Stocks and News
Home | Week in Review Process | Terms of Use | About UsContact Us
   Articles Go Fund Me All-Species List Hot Spots Go Fund Me
Week in Review   |  Bar Chat    |  Hot Spots    |   Dr. Bortrum    |   Wall St. History
Week-in-Review
  Search Our Archives: 
 

 

Week in Review

http://www.gofundme.com/s3h2w8

AddThis Feed Button

   

07/16/2016

For the week 7/11-7/15

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs.  Your support is greatly appreciated.  Click on the gofundme link above or send a check to PO Box 990, New Providence, NJ 07974.

Edition 901

Our World

Last week I started out by reiterating my ’24-hour rule,’ in that case because at the time we didn’t have all the facts in the police shootings in Baton Rouge and St. Paul, and especially in the case of the latter we still don’t.  I’ve just learned it’s always reckless to react without the facts, which would make me a poor Black Lives Matter movement member, he typed mischievously.

So tonight as I go to post I invoke the 24-hour rule once again as it pertains to the attempted coup in Turkey.  As I read the wires, I see two explosions at the parliament building in Ankara, two explosions in or near Taksim Square in Istanbul, where President Erdogan has returned from his vacation on the Aegean.

I know Turkey pretty well.  I’m a student of Ataturk and the only kid on my block who has made a pilgrimage to Ataturk’s tomb in Ankara, and I guarantee the only kid on the block who has been to Turkey’s national military museum in Istanbul twice (one of the great museums in the world).

I’m a closet fan of Turkey’s military and I’m well aware of the serious issues President Erdogan has with it as he has tried to boot the secular generals and senior officers, replacing them with Islamists, to generalize.

I have to smile, because once again it goes back to August 2012, and President Obama’s decision not to work with Erdogan on a no-fly zone in Syria.  I’ve only told you a zillion times since that this single decision changed everything.  Changed history.  We ‘lost’ Erdogan, for one, who has drifted further and further to the Islamist side ever since.

As for this coup attempt, it is a symptom of far more serious problems as Turkey slides into what Erdogan would like to see, an Islamist theocracy, a dictatorship.  We’ve been seeing Turks’ freedoms consistently taken away the past few years and if the coup is crushed, it will only get worse.  I do not see him reforming.

Meanwhile, I cover the Nice Attack down below and, once again, it’s no mystery these days why the financial markets don’t react much anymore to such heinous stuff, because as frequent as the attacks have been coming, we still haven’t had two big ones back-to-back, like on consecutive days in major Western European cities, more than of the lone wolf variety...the kind that would totally crush confidence and sentiment.

As for the big rally in stocks of the past three weeks, four in London, it’s really about the central banks and low interest rates seemingly lasting forever, with stocks being an attractive alternative.  OK, I’m not going to argue that for now.

But where I will argue is with the insane belief that the worst of Brexit is over!  Are you freakin’ nuts?!  It hasn’t even started.

Britain deserves credit for a seamless transition at 10 Downing Street, but the long process of negotiations with the European Union hasn’t begun, and if Britain’s new leadership has its way, the clock won’t start for months to come.  Just understand there could be good moments with the negotiations, but there are likely to be bad ones and Europe, not just the UK, is a political tinderbox...and a volatile political situation is not conducive to a good economy.  Period.

Brexit is also largely responsible for the latest move down in interest rates and while the stock markets love this, assuming earnings eventually rationalize the increasingly extended valuations, you know by now that these never before seen low yields are killing pension funds and insurance companies – inflating funding gaps, which means large companies have to fund them, which means less for capital expenditure and R&D.  That’s not good.

But another reason given for this week’s rally was Japan’s election, which I cover below, and while Prime Minister Abe got his supermajority in parliament, that doesn’t mean he’s going to suddenly make the right economic decisions and get them through the legislature.  I see zero reason to be optimistic on Japan.  [Longer-term, I really see zero cause for optimism given their frightful demographics.]

So those are some random musings as I head to post time, with President Erdogan still at Ataturk International Airport, the situation in Istanbul and Ankara still fluid.

And next week we have Cleveland.  Oh joy.

Lastly, never take your eye off the South China Sea, or let me worry about that one for you.  Call it another free feature of StocksandNews.

Brexit and Europe

Well that was quick.  At first, immediately following the Brexit vote, then-British Prime Minister David Cameron said he would hang on until October while a new party leader, and thus prime minister, was selected.  Then it was September.  Then the Conservative Party (Tory) leadership race was quickly narrowed down to Home Secretary Theresa May and Energy Minister Andrea Leadsom.  Then Ms. Leadsom, in an interview with the London Times last weekend, said that as a mother of three, having children meant she had “a very real stake” in Britain’s future, implying that Mrs. May, who has no children, wasn’t as good a choice.

Leadsom’s exact words, in response to the question, “Do you feel like a mum in politics?”

Leadsom: “Yes.  So...

Rachel Sylvester/The Times: “Why and how?”

AL: “So really carefully because I am sure, I don’t really know Theresa very well but I am sure she will be really really sad she doesn’t have children so I don’t want this to be ‘Andrea has children, Theresa hasn’t’ because I think that would be really horrible.

“But genuinely I feel being a mum means you have a very real stake in the future of our country, a tangible stake.”

“She possibly has nieces, nephews, lots of people, but I have children, who are going to have children, who will directly be a part of what happens.”

And with that, Andrea Leadsom, who many thought was nowhere near being qualified in the first place, stepped down from the leadership race, David Cameron stepped forward to say there would be a new prime minister, Mrs. May, and in less than 48 hours, Theresa May moved into No. 10.

In her first remarks, May said: “Under my leadership, the Conservative Party will put itself completely, absolutely, unequivocally, at the service of ordinary working people.  We will make Britain a country that works for everyone.”

So then May went to work on her cabinet, first selecting foreign secretary Philip Hammond to become  Chancellor of the Exchequer (Treasury secretary), with leading Brexit campaigner Boris Johnson taking over Hammond’s position in a shocking move.  Amber Rudd is home secretary, and Eurosceptic David Davis will be in charge of Britain’s exit from the EU, i.e., Brexit secretary (chief negotiator).  Michael Fallon was retained as defense secretary, with Mrs. May seemingly trying to balance out those who supported Leave vs. Remain.

Asked about his priorities as chancellor, Hammond said there would be “no emergency Budget” and that he would work closely with the Bank of England, which later opted not to lower interest rates as expected.  Hammond did indicate he would pull back on some of the austerity measures enacted by his predecessor, George Osborne.

There is no doubt Britain’s economic confidence has been shaken to the core, with business sentiment readings cratering.  Two-thirds of respondents in a Credit Suisse survey suggested they will postpone or reduce spending in the UK in the next six months.  Hiring plans fell particularly sharply, with nearly half the respondents saying they would postpone decisions in the UK and almost a quarter saying they will reduce employment.  For his part, Hammond said the government needed to “send signals of reassurance about the future as quickly and as powerful as we can.”

Prime Minister May met with Scotland’s First Minister Nicola Sturgeon in Edinburgh on Friday, with May stressing she won’t trigger the Article 50 “divorce clause” until she is sure of a “UK wide approach” to negotiations with the EU.

May has a real problem with Sturgeon and Scotland, which is seeking to maintain economic ties with Europe, including the possibility of holding a second referendum on independence. On June 23, Scotland voted 62-38 to remain in Europe.  May’s new chancellor, Philip Hammond, has said he does not envisage a situation where Scotland would be offered a different deal with the EU than the rest of Britain.

Back to Boris Johnson becoming foreign secretary, the choice is being ridiculed throughout Europe.  He’s not likely to get along well with Turkish President Erdogan (assuming he is still in power), who just two months ago, Johnson penned a poem about wherein Erdogan was having sex with a goat.

There was a young fellow from Ankara, Who was a terrific wankerer, Till he sowed his wild oats, With the help of a goat, But he didn’t even stop to thankera.”  [Turkey’s foreign ministry was in a forgiving mood upon Johnson’s appointment, saying “British-Turkish relations are more important (than Johnson’s past words) and can’t be hostage to these statements.”]

Johnson has also praised Syrian President Assad for battling ISIS, no matter Assad’s parallel campaign that has killed tens of thousands of civilians (not counting tens of thousands who have simply disappeared...taken by his secret police).  Johnson also once suggested Africa would be better off still administered by the former colonial powers.

French Foreign Minister Jean-Marc Ayrault said of Johnson that he was a liar.  “I am not at all worried about Boris Johnson, but...during the (Brexit) campaign he lied a lot to the British people and now it is he who has his back to the wall,” Ayrault said.

Meanwhile, regarding the crisis with Italy’s banks, it eased somewhat (kind of, sort of).  With an estimated $400bn in non-performing loans, Jeroen Dijsselbloem, the president of the Euro area finance ministers, said that problems in Italy’s financial sector do not amount to an “acute crisis” and would have to be dealt with “gradually.”  But any plan to help the banks would have to respect “strict” new EU rules requiring banks’ creditors to take losses before they can be helped with public money.

The EU rules are “very clear” on when creditors should face compulsory losses, known as bail-ins, Mr. Dijsselbloem said.

Dijsselbloem also warned Europe’s banks in general, saying it was unreasonable for them to keep asking for public support to solve their problems.

“There have always been, and will always be, bankers who say we need more public money to recapitalize our banks, and I will resist that very strongly, because again and again it’s hitting on the taxpayer, again and again increasing sovereign debt in countries that are heavily indebted....

“We need leaders in the banks that address the problems themselves instead of saying, ‘Ah, well, here politicians, have our problems.’ There has to come an end to this.” [Financial Times]

German Chancellor Angela Merkel said “intensive talks” are under way between Italian Prime Minister Matteo Renzi’s government and the European Commission.

“I am very convinced that the questions that need to be decided there will be resolved in a good way.” [Bloomberg]

For his part, Renzi is seeking to ease the hit private creditors would take if the lenders are recapitalized without violating EU rules.

As to the interest rate environment in euroland, Germany sold 10-year debt at a negative yield on Wednesday, -0.09%, becoming the first eurozone nation to do so.  But by week’s end, the Bund had closed with a yield of 0.007%...positive!  Get out your ‘Rule of 72’ decoder ring, boys and girls.

Philip Stevens / Financial Times

“One by one, the rivals to replace David Cameron were found out.  Boris Johnson, a chancer who thinks a smattering of schoolboy Latin fair substitute for strategy or principle.  Michael Gove, a political sociopath with a manifesto that read like an undergraduate essay. Andrea Leadsom, the hard-right’s unelectable answer to Labour’s far-left, and unelectable, Jeremy Corbyn.  After winning the war, the leading Brexiters lost the peace.  Theresa May’s stroll into Downing Street offered some hope that Britain has not gone completely mad.

“The adage has it that politics always ends in failure.  In Mr. Cameron’s case it was self-inflicted. He always preferred tactics to strategy.  Add an inflated sense of his ability to get out of tight spots and an unhappy ending was inevitable. The big tactical swerve – the promise of a referendum on Europe in a vain attempt to appease Tory Europhobes – steered him, and the nation, into a brick wall....

“ ‘Brexit means Brexit’ is Mrs. May’s favorite phrase.  It is calculated to offer assurance to Tory Outers who worry about her commitment to withdrawal. It says nothing, though, about the shape of post-Brexit relations.  The new prime minister has avoided showing her hand on where she wants to draw the balance between access to the single market and national control of immigration policy. This will be the subject of two sets of negotiations – the first with her own party, where the interests of business will collide with the ideology of Little Englanders, and then with the other 27 EU states.  The former may be harder than the latter.

“Mrs. May will be told by the Brexiters to get on with it: set out your position clearly, trigger Article 50 and wrap up a deal as quickly as possible to put an end to uncertainty.  The prime minister should ignore the pleas. The only hope she has of squaring half-a-dozen circles will be to play the negotiations long.

“We are living through a period of political and economic upheaval – in Britain and in the rest of the continent. What Mrs. May must hope is that over time the politically impossible becomes the possible; that compromises unacceptable today are seen as common sense a year or two hence.”

Eurobits....

--The IMF reduced its growth forecast for the eurozone to 1.6% in 2016 and 1.4% in 2017 (from 1.7% both years).

The IMF’s estimates are based on the UK and the EU reaching a favorable deal on Brexit close to the so-called Norway model, in which Britain continues to have access to the EU single market.  But while this would limit the damage, the only way such a deal is probably possible is if the UK was unable to impose limits on immigration from within the EU and no way that is going to be acceptable to the Brits.

The IMF also said that if the damage from Brexit turns out to be worse than expected, the European Central Bank should unveil more stimulus, preferably by adding to its quantitative easing program instead of cutting interest rates further into negative territory.

But some national central banks would then run out of assets to buy, or be forced to buy piles of crapola.

--The June inflation rate for the eurozone was 0.1% annualized vs. -0.1% in May.  Germany was 0.2% (ann.), France 0.3%, Italy -0.2%, and Spain -0.9%.

--Industrial production in the euro area was down 1.2% May over April, up 0.5% year-over-year.

--European equity funds suffered their largest withdrawals on record in the past week as the Italian bank crisis drove investors to the safety of the U.S.   European stock funds saw $5.8bn of outflows in the week to July 13, eclipsing a weekly record set in October 2014.  The unease is also heightened by European financial stress tests, due July 29, with some analysts expecting the weakest Italian banks to fail.

--As to the Nice terror attack...84 dead, including 10 children, with the toll destined to rise further.  There has been no claim of responsibility as yet, but it is roiling French politics.  This was clearly gross negligence on the part of security forces and France’s opposition parties are letting loose.

Marine Le Pen, leader of France’s far right National Front party (FN), issued a statement on Friday urging the country to ‘declare war’ against ‘the scourge of Islamist fundamentalism.’

“We must not let terror attacks come one  after another and count more deaths without taking action.

“The war against the scourge of Islamist fundamentalism has not begun; it’s now urgent to declare it....

“It’s on this day, I will put all of my energy toward the profound desires of the bruised people of France, so that they are heard and that the battles are waged.”

Ms. Le Pen has no doubt picked up another point or two in support, with next spring’s presidential election looming.

--Germany’s refugee influx is running at less than half the pace of last year, when a record of more than 1 million asylum seekers arrived, according to the German government.

The number of arrivals in June was little changed for a third consecutive month at about 16,000, bringing the first-half total to 222,264, the Interior Ministry said in a statement.  As recently as January the monthly figure was 92,000, before the European Union and Turkey reached a refugee deal championed by Angela Merkel. Syrians filed the most asylum applicants in the first six months of 2016, followed by Afghans and Iraqis.

--Lastly, Jeffrey Gundlach, the bond maven at DoubleLine Capital, had this blurb in an interview with Barron’s.

Addressing the uncertainty in the markets, post-Brexit: “What is really happening here is that there’s massive technological change, and big changes almost always lead to political instability.  People who benefit from the old construct are loath to see it change, because they don’t want to lose their power and economic advantage. And so they dig their heels in even harder.  That’s what we’re seeing in Britain right now.  People who remember the good old days when they had factory jobs and made a good living – that’s been taken away, and they want to do something about it.  They want to blame somebody, so let’s blame the EU.”

Washington and Wall Street

There was a slew of economic data, headlined by the inflation figures for June.  Producer prices rose a higher than expected 0.5%, 0.4% ex-food and energy.  Year-on-year, the PPI was up 0.3%, but 1.3% on core.

Consumer prices rose 0.2%, including on core, but are up 1.0% over the past 12 months, with the core up 2.3%, a solid and reliable figure that happens to be above the Fed’s 2% target but, as we all know by now, the Fed prefers the PCE (personal consumption expenditures index) and that is at 1.6%.

My bottom line is that there is inflation, between the core CPI and wages, up 2.5%.  I’m not saying the Fed should be panicking, I just want them to be intellectually honest in their statements.  I’m sure they wouldn’t mind letting inflation run ‘hot’ for a brief spell (and these numbers are not hot) just to be sure before it makes another move.

That said, I have argued that with July off the table in terms of the Federal Reserve raising interest rates, September will be as well due to the election, and that there is a real chance the Fed could be caught with its pants down if we get a few more solid employment numbers in the coming months.

Ergo, this little rout we had this week in the Treasury market (more so in percentage terms), with the yield on the 10-year moving from 1.36% to 1.55% (a late rally from 1.59% near the close...still the biggest one-week rise in a year), could turn into a mini-panic if the market believes the Fed is behind the curve.  After all, we saw a terrific example of being on the wrong side of a trade with the Brexit vote, with investors not only being caught with their pants down, but without any toilet paper.

Among the other economic data points on the week, June retail sales came in stronger than expected, 0.6%, 0.7% ex-autos.  [Though department store sales are down 3.7% year-on-year.]

June industrial production was also better than expected, up a solid 0.6%.

But I do have to note that the Atlanta Fed’s GDPNow indicator is pegging second-quarter growth at 2.4%, down from an earlier estimate of 2.9%.  [Q1 was 1.1%.]

Asia

China reported GDP for the second quarter came in at 6.7%, the same as the first quarter’s pace and falling within the government’s stated target for the year of 6.5% to 7.0%.  How conveeenient.  [GDP was 6.9% in 2015.]

But of the 6.7%, 2.5 points came from investment, while 4.9 came from consumption amid the ongoing rebalancing of the economy.  [Net exports were a minus 0.7 points.]

Fixed asset investment for the first six months was just 9%, continuing a decline in this critical category, while retail sales for the month of June were a solid 10.6%, year-over-year, the fastest pace since December.

June exports, in dollar terms, were down 4.7% year-over-year, with imports down 8.4%.  For the first six months, exports to the EU are down 4%, to the U.S. down 10.9%, and they have declined 8.1% to Southeast Asia.

But when you add it all up, at least for now, the hard-landing fears in China have eased.

In Japan, Prime Minister Shinzo Abe won a sweeping victory in elections to Japan’s upper house and he now has a parliamentary supermajority (2/3s) in both the lower and upper houses (the lower being more important).  What this means is Abe has the votes to revise Japan’s pacifist constitution, as some have described, a once-in-a-lifetime opportunity to put constitutional change to a national referendum, though with his supermajority margin extremely thin, Abe is going to move slowly.

It seems that Abe is not out to scrap the war-renouncing Article 9, but rather he may want to set a precedent for future constitutional reform.  His coalition partner, a Buddhist party, also wants reform, but it doesn’t want to see Article 9 scrapped, rather it wants to add environmental protections and privacy rights.  So there’s a conflict to deal with.

Abe said: “We have to accelerate Abenomics to meet the public’s expectations,” while promising to “deepen debate” on the constitution.  It is expected that Abe will launch a large stimulus program.

I can’t say I’ve followed Japanese voter turnout, but it was 54.7 percent, the fourth lowest since the second world war.  [Financial Times]

One important economic indicator in the here and now, June machine tool orders, a big metric  for gleaning activity, was down a whopping 19.9% year-over-year, the 11th consecutive month of contraction.

Editorial / Wall Street Journal

“Instead of the economic reforms he promised, Mr. Abe continues to push the same government spending and monetary loosening Japan has tried since the 1990s. The economy continues to dip into and out of recession, and deflation has returned since March with consumer prices falling 0.4% year on year in May. The election gives Mr. Abe another chance to arrest Japan’s economic slide, whether or not he deserves it, and his best bet is to tackle the labor market.

“In 2014 Mr. Abe seemed poised to amend laws that make it difficult for companies to lay off full-time employees.  But he backed off amid opposition from labor unions.  Instead the Prime Minister focused on reinterpreting Japan’s constitution to allow closer military cooperation with the U.S.  That was a worthy initiative, but it was so unpopular that Mr. Abe has lacked the political capital to pass economic reforms.

“It’s time to try again.  Japan’s labor laws allow even clearly incompetent employees to file wrongful dismissal cases that drag on for years.  The Nikkei newspaper cites an estimate that six million full-time workers have nothing to do....

“Resistance to labor reform from the opposition Democratic Party and even within Mr. Abe’s coalition will be intense. But the voters have given him his third successive mandate. This may be his last chance to use an election victory to push through the most critical reform for rejuvenating Japan’s economy.”

Editorial / Washington Post

“[Rather than focusing on constitutional reform that is probably not needed, Abe already having won legislative approval for joint military missions with the U.S. and other allies], Better for Mr. Abe to focus on refloating the dead-in-the-water Japanese economy, still plagued by deflation, negligible growth and declining exports more than three years since the ballyhooed launch of ‘Abenomics.’  Massive injections of stimulus, both fiscal and monetary, have essentially failed; yet the ‘third arrow’ of Abenomics – structural reform in labor markets, corporate governance and agriculture – has barely been implemented.  Given fierce resistance from entrenched interest groups, this was always bound to be Mr. Abe’s most difficult task.  And American presidential nominees are not making it easier for him by denouncing the Trans-Pacific Partnership trade agreement, which helps lay the basis, economic and political, for further Japanese reform.”

At least the Tokyo stock market was buoyed big time by the election results, with the Nikkei up 9.2%, the best week in 6 ½ years!

Street Bytes

--The Dow hit a new all-time high, 18516, up 2%.  It is now +6.3% for the year. The S&P 500 also hit a new high, 2163, up 1.5%, while Nasdaq gained 1.5% as well.  The next two weeks, earnings should dominate.  This past one, it helped that financials, round one, had largely positive results.

--U.S. Treasury Yields

6-mo. 0.41%  2-yr. 0.67%  10-yr. 1.55%  30-yr. 2.27%

BlackRock Inc. CEO Larry Fink said he would not be surprised to see U.S. interest rates sink far lower under pressure from international demand.

The Congressional Budget Office’s annual look at long-term federal spending and revenue shows the national debt remains on an upward trajectory, but the rate of acceleration is uncertain due to lower interest rates but also slower GDP growth.

The federal debt is 75% of GDP currently and will rise to 100%+ by 2033, quicker than last year’s projections that had it reaching this threshold in 2039.

The CBO estimates the 10-year Treasury rate, after inflation, reaching just 1.9% over the long term, down from an estimate of 3% in 2013.

Today, the 10-year after inflation is essentially zero.

Separately, the White House Office of Management and Budget said the U.S. budget deficit is projected to rise to $600bn in fiscal 2016, $16bn less than previously expected, which would mean a deficit of 3.3 percent of GDP.

[I’m going to attempt to plow through the CBO numbers this week so I can provide more insight next time.]

--Oil prices continued to slide a bit (before rallying Friday) on the heels of further bearish inventory news.

Also, last time I noted that the International Energy Agency said Middle East producers, such as Saudi Arabia and Iraq, now have the biggest share of the global oil market since the Arab oil embargo of the 1970s.

This week the IEA said Middle Eastern output exceeded 31 million barrels a day for the third month in June amid near-record supply from Saudi Arabia, while U.S. oil production fell 140,000 barrels a day to 12.45 million. 

In its monthly report, the Paris-based IEA said: “When U.S. shale production was moving upwards very fast it became fashionable to talk of lower reliance on traditional suppliers,” but the Middle East’s resurgence is “an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets.”

Meanwhile, Venezuela’s crude production sank to a 13-year low of 2.18 mbd owing to the economic crisis there.

--BP PLC has put a final price tag on the cost of its Gulf of Mexico oil spill five years ago...$61.6 billion ($44 billion after tax deductions are factored in).

--J.P. Morgan Chase & Co. kicked off bank earnings season with better-than-expected results, with CFO Marianne Lake said the bank views Brexit as a political and economic challenge but not a financial crisis.

“Energy continues to be a tailwind for consumers. The labor market continues to be solid and improving. And sentiment is still good,” Ms. Lake said on a call with analysts. “All other things equal, consumers are in very good shape.”

Earnings fell slightly from a year earlier while revenue rose slightly, 2.4% to $24.38 billion.  Much of the gain on this front came from trading bonds and currencies, up 35% to $5.56 billion.

The bank’s loan portfolio – setting aside allowances for bad loans – grew to $858.6 billion.

--Citigroup reported earnings that were better than expected, but down 14% year-on-year.  Total revenue of $17.5bn was 8% lower than the same period a year ago.

--Wells Fargo exactly matched Wall Street’s estimates for second-quarter profits, with revenues up a little over Q2 2015.

John Stumpf, chairman and CEO, said the bank’s results “demonstrated our ability to generate consistent performance during periods of economic, capital markets and interest rate uncertainty.”

For all the banks, it’s really about net-interest margin these days, and for real improvement they need a steeper yield curve

--Tesla Motors Inc. announced it was cutting the starting price of its Model X crossover, the second time this year the automaker has lowered prices after missing sales targets.

A new version of the Model X, the 60D, will be priced at $74,000, $9,000 less than the Model X 75D.  The 60D will have a shorter range between charges than the 75D.

On Sunday, CEO Elon Musk tweeted that he planned soon to publish part two of his “top secret Tesla masterplan.” Frankly, I forgot what the first part was.  [Actually, one analyst said it was the original masterplan from 2006, that the analyst, Barclays’ Brian Johnson, told Reuters “dug a $4.2 billion hole” for the company.  Johnson has a $165 share price target on the stock, which closed the week at $219.70.

Last month, Tesla cut the base price of its Model S sedan to $66,000.

Separately, the SEC is reportedly investigating Tesla for failing to disclose that one of its drivers had died while using the Autopilot software, a possible breach of its corporate duty to inform the agency of so-called material events.

Coincidentally, Consumer Reports called Tesla’s Autopilot “Too Much Autonomy Too Soon’ and called on the automaker to disable the hands-free feature until its safety can be improved.

In an article published Thursday, Laura MacCleery said, “By marketing their feature as ‘Autopilot,’ Tesla gives consumers a false sense of security.”

Tesla CEO Elon Musk is not about to make any changes, the company stressing the 70,000 cars equipped with Autopilot have driven more than 130 million miles while using the feature.

--Amazon.com held its annual “Prime Day” shopping event on Tuesday and customers placed 60 percent more orders worldwide than last year’s Prime Day.

--Herbalife reached a $200 million settlement with the Federal Trade Commission after an investigation into whether the nutrition drinks marketing business amounted to a pyramid scheme.  Hedge fund manager Bill Ackman has been most vocal in arguing Herbalife was indeed a sham, but this was not accepted by the FTC.

However, the commission ordered changes to the company’s practices, including recruits being led to believe they would get richer than was likely.  As the FTC’s statement said: “(This) structure led many members to purchase an oversupply of product and rewarded only the tiny percentage of distributors with large downlines.  As a result, according to the complaint, a large majority of distributors made little or no money and a substantial percentage lost money.”

--Starbucks announced employees in its stores, including managers, will get pay raises of at least 5 percent, effective Oct. 3, in order for the company to remain “a retail employer of choice,” as stated by CEO Howard Schultz.  Starbucks is also doubling its annual “bean stock” awards, which are shares in Starbucks for partners who reach two years of continuous service.

Nothing wrong with all that.  [StocksandNews rewards its employees with six packs of domestic.]

Starbucks and others are trying to get ahead of the curve in terms of the Fight for $15 movement, with the Democratic Party, for one, amending its platform to call for a $15-an-hour federal minimum wage.

--Writing as Barack Obama, J.D., in the Journal of the American Medical Association, President Obama defended the Affordable Care Act and suggested Congress and his successor should add a government-run, or public, insurance option and increase federal financial assistance for people to buy coverage.

“The Affordable Care Act is the most important health care legislation enacted in the United States since the creation of Medicare and Medicaid in 1965,” he wrote.  “Although partisanship and special interest opposition remain, experience with the Affordable Care Act demonstrates that positive change is achievable on some of the nation’s most complex challenges.”

In acknowledging the law’s shortcomings, he noted the existence of parts of the country with limited competition and options, forcing customers to swallow high premiums.

“More can and should be done to enhance competition in the Marketplaces,” Mr. Obama wrote.  “Public programs like Medicare often deliver care more cost effectively by curtailing administrative overhead and securing better prices from providers.  The public plan didn’t make it into the final legislation.  Now, based on experience with the ACA, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.”

Obama then accused Republicans of acting in bad faith for refusing to support ideas they had supported earlier before the ACA became law, and then undermining its implementation through “inadequate funding, opposition to routine technical corrections, excessive oversight, and relentless litigation.”  [Louise Radnofsky / Wall Street Journal]

--Sales of new passenger cars in Russia fell 14% in the first six months of the year, but, Ford saw its sales in Russia rise 51% over the same period, selling 20,678 units, according to the Association of European Businesses.  [Moscow Times]

--Regarding cars and the car culture in the U.S., from Robert Samuelson / Washington Post:

“Few technological breakthroughs have had the social and economic impact of the automobile. It changed America’s geography, spawning suburbs, shopping malls and sprawl as far as the eye could see.  It redefined how we work and play, from the daily commute to the weekend trek to the beach...

“Now there are signs that the car and its many offshoots (SUVs, pickup trucks) are losing their grip on the American psyche and pocketbook....

“Young Americans, particularly millennials (ages 18 to 35), have lost their zest for buying and driving cars, it’s said.  Once upon a time, getting your driver’s license – typically at 16 or 17 – was a rite of passage.  You were liberated from dependence on the parental chauffeur.  It was a big step toward adulthood.  But this landmark no longer seems to matter so much.

“Just recently, the Federal highway Administration published figures – first reported on the Atlantic magazine’s CityLab website – indicating that the number of licensed drivers 16 or younger in 2014 had dropped 37 percent since 2009 and, at 1.08 million, was ‘the lowest number since the 1960s.’

“More impressive, the trend seems long term.  A report from the Highway Loss Data Institute cites studies showing that from 1983 to 2010 the share of 16-year-olds with a license fell from 46 percent to 28 percent; over the same period, the share of licensed 17-year-olds declined from 69 percent to 46 percent.

“Theories abound to explain this shift.  One emphasizes cost; it’s too expensive to own a car, especially after the high unemployment and meager wage gains of the Great Recession.  Uber and other on-demand transportation services make this choice more practical.

“Other theories focus on lifestyles and values.  Young Americans ‘just don’t think driving is cool – or even necessary – anymore,’ said Fortune magazine.  Cars pollute, contributing to global warming.  Millennials disapprove....

“Maybe.  But a new study by Federal Reserve economists Christopher Kurz, Geng LI and Daniel Vine throws cold water on these and other generational explanations.  It suggests that most potential young buyers couldn’t afford a new vehicle or didn’t want to incur the debt and operating expenses of doing so. Economic considerations dominated.”

--Related to the above, two new forecasts of auto sales both point to a slowdown.

LMC Automotive says it believes sales will break their seven-year streak by not rising this year, while TrueCar’s forecast is for another record, but just not as much as it had previously expected.

Both cite Brexit and the outcome of the U.S. election as main reasons for the reduced forecasts.

LMC now predicts the auto industry will sell 17.4 million new vehicles this year, while TrueCar says it expects 17.6 million, down from its previous estimate of 18 million.

But Edmunds.com is sticking with its 2016 forecast of 18.1 million.

Last year 17.47 million new vehicles were sold, according to Autodata.

--Airbus is slashing production of its A380 superjumbo.  The group told employees that the impact on jobs of a cut from 27 deliveries to just 12 by 2018 would be offset by accelerated ramp-up in production of the midsized A350 and the A320 line of single-aisle planes.

Talk about time flying, the A380, the world’s largest passenger aircraft, had its first flight in 2005, but has been beset by production problems and cost overruns.  319 have been ordered.

But there was some good news as discount-carrier Air Asia announced it would purchase 100 A321 single-aisle passenger jets that seat 236.

--Delta Air Lines Inc.’s second-quarter profit beat expectations despite lower revenue.

Lower fuel prices have helped airlines earn big profits; $1.55 billion for Q2 in Delta’s case.

But the airlines responded by adding flights and seats faster than demand, which led to lower average ticket prices.  Delta’s unit revenue fell 5%.  Overall revenue fell 2%.

--Rebecca Smith of the Wall Street Journal had a disconcerting piece on the state of America’s power grid, with “tens of thousands of substations...vulnerable to saboteurs.”

“The U.S. electric system is in danger of widespread blackouts lasting days, weeks or longer through the destruction of sensitive, hard-to-replace equipment.  Yet records are so spotty that no government agency can offer an accurate tally of substation attacks, whether for vandalism, theft or more nefarious purposes.

It was back in 2013 that an attack on PG&E’s Metcalf facility near San Jose, Calif., nearly led to a blackout after gunmen knocked out 17 transformers that help power Silicon Valley.  The assailants were never caught.

--Yum Brands Inc. raised its projections for the year after reporting a continued rebound in its China business in the first half, with core operating profit there increasing at least 14% from a year earlier.

The China business accounts for half of Yum’s revenue and sales rose 3%, adjusted for currency conversions.

But sales at Pizza Hut, which accounts for about one-quarter of the company’s operating profit in China, contracted 11% in the second quarter.

Overall revenue  at KFC was up 6%, Taco Bell 2%, and Pizza Hut 1%, though on a comp-store sales basis, Yum reported results were even from the year-ago period as KFC helped offset lower sales at Taco Bell. 

--CSX Corp. said revenue for its second quarter fell 12% with falling coal shipments, but shares rose as earnings topped expectations.

For the latest quarter, coal volume was down 30%, with CSX forecasting it will decline 25% for the year.

--The European Commission sent Google (through parent Alphabet Inc.) two statements of objections for skewing shopping results in its own favor and unfairly restricting rival online advertising platforms.  I’m with the EC on this one.

--According to a report from the New York Building Congress, the average wage of a construction worker in New York City reached $76,300 last year, up modestly since 2011.  The study broke out three broad categories with the best paid being heavy construction and civil engineering  (including unionized crane operators who can make $400,000 a year).

The Heavy, Civil Engineering avg. wage is $120,700, though this is just 6% of the workforce.

General Construction $73,300...29%
Specialty Construction $73,800...65%

But as reported in Crain’s New York Business, “Builders say those figures don’t reflect their costs for using union labor. During 2015, for example, the carpenters’ contract called for an hourly rate of $49.88 plus $44.10 in supplemental benefits.  By extrapolating those numbers, an employer-circulated chart put the total compensation for a carpenter at just under $200,000 a year.

Kind of makes you want to break out in song... If I had a hammer...

--Speaking of song, the amount of revenue YouTube paid to music labels relative to the number of streams of their content halved last year, a potential lost revenue of $755m for the industry, according to Midia (sic) Research.

The site paid $740m last year to music rights holder – a 15 percent rise from the prior year.

But streams on YouTube and Vevo, a music site controlled by Sony and Universal Music Group, grew 132 percent to a record 751bn.

This surge in videos streamed halved YouTube’s effective payment rate per stream from $0.002 in 2014 to $0.001 in 2015, Midia said.

I have to admit, knowing how much I go to YouTube for music, that this just isn’t right.

YouTube and Vevo pay music rights holders 55 percent of music video revenues, while Spotify paid 83 percent of its 2015 revenue to content holders.  [Anna Nicolaou / Financial Times]

--Shares in Japanese gaming company Nintendo jumped by nearly a quarter on Monday following launch of its new Pokemon Go smartphone game.

Millions immediately downloaded the game, which requires users to catch on-screen characters like Pikachu using real-world locations.

Just how much Nintendo will profit is in question, though, because it was not the main developer, that being U.S.-based game developer Niantic and the Pokemon Company, which owns the rights to the characters.

But I admit to total ignorance of the game, though I do understand how businesses can certainly promote themselves by making their establishments a destination for players to visit to capture the characters, and that is a purchase.

And while I couldn’t care less about the game, I did find it outrageous that the Holocaust Museum in D.C. was a “PokeStop,” three of them within various parts of the museum.

On the other hand, for less visited, and less ‘serious,’ museums, having a PokeStop makes sense.

Many analysts believe Pokemon Go could become a $1 billion business within a year as local businesses shell out fees to become physical destinations.

--Finally, I have written on many an occasion that Sunday is Salmon Sunday, which is still the case almost all the time, so I couldn’t help but note a bit in the Financial Times that “the salmon price has leapt to a record high as the lack of supplies due to Chile’s toxic algae break out earlier this year takes its toll on international fish markets.”

No one told me!

According to Piotr Wingaard at FishPool (which trades forward contracts for salmon), “There’s a global lack of fish.”

Chile is the world’s second-largest producer of farmed salmon and is facing a 20-25 percent drop in production.

But did you see this week that a number of countries, including Norway (the largest grower) are now looking to raise salmon on tankers?  So beware of labels that read, “Farmed on tankers: Crude oil content 20%.”

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey:

Joby Warrick and Souad Mekhennet / Washington Post

“Even as it launches waves of terrorist attacks around the globe, the Islamic State is quietly preparing its followers for the eventual collapse of the caliphate it proclaimed with great fanfare two years ago.

“In public messages and in recent actions in Syria, the group’s leaders are acknowledging the terrorist organization’s declining fortunes on the battlefield while bracing for the possibility that its remaining strongholds could fall.

“At the same time, the group is vowing to press on with its recent campaign of violence, even if the terrorists themselves are driven underground.  U.S. counterterrorism experts believe the mass-casualty attacks in Istanbul and Baghdad in the past month were largely a response to military reversals in Iraq and Syria.

“Such terrorist acts are likely to continue and even intensify, at least initially, analysts say, as the group evolves from a quasi-state with territorial holdings to a shadowy and diffuse network with branches and cells on at least three continents....

“ ‘Where al-Qaeda was hierarchical and somewhat controlled, these guys are not. They have all the energy and unpredictability of a populist movement,’ said Michael Hayden, the retired Air Force general who headed the CIA from 2006 to 2009....

“But signs of desperation are mounting weekly inside the caliphate, which shrank by another 12 percent in the first six months of 2016, according to a report last week by IHS Inc., an analysis and consulting firm....

“European intelligence officials fear that the new phase is already underway.  ‘They are...challenged as we adapt our strategy to their initial one, in order to start ‘de-sanctuarizing’ them,’ said a senior French security official, speaking on the condition of anonymity to discuss counterterrorism strategy.  ‘But they will now expand to other tactics and start executing much more insidious and covert ops, in big cities.

“ ‘The next step,’ he said, ‘has begun.’”  [Ed. this was written days before the Nice Attack.]

Josh Roggin / Washington Post

“While the United States and Russia inch closer to more military cooperation in Syria on the ground, Secretary of State John F. Kerry is sounding more and more like he agrees with the Russian view of the Syrian rebel groups fighting against the Assad regime.

“Late last month in Aspen, Colo., Kerry said the most important thing the administration is doing to ramp up the effort to defeat extremists in Syria is to ‘reach an understanding’ with the Russian government about how to deal with the terrorists there, which he names as the Islamic State, often referred to as Daesh, and Jabhat al-Nusra, al-Qaeda’s Syrian branch.  As I reported, Kerry and President Obama have proposed to Moscow increased cooperation against those troops, especially Jabhat al-Nusra, in exchange for Russia convincing Syrian President Bashar al-Assad to abide by the crumbling cease-fire and lay off bombing the other rebels.

“But then Kerry, perhaps accidentally, threw two other Syrian rebel groups under the bus by calling them ‘subgroups’ of the terrorists. [Ed. Jaysh al-Islam and Ahrar al-Sham.]....

“The remark, which went largely unnoticed by the media in Aspen, nonetheless set off alarm bells inside the Obama administration....

“ ‘For months, we’ve been arguing to make sure the Russians and the Syrian regime don’t equate these groups with the terrorists,’ one senior administration official told me.  ‘Kerry’s line yields that point.’

“Another U.S. official simply emailed, ‘Baffled. SMH [Shaking my head].’....

“Even if Kerry misspoke, some Syrian groups see his comments as an example of how the Obama administration has slowly but steadily moved toward the Russian view of Syria, which includes painting all opposition groups as terrorists.”

So Russia and Syria will just continue to bomb away as U.S. credibility sinks to zero.  [If we were using my economic PMI numbers, with 50 being the dividing line between ‘credibility’ and ‘no credibility,’ the U.S. would be at a 35.]

In other news...

The Pentagon announced it was sending 560 more military personnel to Iraq to help in the fight against ISIS, bringing the total to about 4,650 in Iraq, most of them serving in training and advisory roles.

Sec. of Defense Ash Carter emphasized that the extra troops will play a large role in helping local forces retake the IS stronghold of Mosul.  The new force will be deployed at an airbase about 40 miles south of ISIS’ last urban bastion in Iraq.

A senior ISIS operative, Abu Omar al-Shishani (the Chechen) was killed in combat in the Iraqi city of Shirqat, south of Mosul.  The Pentagon has described him as the group’s “minister of war” and the U.S. had said in March he was killed in an airstrike in Syria.  This week’s announcement came from a news agency that supports Islamic State.

Meanwhile, the Wall Street Journal reported: “Food and medicine have begun to dwindle in the city of Aleppo after an advance by Syrian regime forces effectively cut off the only road into the rebel-held side of the divided city, residents and opposition leaders said Wednesday.”

Despite numerous ‘cease-fires,’ fighting around the critical Castello road has intensified, this being  the only route by which humanitarian aid can reach rebel-controlled neighborhoods.  The Assad regime is attempting to encircle Aleppo’s eastern half – with an estimated population of 300,000 – which would make it the largest civilian population under siege.

The U.N. currently lists 19 areas with nearly 600,000 living under siege, meaning little food and other aid is getting in.

Iran: President Hassan Rouhani marked the first anniversary of his country’s nuclear deal with the U.S. and the other members of the P5+1 with a warning that Tehran could quickly restore its nuclear capability if the terms of the accord are violated.

“We always keep our word,” Rouhani said on state television. “But if they want to breach their commitment, our nuclear capabilities are such that we can reach the level we want in a short period of time.”

Iran has been struggling to attract foreign investment, in large part because it still has trouble gaining access to the international banking system.

Iran has accused the U.S. of deliberately discouraging business dealings with the country, which the White House denies.

One example is the Boeing deal to sell Iran 80 passenger aircraft that is facing Congressional opposition.  Secretary of State John Kerry has said businesses should not use U.S. sanctions on Iran as an excuse for avoiding business with Tehran.

Most Iranians believe the hoped for economic benefits haven’t materialized, with three quarters surveyed in a recent poll conducted by IranPoll.com for the University of Maryland saying they had seen no improvement in the economy.

Bret Stephens / Wall Street Journal

“What diplomats call the Joint Comprehensive Plan of Action – known to the rest of us as the Disastrous Iran Deal – was agreed to in Vienna a year ago this week.  Now comes a status update, courtesy of our friends at the Bundesamt fur Vergassungsschutz, or BfV.

“In its fascinating 2015 annual report, published late last month, the German domestic intelligence service reports a ‘particularly strong increase’ in the number of Salafists, describes the reach of Russian and Chinese espionage efforts in Germany, and notes a growing number of right-wing extremists.

“Then there’s this:

“ ‘The illegal proliferation-sensitive procurement activities [by Iran] in Germany registered by the Federal Office for the Protection of the Constitution persisted in 2015 at what is, even by international standards, a quantitatively high level.  This holds true in particular with regard to items which can be used in the field of nuclear technology.’

“The report also notes ‘a further increase in the already considerable procurement efforts in connection with Iran’s ambitious missile technology program which could among other things potentially serve to deliver nuclear weapons.  Against this backdrop it is safe to expect that Iran will continue its intensive procurement activities in Germany using clandestine methods to achieve its objectives.’....

“All this was enough to prompt Angela Merkel to warn the Bundestag last week that Iran ‘continued to develop its rocket program in conflict with relevant provisions of the U.N. Security Council.’  Don’t expect German sanctions, but at least the chancellor is living in the reality zone.

“As for the Obama administration, not so much.  For the past year it has developed a narrative – spoon-fed to the reporters and editorial writers Ben Rhodes publicly mocks as dopes and dupes – that Iran has met all its obligations under the deal, and now deserves extra cookies in the form of access to U.S. dollars, Boeing jets, U.S. purchases of Iranian heavy water (thereby subsidizing its nuclear program), and other concessions the administration last year promised Congress it would never grant.

“ ‘We still have sanctions on Iran for its violations of human rights, for its support for terrorism, and for its ballistic-missile program, and we will continue to enforce those sanctions vigorously,’ Mr. Obama said in January. Whatever....

“So let’s recap. Mr. Obama says Iran is honoring the nuclear deal, but German intelligence tells us Tehran is violating it more aggressively than ever.  He promised ‘snapback’ sanctions in the event of such violations, but the U.S. is operating as Iran’s trade-promotion agent. He promised ‘unprecedented’ inspections, but we’re not permitted to inspect sites where uranium was found. He promised an eight-year ban on Iran’s testing of ballistic missiles, but Tehran violated that ban immediately and repeatedly with only mild pushback from the West.  He promised that the nuclear deal was not about ‘normalizing’ relations with a rogue regime.  But he wants it in the WTO.

“Is Mr. Obama rationalizing a failed agreement or did he mean to mislead the American public?  Either way, truth is catching up with the Iran deal.”

Speaking of Iran’s ballistic missile program, last Saturday, a foreign ministry spokesman Bahram Ghasemi said in comments published on the ministry’s website:

“Iran will strongly continue its missile program based on its own defense and national security calculations.”

Iran’s missile program is not linked to the nuclear deal and does not conflict with the U.N. Security Council resolution endorsing the agreement, he said.  “Iran’s missile program has aimed at defense and it is not designed to carry a nuclear warhead.”  [New York Times]

China: As expected, an international tribunal in The Hague has ruled that China does not have historic rights to justify its expansive claims to the South China Sea, ruling in favor of the Philippines which had brought a case.

Beijing has repeatedly said it would not recognize nor implement the ruling.  China’s official Xinhua News Agency said Western countries were bent on containing its rise.  “This is a bundle of fairy rope the West has tossed out at a strategic moment in a vain attempt to terminate China’s development,” repeating President Xi Jinping’s earlier assertion that China “doesn’t cause trouble, but it also doesn’t fear trouble.”

The tribunal said “there was no legal basis for China to claim historic rights to resources...within the sea areas falling within the ‘nine-dash line’” which China draws around most of the South China Sea.

Five governments have claims that overlap with Beijing’s in the resource-rich South China Sea, one of the world’s busiest trade routes.

China’s foreign ministry called the ruling a “farce” and said Beijing reserves the right to declare an air defense identification zone over the area.

Beijing could also show its defiance by increasing its program of reclamation work expanding reefs and small islands in areas it claims.

“It will have a significant long-term impact on U.S.-China relations.  Mutual distrust and suspicion will deepen and continue to grow,” said Zhu Zhiqun, the director of the China Institute at Bucknell University.

Zhu noted that the U.S. decision just days earlier to deploy a missile defense shield in South Korea, a move Beijing strongly objected to, adds to the tensions between Washington and Beijing.

Miles Yu, a professor of East Asian military and naval history at the United States Naval Academy, said both nations would increase their military presence in the region as evidenced ‘by the huff and puff of the military bravado’ displayed by the People’s Liberation Army in the South China Sea.

“However, it is unlikely that the U.S. and China will go into a general war, which China knows it cannot win,” Yu said.  [South China Morning Post]

“If China declares an air defense identification zone in the South China Sea, the U.S. is likely to challenge it with military fly-bys,” Yanmie Xie and Tom Johnston of the International Crisis Group wrote before the decision was announced.  “If the U.S. conducts more frequent and higher profile freedom of navigation patrols near Chinese-held reefs, Beijing may feel compelled to intercept or even evict U.S. vessels. The risk of military clashes is small but cannot be ruled out.”  [Washington Post]

Friday, in Manila’s strongest comment yet on its sweeping win, the nation’s top lawyer (Solicitor General Jose Calida) called the decision invalidating China’s vast claims a “crowning glory” that renews faith in international law.

Manila hasn’t been looking to rock the boat, preferring to start a dialogue with Beijing.

(The ruling) confirms that no one state can claim virtually an entire sea.  The award is a historic win not only for the Philippines...it renews humanity’s faith in a rules based global order,” Calida told a forum on the South China Sea.

Immediately after the ruling, Philippines’ President Rodrigo Duterte, normally a bombastic type, said he wanted dialogue with China, as he has warned his ministers not to pique Beijing.

China’s Foreign Ministry said on Friday that Beijing’s position had the support of Laos, current chair of the Association of the South East Asian Nations (ASEAN).

Chinese state media on Friday reported again that China aims to launch a series of offshore nuclear power platforms to promote development in the South China Sea.

Editorial / Washington Post

“China’s Communist regime is reacting with rhetorical frenzy to a ruling by an international tribunal rejecting its expansive territorial claims in the South China Sea.  President Xi Jinging, who has aggressively pushed what has now been formally deemed as illegal construction of bases on contested islets, issued a statement saying that China ‘will never accept any claim or action based on these awards.’  He’s right that the judgment, in a case filed by the Philippines, is unenforceable.  But it is a major blow to Mr. Xi’s attempt to establish Chinese hegemony in the region and presents him with a fateful choice: embark on a dangerous escalation, or slowly and quietly back down.

“Beijing’s insistence that the court decision is ‘invalid and has no binding force’ only goes so far.  The Philippines sued under the Law of the Sea treaty, which China has ratified.  That means the decision is legally binding whether Mr. Xi recognizes it or not.  Nations far beyond Asia will watch to see if the rising superpower violates a treaty it agreed to be bound by.  If it does, the damage to China’s international standing and influence could prove considerably greater than whatever it might gain from fortifying a few coral reefs....

“The United States nevertheless must be prepared for the possibility that Mr. Xi will double down on his adventurism, perhaps hoping to take advantage of a president in his last months of office who has responded weakly to red-line crossings in other parts of the world.  For some time experts have been concerned China would attempt to militarize Scarborough Shoal, placing planes or missiles 150 miles from Subic Bay in the Philippines; it has also threatened to declare an air defense zone over the South China Sea.  Any such action must be contested by the United States. The alternative would be to sanction Mr. Xi’s use of raw power to advance his nationalist aims – and open the way to serious conflict in East Asia.”

Editorial / Wall Street Journal

“A United Nations tribunal ruled Tuesday that China’s sovereignty claims over the South China Sea, and its aggressive attempts to enforce them, violate international law. This is a necessary rebuke to Beijing, but it comes with no enforcement measures and Chinese leaders have rejected it.  So its effect will depend on how China’s neighbors and the United States respond.  International norms can’t survive without democracies willing to defend them....

“The Obama Administration has made some helpful military moves, flying A-10 attack planes from a Philippine base near Scarborough and operating two carrier battle groups in the Western Pacific. But its much-touted freedom-of-navigation operations have been spare and timid.

“With the Hague verdict, these operations should increase in frequency and scope.  Patrols from Australia and others would help too.  Mr. Le Drian, the French defense minister, has suggested European patrols.

“Most important is to reverse military cuts, protectionism and other self-defeating policies. Curbing Chinese aggression will be a years-long effort.  No U.N. tribunal decision can be a victory for the rules-based liberal order if liberal states won’t defend that order.  That requires more free trade, bigger navies, and a renewed commitment from Washington to protect its friends, interests and principles around the world.”

[Taiwan also lost in the tribunal’s ruling, as it declared a piece of land Taiwan considers an “island” (which Taiwan calls “Taiping”) a “rock,” thus Taiwan has no control over it.  So Taipei has rejected the ruling, a la Beijing.]

Russia: President Vladimir Putin held phone talks with German Chancellor Angela Merkel and French President Francois Hollande to discuss increasing violations of the ceasefire agreement in southeast Ukraine, the Kremlin announced.

Putin stressed the “provocative nature” of Ukraine’s military operations in the Donbass region, and called on Merkel and Hollande to pressure Ukrainian president Petro Poroshenko into complying with the Minsk accords.

You can stop laughing.

Andrey Parubiy, the speaker of Ukraine’s parliament, warned earlier this week that military activity could soon flare up in the Donbass.

“There is a risk that our enemy could strengthen on two fronts.  There is an election campaign in the U.S. and Europe is going through a moment of crisis. The Kremlin is also planning to intensify the conflict in this period,” Parubiy said.  “On one front we face military attacks and attempts to destabilize the country on the other.”  [Moscow Times]

The conflict that began in April 2014 has claimed more than 9,000 civilians and combatants.

Separately, NATO General Secretary Jens Stoltenberg said the organization is committed to maintaining political dialogue with Russia, with NATO reaching agreement at last weekend’s summit to commit 4,000 troops to Poland and the Baltic states.

Charles Krauthammer / Washington Post

“ ‘The most significant reinforcement of our collective defense any time since the Cold War,’ President Obama called it. A bit of an exaggeration, perhaps, but it was still an achievement: Last week’s NATO summit in Warsaw ordered the deployment of troops to Eastern Europe, the alliance’s most serious response yet to Russia’s aggression and provocations on its western frontier.

“The post-Ukraine economic sanctions have been weak; the declamatory denunciations, a mere embarrassment.  They’ve only encouraged further reckless Russian behavior – the buzzing of U.S. ships, intrusions into European waters, threats to the Baltic States.

“NATO will now deploy four battalions to front-line states.  In Estonia, they will be led by Britain; in Lithuania, by Germany; in Latvia, by Canada; in Poland, by the United States.  Not nearly enough, and not permanently based, but nonetheless significant.

“In the unlikely event of a Russian invasion of any of those territories, these troops are to act as a tripwire, triggering a full-scale war with NATO. It’s the kind of coldblooded deterrent that kept the peace in Europe during the Cold War and keeps it now along the DMZ in Korea....

“After the humiliating collapse of Obama’s cherished Russian ‘reset,’ instilling backbone in NATO and resisting Putin are significant strategic achievements....

“However, the Western order remains challenged by the other two members of the troika of authoritarian expansionists: China and Iran.

“Their provocations proceed unabated.  Indeed, the next test for the United States is China’s furious denunciation of the decision handed down Tuesday by the Permanent Court of Arbitration in The Hague – a blistering, sweeping and unanimous rejection of China’s territorial claims and military buildup in the South China Sea.

“Without American action, however, The Hague’s verdict is a dead letter.  Lecturing other great powers about adherence to ‘international norms’ is fine.  But the Pacific Rim nations are anxious to see whether we will actually do something.

“Regarding Iran, we certainly won’t.  Our abject appeasement continues, from ignoring Tehran’s serial violations of the nuclear agreement (the latest: intensified efforts to obtain illegal nuclear technology in Germany) to the administration acting as a kind of Chamber of Commerce to facilitate the sale of about 100 Boeing jetliners to a regime that routinely uses civilian aircraft for military transport (particularly in Syria).

“The troop deployments to Eastern Europe are a good first step in pushing back against the rising revisionist powers.  But a first step, however welcome, 7 ½ years into a presidency, is a melancholy reminder of what might have been.”

In a new survey of Russians by the independent Levada Center revealed Wednesday, 73 percent feel they have no influence over what happens in their country, up from 59 percent in November.  Only 17 percent believe they could slightly influence the country.

64 percent said that they felt absolutely no responsibility for what happens in Russia.  In a separate recent survey from Levada, a third of Russians expect the upcoming State Duma elections to be rigged.  [Moscow Times]

Australia: Prime Minister Malcolm Turnbull declared victory for his conservative coalition in the closely fought general election, after opposition Labor leader Bill Shorten conceded defeat.

Turnbull’s Liberal-National coalition is expected to win enough seats to govern, including the support of three independents.

Random Musings

--This is the Republicans’ week in the spotlight in Cleveland.  Boy, I’m worried how this will all go down in terms of violence considering all the protests on tap.  I sure as heck wouldn’t want to be there.

From a purely political standpoint, I do have to say the selection of Indiana Gov. Mike Pence to be Donald Trump’s running mate was a smart pick.  I always liked Pence and anyone favored by House Speaker Paul Ryan is good enough for me.  [That said I’m still voting third party at this point.]

But the stories are rolling in on what a mess of it all Trump made Thursday, jerking everyone around as he waffled on his decision at the last minute.

Also, for the record, I do have to note that the Republican Rules Committee rejected a proposal that would have allowed delegates to back the candidate of their choice, 87-12.  Delegates thus remain “bound” to candidates decided by state primaries and caucuses.

--Polls....

While at this point one should really wait until both conventions play out over the next two weeks before looking at any new surveys, the latest from Quinnipiac University on some key swing states is more than a bit interesting.

Donald Trump leads Hillary Clinton 42-39 in Florida.  Just last month, Clinton led 47-39.

Trump has also retaken the lead from Clinton in Pennsylvania, now up 43-41, when last month, Clinton led 42-41.

In Ohio, the two remain tied at 41 apiece, a tick up from 40 the prior month.

Obviously, the beating Clinton took from FBI Director James Comey on her use of a private email server as secretary of state, even if she wasn’t indicted, has cost her in some precincts.

If you add in Libertarian candidate Gary Johnson and Green Party candidate Jill Stein, Trump does even better in each of the states, according to Quinnipiac.

In Florida, he leads 41-36, 7 percent Johnson, 4 percent Stein.

In Ohio, Trump leads 37-36, Johnson 7, Stein 6.

In Pennsylvania, Trump increases his lead to 40-34, with Johnson at 9 percent, Stein at 3.

However, a Wall Street Journal/NBC News survey of battleground states has Clinton leading in all four that were polled.

Florida: Clinton 44 Trump 37 [41-36, if Gary Johnson (7) and Jill Stein (4) are added]

Colorado: Clinton 44-35 [39-33, Johnson 13, Stein 4]

North Carolina: Clinton 44-38 [42-36, Johnson 7, Stein 2]

Virginia: Clinton 44-35 [41-34, Johnson 10, Stein 2]

The Journal notes these four states are among the most racially diverse presidential battlegrounds.  Support for Trump among African-Americans is 5% in Florida, 4% in North Carolina and 3% in Virginia, all below the 7% support that 2012 GOP nominee Mitt Romney received nationally.

At least 58% of voters in all four states view Clinton unfavorably, and at least 61% view Trump unfavorably (68% in Colorado).

A separate NBC News/Marist College survey of Pennsylvania also has Clinton leading Trump among registered voters, 45% to 36%, so a big difference from Quinnipiac.

The NBC/Marist poll also had Clinton ahead in Iowa, 42-39, and tied in Ohio at 39% apiece (Quinnipiac had a tie here too).  Reminder, no Republican has ever been elected president without carrying this state.

Nationally, a new CBS News/New York Times poll shows Clinton and Trump are tied at 40% each, Clinton’s six-point lead from last month evaporating.

But a Reuters/Ipsos poll released late Friday has Clinton with a 12-point lead over Trump; 45-33 among likely voters.  Actually, Clinton has had this kind of lead in this one since January. 

And one more tidbit, from Bloomberg Politics.  Clinton is crushing Trump among college-educated white voters, a group Mitt Romney easily won in 2012, with 48% backing Clinton to 37% for Trump.  Romney won the group by 14 points.

--Back to the Hillary Clinton e-mail fallout, according to a new Washington Post/ABC News poll, a majority of Americans (56% to 35%) reject the FBI’s recommendation against charging Clinton with a crime for her State Department e-mail practices and say the issue raises concerns about how she might perform her presidential duties, while six in 10 voters say the outcome will have no impact on their vote this November, even as those who do largely say it discourages them from backing the presumptive Democratic nominee.

A new CBS News/New York Times poll showed 67% of voters say Clinton is not honest and trustworthy, up five percentage points from a CBS News poll conducted last month.

--Maureen Dowd / New York Times

“(What) should disturb Obama, who bypassed his own vice president to lay out the red carpet for Hillary, is that the email transgression is not a one off. It’s part of a long pattern of ethnical slipping and sliding, obsessive secrecy and paranoia, and collateral damage.

“Comey’s verdict that Hillary was ‘negligent’ was met with sighs rather than shock. We know who Hillary and Bill are now. We’ve been held hostage to their predilections and braided intrigues for a long time.  (On the Hill, Comey refused to confirm or deny that he’s investigating the Clinton Foundation, with its unseemly tangle of donors and people doing business with State.)

We’re resigned to the Clintons focusing on their viability and disregarding the consequences of their heedless actions on others.  They’re always offering a Faustian deal. This year’s election bargain: Put up with our iniquities or get Trump’s short fingers on the nuclear button.

“The Clintons work hard but don’t play by the rules.  Imagine them in the White House with the benefit of low expectations.”

Meanwhile, I liked this bit from the Washington Post’s Chris Cillizza last weekend on the presumptive Republican nominee.

“You can love Donald Trump. You can hate him. But what you cannot dispute is that the way he has run his campaign since sealing the Republican nomination two months ago has been absolutely disastrous.

“Campaigns are complicated things.  No one gets every piece of them right.  Some candidates are great at big rallies.  Some are good only at small events. Some are terrific communicators but bad on the stump. Some delegate well, and others don’t.  Some never waver from a message, while others can’t seem to find one with a 10-foot pole.  It’s a high-wire balancing act every day with tens of millions of people watching.

“But there are basic blocking and tackling elements of any campaign that are less complex – and absolutely necessary to do if you want to win. The most basic of all? If your opponent is having a bad day or a bad week, let them have it.  Just get out of the way.”

Trump has a hard time doing that, like at his rally in Cincinnati about ten days ago when he spent the first 20 minutes slamming Hillary on her email practices, honesty and trustworthiness, and then threw away the notes and brought up the issue of Saddam anew and how the media has misconstrued his comments and it was a disastrous performance.  Embarrassing.  And then he went back to the six-sided star on Twitter.

Back to Hillary, Bernie Sanders finally endorsed her, but he was a jerk about it.  He did at least get the Democratic Party platform to move further left.

What seems clear to many, though, is that after Cleveland, Bernie will go back to being irrelevant.

--Race Relations....

A New York Times/CBS poll released this week, post- Baton Rouge, St. Paul and Dallas, showed 69% said race relations are generally bad in America, with six in 10 saying they are growing worse, up from 38% a year ago, the worst such figures since the 1992 riots in Los Angeles during the Rodney King case.

Rich Lowry / New York Post

“ ‘African-Americans,’ (President) Obama said in Warsaw, ‘are arrested at twice the rate of whites.’ But African-Americans commit about 24 percent of violent crimes, even though they’re 13 percent of the population.  Of course they’re going to be arrested at disproportionate rates. About half of murderers are black and over 40 percent of cop-killers are black.

“This doesn’t mean that there aren’t bad cops or that there isn’t bias in policing, but the picture painted by Black Lives Matter of pervasive police predation, and an open season on blacks, is a politicized lie.

“A new study published in the National Bureau of Economic Research found racial disparities in lower-level use of police force – e.g., police placing hands on civilians or pushing them into walls.  But it concluded that ‘on the most extreme use of force – officer-involved shootings – we are unable to detect any racial differences in either the raw data or accounting for controls.’

“How is that possible, given the outsize role of allegedly racist police shootings in our politics?  It just might be that Black Lives Mater and the media take a few instances of police-involved shooting and dramatize and obsess over them to create a sense that cops are itching to shoot black people

“Some of these cases involve genuine crimes by the police; others harrowingly mistaken judgments; and still others completely justifiable acts that are lied about by Black Lives Matter, most notably the shooting of Michael Brown in Ferguson, Mo.

“If President Obama really wanted to try to cool the passions on this issue, he would go even further in saying commonsensical things unwelcome to an inflamed left.

“He might routinely mention that the best way to try to avoid a confrontation with the police that might go tragically wrong is to comply with police orders, and pursue a complaint or lawsuit later, outside the heat of the moment.  He might note that, just because an incident looks bad on an initial video, it doesn’t mean the police did anything wrong and no one should assume as much.

“He might gently remind Black Lives Matter that its initial understanding of what happened in Ferguson was entirely erroneous and that the case should remain a cautionary tale about drawing large conclusions on the basis of fragmentary (or dishonest) evidence.

“He could do all of this and still speak to his belief, and that of so many other blacks, that they have been targeted and treated unfairly by police.

“That he won’t is an indictment of his political courage and intellectual honesty, on an issue where he should be uniquely suited to lead.”

David Brooks / New York Times

“Normally, nations pull together after tragedy, but a society plagued by dislocation and slipped off the rails of reality can go the other way. Rallies become griped by an exaltation of tribal fervor.  Before you know it, political life has spun out of control, dragging the country itself into a place both bizarre and unrecognizable.

“This happened in Europe in the 1930s.  We’re not close to that kind of descent in America today, but we’re closer than we’ve been.  Let’s be honest: The crack of some abyss opened up for a moment by the end of last week.

“Blood was in the streets last week – victims of police violence in two cities and slain cops in another. America’s leadership crisis looked dire. The FBI director’s statements reminded us that Hillary Clinton is willing to blatantly lie to preserve her career.  Donald Trump, of course, lies continually and without compunction. It’s very easy to see this country on a nightmare trajectory.

“How can America answer a set of generational challenges when the leadership class is dysfunctional, political conversation has entered a post-fact era and the political parties are divided on racial lines – set to blow at a moment’s notice?”

Jason L. Riley / Wall Street Journal

“Yes, Mr. Obama has denounced what happened in Dallas, but he has also been winking at a Black Lives Matter movement that has spent the past two years holding rallies that call for (and sometimes feature) violence against cops.  Like the president, these protesters maintain that the police are motivated by racial prejudice, not by the behavior of suspects.  They insist that a biased criminal-justice system explains the black crime rate, not antisocial behavior.  By indulging this narrative, Mr. Obama and his fans in the liberal media were playing with fire, and the Dallas carnage was the result.”

Mike Rawlings / Mayor of Dallas

“Yes, it’s that word race and we’ve got to attack it head on.  I will tell you, this is on my generation of leaders.  It is on our watch that we have allowed this to continue to fester, that we have led the next generation down a vicious path of rhetoric and action that pit one against the other.”

A June survey by the Pew Research Center found that only 46 percent of whites surveyed thought that race relations were generally good, a sharp drop from the 66 percent who held that opinion in June 2009, shortly after Mr. Obama took office.  For blacks, the corresponding decline – to 34 percent last month from 59 percent in 2009 – was even steeper.

Newt Gingrich, in a town hall forum, said that “if you are a normal, white American, the truth is you don’t understand being black in America and you instinctively underestimate the level of discrimination and the level of additional risk.”

Michael Eric Dyson / New York Times...addressing his piece to “White America,” while arguing most whites have been too slow to speak out when injustices occur and that, once they do, such expressions rarely equate to meaningful change.

“It makes the killings worse to know that your disapproval of them has spared your reputations and not our lives...

“You will never understand the helplessness we feel in watching these events unfold, violently, time and again, as shaky images tell a story more sobering than your eyes are willing to believe: that black life can mean so little...

“You do not know that after we get angry with you, we get even angrier with ourselves, because we don’t know how to make you stop, or how to make you care enough to stop those who pull the triggers.”

After Dallas, the number of policemen killed by firearms rose to 26 this year, compared with 18 at this point in time in 2015.  According to Nick Breul, director of research for the National Law Enforcement Officers Memorial Fund, there have been 11 ambushes.

Editorial / Wall Street Journal

“Barack Obama came into the American presidency as a self-declared unifier. As he departs eight years later, the country is polarized, politically and racially. This surely is not the legacy Mr. Obama intended.

“White cops versus black people is a narrative that has reached the end of whatever use it may have had. It offers no exit for anyone.  The moment has arrived for the country’s political leadership to say so clearly.  The U.S. has been here before.  It can get worse.”

Rudy Giuliani on CBS’ “Face the Nation”:

“When there are 60 shootings in Chicago over the Fourth of July and 14 murders, and Black Lives Matter is nonexistent, and then there’s one police murder of very questionable circumstances and we hear from Black Lives Matter, we wonder: Do black lives matter, or only the very few black lives that are killed by white policemen?”

John Lott / New York Post

“Hours before the murders of five police officers in Dallas, Texas, President Obama was again spouting false claims about racism by the police. He sees racism whenever there is any disparity in outcomes, no matter what the cause.

“Obama and others inflame passions, but take no responsibility, and instead use events to push for more gun control....

“Obama is also wrong, as he was on Thursday (7/7), to infer racism from higher arrest rates or prison-sentence lengths.  ‘African Americans are arrested at twice the rate of whites,’ he said. What he failed to note is that blacks commit murder at almost six times the rate whites do.

“ ‘The African-American and Hispanic population, who make up only 30 percent of the general population, make up more than half of the incarcerated population,’ he added.  But Obama ignores the facts put out by his own Department of Justice.  The FBI claims that gangs commit 80 percent of crimes in the U.S., and the National Gang Center estimates that 82 percent of gang members are black or Hispanic.”

As for President Obama’s memorial service speech in Dallas on Tuesday, he started off strong but then in the words of the New York Post’s John Podhoretz, “he blew it.”

“He blew it by going on for almost 25 more minutes, repeating himself endlessly, and broadening his specific focus to a more general preachment about how ‘we’ need to ‘open our hearts’ on the subject of race.

“As usual, Obama made strange use of the word ‘we,’ because when he says ‘we,’ he means ‘you,’ and when he means ‘you,’ he means people who aren’t as enlightened and thoughtful as he and his ideological compatriots are.

“Worse yet, the excessive length gave rise to a few extraordinarily ill-conceived flourishes that would have been discarded from a more contained and controlled final speech.

“By far the most jaw-dropping was his assertion that it’s easier for a poor kid in a struggling neighborhood to get a Glock than a book. That’s not presidential.  That’s Bill Maher, or Trevor Noah.”

Basketball Hall of Famer and TV analyst Charles Barkley:

“The cops have made some mistakes, but that doesn’t give us the right to riot and shoot cops.  We need the cops, especially in the black community.  We as black people, we’ve got to do better. We never get mad when black people kill each other, which that has always bothered me...I’ve always said if we as black people want more respect, we have to give each other respect.  You can’t demand respect from white people and the cops if you don’t respect each other. We’ve got to do better as black people.” [ESPN’s Dan Le Batard Show]

--In an Associated Press interview published Friday, Supreme Court Justice Ruth Bader Ginsburg, the 83-year-old known as RBG, said she presumes Hillary Clinton will be the next president, adding the thought of a Trump presidency is basically unthinkable.

“I don’t want to think about that possibility, but if it should be, then everything is up for grabs.”

To the New York Times, RBG said, “I can’t imagine what this place would be – I can’t imagine what the country would be – with Donald Trump as our president.  For the country, it could be four years.  For the court, it could be – I don’t even want to contemplate that.”

She recalled a joke her late husband used to make about unfortunate political outcomes.  “How it’s time for us to move to New Zealand.”

So immediately many wondered what impact such talk would have on Ginsburg’s decision to hear cases involving Trump?

But everyone was in agreement, Democrat and Republican, that Ginsburg had handed Trump an immense gift, reinforcing the importance of the election in terms of deciding the fate of the Supreme Court, currently 4-4 ideologically on most issues after the death of Justice Antonin Scalia.

“I find it baffling actually that she says these things,” said Arthur Hellman, a law professor at the University of Pittsburgh who studies the judiciary.  “She must know that she shouldn’t be.  However tempted she might be, she shouldn’t be doing it.”

Edward Whelan III, president of the Ethics and Public Policy Centre and a former Scalia clerk, has criticized Ginsburg before for her public comments. But he said this one is indefensible.

“I think this exceeds the others in terms of her indiscretions,” Whelan said.  “I am not aware of any justice ever expressing views on the merits or demerits of a presidential candidate in the midst of the campaign.  I am not a fan of Donald Trump’s at all. But the soundness or unsoundness of her concerns about Donald Trump has no bearing on whether it was proper for her to say what she said.”

Trump responded by calling Ginsburg a “disgrace,” questioning her “mental capacity” and calling on her to resign.

Editorial / Wall Street Journal

“Justice Ginsburg talks as if the Court is a purely political body and seems oblivious to the damage she is doing. All of this raises questions about her judgment, her temperament, and her continuing capacity to serve as a judge.  She should resign from the Court before she does the reputation of the judiciary more harm.”

The above was prior to a semi-apology on Thursday, with Justice Ginsburg saying:

“On reflection, my recent remarks in response to press inquiries were ill-advised and I regret making them,” she said in a statement.  “Judges should avoid commenting on a candidate for public office.  In the future I will be more circumspect.”

Editorial / New York Post

“Justice Ruth Bader Ginsburg issued a ‘never mind’ statement on Thursday – too late to reverse the damage she’s done to the Supreme Court, to Hillary Clinton and to herself.

“In not one but three interviews this week, Ginsburg trashed Donald Trump as well as the GOP leaders of the U.S. Senate (for refusing to act on President Obama’s nomination for the Scalia seat) and announced her eagerness to overturn recent high-court rulings once Clinton-appointed justices give liberals a clear majority.

“The Trump-bashing was way, way over the top, calling him a ‘faker’ and saying, ‘I can’t imagine what our country would be with Donald Trump as our president.’

“Plenty of Americans agree – but even most liberals understand that a Supreme Court justice isn’t supposed to say this stuff out loud.  Here’s another liberal justice, Stephen Breyer, when asked about Ginsburg’s comments: ‘If I had an opinion, I wouldn’t express it.’

“Because a member of the nation’s highest court is supposed to be beyond politics – or certainly to appear that way.  Otherwise, the rule of law becomes meaningless, and the Supreme Court a travesty.

“On top of that, Ginsburg gave even #NeverTrump Republicans good reason to vote for him anyway.  She all but promised wholesale left-wing revision of the nation’s basic laws should Clinton win....

“Bottom line: In spending days mouthing off to the media, and plainly enjoying it.  Ginsburg showed atrocious judgment.  Saying she regrets her ‘ill-advised’ remarks and promising to ‘be more circumspect’ doesn’t cut it.  She’s proven herself incompetent to serve.”

--Republicans suffered a potentially big blow when former Democratic Sen. Evan Bayh announced he was jumping into the Indiana Senate race, while the party’s Democratic nominee, former Rep. Baron Hill, said he would step aside. 

So the Democrats have responded to Marco Rubio’s decision to run for reelection, which made him the favorite in a seat Democrats were hoping to flip.

Remember, Republicans have a 54-46 margin currently, but Democrats are favored to win seats in Illinois and Wisconsin, while Republicans have a real battle on their hands in New Hampshire, Pennsylvania and Ohio.  Now Indiana is in play.

[I always viewed Bayh as a solid pragmatist.]

--New York Police Department Commissioner Bill Bratton is becoming more irascible by the day, calling the Black Lives Matter movement a “leaderless” crusade that could learn from the NAACP and the civil rights movement, weeks after calling rappers thugs.

Bratton told a radio host that Black Lives Matter protesters should stop “yelling and screaming” at cops about police brutality because it “accomplishes nothing.”

“Unlike the civil rights movement, which focused on the broad needs of desegregation and a segregated country, the needs of jobs, the needs of voting rights, the needs of education, the Black Lives Matter movement has focused entirely on police, and is not engaging in dialogue, instead engaging in protests where there’s a lot of yelling and screaming...

“(Getting) into the face of police officers manning those lines, trying to protect those demonstrators, trying to protect the lives of people, trying to protect their rights to demonstrate, and standing there yelling and screaming at them, that accomplishes nothing.  Nothing.”

Bratton then praised the actions of the NAACP.

“(They have) been sponsoring meetings at schools and other locations where people in fact can engage in dialogue.

“They’re encouraging their members to attend police precinct community councils, where they can express their concerns and do it in a way in which their voices can be heard, do it in a way in which they can be seen, and also would allow the police and other criminal justice officials, district attorneys, etc., to also be seen and be heard.

“And until we do that, we can then just stand on these picket lines at these marches and demonstrations and scream and holler and accomplish nothing. It makes for good TV, but it doesn’t make for good consensus building or good resolution of the issues of the day.”

--Back to the pathetic John Kerry.

Editorial / New York Post

“Secretary of State John Kerry didn’t skip out early on last weekend’s NATO summit just to catch Lin-Manuel Miranda’s final performance in ‘Hamilton,’ the State Department now insists.

“The excuse is that Kerry actually left what President Obama called a ‘pivotal’ gathering to attend a wedding.

“Then somehow the most sought-after tickets in Broadway history just fell into his lap, so he presumably ditched the wedding festivities to see the show.

“Right.

“We don’t fault Kerry for wanting to see the musical, but sorry: Catching Miranda’s last performance is strictly a bragging-rights thing.

“Back at the summit, meanwhile, Obama was noting, ‘In nearly 70 years of NATO, we have perhaps never faced such a range of challenges all at once – security, humanitarian, political.’

“You know, the sort of challenges America’s top diplomat should drop everything to confront.”

--From Mary Hui / Washington Post

“When an Italian baby was taken to a hospital in Milan earlier this month by his grandparents, doctors there were shocked by the baby’s condition.  At 14 months old, he weighed only slightly more than a 3-month-old, according to the Local Italy.

“Upon further examination, a more harrowing picture began  to take shape.  The baby, whose parents allegedly kept him on a vegan diet without providing dietary supplements, was found to be severely malnourished, suffering from dangerously low calcium levels.  Complicating matters, the baby had to undergo an emergency operation because of a congenital heart condition, which was aggravated by his low calcium levels.”

The baby’s parents lost their custodial rights to their child.

Paid for by the International Beef and Dairy Cartel (IBDC).

--Finally, as a Wake Forest alum, I can’t help but note the retirement of fellow Demon Deacon Tim Duncan, who walks away after a spectacular 19-season NBA career, all with the San Antonio Spurs, that included five championships. From the first day he stepped foot on the Wake campus to today, Duncan has been all class and a tremendous role model.  So as a fan, I just want to say, thank you, Timmy D.!

---

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

God bless America.

---

Gold $1337
Oil $45.95

Returns for the week 7/11-7/15

Dow Jones  +2.0%  [18516...new all-time high]
S&P 500  +1.5%  [2161...new all-time high set this week, 2163]
S&P MidCap  +1.5%
Russell 2000  +2.4%
Nasdaq  +1.5%  [5029...all-time closing high is 5218, 7/20/15]

Returns for the period 1/1/16-7/15/16

Dow Jones  +6.3%
S&P 500  +5.8%
S&P MidCap  +10.4%
Russell 2000  +6.1%
Nasdaq  +0.4%

Bulls 52.5...getting a tad frothy...
Bears 24.7 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



AddThis Feed Button

-07/16/2016-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Week in Review

07/16/2016

For the week 7/11-7/15

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs.  Your support is greatly appreciated.  Click on the gofundme link above or send a check to PO Box 990, New Providence, NJ 07974.

Edition 901

Our World

Last week I started out by reiterating my ’24-hour rule,’ in that case because at the time we didn’t have all the facts in the police shootings in Baton Rouge and St. Paul, and especially in the case of the latter we still don’t.  I’ve just learned it’s always reckless to react without the facts, which would make me a poor Black Lives Matter movement member, he typed mischievously.

So tonight as I go to post I invoke the 24-hour rule once again as it pertains to the attempted coup in Turkey.  As I read the wires, I see two explosions at the parliament building in Ankara, two explosions in or near Taksim Square in Istanbul, where President Erdogan has returned from his vacation on the Aegean.

I know Turkey pretty well.  I’m a student of Ataturk and the only kid on my block who has made a pilgrimage to Ataturk’s tomb in Ankara, and I guarantee the only kid on the block who has been to Turkey’s national military museum in Istanbul twice (one of the great museums in the world).

I’m a closet fan of Turkey’s military and I’m well aware of the serious issues President Erdogan has with it as he has tried to boot the secular generals and senior officers, replacing them with Islamists, to generalize.

I have to smile, because once again it goes back to August 2012, and President Obama’s decision not to work with Erdogan on a no-fly zone in Syria.  I’ve only told you a zillion times since that this single decision changed everything.  Changed history.  We ‘lost’ Erdogan, for one, who has drifted further and further to the Islamist side ever since.

As for this coup attempt, it is a symptom of far more serious problems as Turkey slides into what Erdogan would like to see, an Islamist theocracy, a dictatorship.  We’ve been seeing Turks’ freedoms consistently taken away the past few years and if the coup is crushed, it will only get worse.  I do not see him reforming.

Meanwhile, I cover the Nice Attack down below and, once again, it’s no mystery these days why the financial markets don’t react much anymore to such heinous stuff, because as frequent as the attacks have been coming, we still haven’t had two big ones back-to-back, like on consecutive days in major Western European cities, more than of the lone wolf variety...the kind that would totally crush confidence and sentiment.

As for the big rally in stocks of the past three weeks, four in London, it’s really about the central banks and low interest rates seemingly lasting forever, with stocks being an attractive alternative.  OK, I’m not going to argue that for now.

But where I will argue is with the insane belief that the worst of Brexit is over!  Are you freakin’ nuts?!  It hasn’t even started.

Britain deserves credit for a seamless transition at 10 Downing Street, but the long process of negotiations with the European Union hasn’t begun, and if Britain’s new leadership has its way, the clock won’t start for months to come.  Just understand there could be good moments with the negotiations, but there are likely to be bad ones and Europe, not just the UK, is a political tinderbox...and a volatile political situation is not conducive to a good economy.  Period.

Brexit is also largely responsible for the latest move down in interest rates and while the stock markets love this, assuming earnings eventually rationalize the increasingly extended valuations, you know by now that these never before seen low yields are killing pension funds and insurance companies – inflating funding gaps, which means large companies have to fund them, which means less for capital expenditure and R&D.  That’s not good.

But another reason given for this week’s rally was Japan’s election, which I cover below, and while Prime Minister Abe got his supermajority in parliament, that doesn’t mean he’s going to suddenly make the right economic decisions and get them through the legislature.  I see zero reason to be optimistic on Japan.  [Longer-term, I really see zero cause for optimism given their frightful demographics.]

So those are some random musings as I head to post time, with President Erdogan still at Ataturk International Airport, the situation in Istanbul and Ankara still fluid.

And next week we have Cleveland.  Oh joy.

Lastly, never take your eye off the South China Sea, or let me worry about that one for you.  Call it another free feature of StocksandNews.

Brexit and Europe

Well that was quick.  At first, immediately following the Brexit vote, then-British Prime Minister David Cameron said he would hang on until October while a new party leader, and thus prime minister, was selected.  Then it was September.  Then the Conservative Party (Tory) leadership race was quickly narrowed down to Home Secretary Theresa May and Energy Minister Andrea Leadsom.  Then Ms. Leadsom, in an interview with the London Times last weekend, said that as a mother of three, having children meant she had “a very real stake” in Britain’s future, implying that Mrs. May, who has no children, wasn’t as good a choice.

Leadsom’s exact words, in response to the question, “Do you feel like a mum in politics?”

Leadsom: “Yes.  So...

Rachel Sylvester/The Times: “Why and how?”

AL: “So really carefully because I am sure, I don’t really know Theresa very well but I am sure she will be really really sad she doesn’t have children so I don’t want this to be ‘Andrea has children, Theresa hasn’t’ because I think that would be really horrible.

“But genuinely I feel being a mum means you have a very real stake in the future of our country, a tangible stake.”

“She possibly has nieces, nephews, lots of people, but I have children, who are going to have children, who will directly be a part of what happens.”

And with that, Andrea Leadsom, who many thought was nowhere near being qualified in the first place, stepped down from the leadership race, David Cameron stepped forward to say there would be a new prime minister, Mrs. May, and in less than 48 hours, Theresa May moved into No. 10.

In her first remarks, May said: “Under my leadership, the Conservative Party will put itself completely, absolutely, unequivocally, at the service of ordinary working people.  We will make Britain a country that works for everyone.”

So then May went to work on her cabinet, first selecting foreign secretary Philip Hammond to become  Chancellor of the Exchequer (Treasury secretary), with leading Brexit campaigner Boris Johnson taking over Hammond’s position in a shocking move.  Amber Rudd is home secretary, and Eurosceptic David Davis will be in charge of Britain’s exit from the EU, i.e., Brexit secretary (chief negotiator).  Michael Fallon was retained as defense secretary, with Mrs. May seemingly trying to balance out those who supported Leave vs. Remain.

Asked about his priorities as chancellor, Hammond said there would be “no emergency Budget” and that he would work closely with the Bank of England, which later opted not to lower interest rates as expected.  Hammond did indicate he would pull back on some of the austerity measures enacted by his predecessor, George Osborne.

There is no doubt Britain’s economic confidence has been shaken to the core, with business sentiment readings cratering.  Two-thirds of respondents in a Credit Suisse survey suggested they will postpone or reduce spending in the UK in the next six months.  Hiring plans fell particularly sharply, with nearly half the respondents saying they would postpone decisions in the UK and almost a quarter saying they will reduce employment.  For his part, Hammond said the government needed to “send signals of reassurance about the future as quickly and as powerful as we can.”

Prime Minister May met with Scotland’s First Minister Nicola Sturgeon in Edinburgh on Friday, with May stressing she won’t trigger the Article 50 “divorce clause” until she is sure of a “UK wide approach” to negotiations with the EU.

May has a real problem with Sturgeon and Scotland, which is seeking to maintain economic ties with Europe, including the possibility of holding a second referendum on independence. On June 23, Scotland voted 62-38 to remain in Europe.  May’s new chancellor, Philip Hammond, has said he does not envisage a situation where Scotland would be offered a different deal with the EU than the rest of Britain.

Back to Boris Johnson becoming foreign secretary, the choice is being ridiculed throughout Europe.  He’s not likely to get along well with Turkish President Erdogan (assuming he is still in power), who just two months ago, Johnson penned a poem about wherein Erdogan was having sex with a goat.

There was a young fellow from Ankara, Who was a terrific wankerer, Till he sowed his wild oats, With the help of a goat, But he didn’t even stop to thankera.”  [Turkey’s foreign ministry was in a forgiving mood upon Johnson’s appointment, saying “British-Turkish relations are more important (than Johnson’s past words) and can’t be hostage to these statements.”]

Johnson has also praised Syrian President Assad for battling ISIS, no matter Assad’s parallel campaign that has killed tens of thousands of civilians (not counting tens of thousands who have simply disappeared...taken by his secret police).  Johnson also once suggested Africa would be better off still administered by the former colonial powers.

French Foreign Minister Jean-Marc Ayrault said of Johnson that he was a liar.  “I am not at all worried about Boris Johnson, but...during the (Brexit) campaign he lied a lot to the British people and now it is he who has his back to the wall,” Ayrault said.

Meanwhile, regarding the crisis with Italy’s banks, it eased somewhat (kind of, sort of).  With an estimated $400bn in non-performing loans, Jeroen Dijsselbloem, the president of the Euro area finance ministers, said that problems in Italy’s financial sector do not amount to an “acute crisis” and would have to be dealt with “gradually.”  But any plan to help the banks would have to respect “strict” new EU rules requiring banks’ creditors to take losses before they can be helped with public money.

The EU rules are “very clear” on when creditors should face compulsory losses, known as bail-ins, Mr. Dijsselbloem said.

Dijsselbloem also warned Europe’s banks in general, saying it was unreasonable for them to keep asking for public support to solve their problems.

“There have always been, and will always be, bankers who say we need more public money to recapitalize our banks, and I will resist that very strongly, because again and again it’s hitting on the taxpayer, again and again increasing sovereign debt in countries that are heavily indebted....

“We need leaders in the banks that address the problems themselves instead of saying, ‘Ah, well, here politicians, have our problems.’ There has to come an end to this.” [Financial Times]

German Chancellor Angela Merkel said “intensive talks” are under way between Italian Prime Minister Matteo Renzi’s government and the European Commission.

“I am very convinced that the questions that need to be decided there will be resolved in a good way.” [Bloomberg]

For his part, Renzi is seeking to ease the hit private creditors would take if the lenders are recapitalized without violating EU rules.

As to the interest rate environment in euroland, Germany sold 10-year debt at a negative yield on Wednesday, -0.09%, becoming the first eurozone nation to do so.  But by week’s end, the Bund had closed with a yield of 0.007%...positive!  Get out your ‘Rule of 72’ decoder ring, boys and girls.

Philip Stevens / Financial Times

“One by one, the rivals to replace David Cameron were found out.  Boris Johnson, a chancer who thinks a smattering of schoolboy Latin fair substitute for strategy or principle.  Michael Gove, a political sociopath with a manifesto that read like an undergraduate essay. Andrea Leadsom, the hard-right’s unelectable answer to Labour’s far-left, and unelectable, Jeremy Corbyn.  After winning the war, the leading Brexiters lost the peace.  Theresa May’s stroll into Downing Street offered some hope that Britain has not gone completely mad.

“The adage has it that politics always ends in failure.  In Mr. Cameron’s case it was self-inflicted. He always preferred tactics to strategy.  Add an inflated sense of his ability to get out of tight spots and an unhappy ending was inevitable. The big tactical swerve – the promise of a referendum on Europe in a vain attempt to appease Tory Europhobes – steered him, and the nation, into a brick wall....

“ ‘Brexit means Brexit’ is Mrs. May’s favorite phrase.  It is calculated to offer assurance to Tory Outers who worry about her commitment to withdrawal. It says nothing, though, about the shape of post-Brexit relations.  The new prime minister has avoided showing her hand on where she wants to draw the balance between access to the single market and national control of immigration policy. This will be the subject of two sets of negotiations – the first with her own party, where the interests of business will collide with the ideology of Little Englanders, and then with the other 27 EU states.  The former may be harder than the latter.

“Mrs. May will be told by the Brexiters to get on with it: set out your position clearly, trigger Article 50 and wrap up a deal as quickly as possible to put an end to uncertainty.  The prime minister should ignore the pleas. The only hope she has of squaring half-a-dozen circles will be to play the negotiations long.

“We are living through a period of political and economic upheaval – in Britain and in the rest of the continent. What Mrs. May must hope is that over time the politically impossible becomes the possible; that compromises unacceptable today are seen as common sense a year or two hence.”

Eurobits....

--The IMF reduced its growth forecast for the eurozone to 1.6% in 2016 and 1.4% in 2017 (from 1.7% both years).

The IMF’s estimates are based on the UK and the EU reaching a favorable deal on Brexit close to the so-called Norway model, in which Britain continues to have access to the EU single market.  But while this would limit the damage, the only way such a deal is probably possible is if the UK was unable to impose limits on immigration from within the EU and no way that is going to be acceptable to the Brits.

The IMF also said that if the damage from Brexit turns out to be worse than expected, the European Central Bank should unveil more stimulus, preferably by adding to its quantitative easing program instead of cutting interest rates further into negative territory.

But some national central banks would then run out of assets to buy, or be forced to buy piles of crapola.

--The June inflation rate for the eurozone was 0.1% annualized vs. -0.1% in May.  Germany was 0.2% (ann.), France 0.3%, Italy -0.2%, and Spain -0.9%.

--Industrial production in the euro area was down 1.2% May over April, up 0.5% year-over-year.

--European equity funds suffered their largest withdrawals on record in the past week as the Italian bank crisis drove investors to the safety of the U.S.   European stock funds saw $5.8bn of outflows in the week to July 13, eclipsing a weekly record set in October 2014.  The unease is also heightened by European financial stress tests, due July 29, with some analysts expecting the weakest Italian banks to fail.

--As to the Nice terror attack...84 dead, including 10 children, with the toll destined to rise further.  There has been no claim of responsibility as yet, but it is roiling French politics.  This was clearly gross negligence on the part of security forces and France’s opposition parties are letting loose.

Marine Le Pen, leader of France’s far right National Front party (FN), issued a statement on Friday urging the country to ‘declare war’ against ‘the scourge of Islamist fundamentalism.’

“We must not let terror attacks come one  after another and count more deaths without taking action.

“The war against the scourge of Islamist fundamentalism has not begun; it’s now urgent to declare it....

“It’s on this day, I will put all of my energy toward the profound desires of the bruised people of France, so that they are heard and that the battles are waged.”

Ms. Le Pen has no doubt picked up another point or two in support, with next spring’s presidential election looming.

--Germany’s refugee influx is running at less than half the pace of last year, when a record of more than 1 million asylum seekers arrived, according to the German government.

The number of arrivals in June was little changed for a third consecutive month at about 16,000, bringing the first-half total to 222,264, the Interior Ministry said in a statement.  As recently as January the monthly figure was 92,000, before the European Union and Turkey reached a refugee deal championed by Angela Merkel. Syrians filed the most asylum applicants in the first six months of 2016, followed by Afghans and Iraqis.

--Lastly, Jeffrey Gundlach, the bond maven at DoubleLine Capital, had this blurb in an interview with Barron’s.

Addressing the uncertainty in the markets, post-Brexit: “What is really happening here is that there’s massive technological change, and big changes almost always lead to political instability.  People who benefit from the old construct are loath to see it change, because they don’t want to lose their power and economic advantage. And so they dig their heels in even harder.  That’s what we’re seeing in Britain right now.  People who remember the good old days when they had factory jobs and made a good living – that’s been taken away, and they want to do something about it.  They want to blame somebody, so let’s blame the EU.”

Washington and Wall Street

There was a slew of economic data, headlined by the inflation figures for June.  Producer prices rose a higher than expected 0.5%, 0.4% ex-food and energy.  Year-on-year, the PPI was up 0.3%, but 1.3% on core.

Consumer prices rose 0.2%, including on core, but are up 1.0% over the past 12 months, with the core up 2.3%, a solid and reliable figure that happens to be above the Fed’s 2% target but, as we all know by now, the Fed prefers the PCE (personal consumption expenditures index) and that is at 1.6%.

My bottom line is that there is inflation, between the core CPI and wages, up 2.5%.  I’m not saying the Fed should be panicking, I just want them to be intellectually honest in their statements.  I’m sure they wouldn’t mind letting inflation run ‘hot’ for a brief spell (and these numbers are not hot) just to be sure before it makes another move.

That said, I have argued that with July off the table in terms of the Federal Reserve raising interest rates, September will be as well due to the election, and that there is a real chance the Fed could be caught with its pants down if we get a few more solid employment numbers in the coming months.

Ergo, this little rout we had this week in the Treasury market (more so in percentage terms), with the yield on the 10-year moving from 1.36% to 1.55% (a late rally from 1.59% near the close...still the biggest one-week rise in a year), could turn into a mini-panic if the market believes the Fed is behind the curve.  After all, we saw a terrific example of being on the wrong side of a trade with the Brexit vote, with investors not only being caught with their pants down, but without any toilet paper.

Among the other economic data points on the week, June retail sales came in stronger than expected, 0.6%, 0.7% ex-autos.  [Though department store sales are down 3.7% year-on-year.]

June industrial production was also better than expected, up a solid 0.6%.

But I do have to note that the Atlanta Fed’s GDPNow indicator is pegging second-quarter growth at 2.4%, down from an earlier estimate of 2.9%.  [Q1 was 1.1%.]

Asia

China reported GDP for the second quarter came in at 6.7%, the same as the first quarter’s pace and falling within the government’s stated target for the year of 6.5% to 7.0%.  How conveeenient.  [GDP was 6.9% in 2015.]

But of the 6.7%, 2.5 points came from investment, while 4.9 came from consumption amid the ongoing rebalancing of the economy.  [Net exports were a minus 0.7 points.]

Fixed asset investment for the first six months was just 9%, continuing a decline in this critical category, while retail sales for the month of June were a solid 10.6%, year-over-year, the fastest pace since December.

June exports, in dollar terms, were down 4.7% year-over-year, with imports down 8.4%.  For the first six months, exports to the EU are down 4%, to the U.S. down 10.9%, and they have declined 8.1% to Southeast Asia.

But when you add it all up, at least for now, the hard-landing fears in China have eased.

In Japan, Prime Minister Shinzo Abe won a sweeping victory in elections to Japan’s upper house and he now has a parliamentary supermajority (2/3s) in both the lower and upper houses (the lower being more important).  What this means is Abe has the votes to revise Japan’s pacifist constitution, as some have described, a once-in-a-lifetime opportunity to put constitutional change to a national referendum, though with his supermajority margin extremely thin, Abe is going to move slowly.

It seems that Abe is not out to scrap the war-renouncing Article 9, but rather he may want to set a precedent for future constitutional reform.  His coalition partner, a Buddhist party, also wants reform, but it doesn’t want to see Article 9 scrapped, rather it wants to add environmental protections and privacy rights.  So there’s a conflict to deal with.

Abe said: “We have to accelerate Abenomics to meet the public’s expectations,” while promising to “deepen debate” on the constitution.  It is expected that Abe will launch a large stimulus program.

I can’t say I’ve followed Japanese voter turnout, but it was 54.7 percent, the fourth lowest since the second world war.  [Financial Times]

One important economic indicator in the here and now, June machine tool orders, a big metric  for gleaning activity, was down a whopping 19.9% year-over-year, the 11th consecutive month of contraction.

Editorial / Wall Street Journal

“Instead of the economic reforms he promised, Mr. Abe continues to push the same government spending and monetary loosening Japan has tried since the 1990s. The economy continues to dip into and out of recession, and deflation has returned since March with consumer prices falling 0.4% year on year in May. The election gives Mr. Abe another chance to arrest Japan’s economic slide, whether or not he deserves it, and his best bet is to tackle the labor market.

“In 2014 Mr. Abe seemed poised to amend laws that make it difficult for companies to lay off full-time employees.  But he backed off amid opposition from labor unions.  Instead the Prime Minister focused on reinterpreting Japan’s constitution to allow closer military cooperation with the U.S.  That was a worthy initiative, but it was so unpopular that Mr. Abe has lacked the political capital to pass economic reforms.

“It’s time to try again.  Japan’s labor laws allow even clearly incompetent employees to file wrongful dismissal cases that drag on for years.  The Nikkei newspaper cites an estimate that six million full-time workers have nothing to do....

“Resistance to labor reform from the opposition Democratic Party and even within Mr. Abe’s coalition will be intense. But the voters have given him his third successive mandate. This may be his last chance to use an election victory to push through the most critical reform for rejuvenating Japan’s economy.”

Editorial / Washington Post

“[Rather than focusing on constitutional reform that is probably not needed, Abe already having won legislative approval for joint military missions with the U.S. and other allies], Better for Mr. Abe to focus on refloating the dead-in-the-water Japanese economy, still plagued by deflation, negligible growth and declining exports more than three years since the ballyhooed launch of ‘Abenomics.’  Massive injections of stimulus, both fiscal and monetary, have essentially failed; yet the ‘third arrow’ of Abenomics – structural reform in labor markets, corporate governance and agriculture – has barely been implemented.  Given fierce resistance from entrenched interest groups, this was always bound to be Mr. Abe’s most difficult task.  And American presidential nominees are not making it easier for him by denouncing the Trans-Pacific Partnership trade agreement, which helps lay the basis, economic and political, for further Japanese reform.”

At least the Tokyo stock market was buoyed big time by the election results, with the Nikkei up 9.2%, the best week in 6 ½ years!

Street Bytes

--The Dow hit a new all-time high, 18516, up 2%.  It is now +6.3% for the year. The S&P 500 also hit a new high, 2163, up 1.5%, while Nasdaq gained 1.5% as well.  The next two weeks, earnings should dominate.  This past one, it helped that financials, round one, had largely positive results.

--U.S. Treasury Yields

6-mo. 0.41%  2-yr. 0.67%  10-yr. 1.55%  30-yr. 2.27%

BlackRock Inc. CEO Larry Fink said he would not be surprised to see U.S. interest rates sink far lower under pressure from international demand.

The Congressional Budget Office’s annual look at long-term federal spending and revenue shows the national debt remains on an upward trajectory, but the rate of acceleration is uncertain due to lower interest rates but also slower GDP growth.

The federal debt is 75% of GDP currently and will rise to 100%+ by 2033, quicker than last year’s projections that had it reaching this threshold in 2039.

The CBO estimates the 10-year Treasury rate, after inflation, reaching just 1.9% over the long term, down from an estimate of 3% in 2013.

Today, the 10-year after inflation is essentially zero.

Separately, the White House Office of Management and Budget said the U.S. budget deficit is projected to rise to $600bn in fiscal 2016, $16bn less than previously expected, which would mean a deficit of 3.3 percent of GDP.

[I’m going to attempt to plow through the CBO numbers this week so I can provide more insight next time.]

--Oil prices continued to slide a bit (before rallying Friday) on the heels of further bearish inventory news.

Also, last time I noted that the International Energy Agency said Middle East producers, such as Saudi Arabia and Iraq, now have the biggest share of the global oil market since the Arab oil embargo of the 1970s.

This week the IEA said Middle Eastern output exceeded 31 million barrels a day for the third month in June amid near-record supply from Saudi Arabia, while U.S. oil production fell 140,000 barrels a day to 12.45 million. 

In its monthly report, the Paris-based IEA said: “When U.S. shale production was moving upwards very fast it became fashionable to talk of lower reliance on traditional suppliers,” but the Middle East’s resurgence is “an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets.”

Meanwhile, Venezuela’s crude production sank to a 13-year low of 2.18 mbd owing to the economic crisis there.

--BP PLC has put a final price tag on the cost of its Gulf of Mexico oil spill five years ago...$61.6 billion ($44 billion after tax deductions are factored in).

--J.P. Morgan Chase & Co. kicked off bank earnings season with better-than-expected results, with CFO Marianne Lake said the bank views Brexit as a political and economic challenge but not a financial crisis.

“Energy continues to be a tailwind for consumers. The labor market continues to be solid and improving. And sentiment is still good,” Ms. Lake said on a call with analysts. “All other things equal, consumers are in very good shape.”

Earnings fell slightly from a year earlier while revenue rose slightly, 2.4% to $24.38 billion.  Much of the gain on this front came from trading bonds and currencies, up 35% to $5.56 billion.

The bank’s loan portfolio – setting aside allowances for bad loans – grew to $858.6 billion.

--Citigroup reported earnings that were better than expected, but down 14% year-on-year.  Total revenue of $17.5bn was 8% lower than the same period a year ago.

--Wells Fargo exactly matched Wall Street’s estimates for second-quarter profits, with revenues up a little over Q2 2015.

John Stumpf, chairman and CEO, said the bank’s results “demonstrated our ability to generate consistent performance during periods of economic, capital markets and interest rate uncertainty.”

For all the banks, it’s really about net-interest margin these days, and for real improvement they need a steeper yield curve

--Tesla Motors Inc. announced it was cutting the starting price of its Model X crossover, the second time this year the automaker has lowered prices after missing sales targets.

A new version of the Model X, the 60D, will be priced at $74,000, $9,000 less than the Model X 75D.  The 60D will have a shorter range between charges than the 75D.

On Sunday, CEO Elon Musk tweeted that he planned soon to publish part two of his “top secret Tesla masterplan.” Frankly, I forgot what the first part was.  [Actually, one analyst said it was the original masterplan from 2006, that the analyst, Barclays’ Brian Johnson, told Reuters “dug a $4.2 billion hole” for the company.  Johnson has a $165 share price target on the stock, which closed the week at $219.70.

Last month, Tesla cut the base price of its Model S sedan to $66,000.

Separately, the SEC is reportedly investigating Tesla for failing to disclose that one of its drivers had died while using the Autopilot software, a possible breach of its corporate duty to inform the agency of so-called material events.

Coincidentally, Consumer Reports called Tesla’s Autopilot “Too Much Autonomy Too Soon’ and called on the automaker to disable the hands-free feature until its safety can be improved.

In an article published Thursday, Laura MacCleery said, “By marketing their feature as ‘Autopilot,’ Tesla gives consumers a false sense of security.”

Tesla CEO Elon Musk is not about to make any changes, the company stressing the 70,000 cars equipped with Autopilot have driven more than 130 million miles while using the feature.

--Amazon.com held its annual “Prime Day” shopping event on Tuesday and customers placed 60 percent more orders worldwide than last year’s Prime Day.

--Herbalife reached a $200 million settlement with the Federal Trade Commission after an investigation into whether the nutrition drinks marketing business amounted to a pyramid scheme.  Hedge fund manager Bill Ackman has been most vocal in arguing Herbalife was indeed a sham, but this was not accepted by the FTC.

However, the commission ordered changes to the company’s practices, including recruits being led to believe they would get richer than was likely.  As the FTC’s statement said: “(This) structure led many members to purchase an oversupply of product and rewarded only the tiny percentage of distributors with large downlines.  As a result, according to the complaint, a large majority of distributors made little or no money and a substantial percentage lost money.”

--Starbucks announced employees in its stores, including managers, will get pay raises of at least 5 percent, effective Oct. 3, in order for the company to remain “a retail employer of choice,” as stated by CEO Howard Schultz.  Starbucks is also doubling its annual “bean stock” awards, which are shares in Starbucks for partners who reach two years of continuous service.

Nothing wrong with all that.  [StocksandNews rewards its employees with six packs of domestic.]

Starbucks and others are trying to get ahead of the curve in terms of the Fight for $15 movement, with the Democratic Party, for one, amending its platform to call for a $15-an-hour federal minimum wage.

--Writing as Barack Obama, J.D., in the Journal of the American Medical Association, President Obama defended the Affordable Care Act and suggested Congress and his successor should add a government-run, or public, insurance option and increase federal financial assistance for people to buy coverage.

“The Affordable Care Act is the most important health care legislation enacted in the United States since the creation of Medicare and Medicaid in 1965,” he wrote.  “Although partisanship and special interest opposition remain, experience with the Affordable Care Act demonstrates that positive change is achievable on some of the nation’s most complex challenges.”

In acknowledging the law’s shortcomings, he noted the existence of parts of the country with limited competition and options, forcing customers to swallow high premiums.

“More can and should be done to enhance competition in the Marketplaces,” Mr. Obama wrote.  “Public programs like Medicare often deliver care more cost effectively by curtailing administrative overhead and securing better prices from providers.  The public plan didn’t make it into the final legislation.  Now, based on experience with the ACA, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.”

Obama then accused Republicans of acting in bad faith for refusing to support ideas they had supported earlier before the ACA became law, and then undermining its implementation through “inadequate funding, opposition to routine technical corrections, excessive oversight, and relentless litigation.”  [Louise Radnofsky / Wall Street Journal]

--Sales of new passenger cars in Russia fell 14% in the first six months of the year, but, Ford saw its sales in Russia rise 51% over the same period, selling 20,678 units, according to the Association of European Businesses.  [Moscow Times]

--Regarding cars and the car culture in the U.S., from Robert Samuelson / Washington Post:

“Few technological breakthroughs have had the social and economic impact of the automobile. It changed America’s geography, spawning suburbs, shopping malls and sprawl as far as the eye could see.  It redefined how we work and play, from the daily commute to the weekend trek to the beach...

“Now there are signs that the car and its many offshoots (SUVs, pickup trucks) are losing their grip on the American psyche and pocketbook....

“Young Americans, particularly millennials (ages 18 to 35), have lost their zest for buying and driving cars, it’s said.  Once upon a time, getting your driver’s license – typically at 16 or 17 – was a rite of passage.  You were liberated from dependence on the parental chauffeur.  It was a big step toward adulthood.  But this landmark no longer seems to matter so much.

“Just recently, the Federal highway Administration published figures – first reported on the Atlantic magazine’s CityLab website – indicating that the number of licensed drivers 16 or younger in 2014 had dropped 37 percent since 2009 and, at 1.08 million, was ‘the lowest number since the 1960s.’

“More impressive, the trend seems long term.  A report from the Highway Loss Data Institute cites studies showing that from 1983 to 2010 the share of 16-year-olds with a license fell from 46 percent to 28 percent; over the same period, the share of licensed 17-year-olds declined from 69 percent to 46 percent.

“Theories abound to explain this shift.  One emphasizes cost; it’s too expensive to own a car, especially after the high unemployment and meager wage gains of the Great Recession.  Uber and other on-demand transportation services make this choice more practical.

“Other theories focus on lifestyles and values.  Young Americans ‘just don’t think driving is cool – or even necessary – anymore,’ said Fortune magazine.  Cars pollute, contributing to global warming.  Millennials disapprove....

“Maybe.  But a new study by Federal Reserve economists Christopher Kurz, Geng LI and Daniel Vine throws cold water on these and other generational explanations.  It suggests that most potential young buyers couldn’t afford a new vehicle or didn’t want to incur the debt and operating expenses of doing so. Economic considerations dominated.”

--Related to the above, two new forecasts of auto sales both point to a slowdown.

LMC Automotive says it believes sales will break their seven-year streak by not rising this year, while TrueCar’s forecast is for another record, but just not as much as it had previously expected.

Both cite Brexit and the outcome of the U.S. election as main reasons for the reduced forecasts.

LMC now predicts the auto industry will sell 17.4 million new vehicles this year, while TrueCar says it expects 17.6 million, down from its previous estimate of 18 million.

But Edmunds.com is sticking with its 2016 forecast of 18.1 million.

Last year 17.47 million new vehicles were sold, according to Autodata.

--Airbus is slashing production of its A380 superjumbo.  The group told employees that the impact on jobs of a cut from 27 deliveries to just 12 by 2018 would be offset by accelerated ramp-up in production of the midsized A350 and the A320 line of single-aisle planes.

Talk about time flying, the A380, the world’s largest passenger aircraft, had its first flight in 2005, but has been beset by production problems and cost overruns.  319 have been ordered.

But there was some good news as discount-carrier Air Asia announced it would purchase 100 A321 single-aisle passenger jets that seat 236.

--Delta Air Lines Inc.’s second-quarter profit beat expectations despite lower revenue.

Lower fuel prices have helped airlines earn big profits; $1.55 billion for Q2 in Delta’s case.

But the airlines responded by adding flights and seats faster than demand, which led to lower average ticket prices.  Delta’s unit revenue fell 5%.  Overall revenue fell 2%.

--Rebecca Smith of the Wall Street Journal had a disconcerting piece on the state of America’s power grid, with “tens of thousands of substations...vulnerable to saboteurs.”

“The U.S. electric system is in danger of widespread blackouts lasting days, weeks or longer through the destruction of sensitive, hard-to-replace equipment.  Yet records are so spotty that no government agency can offer an accurate tally of substation attacks, whether for vandalism, theft or more nefarious purposes.

It was back in 2013 that an attack on PG&E’s Metcalf facility near San Jose, Calif., nearly led to a blackout after gunmen knocked out 17 transformers that help power Silicon Valley.  The assailants were never caught.

--Yum Brands Inc. raised its projections for the year after reporting a continued rebound in its China business in the first half, with core operating profit there increasing at least 14% from a year earlier.

The China business accounts for half of Yum’s revenue and sales rose 3%, adjusted for currency conversions.

But sales at Pizza Hut, which accounts for about one-quarter of the company’s operating profit in China, contracted 11% in the second quarter.

Overall revenue  at KFC was up 6%, Taco Bell 2%, and Pizza Hut 1%, though on a comp-store sales basis, Yum reported results were even from the year-ago period as KFC helped offset lower sales at Taco Bell. 

--CSX Corp. said revenue for its second quarter fell 12% with falling coal shipments, but shares rose as earnings topped expectations.

For the latest quarter, coal volume was down 30%, with CSX forecasting it will decline 25% for the year.

--The European Commission sent Google (through parent Alphabet Inc.) two statements of objections for skewing shopping results in its own favor and unfairly restricting rival online advertising platforms.  I’m with the EC on this one.

--According to a report from the New York Building Congress, the average wage of a construction worker in New York City reached $76,300 last year, up modestly since 2011.  The study broke out three broad categories with the best paid being heavy construction and civil engineering  (including unionized crane operators who can make $400,000 a year).

The Heavy, Civil Engineering avg. wage is $120,700, though this is just 6% of the workforce.

General Construction $73,300...29%
Specialty Construction $73,800...65%

But as reported in Crain’s New York Business, “Builders say those figures don’t reflect their costs for using union labor. During 2015, for example, the carpenters’ contract called for an hourly rate of $49.88 plus $44.10 in supplemental benefits.  By extrapolating those numbers, an employer-circulated chart put the total compensation for a carpenter at just under $200,000 a year.

Kind of makes you want to break out in song... If I had a hammer...

--Speaking of song, the amount of revenue YouTube paid to music labels relative to the number of streams of their content halved last year, a potential lost revenue of $755m for the industry, according to Midia (sic) Research.

The site paid $740m last year to music rights holder – a 15 percent rise from the prior year.

But streams on YouTube and Vevo, a music site controlled by Sony and Universal Music Group, grew 132 percent to a record 751bn.

This surge in videos streamed halved YouTube’s effective payment rate per stream from $0.002 in 2014 to $0.001 in 2015, Midia said.

I have to admit, knowing how much I go to YouTube for music, that this just isn’t right.

YouTube and Vevo pay music rights holders 55 percent of music video revenues, while Spotify paid 83 percent of its 2015 revenue to content holders.  [Anna Nicolaou / Financial Times]

--Shares in Japanese gaming company Nintendo jumped by nearly a quarter on Monday following launch of its new Pokemon Go smartphone game.

Millions immediately downloaded the game, which requires users to catch on-screen characters like Pikachu using real-world locations.

Just how much Nintendo will profit is in question, though, because it was not the main developer, that being U.S.-based game developer Niantic and the Pokemon Company, which owns the rights to the characters.

But I admit to total ignorance of the game, though I do understand how businesses can certainly promote themselves by making their establishments a destination for players to visit to capture the characters, and that is a purchase.

And while I couldn’t care less about the game, I did find it outrageous that the Holocaust Museum in D.C. was a “PokeStop,” three of them within various parts of the museum.

On the other hand, for less visited, and less ‘serious,’ museums, having a PokeStop makes sense.

Many analysts believe Pokemon Go could become a $1 billion business within a year as local businesses shell out fees to become physical destinations.

--Finally, I have written on many an occasion that Sunday is Salmon Sunday, which is still the case almost all the time, so I couldn’t help but note a bit in the Financial Times that “the salmon price has leapt to a record high as the lack of supplies due to Chile’s toxic algae break out earlier this year takes its toll on international fish markets.”

No one told me!

According to Piotr Wingaard at FishPool (which trades forward contracts for salmon), “There’s a global lack of fish.”

Chile is the world’s second-largest producer of farmed salmon and is facing a 20-25 percent drop in production.

But did you see this week that a number of countries, including Norway (the largest grower) are now looking to raise salmon on tankers?  So beware of labels that read, “Farmed on tankers: Crude oil content 20%.”

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey:

Joby Warrick and Souad Mekhennet / Washington Post

“Even as it launches waves of terrorist attacks around the globe, the Islamic State is quietly preparing its followers for the eventual collapse of the caliphate it proclaimed with great fanfare two years ago.

“In public messages and in recent actions in Syria, the group’s leaders are acknowledging the terrorist organization’s declining fortunes on the battlefield while bracing for the possibility that its remaining strongholds could fall.

“At the same time, the group is vowing to press on with its recent campaign of violence, even if the terrorists themselves are driven underground.  U.S. counterterrorism experts believe the mass-casualty attacks in Istanbul and Baghdad in the past month were largely a response to military reversals in Iraq and Syria.

“Such terrorist acts are likely to continue and even intensify, at least initially, analysts say, as the group evolves from a quasi-state with territorial holdings to a shadowy and diffuse network with branches and cells on at least three continents....

“ ‘Where al-Qaeda was hierarchical and somewhat controlled, these guys are not. They have all the energy and unpredictability of a populist movement,’ said Michael Hayden, the retired Air Force general who headed the CIA from 2006 to 2009....

“But signs of desperation are mounting weekly inside the caliphate, which shrank by another 12 percent in the first six months of 2016, according to a report last week by IHS Inc., an analysis and consulting firm....

“European intelligence officials fear that the new phase is already underway.  ‘They are...challenged as we adapt our strategy to their initial one, in order to start ‘de-sanctuarizing’ them,’ said a senior French security official, speaking on the condition of anonymity to discuss counterterrorism strategy.  ‘But they will now expand to other tactics and start executing much more insidious and covert ops, in big cities.

“ ‘The next step,’ he said, ‘has begun.’”  [Ed. this was written days before the Nice Attack.]

Josh Roggin / Washington Post

“While the United States and Russia inch closer to more military cooperation in Syria on the ground, Secretary of State John F. Kerry is sounding more and more like he agrees with the Russian view of the Syrian rebel groups fighting against the Assad regime.

“Late last month in Aspen, Colo., Kerry said the most important thing the administration is doing to ramp up the effort to defeat extremists in Syria is to ‘reach an understanding’ with the Russian government about how to deal with the terrorists there, which he names as the Islamic State, often referred to as Daesh, and Jabhat al-Nusra, al-Qaeda’s Syrian branch.  As I reported, Kerry and President Obama have proposed to Moscow increased cooperation against those troops, especially Jabhat al-Nusra, in exchange for Russia convincing Syrian President Bashar al-Assad to abide by the crumbling cease-fire and lay off bombing the other rebels.

“But then Kerry, perhaps accidentally, threw two other Syrian rebel groups under the bus by calling them ‘subgroups’ of the terrorists. [Ed. Jaysh al-Islam and Ahrar al-Sham.]....

“The remark, which went largely unnoticed by the media in Aspen, nonetheless set off alarm bells inside the Obama administration....

“ ‘For months, we’ve been arguing to make sure the Russians and the Syrian regime don’t equate these groups with the terrorists,’ one senior administration official told me.  ‘Kerry’s line yields that point.’

“Another U.S. official simply emailed, ‘Baffled. SMH [Shaking my head].’....

“Even if Kerry misspoke, some Syrian groups see his comments as an example of how the Obama administration has slowly but steadily moved toward the Russian view of Syria, which includes painting all opposition groups as terrorists.”

So Russia and Syria will just continue to bomb away as U.S. credibility sinks to zero.  [If we were using my economic PMI numbers, with 50 being the dividing line between ‘credibility’ and ‘no credibility,’ the U.S. would be at a 35.]

In other news...

The Pentagon announced it was sending 560 more military personnel to Iraq to help in the fight against ISIS, bringing the total to about 4,650 in Iraq, most of them serving in training and advisory roles.

Sec. of Defense Ash Carter emphasized that the extra troops will play a large role in helping local forces retake the IS stronghold of Mosul.  The new force will be deployed at an airbase about 40 miles south of ISIS’ last urban bastion in Iraq.

A senior ISIS operative, Abu Omar al-Shishani (the Chechen) was killed in combat in the Iraqi city of Shirqat, south of Mosul.  The Pentagon has described him as the group’s “minister of war” and the U.S. had said in March he was killed in an airstrike in Syria.  This week’s announcement came from a news agency that supports Islamic State.

Meanwhile, the Wall Street Journal reported: “Food and medicine have begun to dwindle in the city of Aleppo after an advance by Syrian regime forces effectively cut off the only road into the rebel-held side of the divided city, residents and opposition leaders said Wednesday.”

Despite numerous ‘cease-fires,’ fighting around the critical Castello road has intensified, this being  the only route by which humanitarian aid can reach rebel-controlled neighborhoods.  The Assad regime is attempting to encircle Aleppo’s eastern half – with an estimated population of 300,000 – which would make it the largest civilian population under siege.

The U.N. currently lists 19 areas with nearly 600,000 living under siege, meaning little food and other aid is getting in.

Iran: President Hassan Rouhani marked the first anniversary of his country’s nuclear deal with the U.S. and the other members of the P5+1 with a warning that Tehran could quickly restore its nuclear capability if the terms of the accord are violated.

“We always keep our word,” Rouhani said on state television. “But if they want to breach their commitment, our nuclear capabilities are such that we can reach the level we want in a short period of time.”

Iran has been struggling to attract foreign investment, in large part because it still has trouble gaining access to the international banking system.

Iran has accused the U.S. of deliberately discouraging business dealings with the country, which the White House denies.

One example is the Boeing deal to sell Iran 80 passenger aircraft that is facing Congressional opposition.  Secretary of State John Kerry has said businesses should not use U.S. sanctions on Iran as an excuse for avoiding business with Tehran.

Most Iranians believe the hoped for economic benefits haven’t materialized, with three quarters surveyed in a recent poll conducted by IranPoll.com for the University of Maryland saying they had seen no improvement in the economy.

Bret Stephens / Wall Street Journal

“What diplomats call the Joint Comprehensive Plan of Action – known to the rest of us as the Disastrous Iran Deal – was agreed to in Vienna a year ago this week.  Now comes a status update, courtesy of our friends at the Bundesamt fur Vergassungsschutz, or BfV.

“In its fascinating 2015 annual report, published late last month, the German domestic intelligence service reports a ‘particularly strong increase’ in the number of Salafists, describes the reach of Russian and Chinese espionage efforts in Germany, and notes a growing number of right-wing extremists.

“Then there’s this:

“ ‘The illegal proliferation-sensitive procurement activities [by Iran] in Germany registered by the Federal Office for the Protection of the Constitution persisted in 2015 at what is, even by international standards, a quantitatively high level.  This holds true in particular with regard to items which can be used in the field of nuclear technology.’

“The report also notes ‘a further increase in the already considerable procurement efforts in connection with Iran’s ambitious missile technology program which could among other things potentially serve to deliver nuclear weapons.  Against this backdrop it is safe to expect that Iran will continue its intensive procurement activities in Germany using clandestine methods to achieve its objectives.’....

“All this was enough to prompt Angela Merkel to warn the Bundestag last week that Iran ‘continued to develop its rocket program in conflict with relevant provisions of the U.N. Security Council.’  Don’t expect German sanctions, but at least the chancellor is living in the reality zone.

“As for the Obama administration, not so much.  For the past year it has developed a narrative – spoon-fed to the reporters and editorial writers Ben Rhodes publicly mocks as dopes and dupes – that Iran has met all its obligations under the deal, and now deserves extra cookies in the form of access to U.S. dollars, Boeing jets, U.S. purchases of Iranian heavy water (thereby subsidizing its nuclear program), and other concessions the administration last year promised Congress it would never grant.

“ ‘We still have sanctions on Iran for its violations of human rights, for its support for terrorism, and for its ballistic-missile program, and we will continue to enforce those sanctions vigorously,’ Mr. Obama said in January. Whatever....

“So let’s recap. Mr. Obama says Iran is honoring the nuclear deal, but German intelligence tells us Tehran is violating it more aggressively than ever.  He promised ‘snapback’ sanctions in the event of such violations, but the U.S. is operating as Iran’s trade-promotion agent. He promised ‘unprecedented’ inspections, but we’re not permitted to inspect sites where uranium was found. He promised an eight-year ban on Iran’s testing of ballistic missiles, but Tehran violated that ban immediately and repeatedly with only mild pushback from the West.  He promised that the nuclear deal was not about ‘normalizing’ relations with a rogue regime.  But he wants it in the WTO.

“Is Mr. Obama rationalizing a failed agreement or did he mean to mislead the American public?  Either way, truth is catching up with the Iran deal.”

Speaking of Iran’s ballistic missile program, last Saturday, a foreign ministry spokesman Bahram Ghasemi said in comments published on the ministry’s website:

“Iran will strongly continue its missile program based on its own defense and national security calculations.”

Iran’s missile program is not linked to the nuclear deal and does not conflict with the U.N. Security Council resolution endorsing the agreement, he said.  “Iran’s missile program has aimed at defense and it is not designed to carry a nuclear warhead.”  [New York Times]

China: As expected, an international tribunal in The Hague has ruled that China does not have historic rights to justify its expansive claims to the South China Sea, ruling in favor of the Philippines which had brought a case.

Beijing has repeatedly said it would not recognize nor implement the ruling.  China’s official Xinhua News Agency said Western countries were bent on containing its rise.  “This is a bundle of fairy rope the West has tossed out at a strategic moment in a vain attempt to terminate China’s development,” repeating President Xi Jinping’s earlier assertion that China “doesn’t cause trouble, but it also doesn’t fear trouble.”

The tribunal said “there was no legal basis for China to claim historic rights to resources...within the sea areas falling within the ‘nine-dash line’” which China draws around most of the South China Sea.

Five governments have claims that overlap with Beijing’s in the resource-rich South China Sea, one of the world’s busiest trade routes.

China’s foreign ministry called the ruling a “farce” and said Beijing reserves the right to declare an air defense identification zone over the area.

Beijing could also show its defiance by increasing its program of reclamation work expanding reefs and small islands in areas it claims.

“It will have a significant long-term impact on U.S.-China relations.  Mutual distrust and suspicion will deepen and continue to grow,” said Zhu Zhiqun, the director of the China Institute at Bucknell University.

Zhu noted that the U.S. decision just days earlier to deploy a missile defense shield in South Korea, a move Beijing strongly objected to, adds to the tensions between Washington and Beijing.

Miles Yu, a professor of East Asian military and naval history at the United States Naval Academy, said both nations would increase their military presence in the region as evidenced ‘by the huff and puff of the military bravado’ displayed by the People’s Liberation Army in the South China Sea.

“However, it is unlikely that the U.S. and China will go into a general war, which China knows it cannot win,” Yu said.  [South China Morning Post]

“If China declares an air defense identification zone in the South China Sea, the U.S. is likely to challenge it with military fly-bys,” Yanmie Xie and Tom Johnston of the International Crisis Group wrote before the decision was announced.  “If the U.S. conducts more frequent and higher profile freedom of navigation patrols near Chinese-held reefs, Beijing may feel compelled to intercept or even evict U.S. vessels. The risk of military clashes is small but cannot be ruled out.”  [Washington Post]

Friday, in Manila’s strongest comment yet on its sweeping win, the nation’s top lawyer (Solicitor General Jose Calida) called the decision invalidating China’s vast claims a “crowning glory” that renews faith in international law.

Manila hasn’t been looking to rock the boat, preferring to start a dialogue with Beijing.

(The ruling) confirms that no one state can claim virtually an entire sea.  The award is a historic win not only for the Philippines...it renews humanity’s faith in a rules based global order,” Calida told a forum on the South China Sea.

Immediately after the ruling, Philippines’ President Rodrigo Duterte, normally a bombastic type, said he wanted dialogue with China, as he has warned his ministers not to pique Beijing.

China’s Foreign Ministry said on Friday that Beijing’s position had the support of Laos, current chair of the Association of the South East Asian Nations (ASEAN).

Chinese state media on Friday reported again that China aims to launch a series of offshore nuclear power platforms to promote development in the South China Sea.

Editorial / Washington Post

“China’s Communist regime is reacting with rhetorical frenzy to a ruling by an international tribunal rejecting its expansive territorial claims in the South China Sea.  President Xi Jinging, who has aggressively pushed what has now been formally deemed as illegal construction of bases on contested islets, issued a statement saying that China ‘will never accept any claim or action based on these awards.’  He’s right that the judgment, in a case filed by the Philippines, is unenforceable.  But it is a major blow to Mr. Xi’s attempt to establish Chinese hegemony in the region and presents him with a fateful choice: embark on a dangerous escalation, or slowly and quietly back down.

“Beijing’s insistence that the court decision is ‘invalid and has no binding force’ only goes so far.  The Philippines sued under the Law of the Sea treaty, which China has ratified.  That means the decision is legally binding whether Mr. Xi recognizes it or not.  Nations far beyond Asia will watch to see if the rising superpower violates a treaty it agreed to be bound by.  If it does, the damage to China’s international standing and influence could prove considerably greater than whatever it might gain from fortifying a few coral reefs....

“The United States nevertheless must be prepared for the possibility that Mr. Xi will double down on his adventurism, perhaps hoping to take advantage of a president in his last months of office who has responded weakly to red-line crossings in other parts of the world.  For some time experts have been concerned China would attempt to militarize Scarborough Shoal, placing planes or missiles 150 miles from Subic Bay in the Philippines; it has also threatened to declare an air defense zone over the South China Sea.  Any such action must be contested by the United States. The alternative would be to sanction Mr. Xi’s use of raw power to advance his nationalist aims – and open the way to serious conflict in East Asia.”

Editorial / Wall Street Journal

“A United Nations tribunal ruled Tuesday that China’s sovereignty claims over the South China Sea, and its aggressive attempts to enforce them, violate international law. This is a necessary rebuke to Beijing, but it comes with no enforcement measures and Chinese leaders have rejected it.  So its effect will depend on how China’s neighbors and the United States respond.  International norms can’t survive without democracies willing to defend them....

“The Obama Administration has made some helpful military moves, flying A-10 attack planes from a Philippine base near Scarborough and operating two carrier battle groups in the Western Pacific. But its much-touted freedom-of-navigation operations have been spare and timid.

“With the Hague verdict, these operations should increase in frequency and scope.  Patrols from Australia and others would help too.  Mr. Le Drian, the French defense minister, has suggested European patrols.

“Most important is to reverse military cuts, protectionism and other self-defeating policies. Curbing Chinese aggression will be a years-long effort.  No U.N. tribunal decision can be a victory for the rules-based liberal order if liberal states won’t defend that order.  That requires more free trade, bigger navies, and a renewed commitment from Washington to protect its friends, interests and principles around the world.”

[Taiwan also lost in the tribunal’s ruling, as it declared a piece of land Taiwan considers an “island” (which Taiwan calls “Taiping”) a “rock,” thus Taiwan has no control over it.  So Taipei has rejected the ruling, a la Beijing.]

Russia: President Vladimir Putin held phone talks with German Chancellor Angela Merkel and French President Francois Hollande to discuss increasing violations of the ceasefire agreement in southeast Ukraine, the Kremlin announced.

Putin stressed the “provocative nature” of Ukraine’s military operations in the Donbass region, and called on Merkel and Hollande to pressure Ukrainian president Petro Poroshenko into complying with the Minsk accords.

You can stop laughing.

Andrey Parubiy, the speaker of Ukraine’s parliament, warned earlier this week that military activity could soon flare up in the Donbass.

“There is a risk that our enemy could strengthen on two fronts.  There is an election campaign in the U.S. and Europe is going through a moment of crisis. The Kremlin is also planning to intensify the conflict in this period,” Parubiy said.  “On one front we face military attacks and attempts to destabilize the country on the other.”  [Moscow Times]

The conflict that began in April 2014 has claimed more than 9,000 civilians and combatants.

Separately, NATO General Secretary Jens Stoltenberg said the organization is committed to maintaining political dialogue with Russia, with NATO reaching agreement at last weekend’s summit to commit 4,000 troops to Poland and the Baltic states.

Charles Krauthammer / Washington Post

“ ‘The most significant reinforcement of our collective defense any time since the Cold War,’ President Obama called it. A bit of an exaggeration, perhaps, but it was still an achievement: Last week’s NATO summit in Warsaw ordered the deployment of troops to Eastern Europe, the alliance’s most serious response yet to Russia’s aggression and provocations on its western frontier.

“The post-Ukraine economic sanctions have been weak; the declamatory denunciations, a mere embarrassment.  They’ve only encouraged further reckless Russian behavior – the buzzing of U.S. ships, intrusions into European waters, threats to the Baltic States.

“NATO will now deploy four battalions to front-line states.  In Estonia, they will be led by Britain; in Lithuania, by Germany; in Latvia, by Canada; in Poland, by the United States.  Not nearly enough, and not permanently based, but nonetheless significant.

“In the unlikely event of a Russian invasion of any of those territories, these troops are to act as a tripwire, triggering a full-scale war with NATO. It’s the kind of coldblooded deterrent that kept the peace in Europe during the Cold War and keeps it now along the DMZ in Korea....

“After the humiliating collapse of Obama’s cherished Russian ‘reset,’ instilling backbone in NATO and resisting Putin are significant strategic achievements....

“However, the Western order remains challenged by the other two members of the troika of authoritarian expansionists: China and Iran.

“Their provocations proceed unabated.  Indeed, the next test for the United States is China’s furious denunciation of the decision handed down Tuesday by the Permanent Court of Arbitration in The Hague – a blistering, sweeping and unanimous rejection of China’s territorial claims and military buildup in the South China Sea.

“Without American action, however, The Hague’s verdict is a dead letter.  Lecturing other great powers about adherence to ‘international norms’ is fine.  But the Pacific Rim nations are anxious to see whether we will actually do something.

“Regarding Iran, we certainly won’t.  Our abject appeasement continues, from ignoring Tehran’s serial violations of the nuclear agreement (the latest: intensified efforts to obtain illegal nuclear technology in Germany) to the administration acting as a kind of Chamber of Commerce to facilitate the sale of about 100 Boeing jetliners to a regime that routinely uses civilian aircraft for military transport (particularly in Syria).

“The troop deployments to Eastern Europe are a good first step in pushing back against the rising revisionist powers.  But a first step, however welcome, 7 ½ years into a presidency, is a melancholy reminder of what might have been.”

In a new survey of Russians by the independent Levada Center revealed Wednesday, 73 percent feel they have no influence over what happens in their country, up from 59 percent in November.  Only 17 percent believe they could slightly influence the country.

64 percent said that they felt absolutely no responsibility for what happens in Russia.  In a separate recent survey from Levada, a third of Russians expect the upcoming State Duma elections to be rigged.  [Moscow Times]

Australia: Prime Minister Malcolm Turnbull declared victory for his conservative coalition in the closely fought general election, after opposition Labor leader Bill Shorten conceded defeat.

Turnbull’s Liberal-National coalition is expected to win enough seats to govern, including the support of three independents.

Random Musings

--This is the Republicans’ week in the spotlight in Cleveland.  Boy, I’m worried how this will all go down in terms of violence considering all the protests on tap.  I sure as heck wouldn’t want to be there.

From a purely political standpoint, I do have to say the selection of Indiana Gov. Mike Pence to be Donald Trump’s running mate was a smart pick.  I always liked Pence and anyone favored by House Speaker Paul Ryan is good enough for me.  [That said I’m still voting third party at this point.]

But the stories are rolling in on what a mess of it all Trump made Thursday, jerking everyone around as he waffled on his decision at the last minute.

Also, for the record, I do have to note that the Republican Rules Committee rejected a proposal that would have allowed delegates to back the candidate of their choice, 87-12.  Delegates thus remain “bound” to candidates decided by state primaries and caucuses.

--Polls....

While at this point one should really wait until both conventions play out over the next two weeks before looking at any new surveys, the latest from Quinnipiac University on some key swing states is more than a bit interesting.

Donald Trump leads Hillary Clinton 42-39 in Florida.  Just last month, Clinton led 47-39.

Trump has also retaken the lead from Clinton in Pennsylvania, now up 43-41, when last month, Clinton led 42-41.

In Ohio, the two remain tied at 41 apiece, a tick up from 40 the prior month.

Obviously, the beating Clinton took from FBI Director James Comey on her use of a private email server as secretary of state, even if she wasn’t indicted, has cost her in some precincts.

If you add in Libertarian candidate Gary Johnson and Green Party candidate Jill Stein, Trump does even better in each of the states, according to Quinnipiac.

In Florida, he leads 41-36, 7 percent Johnson, 4 percent Stein.

In Ohio, Trump leads 37-36, Johnson 7, Stein 6.

In Pennsylvania, Trump increases his lead to 40-34, with Johnson at 9 percent, Stein at 3.

However, a Wall Street Journal/NBC News survey of battleground states has Clinton leading in all four that were polled.

Florida: Clinton 44 Trump 37 [41-36, if Gary Johnson (7) and Jill Stein (4) are added]

Colorado: Clinton 44-35 [39-33, Johnson 13, Stein 4]

North Carolina: Clinton 44-38 [42-36, Johnson 7, Stein 2]

Virginia: Clinton 44-35 [41-34, Johnson 10, Stein 2]

The Journal notes these four states are among the most racially diverse presidential battlegrounds.  Support for Trump among African-Americans is 5% in Florida, 4% in North Carolina and 3% in Virginia, all below the 7% support that 2012 GOP nominee Mitt Romney received nationally.

At least 58% of voters in all four states view Clinton unfavorably, and at least 61% view Trump unfavorably (68% in Colorado).

A separate NBC News/Marist College survey of Pennsylvania also has Clinton leading Trump among registered voters, 45% to 36%, so a big difference from Quinnipiac.

The NBC/Marist poll also had Clinton ahead in Iowa, 42-39, and tied in Ohio at 39% apiece (Quinnipiac had a tie here too).  Reminder, no Republican has ever been elected president without carrying this state.

Nationally, a new CBS News/New York Times poll shows Clinton and Trump are tied at 40% each, Clinton’s six-point lead from last month evaporating.

But a Reuters/Ipsos poll released late Friday has Clinton with a 12-point lead over Trump; 45-33 among likely voters.  Actually, Clinton has had this kind of lead in this one since January. 

And one more tidbit, from Bloomberg Politics.  Clinton is crushing Trump among college-educated white voters, a group Mitt Romney easily won in 2012, with 48% backing Clinton to 37% for Trump.  Romney won the group by 14 points.

--Back to the Hillary Clinton e-mail fallout, according to a new Washington Post/ABC News poll, a majority of Americans (56% to 35%) reject the FBI’s recommendation against charging Clinton with a crime for her State Department e-mail practices and say the issue raises concerns about how she might perform her presidential duties, while six in 10 voters say the outcome will have no impact on their vote this November, even as those who do largely say it discourages them from backing the presumptive Democratic nominee.

A new CBS News/New York Times poll showed 67% of voters say Clinton is not honest and trustworthy, up five percentage points from a CBS News poll conducted last month.

--Maureen Dowd / New York Times

“(What) should disturb Obama, who bypassed his own vice president to lay out the red carpet for Hillary, is that the email transgression is not a one off. It’s part of a long pattern of ethnical slipping and sliding, obsessive secrecy and paranoia, and collateral damage.

“Comey’s verdict that Hillary was ‘negligent’ was met with sighs rather than shock. We know who Hillary and Bill are now. We’ve been held hostage to their predilections and braided intrigues for a long time.  (On the Hill, Comey refused to confirm or deny that he’s investigating the Clinton Foundation, with its unseemly tangle of donors and people doing business with State.)

We’re resigned to the Clintons focusing on their viability and disregarding the consequences of their heedless actions on others.  They’re always offering a Faustian deal. This year’s election bargain: Put up with our iniquities or get Trump’s short fingers on the nuclear button.

“The Clintons work hard but don’t play by the rules.  Imagine them in the White House with the benefit of low expectations.”

Meanwhile, I liked this bit from the Washington Post’s Chris Cillizza last weekend on the presumptive Republican nominee.

“You can love Donald Trump. You can hate him. But what you cannot dispute is that the way he has run his campaign since sealing the Republican nomination two months ago has been absolutely disastrous.

“Campaigns are complicated things.  No one gets every piece of them right.  Some candidates are great at big rallies.  Some are good only at small events. Some are terrific communicators but bad on the stump. Some delegate well, and others don’t.  Some never waver from a message, while others can’t seem to find one with a 10-foot pole.  It’s a high-wire balancing act every day with tens of millions of people watching.

“But there are basic blocking and tackling elements of any campaign that are less complex – and absolutely necessary to do if you want to win. The most basic of all? If your opponent is having a bad day or a bad week, let them have it.  Just get out of the way.”

Trump has a hard time doing that, like at his rally in Cincinnati about ten days ago when he spent the first 20 minutes slamming Hillary on her email practices, honesty and trustworthiness, and then threw away the notes and brought up the issue of Saddam anew and how the media has misconstrued his comments and it was a disastrous performance.  Embarrassing.  And then he went back to the six-sided star on Twitter.

Back to Hillary, Bernie Sanders finally endorsed her, but he was a jerk about it.  He did at least get the Democratic Party platform to move further left.

What seems clear to many, though, is that after Cleveland, Bernie will go back to being irrelevant.

--Race Relations....

A New York Times/CBS poll released this week, post- Baton Rouge, St. Paul and Dallas, showed 69% said race relations are generally bad in America, with six in 10 saying they are growing worse, up from 38% a year ago, the worst such figures since the 1992 riots in Los Angeles during the Rodney King case.

Rich Lowry / New York Post

“ ‘African-Americans,’ (President) Obama said in Warsaw, ‘are arrested at twice the rate of whites.’ But African-Americans commit about 24 percent of violent crimes, even though they’re 13 percent of the population.  Of course they’re going to be arrested at disproportionate rates. About half of murderers are black and over 40 percent of cop-killers are black.

“This doesn’t mean that there aren’t bad cops or that there isn’t bias in policing, but the picture painted by Black Lives Matter of pervasive police predation, and an open season on blacks, is a politicized lie.

“A new study published in the National Bureau of Economic Research found racial disparities in lower-level use of police force – e.g., police placing hands on civilians or pushing them into walls.  But it concluded that ‘on the most extreme use of force – officer-involved shootings – we are unable to detect any racial differences in either the raw data or accounting for controls.’

“How is that possible, given the outsize role of allegedly racist police shootings in our politics?  It just might be that Black Lives Mater and the media take a few instances of police-involved shooting and dramatize and obsess over them to create a sense that cops are itching to shoot black people

“Some of these cases involve genuine crimes by the police; others harrowingly mistaken judgments; and still others completely justifiable acts that are lied about by Black Lives Matter, most notably the shooting of Michael Brown in Ferguson, Mo.

“If President Obama really wanted to try to cool the passions on this issue, he would go even further in saying commonsensical things unwelcome to an inflamed left.

“He might routinely mention that the best way to try to avoid a confrontation with the police that might go tragically wrong is to comply with police orders, and pursue a complaint or lawsuit later, outside the heat of the moment.  He might note that, just because an incident looks bad on an initial video, it doesn’t mean the police did anything wrong and no one should assume as much.

“He might gently remind Black Lives Matter that its initial understanding of what happened in Ferguson was entirely erroneous and that the case should remain a cautionary tale about drawing large conclusions on the basis of fragmentary (or dishonest) evidence.

“He could do all of this and still speak to his belief, and that of so many other blacks, that they have been targeted and treated unfairly by police.

“That he won’t is an indictment of his political courage and intellectual honesty, on an issue where he should be uniquely suited to lead.”

David Brooks / New York Times

“Normally, nations pull together after tragedy, but a society plagued by dislocation and slipped off the rails of reality can go the other way. Rallies become griped by an exaltation of tribal fervor.  Before you know it, political life has spun out of control, dragging the country itself into a place both bizarre and unrecognizable.

“This happened in Europe in the 1930s.  We’re not close to that kind of descent in America today, but we’re closer than we’ve been.  Let’s be honest: The crack of some abyss opened up for a moment by the end of last week.

“Blood was in the streets last week – victims of police violence in two cities and slain cops in another. America’s leadership crisis looked dire. The FBI director’s statements reminded us that Hillary Clinton is willing to blatantly lie to preserve her career.  Donald Trump, of course, lies continually and without compunction. It’s very easy to see this country on a nightmare trajectory.

“How can America answer a set of generational challenges when the leadership class is dysfunctional, political conversation has entered a post-fact era and the political parties are divided on racial lines – set to blow at a moment’s notice?”

Jason L. Riley / Wall Street Journal

“Yes, Mr. Obama has denounced what happened in Dallas, but he has also been winking at a Black Lives Matter movement that has spent the past two years holding rallies that call for (and sometimes feature) violence against cops.  Like the president, these protesters maintain that the police are motivated by racial prejudice, not by the behavior of suspects.  They insist that a biased criminal-justice system explains the black crime rate, not antisocial behavior.  By indulging this narrative, Mr. Obama and his fans in the liberal media were playing with fire, and the Dallas carnage was the result.”

Mike Rawlings / Mayor of Dallas

“Yes, it’s that word race and we’ve got to attack it head on.  I will tell you, this is on my generation of leaders.  It is on our watch that we have allowed this to continue to fester, that we have led the next generation down a vicious path of rhetoric and action that pit one against the other.”

A June survey by the Pew Research Center found that only 46 percent of whites surveyed thought that race relations were generally good, a sharp drop from the 66 percent who held that opinion in June 2009, shortly after Mr. Obama took office.  For blacks, the corresponding decline – to 34 percent last month from 59 percent in 2009 – was even steeper.

Newt Gingrich, in a town hall forum, said that “if you are a normal, white American, the truth is you don’t understand being black in America and you instinctively underestimate the level of discrimination and the level of additional risk.”

Michael Eric Dyson / New York Times...addressing his piece to “White America,” while arguing most whites have been too slow to speak out when injustices occur and that, once they do, such expressions rarely equate to meaningful change.

“It makes the killings worse to know that your disapproval of them has spared your reputations and not our lives...

“You will never understand the helplessness we feel in watching these events unfold, violently, time and again, as shaky images tell a story more sobering than your eyes are willing to believe: that black life can mean so little...

“You do not know that after we get angry with you, we get even angrier with ourselves, because we don’t know how to make you stop, or how to make you care enough to stop those who pull the triggers.”

After Dallas, the number of policemen killed by firearms rose to 26 this year, compared with 18 at this point in time in 2015.  According to Nick Breul, director of research for the National Law Enforcement Officers Memorial Fund, there have been 11 ambushes.

Editorial / Wall Street Journal

“Barack Obama came into the American presidency as a self-declared unifier. As he departs eight years later, the country is polarized, politically and racially. This surely is not the legacy Mr. Obama intended.

“White cops versus black people is a narrative that has reached the end of whatever use it may have had. It offers no exit for anyone.  The moment has arrived for the country’s political leadership to say so clearly.  The U.S. has been here before.  It can get worse.”

Rudy Giuliani on CBS’ “Face the Nation”:

“When there are 60 shootings in Chicago over the Fourth of July and 14 murders, and Black Lives Matter is nonexistent, and then there’s one police murder of very questionable circumstances and we hear from Black Lives Matter, we wonder: Do black lives matter, or only the very few black lives that are killed by white policemen?”

John Lott / New York Post

“Hours before the murders of five police officers in Dallas, Texas, President Obama was again spouting false claims about racism by the police. He sees racism whenever there is any disparity in outcomes, no matter what the cause.

“Obama and others inflame passions, but take no responsibility, and instead use events to push for more gun control....

“Obama is also wrong, as he was on Thursday (7/7), to infer racism from higher arrest rates or prison-sentence lengths.  ‘African Americans are arrested at twice the rate of whites,’ he said. What he failed to note is that blacks commit murder at almost six times the rate whites do.

“ ‘The African-American and Hispanic population, who make up only 30 percent of the general population, make up more than half of the incarcerated population,’ he added.  But Obama ignores the facts put out by his own Department of Justice.  The FBI claims that gangs commit 80 percent of crimes in the U.S., and the National Gang Center estimates that 82 percent of gang members are black or Hispanic.”

As for President Obama’s memorial service speech in Dallas on Tuesday, he started off strong but then in the words of the New York Post’s John Podhoretz, “he blew it.”

“He blew it by going on for almost 25 more minutes, repeating himself endlessly, and broadening his specific focus to a more general preachment about how ‘we’ need to ‘open our hearts’ on the subject of race.

“As usual, Obama made strange use of the word ‘we,’ because when he says ‘we,’ he means ‘you,’ and when he means ‘you,’ he means people who aren’t as enlightened and thoughtful as he and his ideological compatriots are.

“Worse yet, the excessive length gave rise to a few extraordinarily ill-conceived flourishes that would have been discarded from a more contained and controlled final speech.

“By far the most jaw-dropping was his assertion that it’s easier for a poor kid in a struggling neighborhood to get a Glock than a book. That’s not presidential.  That’s Bill Maher, or Trevor Noah.”

Basketball Hall of Famer and TV analyst Charles Barkley:

“The cops have made some mistakes, but that doesn’t give us the right to riot and shoot cops.  We need the cops, especially in the black community.  We as black people, we’ve got to do better. We never get mad when black people kill each other, which that has always bothered me...I’ve always said if we as black people want more respect, we have to give each other respect.  You can’t demand respect from white people and the cops if you don’t respect each other. We’ve got to do better as black people.” [ESPN’s Dan Le Batard Show]

--In an Associated Press interview published Friday, Supreme Court Justice Ruth Bader Ginsburg, the 83-year-old known as RBG, said she presumes Hillary Clinton will be the next president, adding the thought of a Trump presidency is basically unthinkable.

“I don’t want to think about that possibility, but if it should be, then everything is up for grabs.”

To the New York Times, RBG said, “I can’t imagine what this place would be – I can’t imagine what the country would be – with Donald Trump as our president.  For the country, it could be four years.  For the court, it could be – I don’t even want to contemplate that.”

She recalled a joke her late husband used to make about unfortunate political outcomes.  “How it’s time for us to move to New Zealand.”

So immediately many wondered what impact such talk would have on Ginsburg’s decision to hear cases involving Trump?

But everyone was in agreement, Democrat and Republican, that Ginsburg had handed Trump an immense gift, reinforcing the importance of the election in terms of deciding the fate of the Supreme Court, currently 4-4 ideologically on most issues after the death of Justice Antonin Scalia.

“I find it baffling actually that she says these things,” said Arthur Hellman, a law professor at the University of Pittsburgh who studies the judiciary.  “She must know that she shouldn’t be.  However tempted she might be, she shouldn’t be doing it.”

Edward Whelan III, president of the Ethics and Public Policy Centre and a former Scalia clerk, has criticized Ginsburg before for her public comments. But he said this one is indefensible.

“I think this exceeds the others in terms of her indiscretions,” Whelan said.  “I am not aware of any justice ever expressing views on the merits or demerits of a presidential candidate in the midst of the campaign.  I am not a fan of Donald Trump’s at all. But the soundness or unsoundness of her concerns about Donald Trump has no bearing on whether it was proper for her to say what she said.”

Trump responded by calling Ginsburg a “disgrace,” questioning her “mental capacity” and calling on her to resign.

Editorial / Wall Street Journal

“Justice Ginsburg talks as if the Court is a purely political body and seems oblivious to the damage she is doing. All of this raises questions about her judgment, her temperament, and her continuing capacity to serve as a judge.  She should resign from the Court before she does the reputation of the judiciary more harm.”

The above was prior to a semi-apology on Thursday, with Justice Ginsburg saying:

“On reflection, my recent remarks in response to press inquiries were ill-advised and I regret making them,” she said in a statement.  “Judges should avoid commenting on a candidate for public office.  In the future I will be more circumspect.”

Editorial / New York Post

“Justice Ruth Bader Ginsburg issued a ‘never mind’ statement on Thursday – too late to reverse the damage she’s done to the Supreme Court, to Hillary Clinton and to herself.

“In not one but three interviews this week, Ginsburg trashed Donald Trump as well as the GOP leaders of the U.S. Senate (for refusing to act on President Obama’s nomination for the Scalia seat) and announced her eagerness to overturn recent high-court rulings once Clinton-appointed justices give liberals a clear majority.

“The Trump-bashing was way, way over the top, calling him a ‘faker’ and saying, ‘I can’t imagine what our country would be with Donald Trump as our president.’

“Plenty of Americans agree – but even most liberals understand that a Supreme Court justice isn’t supposed to say this stuff out loud.  Here’s another liberal justice, Stephen Breyer, when asked about Ginsburg’s comments: ‘If I had an opinion, I wouldn’t express it.’

“Because a member of the nation’s highest court is supposed to be beyond politics – or certainly to appear that way.  Otherwise, the rule of law becomes meaningless, and the Supreme Court a travesty.

“On top of that, Ginsburg gave even #NeverTrump Republicans good reason to vote for him anyway.  She all but promised wholesale left-wing revision of the nation’s basic laws should Clinton win....

“Bottom line: In spending days mouthing off to the media, and plainly enjoying it.  Ginsburg showed atrocious judgment.  Saying she regrets her ‘ill-advised’ remarks and promising to ‘be more circumspect’ doesn’t cut it.  She’s proven herself incompetent to serve.”

--Republicans suffered a potentially big blow when former Democratic Sen. Evan Bayh announced he was jumping into the Indiana Senate race, while the party’s Democratic nominee, former Rep. Baron Hill, said he would step aside. 

So the Democrats have responded to Marco Rubio’s decision to run for reelection, which made him the favorite in a seat Democrats were hoping to flip.

Remember, Republicans have a 54-46 margin currently, but Democrats are favored to win seats in Illinois and Wisconsin, while Republicans have a real battle on their hands in New Hampshire, Pennsylvania and Ohio.  Now Indiana is in play.

[I always viewed Bayh as a solid pragmatist.]

--New York Police Department Commissioner Bill Bratton is becoming more irascible by the day, calling the Black Lives Matter movement a “leaderless” crusade that could learn from the NAACP and the civil rights movement, weeks after calling rappers thugs.

Bratton told a radio host that Black Lives Matter protesters should stop “yelling and screaming” at cops about police brutality because it “accomplishes nothing.”

“Unlike the civil rights movement, which focused on the broad needs of desegregation and a segregated country, the needs of jobs, the needs of voting rights, the needs of education, the Black Lives Matter movement has focused entirely on police, and is not engaging in dialogue, instead engaging in protests where there’s a lot of yelling and screaming...

“(Getting) into the face of police officers manning those lines, trying to protect those demonstrators, trying to protect the lives of people, trying to protect their rights to demonstrate, and standing there yelling and screaming at them, that accomplishes nothing.  Nothing.”

Bratton then praised the actions of the NAACP.

“(They have) been sponsoring meetings at schools and other locations where people in fact can engage in dialogue.

“They’re encouraging their members to attend police precinct community councils, where they can express their concerns and do it in a way in which their voices can be heard, do it in a way in which they can be seen, and also would allow the police and other criminal justice officials, district attorneys, etc., to also be seen and be heard.

“And until we do that, we can then just stand on these picket lines at these marches and demonstrations and scream and holler and accomplish nothing. It makes for good TV, but it doesn’t make for good consensus building or good resolution of the issues of the day.”

--Back to the pathetic John Kerry.

Editorial / New York Post

“Secretary of State John Kerry didn’t skip out early on last weekend’s NATO summit just to catch Lin-Manuel Miranda’s final performance in ‘Hamilton,’ the State Department now insists.

“The excuse is that Kerry actually left what President Obama called a ‘pivotal’ gathering to attend a wedding.

“Then somehow the most sought-after tickets in Broadway history just fell into his lap, so he presumably ditched the wedding festivities to see the show.

“Right.

“We don’t fault Kerry for wanting to see the musical, but sorry: Catching Miranda’s last performance is strictly a bragging-rights thing.

“Back at the summit, meanwhile, Obama was noting, ‘In nearly 70 years of NATO, we have perhaps never faced such a range of challenges all at once – security, humanitarian, political.’

“You know, the sort of challenges America’s top diplomat should drop everything to confront.”

--From Mary Hui / Washington Post

“When an Italian baby was taken to a hospital in Milan earlier this month by his grandparents, doctors there were shocked by the baby’s condition.  At 14 months old, he weighed only slightly more than a 3-month-old, according to the Local Italy.

“Upon further examination, a more harrowing picture began  to take shape.  The baby, whose parents allegedly kept him on a vegan diet without providing dietary supplements, was found to be severely malnourished, suffering from dangerously low calcium levels.  Complicating matters, the baby had to undergo an emergency operation because of a congenital heart condition, which was aggravated by his low calcium levels.”

The baby’s parents lost their custodial rights to their child.

Paid for by the International Beef and Dairy Cartel (IBDC).

--Finally, as a Wake Forest alum, I can’t help but note the retirement of fellow Demon Deacon Tim Duncan, who walks away after a spectacular 19-season NBA career, all with the San Antonio Spurs, that included five championships. From the first day he stepped foot on the Wake campus to today, Duncan has been all class and a tremendous role model.  So as a fan, I just want to say, thank you, Timmy D.!

---

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

God bless America.

---

Gold $1337
Oil $45.95

Returns for the week 7/11-7/15

Dow Jones  +2.0%  [18516...new all-time high]
S&P 500  +1.5%  [2161...new all-time high set this week, 2163]
S&P MidCap  +1.5%
Russell 2000  +2.4%
Nasdaq  +1.5%  [5029...all-time closing high is 5218, 7/20/15]

Returns for the period 1/1/16-7/15/16

Dow Jones  +6.3%
S&P 500  +5.8%
S&P MidCap  +10.4%
Russell 2000  +6.1%
Nasdaq  +0.4%

Bulls 52.5...getting a tad frothy...
Bears 24.7 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore