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09/10/2016

For the week 9/5-9/9

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs.  Your support is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974.  *Special thanks to Dan and Jean C. (loved the note paper...hope you won).

Edition 909

Washington and Wall Street

What a depressing, and distressing, time for America.  In fact to many of us, certainly at least yours truly, we are nearing the end of a 16-year cycle with two of the five worst presidents in U.S. history and we’ll be paying for the mistakes of both for decades to come, especially those of the current occupier of the White House.

I keep writing these last few months, just what will President Barack Obama say when he addresses America for a final time in January.  What can he possibly point to as a success?

Seriously, ObamaCare?  Are you kidding me?!  I receive non-stop news flashes from around the country, through many different outlets, and one of them this morning was from the Baltimore Sun and word that healthcare premiums for Marylanders were set to rise a full 20% on average next year, which is essentially the norm around the country as competition dries up and costs soar.

What can President Obama possibly say about race relations in America?  Have they improved in his eight years?  I think you know the answer to that one.

What can he say about the nation’s infrastructure?  What can he say about America’s fiscal stability, as both he and President George W. Bush, for 16 years, failed to attack the looming entitlement crisis?

But most importantly for me, and for the very future of America, what one single success can President Obama claim on the foreign policy front?  He has none. And across the board, things have only gotten worse.  Much worse.  It is not a stretch in any way to say that our very existence, as a democracy, is at risk over the coming 10-20 years, if not sooner, depending on what happens on the terror and weapons of mass destruction front, or because of a nuclear crisis with Russia or China...or both acting in tandem.

I’ve gotten a kick out of the Colin Kaepernick situation, which is only going to spread across the sports landscape.  So many offering up an opinion are hopelessly naïve.  Yes, we are lucky that we have free speech in America, that I can write what I do each week, for over 17 years, without fear of being censured...or arrested.

But very few Americans truly understand that this basic right is disappearing at lightspeed in Russia and China, in Turkey, and in places as close as Venezuela (of course it hasn’t been a basic right just 90 miles away in Cuba for 50 years).

It’s an incredibly dangerous time, as terrifically encapsulated by William Galston below, but who do we have filling the breach come next January?  Donald Trump or Hillary Clinton?!

Oh God help us.

This is beyond pathetic.  330 million people in America and we came up with these two. And another guy, Gary Johnson, who I was seriously considering but when asked by MSNBC’s Mike Barnicle this week, “What would you do if you were elected about Aleppo?” Johnson responded, “About?”  “Aleppo,” said Barnicle.

Johnson paused and said: “And what is Aleppo?”

“You’re kidding...” the incredulous Barnicle answered.

“No,” Johnson said.

I give up.

There’s a reason why some of us are the sports fanatics we are...it’s a release.  Yes, it presents frustrations of a different kind depending on where your allegiances lie, but sports provides those small respites from the troubles that face us both today and in the near future.

I cover the election in detail below.  For now....

William A. Galston / Wall Street Journal

“As our dispiriting presidential campaign grinds on, the rest of the world is not standing still. And the news is not good.

“At the G-20 meeting last weekend, Chinese officials treated the president of the United States and his senior aides with blatant disrespect.  As Chinese nationalism surges, President Xi Jinping is asserting his country’s claims throughout the South China Sea, a move that episodic demonstrations of American naval power have failed to halt.  Meanwhile, the linchpin of President Obama’s ‘pivot’ to Asia – the Trans-Pacific Partnership – faces opposition from both presidential candidates and hangs by a thread in Congress.  Its defeat would deal a heavy blow to American credibility.

“In the Middle East, the Syrian civil war continues its bloody course, and the latest effort to negotiate a humanitarian cease-fire with the Russians has foundered over what the administration describes as ‘trust’ issues.  Mr. Obama’s prediction that Vladimir Putin’s use of military force would land him in a quagmire described his own state of mind rather than reality.  Instead, at modest cost, Mr. Putin has restored Russia’s standing as a key player in the region, while our friends and allies see America in retreat.

“In northern Syria, U.S.-backed Kurds have been the only effective fighters against Islamic State.  But when Turkey sent its forces across the border, Mr. Obama sent Vice President Joe Biden to Turkey, where he demanded that the Kurds withdraw from ISIS-held territory they had recently seized.  President Recep Tayyip Erdogan sees every manifestation of Kurdish nationalism, wherever it may occur, as a threat to Turkey’s domestic security.

“The U.S. is under no obligation to agree with him, especially at the expense of one of the few reliably pro-Western forces in the region.  Mr. Obama’s meeting in China with Mr. Erdogan did not yield an agreement. The administration’s brand of ‘realism’ in Syria has ended in a damaging muddle.

“The group photo at the G-20 meeting spoke volumes. At one end, President Putin was speaking to President Erdogan, who listened attentively. At the other end, President Obama peered curiously at the colloquy.  In the middle, President Xi smiled confidently. As the authoritarian entente cordiale flowers, the U.S. is reduced to a bystander’s role.

“Mr. Obama seems to have assumed that events in Syria, however awful to behold, would have no effect on core American interests.  If so, he was badly mistaken. The flood of Syrian refugees has destabilized its neighbors in the Middle East and Europe.

“Anti-immigrant nationalism is on the rise throughout the Continent, and it contributed to June’s pro-Brexit vote in the U.K.  Chancellor Angela Merkel, who initially welcomed the refugees, has been thrown on the defensive....

“Weakness begets weakness.  America’s response to Mr. Putin’s annexation of Ukraine’s Crimea was totally ineffective. When Hitler’s forces marched into the Rhineland in 1936, along the demilitarized border with France, England’s Lord Lothian remarked that this was no more than the Germans walking into ‘their own back garden’ – never mind Germany’s treaty obligations not to do so.

“It was not hard to discern similar undercurrents in the wake of Mr. Putin’s bold Crimea stroke and the U.S. failure to provide defensive weaponry to Ukraine after Russian-backed separatists struck again in eastern Ukraine....

“Despite its many mistakes, the U.S. remains the most credible guarantor of global peace and security.  No invisible hand will secure this outcome. When we pull back, chaos results. And nothing in human affairs is worse.”

---

On Wall Street, for the first time in 43 trading days (since July 8), the equity markets moved up or down 1% (as represented by the S&P 500), in this case down 2.4% on Friday (with the Dow and Nasdaq falling 2.1% and 2.5%, respectively).

The catalyst was a statement from a Federal Reserve governor, Eric Rosengren, the president of the Boston Fed and a voting member of the Fed’s policy-setting board (i.e., his voice thus carries more weight than non-voting members), who said there is a “reasonable case” for a rate hike given the rising risks that the economy and financial markets will overheat.  He added that “despite headwinds from abroad,” the U.S. labor market continues to “gradually tighten” while inflation is “slowly returning” to the Fed’s 2% target.

Rosengren said the jobs market may “reach or even exceed full employment over the next year.”

But another Fed governor, Daniel Tarullo, who is also a voting member, said that while the jobs market has made significant strides since the Great Recession, unemployment could still fall further to fulfill the Fed’s mandate for maximum employment, while inflation is still below the central bank’s 2% target (as measured by its preferred Personal Consumption Expenditures index).  So the Fed should not necessarily raise rates until prices have truly stabilized at or above the benchmark.  Tarullo’s bottom line was that he “wouldn’t foreclose” the possibility of a rate increase this year, but he wasn’t targeting this month like Rosengren was.

[Last weekend, non-voting Fed board member John Williams of San Francisco said the economy was at full strength and that it made sense for monetary policy to respond in kind, “a pace of gradual rate increases, preferably sooner rather than later.”]

Ergo, when it comes to the Sept. 20-21 Open Market Committee meeting, yes, a September rate hike is back on the front burner, but I continue to maintain ‘no way’ because of the election.*  As of Friday afternoon, traders had raised the odds on a September hike to 36% from 28% on Thursday and 15% the week before.

*Trump railed against the Fed this week for artificially propping up the market through low interest rates, though a year ago he said rates should remain at current levels for a long spell.

Meanwhile, the Fed’s Beige Book report on regional economic activity for July and August showed the U.S. economy expanded at a “modest” rate, but price increases remained “slight overall.”

One economic data point arguing against a rate hike in September was the August ISM services reading that came in at 51.4 (50 being the dividing line between growth and contraction), far less than expected and the lowest since Feb. 2010.  Last week we had a poor ISM reading on manufacturing.

---

Congress came back to work after a seven-week recess, and it’s only going to be in session about three weeks before breaking off to campaign.

Ergo, Congress has little time to do important things and, for starters, the U.S. Senate failed to pass a funding bill to help fight the Zika virus for a third time.  Senate Democrats blocked the bill after Republicans sought to stop funding for Planned Parenthood.

Republican Senate Majority Leader Mitch McConnell blamed his Democratic counterparts.

“It’s hard to explain why, despite their own calls for funding, Democrats would block plans to keep women and babies safe from Zika.”

Republican House Speaker Paul Ryan indicated lawmakers would work to include funding for Zika in a budget deal or a continuing resolution that Congress must pass to avoid a government shutdown end of September.  McConnell is eyeing a short-term spending measure that would last through early December, which would force lawmakers to pass either another short-term bill or an omnibus spending package by the end of the year.

Europe and Asia

European Central Bank President Mario Draghi and his board met on Thursday and held the line on interest rates, while making no changes to the 80 billion euro a month bond-buying program (quantitative easing, QE), which is widely expected to be extended beyond next March, though for now, Draghi didn’t commit to do so and said, instead, that the Governing Council will study possible policy changes.

So while Draghi didn’t add any further details, the speculation has been the ECB could expand the kinds of assets that could be purchased, like bank bonds, non-performing loans or even stocks, thus the immediate disappointment in not offering more clarity.

I have been harping for the better part of a year that there is only so much crapola out there for the ECB to purchase, without violating its existing mandates, and the market is finally beginning to recognize this. 

Separately, the ECB slightly amended its growth forecasts for 2016-2018, but to the same 1.6% to 1.7% pace, with inflation of 0.2% this year, 1.2% in 2017 and 1.6% in 2018, all below the 2% target.

The Euro bond market took out its frustrations on Draghi’s failure to lay out a more definitive plan for keeping the spigot open and, for example, the yield on the German 10-year Bund rose from -0.12% to 0.01% (positive!) on just Thursday and Friday.  The British 10-year yield rose from 0.68% to 0.86%, and the French 10-year from 0.16% to 0.30%; still historic record lows, for sure, but big percentage moves some traders got skunked on.

What should be most worrisome is the sector I keep harping on, the bonds on the periphery, from Spain, Italy and Portugal (Greece is a separate case).  The yield on Italy’s 10-year rose Thursday and Friday from 1.08% to 1.25%, to cite another example.  They can surely back down again, depending on what words come from the ECB in the ensuing weeks and months, but some of these yields deserve to be much higher anyway, especially when you have Italy and Portugal with debt loads of about 130% of GDP (Greece is 180%).

There was some economic news for the Eurozone. Retail sales rose 1.1% in July over June, up 2.9% year over year, the largest monthly increase of the year, but non-food was up only 0.4% on the month and this is the indicator for discretionary spending.

Second-quarter GDP for the EA19 was up 0.3% from Q1, 1.6% year on year, in line with previous estimates.  Consumer spending was only 0.2% for the second quarter.

The service sector PMI for the Eurozone was 52.8 vs. 52.9 in July; Germany was 51.7 (lowest in 37 months, 54.4 in July), Italy 52.3, and France 52.3 (10-month high).  Spain was a strong 56.0 vs. 54.1 the prior month.

Industrial production in Germany was down 1.5%, July over June, the biggest drop in 2 years, though this is volatile, while construction was up 2.6% the same month.

But German exports in July fell 10% compared to a year ago, the biggest year on year decline since 2009.  Imports fell by 6.5% over the same period. The exports reading was much worse than expected.

The DIW Institute slashed its estimate on German GDP for 2017 to just 1.0%, citing concerns Brexit will slam exporters.

Speaking of Brexit, the services PMI in the U.K. was 52.9 in August vs. 47.4 in July.  Recall, manufacturing came out the week before at 53.3 for August vs. 48.3, so both would have you believe Brexit is no problem after the initial negative post-Brexit reaction in July (the vote being June 23).

Wrong, as I’ve been saying.  The picture thus far is decidedly mixed, but we won’t know what the real pattern might be until next year once negotiations are truly underway.

Retail sales, for example, fell 0.3% year over year in August, the weakest since Sept. 2014, while manufacturing was down 0.9% in July over June.

There is a critical EU summit, sans Britain, in Bratislava next week.

European Council President Donald Tusk said on Thursday that Britain should start talks to leave the EU as soon as possible.  In London, Tusk met with Prime Minister Theresa May for their first head-to-head meeting since the referendum, as both discussed what steps might be taken over the next few months.

But May insists Britain will not trigger Article 50 of the EU’s Lisbon Treaty to start the exit procedure this year to give her government time to come up with a negotiating strategy.

Philip Stephens / Financial Times

“What was all the fuss about?  The sun is still shining, the economy is growing and Scotland has not seceded. It is time for pro-European doomsters to admit it: Brexit was good for Britain. Now the world awaits its return as a truly ‘sovereign’ nation.  All that remains is for Theresa May’s government to step up the pace of negotiations in order to sever ties with Brussels sooner rather than later.

“So says the prevailing mood nearly three months after the popular vote to take Britain out of the EU. One could quibble with the detail.  The latest rises in some economic indicators reflect a reversal of earlier post-Brexit falls rather than a sign of a coming boom. There is plenty of anecdotal evidence that business is holding back on investment.  The public finances are set to worsen.  As for the fall of sterling, well, yes, it has made exports cheaper, but at the expense of lowering living standards....

“Hubristic denial is the order of the day.  In any event, an argument about the immediate impact of the vote misses the point.  The Brexiters now trumpeting a bright independent future see departure from the EU as an event.  In truth it will be a long, tortuous process – a slow burn, if you like, with costs, economic and political, that will reach well into coming decades.  To make such an obvious point is not to talk Britain down: the fact that things seem fine now says next to nothing about the consequences along the road.

“Mrs. May was reminded of this as she cut a rather lonely figure in meetings with other leaders at the G20 gathering in Hangzhou.  No, the U.S. will not put Britain at the head of the queue for future trade deals.  And yes, Japanese companies will step back from investing in the UK if the government takes it out of the EU single market.  Allies and trading partners are at one in concluding Britain will be diminished by Brexit.  A few kind words from the Australian government are scant consolation.

“To be fair to Mrs. May, word in Whitehall has it that she understands the scale and complexity of the challenge. When she tells the House of Commons that she has no intention of prematurely showing her negotiating hand, what she really means is that she does not yet have such a hand.”

Eurobits...

French authorities arrested three women on Thursday in connection with a car laden with gas canisters that was found abandoned near Paris’ Notre Dame cathedral.  Interior Minister Bernard Cazeneuve said, “These three women aged 39, 23 and 19 had been radicalized, were fanatics and were in all likelihood preparing an imminent, violent act.”  One of the detained women stabbed a police officer during the operation before being shot and wounded.  [Reuters]  Late word has the three being controlled by ISIS.

On the migration front....the issue played a big role in German Chancellor Angela Merkel’s election defeat last weekend as the right-wing AfD party, formed just three years ago, came in second in the chancellor’s home state of Mecklenburg-West Pomerania, polling 21%, while her CDU party was third at 19%; the center-left Social Democrats finishing first at 31%.

AfD (Alternative fuer Deutschland) leader, Leif-Erik Holm, suggested that “perhaps this is the beginning of the end of Angela Merkel’s chancellorship.”

Edmund Stoiber, honorary chairman of the Bavarian-based CSU, the sister party of the CDU, said, “It’s a debacle for Angela Merkel and her refugee policy.”

Wolfgang Bosbach of the CDU said the arrival of hundreds of thousands of migrants without documents had “put the wind in AfD’s sails.”

Many are calling for an immediate cap on refugees. 

So Merkel faces a big election next year, when it is expected she’ll seek a fourth term, but in the immediate aftermath of the humiliating defeat in her home state, she vowed to stand by her refugee policy.  Merkel warned parliament that the AfD’s rise was “a challenge for us all in this building.”

One or two high-profile terror attacks perpetrated by Islamists and Merkel may not make it to Sept. 2017 (the expected election date).  There is one thing in her favor, however...no obvious successor within her party.

One other issue on the topic of migrants is the disastrous migrant camp in Calais, France, called the “Jungle,” where the U.K. is funding a wall along both sides of the main road to Calais port.

The issue has been there are 7,000 migrants, from Africa and the Middle East, who have a very well-established camp as they seek to sneak onto trucks (and ferries), the Channel Tunnel,  and ships making the crossing to the U.K.  As I’ve written for a year in this space, needless to say the locals in northern France (Normandy) are furious, as they see their communities overrun, retail businesses hit, and real estate values plummet.

On Monday, French lorry drivers and farmers blockaded the main motorway route into Calais in a protest calling for the closure of the Jungle.  Drivers are regularly threatened by bands of migrants “and even mafia organizations attempting to smuggle people across the Channel.”  [Financial Times]

The Jungle is a source of major tension between the U.K. and France, with some French politicians demanding the renegotiation of the 2003 Le Touquet treaty, which enables British officials to check passports in France; which also means the migrants gather in Calais for processing rather than in the U.K.

Nicolas Sarkozy, who wants to return as president in France, last week said that Britain should open a detention center for migrants on its territory, rather than in France. Sarkozy said that if elected, he would “travel to London the next day” to negotiate over the migrants.   [FT]

[Meanwhile, Sarkozy faces a potential trial over 2012 election funding irregularities, along with 13 others in what is called the Bygmalion Affair (sic), involving spending overruns and allegedly illegal financing.  Sarkozy’s Les Republicains party holds their primary contest in late November for the place on the presidential ballot next spring.]

Lastly, Poland’s foreign minister was due to visit the U.K. after a Pole was beaten to death in Harlow, north of London, on Aug. 27 and two Polish nationals were assaulted in the same town on Sept. 4, as police investigate the incidents as potential hate crimes amid an escalation of anti-foreigner sentiment following Brexit.

