obama’s birthplace. He lacked the qualifications, experience or knowledge to be president. He was running to promote his brand. We wouldn’t give him the satisfaction.

“Our assessment of Mr. Trump was correct, but the tactical response was not.  His popular support has hung steady at about 30 percent of Republicans, and his candidacy has tugged the debate toward divisiveness as his bigotry has drawn cheers and many of his rivals have strove to mimic him.  Now some detractors opt again to disregard his lies, but for a different reason: Criticism from establishment politicians and tough questions from establishment journalists, it is feared, will only fuel his self-portrayal as the truth-telling outsider.

“That may be so, but it cannot justify silence.”

Gerald F. Seib / Wall Street Journal

“(Mr. Trump) rolls on, still the Republican front-runner.

“How does that happen?

“The answer has less to do with Mr. Trump – who is pretty much the same guy who toyed with presidential runs in the past, to no great effect – than with the mood of the electorate, or at least a slice of it.  A quick look back at American history also shows the phenomenon is neither unprecedented nor inexplicable....

“Lesser candidates have faded after stirring up a fraction of (the controversies Trump has). But they weren’t running in 2015, a time in which respect for the political establishment and political institutions could hardly be lower.

“The country has been through two long and unsatisfying wars in Iraq and Afghanistan.  Many Americans feel they have never really recovered, and maybe never will recover, from the deep recession of 2007-09.  Moreover, some Americans see demographic trends and cultural changes, such as the spread of gay marriage, that leave them feeling they don’t recognize their own society.

“As a result, the unfolding Republican primary sometimes seems to be a contest to see who can be most derogatory of current political leadership – and that’s a contest Mr. Trump figures to win every time. His supporters seem less interested in the details of his pronouncements than in his attitude.”

--John Bel Edwards, a previously little-known Democratic state legislator, soundly defeated U.S. Senator David Vitter last Saturday to become the next governor of Louisiana.  Vitter, who wasn’t exactly a great candidate, carrying baggage that was over airline limits, announced after that he would not run for re-election to the Senate in 2016.

--Pope Francis is on an ambitious trip to Africa and, arriving in Kenya, he addressed the issue of Islamic extremism, saying God’s “name must never be used to justify hatred and violence.”  While not referring specifically to the Paris attacks, Francis did recall the “barbarous attacks” by al-Shabaab terrorists in Kenya, such as on Nairobi’s Westgate Mall and Garissa University, that combined killed more than 220 in 2013 and 2015. 

--It is truly despicable not only what Chicago police officer Jason Van Dyke did in the shooting of teenager Laquan McDonald, but unbelievable how corrupt the Chicago PD is and how equally pathetic  Mayor Rahm Emanuel has been in withholding the video of McDonald’s murder for so long.

Editorial / Washington Post

“This time in Chicago, the police cover-up failed....

“The problem starts in the mayor’s office; implicates the police department’s top brass, the police union and rank-and-file officers; and runs through the city’s nominally independent police review authority, which routinely dismisses allegations of police wrongdoing.  Since 2007, the authority has reviewed nearly 400 police-involved shootings in Chicago, fatal and non-fatal – an average of about one per week – and judged just one of them to be unjustified.  Just one officer was charged criminally in all those shootings, and he was acquitted....

“The video is stomach-turning.  It’s aftermath lays bare a system with an utter absence of accountability. It also raises disturbing questions about the Cook County prosecutor, Anita Alvarez, and federal prosecutors.  They had the incriminating videotape for months; why were no charges brought until this week?

“Mayor Rahm Emanuel (D) fought to withhold the video from public view for months until a judge ordered it released. Then, rather than calling for reform in the police department, which fatally shoots more people than any other force in the nation, Mr. Emanuel suggested the episode arose from one bad apple.

“That’s wrong.... It was the police who issued misleading information, saying Mr. McDonald was shot as he ‘continued to approach the officers.’  It was the police who maintained a code of silence despite at least seven other officers who witnessed the shooting at close range. That’s outrageous and should lead to further criminal inquiries and the immediate firing of the city’s police superintendent, Garry McCarthy.

“The problems are not about tactics and training; they’re about a culture of impunity, including a police union that routinely covers for even the dirtiest cops....

“Mr. Emanuel, appealing for calm, now says it is time for ‘healing’ in Chicago. In fact, no real healing is possible without deep reforms in a rotten system.”

--A backlash has developed over the student protests that have gained notoriety in recent weeks.  As reported by Melissa Korn and Douglas Belkin of the Wall Street Journal:

“At the University of Missouri, where the protests climaxed two weeks ago with the resignation of the school president, Ian Paris said he was prompted to speak out when classmates told him they disagreed with some of the demands protesters had made but were afraid to speak out.

“ ‘If you disagree with anything they’re saying, you will instantly be denounced as a bigot and attacked on social media,’ said Mr. Paris, a 21-year-old senior.  ‘The most jarring part of all this is to see the administration going along with it.’”

At Princeton, where as I wrote the other week the Black Justice League ended a 32-hour sit-in only when the administration agreed to consider the removal of Woodrow Wilson’s name from some of the buildings on campus, more than 500 people signed a petition denouncing the school for giving in to the protesters.

A senior who co-wrote the petition, Evan Draim, said, “The discussion surrounding these issues on campus was being monopolized by a few very loud and very passionate students, but the silent majority of Princeton students weren’t being heard for fear of being called racist or another term.”

“At the University of Kansas, a student group has called for impeachment of the student-body president because she didn’t stand up during a town-hall meeting when they called for support of a series of items demanding racial justice.  One item was a call for a parallel student government that emphasized diversity.

“Jessie Pringle, who took office in May, said she needed to think about that and hesitated to take a stand.  Demands that she step down have prompted calls from students and even more from alumni telling her to push back, she said.”

--Malia Obama is a high school senior and Darlene Superville of the Associated Press had a piece on her college list for next fall.  Dad is a 1983 graduate of Columbia.  Mom graduated from Princeton in 1985.  Malia’s cousin, Leslie Robinson, is a sophomore at Princeton. The president and the first lady earned their law degrees at Harvard.

So the potential winner is among the following: Cal-Berkeley; Stanford; New York University; the University of Pennsylvania; Barnard; Tufts; Brown; Yale and Wesleyan, plus, it is assumed, Columbia, Princeton and Harvard.

--Back to Louisiana, 60% of residents eat green-bean casserole on Thanksgiving, the most in the country per the Del Monte Green Bean Index.  This is one of my brother’s favorite dishes and he had done his research.

--Finally, on a personal note, I learned this week that my eye doctor, Howard Eisenstodt, had passed away.  I had my last appointment with him in July, after which he finally retired at the age of 85 weeks later.

For 35 years I had my twice-yearly checkups with this good man (being a contact lens wearer, my prescription changed frequently), always making sure I was the first appointment of the day because he was old school and didn’t rush things; as in the patient line backed up pretty quickly if you weren’t first.

Dr. Eisenstodt and I talked Mid-East politics all the time, much to the consternation of those in the waiting room, I’m sure.  He was always interested in my travels (wondering why I’d go to Lebanon and Jordan and not Israel, for one...I’ll get there), and I loved getting his opinion on the region, his son having served in the Mossad for years.

A kinder, more humble soul you never met, and I’m glad he kept practicing to the very end.  I’ll miss the man.

---

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

God bless America.

---

Gold $1057...another 5-year+ low
Oil $41.71

Returns for the week 11/23-11/27

Dow Jones  -0.1%  [17798]
S&P 500  +0.04%  [2090]
S&P MidCap  +1.5%
Russell 2000  +2.3%
Nasdaq  +0.4%  [5127]

Returns for the period 1/1/15-11/27/15

Dow Jones  -0.1%
S&P 500  +1.5%
S&P MidCap  +1.1%
Russell 2000  -0.2%
Nasdaq  +8.3%

Bulls  45.4
Bears  26.8  [Source: Investors Intelligence]

Have a great week. As Sgt. Phil Esterhaus (actor Michael Conrad) used to say on “Hill Street Blues,” let’s be careful out there.

Brian Trumbore



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-11/28/2015-      
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Week in Review

11/28/2015

For the week 11/23-11/27

[Posted 11:00 PM ET, Friday]

Note: If you haven’t already done so, please click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.

*Special thanks to Josh P., longtime reader who over the years has supplied me with some terrific information from the So. Cal area.  Thank you, JP.

And to Jim D. for his ongoing support.

Edition 868...for new readers, yes, 868 columns, one week off.

Wall Street and Washington

There was a slew of economic data this week, none of which should prevent the Federal Reserve from raising rates when it convenes Dec. 15-16, though the final key will be next Friday’s jobs report for November.

That said we had an upward revision to third-quarter GDP, from 1.5% to 2.1%, so the first three quarters of the year have seen....

Q1 0.6% (annualized)
Q2 3.9%
Q3 2.1%

Ergo, just another year of 2.0% to 2.5% growth. As former NBA star Derrick Coleman would have said, “Whoopty-damn-do.” 

At least the consumer spending portion of the GDP report was up 3% for the quarter, vs. up 3.6% for Q2, both decent.  Corporate profits for the quarter, however, were down 4.7% year-over-year, owing in no small part to the stronger dollar.

[Looking ahead to the current quarter, the Atlanta Fed’s GDPNow indicator currently pegs growth at 2.3%...more of the same.]

October existing home sales came in less than expected for October, down 3.4%, but this was off September’s pace, which was the second-highest total since 2007.  The median home price of $219,600 was up 5.8% year-over-year, which is not necessarily good for first-time home buyers, especially as mortgage rates are about to rise once the Fed acts.

October new home sales came in less than expected, an annualized pace of 495,000, which is up 4.9% from year ago levels.  Just so-so.

October durable goods (big-ticket items) were up a solid 3%, up 0.5% ex-transportation, which is also good. 

October personal income was up 0.4%, in line with expectations and pretty good; while October consumption was up a weaker than expected 0.1%.

A few weeks ago, Goldman Sachs’ chief U.S. strategist, David Kostin, said the average annual total return on the S&P 500 would be just 5% over the coming decade; 2% from dividends, 3% from price appreciation.  That’s hardly scintillating, though reflective of a global outlook that remains lackluster.  Add in a few more high-profile terror attacks and the outlook will turn decidedly moribund (that part is moi).

Robert Samuelson / Washington Post

“In the era of Pax Americana, history texts have emphasized diplomatic dramas and military conflicts. The more obscure reality is that military might has often been used to buy time for the economic logic of shared prosperity to work.

“But this approach to foreign policy has long suffered from two potentially crippling defects.

“One is unrealistic expectations that, when disappointed, backfire in popular discontent and, sometimes, protectionism.  The ideology of economic growth has presumed that growth can be, more or less, taken for granted.  Unfortunately, it can’t, and when growth stalls or falls, all the individuals and institutions that had uncritically banked on its permanence find their plans disrupted or destroyed.  Local and global politics are thrown into turmoil.  In the wake of the 2008-2009 financial crisis and the Great Recession, we are going through just such an episode now, whose long-range consequences are not yet clear.

“The second defect is more unnerving and dangerous. It is the true Achilles’ heel of American foreign policy: Significant blocs of humanity ignore or repudiate our faith in the power of shared prosperity. They put other values and goals first.  Nationalism is one obvious alternative – Putin’s Russia being a good example. The case of China is more complicated. Although it is obsessed with economic growth, it’s also indulging a nationalistic urge to reassert itself on the global stage.

“Less ambiguous is radical Islam, whether the Islamic State or other variations. We don’t speak the same language or, at any level, share the same goals.  Radical Islamists deny the legitimacy of the secular state and seem willing to do almost anything to weaken or destroy it.  Their moral code is completely disconnected from ours.  They are creatures of rigid religious dogma, fervor and fanaticism.  We are the secular state – creatures of messy modern democracies with their (at times) seemingly elastic moral standards.

“What’s happening is completely at variance with our post-World War II experience.  Even at the height of the Cold War – when people really feared nuclear annihilation – there was some self-restraint (based on mutual fear) and, perhaps more surprisingly, a common understanding of the terms of the contest.  There was an acknowledged competition between capitalism and communism.  Which could better satisfy the wants and needs of its citizens?  ‘We will bury you,’ bragged Nikita Khrushchev.

“In the end, the opposite occurred.  The Soviet bloc ultimately collapsed because it lost this competition, weakening its claim to any popular legitimacy as well as undermining its military strength. What makes the present struggle so threatening is that it’s not being waged on familiar grounds that play to our strengths – our ability to outproduce our opponents.  The battlefield has been selected by them, and it’s what makes today’s predicament so disorienting.”

Europe and Asia

This coming week is a big one for the eurozone as the European Central Bank is expected to further loosen monetary policy on Thursday, highlighting its divergence from the Federal Reserve, barring a surprise in the aforementioned U.S. jobs report.

ECB President Mario Draghi has unleashed “a relentless shower of dovish speeches” in recent weeks, as the Financial Times’ Joel Lewin put it.

But some of the data this past week wasn’t that weak, so it’s unclear just how much further easing is really necessary.  I mean when you look at the following, does the German two-year need to have a yield of minus 0.42%?!

As in Markit released flash readings on manufacturing and services, and the composite reading for the eurozone as a whole came in at 54.4 for November vs. 53.9 in October (50 being the dividing line between growth and contraction).  The manufacturing PMI was 52.8 vs. 52.3.

In Germany, the flash comp was 54.9 vs. 54.2 in October; 52.6 vs. 52.1 for manufacturing.  And in France, the comp was 51.3 vs. 52.6, with manufacturing at 50.8 vs. 50.6, though it’s hard to calculate the impact of the 11/13 Paris attacks on the data.

When you look at the impact of the terror attacks, what you see is a pile of evidence that it will be significant.  Both Britain and Ireland, to cite one small but meaningful example, are forbidding school trips to Paris for the time being, and there are clear signs French consumers have been shopping less; let alone the week-long shutdown you saw in Brussels, Belgium.

But for the eurozone as a whole, Chris Williamson, Chief Economist at Markit said:

“The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past  4 ½ years. The data are signaling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December....

“However, with recent comments from ECB chief Mario Draghi highlighting how the central bank remains disappointed with the strength of the upturn at this stage in the recovery, November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth.”

Euro Bits....

--Ahead of next month’s big election, Spain’s National Statistics Institute said GDP expanded 0.8% in the third quarter, over Q2, matching the initial forecast, with the government calling for 3.3% overall growth for this year and 3% next.

So Prime Minister Mariano Rajoy can tell the electorate the economy has now had nine straight quarters of growth, but voters just want change (and an end to austerity).

--Greece’s biggest public and private sector unions have scheduled a nationwide anti-austerity strike against pension reform on Dec. 3, the second one in under a month.

The government has passed legislation raising the retirement age, increasing health care contributions and scrapping most early retirement benefits.

The public sector union, ADEDY, described the move as “the final blow to social insurance.”

“Society, which has suffered brutally from the bailout, will overturn the austerity measures,” it said in a statement.  [Reuters]

So Greece could easily reemerge as an issue for the eurozone as a whole.  It doesn’t help that third-quarter GDP was revised to a decline of 0.9% from an initial -0.5% estimate.

--Portugal’s bond market rallied on news that the new socialist leader, Antonio Costa, who was installed as prime minister on Tuesday, may not totally retreat on many of the deficit-cutting measures taken by his center-right predecessor after the financial crisis.

But most see this as only a short-term positive and a new round of elections could still be in the offing next year.

--The growth forecast for the U.K. in 2016 was revised higher to 2.4% from an earlier government estimate of 2.3%.

Lastly, on the migration front, the number of refugees arriving in the European Union will no doubt decline rather significantly during the winter months, with November probably coming in around 130,000 (that’s me extrapolating some numbers I saw), vs. a record 220,500 in October, according to the U.N.

Hungary has only seen a trickle after Prime Minister Viktor Orban closed the country’s border with Croatia on Oct. 18. But that meant more flowed into Austria, which then means more into Germany as the next destination.  I get into some of the issues facing Chancellor Angela Merkel down below.

Turning to Asia, in China the Shanghai Composite stock index fell 5.5% on Friday after reports regulators were once again going after the country’s biggest brokerages, raising fears that the government’s desire to root out corruption could lead to a repeat of the market crash we had in the spring.

Adding to the gloom was a report that industrial profits fell by 4.6% in October.

Separately, Fitch maintained its sovereign rating for China’s debt at A+, but the ratings agency warned there is still a risk of a sharp and disruptive adjustment in the economy.

Fitch expects the growth rate to be 6.8% this year, but then fall to 6.3% in 2016 and 6% in 2017; the slowdown largely driven by a sharp drop-off in residential construction.  Fitch also warns of the “crystallization of losses in the financial system.”

Japan had a data dump this week, with household spending down a surprising 2.4% in October from a year earlier and weaker than a 0.4% decline in September.  Economists were calling for an unchanged mark last month.

But Japan’s jobless rate fell to its lowest rate in 20 years, 3.1%, down from 3.4% in September, but this comes courtesy of a shrinking labor force.

Meanwhile, headline inflation rose 0.3% in October from a year earlier, up from zero percent in September, though core inflation, which in Japan includes energy prices, but not food, was -0.1%; the third straight month of deflation for this figure.

One other...a flash reading on Japanese manufacturing from Markit came in at 52.8 for November vs. 52.7 in October.

Street Bytes

--Since I didn’t get a break this Thanksgiving holiday (I never do), I’m taking one now.  All you need to know is that over the four trading days, the S&P 500 was down 2 points, up 2 points, unchanged and up 1 point.

Up a single freakin’ point on the week to 2090.   The Dow Jones fell 0.1% to 17798, while Nasdaq added 0.4% to 5127.

Black Friday crowds were also apparently thinner.

--U.S. Treasury Yields

6-mo. 0.37%  2-yr. 0.92%  10-yr. 2.22%  30-yr. 3.00%

--Federal Reserve Governor Daniel Tarullo told Bloomberg News that large U.S. banks may have to endure tougher stress tests in the future; ergo, they would have to hold more capital to be allowed to pay out dividends to shareholders.  The Fed hasn’t decided just how it will toughen the exams. 

Last July the Fed assigned capital charges totaling more than $200 billion for eight of the biggest U.S. banks, to reduce risks they could pose to the financial system.  The extra capital requirements, or surcharges, range from 1% to 4.5% of banks’ risk-weighted assets.

Tarullo added requirements under Dodd-Frank on counterparty credit limits and executive pay could be completed early next year.  On the pay front the Act is intended to restrict compensation arrangements that might incentivize bankers to take undue risks.

Some banks continue to get in trouble for failing to remember to use a No. 2 pencil when taking the exam as well.

--There is an important OPEC meeting next week, with investors wondering if Saudi Arabia will change its policy any.   Film at eleven.

--You would think Pfizer’s takeover of Ireland-based Allergan – the largest “tax inversion” to avoid American taxes by reincorporating in a lower-tax country – would finally get Congress to act to reform our corporate tax code.  But don’t look for it coming to a theater near you anytime soon.

Good plans have been put forward, but it takes leadership.  Politicians of both parties decry such moves and want legislation prohibiting them instead of freakin’ reforming the code.

The Pfizer-Allergan merger is a $160bn deal that creates the world’s largest drugmaker, but while Pfizer is the larger company, it’s structured so that Allergan is the acquirer.  The merged company’s principal executive offices will be in Dublin, with an effective tax rate of 17% to 18%, well below Pfizer’s current 25.5%.*  [Los Angeles Times]

*Technically, Ireland’s top corporate tax rate is 12.5%, while the top rate in the U.S. is 35%.

--Drivers paid the lowest pump prices this holiday weekend since 2008, with the national average on the verge of falling below $2.00 per gallon by Christmas.  Today’s national average is $2.07 last I looked.  Every dollar saved is one domestic beer, I like to calculate.

--Shares in Deere & Co., the world’s largest seller of tractors and harvesting combines, rose on Wednesday after the company reported earnings and revenue declines weren’t as sharp as analysts had forecast, while the 2016 sales outlook met expectations.

Granted, these are still miserable figures, with sales estimated to be down 7% next year amid the ongoing slump in the farm sector.  For the year ended in October, sales fell 22% from the previous year, though first-quarter sales are expected to drop 11% from a year earlier.

For the quarter, total revenue decreased 25%, but the profit and earnings per share far exceeded the Street’s numbers.

--On a related note, the Agriculture Department said on Tuesday that net U.S. farm income will drop 38% this year to $55.9 billion, the lowest level in more than a decade.  Depressed crop prices and softening dairy and hog markets are to blame.

In 2013, U.S. farm income reached a record $123 billion.  It totaled $90.4 billion in 2014.

Corn prices have fallen more than 50% since peaking during the drought of 2012.

--As leaders from 140 countries gather in Paris this week for the latest summit on climate change, here’s the beginning of a piece by Michael Birnbaum in the Washington Post:

“In this traffic-packed Dutch city [Ed. Rotterdam], electric cars jostle for space at charging stations.  The oldest exhaust-spewing vehicles will soon be banned from the city center. Thanks to generous tax incentives, the share of electric vehicles has grown faster in the Netherlands than in nearly any other country in the world.

“But behind the green growth is a filthy secret: In a nation famous for its windmills, electricity is coming from  a far dirtier source. Three new coal-fired power plants, including two here on the Rotterdam harbor, are supplying much of the power to fuel the Netherlands’ electric-car boom.

“As the world tries to reduce greenhouse-gas emissions and combat climate change, policymakers have pinned hopes to electric cars, whose range and convenience are quickly improving. Alongside the boom has come a surging demand for power to charge the vehicles, which can consume as much electricity in a single charge as the average refrigerator does in a month and a half....

“In some cases (the electric-car jump) could be even worse than the overall climate impact of driving, experts say.”

[Coal-fired power plants generate 40% of the world’s electricity.]

“Amid the mixed picture for electric cars, some environmentalists say that money spent on them might be better directed elsewhere.

“ ‘The economics do not make sense to push more electric vehicles onto the market’ to improve the climate, said John DeCicco, a professor at the University of Michigan Energy Institute.  He said that attention might be better focused on making conventional combustion engines more efficient.”

Look at the huge strides the auto industry has made regarding this last point.  You ‘short’ Tesla stock at your own risk because its loyal supporters seem to always find a way to pump it back up, even when there is bad news, but this company is ridiculously overvalued....and even more overrated.

I’m souring on Elon Musk, after admitting to being a big admirer initially.  But more on him below.

--About two hours after I went to post last Friday night, it was announced the United Auto Workers had ratified contracts with General Motors and Ford Motor, following an agreement in October between union workers and Fiat Chrysler, the third of the Big Three.  G.M.’s skilled trades’ workers, about 8,500 of the 52,000 involved, initially rejected an October agreement, but both sides agreed to changes to protect seniority rights and some classifications.

The four-year agreement for both G.M. and Ford includes ratification bonuses of $10,000 and a path to top wages for entry-level employees, aside from raises for all workers.

I’ve tried to follow the course of these negotiations pretty closely and it seems all sides acted in good faith...and that’s good for America, gosh darnit!

Oh, some will bitch, but I think this protects most workers when the next down-cycle occurs, and in the meantime if the good times in the auto industry continue, let the profit-sharing bonuses flow.

--The two companies formed from Hewlett-Packard – Hewlett-Packard Enterprise, an IT operations company, and HP Inc., a maker of PCs and printers – disappointed with their guidance for the first quarter of 2016 in issuing their first earnings reports.

Revenue from both the PC and printer units fell 14% year-over-year in the most recent quarter, though it took market share among weak demand for the sector.

Revenue for the combined company declined 9% in the last quarter from the same period in 2014.  Same-old story across much of Corporate America. For all of 2015, revenues for the S&P 500 are set to decline 3.3%, according to FactSet, much of this due to the strong dollar.

--Tiffany & Co. said its full-year profit would fall more than it had initially forecast (again) owing to unfavorable exchange rates that are impacting tourists’ spending.  Tiffany joins the likes of Nordstrom and Macy’s in warning of economic uncertainty.

Tiffany generates nearly a quarter of its U.S. sales – and more than 40% of sales at its flagship Fifth Avenue store in Manhattan – from foreign visitors.  Spending from same in the U.S. was sharply lower during the third quarter and helped push sales in the Americas down by 7%.

Revenue at least rose 17% in Japan year over year, as the country reported an increase in tourism.

Same-store sales worldwide fell 6%.

--Walt Disney chose Friday, a quiet time in the markets, to announce it had lost 3m ESPN subscribers over the past year, ESPN having an October fiscal year, from 95m to 92m in that period.  So there are renewed fears viewers are choosing to “cut the cord.”

--I’ve said in the past there are some American companies I just like to see do well, such as McDonald’s.  Campbell Soup Co. is another and on Tuesday, Campbell raised its earnings guidance for the year, though it reduced its sales forecast, saying they are now expected to come in flat to down 1%.  Campbell has been slashing costs to improve the bottom line and it has introduced a variety of new products that include more organic ingredients, while pledging to remove high-fructose corn syrup from its foods.

I just wish they would eliminate salt and let us salt the food ourselves, though I recognize this is an impossibility.

Overall sales fell 2.3% in the quarter vs. year ago levels, with sales of Pepperidge Farm products increasing.  It seems we are buying more Goldfish crackers, though there is no health benefit from the fake fish themselves.

Anyway, anytime I feel like I may be coming down with a cold (November is my worst month it always seems), I turn to the goodness of Campbell’s Chicken Noodle Soup to knock it down. Works every time, sports fans.

--Back to McDonald’s, Lisa Fickenscher of the New York Post:

“The burger giants are back.

“For the first time in years, the Big Three fast-food burger chains – McDonald’s, Burger King and Wendy’s – are all on track to post same-store sales growth of at least 3 percent this quarter.  What’s more, that growth is coming at the expense of other big chains like Denny’s, IHOP and Cracker Barrel.”

McDonald’s all-day breakfast menu is working, even as the company tries to play down expectations.  And as I’ve seen in a number of articles in just the past week, it is indeed at the expense of Denny’s and IHOP.  I mean why take time at a sit down when you can get an Egg McMuffin anytime you want on the fly?

And as noted the other week, Wendy’s 4 for $4 has been a big hit as fast food restaurants take away from fast-casual “by shifting their pricing downwards,” according to Richard Adams, a former McDonald’s franchisee who has founded Franchise Equity Group.

--Costco is suffering from an E. Coli outbreak that ABC News said might be more serious than the one at Chipotle Mexican Grill.  Nineteen people in seven states have been sickened, with five suffering a form of kidney failure.  Tests performed by health officials, including the FDA, trace the E. coli to an onion and celery mix that was part of Costco chicken salads.

The source still hasn’t been found at Chipotle, by the way, as it deals with E. coli in six states, though the strain isn’t as dangerous as the Costco variant.

--Jeff Bezos has one-upped Elon Musk in the race to launch a rocket into space and return it safely to earth. Bezos’ Blue Origin did just that on Monday, while Musk’s SpaceX has failed to do so in several attempts thus far.

Blue Origin launched New Shepard, which rose to a height of 329,839 feet, carrying a crew capsule, which then separated and returned to earth separately from the rocket.

The rocket (named after Alan Shepard) landed just four feet from the center of the launch pad.

“Full reuse is a game changer, and we can’t wait to fuel up and fly again,” Bezos said, as this is indeed a game changer re efforts to bring down the costs.

Blue Origin had already been tapped to manufacture the new engine for United Launch Alliance’s Vulcan rockets, which are taking over critical tasks in the U.S. space program.

As for Musk, who can’t seem to manufacture safety belts on his Model S car properly, his SpaceX program suffered a setback in June when one of its Falcon 9 rockets (named after, err, a falcon) blew up shortly after take-off on a mission that was to restock the International Space Station, after which the astronauts on board were forced to till the artificial turf on the ISS in order to grow crops and prevent starvation.  [Just seeing if you’re paying attention.  One detail isn’t exactly true in the preceding.]

Back to Blue Origin, it is close to pursuing a “rigorous” test flight program as part of preparations for future space flights that will take six tourists at a time.

--Apple shareholders beware.  The company’s big growth market is China and I just read the following in the South China Morning Post on Thursday.

“Chinese smartphone maker Huawei, the world’s third-largest vendor, revealed its most advanced flagship smartphone in Shanghai on Thursday in what looks like a bold challenge to Apple’s iPhone 6.

“The seamlessly designed Mate 8, which is now available in mainland China, is of comparable size to the larger iPhone 6S but with an even bigger 6-inch FHD display.”

No surprise, but Richard Yu Chengdong, CEO of Huawei Consumer Business Group, said the Mate 8 is the superior smartphone in many ways.

“Huawei is set to be the fastest-growing major smartphone vendor this year after selling 27.4 million handsets in the third quarter,” he said.

“The latest quarter thus put it on course to offload 100 million smartphones this year, up 33 percent from 2014. Such growth would eclipse similar forecasts for top rivals like Apple and China’s Xiaomi and Lenovo Group.” [Hu Huifeng / SCMP]

--Speaking of the South China Morning Post, I was disturbed to see that Jack Ma, chairman of Internet giant Alibaba Group, is in talks to buy the great English-language newspaper based in Hong Kong that I have been a subscriber of for years.  No way the newspaper’s editorial independence would remain the same if this went through.  You all know how Hong Kong guarantees freedom of the press, but Ma “needs support from Beijing to continue his dominance of the Internet transactional world, and therefore he’s going to be careful in what he does in the publishing world,” said Andrew Collier, a former Beijing-based reporter for the newspaper who now has a financial research firm in Hong Kong.

Ma once said in a 2013 interview with the SCMP that the Chinese government’s move to suppress the 1989 student-led Tiananmen Square demonstrations was “the most correct decision” under the circumstances.  For those of you who forgot, hundreds died.  [Michael Forsythe / New York Times]

I have said since Alibaba’s IPO, I wouldn’t touch this stock.  Now more so.

--With the problems the daily fantasy sports industry is having, owing to state actions such as those of New York Attorney General Eric Schneiderman and his move to shut down DraftKings and FanDuel, Eielers Research wrote in a report the other day that “Some investors have informed us that secondary market valuations for FanDuel and DraftKings are roughly 50 percent below the last round given the legal uncertainties.”  [New York Post]

--Speaking of gambling, guess who is showing profits?  Atlantic City!  After dumping four casinos in 2014, the remaining eight resorts have seen increasing revenue and profits, according to a report this week by the state Division of Gaming Enforcement.

Sales and profits for the nine months ending Sept. 30 were also up, with the Golden Nugget seeing its bottom line rise 354% in the nine-month period vs. last year.  Only the Tropicana showed a decrease in profits.

This shocked me.  Hotel occupancy rates rose during the third quarter to 83% overall. Granted this was for the summer months, but 83% isn’t that shabby, by my way of thinking.

Revel, The Atlantic Club, Trump Plaza and Showboat all closed last year.  [Paul Milo / NJ.com]

Foreign Affairs

Iraq/Syria/ISIS/Russia/Iran/Turkey...the list keeps growing.  And the situation grows more complicated.

On Tuesday, Turkish fighter jets shot down a Russian SU-24 war plane near the Syrian border after supposedly being warned 10 times in the space of five minutes about violating Turkish airspace, according to the Turks, with Moscow saying its jet had not left Syrian air space.  One of the pilots was rescued, another was apparently killed by ground fire as he descended in his parachute.

Another Russian was killed in the search for the missing crew when an Mi-8 helicopter was hit by an antitank missile.  The pilot that escaped was picked up by the Syrian army.

It was the first time a NATO member’s armed forces have downed a Russian or Soviet military aircraft since the 1950s.

Russian President Vladimir Putin initially said the episode would have “serious consequences for Russian-Turkish relations,” calling the shooting down of a Russian jet a “stab in the back” by those who “abet” terrorism as he accused Turkey of aiding the Islamic State by helping it sell its oil.

Putin was also miffed Turkey reached out to NATO after the episode but not to Moscow.

Turkish President Recep Tayyip Erdogan told CNN: “I think if there is a party that needs to apologize, it is not us.  Those who violated our airspace are the ones who need to apologize.”

By Thursday, Russian Prime Minister Dmitry Medvedev called for tough sanctions against Turkey that could cut into more than $30 billion in trade ties between the two.  Police began deporting Turkish businessmen (39 at last count, saying they were in the country on tourist visas) and seizing products.  Russia also strongly hinted it could provide military aid to Turkey’s enemies, including the Kurds.

[Friday, Russian Foreign Minister Lavrov said visa-free travel with Turkey will be suspended January 1st.]

Moscow also announced on Thursday that it had deployed powerful S-400 ground-to-air missiles in Syria that can reach across the country and far into Turkey from the Russian air base in the province of Latakia on Syria’s Mediterranean coast.

By Friday, it was suspected Russia had bombed Turkish-backed rebel groups, again, such as the Turkmen, ethnic Turks, who have been fighting Assad.

The reaction and Russian attitudes towards Turkey are changing so quickly that the Washington Post reported, “Most Russian tour operators stopped selling travel packages to Turkey on Wednesday.”

But also on Friday, after meeting with President Hollande in Moscow, Putin said he wanted to work with France and the U.S. in fighting ISIS, though the issue of the fate of Assad is still undecided.  For his part, President Erdogan said he wanted to meet with Putin.

Back in Washington, on Tuesday, President Obama said after his meeting with French President Francois Hollande that Turkey had a right to defend its airspace, accusing Moscow of attacking moderate rebel groups rather than ISIS.  Obama, though discouraged “any kind of escalation.”

Turkey, along with the West, wants Syrian President Bashar al-Assad to step down as part of a political transition.  Hollande, in his meeting with Putin, said Assad “cannot play a role in the future of this country,” which Putin refuted.

“We all agree that it’s impossible to defeat terrorists in Syria without ground operations,” Putin said.  “There are no forces other than the Syrian government troops. Therefore Mr. Assad and his government are our natural allies in this.”

So to sum up...

Russia and Iran want to keep Assad in power and have provided him with military support, while Lebanon’s Hizbullah (which is backed by Iran) has supplied Assad with hardened soldiers that have been critical to Assad’s survival.

The U.S.-led coalition has launched airstrikes against ISIS the past year, albeit in a fairly minimal way, while the past two months, Russia has largely been bombing the rebels, not ISIS, who have been battling Assad’s forces; many of these militias the same ones being supported by the West.

The U.S. is aiding the Kurds, who are fighting ISIS, but Turkey has struck out at some of the same Kurdish factions that have been at war for decades against the Turks inside Turkey; a war that has claimed over 40,000 lives.

Turkey shoots down a Russian fighter jet that had strayed into Turkish airspace, ostensibly, it seems, for Russia bombing ethnic Turks (Turkmen) fighting against Assad in Syria right across the border.

On Thursday, Hollande said to Putin at the Kremlin, “I am in Moscow with you to figure out how we can act together in order to coordinate our actions to hit this terrorist group and look for political solutions for Syria.”

In London, British Prime Minister David Cameron has been arguing his case in Parliament that it’s time to target ISIS in Syria, saying it posed a “fundamental threat” to the U.K. and Britain and they can’t afford to “wait until an attack takes place here.”

Cameron told Parliament that if Britain won’t act “when our friend and ally France has been struck in this way, then our allies in the world can be forgiven for asking: If not now, when?”  [Andrew Roth / Washington Post]

But the bottom line is the West wants Assad out, Russia and Iran want him to stay.  Russian Foreign Minister Sergei Lavrov said the other day that Assad “represents the interests of a significant part of Syrian society...so no peaceful solution can be found without his participation.”

Peace talks that are being held in Vienna will go nowhere with such hardened attitudes.

Philip Stephens / Financial Times

“I wonder what happened to Vladimir Putin the grandmaster?  I had given up counting the commentaries casting the Russian president as a daring, decisive foil to a collection of feeble, vacillating leaders in the world’s advanced democracies. The hyperbole was always just that.  Now we are catching a glimpse of Russia’s real vulnerability.

“By any measure, Mr. Putin has lost some of his shine.  Moscow’s military gambit in Syria was widely hailed as a game-changer – the sort of bold chess opening that U.S. President Barack Obama would never risk.  By committing forces the Russian leader had positioned himself at the center of any international effort to end the civil war....Banished from polite diplomatic society after the invasion of Ukraine, the scowling figure in the shadows was suddenly back at the top table.

“Television images of sleek Russian warplanes and submerged submarines raining fire on Syrian rebels burnished the president’s self-image as the leader of a great patriotic revival.  Who said Russia was no longer a superpower?  We have short memories....

“The lionization of Mr. Putin came before terrorists affiliated with the self-styled Islamic State planted the bomb that killed nearly 220 Russian holidaymakers on a flight home from the Egyptian resort of Sharm el-Sheikh; the murders were claimed as a reprisal for Moscow’s Syrian intervention.  And it was before this week’s downing by Turkish warplanes of a Russian jet, said to have strayed across the Syrian border into Turkey’s airspace. And it was before Ukrainian saboteurs – with or without the collusion of Kiev – turned off the lights in Russian-occupied Crimea by blowing up power-supply lines. [Ed. more on this below.]....

“The unforgivable mistake would be to accept any crossover from Syria to Ukraine.  Mr. Putin will want to trade cooperation in Syria for Western concessions in Ukraine. That way lies ruin. European leaders tempted to ease sanctions should recall that they successfully separated the Iran nuclear deal from the dispute about Ukraine.  And no one should forget that Russia, every bit as much as the West, has an interest in the defeat of violent Islamist extremism.

“Syria has left everyone in a hole. The U.S. and Europe misread the conflict almost from the outset. Mr. Putin, the decisive tactician, has shown himself a poor strategist.  If a deal is still possible then everyone should be ready to seize the moment, but no one should imagine that the Russian president has given up his revanchist worldview.”

Editorial / Wall Street Journal

“Mr. Putin may (be) testing NATO cohesion. Turkish President Recep Tayyip Erdogan is an impulsive leader who has alienated his allies with his autocratic instincts and Islamist sympathies. If Russia continues to prick Turkey and NATO fails to support Ankara, it will expose the hollowness of NATO’s Article 5 collective-defense obligations.

“The Obama Administration failed to invoke Article 5 on France’s behalf after the Paris massacre. And on Tuesday President Obama said that while Turkey had the right to defend its airspace, his priority is to ‘discourage any escalation.’  But what if Mr. Putin retaliates against Turkey?  Mr. Obama should have said that the U.S. will stand with its NATO partner.

“At his Tuesday press conference with French President Francois Hollande, Mr. Obama also said his visit to Paris later this month for a global-warming summit would be ‘a powerful rebuke to the terrorists.’ We can only imagine what Mr. Putin makes of that.”

On the Syrian refugee issue, Charles Krauthammer / Washington Post

“The Syrian refugee debate has become a national embarrassment.  It begins with a president, desperate to deflect attention from the collapse of his foreign policy, retreating to his one safe zone – ad hominem attacks on critics, this time for lack of compassion toward Syrian widows and orphans.

“This, without a glimmer of acknowledgment of his own responsibility for these unfortunate souls becoming widowed and orphaned, displaced and homeless, in the first place. A quarter-million deaths ago, when Bashar al-Assad began making war on his own people, he unleashed his air force and helicopters. They dropped high explosives, nail-filled barrel bombs and even chemical weapons on helpless civilians.  President Obama lifted not a finger.

“In the earliest days, we could have stopped the slaughter: cratered Assad’s airfields, taken out his planes, grounded his helicopters and created a nationwide no-fly zone.  (We successfully maintained one over Kurdistan for 12 years between 1991 and 2003.)

“At the time, Assad was teetering. His national security headquarters had been penetrated and bombed. High-level aides were defecting. Military officers were forming a Free Syrian Army.

“Against the advice of his top civilian and military aides, Obama refused to intervene.  The widows and orphans he now so ostentatiously champions are the product of his coldhearted refusal to do anything that might sully his peacemaking image.”

Mr. Krauthammer posted this Thursday night for Friday’s paper.  I of course have said it was over in 2012...it was about Obama’s reelection back then which Krauthammer fails to mention.

You know: Bin Laden is dead...G.M. is alive.

By the way, the U.N. is now estimating 7.6 million Syrians have been displaced, on top of the 4 million+ refugee count.

The Washington Post’s Liz Sly and Alice Martins did a piece on the costs of the war and the damage to date “is estimated at a staggering $270 billion – and rebuilding could run to more than $300 billion...more than 10 times the amount spent by the United States on reconstruction in Iraq, with few discernible results.”

Lars Bromley, who analyzes satellite imagery for the United Nations, told the Post that “Aleppo is by far the most devastated thing any of us have ever seen. I call it Stalingrad.”

Remember Kobane, where there was a months-long campaign to oust ISIS from the Syrian-Turkish border city?  The cost to rebuild there alone is estimated at $6 billion, though people have begun to move back.

In other developments in both Syria and Iraq, ISIS has claimed responsibility for a number of attacks in the past ten days in Baghdad that have killed at least 29.

Iraqi forces cut ISIS’ last supply line into the western city of Ramadi, taking a key bridge that apparently means Iraqi forces have the city surrounded.  Ramadi, the capital of Anbar province, fell to ISIS in May, which was a huge blow to the Iraqi government.

The Syrian army and allied militia (read Hizbullah), backed by Russian airstrikes, took control of two towns in western Syria after heavy battles with ISIS fighters, as reported by the Daily Star.  The towns are close to roads that link the ISIS-held city of Palmyra to western cities.  The government’s goal is to eventually retake Palmyra.

The U.S. accused Syria of buying oil from ISIS and imposed sanctions on a Syrian businessman said to be at the center of the trade.  As noted above, Russia accuses the Turks of buying the same oil.

And in Iran, Supreme Leader Ayatollah Ali Khamenei told visiting President Vladimir Putin that the U.S. had “no right” to remove Assad, adding: “Americans have a long-term plan to dominate Syria and then expand their control over the region to compensate for their historical absence in western Asia. This road map is a threat to all nations, in particular Iran and Russia.”

For Putin it was his first visit to Tehran in eight years and he held two hours of talks with Khamenei.

But Iran is concerned Putin just wants to strike a deal with the West over Ukraine; a deal that would involve the departure of Assad.

There were also reports this week that Putin had sent large numbers of Russian ground troops into Syria, though the Kuwaiti story hasn’t been verified, according to the Jerusalem Post.

Lastly, Iran sentenced detained Washington Post journalist Jason Rezaian to an unspecified prison term following his conviction last month on charges including espionage, Iranian state television reported last Sunday.

France/Belgium: Brussels was on lockdown and at its highest state of alert since last Friday evening, with authorities lifting it on Thursday, even though Salah Abdeslam, the most wanted man in Europe for his role in the Paris attacks, still said to be in Belgium, had not yet been captured or neutralized.

Bizarrely, Belgian Prime Minister Charles Michel maintained the highest security threat level even as schools and the metro reopened in Brussels on Wednesday.

Tons of people have been arrested in both Belgium and France since the Paris attacks, but no one feels any safer.

As two Danish tourists in Brussels put it when interviewed by the BBC at one of the city’s famous chocolatiers, one of the few that opened: “We can admit we’re scared. We were told by the hotel manager not to come here, but we thought we’d take a chance.  Buy presents for the family and leave quickly.”

Belgium’s government has been under fire, but it was just elected in October and has been rolling back previous plans to actually reduce spending on the national intelligence budget.

As reported by the Financial Times’ Jim Brunsden: “More Belgian nationals have travelled to fight alongside ISIS in Iraq and Syria than any other European country, on a per capita basis.  Much of the early recruiting of so-called ‘foreign fighters’ was organized by a cell called Sharia4Belgium based in the Flemish capital of Antwerp.”

The government has faced criticism for not going after the cell.

Meanwhile, I warned years ago about the dangers at Europe’s thousands of Christmas markets (some 2,500 in Germany alone), and last weekend, the Wall Street Journal’s Ruth Bender had a piece titled “Paris Attacks Cast Shadow Over Europe’s Christmas Markets.”

The police presence has been heightened, but as I saw firsthand in Cologne and Berlin there are so many ways to enter the markets and as one Berliner put it perfectly, “There are a lot of dark spots, you never know who will hang about there.  If I end up going, I will only do so during daylight.”

Separately, the debate over the “Schengen area,” the passport-free travel zone made up of 26 European countries, including 22 EU states, continues to heat up.

Wolfgang Munchau / Financial Times

“Last week it became clear the security network that supposedly operates quietly and efficiently in the background of Schengen is not working. The death of Abdelhamid Abaaoud during a police raid on the Paris suburb of Saint-Denis was at one level a big success. The police got the suspected terrorist who coordinated this and other attacks.  On another level his death was also a nasty shock.  What does it say about Schengen if one of the world’s most wanted criminals was able to move freely between Syria, France and Belgium? That was not supposed to be possible.

“There are, in principle, two fixes. Repair Schengen; or revert to national systems. Both work. The first would be economically efficient but is politically hard to do. The second is politically easier to do, but would constitute a spending shock of macroeconomic scale for many countries....

“The problem with Schengen is that within a few weeks it has lost its biggest asset – the trust of the population.  President Francois Hollande clearly did not trust the system.  Why else has he reimposed border controls?....

“Before the attacks, (the borders) were almost invisible.  On the train from Brussels to Paris, you would be hard pressed to notice when you changed countries. On the motorway, a derelict frontier post would have reminded you that there was once a border, followed by a country sign encircled by the twelve EU stars. Schengen turned the Molenbeek district of Brussels and Saint Denis in northern Paris into adjacent neighborhoods. The terrorists led the life of commuters, living in Brussels and working in Paris.

“Since we are not going to fix Schengen, let us return to national border controls. It will be very expensive, especially for France, which has yet to build up a fully functional domestic security service....

“The overriding goal has to be to preserve one of the most important common goods the EU can provide to its citizens: a modern and professional level of internal security.  Schengen cannot deliver this.  But the member states still can, and should be allowed to do this.”

Meanwhile, in French politics, Nicolas Sarkozy is taking advantage of the moment to tack to the right and to bring back “eternal France.”

In his first political rally since the attacks in Paris, the former French president told supporters that multiculturalism is what has made Western democracies vulnerable to Islamist extremists.

“France is not a supermarket, it’s a whole,” Sarkozy said.  “There is no French identity, no happy identity in a multicultural society.”

As reported by Anne-Sylvaine Chassany of the Financial Times:

“For Mr. Sarkozy reviving la France de toujours  goes well beyond emergency powers for the police or tough border checks, as instigated by socialist president Francois Hollande. It means everything from fighting ‘cultural conformism’ caused by unbridled globalization to restoring homework, standards and discipline to schools.

“Squeezed between a rebounding Mr. Hollande and a resurgent National Front (FN), the anti-immigration party led by Marine Le Pen, Mr. Sarkozy has opted to veer to the right.  It is a strategy reminiscent of his presidential campaign in 2012, when he was defeated by Mr. Hollande.”

Next weekend sees the first round of regional elections in which Le Pen is expected to make a historic breakthrough and secure at least one region.  Should the FN do so, it once again leaves Sarkozy in the wilderness, 18 months before the next presidential poll.

Hollande’s approval ratings, by the way, have surged between 7 and 17 points post-attacks.  But this can be short-lived.

Finally, a CNN report was incredibly disturbing; that being the infiltration of Paris’ transportation system by the likes of ISIS.  Supposedly, for example, Charles de Gaulle Airport is a beehive of activity of terrorists.

Russia/Ukraine: Last weekend, unknown perpetrators blew up pylons carrying power lines from Ukraine to Crimea. Russian authorities declared a state of emergency as nearly 2 million Crimeans were left relying on generators, with the Russia-appointed Prime Minister Sergei Aksyonov calling the destruction “a terrorist act.”

Since annexing Crimea in 2014, Russia has been working on a power “bridge” from its southern Krasnodar region to Crimea, but this isn’t expected to be completed until 2018.

Parts of Ukraine were also left without power with the attack.

A group called the Civil Blockade of Crimea, which includes Crimean Tatar activists, prevented Ukrainian officials from conducting repairs following the explosions, demanding a tougher line be taken against Moscow.

The Crimean Tatars opposed Russia’s annexation of the peninsula, having been persecuted during the Soviet era.

In a tit-for-tat move, Russia’s gas giant Gazprom claimed it had stopped supplying gas to Ukraine due to lack of payments, but Ukraine said it could buy all the gas it needed from Europe for the upcoming winter.

Russia has also proposed halting coal supplies to Ukraine in response to the Crimean power outage.

Also on Wednesday, Ukrainian Prime Minister Arseniy Yatseniuk said his country was closing its airspace to all Russian civilian passenger airlines.

Earlier, the government in Kiev banned cargo trucks from entering Crimea.

Tunisia: I’ve said this before but this is one country I truly feel sorry for.  Tunisia was the birthplace of the Arab Spring and while the rest of the region’s experiments with revolution have gone bad, Tunisia made all the right moves and held a peaceful, democratic election.

But Islamic extremists, including ISIS, have had their way and an ISIS suicide attack on a bus in Tunis carrying members of the presidential guard killed at least 12 this week.

Tunisia is believed to be the biggest exporter of jihadis, with an estimated 3,000 of its nationals fighting in Iraq and Syria.

The government immediately called a curfew and a state of emergency for the next 30 days.

Earlier this year, terrorists staged a series of attacks that killed 60, crippling the vital tourism industry.

Thankfully, President Essebsi was not on the bus.  He easily could have been.

The U.S. is negotiating with Tunisia on a loan guarantee and this is a case where a large loan is more than warranted.

Mali: In the wake of the recent terrorist attack in Mali’s capital that claimed 20 lives, Germany is dispatching up to 650 soldiers to join a French-led peacekeeping operation that helps Paris focus its own military resources on fighting Islamist terrorism elsewhere.  Germany already had 200 troops in Mali.

Germany: Separately, Chancellor Angela Merkel marked ten years in office last weekend, but her poll numbers and that of her party have been plummeting on the heels of her response to the migrant crisis and the Paris attacks.

Support for Merkel’s conservatives is down to 37 percent, while the anti-immigrant Alternative for Germany (AfD), is surging.

Merkel’s own popularity has taken a big hit, with her approval rating falling from 75 percent last April to 49 percent today.

The head of her Bavarian sister party has been Merkel’s harshest critic as Bavaria takes in the bulk of the refugees.

But Merkel is saved, thus far, by good feelings on the economy, with 82 percent of Germans describing it as good or very good.

The next federal election isn’t slated until fall 2017, but three state elections in the spring could be decisive in whether Merkel decides to run again or leave after what will be a 12-year run as chancellor.  [Irish Independent]

Afghanistan: A U.S. military investigation has concluded the crew of an American gunship that attacked a hospital in Kunduz last month run by Doctors Without Borders, killing 30, misidentified the target, confusing it with a Taliban stronghold.

“This was a tragic and avoidable accident caused primarily by human error,” Gen. John Campbell, the top U.S. commander for Afghanistan, said at a news conference in Kabul on Wednesday.

Several American personnel involved in the decision have been suspended and could face further disciplinary action.

But the coordinates and call for airstrikes started with the Afghans, as first reported, so this raises serious questions about the reliability of our Afghan partners.

An official with Doctors Without Borders said, “It is shocking that an attack can be carried out when U.S. forces have neither eyes on a target nor access to a no-strike list, and have malfunctioning communications systems.” DWB continues to call for an independent investigation, as does Human Rights Watch.

Bangladesh: In yet another example of the impact of ISIS and terror, Annie Gowen of the Washington Post had a story on how “life in Bangladesh’s crowded capital (of Dhaka) has changed significantly since a string of terrorist attacks this year, including shootings claimed by the Islamic State that left two foreigners dead and a third, an Italian missionary, seriously wounded.

“Many have stopped walking or bicycling to work in favor of company cars.  An international AIDS conference was postponed and other events canceled.... Aid organizations from Japan and Australia have begun quietly sending their workers and volunteers home.

“Those who remain have been buying groceries online and going home before dark.  The U.S. Embassy is no longer permitting its personnel and their families to be in most public places, including thoroughfares, sidewalks and large gatherings, including those held at international hotels.”

Now that’s depressing.  And this doesn’t include the four bloggers that have been killed for their secular writings on faith and culture.

In Ms. Gowen’s words, “Fears that the security situation in Bangladesh is spiraling out of control intensified in recent days, when the Islamic State asserted responsibility online for attacks on (the) three foreigners, a Shiite religious procession and a police checkpoint.”

The government is acting like ISIS isn’t a threat, but instead is going after the political opposition, jailing some of its top leaders.

Bangladesh is rapidly becoming both a failed state and safe haven for ISIS. 

Honduras: Police here on Wednesday said that 15 people had been killed in two attacks within a span of 12 hours. Seven were shot to death in the capital, Tegucigalpa, and eight bus drivers were killed in the northern city of San Pedro Sula, victims of extortion gangs.  Drivers, for example, are required to pay a weekly amount to the gangs.

Argentina: But there was some potential good news this week.  Marucio Macri, the center-right mayor of Buenos Aires, won the presidential election last Sunday, marking a big change in his country, or “the change of an epoch,” as he told his supporters.

“It is here, it is now, let’s go Argentina!” he roared.

Macri defeated the government-backed candidate, Daniel Scioli, by a 52-48 margin.

Scioli was gracious in defeat.  “May God illuminate Macri so that this change is a winning one.”

The victory brings to an end a 12-year run by outgoing leftist president Cristina Fernandez, and her late husband and predecessor, Nestor Kirchner.

Hopefully, Macri’s win helps lead to major changes in Brazil and Venezuela as well.

Random Musings

--Lots of new polls this week.  On the Republican side...

In a Fox New national poll, Donald Trump leads with 28%, followed by Ben Carson at 18% with Ted  Cruz and Marco Rubio tied for third at 14%.  Jeb Bush lags way back in fifth at just 5%.

A Washington Post/ABC News national poll had Trump at 32%, Carson 22%.  Rubio, at 11%, is the only other candidate in double figures, with Cruz fourth at 8%, and Bush at 6%.

In a Quinnipiac University poll of likely Republican Caucus participants in Iowa, Trump gets 25%, with Cruz vaulting up to 23%, while Carson falls to 18%.  Rubio is at 13%, with Rand Paul in fifth at 5%, Jeb Bush 4% and Carly Fiorina 3%.

CBS News/YouGov did a series of battleground state polls and Trump is way in front....

Iowa: Trump 30%, Cruz 21%, Carson 19%, Rubio 11%, Bush 5%.

New Hampshire: Trump 32%, Rubio 13%, Carson 10%, Cruz 10%, Kasich 8%, Bush, Fiorina, Paul 6%, Christie 5%.

South Carolina: Trump 35%, Carson 19%, Rubio 16%, Cruz 13%, Bush 5%, Graham 3%.

[All of the above CBS surveys were taken Nov. 15-19 among likely Republican voters.]

A Suffolk University/Boston Globe poll of New Hampshire voters found Trump was leading at 22%, followed by Rubio at 11% and Carson 10%, with Cruz and John Kasich at 9%, Bush at 8%. 

On the Democratic side.....

In the Fox News national poll, Hillary Clinton leads Bernie Sanders 55-32, with Martin O’Malley at 3%.  But she trails all the leading Republican candidates in head to head matchups, with Rubio faring best at 50-42.

In the Washington Post/ABC News national survey, Clinton leads Sanders 60% to 34% among registered Democrats and Democratic-leaning independents; a big rebound for her since her low point of 42% in September, during the height of the debate over her emails.

In the aforementioned Quinnipiac poll of Iowa caucusgoers, Clinton leads Sanders 51-42, with O’Malley at 4%, virtually unchanged from an October 23 survey that had Clinton leading 51-40.

As for President Obama, in the Fox News poll, his job approval has fallen to just 40%, with 54% disapproving.  This compares to a 45-50 split back on Nov. 1-3, so you see the probable impact of the Paris attacks and the president’s weak initial response.

--An Associated Press analysis of public disclosure forms and records reveals Hillary Clinton and her hubby, Bill, have made at least $35 million in a 15-year period, specifically giving 164 speeches to financial services, real estate and insurance companies after leaving the White House in 2001, which is fodder for Sanders, who has accused Hillary of being too cozy with Wall Street.

The Clintons made $millions giving speeches to other groups, but in terms of the financial industry, the couple made $26 million from 109 appearances sponsored by banks, insurance companies, hedge funds, private equity firms and real estate businesses after the 2008 economic crisis, with Hillary serving as secretary of state for most of that time.

--Michael Gerson / Washington Post

“The presidential candidate who has consistently led the Republican field for four months, Donald Trump, has proposed: to forcibly expel 11 million people from the country, requiring a massive apparatus of enforcement, courts and concentration camps; to rewrite or reinterpret the 14th Amendment to end the Civil War-era Republican principle of birthright citizenship; to build a 2,000-mile wall on our southern border while forcing Mexico to pay the cost.  He has characterized undocumented Mexican immigrants as rapists and murderers, and opposed the speaking of Spanish in the United States.

“Republican candidates have proposed: to favor the admission of Christian over Muslim refugees from the Middle East; to ‘send home’ Syrian refugees, mainly women and children, into a war zone; to ‘strongly consider’ the shutting down of suspicious mosques; to compile a database of Muslims and (perhaps) force them to carry special identification showing their religion.  They have compared Syrian refugees to ‘rabid dogs,’ ruled out the possibility of a Muslim president and warned that Muslim immigration to the United States is really ‘colonization.’

“There are, of course, Republican presidential hopefuls who have vigorously opposed each of these proposals, arguments and stereotypes.  But Trump has, so far, set the terms of the primary debate and dragged other candidates in the direction of ethnic and religious exclusion.  One effect has been the legitimization of even more extreme views – signaling that it is okay to give voice to sentiments and attitudes that, in previous times, people would have been too embarrassed to share in public.  So in Tennessee, the chairman of the state legislature’s GOP caucus has called for the mobilization of the National Guard to round up Syrian refugees and put them in camps....

“Vin Weber, a prominent GOP strategist, told me that many Republicans remain in ‘denial mode’ about the possibility of Trump’s nomination.  ‘How can you be the leader in national polls,’ Weber says, ‘and in the early states, and maybe even in money, and be counted out?’ In spite of saturation media coverage, Weber thinks the Trump effect on the GOP is ‘understated.’....

“(Trump’s) message comes in the context of a long period of political pessimism – more than 10 years in which polls have generally found more than 60 percent of Americans believing that their country is on the wrong track. There has been an angry decline in respect for most social institutions, including government. This has left some Americans more open to radical political answers – more prepared, in Weber’s words, ‘to roll the dice on the future of the country.’”

Editorial / Washington Post

“The growing ugliness of Donald Trump’s campaign poses a challenge to us all. We have seen the likes of him before, in the United States and elsewhere: narcissistic bullies who rise to prominence by spreading lies, appealing to fears and stoking hatred. Such people are dangerous.

“Like many Americans, our first inclination was to ignore Mr. Trump. The Huffington Post, you may recall, announced that it would feature him in its Entertainment section, not in its coverage of politics.  He was a buffoon, a disseminator of ludicrous rumors about President Obama’s birthplace. He lacked the qualifications, experience or knowledge to be president. He was running to promote his brand. We wouldn’t give him the satisfaction.

“Our assessment of Mr. Trump was correct, but the tactical response was not.  His popular support has hung steady at about 30 percent of Republicans, and his candidacy has tugged the debate toward divisiveness as his bigotry has drawn cheers and many of his rivals have strove to mimic him.  Now some detractors opt again to disregard his lies, but for a different reason: Criticism from establishment politicians and tough questions from establishment journalists, it is feared, will only fuel his self-portrayal as the truth-telling outsider.

“That may be so, but it cannot justify silence.”

Gerald F. Seib / Wall Street Journal

“(Mr. Trump) rolls on, still the Republican front-runner.

“How does that happen?

“The answer has less to do with Mr. Trump – who is pretty much the same guy who toyed with presidential runs in the past, to no great effect – than with the mood of the electorate, or at least a slice of it.  A quick look back at American history also shows the phenomenon is neither unprecedented nor inexplicable....

“Lesser candidates have faded after stirring up a fraction of (the controversies Trump has). But they weren’t running in 2015, a time in which respect for the political establishment and political institutions could hardly be lower.

“The country has been through two long and unsatisfying wars in Iraq and Afghanistan.  Many Americans feel they have never really recovered, and maybe never will recover, from the deep recession of 2007-09.  Moreover, some Americans see demographic trends and cultural changes, such as the spread of gay marriage, that leave them feeling they don’t recognize their own society.

“As a result, the unfolding Republican primary sometimes seems to be a contest to see who can be most derogatory of current political leadership – and that’s a contest Mr. Trump figures to win every time. His supporters seem less interested in the details of his pronouncements than in his attitude.”

--John Bel Edwards, a previously little-known Democratic state legislator, soundly defeated U.S. Senator David Vitter last Saturday to become the next governor of Louisiana.  Vitter, who wasn’t exactly a great candidate, carrying baggage that was over airline limits, announced after that he would not run for re-election to the Senate in 2016.

--Pope Francis is on an ambitious trip to Africa and, arriving in Kenya, he addressed the issue of Islamic extremism, saying God’s “name must never be used to justify hatred and violence.”  While not referring specifically to the Paris attacks, Francis did recall the “barbarous attacks” by al-Shabaab terrorists in Kenya, such as on Nairobi’s Westgate Mall and Garissa University, that combined killed more than 220 in 2013 and 2015. 

--It is truly despicable not only what Chicago police officer Jason Van Dyke did in the shooting of teenager Laquan McDonald, but unbelievable how corrupt the Chicago PD is and how equally pathetic  Mayor Rahm Emanuel has been in withholding the video of McDonald’s murder for so long.

Editorial / Washington Post

“This time in Chicago, the police cover-up failed....

“The problem starts in the mayor’s office; implicates the police department’s top brass, the police union and rank-and-file officers; and runs through the city’s nominally independent police review authority, which routinely dismisses allegations of police wrongdoing.  Since 2007, the authority has reviewed nearly 400 police-involved shootings in Chicago, fatal and non-fatal – an average of about one per week – and judged just one of them to be unjustified.  Just one officer was charged criminally in all those shootings, and he was acquitted....

“The video is stomach-turning.  It’s aftermath lays bare a system with an utter absence of accountability. It also raises disturbing questions about the Cook County prosecutor, Anita Alvarez, and federal prosecutors.  They had the incriminating videotape for months; why were no charges brought until this week?

“Mayor Rahm Emanuel (D) fought to withhold the video from public view for months until a judge ordered it released. Then, rather than calling for reform in the police department, which fatally shoots more people than any other force in the nation, Mr. Emanuel suggested the episode arose from one bad apple.

“That’s wrong.... It was the police who issued misleading information, saying Mr. McDonald was shot as he ‘continued to approach the officers.’  It was the police who maintained a code of silence despite at least seven other officers who witnessed the shooting at close range. That’s outrageous and should lead to further criminal inquiries and the immediate firing of the city’s police superintendent, Garry McCarthy.

“The problems are not about tactics and training; they’re about a culture of impunity, including a police union that routinely covers for even the dirtiest cops....

“Mr. Emanuel, appealing for calm, now says it is time for ‘healing’ in Chicago. In fact, no real healing is possible without deep reforms in a rotten system.”

--A backlash has developed over the student protests that have gained notoriety in recent weeks.  As reported by Melissa Korn and Douglas Belkin of the Wall Street Journal:

“At the University of Missouri, where the protests climaxed two weeks ago with the resignation of the school president, Ian Paris said he was prompted to speak out when classmates told him they disagreed with some of the demands protesters had made but were afraid to speak out.

“ ‘If you disagree with anything they’re saying, you will instantly be denounced as a bigot and attacked on social media,’ said Mr. Paris, a 21-year-old senior.  ‘The most jarring part of all this is to see the administration going along with it.’”

At Princeton, where as I wrote the other week the Black Justice League ended a 32-hour sit-in only when the administration agreed to consider the removal of Woodrow Wilson’s name from some of the buildings on campus, more than 500 people signed a petition denouncing the school for giving in to the protesters.

A senior who co-wrote the petition, Evan Draim, said, “The discussion surrounding these issues on campus was being monopolized by a few very loud and very passionate students, but the silent majority of Princeton students weren’t being heard for fear of being called racist or another term.”

“At the University of Kansas, a student group has called for impeachment of the student-body president because she didn’t stand up during a town-hall meeting when they called for support of a series of items demanding racial justice.  One item was a call for a parallel student government that emphasized diversity.

“Jessie Pringle, who took office in May, said she needed to think about that and hesitated to take a stand.  Demands that she step down have prompted calls from students and even more from alumni telling her to push back, she said.”

--Malia Obama is a high school senior and Darlene Superville of the Associated Press had a piece on her college list for next fall.  Dad is a 1983 graduate of Columbia.  Mom graduated from Princeton in 1985.  Malia’s cousin, Leslie Robinson, is a sophomore at Princeton. The president and the first lady earned their law degrees at Harvard.

So the potential winner is among the following: Cal-Berkeley; Stanford; New York University; the University of Pennsylvania; Barnard; Tufts; Brown; Yale and Wesleyan, plus, it is assumed, Columbia, Princeton and Harvard.

--Back to Louisiana, 60% of residents eat green-bean casserole on Thanksgiving, the most in the country per the Del Monte Green Bean Index.  This is one of my brother’s favorite dishes and he had done his research.

--Finally, on a personal note, I learned this week that my eye doctor, Howard Eisenstodt, had passed away.  I had my last appointment with him in July, after which he finally retired at the age of 85 weeks later.

For 35 years I had my twice-yearly checkups with this good man (being a contact lens wearer, my prescription changed frequently), always making sure I was the first appointment of the day because he was old school and didn’t rush things; as in the patient line backed up pretty quickly if you weren’t first.

Dr. Eisenstodt and I talked Mid-East politics all the time, much to the consternation of those in the waiting room, I’m sure.  He was always interested in my travels (wondering why I’d go to Lebanon and Jordan and not Israel, for one...I’ll get there), and I loved getting his opinion on the region, his son having served in the Mossad for years.

A kinder, more humble soul you never met, and I’m glad he kept practicing to the very end.  I’ll miss the man.

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

God bless America.

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Gold $1057...another 5-year+ low
Oil $41.71

Returns for the week 11/23-11/27

Dow Jones  -0.1%  [17798]
S&P 500  +0.04%  [2090]
S&P MidCap  +1.5%
Russell 2000  +2.3%
Nasdaq  +0.4%  [5127]

Returns for the period 1/1/15-11/27/15

Dow Jones  -0.1%
S&P 500  +1.5%
S&P MidCap  +1.1%
Russell 2000  -0.2%
Nasdaq  +8.3%

Bulls  45.4
Bears  26.8  [Source: Investors Intelligence]

Have a great week. As Sgt. Phil Esterhaus (actor Michael Conrad) used to say on “Hill Street Blues,” let’s be careful out there.

Brian Trumbore