---

Turning to Asia, in China, the private Caixin services PMI came in at 52.1 vs. 51.7 in July, while August exports fell 2.8% in $dollar terms year over year vs. a decline of 4.4% in July.  Imports rose 1.5% (the first rise since Oct. 2014) vs. a decline of 12.5%, according to government statistics.

Exports to the U.S. fell 0.2% and 2.0% to Asean, but rose 2.4% to the EU.

Producer, or factory gate, prices in China fell the least since 2012 last month, which is a good sign, contracting only 0.8% year on year, better than July’s 1.8% drop, according to the National Bureau of Statistics.

Month-on-month, producer prices rose 0.2% for a second month running.

The official consumer price index rose 1.3% in August, down from 1.8% in July.  Food inflation was 1.5%.

In Japan, real wage growth rose a sixth consecutive month in July, up 2.0% adjusted for inflation, which is good, but it’s not good enough as a revision to second quarter GDP, while being revised upward to 0.7% from 0.2% annualized, showed private consumption rising only 0.2% year over year and this is 60% of the economy.

The service sector PMI came in at 49.6 in August vs. 50.4 in July.

But the yield on the Japanese 10-year (JGB) climbed to -0.02%!....the highest in six months.

However, just as in the case of the ECB, Japan’s central bank could be running out of government bonds to buy.  As the Wall Street Journal noted on Friday, the Bank of Japan is buying up more than $750 billion worth of government paper a year, but at that rate, banks could run out of government debt to sell within the next 18 months.

The Japanese banks have to hold a certain amount of safe debt to use as collateral for their everyday transactions, which limits what they have available to sell at the BOJ’s pace of buying. 

Much more on this topic in coming weeks, because some say there will be no more supply by end of the year.  This week’s ‘rally’ to a yield of -0.02% on the 10-year is a sign the BOJ is already reducing its purchase of longer-dated JGBs.

Street Bytes

--The market’s losses for the holiday-shortened week were all essentially on Friday, with the Dow losing 2.2% to 18085, the S&P 500 2.4% to 2127 and Nasdaq 2.4% to 5125.

--U.S. Treasury Yields

6-mo. 0.51%  2-yr. 0.78%  10-yr. 1.67%  30-yr. 2.39%

The yield on the 10-year is the highest since June.  Reminder...it finished 2015 at 2.27%.

--Oil prices rallied back some this week, largely on the heels of a report Thursday that showed U.S. crude inventories tumbled by the most since 1999 last week.

Earlier, at the G20 summit, Russian and Saudi energy ministers announced an agreement to look for ways to stabilize the oil market, including a possible attempt to limit oil output, or an outright “freeze,” as Russia put it.

But Saudi Arabia said freezing output was not “necessary” now.

There is an informal energy meeting coming up later this month, with OPEC scheduled to officially meet in Vienna in November, with Russia likely to send a delegation to that confab.

--The national average price for regular unleaded gasoline was $2.20 per gallon on Labor Day, 18 cents less than a year ago, but 8 cents more than one month ago.

Gas prices are lowest in South Carolina ($1.94), while Hawaii ($2.75) and California ($2.67) have the highest.

Here in New Jersey, the average the other day was $1.99.

--Wells Fargo was fined $185 million, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has ever issued, as the bank’s employees created fake email accounts to sign up customers for online banking services, with customers accumulating late fees on accounts they never even knew they had.

In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by their customers.

Wells said it has fired over 5,000 employees that were motivated by compensation policies that rewarded them for drumming up new business.

Richard Cordray, director of the Consumer Financial Protection Bureau, said, “Unchecked incentives can lead to serious consumer harm, and that is what happened here.”

Regulators said the illegal sales practices had been going on since at least 2011.

--Apple unveiled its new iPhone 7 and 7 Plus Wednesday, though there are no major changes (save one), which most expect to come next year at the 10-year anniversary of the smartphone.

Instead, Apple talked of better battery life, water resistance, and a more powerful camera.

But Apple removed the headphone jack, because the phones will now include headphones that connect to the lightning jack, which charges the phone.  Apple, instead, announced a new product called “AirPods,” wireless ear buds, and this stirred up social media in a most negative way.

Apple also announced a new version of its Watch, “Series 2,” which has been “completely reengineered,” operating chief Jeff Williams said on stage in San Francisco.  There is a built-in GPS, bringing its features closer to traditional running watches by the likes of Garmin.

Sales of the original Apple Watch have been disappointing, though some analysts say customers have been waiting for the new model.  [Yeah, right.  This is just a stupid product.]

The fact is Apple is an ex-growth company. Revenues in the past four quarters were $220 billion, and $224bn in the prior 12 months.  The smartphone market is saturated.  In the second quarter 343.3m devices were shipped, according to research firm IDC, which was just a 0.3% increase on the same period a year earlier.  [Financial Times / Lex column]

Lastly, Apple is relying on heavy sales from China, but it has fallen to fifth place in smartphone sales there as Chinese makers offer feature-rich devices for lower prices, while the anti-Western rhetoric I have long warned about, will no doubt crimp Apple sales further.

But as the Wall Street Journal’s Eva Dou points out, if the iPhone 7 flops in China, this would impact hundreds of thousands of workers at the Foxconn Technology complex in Zhengzhou where the iPhone is primarily assembled.

--Apple competitor Samsung has its own big problems as this week it announced a massive recall of its new Galaxy Note 7 smartphones, due to instances where the lithium-ion battery is exploding when it is being charged.

The lithium batteries are no more inherently dangerous than any other battery, but they are more energy dense, which makes them so attractive for device makers because they can store relatively large amounts of energy in a small space.

But with all that stored energy, the battery becomes more dangerous. 

Samsung has confirmed at least 35 cases of the smartphones catching fire or exploding.

The FAA issued a directive prohibiting airline passengers from packing Galaxy Note 7s in their checked luggage, nor using them onboard.

--Hewlett Packard Enterprise announced the sale of most of the company’s software assets to a British outfit called Micro Focus for about $8.8 billion.  Meg Whitman, the CEO of H.P.E., also announced higher earnings in the company’s most recent quarter though a decline in revenue from a year ago.

H.P.E. is the computing giant created from half of Hewlett-Packard last year, with the other half specializing in PC and printer sales...HP Inc.

--The other day I talked about bankrupt Hanjin Shipping Co. of South Korea, which has dozens of ships carrying more than half a million cargo containers that are being denied access to ports around the world.  With questions about the payment of docking fees and container storage, some of the ships have already been seized.  As the Wall Street Journal reported, Samsung Electronics Co. said it has cargo valued at $38 million stranded on Hanjin ships.

About 95% of the word’s manufactured goods are conveyed in shipping containers and, while Hanjin represents ‘only’ about 3% of global container capacity, this chaos comes as retailers are preparing for the holiday season and shelve stocking time.

You also have an issue where the ships themselves are running low on food, water and fuel.  Plus the rats are going stir crazy.

The industry as a whole continues to struggle with too much capacity for the current sluggish levels of demand.  But Hanjin made things worse when it sold off much of its fleet after 2008 and chartered vessels, whose rates were fixed at 30 to 50 percent higher than current market rates.  [South China Morning Post]

[Late Friday, Hanjin did say it had enough cash to begin unloading four ships in the U.S.]

--Canada’s economy added more jobs, 26,200, than expected in August. The unemployment rate rose to 7.0 percent as more people entered the labor market.

--Apache Corp. said it had discovered a huge new field in West Texas, which the company says could become one of the biggest finds of the past decade; perhaps two billion barrels of oil.  Actually, the test well produced more natural gas than oil, but the profits, even at today’s prices, could be huge.

Apache is the sixth-largest independent energy company in the U.S.

--Betterment LLC still hasn’t come clean on its 2 ½ hour trading halt during the post-Brexit market turmoil of June 23.  June 24, financial advisors and institutional customers were told they would receive more information within weeks that explained the firm’s policies around trading halts, but as the Wall Street Journal reported the other day, “no such guidance has been coming from Betterment.”

In a form filed with the Securities and Exchange Commission, Betterment clarified that it reserves the right to delay or manage trading in response to market instability “at any time without notice.”

Betterment is just one of the robo advisers that are disrupting traditional Wall Street, but in this case they are eschewing the very transparency they trumpet.

These firms tout their ability to keep costs low by directing clients into baskets of exchange-traded funds calibrated to the client’s goals and risk tolerances.

But in times of turmoil, like the Brexit situation, they didn’t provide the liquidity expected of them.

--PIMCO’s Total Return bond fund suffered its 40th consecutive month of customer redemptions, according to the company.  Once the largest fixed income fund in the world with $293bn in assets at its peak, Total Return was down to $85.8bn at the end of August after another $615m of outflows.  It hasn’t helped that the fund is in the bottom 20 percentile in its category, according to figures from Morningstar.  September marks two years since Bill Gross’ departure, which turned a trickle of outflows at that time into a torrent, with investors and pension funds abandoning ship in droves.

--Delta Air Lines said its massive computer issues in August caused revenue to be hit by $100 million in the month, with passenger revenue per available seat mile, a key metric, falling 9.5% year on year last month, after a 7% drop in July.

--Update: I recently wrote of a data leak involving a French naval contractor, DCNS, that was building submarines for India.  This week India announced it was unlikely to proceed with an order for three new subs, in addition to the six DCNS is already building for the country, due to the leak.

--Activist investor Bill Ackman disclosed his Pershing Square investment vehicle had taken a 9.9% stake in Chipotle Mexican Grille, which sent shares soaring 9%.  Ackman said he hoped to see improvements in the board composition, operations and the financial condition of the company.

Chipotle stock had fallen over 40% in the past year as the casual dining chain attempts to build back customer trust following an E. coli scare late last year.  Despite various company initiatives, the days of lines out the door are a thing of the past.

--ITT Technical Institute, a for-profit education chain, permanently closed all its campuses nationwide, as the company blamed the U.S. Education Department and its ban that prevented ITT from enrolling new students who use federal financial aid.

The shutdown affects about 35,000 students and will also cost more than 8,000 employees their jobs.  Some of the students will be eligible to have federal loans from their ITT education forgiven if they start over at another school.

--Movie box-office receipts for the three summer months in China stagnated this year, 12.43 billion yuan ($1.86bn), compared with 12.47 billion yuan last summer, according to Beijing based film-research company EntGroup.

Apparently, ticket sales were hurt by the phaseout of generous discounts from online-ticketing platforms trying to build market share.

Foreign movies did better than domestic ones over the summer, with 18 imported titles accounting for 48% of the box office, including Hollywood flop “Warcraft.”  [WSJ]

--The parent company of Fox News, 21st Century Fox Corporation, settled a lawsuit with former Fox News anchor Gretchen Carlson, who said that Roger Ailes had sexually harassed her when he was chairman of the network.  The settlement was for a reported $20 million.  There have also been far smaller settlements with two other unidentified Fox employees.

At the same time, minutes after the Carlson settlement was announced, the departure of Greta Van Susteren was revealed, to be replaced by Brit Hume, probably just through the election (as he is already eagerly saying).

Here I just told you the other day that Greta was the only anchor at Fox that I liked, and the exit was so fast, she wasn’t allowed to announce her departure on her own show.  She apparently had wanted a couple weeks of final air time after 14 years.

Greta was among the first to publically defend former chairman and founder Ailes when Carlson slapped him with the sexual harassment suit.  Greta also ripped Carlson as a bitter ex-employee and a liar.

--Dos Equis is unveiling its new “Most Interesting Man in the World” – 41-year-old French actor Augustin Legrand, who is taking over for Jonathan Goldsmith, who retired from the iconic role that he played for nearly a decade.

There is a teaser spot out there now, but the full ad campaign launches in October.

--Talk about a nightmare, how about being stranded in a cable car at 10,000 feet, as was the case for 45 people at Europe’s highest mountain, Mount Blanc, overnight, for a full 10 hours before they were rescued.

The Vallee Blanche cable car journey is 5km long and usually takes 35 minutes.  65 people were rescued before nightfall prohibited further rescues, in what was obviously a rather delicate operation.

It seems that the cables got tangled in high wind.

Hopefully no one started “100 bottles of beer on the wall....” 

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: I’m the ‘wait 24 hours’ guy and a few hours ago we learned that the U.S. and Russia announced plans for a cease-fire deal in Syria that would ultimately include military cooperation if implemented.

The accord would prevent the Syrian regime from flying combat missions where opposition forces are operating.  At first shorter cease-fires would take place and after 7 days, the U.S. and Russia would cooperate militarily to combat ISIS.

Sustained humanitarian access to all of the besieged areas, including Aleppo, is part of the agreement.

Needless to say we’ll learn a lot by the time I next write.

This week Syria was accused of dropping barrel bombs containing chlorine from helicopters on a suburb of Aleppo, killing at least two and injuring over 80.  The footage of the aftermath was chilling.

The leader of Syria’s main political opposition group criticized the U.S. for not doing enough to end his country’s civil war, as he warned that his group’s new plan to halt the bloodshed will only succeed if the West gets President Bashar al-Assad to quit.

Riad Hijab, head of the High Negotiations Committee (HNC), an umbrella of opposition groups backed by the West and Gulf states, said Obama is “paying lip service support” to the opposition.

“We are very disappointed that the Americans are not taking an effective role in delivering what they said they should deliver,” Mr. Hijab said.  “Obama said in 2011 that Assad has lost his legitimacy. He had many ‘red lines’ [that Assad has crossed], but we’re now coming to a position where Obama is leaving and Assad is still in place.”

Meanwhile, Turkey said it would be willing to join an initiative proposed by the United States to capture the ISIS stronghold of Raqqa, per discussions President Obama had with Turkish President Erdogan at the G20 summit in China.

But the U.S. is still concerned that following Turkey’s invasion of northern Syria on Aug. 24, the Turks have not just been going after ISIS, but also Kurdish forces friendly to the U.S., the YPG.

Heavy Turkish shelling across the border into Syria killed six U.S.-backed Kurdish fighters (the YPG) and wounded several civilians, according to the Syrian Observatory for Human Rights. At least 19 Kurdish fighters and allied fighters have been killed by the Turks since the incursion began.

The Turks have begun losing soldiers in the conflict, with three killed by rockets fired by ISIS on Tuesday.

Turkey has also been calling for a “safe zone” on the Syrian border to stem the flow of Syrian refugees, but the U.S. and Russia would have to agree to this and this isn’t likely.

In other developments....

ISIS claimed responsibility for a string of bombing across Syria on Monday that killed at least 48, one of which targeted a bridge in the provincial capital of Tartus that killed 35.  A car bomb exploded first, and then a suicide bomber detonated his explosive belt when people gathered to help the wounded.

A senior commander of the Syrian militant group formerly known as al-Nusra Front was killed near Aleppo in an airstrike, according to the group Janhat Fateh al-Sham, which is what Al-Nusra Front changed its name to this summer in cutting ties with al-Qaeda at the same time.  It’s not known whose warplanes took out Abu Omar Sarakeb.

Israel:  The Israelis are increasingly concerned about troop movements by Syrian regime forces, along with Hizbullah fighters near the border with Israel as they look to clear out opposition forces.  On Monday, a former Israeli security official told the Jerusalem Post that the Syrian conflict is entering a highly unpredictable phase, with Hizbullah posing a growing threat despite losing a large number of fighters in the Syrian war.

Iran: A bitter war of words between Iran and Saudi Arabia has intensified ahead of the annual hajj pilgrimage from which Iranians have been excluded for the first time in decades.

Supreme Leader Ayatollah Ali Khamenei blasted the “incompetence” of the Saudi royal family as he met with the families of victims of last year’s deadly stampede at the hajj.

“This incident proves once again that this cursed, evil family does not deserve to be in charge and manage the holy sites,” Khamenei said.

The hajj is due to start today, Saturday, and Iranians have been blocked after talks on safety and logistics fell apart in the spring.

Iranian President Hassan Rouhani said of the Saudis, “Unfortunately, this government by committing crimes in the region and supporting terrorism in fact shed the blood of Muslims in Iraq, Syria and Yemen.”

Saudi Arabia claims the death toll from last year’s stampede was ‘only’ 769.  The Iranians claim 2,300 deaths, including hundreds of their countrymen.  Data from more than 30 countries suggests it was far higher than the 769 figure.

Iran has boycotted the hajj in the past, like after clashes between Iranian pilgrims and Saudi police left hundreds dead in 1987, though diplomatic ties were restored in 1991. 

Around 60,000 Iranians took part in last year’s hajj.  [Agence France Presse]

Separately, an ongoing Wall Street Journal investigation by Jay Solomon and Carol E. Lee has found that “The Obama administration followed up a planeload of $400 million in cash sent to Iran in January with two more such shipments in the next 19 days, totaling another $1.3 billion.”

“The cash payments – made in Swiss francs, euros and other currencies – settled a decades-old dispute over a failed arms deal dating back to 1979.  U.S. officials have acknowledged the payment of the first $400 million coincided with Iran’s release of American prisoners and was used as leverage to ensure they were flown out of Tehran’s Mehrabad on the morning of Jan. 17.”

But the latest revelations add to Republicans’ argument that the White House paid ransom to Tehran, a charge President Obama has repeatedly denied.  Sen. Marco Rubio has introduced legislation that would bar such payments in the future, while seeking to reclaim the $1.7 billion for victims of Iranian-backed terrorism.

Afghanistan: Three separate blasts in Kabul on Monday killed at least 35 people, including four Afghan soldiers, with more than 100 injured.  The Taliban claimed responsibility as the once secure capital continues to get hit with regularity, a terrible sign.

One of the bombs went off outside a building belonging to CARE, a U.S.-based charity.

North Korea: Pyongyang exploded its fifth nuclear test despite threats of more sanctions from the United States and the U.N., resulting in a magnitude 5.3 “artificial” tremor.  North Korea last tested a nuclear device on Jan. 6, and this one appears to be the biggest of the five.  [Earlier in the week, in a move timed to compete with the G20 summit in Hangzhou, the North fired three ballistic missiles toward Japan.]

State TV in Pyongyang said the test elevated the country’s nuclear arsenal and is part of its response to sanctions.  The North said it will continue to strengthen the quantity and quality of its nuclear weapons.

“Our nuclear scientists staged a nuclear explosion test on a newly developed nuclear warhead at the country’s northern nuclear test site,” state TV said.

“Our...party sent a congratulatory message to our nuclear scientists...for conducting the successful nuclear warhead explosion test.”

South Korean President Park Geun-hye strongly condemned the test, describing the action as the “fanatic recklessness of the Kim Jong Un government as it clings to nuclear development.”

President Obama warned of “serious consequences.”  [Whatever...]

Russia’s Foreign Ministry said in a statement that Pyongyang must give up its missile and nuclear programs, adding: “We insist that the North Korean side stop its dangerous escapades and unconditionally implement all resolutions of the United Nations Security Council.”

NATO Secretary General Jens Stoltenberg told Pyongyang it must drop all nuclear and ballistic missile activities.

Japanese Prime Minister Shinzo Abe said: “North Korea’s carrying out of a nuclear test is absolutely unacceptable for Japan.  North Korea’s nuclear development is becoming a graver threat to Japan’s safety and severely undermines the peace and safety of the region and the international community.”

China said on Friday it “firmly opposes” the test but it has limited room to maneuver, as its priority is to avoid a collapse of the regime that would create a crisis on its border.

A representative from the South’s meteorological agency said “The 10-kiloton blast was nearly twice the fourth nuclear test and slightly less than the Hiroshima bombing, which was measured at about 15 kilotons.”

Kim Jong Un has overseen a rapid increase in the number of missiles tested this year, as the world waits to see when it will miniaturize its nuclear capability to the point of having a nuclear warhead that would fit on a long-range missile capable of hitting the U.S., as it also works to perfect new platforms for launching them – submarines and mobile launchers.

But while the U.N. will no doubt come up with new sanctions, it’s pretty clear the existing ones haven’t been effective.

I have written in the past, the North would appear to be making such rapid progress in its missile program that I am already concerned about next Fourth of July, Pyongyang always picking significant dates for its tests.  The nuke test fell on the 68th anniversary of the founding of North Korea’s government.

China: Charles Krauthammer / Washington Post...on Obama’s arrival at the G-20....

“The president of the United States lands with all the majesty of Air Force One, waiting to exit the front door and stride down the rolling staircase to the red-carpeted tarmac. Except that there is no rolling staircase. He is forced to exit – as one China expert put it rather undiplomatically – through ‘the ass’ of the plane.

“This happened Saturday at Hangzhou airport.  Yes, in China. If the Chinese didn’t invent diplomatic protocol, they surely are its most venerable and experienced practitioners. They’ve been at it for 4,000 years.  They are the masters of every tributary gesture, every nuance of hierarchical ritual.  In a land so exquisitely sensitive to protocol, rolling staircases don’t just disappear at arrival ceremonies.  Indeed, not one of the other G-20 world leaders was left stranded on his plane upon arrival.

“Did President Xi Jinping directly order airport personnel and diplomatic functionaries to deny President Obama a proper welcome? Who knows? But the message, whether intentional or not, wasn’t very subtle. The authorities expressed no regret, no remorse and certainly no apology. On the contrary, they scolded the media for even reporting the snub.

“No surprise. China’s ostentatious rudeness was perfectly reflective of the world’s general disdain for Obama.  His high-minded lectures about global norms and demands that others live up to their ‘international obligations’ are no longer amusing.  They’re irritating.

“Foreign leaders have reciprocated by taking this administration down a notch knowing they pay no price.  In May 2013, Vladimir Putin reportedly kept the U.S. secretary of state cooling his heels for three hours outside his office before deigning to receive him.  Even as Obama was hailing the nuclear deal with Iran as a great breakthrough, the ayatollah vowed ‘no change’ in his policy, which remained diametrically opposed to ‘U.S. arrogant system.’ The mullahs followed by openly conducting illegal ballistic missile tests – calculating, correctly, that Obama would do nothing.  And when Iran took prisoner 10 American sailors in the Persian Gulf, made them kneel and broadcast the video, what was the U.S. response?  Upon their release, John Kerry publicly thanked Iran for its good conduct.

“Why should Xi treat Obama with any greater deference?  Beijing illegally expands into the South China Sea, meeting only the most perfunctory pushback from the U.S. Obama told CNN that he warned Xi to desist or ‘there will be consequences.’ Is there a threat less credible?

“Putin annexes Crimea and Obama crows about the isolation he has imposed on Russia. Look around.  Moscow has become Grand Central Station for Middle East leaders seeking outside help in their various conflicts.  As for Ukraine, both the French president and the German chancellor have hastened to Moscow to plead with Putin to make peace. Some isolation....

“At the G-20, Obama said he spoke to Putin about cyberwarfare, amid revelations that Russian hackers have been interfering in our political campaigns.  We are more technologically advanced, both offensively and defensively, in this arena than any of our adversaries, said Obama, but we really don’t want another Cold War-style arms race.

“Instead, we must all adhere to norms of international behavior.

“It makes you want to weep.”

At an East Asia summit where the issue of security in the South China Sea was raised, China’s vice foreign minister, Liu Zhenmin, responding to a question from a reporter about whether the leaders of Japan and the United States had raised concerns about the disputed area, said, “Outsider countries like to interfere whenever they see countries in the region strengthening relations and working together to solve problems,” and that two (unidentified) countries kept trying to “sow discord” during the summit.

On the issue of Hong Kong, at last weekend’s LegCo elections, 30 pro-democracy candidates were elected to the 70-seat legislative body, meaning they retain the ability to veto any major constitutional changes the pro-Beijing forces may put up.  The 30 figure is up from 27 previously and includes 23-year-old Nathan Law, a prominent activist from 2014’s “Umbrella Protests.”

Beijing is warning that anyone advocating Hong Kong’s independence could be punished, state media reported, as the Chinese government is strongly opposed to more political independence for Hong Kong.

But the pro-democracy forces want one thing...they don’t want to become just another Chinese city, with other forces within this bloc seeking a referendum on the former British colony’s future.

Chinese state news agency Xinhua countered, “We firmly support the Hong Kong SAR [special administrative region] government to mete out penalties according to law.”

2017 will be an explosive year here.  40 percent of Hong Kong youths between ages 15 and 24 support eventual independence, according to a recent poll.

Just another item for the new U.S. president’s agenda.

China also released a series of high-definition satellite images that zoomed in on foreign military installations, including Edwards Air Force Base in California and the Area 51 weapons testing grounds in Nevada, the first time such images had been released to the public.

The images were taken by JLCG-1, a microsatellite constellation launched last year, which consists of four satellites that have limited maneuverability, “meaning that if they enter into a collision course with the space station or other spacecraft in the busy lower-earth orbit, their operator would be unable to move them out of the way,” as reported by the South China Morning Post’s Stephen Chen.

I recently wrote about the skyrocketing number of satellites orbiting the earth, whose numbers will continue to soar (more than double in five years), but this drastically increases the risks of collision and huge amounts of space debris.

As Mr. Chen writes, “China could ‘pollute’ space with a large number of small, cheap satellites...unless the industry is reined in with strict, clear regulations as quickly as possible.”

Ain’t gonna happen.

Russia: A Russian fighter jet carried out an “unsafe and unprofessional” intercept of a U.S. spy plane over the Black Sea and came within 10 feet of the American aircraft, U.S. defense officials said on Wednesday.  Russia said it sent Su-27 fighter planes to intercept a U.S. aircraft approaching its border over the Black Sea because the American planes had turned off their transponders, which are needed for identification.

Separately...Anne Applebaum / Washington Post

“ ‘U.S. investigates potential covert Russian plan to disrupt November elections.’  To those unused to this kind of story, I can imagine that headline, from The Post this week, seemed strange.  A secret Russian plot to throw a U.S. election through a massive hack of the electoral system?  It sounds like a thriller, or a movie starring Harrison Ford.  In fact, the scenario under investigation has already taken place, in whole or in part, in other countries.  Quite a bit of the story is already unfolding in public; strictly speaking, it’s not ‘secret’ or ‘covert’ at all. But because most Americans haven’t seen this kind of game played before (most Americans, quite wisely, don’t follow political news from Central Europe or Ukraine), I think the scenario needs to be fully spelled out. And so, based on Russia’s past tactics in other countries, assuming it acts more or less the same way it acts elsewhere, here’s what could happen over the next two months:

“1. Trump, who is advised by several people with Russian links, will repeat and strengthen his ‘the election is rigged’ narrative...

“2. Russia will continue to distribute and publish the material its hackers have already obtained from attacks on the Democratic National Committee, George Soros’ Open Society Foundation, former NATO supreme commander Gen. Philip Breedlove and probably others.  The point will be to discredit not just Hillary Clinton but also the U.S. democratic process and, again, the ‘elite’ who supposedly run it....

“3. On or before Election Day, Russian hackers will seek to hack the U.S. voting system.  We certainly know that this is possible: Hackers have already targeted voter registration systems in Illinois and Arizona, according to The Post, and the FBI has informed Arizona officials that it suspects Russian hacking teams....

“4. The Russians attempt to throw the election.  They might try to get Trump elected....

“5. Once revealed, the result will be media hysteria, hearings, legal challenges, mass rallies, a constitutional crisis – followed by confusion, chaos and an undermining of the office of the presidency.  Trump might emerge from the process as president after all.  He will then go on, as promised at so many rallies, to ‘lock her up,’ and of course to open a broad relation with Russian President Vladimir Putin, the only foreign leader he seems to truly admire.  Even if Clinton remains as president, she will be tarnished....At least a part of the country will assume she is illegitimate...

“6. More likely, the hack will fail, or never even get off the ground.  But what’s the downside in trying, or even in letting it be known that it was tried?  Rumors of election fraud can create the same hysteria as real election fraud....

“7. And what’s the downside for Trump?  If he wins, he wins.  If he loses – then there are all kinds of ways to make money from the ‘election was rigged’ narrative... Whatever happens, the political process is undermined, social trust plummets further and the appeal of American democracy, both at home and around the world, diminishes. And that, of course, is the point.”

Lastly, Interfax news agency quoted Russia’s Defense Ministry as saying Russia has formed a “self-sufficient military group” in Crimea capable of repelling attempts to seize the peninsula.

Philippines: Last week I said my piece on Philippine President Rodrigo Duterte, calling him “a wacko.”  Well, a few days later you had an example of what I was referring to when Duterte said that Obama better not question him about his drug war that has seen more than 2,400 killed, calling Obama a “son of a bitch.”

The two were to meet on Monday, but Obama correctly canceled after the insult.  Duterte later said he “regretted” using such language.

Shortly after his election, Duterte declared, “I will be charting a [new] course [for the Philippines] on its own and will not be dependent on the United States.”

But as Richard Javad Heydarian recently wrote for Defense News:

“Since then, when it comes to relations with Washington, the new president has broken one diplomatic taboo after the other.  On multiple occasions, he has openly questioned America’s commitment to come to the Philippines’ aid in an event of conflict in the South China Sea.  He has intimated that he will put new restrictions on the movement of American military personnel on Philippine soil, though vowed to honor existing bilateral security agreements.”

The Obama administration is walking a tightrope, as Duterte has moved closer to China in recent months, despite China’s refusal to even acknowledge the United Nations Convention on the Law of the Sea ruling at The Hague this summer, debunking the bulk of Beijing’s territorial claims over the South China Sea.

Duterte has met with the Chinese ambassador to the Philippines more than any other diplomatic envoy in Manila, according to Heydarian.

Random Musings

--Polls....

A CNN/ORC national poll of likely voters has Donald Trump with a 45-43 lead over Hillary Clinton, with Libertarian Gary Johnson at 7% and Green Party candidate Jill Stein at 2%.

Independents favor Trump 49-29, with Johnson at 16%.

Single women go for Hillary over Trump by a 73-20 margin.  Married women favor Trump 53-26.

In an NBC News/Survey Monkey Weekly Tracking Poll, Trump leads Clinton by 19 points, 55% to 36% - among voters who are currently serving or have previously served in the U.S. military.

[In the battle of the generals’ endorsements, Trump came up with 88, Clinton 95.  Many of these are nothing more than bureaucratic hacks.]

Among all registered voters, 59% would not be confident in Trump’s ability to serve as commander-in-chief of the military and just 39% would feel confident.  In this same category, 52% would not be confident in Clinton’s ability to serve, 46% would be.

A RealClearPolitics average of the polls is now at about 2 points, Clinton leading Trump, which is down from 8 points in mid-August.

But as for some key battleground states, a Quinnipiac University poll released Thursday had some important data:

Florida: Clinton is tied with Trump at 47 percent.
North Carolina: Clinton leads Trump 47-43.
Ohio: Trump leads Clinton 46-45.
Pennsylvania: Clinton leads 48-43.

If you add in Gary Johnson and Jill Stein....

Florida: 43-43, Johnson 8%, Stein 2%
North Carolina: Clinton 42-38, Johnson 15%, Stein is not on the ballot.
Ohio: Trump 41-37, Johnson 14%, Stein 4%.
Pennsylvania: Clinton 44-39, Johnson 9%, Stein 3%.

But the impressive totals for Johnson in some of the above were prior to his gaffe.

--The FBI conveniently released notes from an FBI interview with Hillary Clinton over Labor Day weekend and there were about 40 times where the former secretary of State told officials she did not recall receiving emails she thought should not have been on an unclassified system, relying instead on State officials to use their judgment when emailing her.

RNC chairman Reince Priebus said in a statement, “Clinton’s answers either show she is completely incompetent or blatantly lied to the FBI or the public.”

Clinton spokesman Brian Fallon said in a statement: “While her use of a single email account was clearly a mistake and she has taken responsibility for it, these materials make clear why the Justice Department believed there was no basis to move forward with this case.”

Investigators found that a number of Clinton’s private emails were erased several weeks after the New York Times first reported on the existence of the private server and her use of it while in office.

Editorial / Wall Street Journal

“The closer we look at the FBI’s investigative file on Hillary Clinton’s emails, the more we wonder if Director James Comey always intended to let her off the hook. The calculated release before the long Labor Day weekend suggest political favoritism, and the report shows the FBI didn’t pursue evidence of potential false statements, obstruction of justice and destruction of evidence.

“Mr. Comey’s concessions start with his decision not to interview Mrs. Clinton until the end of his investigation, a mere three days before he announced his conclusions.  Popular FBI practice is to get a subject on the record early then see if his story meshes with what agents find. In this case they accepted Mrs. Clinton’s I-don’t-recall defenses after the fact.

“The notes also show the G-men never did grill Mrs. Clinton on her ‘intent’ in setting up her server. Instead they bought her explanation that it was for personal convenience. This helped Mr. Comey avoid concluding that her purpose was to evade statutes like the Federal Records Act.  Mr. Comey also told Congress that indicting her without criminal intent would pose a constitutional problem. But Congress has written many laws that don’t require criminal intent, and negligent homicide (for example) has never been unconstitutional.

“The FBI notes also blow past evidence that Clinton advisers may have engaged in a cover-up.  Consider page 10 of the FBI report: ‘Clinton’s immediate aides, to include [Huma] Abedin, [Cheryl] Mills, Jacob Sullivan, and [redacted] told the FBI they were unaware of the existence of the private server until after Clinton’s tenure at State or when it became public knowledge.’

“That’s amazing given that Ms. Abedin had her own email account on the private server.  It is also contradicted by page 3: ‘At the recommendation of Huma Abedin, Clinton’s long-time aide and later Deputy Chief of Staff, in or around fall 2008, [Bill Clinton aide Justin] Cooper contacted Bryan Pagliano...to build the new server system and to assist Cooper with the administration of the new server system.’....

“There’s more the G-men ignored.  Starting on page 18, the FBI notes that on March 2, 2015, the New York Times broke  the news about Mrs. Clinton’s private server.  On March 4, 2015, the House Select Committee on Benghazi issued a subpoena for Mrs. Clinton to produce emails from clintonemail.com.  The FBI notes that in the days following the New York Times story, Ms. Mills ‘requested that PRN [Platte River Networks, the outside company then maintaining the Clinton technology] conduct a complete inventory of all equipment related to [the Clinton server].  And on March 25, PRN ‘held a conference call with President Clinton’s staff.’  A PRN employee then sometime ‘between March 25-31, 2015 deleted the Clinton archive mailbox from the PRN server.’  The FBI reports that it had found a ‘PRN work ticket, which referenced a conference call among PRN, [Clinton attorney David] Kendall, and Mills on March 31, 2015.’  The PRN employee was advised by an attorney ‘not to comment on the conversation with Kendall based upon the assertion of attorney-client privilege.’....

“What was said in those PRN* conversations with Ms. Mills, Clinton aides and Mr. Kendall?  Why the sudden Clinton rush to deal with a server that had been sitting quietly for so long?   Usually, the FBI is keenly interested in any potential destruction of evidence – especially evidence under subpoena. Yet the FBI didn’t explore the details of the convenient archive deletions.

“The FBI’s kid-glove treatment of Mrs. Clinton raises serious doubts about the seriousness of Mr. Comey’s probe.  His July 5 public rebuke of her ‘extremely careless’ handling of secrets has masked that Mrs. Clinton and her aides were given a pass on much of their behavior and dubious answers.  The entire episode is another Jim Comey scar on the FBI’s reputation.”

*PRN used BleachBit, a software designed to prevent the recovery of deleted files.

Editorial / New York Post

“In her FBI interview, (Clinton) ‘couldn’t recall’ any State training or warnings on retaining records, handling classified info or e-mail policies of any kind.

“But she was the boss: It was her job to know the rules for protecting the nation’s secrets and leaving a complete record of her work – or at least to hire aides who’d get it done.  But she hired enablers who helped keep her secrets without guarding America’s.

“In total, the report shows behavior far worse than ‘extremely careless,’ as FBI chief Jim Comey termed it as he recommended against legal charges.  Central to the case for mercy was his claim she didn’t ‘intend’ to break the law. Yet his own agents’ report shows that, at the minimum, she just didn’t give a damn what the law required.

“ ‘Criminally reckless’ is more like it.”

Former secretary of State Colin Powell advised his successor, Clinton, on how to circumvent federal records requirements in a newly released email exchange, dating back to two days after Clinton was sworn into office in 2009.

“I had an ancient version of a PDA and used it,” Powell said in the exchange with Clinton.  “If it is public that you have a Blackberry, it may become an official record and subject to the law.”

“Be very careful,” warned Powell.  “I got around it all by not saying much and not using systems that captured the data,” he said.

The email was released by Rep. Elijah Cummings, the top Democrat on the House Oversight Committee.

The exchange, said Cummings, shows that Powell gave Clinton “a detailed blueprint on how to skirt security rules and bypass requirements to preserve federal records, although Secretary Clinton has made clear that she did not rely on this advice.  (It) also illustrated the longstanding problem that no secretary of State ever used an official unclassified email account until the current secretary of State,” Cummings said.

For his part, Powell reiterated on Thursday he used a private email account to conduct government business while serving as secretary of State, saying he was “unaware” of requirements to preserve emails sent between private accounts.

In a statement released through an assistant, Powell said: “I was not aware at the time of any requirement for private, unclassified exchanges to be treated as official records.  I have been interviewed by the State Department [inspector general] and the FBI about my actions and decisions. I stand by my decisions and I am fully accountable.”

--The Washington Post’s Rosalind S. Helderman and Michelle Ye Hee Lee had a story on for-profit college company, Laureate International Universities, and how they signed Bill Clinton to a deal as a consultant and “honorary chancellor” that paid him $17.6 million over five years until the contract ended in 2015 as Hillary Clinton launched her campaign for president.

“There is no evidence that Laureate received special favors from the State Department in direct exchange for hiring Bill Clinton, but the Baltimore-based company had much to gain from an association with a globally connected ex-president and, indirectly, the United States’ chief diplomat....

“While much of the controversy about Hillary Clinton’s State Department tenure has involved donations to her family’s charity, the Clinton Foundation, a close examination of the Laureate deal reveals how Bill Clinton leveraged the couple’s connections during that time to enhance their personal wealth”

As Hillary assumed the post at the State Department, Bill was taking on new consulting work, signing “contracts worth millions with GEMS Education, a secondary-education chain based in Dubai, as well as Shangri-La Industries and Wasserman Investment, two companies run by longtime Democratic donors.  All told, with his consulting, writing and speaking fees, Bill Clinton was paid $65.4 million during Hillary Clinton’s four years as secretary of state.”

--John Podhoretz / New York Post

“So Hillary Clinton and Donald Trump appeared one after the other last night for a half-hour on NBC to talk about being commander in chief.  Polls will tell us who ‘won’; frankly, I have no idea.

“But overall, America lost, big time.

“Listening to Clinton prevaricate about her emails and Trump prevaricate about positions he holds and doesn’t entirely seem to understand once again raises the unholy horror of the fact that out of 330 million people in the United States, these are the two who have ended up in the race for the White House in 2016.

“NBC’s Matt Lauer was quite relentless with Clinton when it came to her handling of classified information on an unsecured private server, even going so far as to ask whether it disqualified her from the presidency.

“She has tried out various approaches to this matter, from saying she made an error for which she had no excuse (a line she repeated to Lauer) to saying she did nothing wrong and had  nothing to apologize for. But last night her chutzpah reached an all-time high when she pointed out there was all kinds of evidence government servers had been hacked but no evidence her private server had been hacked.

“The clear suggestion here was that Hillary Clinton had been a better steward of the classified information of the United States government than the United States government – even though she had just said it had been a mistake to set up her private server in the first place.  By what logic, then, should she consider her conduct a mistake?

“The simple fact of the matter is that there’s no defense for what she did, since she did it in bad faith to shield her email improperly from future public discovery – and would have succeeded had the events in Benghazi not occurred on her watch.  So now she simply uses every opportunity she has to create new smokescreens simply to evade more thorough and direct questioning.

“The FBI may not have indicted her, but her conduct has been so unbecoming a leader that the American people have – polls show nearly 70 percent of the American people consider her untrustworthy....

“But at least she didn’t spend three minutes of her time sucking up to Vladimir Putin, the way Donald Trump did.  Trump not only praised the Russian thug’s leadership and cited the KGB goon’s poll numbers, but appeared to draw a comparison between Putin and Barack Obama that favored Putin.  I’m the opposite of an Obama fan, but that’s just disgusting.  Obama hasn’t had reporters killed, hasn’t choked off press freedoms,  hasn’t swallowed up Crimea, and isn’t seeking imperial dominion of America’s geographical neighbors....

“Democracy, the great cynic H.L. Mencken once said, “is the theory that the common people know what they want, and deserve to get it good and hard.’ And boy, are we going to get it, one way or another, come November.”

Among the statements Trump made about Putin was: “I think when he calls me brilliant I’ll take the compliment, OK?”  Putin also had “great control over his country.”

Last December, Trump said it was “a great honor” when Putin called him “a talented person.”

Trump’s remarks came hours after Defense Secretary Ash Carter said Russia “has clear ambitions to erode the principled international order.”

Trump on Wednesday at the commander-in-chief forum, also stood by a tweet he wrote three years ago when he appeared to blame sex abuse in the military on the decision to allow women in the armed forces.  He also remarked then: “What did these geniuses expect when they put men & women together?”

“It is a correct tweet,” he told Matt Lauer.

--Trump offered a plan Wednesday morning in Philadelphia to revitalize America’s military by building up troop levels and ending caps on the military budget. Among the items he ticked off would be increasing the size of the Army to about 540,000 troops, taking the Marine Corps up to about 36 battalions, a navy with 350 ships and submarines and an Air Force of 1,200 fighter planes; all big increases over today’s levels, which today are essentially at post-World War II lows.

--Trump dismissed questions about his failure to disclose an improper $25,000 contribution in 2013 to a political group connected to Florida Attorney General Pam Bondi, who at the time was considering whether or not to open an investigation into Trump University.

The donation was made by the Donald J. Trump Foundation, which thus violated federal rules prohibiting a charity from donating to a political candidate.  The gift also wasn’t disclosed to the IRS.

“I never spoke to her, first of all. She’s a fine person, beyond reproach. I never even spoke to her about it at all,” Trump said Monday when the story broke nationally (it was a minor one earlier).  “Many of the attorney generals turned that case down because I’ll win that case in court.”

But a consultant on Bondi’s reelection effort, Marc Reichelderfer, told the Associated Press the other month that Bondi spoke with Trump and solicited the donation herself.  But Reichelderfer said Bondi had not been aware of the complaints against Trump University when she asked for the contribution.

Trump paid the IRS a $2,500 penalty this year when reports surfaced about the gift and disclosure error.

--Editorial / Washington Post

“Libertarian presidential nominee Gary Johnson embarrassed himself Thursday when he was asked about the epicenter of Syria’s civil war and responded, ‘What is Aleppo?’  The moment, on an MSNBC morning program, deserves to become iconic because it encapsulates why Mr. Johnson is not fit to be president. His disregard for U.S. foreign policy and strategic interests is so profound that he did not recognize a reference to Syria’s largest city, which, for several years, has been the site of intense fighting, massive war crimes and an ongoing humanitarian crisis that has, with its tidal wave of refugees, rocked prime U.S. allies in Europe.

“But let’s be fair to Mr. Johnson: In the context of the 2016 presidential campaign, he’s far from winning the cluelessness contest.  Following his gaffe, the former New Mexico governor offered a relatively cogent summary of U.S. support for various Syrian factions.  Later, he apologized, saying that he thought ‘Aleppo’ was an acronym.  ‘I feel horrible,’ he said to Bloomberg Politics.  ‘I have to get smarter, and that’s just part of the process.’

“It’s refreshing, at least, to hear a national candidate acknowledge error and vow to do better.  Contrast that with Donald Trump, who in a televised national security forum Wednesday offered a staggering array of ignorant and mendacious assertions – and acknowledged no regrets about any of them.  In addition to repeating his false claims to having opposed the U.S. interventions in Iraq and Libya, Mr. Trump defended a tweet saying that military sexual assault was the result of men and women serving together, and he suggested the solution was to ‘set up a court system within the military’ because ‘right now, the court system practically doesn’t exist.’  Does he really mean to replace the U.S. military justice system?....

“Most troubling of all was Mr. Trump’s renewed endorsement for Vladimir Putin, in spite of the mounting evidence that the Russian government is attempting to directly interfere in the U.S. election campaign....

“Mr. Johnson may not know what Aleppo is. But in the contest between the United States and an autocratic and increasingly belligerent Russia, Mr. Trump appears not to be sure which side he is on.”

Gary Johnson, op-ed / Washington Post...prior to the gaffe....

“Shortly after drafting the Massachusetts Constitution, John Adams expressed his greatest fear for the nation: ‘There is nothing which I dread so much as a division of the republic into great parties, each arranged under its leader...This...is to be dreaded as the greatest political evil.’

“He wasn’t alone.  James Madison warned against the dangers of factionalism.  And in his farewell address, George Washington called ‘party dissension’ a kind of ‘frightful despotism,’ warning that a party leader would be prone to pursue his own agenda ‘to the purposes of his own elevation, on the ruins of public liberty.’

“Almost in spite of themselves, the founders allied themselves into political parties...

“Has the two-party division that the founders railed against become today’s political status quo?

“It doesn’t have to be. With the Republicans and the Democrats having nominated their most polarizing presidential candidates in more than a generation, now is the moment for a third way.

“My running mate, Bill Weld, and I were both two-term Republican governors in heavily Democratic states.  Both of us won reelection overwhelmingly. We did this by governing as fiscal conservatives and social liberals.  That’s where most Americans want their government to be.

“Political parties aren’t necessarily evil – unless they lead to the level of dysfunction that we have today.  Elected officials in Washington cannot even agree on a real budget – and haven’t for years. That’s their most straightforward responsibility.

“These partisans place loyalty to their team over loyalty to the nation’s needs....

“Fortunately, most American aren’t buying it.  More people consider themselves ‘independents’ than are aligned with either of the two largest political parties.  They want an alternative: a common-sense approach that combines fiscal discipline with social inclusion.

“As presidential and vice-presidential candidates, that’s our message.  A nonpartisan approach in the Oval Office would do wonders to defuse the harsh partisanship that we’ve seen develop in recent years....

“A great deal could be accomplished by having third-party leadership dedicated to finding the common ground that has so often eluded the parties in recent years: on balancing the budget, curbing taxes, protecting our privacy and reforming our criminal-justice system.

“The fact that the founders anticipated our two-party morass and warned against it ought to be enough incentive to look beyond it.  The two major parties have failed to meet the needs of the nation.  It’s time to try something different.”

--Congress on Friday sent President Obama a bill that would allow families of the victims of the 9/11 attacks to sue Saudi Arabia over its alleged ties to terrorism, but President Obama has threatened to veto it, as the White House argues the bill could harm the relationship with the Saudis and establish a legal precedent that jeopardizes American officials overseas.

Obama could pocket-veto the legislation if lawmakers leave too soon for campaigning by October.  This will be interesting over the next few weeks.

--The city of San Bernardino, California, with just 216,000 residents, has seen 47 murders thus far in 2016, exceeding the 44 total of all of last year, which included the 14 people killed by terrorists last Dec. 2nd.

--We note the passing of Phyllis Schlafly, the conservative activist, lawyer and author who almost single-handedly stopped passage of the Equal Rights Amendment in the 1970s.  The ERA was anti-family and anti-American, she said.  Equality would be a step down for most women, who she said are “extremely well-treated” by society and laws.  She later formed the Eagle Forum, and with the 1973 Supreme Court decision on Roe v. Wade, legalizing abortion, a new constituency was energized to engage in politics.

--In New York City, there is a relatively new ‘celebration’ called J’Ouvert, that is held over the Labor Day weekend and is nothing more than a lawless exercise, a really stupid pre-dawn “party” that is a prelude to that day’s West India Day Parade.

So after an aide to Gov. Cuomo was killed by a stray bullet at the celebration last year, Mayor Bill de Blasio and the police commissioner vowed this year’s event would be safe.  Instead, two were killed in shootings and three others were hit, plus one person was stabbed.

Michael Goodwin / New York Post

“No surprise, they failed.  There was no other possible outcome.

“An army of cops, a forest of light towers, months of meetings and posters warning, ‘Do not shoot anyone. Do not stab anyone,’ didn’t matter.

“When the guns came out, reality shattered the illusion.

“With two dead, two wounded and fear in every heart, it was J’Ouvert as usual. De Blasio’s promise that the carnival would be ‘safer than ever’ was another example of his big talk and puny performance.

“The aftermath is even more disconcerting, as neither the pols nor anyone else seems capable of confronting the truth. Namely, that even with police baby sitters, it is nuts to expect that an all-night street party, where alcohol is consumed openly and drugs are said to be widely available, will end peacefully.

“Police are police, not nannies or blue flowerpots.  The decision to double the number of cops, from 1,700 to 3,400, was a waste of money and manpower because the cops were not allowed to enforce the law.

“Their mere presence was supposed to deter crimes, but the war on cops has the opposite effect.  It encourages people to hate the police and break the law with no fear of consequences.

“It’s the Ferguson Effect, and New York has largely been spared the bloody results that are turning Chicago and other big cities into killing fields.  But what happened in Brooklyn is proof that New York is not exempt from human nature.

“Yet still the pols talk the talk. Cuomo fumed about illegal guns and de Blasio threatened to end* the annual party, but neither mentioned the obvious solution: let cops be cops.  Let them enforce the law, all the laws, so the innocent do not become victims....

“Unless the bad guys fear they will get busted, they will break the law.  Nor is it fair to put cops in the demoralizing position of being forced to watch the law being flouted without letting them act. And law-abiding citizens understandably wonder whose side their government is on.”

*De Blasio later said J’Ouvert would take place next year because, you see, the West Indian community is a key voting bloc for him.

--The following should make you sick...and furious....

David Willman / Los Angeles Times

“From 2002 through early last year, the Pentagon conducted 11 flight tests of the nation’s homeland missile defense system.

“In the carefully scripted exercises, interceptors of the Ground-based Midcourse Defense system, or GMD, were launched from underground silos to pursue mock enemy warheads high above the Pacific.

“The interceptors failed to destroy their targets in six of the 11 tests – a record that has prompted independent experts to conclude the system cannot be relied on to foil a nuclear strike by North Korea or Iran.

“Yet over that same timespan, Boeing Co., the Pentagon’s prime contractor for GMD, collected nearly $2 billion in performance bonuses for a job well-done, the Los Angeles Times has learned.

“The Pentagon paid Boeing more than $21 billion total for managing the system during that period....

“The cumulative total of bonuses paid to Boeing has not been made public before.  The Times obtained details about the payments through a lawsuit it filed against the Defense Department under the Freedom of Information Act....

“The GMD system, which became operational in 2004, is intended to thwart a ‘limited’ nuclear strike by a non-superpower. It has cost more than $40 billion to date.”

I have always supported the Grunts....not necessarily the generals and decision makers.  I must say, Trump was right on one thing...some of the generals suck (though far from all), but what he didn’t say is they suck, and then retire and become lobbyists or executives at the likes of Boeing.

And that is what you all should be outraged over.

--I’ve been writing the past few weeks about the epidemic in heroin overdoses and soaring rates of opioid deaths.  The New York Times this week had a story from Cincinnati on the problem with synthetic opiates like fentanyl, which is 50 times stronger than heroin.

And then there is carfentanil, “an animal tranquilizer used on livestock and elephants with no practical uses for humans.”

Carfentanil is as much as 100 times more potent than fentanyl.  “Experts said an amount smaller than a snowflake could kill a person.”

The drug is being manufactured in China or Mexico and is making its way into the Cincinnati area in heroin shipments and it is so dangerous, police officers carry overdose-reversing naloxone sprays for themselves, “in case they accidentally inhale or touch the tiniest flake.”

--Finally, we note the 15th anniversary of 9/11.  Especially in the New York, Washington and Shanksville, Penn., areas, we all have certain memories.  I raced home that day, driving, from the Boston area where I was to play golf with a friend and recognized while listening to the radio that with the first word of the Trade Center getting hit we were under attack.  I called my father from the Mass Pike, knowing he was watching television, and the second plane hit while he was on with me.  I went to my friend’s office, watched the first tower go down, and told his assistant, as he wasn’t in yet, “Tell Dave I’ll talk to him later.”

I then took a back way home, across Massachusetts to New York State (and down to New Jersey), afraid to go over the Tappan Zee Bridge (a far more direct route), fearing it was a target.  There’s a certain point in northern New Jersey on Route 287 where you crest a hill and can see the far off New York skyline.  That’s the first time I saw the smoke.  I must have gone through a case of Kleenex the next few days.

And then the Mets’ Mike Piazza hit a dramatic home run in the first baseball game after 9/11 and it was then that many of us really moved on.  As I said up above, it’s why sports can play such a critical role in our everyday lives. 

Lots of football and key baseball games this weekend, friends.  Enjoy.  We need some time off from thinking about our scary future.

---

Pray for the men and women of our armed forces...and all the fallen, especially the victims of 9/11 and those who died defending our freedom ever since.

God bless America.

---

Gold closed at $1331
Oil $45.71

Returns for the week 9/5-9/9

Dow Jones  -2.2%  [18085]
S&P 500  -2.4%  [2127]
S&P MidCap  -3.2%
Russell 2000  -2.6%
Nasdaq  -2.4%  [5125]

Returns for the period 1/1/16-9/9/16

Dow Jones  +3.8%
S&P 500  +4.1%
S&P MidCap  +9.3%
Russell 2000  +7.3%
Nasdaq  +2.4%

Bulls  52.5
Bears  22.8  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

09/10/2016

For the week 9/5-9/9

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs.  Your support is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974.  *Special thanks to Dan and Jean C. (loved the note paper...hope you won).

Edition 909

Washington and Wall Street

What a depressing, and distressing, time for America.  In fact to many of us, certainly at least yours truly, we are nearing the end of a 16-year cycle with two of the five worst presidents in U.S. history and we’ll be paying for the mistakes of both for decades to come, especially those of the current occupier of the White House.

I keep writing these last few months, just what will President Barack Obama say when he addresses America for a final time in January.  What can he possibly point to as a success?

Seriously, ObamaCare?  Are you kidding me?!  I receive non-stop news flashes from around the country, through many different outlets, and one of them this morning was from the Baltimore Sun and word that healthcare premiums for Marylanders were set to rise a full 20% on average next year, which is essentially the norm around the country as competition dries up and costs soar.

What can President Obama possibly say about race relations in America?  Have they improved in his eight years?  I think you know the answer to that one.

What can he say about the nation’s infrastructure?  What can he say about America’s fiscal stability, as both he and President George W. Bush, for 16 years, failed to attack the looming entitlement crisis?

But most importantly for me, and for the very future of America, what one single success can President Obama claim on the foreign policy front?  He has none. And across the board, things have only gotten worse.  Much worse.  It is not a stretch in any way to say that our very existence, as a democracy, is at risk over the coming 10-20 years, if not sooner, depending on what happens on the terror and weapons of mass destruction front, or because of a nuclear crisis with Russia or China...or both acting in tandem.

I’ve gotten a kick out of the Colin Kaepernick situation, which is only going to spread across the sports landscape.  So many offering up an opinion are hopelessly naïve.  Yes, we are lucky that we have free speech in America, that I can write what I do each week, for over 17 years, without fear of being censured...or arrested.

But very few Americans truly understand that this basic right is disappearing at lightspeed in Russia and China, in Turkey, and in places as close as Venezuela (of course it hasn’t been a basic right just 90 miles away in Cuba for 50 years).

It’s an incredibly dangerous time, as terrifically encapsulated by William Galston below, but who do we have filling the breach come next January?  Donald Trump or Hillary Clinton?!

Oh God help us.

This is beyond pathetic.  330 million people in America and we came up with these two. And another guy, Gary Johnson, who I was seriously considering but when asked by MSNBC’s Mike Barnicle this week, “What would you do if you were elected about Aleppo?” Johnson responded, “About?”  “Aleppo,” said Barnicle.

Johnson paused and said: “And what is Aleppo?”

“You’re kidding...” the incredulous Barnicle answered.

“No,” Johnson said.

I give up.

There’s a reason why some of us are the sports fanatics we are...it’s a release.  Yes, it presents frustrations of a different kind depending on where your allegiances lie, but sports provides those small respites from the troubles that face us both today and in the near future.

I cover the election in detail below.  For now....

William A. Galston / Wall Street Journal

“As our dispiriting presidential campaign grinds on, the rest of the world is not standing still. And the news is not good.

“At the G-20 meeting last weekend, Chinese officials treated the president of the United States and his senior aides with blatant disrespect.  As Chinese nationalism surges, President Xi Jinping is asserting his country’s claims throughout the South China Sea, a move that episodic demonstrations of American naval power have failed to halt.  Meanwhile, the linchpin of President Obama’s ‘pivot’ to Asia – the Trans-Pacific Partnership – faces opposition from both presidential candidates and hangs by a thread in Congress.  Its defeat would deal a heavy blow to American credibility.

“In the Middle East, the Syrian civil war continues its bloody course, and the latest effort to negotiate a humanitarian cease-fire with the Russians has foundered over what the administration describes as ‘trust’ issues.  Mr. Obama’s prediction that Vladimir Putin’s use of military force would land him in a quagmire described his own state of mind rather than reality.  Instead, at modest cost, Mr. Putin has restored Russia’s standing as a key player in the region, while our friends and allies see America in retreat.

“In northern Syria, U.S.-backed Kurds have been the only effective fighters against Islamic State.  But when Turkey sent its forces across the border, Mr. Obama sent Vice President Joe Biden to Turkey, where he demanded that the Kurds withdraw from ISIS-held territory they had recently seized.  President Recep Tayyip Erdogan sees every manifestation of Kurdish nationalism, wherever it may occur, as a threat to Turkey’s domestic security.

“The U.S. is under no obligation to agree with him, especially at the expense of one of the few reliably pro-Western forces in the region.  Mr. Obama’s meeting in China with Mr. Erdogan did not yield an agreement. The administration’s brand of ‘realism’ in Syria has ended in a damaging muddle.

“The group photo at the G-20 meeting spoke volumes. At one end, President Putin was speaking to President Erdogan, who listened attentively. At the other end, President Obama peered curiously at the colloquy.  In the middle, President Xi smiled confidently. As the authoritarian entente cordiale flowers, the U.S. is reduced to a bystander’s role.

“Mr. Obama seems to have assumed that events in Syria, however awful to behold, would have no effect on core American interests.  If so, he was badly mistaken. The flood of Syrian refugees has destabilized its neighbors in the Middle East and Europe.

“Anti-immigrant nationalism is on the rise throughout the Continent, and it contributed to June’s pro-Brexit vote in the U.K.  Chancellor Angela Merkel, who initially welcomed the refugees, has been thrown on the defensive....

“Weakness begets weakness.  America’s response to Mr. Putin’s annexation of Ukraine’s Crimea was totally ineffective. When Hitler’s forces marched into the Rhineland in 1936, along the demilitarized border with France, England’s Lord Lothian remarked that this was no more than the Germans walking into ‘their own back garden’ – never mind Germany’s treaty obligations not to do so.

“It was not hard to discern similar undercurrents in the wake of Mr. Putin’s bold Crimea stroke and the U.S. failure to provide defensive weaponry to Ukraine after Russian-backed separatists struck again in eastern Ukraine....

“Despite its many mistakes, the U.S. remains the most credible guarantor of global peace and security.  No invisible hand will secure this outcome. When we pull back, chaos results. And nothing in human affairs is worse.”

---

On Wall Street, for the first time in 43 trading days (since July 8), the equity markets moved up or down 1% (as represented by the S&P 500), in this case down 2.4% on Friday (with the Dow and Nasdaq falling 2.1% and 2.5%, respectively).

The catalyst was a statement from a Federal Reserve governor, Eric Rosengren, the president of the Boston Fed and a voting member of the Fed’s policy-setting board (i.e., his voice thus carries more weight than non-voting members), who said there is a “reasonable case” for a rate hike given the rising risks that the economy and financial markets will overheat.  He added that “despite headwinds from abroad,” the U.S. labor market continues to “gradually tighten” while inflation is “slowly returning” to the Fed’s 2% target.

Rosengren said the jobs market may “reach or even exceed full employment over the next year.”

But another Fed governor, Daniel Tarullo, who is also a voting member, said that while the jobs market has made significant strides since the Great Recession, unemployment could still fall further to fulfill the Fed’s mandate for maximum employment, while inflation is still below the central bank’s 2% target (as measured by its preferred Personal Consumption Expenditures index).  So the Fed should not necessarily raise rates until prices have truly stabilized at or above the benchmark.  Tarullo’s bottom line was that he “wouldn’t foreclose” the possibility of a rate increase this year, but he wasn’t targeting this month like Rosengren was.

[Last weekend, non-voting Fed board member John Williams of San Francisco said the economy was at full strength and that it made sense for monetary policy to respond in kind, “a pace of gradual rate increases, preferably sooner rather than later.”]

Ergo, when it comes to the Sept. 20-21 Open Market Committee meeting, yes, a September rate hike is back on the front burner, but I continue to maintain ‘no way’ because of the election.*  As of Friday afternoon, traders had raised the odds on a September hike to 36% from 28% on Thursday and 15% the week before.

*Trump railed against the Fed this week for artificially propping up the market through low interest rates, though a year ago he said rates should remain at current levels for a long spell.

Meanwhile, the Fed’s Beige Book report on regional economic activity for July and August showed the U.S. economy expanded at a “modest” rate, but price increases remained “slight overall.”

One economic data point arguing against a rate hike in September was the August ISM services reading that came in at 51.4 (50 being the dividing line between growth and contraction), far less than expected and the lowest since Feb. 2010.  Last week we had a poor ISM reading on manufacturing.

---

Congress came back to work after a seven-week recess, and it’s only going to be in session about three weeks before breaking off to campaign.

Ergo, Congress has little time to do important things and, for starters, the U.S. Senate failed to pass a funding bill to help fight the Zika virus for a third time.  Senate Democrats blocked the bill after Republicans sought to stop funding for Planned Parenthood.

Republican Senate Majority Leader Mitch McConnell blamed his Democratic counterparts.

“It’s hard to explain why, despite their own calls for funding, Democrats would block plans to keep women and babies safe from Zika.”

Republican House Speaker Paul Ryan indicated lawmakers would work to include funding for Zika in a budget deal or a continuing resolution that Congress must pass to avoid a government shutdown end of September.  McConnell is eyeing a short-term spending measure that would last through early December, which would force lawmakers to pass either another short-term bill or an omnibus spending package by the end of the year.

Europe and Asia

European Central Bank President Mario Draghi and his board met on Thursday and held the line on interest rates, while making no changes to the 80 billion euro a month bond-buying program (quantitative easing, QE), which is widely expected to be extended beyond next March, though for now, Draghi didn’t commit to do so and said, instead, that the Governing Council will study possible policy changes.

So while Draghi didn’t add any further details, the speculation has been the ECB could expand the kinds of assets that could be purchased, like bank bonds, non-performing loans or even stocks, thus the immediate disappointment in not offering more clarity.

I have been harping for the better part of a year that there is only so much crapola out there for the ECB to purchase, without violating its existing mandates, and the market is finally beginning to recognize this. 

Separately, the ECB slightly amended its growth forecasts for 2016-2018, but to the same 1.6% to 1.7% pace, with inflation of 0.2% this year, 1.2% in 2017 and 1.6% in 2018, all below the 2% target.

The Euro bond market took out its frustrations on Draghi’s failure to lay out a more definitive plan for keeping the spigot open and, for example, the yield on the German 10-year Bund rose from -0.12% to 0.01% (positive!) on just Thursday and Friday.  The British 10-year yield rose from 0.68% to 0.86%, and the French 10-year from 0.16% to 0.30%; still historic record lows, for sure, but big percentage moves some traders got skunked on.

What should be most worrisome is the sector I keep harping on, the bonds on the periphery, from Spain, Italy and Portugal (Greece is a separate case).  The yield on Italy’s 10-year rose Thursday and Friday from 1.08% to 1.25%, to cite another example.  They can surely back down again, depending on what words come from the ECB in the ensuing weeks and months, but some of these yields deserve to be much higher anyway, especially when you have Italy and Portugal with debt loads of about 130% of GDP (Greece is 180%).

There was some economic news for the Eurozone. Retail sales rose 1.1% in July over June, up 2.9% year over year, the largest monthly increase of the year, but non-food was up only 0.4% on the month and this is the indicator for discretionary spending.

Second-quarter GDP for the EA19 was up 0.3% from Q1, 1.6% year on year, in line with previous estimates.  Consumer spending was only 0.2% for the second quarter.

The service sector PMI for the Eurozone was 52.8 vs. 52.9 in July; Germany was 51.7 (lowest in 37 months, 54.4 in July), Italy 52.3, and France 52.3 (10-month high).  Spain was a strong 56.0 vs. 54.1 the prior month.

Industrial production in Germany was down 1.5%, July over June, the biggest drop in 2 years, though this is volatile, while construction was up 2.6% the same month.

But German exports in July fell 10% compared to a year ago, the biggest year on year decline since 2009.  Imports fell by 6.5% over the same period. The exports reading was much worse than expected.

The DIW Institute slashed its estimate on German GDP for 2017 to just 1.0%, citing concerns Brexit will slam exporters.

Speaking of Brexit, the services PMI in the U.K. was 52.9 in August vs. 47.4 in July.  Recall, manufacturing came out the week before at 53.3 for August vs. 48.3, so both would have you believe Brexit is no problem after the initial negative post-Brexit reaction in July (the vote being June 23).

Wrong, as I’ve been saying.  The picture thus far is decidedly mixed, but we won’t know what the real pattern might be until next year once negotiations are truly underway.

Retail sales, for example, fell 0.3% year over year in August, the weakest since Sept. 2014, while manufacturing was down 0.9% in July over June.

There is a critical EU summit, sans Britain, in Bratislava next week.

European Council President Donald Tusk said on Thursday that Britain should start talks to leave the EU as soon as possible.  In London, Tusk met with Prime Minister Theresa May for their first head-to-head meeting since the referendum, as both discussed what steps might be taken over the next few months.

But May insists Britain will not trigger Article 50 of the EU’s Lisbon Treaty to start the exit procedure this year to give her government time to come up with a negotiating strategy.

Philip Stephens / Financial Times

“What was all the fuss about?  The sun is still shining, the economy is growing and Scotland has not seceded. It is time for pro-European doomsters to admit it: Brexit was good for Britain. Now the world awaits its return as a truly ‘sovereign’ nation.  All that remains is for Theresa May’s government to step up the pace of negotiations in order to sever ties with Brussels sooner rather than later.

“So says the prevailing mood nearly three months after the popular vote to take Britain out of the EU. One could quibble with the detail.  The latest rises in some economic indicators reflect a reversal of earlier post-Brexit falls rather than a sign of a coming boom. There is plenty of anecdotal evidence that business is holding back on investment.  The public finances are set to worsen.  As for the fall of sterling, well, yes, it has made exports cheaper, but at the expense of lowering living standards....

“Hubristic denial is the order of the day.  In any event, an argument about the immediate impact of the vote misses the point.  The Brexiters now trumpeting a bright independent future see departure from the EU as an event.  In truth it will be a long, tortuous process – a slow burn, if you like, with costs, economic and political, that will reach well into coming decades.  To make such an obvious point is not to talk Britain down: the fact that things seem fine now says next to nothing about the consequences along the road.

“Mrs. May was reminded of this as she cut a rather lonely figure in meetings with other leaders at the G20 gathering in Hangzhou.  No, the U.S. will not put Britain at the head of the queue for future trade deals.  And yes, Japanese companies will step back from investing in the UK if the government takes it out of the EU single market.  Allies and trading partners are at one in concluding Britain will be diminished by Brexit.  A few kind words from the Australian government are scant consolation.

“To be fair to Mrs. May, word in Whitehall has it that she understands the scale and complexity of the challenge. When she tells the House of Commons that she has no intention of prematurely showing her negotiating hand, what she really means is that she does not yet have such a hand.”

Eurobits...

French authorities arrested three women on Thursday in connection with a car laden with gas canisters that was found abandoned near Paris’ Notre Dame cathedral.  Interior Minister Bernard Cazeneuve said, “These three women aged 39, 23 and 19 had been radicalized, were fanatics and were in all likelihood preparing an imminent, violent act.”  One of the detained women stabbed a police officer during the operation before being shot and wounded.  [Reuters]  Late word has the three being controlled by ISIS.

On the migration front....the issue played a big role in German Chancellor Angela Merkel’s election defeat last weekend as the right-wing AfD party, formed just three years ago, came in second in the chancellor’s home state of Mecklenburg-West Pomerania, polling 21%, while her CDU party was third at 19%; the center-left Social Democrats finishing first at 31%.

AfD (Alternative fuer Deutschland) leader, Leif-Erik Holm, suggested that “perhaps this is the beginning of the end of Angela Merkel’s chancellorship.”

Edmund Stoiber, honorary chairman of the Bavarian-based CSU, the sister party of the CDU, said, “It’s a debacle for Angela Merkel and her refugee policy.”

Wolfgang Bosbach of the CDU said the arrival of hundreds of thousands of migrants without documents had “put the wind in AfD’s sails.”

Many are calling for an immediate cap on refugees. 

So Merkel faces a big election next year, when it is expected she’ll seek a fourth term, but in the immediate aftermath of the humiliating defeat in her home state, she vowed to stand by her refugee policy.  Merkel warned parliament that the AfD’s rise was “a challenge for us all in this building.”

One or two high-profile terror attacks perpetrated by Islamists and Merkel may not make it to Sept. 2017 (the expected election date).  There is one thing in her favor, however...no obvious successor within her party.

One other issue on the topic of migrants is the disastrous migrant camp in Calais, France, called the “Jungle,” where the U.K. is funding a wall along both sides of the main road to Calais port.

The issue has been there are 7,000 migrants, from Africa and the Middle East, who have a very well-established camp as they seek to sneak onto trucks (and ferries), the Channel Tunnel,  and ships making the crossing to the U.K.  As I’ve written for a year in this space, needless to say the locals in northern France (Normandy) are furious, as they see their communities overrun, retail businesses hit, and real estate values plummet.

On Monday, French lorry drivers and farmers blockaded the main motorway route into Calais in a protest calling for the closure of the Jungle.  Drivers are regularly threatened by bands of migrants “and even mafia organizations attempting to smuggle people across the Channel.”  [Financial Times]

The Jungle is a source of major tension between the U.K. and France, with some French politicians demanding the renegotiation of the 2003 Le Touquet treaty, which enables British officials to check passports in France; which also means the migrants gather in Calais for processing rather than in the U.K.

Nicolas Sarkozy, who wants to return as president in France, last week said that Britain should open a detention center for migrants on its territory, rather than in France. Sarkozy said that if elected, he would “travel to London the next day” to negotiate over the migrants.   [FT]

[Meanwhile, Sarkozy faces a potential trial over 2012 election funding irregularities, along with 13 others in what is called the Bygmalion Affair (sic), involving spending overruns and allegedly illegal financing.  Sarkozy’s Les Republicains party holds their primary contest in late November for the place on the presidential ballot next spring.]

Lastly, Poland’s foreign minister was due to visit the U.K. after a Pole was beaten to death in Harlow, north of London, on Aug. 27 and two Polish nationals were assaulted in the same town on Sept. 4, as police investigate the incidents as potential hate crimes amid an escalation of anti-foreigner sentiment following Brexit.

---

Turning to Asia, in China, the private Caixin services PMI came in at 52.1 vs. 51.7 in July, while August exports fell 2.8% in $dollar terms year over year vs. a decline of 4.4% in July.  Imports rose 1.5% (the first rise since Oct. 2014) vs. a decline of 12.5%, according to government statistics.

Exports to the U.S. fell 0.2% and 2.0% to Asean, but rose 2.4% to the EU.

Producer, or factory gate, prices in China fell the least since 2012 last month, which is a good sign, contracting only 0.8% year on year, better than July’s 1.8% drop, according to the National Bureau of Statistics.

Month-on-month, producer prices rose 0.2% for a second month running.

The official consumer price index rose 1.3% in August, down from 1.8% in July.  Food inflation was 1.5%.

In Japan, real wage growth rose a sixth consecutive month in July, up 2.0% adjusted for inflation, which is good, but it’s not good enough as a revision to second quarter GDP, while being revised upward to 0.7% from 0.2% annualized, showed private consumption rising only 0.2% year over year and this is 60% of the economy.

The service sector PMI came in at 49.6 in August vs. 50.4 in July.

But the yield on the Japanese 10-year (JGB) climbed to -0.02%!....the highest in six months.

However, just as in the case of the ECB, Japan’s central bank could be running out of government bonds to buy.  As the Wall Street Journal noted on Friday, the Bank of Japan is buying up more than $750 billion worth of government paper a year, but at that rate, banks could run out of government debt to sell within the next 18 months.

The Japanese banks have to hold a certain amount of safe debt to use as collateral for their everyday transactions, which limits what they have available to sell at the BOJ’s pace of buying. 

Much more on this topic in coming weeks, because some say there will be no more supply by end of the year.  This week’s ‘rally’ to a yield of -0.02% on the 10-year is a sign the BOJ is already reducing its purchase of longer-dated JGBs.

Street Bytes

--The market’s losses for the holiday-shortened week were all essentially on Friday, with the Dow losing 2.2% to 18085, the S&P 500 2.4% to 2127 and Nasdaq 2.4% to 5125.

--U.S. Treasury Yields

6-mo. 0.51%  2-yr. 0.78%  10-yr. 1.67%  30-yr. 2.39%

The yield on the 10-year is the highest since June.  Reminder...it finished 2015 at 2.27%.

--Oil prices rallied back some this week, largely on the heels of a report Thursday that showed U.S. crude inventories tumbled by the most since 1999 last week.

Earlier, at the G20 summit, Russian and Saudi energy ministers announced an agreement to look for ways to stabilize the oil market, including a possible attempt to limit oil output, or an outright “freeze,” as Russia put it.

But Saudi Arabia said freezing output was not “necessary” now.

There is an informal energy meeting coming up later this month, with OPEC scheduled to officially meet in Vienna in November, with Russia likely to send a delegation to that confab.

--The national average price for regular unleaded gasoline was $2.20 per gallon on Labor Day, 18 cents less than a year ago, but 8 cents more than one month ago.

Gas prices are lowest in South Carolina ($1.94), while Hawaii ($2.75) and California ($2.67) have the highest.

Here in New Jersey, the average the other day was $1.99.

--Wells Fargo was fined $185 million, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has ever issued, as the bank’s employees created fake email accounts to sign up customers for online banking services, with customers accumulating late fees on accounts they never even knew they had.

In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by their customers.

Wells said it has fired over 5,000 employees that were motivated by compensation policies that rewarded them for drumming up new business.

Richard Cordray, director of the Consumer Financial Protection Bureau, said, “Unchecked incentives can lead to serious consumer harm, and that is what happened here.”

Regulators said the illegal sales practices had been going on since at least 2011.

--Apple unveiled its new iPhone 7 and 7 Plus Wednesday, though there are no major changes (save one), which most expect to come next year at the 10-year anniversary of the smartphone.

Instead, Apple talked of better battery life, water resistance, and a more powerful camera.

But Apple removed the headphone jack, because the phones will now include headphones that connect to the lightning jack, which charges the phone.  Apple, instead, announced a new product called “AirPods,” wireless ear buds, and this stirred up social media in a most negative way.

Apple also announced a new version of its Watch, “Series 2,” which has been “completely reengineered,” operating chief Jeff Williams said on stage in San Francisco.  There is a built-in GPS, bringing its features closer to traditional running watches by the likes of Garmin.

Sales of the original Apple Watch have been disappointing, though some analysts say customers have been waiting for the new model.  [Yeah, right.  This is just a stupid product.]

The fact is Apple is an ex-growth company. Revenues in the past four quarters were $220 billion, and $224bn in the prior 12 months.  The smartphone market is saturated.  In the second quarter 343.3m devices were shipped, according to research firm IDC, which was just a 0.3% increase on the same period a year earlier.  [Financial Times / Lex column]

Lastly, Apple is relying on heavy sales from China, but it has fallen to fifth place in smartphone sales there as Chinese makers offer feature-rich devices for lower prices, while the anti-Western rhetoric I have long warned about, will no doubt crimp Apple sales further.

But as the Wall Street Journal’s Eva Dou points out, if the iPhone 7 flops in China, this would impact hundreds of thousands of workers at the Foxconn Technology complex in Zhengzhou where the iPhone is primarily assembled.

--Apple competitor Samsung has its own big problems as this week it announced a massive recall of its new Galaxy Note 7 smartphones, due to instances where the lithium-ion battery is exploding when it is being charged.

The lithium batteries are no more inherently dangerous than any other battery, but they are more energy dense, which makes them so attractive for device makers because they can store relatively large amounts of energy in a small space.

But with all that stored energy, the battery becomes more dangerous. 

Samsung has confirmed at least 35 cases of the smartphones catching fire or exploding.

The FAA issued a directive prohibiting airline passengers from packing Galaxy Note 7s in their checked luggage, nor using them onboard.

--Hewlett Packard Enterprise announced the sale of most of the company’s software assets to a British outfit called Micro Focus for about $8.8 billion.  Meg Whitman, the CEO of H.P.E., also announced higher earnings in the company’s most recent quarter though a decline in revenue from a year ago.

H.P.E. is the computing giant created from half of Hewlett-Packard last year, with the other half specializing in PC and printer sales...HP Inc.

--The other day I talked about bankrupt Hanjin Shipping Co. of South Korea, which has dozens of ships carrying more than half a million cargo containers that are being denied access to ports around the world.  With questions about the payment of docking fees and container storage, some of the ships have already been seized.  As the Wall Street Journal reported, Samsung Electronics Co. said it has cargo valued at $38 million stranded on Hanjin ships.

About 95% of the word’s manufactured goods are conveyed in shipping containers and, while Hanjin represents ‘only’ about 3% of global container capacity, this chaos comes as retailers are preparing for the holiday season and shelve stocking time.

You also have an issue where the ships themselves are running low on food, water and fuel.  Plus the rats are going stir crazy.

The industry as a whole continues to struggle with too much capacity for the current sluggish levels of demand.  But Hanjin made things worse when it sold off much of its fleet after 2008 and chartered vessels, whose rates were fixed at 30 to 50 percent higher than current market rates.  [South China Morning Post]

[Late Friday, Hanjin did say it had enough cash to begin unloading four ships in the U.S.]

--Canada’s economy added more jobs, 26,200, than expected in August. The unemployment rate rose to 7.0 percent as more people entered the labor market.

--Apache Corp. said it had discovered a huge new field in West Texas, which the company says could become one of the biggest finds of the past decade; perhaps two billion barrels of oil.  Actually, the test well produced more natural gas than oil, but the profits, even at today’s prices, could be huge.

Apache is the sixth-largest independent energy company in the U.S.

--Betterment LLC still hasn’t come clean on its 2 ½ hour trading halt during the post-Brexit market turmoil of June 23.  June 24, financial advisors and institutional customers were told they would receive more information within weeks that explained the firm’s policies around trading halts, but as the Wall Street Journal reported the other day, “no such guidance has been coming from Betterment.”

In a form filed with the Securities and Exchange Commission, Betterment clarified that it reserves the right to delay or manage trading in response to market instability “at any time without notice.”

Betterment is just one of the robo advisers that are disrupting traditional Wall Street, but in this case they are eschewing the very transparency they trumpet.

These firms tout their ability to keep costs low by directing clients into baskets of exchange-traded funds calibrated to the client’s goals and risk tolerances.

But in times of turmoil, like the Brexit situation, they didn’t provide the liquidity expected of them.

--PIMCO’s Total Return bond fund suffered its 40th consecutive month of customer redemptions, according to the company.  Once the largest fixed income fund in the world with $293bn in assets at its peak, Total Return was down to $85.8bn at the end of August after another $615m of outflows.  It hasn’t helped that the fund is in the bottom 20 percentile in its category, according to figures from Morningstar.  September marks two years since Bill Gross’ departure, which turned a trickle of outflows at that time into a torrent, with investors and pension funds abandoning ship in droves.

--Delta Air Lines said its massive computer issues in August caused revenue to be hit by $100 million in the month, with passenger revenue per available seat mile, a key metric, falling 9.5% year on year last month, after a 7% drop in July.

--Update: I recently wrote of a data leak involving a French naval contractor, DCNS, that was building submarines for India.  This week India announced it was unlikely to proceed with an order for three new subs, in addition to the six DCNS is already building for the country, due to the leak.

--Activist investor Bill Ackman disclosed his Pershing Square investment vehicle had taken a 9.9% stake in Chipotle Mexican Grille, which sent shares soaring 9%.  Ackman said he hoped to see improvements in the board composition, operations and the financial condition of the company.

Chipotle stock had fallen over 40% in the past year as the casual dining chain attempts to build back customer trust following an E. coli scare late last year.  Despite various company initiatives, the days of lines out the door are a thing of the past.

--ITT Technical Institute, a for-profit education chain, permanently closed all its campuses nationwide, as the company blamed the U.S. Education Department and its ban that prevented ITT from enrolling new students who use federal financial aid.

The shutdown affects about 35,000 students and will also cost more than 8,000 employees their jobs.  Some of the students will be eligible to have federal loans from their ITT education forgiven if they start over at another school.

--Movie box-office receipts for the three summer months in China stagnated this year, 12.43 billion yuan ($1.86bn), compared with 12.47 billion yuan last summer, according to Beijing based film-research company EntGroup.

Apparently, ticket sales were hurt by the phaseout of generous discounts from online-ticketing platforms trying to build market share.

Foreign movies did better than domestic ones over the summer, with 18 imported titles accounting for 48% of the box office, including Hollywood flop “Warcraft.”  [WSJ]

--The parent company of Fox News, 21st Century Fox Corporation, settled a lawsuit with former Fox News anchor Gretchen Carlson, who said that Roger Ailes had sexually harassed her when he was chairman of the network.  The settlement was for a reported $20 million.  There have also been far smaller settlements with two other unidentified Fox employees.

At the same time, minutes after the Carlson settlement was announced, the departure of Greta Van Susteren was revealed, to be replaced by Brit Hume, probably just through the election (as he is already eagerly saying).

Here I just told you the other day that Greta was the only anchor at Fox that I liked, and the exit was so fast, she wasn’t allowed to announce her departure on her own show.  She apparently had wanted a couple weeks of final air time after 14 years.

Greta was among the first to publically defend former chairman and founder Ailes when Carlson slapped him with the sexual harassment suit.  Greta also ripped Carlson as a bitter ex-employee and a liar.

--Dos Equis is unveiling its new “Most Interesting Man in the World” – 41-year-old French actor Augustin Legrand, who is taking over for Jonathan Goldsmith, who retired from the iconic role that he played for nearly a decade.

There is a teaser spot out there now, but the full ad campaign launches in October.

--Talk about a nightmare, how about being stranded in a cable car at 10,000 feet, as was the case for 45 people at Europe’s highest mountain, Mount Blanc, overnight, for a full 10 hours before they were rescued.

The Vallee Blanche cable car journey is 5km long and usually takes 35 minutes.  65 people were rescued before nightfall prohibited further rescues, in what was obviously a rather delicate operation.

It seems that the cables got tangled in high wind.

Hopefully no one started “100 bottles of beer on the wall....” 

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: I’m the ‘wait 24 hours’ guy and a few hours ago we learned that the U.S. and Russia announced plans for a cease-fire deal in Syria that would ultimately include military cooperation if implemented.

The accord would prevent the Syrian regime from flying combat missions where opposition forces are operating.  At first shorter cease-fires would take place and after 7 days, the U.S. and Russia would cooperate militarily to combat ISIS.

Sustained humanitarian access to all of the besieged areas, including Aleppo, is part of the agreement.

Needless to say we’ll learn a lot by the time I next write.

This week Syria was accused of dropping barrel bombs containing chlorine from helicopters on a suburb of Aleppo, killing at least two and injuring over 80.  The footage of the aftermath was chilling.

The leader of Syria’s main political opposition group criticized the U.S. for not doing enough to end his country’s civil war, as he warned that his group’s new plan to halt the bloodshed will only succeed if the West gets President Bashar al-Assad to quit.

Riad Hijab, head of the High Negotiations Committee (HNC), an umbrella of opposition groups backed by the West and Gulf states, said Obama is “paying lip service support” to the opposition.

“We are very disappointed that the Americans are not taking an effective role in delivering what they said they should deliver,” Mr. Hijab said.  “Obama said in 2011 that Assad has lost his legitimacy. He had many ‘red lines’ [that Assad has crossed], but we’re now coming to a position where Obama is leaving and Assad is still in place.”

Meanwhile, Turkey said it would be willing to join an initiative proposed by the United States to capture the ISIS stronghold of Raqqa, per discussions President Obama had with Turkish President Erdogan at the G20 summit in China.

But the U.S. is still concerned that following Turkey’s invasion of northern Syria on Aug. 24, the Turks have not just been going after ISIS, but also Kurdish forces friendly to the U.S., the YPG.

Heavy Turkish shelling across the border into Syria killed six U.S.-backed Kurdish fighters (the YPG) and wounded several civilians, according to the Syrian Observatory for Human Rights. At least 19 Kurdish fighters and allied fighters have been killed by the Turks since the incursion began.

The Turks have begun losing soldiers in the conflict, with three killed by rockets fired by ISIS on Tuesday.

Turkey has also been calling for a “safe zone” on the Syrian border to stem the flow of Syrian refugees, but the U.S. and Russia would have to agree to this and this isn’t likely.

In other developments....

ISIS claimed responsibility for a string of bombing across Syria on Monday that killed at least 48, one of which targeted a bridge in the provincial capital of Tartus that killed 35.  A car bomb exploded first, and then a suicide bomber detonated his explosive belt when people gathered to help the wounded.

A senior commander of the Syrian militant group formerly known as al-Nusra Front was killed near Aleppo in an airstrike, according to the group Janhat Fateh al-Sham, which is what Al-Nusra Front changed its name to this summer in cutting ties with al-Qaeda at the same time.  It’s not known whose warplanes took out Abu Omar Sarakeb.

Israel:  The Israelis are increasingly concerned about troop movements by Syrian regime forces, along with Hizbullah fighters near the border with Israel as they look to clear out opposition forces.  On Monday, a former Israeli security official told the Jerusalem Post that the Syrian conflict is entering a highly unpredictable phase, with Hizbullah posing a growing threat despite losing a large number of fighters in the Syrian war.

Iran: A bitter war of words between Iran and Saudi Arabia has intensified ahead of the annual hajj pilgrimage from which Iranians have been excluded for the first time in decades.

Supreme Leader Ayatollah Ali Khamenei blasted the “incompetence” of the Saudi royal family as he met with the families of victims of last year’s deadly stampede at the hajj.

“This incident proves once again that this cursed, evil family does not deserve to be in charge and manage the holy sites,” Khamenei said.

The hajj is due to start today, Saturday, and Iranians have been blocked after talks on safety and logistics fell apart in the spring.

Iranian President Hassan Rouhani said of the Saudis, “Unfortunately, this government by committing crimes in the region and supporting terrorism in fact shed the blood of Muslims in Iraq, Syria and Yemen.”

Saudi Arabia claims the death toll from last year’s stampede was ‘only’ 769.  The Iranians claim 2,300 deaths, including hundreds of their countrymen.  Data from more than 30 countries suggests it was far higher than the 769 figure.

Iran has boycotted the hajj in the past, like after clashes between Iranian pilgrims and Saudi police left hundreds dead in 1987, though diplomatic ties were restored in 1991. 

Around 60,000 Iranians took part in last year’s hajj.  [Agence France Presse]

Separately, an ongoing Wall Street Journal investigation by Jay Solomon and Carol E. Lee has found that “The Obama administration followed up a planeload of $400 million in cash sent to Iran in January with two more such shipments in the next 19 days, totaling another $1.3 billion.”

“The cash payments – made in Swiss francs, euros and other currencies – settled a decades-old dispute over a failed arms deal dating back to 1979.  U.S. officials have acknowledged the payment of the first $400 million coincided with Iran’s release of American prisoners and was used as leverage to ensure they were flown out of Tehran’s Mehrabad on the morning of Jan. 17.”

But the latest revelations add to Republicans’ argument that the White House paid ransom to Tehran, a charge President Obama has repeatedly denied.  Sen. Marco Rubio has introduced legislation that would bar such payments in the future, while seeking to reclaim the $1.7 billion for victims of Iranian-backed terrorism.

Afghanistan: Three separate blasts in Kabul on Monday killed at least 35 people, including four Afghan soldiers, with more than 100 injured.  The Taliban claimed responsibility as the once secure capital continues to get hit with regularity, a terrible sign.

One of the bombs went off outside a building belonging to CARE, a U.S.-based charity.

North Korea: Pyongyang exploded its fifth nuclear test despite threats of more sanctions from the United States and the U.N., resulting in a magnitude 5.3 “artificial” tremor.  North Korea last tested a nuclear device on Jan. 6, and this one appears to be the biggest of the five.  [Earlier in the week, in a move timed to compete with the G20 summit in Hangzhou, the North fired three ballistic missiles toward Japan.]

State TV in Pyongyang said the test elevated the country’s nuclear arsenal and is part of its response to sanctions.  The North said it will continue to strengthen the quantity and quality of its nuclear weapons.

“Our nuclear scientists staged a nuclear explosion test on a newly developed nuclear warhead at the country’s northern nuclear test site,” state TV said.

“Our...party sent a congratulatory message to our nuclear scientists...for conducting the successful nuclear warhead explosion test.”

South Korean President Park Geun-hye strongly condemned the test, describing the action as the “fanatic recklessness of the Kim Jong Un government as it clings to nuclear development.”

President Obama warned of “serious consequences.”  [Whatever...]

Russia’s Foreign Ministry said in a statement that Pyongyang must give up its missile and nuclear programs, adding: “We insist that the North Korean side stop its dangerous escapades and unconditionally implement all resolutions of the United Nations Security Council.”

NATO Secretary General Jens Stoltenberg told Pyongyang it must drop all nuclear and ballistic missile activities.

Japanese Prime Minister Shinzo Abe said: “North Korea’s carrying out of a nuclear test is absolutely unacceptable for Japan.  North Korea’s nuclear development is becoming a graver threat to Japan’s safety and severely undermines the peace and safety of the region and the international community.”

China said on Friday it “firmly opposes” the test but it has limited room to maneuver, as its priority is to avoid a collapse of the regime that would create a crisis on its border.

A representative from the South’s meteorological agency said “The 10-kiloton blast was nearly twice the fourth nuclear test and slightly less than the Hiroshima bombing, which was measured at about 15 kilotons.”

Kim Jong Un has overseen a rapid increase in the number of missiles tested this year, as the world waits to see when it will miniaturize its nuclear capability to the point of having a nuclear warhead that would fit on a long-range missile capable of hitting the U.S., as it also works to perfect new platforms for launching them – submarines and mobile launchers.

But while the U.N. will no doubt come up with new sanctions, it’s pretty clear the existing ones haven’t been effective.

I have written in the past, the North would appear to be making such rapid progress in its missile program that I am already concerned about next Fourth of July, Pyongyang always picking significant dates for its tests.  The nuke test fell on the 68th anniversary of the founding of North Korea’s government.

China: Charles Krauthammer / Washington Post...on Obama’s arrival at the G-20....

“The president of the United States lands with all the majesty of Air Force One, waiting to exit the front door and stride down the rolling staircase to the red-carpeted tarmac. Except that there is no rolling staircase. He is forced to exit – as one China expert put it rather undiplomatically – through ‘the ass’ of the plane.

“This happened Saturday at Hangzhou airport.  Yes, in China. If the Chinese didn’t invent diplomatic protocol, they surely are its most venerable and experienced practitioners. They’ve been at it for 4,000 years.  They are the masters of every tributary gesture, every nuance of hierarchical ritual.  In a land so exquisitely sensitive to protocol, rolling staircases don’t just disappear at arrival ceremonies.  Indeed, not one of the other G-20 world leaders was left stranded on his plane upon arrival.

“Did President Xi Jinping directly order airport personnel and diplomatic functionaries to deny President Obama a proper welcome? Who knows? But the message, whether intentional or not, wasn’t very subtle. The authorities expressed no regret, no remorse and certainly no apology. On the contrary, they scolded the media for even reporting the snub.

“No surprise. China’s ostentatious rudeness was perfectly reflective of the world’s general disdain for Obama.  His high-minded lectures about global norms and demands that others live up to their ‘international obligations’ are no longer amusing.  They’re irritating.

“Foreign leaders have reciprocated by taking this administration down a notch knowing they pay no price.  In May 2013, Vladimir Putin reportedly kept the U.S. secretary of state cooling his heels for three hours outside his office before deigning to receive him.  Even as Obama was hailing the nuclear deal with Iran as a great breakthrough, the ayatollah vowed ‘no change’ in his policy, which remained diametrically opposed to ‘U.S. arrogant system.’ The mullahs followed by openly conducting illegal ballistic missile tests – calculating, correctly, that Obama would do nothing.  And when Iran took prisoner 10 American sailors in the Persian Gulf, made them kneel and broadcast the video, what was the U.S. response?  Upon their release, John Kerry publicly thanked Iran for its good conduct.

“Why should Xi treat Obama with any greater deference?  Beijing illegally expands into the South China Sea, meeting only the most perfunctory pushback from the U.S. Obama told CNN that he warned Xi to desist or ‘there will be consequences.’ Is there a threat less credible?

“Putin annexes Crimea and Obama crows about the isolation he has imposed on Russia. Look around.  Moscow has become Grand Central Station for Middle East leaders seeking outside help in their various conflicts.  As for Ukraine, both the French president and the German chancellor have hastened to Moscow to plead with Putin to make peace. Some isolation....

“At the G-20, Obama said he spoke to Putin about cyberwarfare, amid revelations that Russian hackers have been interfering in our political campaigns.  We are more technologically advanced, both offensively and defensively, in this arena than any of our adversaries, said Obama, but we really don’t want another Cold War-style arms race.

“Instead, we must all adhere to norms of international behavior.

“It makes you want to weep.”

At an East Asia summit where the issue of security in the South China Sea was raised, China’s vice foreign minister, Liu Zhenmin, responding to a question from a reporter about whether the leaders of Japan and the United States had raised concerns about the disputed area, said, “Outsider countries like to interfere whenever they see countries in the region strengthening relations and working together to solve problems,” and that two (unidentified) countries kept trying to “sow discord” during the summit.

On the issue of Hong Kong, at last weekend’s LegCo elections, 30 pro-democracy candidates were elected to the 70-seat legislative body, meaning they retain the ability to veto any major constitutional changes the pro-Beijing forces may put up.  The 30 figure is up from 27 previously and includes 23-year-old Nathan Law, a prominent activist from 2014’s “Umbrella Protests.”

Beijing is warning that anyone advocating Hong Kong’s independence could be punished, state media reported, as the Chinese government is strongly opposed to more political independence for Hong Kong.

But the pro-democracy forces want one thing...they don’t want to become just another Chinese city, with other forces within this bloc seeking a referendum on the former British colony’s future.

Chinese state news agency Xinhua countered, “We firmly support the Hong Kong SAR [special administrative region] government to mete out penalties according to law.”

2017 will be an explosive year here.  40 percent of Hong Kong youths between ages 15 and 24 support eventual independence, according to a recent poll.

Just another item for the new U.S. president’s agenda.

China also released a series of high-definition satellite images that zoomed in on foreign military installations, including Edwards Air Force Base in California and the Area 51 weapons testing grounds in Nevada, the first time such images had been released to the public.

The images were taken by JLCG-1, a microsatellite constellation launched last year, which consists of four satellites that have limited maneuverability, “meaning that if they enter into a collision course with the space station or other spacecraft in the busy lower-earth orbit, their operator would be unable to move them out of the way,” as reported by the South China Morning Post’s Stephen Chen.

I recently wrote about the skyrocketing number of satellites orbiting the earth, whose numbers will continue to soar (more than double in five years), but this drastically increases the risks of collision and huge amounts of space debris.

As Mr. Chen writes, “China could ‘pollute’ space with a large number of small, cheap satellites...unless the industry is reined in with strict, clear regulations as quickly as possible.”

Ain’t gonna happen.

Russia: A Russian fighter jet carried out an “unsafe and unprofessional” intercept of a U.S. spy plane over the Black Sea and came within 10 feet of the American aircraft, U.S. defense officials said on Wednesday.  Russia said it sent Su-27 fighter planes to intercept a U.S. aircraft approaching its border over the Black Sea because the American planes had turned off their transponders, which are needed for identification.

Separately...Anne Applebaum / Washington Post

“ ‘U.S. investigates potential covert Russian plan to disrupt November elections.’  To those unused to this kind of story, I can imagine that headline, from The Post this week, seemed strange.  A secret Russian plot to throw a U.S. election through a massive hack of the electoral system?  It sounds like a thriller, or a movie starring Harrison Ford.  In fact, the scenario under investigation has already taken place, in whole or in part, in other countries.  Quite a bit of the story is already unfolding in public; strictly speaking, it’s not ‘secret’ or ‘covert’ at all. But because most Americans haven’t seen this kind of game played before (most Americans, quite wisely, don’t follow political news from Central Europe or Ukraine), I think the scenario needs to be fully spelled out. And so, based on Russia’s past tactics in other countries, assuming it acts more or less the same way it acts elsewhere, here’s what could happen over the next two months:

“1. Trump, who is advised by several people with Russian links, will repeat and strengthen his ‘the election is rigged’ narrative...

“2. Russia will continue to distribute and publish the material its hackers have already obtained from attacks on the Democratic National Committee, George Soros’ Open Society Foundation, former NATO supreme commander Gen. Philip Breedlove and probably others.  The point will be to discredit not just Hillary Clinton but also the U.S. democratic process and, again, the ‘elite’ who supposedly run it....

“3. On or before Election Day, Russian hackers will seek to hack the U.S. voting system.  We certainly know that this is possible: Hackers have already targeted voter registration systems in Illinois and Arizona, according to The Post, and the FBI has informed Arizona officials that it suspects Russian hacking teams....

“4. The Russians attempt to throw the election.  They might try to get Trump elected....

“5. Once revealed, the result will be media hysteria, hearings, legal challenges, mass rallies, a constitutional crisis – followed by confusion, chaos and an undermining of the office of the presidency.  Trump might emerge from the process as president after all.  He will then go on, as promised at so many rallies, to ‘lock her up,’ and of course to open a broad relation with Russian President Vladimir Putin, the only foreign leader he seems to truly admire.  Even if Clinton remains as president, she will be tarnished....At least a part of the country will assume she is illegitimate...

“6. More likely, the hack will fail, or never even get off the ground.  But what’s the downside in trying, or even in letting it be known that it was tried?  Rumors of election fraud can create the same hysteria as real election fraud....

“7. And what’s the downside for Trump?  If he wins, he wins.  If he loses – then there are all kinds of ways to make money from the ‘election was rigged’ narrative... Whatever happens, the political process is undermined, social trust plummets further and the appeal of American democracy, both at home and around the world, diminishes. And that, of course, is the point.”

Lastly, Interfax news agency quoted Russia’s Defense Ministry as saying Russia has formed a “self-sufficient military group” in Crimea capable of repelling attempts to seize the peninsula.

Philippines: Last week I said my piece on Philippine President Rodrigo Duterte, calling him “a wacko.”  Well, a few days later you had an example of what I was referring to when Duterte said that Obama better not question him about his drug war that has seen more than 2,400 killed, calling Obama a “son of a bitch.”

The two were to meet on Monday, but Obama correctly canceled after the insult.  Duterte later said he “regretted” using such language.

Shortly after his election, Duterte declared, “I will be charting a [new] course [for the Philippines] on its own and will not be dependent on the United States.”

But as Richard Javad Heydarian recently wrote for Defense News:

“Since then, when it comes to relations with Washington, the new president has broken one diplomatic taboo after the other.  On multiple occasions, he has openly questioned America’s commitment to come to the Philippines’ aid in an event of conflict in the South China Sea.  He has intimated that he will put new restrictions on the movement of American military personnel on Philippine soil, though vowed to honor existing bilateral security agreements.”

The Obama administration is walking a tightrope, as Duterte has moved closer to China in recent months, despite China’s refusal to even acknowledge the United Nations Convention on the Law of the Sea ruling at The Hague this summer, debunking the bulk of Beijing’s territorial claims over the South China Sea.

Duterte has met with the Chinese ambassador to the Philippines more than any other diplomatic envoy in Manila, according to Heydarian.

Random Musings

--Polls....

A CNN/ORC national poll of likely voters has Donald Trump with a 45-43 lead over Hillary Clinton, with Libertarian Gary Johnson at 7% and Green Party candidate Jill Stein at 2%.

Independents favor Trump 49-29, with Johnson at 16%.

Single women go for Hillary over Trump by a 73-20 margin.  Married women favor Trump 53-26.

In an NBC News/Survey Monkey Weekly Tracking Poll, Trump leads Clinton by 19 points, 55% to 36% - among voters who are currently serving or have previously served in the U.S. military.

[In the battle of the generals’ endorsements, Trump came up with 88, Clinton 95.  Many of these are nothing more than bureaucratic hacks.]

Among all registered voters, 59% would not be confident in Trump’s ability to serve as commander-in-chief of the military and just 39% would feel confident.  In this same category, 52% would not be confident in Clinton’s ability to serve, 46% would be.

A RealClearPolitics average of the polls is now at about 2 points, Clinton leading Trump, which is down from 8 points in mid-August.

But as for some key battleground states, a Quinnipiac University poll released Thursday had some important data:

Florida: Clinton is tied with Trump at 47 percent.
North Carolina: Clinton leads Trump 47-43.
Ohio: Trump leads Clinton 46-45.
Pennsylvania: Clinton leads 48-43.

If you add in Gary Johnson and Jill Stein....

Florida: 43-43, Johnson 8%, Stein 2%
North Carolina: Clinton 42-38, Johnson 15%, Stein is not on the ballot.
Ohio: Trump 41-37, Johnson 14%, Stein 4%.
Pennsylvania: Clinton 44-39, Johnson 9%, Stein 3%.

But the impressive totals for Johnson in some of the above were prior to his gaffe.

--The FBI conveniently released notes from an FBI interview with Hillary Clinton over Labor Day weekend and there were about 40 times where the former secretary of State told officials she did not recall receiving emails she thought should not have been on an unclassified system, relying instead on State officials to use their judgment when emailing her.

RNC chairman Reince Priebus said in a statement, “Clinton’s answers either show she is completely incompetent or blatantly lied to the FBI or the public.”

Clinton spokesman Brian Fallon said in a statement: “While her use of a single email account was clearly a mistake and she has taken responsibility for it, these materials make clear why the Justice Department believed there was no basis to move forward with this case.”

Investigators found that a number of Clinton’s private emails were erased several weeks after the New York Times first reported on the existence of the private server and her use of it while in office.

Editorial / Wall Street Journal

“The closer we look at the FBI’s investigative file on Hillary Clinton’s emails, the more we wonder if Director James Comey always intended to let her off the hook. The calculated release before the long Labor Day weekend suggest political favoritism, and the report shows the FBI didn’t pursue evidence of potential false statements, obstruction of justice and destruction of evidence.

“Mr. Comey’s concessions start with his decision not to interview Mrs. Clinton until the end of his investigation, a mere three days before he announced his conclusions.  Popular FBI practice is to get a subject on the record early then see if his story meshes with what agents find. In this case they accepted Mrs. Clinton’s I-don’t-recall defenses after the fact.

“The notes also show the G-men never did grill Mrs. Clinton on her ‘intent’ in setting up her server. Instead they bought her explanation that it was for personal convenience. This helped Mr. Comey avoid concluding that her purpose was to evade statutes like the Federal Records Act.  Mr. Comey also told Congress that indicting her without criminal intent would pose a constitutional problem. But Congress has written many laws that don’t require criminal intent, and negligent homicide (for example) has never been unconstitutional.

“The FBI notes also blow past evidence that Clinton advisers may have engaged in a cover-up.  Consider page 10 of the FBI report: ‘Clinton’s immediate aides, to include [Huma] Abedin, [Cheryl] Mills, Jacob Sullivan, and [redacted] told the FBI they were unaware of the existence of the private server until after Clinton’s tenure at State or when it became public knowledge.’

“That’s amazing given that Ms. Abedin had her own email account on the private server.  It is also contradicted by page 3: ‘At the recommendation of Huma Abedin, Clinton’s long-time aide and later Deputy Chief of Staff, in or around fall 2008, [Bill Clinton aide Justin] Cooper contacted Bryan Pagliano...to build the new server system and to assist Cooper with the administration of the new server system.’....

“There’s more the G-men ignored.  Starting on page 18, the FBI notes that on March 2, 2015, the New York Times broke  the news about Mrs. Clinton’s private server.  On March 4, 2015, the House Select Committee on Benghazi issued a subpoena for Mrs. Clinton to produce emails from clintonemail.com.  The FBI notes that in the days following the New York Times story, Ms. Mills ‘requested that PRN [Platte River Networks, the outside company then maintaining the Clinton technology] conduct a complete inventory of all equipment related to [the Clinton server].  And on March 25, PRN ‘held a conference call with President Clinton’s staff.’  A PRN employee then sometime ‘between March 25-31, 2015 deleted the Clinton archive mailbox from the PRN server.’  The FBI reports that it had found a ‘PRN work ticket, which referenced a conference call among PRN, [Clinton attorney David] Kendall, and Mills on March 31, 2015.’  The PRN employee was advised by an attorney ‘not to comment on the conversation with Kendall based upon the assertion of attorney-client privilege.’....

“What was said in those PRN* conversations with Ms. Mills, Clinton aides and Mr. Kendall?  Why the sudden Clinton rush to deal with a server that had been sitting quietly for so long?   Usually, the FBI is keenly interested in any potential destruction of evidence – especially evidence under subpoena. Yet the FBI didn’t explore the details of the convenient archive deletions.

“The FBI’s kid-glove treatment of Mrs. Clinton raises serious doubts about the seriousness of Mr. Comey’s probe.  His July 5 public rebuke of her ‘extremely careless’ handling of secrets has masked that Mrs. Clinton and her aides were given a pass on much of their behavior and dubious answers.  The entire episode is another Jim Comey scar on the FBI’s reputation.”

*PRN used BleachBit, a software designed to prevent the recovery of deleted files.

Editorial / New York Post

“In her FBI interview, (Clinton) ‘couldn’t recall’ any State training or warnings on retaining records, handling classified info or e-mail policies of any kind.

“But she was the boss: It was her job to know the rules for protecting the nation’s secrets and leaving a complete record of her work – or at least to hire aides who’d get it done.  But she hired enablers who helped keep her secrets without guarding America’s.

“In total, the report shows behavior far worse than ‘extremely careless,’ as FBI chief Jim Comey termed it as he recommended against legal charges.  Central to the case for mercy was his claim she didn’t ‘intend’ to break the law. Yet his own agents’ report shows that, at the minimum, she just didn’t give a damn what the law required.

“ ‘Criminally reckless’ is more like it.”

Former secretary of State Colin Powell advised his successor, Clinton, on how to circumvent federal records requirements in a newly released email exchange, dating back to two days after Clinton was sworn into office in 2009.

“I had an ancient version of a PDA and used it,” Powell said in the exchange with Clinton.  “If it is public that you have a Blackberry, it may become an official record and subject to the law.”

“Be very careful,” warned Powell.  “I got around it all by not saying much and not using systems that captured the data,” he said.

The email was released by Rep. Elijah Cummings, the top Democrat on the House Oversight Committee.

The exchange, said Cummings, shows that Powell gave Clinton “a detailed blueprint on how to skirt security rules and bypass requirements to preserve federal records, although Secretary Clinton has made clear that she did not rely on this advice.  (It) also illustrated the longstanding problem that no secretary of State ever used an official unclassified email account until the current secretary of State,” Cummings said.

For his part, Powell reiterated on Thursday he used a private email account to conduct government business while serving as secretary of State, saying he was “unaware” of requirements to preserve emails sent between private accounts.

In a statement released through an assistant, Powell said: “I was not aware at the time of any requirement for private, unclassified exchanges to be treated as official records.  I have been interviewed by the State Department [inspector general] and the FBI about my actions and decisions. I stand by my decisions and I am fully accountable.”

--The Washington Post’s Rosalind S. Helderman and Michelle Ye Hee Lee had a story on for-profit college company, Laureate International Universities, and how they signed Bill Clinton to a deal as a consultant and “honorary chancellor” that paid him $17.6 million over five years until the contract ended in 2015 as Hillary Clinton launched her campaign for president.

“There is no evidence that Laureate received special favors from the State Department in direct exchange for hiring Bill Clinton, but the Baltimore-based company had much to gain from an association with a globally connected ex-president and, indirectly, the United States’ chief diplomat....

“While much of the controversy about Hillary Clinton’s State Department tenure has involved donations to her family’s charity, the Clinton Foundation, a close examination of the Laureate deal reveals how Bill Clinton leveraged the couple’s connections during that time to enhance their personal wealth”

As Hillary assumed the post at the State Department, Bill was taking on new consulting work, signing “contracts worth millions with GEMS Education, a secondary-education chain based in Dubai, as well as Shangri-La Industries and Wasserman Investment, two companies run by longtime Democratic donors.  All told, with his consulting, writing and speaking fees, Bill Clinton was paid $65.4 million during Hillary Clinton’s four years as secretary of state.”

--John Podhoretz / New York Post

“So Hillary Clinton and Donald Trump appeared one after the other last night for a half-hour on NBC to talk about being commander in chief.  Polls will tell us who ‘won’; frankly, I have no idea.

“But overall, America lost, big time.

“Listening to Clinton prevaricate about her emails and Trump prevaricate about positions he holds and doesn’t entirely seem to understand once again raises the unholy horror of the fact that out of 330 million people in the United States, these are the two who have ended up in the race for the White House in 2016.

“NBC’s Matt Lauer was quite relentless with Clinton when it came to her handling of classified information on an unsecured private server, even going so far as to ask whether it disqualified her from the presidency.

“She has tried out various approaches to this matter, from saying she made an error for which she had no excuse (a line she repeated to Lauer) to saying she did nothing wrong and had  nothing to apologize for. But last night her chutzpah reached an all-time high when she pointed out there was all kinds of evidence government servers had been hacked but no evidence her private server had been hacked.

“The clear suggestion here was that Hillary Clinton had been a better steward of the classified information of the United States government than the United States government – even though she had just said it had been a mistake to set up her private server in the first place.  By what logic, then, should she consider her conduct a mistake?

“The simple fact of the matter is that there’s no defense for what she did, since she did it in bad faith to shield her email improperly from future public discovery – and would have succeeded had the events in Benghazi not occurred on her watch.  So now she simply uses every opportunity she has to create new smokescreens simply to evade more thorough and direct questioning.

“The FBI may not have indicted her, but her conduct has been so unbecoming a leader that the American people have – polls show nearly 70 percent of the American people consider her untrustworthy....

“But at least she didn’t spend three minutes of her time sucking up to Vladimir Putin, the way Donald Trump did.  Trump not only praised the Russian thug’s leadership and cited the KGB goon’s poll numbers, but appeared to draw a comparison between Putin and Barack Obama that favored Putin.  I’m the opposite of an Obama fan, but that’s just disgusting.  Obama hasn’t had reporters killed, hasn’t choked off press freedoms,  hasn’t swallowed up Crimea, and isn’t seeking imperial dominion of America’s geographical neighbors....

“Democracy, the great cynic H.L. Mencken once said, “is the theory that the common people know what they want, and deserve to get it good and hard.’ And boy, are we going to get it, one way or another, come November.”

Among the statements Trump made about Putin was: “I think when he calls me brilliant I’ll take the compliment, OK?”  Putin also had “great control over his country.”

Last December, Trump said it was “a great honor” when Putin called him “a talented person.”

Trump’s remarks came hours after Defense Secretary Ash Carter said Russia “has clear ambitions to erode the principled international order.”

Trump on Wednesday at the commander-in-chief forum, also stood by a tweet he wrote three years ago when he appeared to blame sex abuse in the military on the decision to allow women in the armed forces.  He also remarked then: “What did these geniuses expect when they put men & women together?”

“It is a correct tweet,” he told Matt Lauer.

--Trump offered a plan Wednesday morning in Philadelphia to revitalize America’s military by building up troop levels and ending caps on the military budget. Among the items he ticked off would be increasing the size of the Army to about 540,000 troops, taking the Marine Corps up to about 36 battalions, a navy with 350 ships and submarines and an Air Force of 1,200 fighter planes; all big increases over today’s levels, which today are essentially at post-World War II lows.

--Trump dismissed questions about his failure to disclose an improper $25,000 contribution in 2013 to a political group connected to Florida Attorney General Pam Bondi, who at the time was considering whether or not to open an investigation into Trump University.

The donation was made by the Donald J. Trump Foundation, which thus violated federal rules prohibiting a charity from donating to a political candidate.  The gift also wasn’t disclosed to the IRS.

“I never spoke to her, first of all. She’s a fine person, beyond reproach. I never even spoke to her about it at all,” Trump said Monday when the story broke nationally (it was a minor one earlier).  “Many of the attorney generals turned that case down because I’ll win that case in court.”

But a consultant on Bondi’s reelection effort, Marc Reichelderfer, told the Associated Press the other month that Bondi spoke with Trump and solicited the donation herself.  But Reichelderfer said Bondi had not been aware of the complaints against Trump University when she asked for the contribution.

Trump paid the IRS a $2,500 penalty this year when reports surfaced about the gift and disclosure error.

--Editorial / Washington Post

“Libertarian presidential nominee Gary Johnson embarrassed himself Thursday when he was asked about the epicenter of Syria’s civil war and responded, ‘What is Aleppo?’  The moment, on an MSNBC morning program, deserves to become iconic because it encapsulates why Mr. Johnson is not fit to be president. His disregard for U.S. foreign policy and strategic interests is so profound that he did not recognize a reference to Syria’s largest city, which, for several years, has been the site of intense fighting, massive war crimes and an ongoing humanitarian crisis that has, with its tidal wave of refugees, rocked prime U.S. allies in Europe.

“But let’s be fair to Mr. Johnson: In the context of the 2016 presidential campaign, he’s far from winning the cluelessness contest.  Following his gaffe, the former New Mexico governor offered a relatively cogent summary of U.S. support for various Syrian factions.  Later, he apologized, saying that he thought ‘Aleppo’ was an acronym.  ‘I feel horrible,’ he said to Bloomberg Politics.  ‘I have to get smarter, and that’s just part of the process.’

“It’s refreshing, at least, to hear a national candidate acknowledge error and vow to do better.  Contrast that with Donald Trump, who in a televised national security forum Wednesday offered a staggering array of ignorant and mendacious assertions – and acknowledged no regrets about any of them.  In addition to repeating his false claims to having opposed the U.S. interventions in Iraq and Libya, Mr. Trump defended a tweet saying that military sexual assault was the result of men and women serving together, and he suggested the solution was to ‘set up a court system within the military’ because ‘right now, the court system practically doesn’t exist.’  Does he really mean to replace the U.S. military justice system?....

“Most troubling of all was Mr. Trump’s renewed endorsement for Vladimir Putin, in spite of the mounting evidence that the Russian government is attempting to directly interfere in the U.S. election campaign....

“Mr. Johnson may not know what Aleppo is. But in the contest between the United States and an autocratic and increasingly belligerent Russia, Mr. Trump appears not to be sure which side he is on.”

Gary Johnson, op-ed / Washington Post...prior to the gaffe....

“Shortly after drafting the Massachusetts Constitution, John Adams expressed his greatest fear for the nation: ‘There is nothing which I dread so much as a division of the republic into great parties, each arranged under its leader...This...is to be dreaded as the greatest political evil.’

“He wasn’t alone.  James Madison warned against the dangers of factionalism.  And in his farewell address, George Washington called ‘party dissension’ a kind of ‘frightful despotism,’ warning that a party leader would be prone to pursue his own agenda ‘to the purposes of his own elevation, on the ruins of public liberty.’

“Almost in spite of themselves, the founders allied themselves into political parties...

“Has the two-party division that the founders railed against become today’s political status quo?

“It doesn’t have to be. With the Republicans and the Democrats having nominated their most polarizing presidential candidates in more than a generation, now is the moment for a third way.

“My running mate, Bill Weld, and I were both two-term Republican governors in heavily Democratic states.  Both of us won reelection overwhelmingly. We did this by governing as fiscal conservatives and social liberals.  That’s where most Americans want their government to be.

“Political parties aren’t necessarily evil – unless they lead to the level of dysfunction that we have today.  Elected officials in Washington cannot even agree on a real budget – and haven’t for years. That’s their most straightforward responsibility.

“These partisans place loyalty to their team over loyalty to the nation’s needs....

“Fortunately, most American aren’t buying it.  More people consider themselves ‘independents’ than are aligned with either of the two largest political parties.  They want an alternative: a common-sense approach that combines fiscal discipline with social inclusion.

“As presidential and vice-presidential candidates, that’s our message.  A nonpartisan approach in the Oval Office would do wonders to defuse the harsh partisanship that we’ve seen develop in recent years....

“A great deal could be accomplished by having third-party leadership dedicated to finding the common ground that has so often eluded the parties in recent years: on balancing the budget, curbing taxes, protecting our privacy and reforming our criminal-justice system.

“The fact that the founders anticipated our two-party morass and warned against it ought to be enough incentive to look beyond it.  The two major parties have failed to meet the needs of the nation.  It’s time to try something different.”

--Congress on Friday sent President Obama a bill that would allow families of the victims of the 9/11 attacks to sue Saudi Arabia over its alleged ties to terrorism, but President Obama has threatened to veto it, as the White House argues the bill could harm the relationship with the Saudis and establish a legal precedent that jeopardizes American officials overseas.

Obama could pocket-veto the legislation if lawmakers leave too soon for campaigning by October.  This will be interesting over the next few weeks.

--The city of San Bernardino, California, with just 216,000 residents, has seen 47 murders thus far in 2016, exceeding the 44 total of all of last year, which included the 14 people killed by terrorists last Dec. 2nd.

--We note the passing of Phyllis Schlafly, the conservative activist, lawyer and author who almost single-handedly stopped passage of the Equal Rights Amendment in the 1970s.  The ERA was anti-family and anti-American, she said.  Equality would be a step down for most women, who she said are “extremely well-treated” by society and laws.  She later formed the Eagle Forum, and with the 1973 Supreme Court decision on Roe v. Wade, legalizing abortion, a new constituency was energized to engage in politics.

--In New York City, there is a relatively new ‘celebration’ called J’Ouvert, that is held over the Labor Day weekend and is nothing more than a lawless exercise, a really stupid pre-dawn “party” that is a prelude to that day’s West India Day Parade.

So after an aide to Gov. Cuomo was killed by a stray bullet at the celebration last year, Mayor Bill de Blasio and the police commissioner vowed this year’s event would be safe.  Instead, two were killed in shootings and three others were hit, plus one person was stabbed.

Michael Goodwin / New York Post

“No surprise, they failed.  There was no other possible outcome.

“An army of cops, a forest of light towers, months of meetings and posters warning, ‘Do not shoot anyone. Do not stab anyone,’ didn’t matter.

“When the guns came out, reality shattered the illusion.

“With two dead, two wounded and fear in every heart, it was J’Ouvert as usual. De Blasio’s promise that the carnival would be ‘safer than ever’ was another example of his big talk and puny performance.

“The aftermath is even more disconcerting, as neither the pols nor anyone else seems capable of confronting the truth. Namely, that even with police baby sitters, it is nuts to expect that an all-night street party, where alcohol is consumed openly and drugs are said to be widely available, will end peacefully.

“Police are police, not nannies or blue flowerpots.  The decision to double the number of cops, from 1,700 to 3,400, was a waste of money and manpower because the cops were not allowed to enforce the law.

“Their mere presence was supposed to deter crimes, but the war on cops has the opposite effect.  It encourages people to hate the police and break the law with no fear of consequences.

“It’s the Ferguson Effect, and New York has largely been spared the bloody results that are turning Chicago and other big cities into killing fields.  But what happened in Brooklyn is proof that New York is not exempt from human nature.

“Yet still the pols talk the talk. Cuomo fumed about illegal guns and de Blasio threatened to end* the annual party, but neither mentioned the obvious solution: let cops be cops.  Let them enforce the law, all the laws, so the innocent do not become victims....

“Unless the bad guys fear they will get busted, they will break the law.  Nor is it fair to put cops in the demoralizing position of being forced to watch the law being flouted without letting them act. And law-abiding citizens understandably wonder whose side their government is on.”

*De Blasio later said J’Ouvert would take place next year because, you see, the West Indian community is a key voting bloc for him.

--The following should make you sick...and furious....

David Willman / Los Angeles Times

“From 2002 through early last year, the Pentagon conducted 11 flight tests of the nation’s homeland missile defense system.

“In the carefully scripted exercises, interceptors of the Ground-based Midcourse Defense system, or GMD, were launched from underground silos to pursue mock enemy warheads high above the Pacific.

“The interceptors failed to destroy their targets in six of the 11 tests – a record that has prompted independent experts to conclude the system cannot be relied on to foil a nuclear strike by North Korea or Iran.

“Yet over that same timespan, Boeing Co., the Pentagon’s prime contractor for GMD, collected nearly $2 billion in performance bonuses for a job well-done, the Los Angeles Times has learned.

“The Pentagon paid Boeing more than $21 billion total for managing the system during that period....

“The cumulative total of bonuses paid to Boeing has not been made public before.  The Times obtained details about the payments through a lawsuit it filed against the Defense Department under the Freedom of Information Act....

“The GMD system, which became operational in 2004, is intended to thwart a ‘limited’ nuclear strike by a non-superpower. It has cost more than $40 billion to date.”

I have always supported the Grunts....not necessarily the generals and decision makers.  I must say, Trump was right on one thing...some of the generals suck (though far from all), but what he didn’t say is they suck, and then retire and become lobbyists or executives at the likes of Boeing.

And that is what you all should be outraged over.

--I’ve been writing the past few weeks about the epidemic in heroin overdoses and soaring rates of opioid deaths.  The New York Times this week had a story from Cincinnati on the problem with synthetic opiates like fentanyl, which is 50 times stronger than heroin.

And then there is carfentanil, “an animal tranquilizer used on livestock and elephants with no practical uses for humans.”

Carfentanil is as much as 100 times more potent than fentanyl.  “Experts said an amount smaller than a snowflake could kill a person.”

The drug is being manufactured in China or Mexico and is making its way into the Cincinnati area in heroin shipments and it is so dangerous, police officers carry overdose-reversing naloxone sprays for themselves, “in case they accidentally inhale or touch the tiniest flake.”

--Finally, we note the 15th anniversary of 9/11.  Especially in the New York, Washington and Shanksville, Penn., areas, we all have certain memories.  I raced home that day, driving, from the Boston area where I was to play golf with a friend and recognized while listening to the radio that with the first word of the Trade Center getting hit we were under attack.  I called my father from the Mass Pike, knowing he was watching television, and the second plane hit while he was on with me.  I went to my friend’s office, watched the first tower go down, and told his assistant, as he wasn’t in yet, “Tell Dave I’ll talk to him later.”

I then took a back way home, across Massachusetts to New York State (and down to New Jersey), afraid to go over the Tappan Zee Bridge (a far more direct route), fearing it was a target.  There’s a certain point in northern New Jersey on Route 287 where you crest a hill and can see the far off New York skyline.  That’s the first time I saw the smoke.  I must have gone through a case of Kleenex the next few days.

And then the Mets’ Mike Piazza hit a dramatic home run in the first baseball game after 9/11 and it was then that many of us really moved on.  As I said up above, it’s why sports can play such a critical role in our everyday lives. 

Lots of football and key baseball games this weekend, friends.  Enjoy.  We need some time off from thinking about our scary future.

---

Pray for the men and women of our armed forces...and all the fallen, especially the victims of 9/11 and those who died defending our freedom ever since.

God bless America.

---

Gold closed at $1331
Oil $45.71

Returns for the week 9/5-9/9

Dow Jones  -2.2%  [18085]
S&P 500  -2.4%  [2127]
S&P MidCap  -3.2%
Russell 2000  -2.6%
Nasdaq  -2.4%  [5125]

Returns for the period 1/1/16-9/9/16

Dow Jones  +3.8%
S&P 500  +4.1%
S&P MidCap  +9.3%
Russell 2000  +7.3%
Nasdaq  +2.4%

Bulls  52.5
Bears  22.8  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore