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10/08/2016

For the week 10/3-10/7

[Posted: 11:30 PM ET, Friday]

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Edition 913

Washington and Wall Street

What a presidential campaign.  What a freakin’ mess.  Just hours before I go to post, we learn of a 2005 Access Hollywood audio/video tape of Donald Trump and Billy Bush engaging in “locker-room banter” about women, with Trump using some totally disgusting terms, and then an hour after this, WikiLeaks releases excerpts from Hillary Clinton’s Wall Street speeches, that her campaign had heretofore refused to, and we learn what we all knew already, frankly, that Clinton’s whole campaign against Bernie Sanders was a fraud.  She did indeed say some nice things about Wall Street, and took positions on issues from immigration to the Keystone pipeline that then ran counter to what she uttered on the campaign trail.

How Trump and Clinton handle this in Sunday’s debate will make for good theater.  But for now, some leading Republicans within hours were rushing for the exits; like House Speaker Paul Ryan who announced Trump had been disinvited from their first joint campaign appearance at an event in Wisconsin on Saturday, while Republican Sen. Mark Kirk called for Trump to drop out, others beginning to echo the same as I write.

But this all happens as a topic I’ve been leading with for weeks, the dangerous geopolitical position our country is in, gets even more so.

Here’s the deal. President Obama is attempting to run out the clock and it’s not working.  We are perilously close to a full-out conflict with Russia.

The cyberattacks that the Kremlin has launched against Democratic Party organizations in an attempt to influence our election are so fierce that the White House, and intelligence community, was forced to publicly accuse Russia of being behind them, a major step.

The U.S. Dept. of Homeland Security and the Office of the Director of National Intelligence on Friday issued a joint statement that read in part: “The U.S. Intelligence Community is confident that the Russian Government directed the recent compromises of e-mails from U.S. persons and institutions, including from U.S. political organizations.  The recent disclosures of alleged hacked e-mails on sites like DCLeaks.com and WikiLeaks and by the Guccifer 2.0 online persona are consistent with the methods and motivations of Russian-directed efforts.  These thefts and disclosures are intended to interfere with the U.S. election process.  Such activity is not new to Moscow – the Russians have used similar tactics and techniques across Europe and Eurasia, for example, to influence public opinion there.”

Kremlin spokesman Dmitry Peskov said such accusations were “nonsense,” as reported by Interfax news agency.

But at the same time, this week Russian moved the sophisticated S-300 anti-aircraft missile system into Syria, for which there is only one target...the United States (and perhaps the fighter jets of the U.S.-led coalition operating in that theater).

There was also a story on Friday, via Estonia, and later confirmed by U.S. intelligence sources, that Russia has moved nuclear-capable missiles into Kaliningrad, the tiny Russian enclave that sits between Poland and Lithuania.

Now I’ve written of Kaliningrad before, including last Dec. 12, noting then that Russia was conducting “nuclear strike drills.”  But with today’s report, you wonder if Russia is about to blackmail the Baltics to see how much they can get away with, knowing how President Obama isn’t anxious to engage Putin in his final days.  Wouldn’t want to screw up his legacy!

But Syria is the real focus.

Dmitri Trenin / Financial Times...Trenin is director of the Carnegie Moscow Center

“Syria, for most of 2016 the site of U.S.-Russian collaboration, could easily turn into a battlefield between the two – with the proxies first taking aim at the principals, and the principals then shooting back not at the proxies, but at each other.

“This is an exceptionally disturbing prospect that should keep people in Moscow and Washington awake at night.  But the new highly asymmetrical relationship between the two powers leaves almost no room for mutual respect.”

I have far more on Syria below, but for now, we wait to see the fallout from the Trump/Clinton disclosures and the reaction on Sunday.

I was going to lead with Tuesday’s vice-presidential candidate debate, but instead I cover it in the politics section.  Let’s just say that while Sen. Tim Kaine didn’t have a good performance and Gov. Mike Pence did, I’m on record as liking both selections when they were made.  I know I’m not the only one who watched and thought our country would survive either being in the Oval Office. But I’m not sure we will with the heads of their respective tickets.

---

On the economic front, the September jobs report was just fine.  The nonfarm payroll figure of 156,000 was below expectations, and the unemployment rate ticked up to 5.0%, the highest since April, but the latter was because more people were entering the labor force and looking for work.

The economy has been generating 178,000 jobs a month on average in 2016, which is solid, though this is down from 2015’s 229,000.

The underemployment rate, U6, was unchanged a third straight month at 9.7%.

Average hourly wages rose 0.2% in September and are up 2.6% year over year, approaching the more normal 3% for an expansion, albeit a putrid one.   [The Atlanta Fed’s GDPNow indicator for third-quarter GDP is down to 2.1%, from 3.8% on Aug. 5.]

The September ISM reading on manufacturing was better than expected, 51.5, with the new orders index up to 55.1, far better than August’s reading of 49.1.  The non-manufacturing figure for last month was also better than expected...far better...at 57.1 vs. 51.4 in August, which is now seen as an outlier.

August construction spending was down 0.7%, a miss, but factory orders rose 0.2%, better than forecast.

Loretta Mester, the president of the Cleveland Fed, told CNBC following release of the jobs report that the U.S. was at full employment and that it “makes sense” to move rates up another quarter-point.  So that’s a vote for December.  I’m not changing my long-held forecast of December as well.

Speaking of that month, the National Retail Federation issued its forecast for the holiday shopping season, which includes November and December, up 3.6%, which contrasts with 3% in 2015, a 10-year average of 2.5%, and 3.4% since the recovery began in 2009.

The International Monetary Fund lowered its 2016 U.S. growth forecast to 1.6% from 2.2%, its July estimate, and for advanced economies as a whole to 1.6%.

The IMF now expects emerging and developing economies to grow by 4.2% this year as a group, resulting in overall global growth of 3.1%, which it forecasts to rise to 3.4% in 2017.

But as the IMF’s chief economist Maurice Obstfeld notes, “political repercussions are likely to depress global growth further.”

The IMF said growth in China would be 6.6% this year and 6.2% in 2017, while it would be 7.6% both years in India.

The U.K., in dealing with Brexit, will grow 1.8% this year but only 1.3% in 2017.

Europe and Asia

This was the week that British Prime Minister Theresa May and members of her Cabinet added some color to the Brexit timetable and the strategy, as May addressed her Conservative Party’s annual conference in Birmingham and in various forums over the ensuing days.

May said the U.K. will begin the process of withdrawal from the European Union in the first quarter of 2017, and that she’ll introduce a bill next year to convert all EU laws into U.K. legislation on the day that Brexit is completed.

“It’s important that we have this in place by the time we leave the European Union so that there’s a smooth transition,” May said.  “It makes it very clear to the British people who’ve voted for us to leave the European Union that that’s exactly what we’re doing.”

Subsequent governments would then be able to repeal or amend individual laws.  The bill will be introduced to Parliament between May 2017 and May 2018.

What became clear is that the government will pursue “a hard Brexit.”  The U.K. will surrender membership of the EU’s single market for trade in return for more power over immigration, law-making and the country’s budget.

The British pound immediately dropped back to lows not seen since the day of the EU vote in June.  It would then go lower.

Nissan Motor Co. CEO Carlos Ghosn was emblematic of the attitude in corporate boardrooms when he said he may not be able to make new investments in Britain without a government pledge for compensation in the event of adverse consequences stemming from Brexit. Vodafone Group Plc said it would consider moving its headquarters to the continent to preserve the EU’s single market access.

Article 50, the formal mechanism for leaving the EU, will be triggered by the end of March but this does not commit the U.K. to any particular interpretation, and many options will be open as negotiations, which will take two years, minimum, proceed, which is hardly good for business as it will only add to the uncertainty.

Theresa May said in her speech on Sunday: “We are going to be a fully independent, sovereign country, a country that is no longer part of a political union with supranational institutions that can override national parliaments and courts.  That means we are going, once more, to have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration.”

Trade Secretary Liam Fox, a longtime opponent of the EU, addressed the delegates: “In case you haven’t noticed, the sky didn’t fall on June 24.  The prime minister has said clearly that Brexit means Brexit, and for those who believe it can be indefinitely postponed, or that there might be a second referendum, or that we might stay by some back-door mechanism, let me tell you: Theresa May is not someone who is known for saying anything other than what she absolutely means.”

Pro-European members of the party urged a more pragmatic approach be applied.

May also addressed voter concerns that drove the surprise Brexit vote.

“Just listen to the way a lot of politicians and commentators talk about the public.  They find their patriotism distasteful, their concerns about immigration parochial, their views about crime illiberal, their attachment to their job security inconvenient.  They find the fact that more than 17 million people voted to leave the European Union simply bewildering.”

What was the reaction on the continent? Chancellor Angela Merkel warned German companies that EU principles, including freedom of movement, will be prioritized before their narrow sectoral interests in the coming negotiations.

The chancellor emphasized that safeguarding the EU’s fundamental principles – including allowing EU workers to move freely in the bloc – would hold sway in the negotiations.

Meanwhile, back to the British pound, a few days after Bank of America Merrill Lynch warned that trading conditions in the currency markets were creaking and that traders were “complacent” over the risks of market shocks, you had a flash crash overnight on Thursday/Friday, as the pound fell more than 6% against the U.S. dollar in two minutes to $1.1841.  [The pound before Brexit was $1.48, and the low in the immediate aftermath of the vote was $1.279 before it rebounded back into the $1.30s.  Now this.]

At first there was speculation the move was caused by a mistaken “fat finger” trade or a rogue automated algorithm. While sterling quickly rebounded, it still closed Friday at $1.24, the lowest since May 1985.

But after traders had a chance to think about things, they decided that the big culprit was the tough stance taken by French President Francois Hollande on Brexit negotiations, as reported by the Financial Times, and that many algorithmic traders these days include tracking news websites in their systems. The FT story was first published the same minute as the move lower began.

“The U.K. has decided to do a Brexit, I believe even a hard Brexit.  Well, then we must go all the way through the U.K.’s willingness to leave the EU,” Hollande said.

Hollande was merely echoing Angela Merkel’s warning that there would be no special treatment for the U.K. without accepting the four basic principles of the bloc – freedom of goods, services, capital and people.

Separately, European Central Bank chief Mario Draghi said he remains committed to using the full force of the ECB’s monetary firepower to meet its growth and inflation targets. This came amid talk the central bank was contemplating “tapering” its asset purchases.

Gideon Rachman / Financial Times

“As soon as Britain triggers Article 50, the EU can simply run the clock down – knowing that the U.K. will be in an increasingly difficult situation, the longer the negotiations drag on without agreement.  At the end of two years, Britain will be out of the EU – and would face tariffs on manufactured goods and the loss of ‘passporting’ rights that allow financial services firms based in the City to do business across the bloc.  The economic damage from this kind of ‘hard Brexit’ would be severe, blowing a hole in the government finances as tax revenues from the City shrink, ushering in a new period of austerity.

“The most ardent Brexiters claim that this is all scaremongering.  Why, they ask, would the EU contemplate the restoration of tariffs when this could be damaging to its own economic interests?  The Leavers can answer that question by looking in the mirror.  It is clear that the main motivation of the pro-Brexit camp in Britain is political, not economic.  And the same will be true of the EU side in the negotiations....

“Some in Britain speak blithely of relying on the rules of the World Trade Organization after Britain has left the EU.  They ignore the fact that Britain is a member of the WTO under the auspices of the EU.  Creating an entirely separate British WTO membership requires another set of complex negotiations.

“That is a much bigger problem for Britain than the EU, since the longer the process is dragged out, the longer Britain is likely to be suspended in a legal limbo that will discourage long-term investment.  For that reason it was absolutely vital that Mrs. May should get some clarity on what happens after two years of negotiations – if and when the EU and the U.K. have failed to reach a definitive new deal.  The obvious solution would have been for Britain to remain inside the EU’s single market, but outside the EU until such time as a new deal was struck.  By failing to get that assurance, the British government has severely weakened its position – even before negotiations start.  So why has Mrs. May been so reckless? The short answer is politics.  If the prime minister had delayed triggering Article 50 any longer she might have faced a revolt from Conservative MPs, who would have feared that she was backsliding on Brexit.  By making her announcement just before the Tory party conference, she has also guaranteed herself some favorable headlines and applause in the conference hall.”

Editorial / The Economist

“The centerpiece of the deal ought to be to secure maximum access to Europe’s single market.  Brexiters say that, once outside, Britain would eventually negotiate low or no tariffs on its trade with the EU.  Yet, even if it did, tariffs are less than half the problem.  Without harmonized regulations, British firms will discover that their products do not meet European requirements, and vice versa.  And it is unlikely that a trade deal between Britain and the EU would cover services, including the financial sort that are among Britain’s biggest exports.  A study by the Treasury before the referendum estimated that the hit to GDP within two years of Brexit would be nearly twice as large if Britain left the single market than if it remained a member.

“Mrs. May seems to want to carve out a special deal with the EU, in which Britain limits immigration and determines product standards – on, say, food-labelling – while still operating fully in the single market.  Perhaps the negotiations will show that this is possible.  However, the signs are that she is overestimating the EU’s willingness to give ground.  Each country has a veto over Britain’s status.  On almost every issue, from immigration to financial services, at least one of them will be reluctant to surrender its advantages....

“A Brexit of some sort looms and Mrs. May will determine its course.  If Britain is not to suffer a car crash, she must ignore the back-seat drivers and fix her eyes firmly on the road ahead.”

---

Lots of economic data on the Eurozone this week, as well as the U.K.

The final composite reading for September, as put out by IHS Markit, was 52.6 vs. 52.9 in August, the worst of the year, with the manufacturing PMI being 52.6 vs. 51.7 (50 being the dividing line between growth and contraction) and the services reading at 52.2 vs. 52.8 in August, a 21-month low.

Germany had a manufacturing PMI of 54.3 last month, 50.9 on services.

France was at 49.7 mfg., a 7-mo. high, with services at 53.3, a 15-mo. high.

Spain was at 52.3 mfg., 54.7 services.

Italy 51.0 mfg., 50.7 services.

Greece 49.2 mfg.

A separate retail PMI for the Eurozone came in at 49.6 for Sept. vs. 51.0 in August.

Chris Williamson, Chief Economist at IHS Markit:

“While the PMI surveys suggest the eurozone economy continued to grow at a 0.3% rate in the third quarter [qtr. over qtr.], there are signs that momentum is waning.  September’s expansion was the smallest since the start of last year.

“The slowing rate of growth across the region in part reflects growing caution among businesses in terms of their spending due to worries about the economic outlook, linked in many cases to political uncertainty.  We see this trend persisting into next year, as the impact of Brexit is exacerbated by uncertainty surrounding elections in France and Germany alongside ongoing political unrest in Italy and Spain.

“While we see the eurozone economy expanding by 1.6% in 2016, even this modest growth is looking unattainable in 2017 given the heightened political uncertainty that lies ahead.

“Of the four largest euro states, only France is showing signs of its upturn gaining momentum, with growth trending lower in Germany, Italy and Spain.  The latter remains the stand-out performer, however, with the PMI pointing to 0.6% GDP growth in the third quarter, double the 0.3% rate of expansion signaled for both France and Germany.  Italy is perhaps the greatest concern, with the PMI indicating a near stalling of economic growth to just 0.1% in the third quarter.”

In the U.K., the manufacturing PMI was 55.4 last month, the best since June 2014, while the reading on services was 52.6.  The weaker pound is helping exporters big time.

Car sales were up 1.6% in September, year over year, to a new record for the month.

Eurobits....

--The Euro bond market (as well as here) was hit this week with the rumors that Draghi tried to dispel, that central banks are nearing a retreat from their extraordinary stimulus measures.  The yield on the German 10-year went from -0.12% to 0.02%; that of the Italian 10-year from 1.18% to 1.38%.

--On the migration front...Italy’s crisis is flaring anew as boats rescued over 6,000 people in the Mediterranean in just one day, piling more pressure on Prime Minister Matteo Renzi’s government, which has been struggling to keep up with the never-ending flows. According to the International Organization for Migration, some 138,000 migrants have arrived by sea to Italy so far this year, a slight increase over the same period last year.  The vast majority are not from Syria (Turkey largely sticking to its deal with the EU to stem the flow through Greece and the Balkans), but rather from Africa, with Nigeria and Eritrea being the top nationalities this year.

For his part, Turkish President Tayyip Erdogan criticized the European Union, saying the bloc had failed to fulfill its pledge to provide 3 billion euros of aid for migrants as part of the landmark deal to stem refugee flows to Europe.

“The year is coming to a close,” Erdogan said.  “They promise but do not deliver.”

The European Commission has said disbursements under the deal are based on projects and not to be paid in a lump sum.

In Hungary, hardline leader Viktor Orban’s bid to strike a blow against Brussels and it’s laxity on migration faltered as his referendum on whether Hungary should accept EU migrant quotas was declared invalid when it failed to meet the turnout threshold of 50% to make it official.

98% of Hungarians who did cast ballots voted No to the quotas.  I would have been right there with them. [Remember, I have a relation or two there.  Slovakia as well.]

Walter Russell Mead / Wall Street Journal

“On migration, Europe has fumbled as badly as it has in managing its money.  This is a colossal failure, brought about by a synthesis of cultural blindness and geopolitical fantasy.

“Just as Europe’s leaders have discounted the geopolitical dimension of their relationship with Russia, so too they have ignored the gathering storms to their south and east.  The combination of demographic explosion, authoritarianism and state failure in much of the Middle East, North Africa and sub-Saharan Africa ensures that wave after wave of desperate people will knock on Europe’s door for the foreseeable future.  Syria is the tragedy of the moment, but developments in Turkey, Egypt, Pakistan and elsewhere could just as easily send new masses of refugees and migrants across the Mediterranean.

“With anti-immigrant feeling growing across the continent, even as the wave of migrants threatens to grow, the EU is unable either to manage the flow or address its causes.  Europeans are deeply and bitterly divided today about how to handle the unprecedented flow of refugees and migrants, but the problem isn’t going away.

“Europe must regain control of its frontiers; its citizens must believe that their union can prevent an unending flow of migrants across the sea and over land.  This means more naval power in the Mediterranean and expanded surveillance of Europe’s frontiers.  It also means building up European hard-power capacities (including intelligence and military options) to better manage events in North Africa and the Middle East that affect vital European interests....

“To recover its elan and continental identity, Europe needs to stop pretending that history is over – that the stark old realities of international politics have given way to irresistible liberal progress.  Europe must instead embrace the national states and cultures at its historic heart and exploit their creative power; it must rebuild its military capacities; and it must proceed with a clear-eyed focus on European interests in a dangerous world.”

As in Syria in 2012, it’s too late in Europe.

---

In Asia, it was Golden Week in China, a week-long holiday in many respects, such as in the financial markets were closed, so there was a dearth of economic data.  The official services PMI did come in at 53.7 for September vs. 53.5 in August (the manufacturing PMI having been earlier reported at 50.4).

In Japan, the manufacturing PMI last month was 50.4 vs. 49.5, while the reading on services was a poor 48.2 (49.6 in August).

Taiwan’s manufacturing PMI for September was a decent 52.2, a 24-month high. Exports in the month, however, were down 1.8% year over year, when a gain had been expected.

India’s PMI on manufacturing was 52.1. 

[Russia 51.1, Brazil 46.0 / 46.1 on services...to round out the topic, knowing that Russia and Brazil are not in Asia.  Didn’t want you thinking I was pulling a Gary Johnson.  “True or false, Mr. Johnson.  Brazil is in Asia.”  “Ah, is that an acronym?”]

Back to China, Jamil Anderlini had an extensive piece in the Financial Times last weekend on the troubling surge of popularity in the country for Mao Zedong.

“Experts estimate that Mao was responsible for between 40 million and 70 million deaths in peacetime – more than Hitler and Stalin combined.  However, while Hitler, Stalin and most of the other totalitarian dictators of the 20th century were repudiated after their deaths, Mao remains a central figure in modern China....

“This whitewashing of Mao’s legacy is a risky strategy.  Thanks to the party’s tight control over education, media and all public discourse, most people in China know very little of Mao’s terrible mistakes.  Indeed, the dictator is more popular today than at any time since his death.  Last year nearly 17 million people made pilgrimages to his home town – Shaoshan – in rural central China.  In the mid-1980s, barely 60,000 undertook the journey.

“China has also seen the rise of a vocal political movement of ‘neo-Maoists’ – militant leftists who espouse many of the utopian egalitarian ideas that China’s current leaders have largely abandoned....

“Many of the people visiting Mao’s remains [in Tiananmen Square] have been left behind by China’s economic boom in recent decades. They see Mao as a symbol of a simpler, fairer society – a time when everyone was poorer but at least they were equally poor.  Those who have studied the resurgence in Mao’s popularity in China see it as part of a broader global phenomenon that encompasses the appeal of Donald Trump in the U.S., Brexit in the U.K. and populist politicians on the left and right in Europe.  At a time of sharp dislocation and intense resentment towards elites, people in many countries are attracted by nostalgia and tradition.  For ordinary people in China, that means Mao and the classless society he envisioned....

“(President Xi) himself has done possibly more than anyone to foster the current Maoist revival....quoting him extensively and even echoing some of his ideas....

“Xi’s embrace of Mao is...puzzling because of the danger inherent in reminding people of the concepts he stood for.  After all, Mao was a romantic revolutionary who called on workers and peasants to take up arms and overthrow the ossified authoritarian system that concentrated wealth in the hands of the powerful.  And while it still calls itself communist, the Chinese government has abandoned almost all of the economic and social ideals that Mao espoused. Xi himself, like many of his colleagues, has supported free-market reforms that Mao would have loathed.

“There is no doubt that Mao would be horrified by modern China, with its stark inequality, rampant commercialism and the lack of rights for workers and peasant farmers....

“What China has today is ‘exactly the worst kind of capitalism that Mao warned would result from revisionism,’ and ‘a new socialist revolution is the only method to reverse the restoration of capitalism,’ the group warned in its manifesto.  It pledged to mobilize the masses and said the best chance of success lay in fomenting rebellion among workers and peasants in China’s large cities....

“A decade ago, even the suggestion of a Maoist revolutionary uprising would have seemed preposterous.  But those who have studied the neo-Maoist phenomenon say these groups pose a big threat to the modern Communist party.”

Street Bytes

--Stocks finished down on the week, with the Dow Jones losing 0.4% to 18240, the S&P 500 0.7% and Nasdaq 0.4%.  Earnings reports start flooding in this coming week.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.83%  10-yr. 1.72%  30-yr. 2.45%

The yield on the 10-year rose 13 basis points from 1.59% the prior week on the growing certainty of a December rate hike.

--The International Monetary Fund warned the world is suffering from a debt hangover eight years after the financial crisis. 

Current debt levels now sit at a record 225 percent of world gross domestic product, with two-thirds of the liabilities being in the private sector, while the rest is public debt, which has increased to 85 percent of GDP from below 70 percent.

Slow global growth is making it difficult to pay off the obligations, “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the fund said.

--The price of crude rose to above $50 for the first time since June (West Texas Intermediate), partly because inventories in the U.S. unexpectedly declined a fifth consecutive week, as reported by the Energy Information Administration, and there are reports that the global oversupply of oil has ended. 

But WTI then finished the week at $49.55, so we still haven’t had a weekly close over $50 since July 2015.

That said, for now the bulls are winning out on hope OPEC members stick to a tentative agreement to reduce production, as recently reached in Algiers, though this won’t be formalized until an OPEC meeting in November.

--Gold, on the other hand, plummeted to levels not seen since June, or the time of the Brexit referendum, as investors eye a rate hike, while demand remains weak in India and China.

In theory, higher U.S. rates make other yield-bearing assets more attractive than gold.  Expectations of a move by the Federal Reserve has also boosted the dollar, which is negative for the precious metal.

But the biggest impact, longer term, is a lessening in demand for gold, with net sales volumes to retail investors in the U.S. of gold and silver coins falling 40-50% in the third quarter, according to Thomson Reuters.

Back to India, Henry Sanderson of the Wall Street Journal reports that imports of gold there fell 43% in September due to weak retail demand.

--General Motors said September sales were down 0.6% in September year on year, but predicted a solid finish to the year.  GM estimated that the seasonally adjusted annual selling rate for overall U.S. light vehicles in September was 17.8m units, or 17.4m on a calendar year basis, compared with nearly 17.5m for calendar 2015.

Ford, on the other hand, announced its sales fell 8%.  Fleet sales (including rental car and commercial) were down 21%.

Fiat Chrysler reported sales were down 1%, while Honda said U.S. sales declined 0.1% from the year ago period.  Toyota’s rose 1%, and VW, still being hammered by the emissions scandal, saw an 8% decline.

--Globally, it appears Mercedes-Benz is the new leader in the sale of luxury cars, as the German car maker had its best sales month in its history in September, 211,286 vehicles, up 12% on a year earlier and the first time it has ever crossed the 200,000 mark in a month.

BMW, which had been first, doesn’t report until next week but analysts are looking at a figure around 190,000.  And through the first eight months it trailed Mercedes, 1.32m cars to 1.28m.

--Last weekend, Tesla reported that deliveries of its Model S sedan and Model X SUV hit 24,500 from July to September, up 70% from the second quarter, but the electric-car maker will still have a tough time meeting its earlier forecast of 80,000-90,000 deliveries for all of 2016.  [The company basically said it is on target for 75,000.]

Meanwhile, a Goldman Sachs analyst, David Tamberrino, in downgrading Tesla shares from “buy” to “neutral,” said, “We now see incremental risk to the business related to management’s willingness to deploy capital for M&A, and we believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to shares.”

Tesla’s tie-up with SolarCity – the solar-panel maker chaired by Elon Musk, “implies increased corporate leverage and exacerbated cash burn,” according to Tamberrino.  [Financial Times]

So the bull/bear debate on this one continues.  I’m a bear.

One other issue.  An automotive news site, Daily Kanban, reported that Tesla’s Fremont, Calif., factory is only allowed to produce 25 vehicles an hour in 2017 under a California permit that regulates the facility’s paint shop, which would place Tesla well below production targets outlined last month.  219,000 vs. the stated goal of 360,000 next year.

--Honeywell unexpectedly cut its sales and earnings outlooks for the year amid a drop off in orders for its commercial aircraft business, which sent chills through the aerospace and defense sector, as the stock fell 8% on the news.  United Technologies and GE were among those issues falling in sympathy.

CFO Thomas Szlosek said in a call with analysts: “As we’re seeing across the aerospace industry, conditions are more difficult than anticipated in both the business jet and aftermarket businesses.

“Weakness in the oil and gas industry is impacting both business jet flying and our commercial helicopter business which resides in defense and space.”

Aerospace accounted for nearly 40% of total group sales last year.

--Former President Bill Clinton blasted ObamaCare at a rally for Hillary, calling it “the craziest thing in the world.”  Clinton said the core principles were unworkable.

“You’ve got this crazy system where all of a sudden 25 million more people have healthcare and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half,” said Bill.  “It’s the craziest thing in the world.”

Wife Hillary has vowed to build on ObamaCare, while acknowledging rising premiums and drug costs.

Needless to say, Trump’s campaign seized on Bill’s comments.  A spokesman for Trump, Jason Miller, said in a statement: “With premiums continuing to skyrocket, state insurance markets collapsing and businesses struggling to comply with its job-killing mandates, even Democrats like Bill Clinton are coming to realize just what bad public policy ObamaCare really is.”

[Minnesota is allowing the health insurers in its ObamaCare market to raise rates by at least 50 percent next year...5-0...after the individual market there was on the brink of collapse.  This follows increases this year of 14 to 49 percent.]

Far more on the topic below.

--Shares in Twitter have recently soared on word it was looking to sell, and Salesforce.com was among those interested, Salesforce CEO Marc Benioff looking to secure a trove of data as well as a prized consumer brand.

Benioff sees Twitter as an “unpolished jewel” with untapped potential in e-commerce and advertising.

So this was early in the week, with others like Alphabet’s Google, Apple and Disney also said to be in the mix.

But then on Thursday, shares in Twitter plunged $5.00, 20%, to below $20, on a report that Google wasn’t interested in buying the company, nor, according to website Recode, Disney or Apple.

And when it comes to Salesforce, its shareholders are not pleased with talk of an acquisition.

--The Wall Street Journal reported that Snapchat is looking to go public in the first quarter of next year, with the company eyeing a reported price tag of at least $25 billion.  Now called Snap Inc., it could bring in about $500 million in sales this year, almost 10 times that of last year, and plans to exceed $1 billion in revenue in 2017, but it’s not known if it’s profitable.

Snap would use the money raised, perhaps $2 billion, to further its expansion plans.  It has already grown from a few hundred employees to more than 1,000 this year

--Walmart announced at its annual investor day that earnings next year would be flat and it was slowing the pace of store openings in the U.S., causing the shares to fall about 3%.  Analysts had been forecasting an earnings gain, while store openings would slow to 55 in 2017, far fewer than the 230 it opened last year.

--British budget carrier EasyJet PLC announced profits will plummet 29% after terrorist attacks slowed bookings and the Brexit vote led to a steep drop in the value of the British pound.

EasyJet is an example of the problems of Brexit in that it is attempting to obtain an EU operating license to help assure traffic rights to the EU, a rather serious issue in that its ability to fly certain routes could be impacted.

--Ericsson AB plans to cut 3,000 jobs in Sweden, a fifth of the workforce in its home country, as it tries to cope with shifting technology and stagnant demand for its wireless-network equipment.  This is a big blow there. 

--ING Groep (sic) NV plans to cut 5,800 jobs in Belgium and the Netherlands over five years as the Dutch lender accelerates its digital transformation, with plans to invest about $1 billion in the venture.  2,300 of the cuts will be in the Netherlands and 3,500 in Belgium.

--Since Hanjin Shipping Co. filed for bankruptcy in August, its 40-foot-long steel cargo boxes have been piling up around the world, including 15,000 piled up in and around the ports of Long Beach and Los Angeles, as reported by the Orange County Register.  No one knows what to do with them.  Most of these are leased.  One container company, Seaco Global Ltd. out of London, leased about 50,000.  One of the many problems is there aren’t enough trailers to store and move them as ports reject them, or take them in until storage yards near the ports are filled, but you need the right equipment to remove the containers from the chassis.

In other words, it’s a mess.

--Zika as a hot-button topic has been pushed to the side but the number of children born with microcephaly-related brain damage is rising across the country, over 200.  Now researchers at Johns Hopkins working with scientists in Colombia have discovered evidence that Zika causes neurological problems in adults.  With Hurricane Matthew, concerns in Florida will no doubt grow again.

--Outdoor-gear retailer Cabela’s is being acquired by privately-held Bass Pro Shops for $4.5 billion, in what seems like a terrific fit.  The combined company will own 184 stores in the United States and Canada.

But for the residents of Sidney, Nebraska, the deal is disconcerting as it is the headquarters of Cabela’s. The area has more jobs (about 8,000) than residents (6,800), as reported by Sara Germano of the Wall Street Journal, with about 2,000 employed by Cabela’s (many commuting to the town from within 60 miles).

Bass Pro Shops’ headquarters is in Springfield, Mo., which is where the combined company’s HQ will be, though Bass said it “intends to continue to maintain important bases of operations in Sidney.”

Meanwhile, a big winner was activist investor Paul Singer, who bought an 11 percent stake in Cabela’s last October, pressing for a sale, and he ended up making roughly 70% on his firm’s investment.

--Janus Capital Group Inc. sold itself to a British rival, Henderson Group PLC for $2.6 billion in an all-share deal for Janus.  Henderson said the purchase will expand its global audience. The new firm – Janus Henderson Global Investors PLC will have more than $320 billion in assets.

Janus faced investor withdrawals from some of its funds as the pressure on active managers grows, the funds charging more for their services vs. the index, passively managed, variety.

Investors pulled $166 billion out of actively managed U.S. stock funds in the first eight months of the year, according to Morningstar, while moving $110 billion into passively managed ones; benefiting the likes of Vanguard and BlackRock.

Janus, of course, is the home of Bill Gross, who joined the group in 2014 after abruptly leaving PIMCO.

--I noted a while back I went to Dollar Tree for, among other things, Calder horseradish sauce, for, err, a dollar.  But my local store hasn’t carried it in a long time, despite my pleas to management, and now Richard H., who hails from nearby Chatham, has been scouting other Dollar Tree locations for me and coming up dry, too.  Much appreciated, Richard.  [Horseradish sauce is good for cleansing the liver, so they say.]

--The U.S. Agriculture Department pegged the size of the nation’s hog and pig herd on Sept. 1 at a record 70.851 million head.  Mmmm, that’s a lot of bacon, sports fans.  [The size of the herd, though, does a number on prices with hog futures down 9% the week of Sept. 26.]

--“Saturday Night Live’s” season premiere last week registered its best ratings since the season opener in 2008, up 29% over last year as well.  Alec Baldwin’s impersonation of Donald Trump clearly helped.  This is the 42nd season for SNL.

But with Friday’s revelations, how will they handle both candidates this week?

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The U.N.’s top diplomat for the Syrian crisis, Staffan de Mistura, the Italian aristocrat tapped by the U.N. to bring peace to the land, offered to personally escort hundreds of al-Qaeda fighters out of Aleppo if it would end hostilities, warning that the city will be completely destroyed by Christmas if current levels of fighting continue.

Al-Nusra (operating under the new name Jabhat Fateh al-Sham) offered no immediate response, but it was met by anger by rebel groups in eastern Aleppo.

Mr. de Mistura warned hundreds of thousands of refugees would be fleeing the remains of the city in the coming months, and that if the fighting continued, “Thousands of Syrian civilians, not terrorists, will be killed and thousands and thousands of them may try to become refugees in order to escape from this.

“This is what you, we, the world, will be seeing when we will be trying to celebrate Christmas or the end of the year if this continues at this rate.”

Russia and Syria have long claimed their goal is to drive al-Nusra and other terrorist groups out of Aleppo, but the West has accused Vladimir Putin and Bashar Assad of using terrorism as a pretext to pummel the rebels, the true opposition to Assad’s regime.

Stupidly, de Mistura seems to be siding with the regime; believing if al-Nusra (al-Qaeda) left, then Assad and Russia would cease their attacks on the city.  But Syrian government forces continued to advance against the rebels, making their biggest gains in years, hours after announcing they would ease their aerial bombardment for humanitarian reasons.

“The military command has decided to reduce the number of air and artillery strikes on terrorist positions to allow civilians who want to leave to reach safe areas,” the statement said.

“Anyone who does not take advantage of the opportunity to lay down their arms or leave will meet their inevitable fate,” it added.

The government statement was immediately ridiculed as a “PR gimmick” by analysts.  [Agence France Presse]

According to the Syrian Observatory, more than 270 have been killed in rebel-held areas since Syria launched its offensive two weeks ago.

Meanwhile, the Russian military warned the United States against striking Syrian forces, which Washington isn’t doing, except for one U.S.-led coalition air strike that accidently killed more than 60 Syrian government soldiers last month.

How bad a mess is Syria?  I was struck by two separate headlines in Friday’s Wall Street Journal.

“Turkey and Iran Draw Closer, Despite Syrian War.”  “In Syria Crisis, Russia Expands Alliance With Iran, Increases Missile Presence.”

In the first instance, Iranian proxies have been battling Turkish-backed rebels for control of Aleppo.  But Iran’s foreign minister visited Ankara for the second time in months for talks on how to improve bilateral ties.  What the two share is their issue with the separatist insurgency by the PKK Kurdistan Workers’ Party, with Iran now seeing a revival of a dormant PKK insurgency in its own Kurdish regions.

In the case of the second headline, it’s about Russia improving contacts with Tehran as Moscow seeks a more permanent presence in the Middle East.

But as I noted in the opening, the biggest story of the week is Russia’s announcement it had deployed an S-300 missile system to its Tartus naval base in Syria.  The Russian Defense Ministry said: “The missile battery is intended to ensure the safety of the naval base...It is unclear why the deployment of the S-300 caused such alarm among our Western partners.”

Monday, the U.S. announced it is “suspending its participation in bilateral channels with Russia.”

“Everybody’s patience with Russia has run out,” White House Press Secretary Josh Earnest told reporters while addressing the decision.

David Ignatius / Washington Post

“As cease-fire talks collapsed over the past two weeks, the Russians have struck hospitals, bread lines at bakeries, civilian neighborhoods. The message, says one U.S. analyst, is: ‘Surrender and you can eat again.’

“Here’s a U.S. intelligence official’s chilling assessment: ‘The Syrian regime and its Russian backers have adopted a calculated approach of exacerbating the dire humanitarian situation in Aleppo as a weapon of war.  Their apparent goal is to make living conditions in the city so intolerable that the opposition has no choice but to capitulate.’

“Think about those analytical words: The Russians have made civilian suffering ‘a weapon of war.’”

Sen. John McCain / Wall Street Journal

“ ‘They make a desert and call it peace,’ wrote Roman historian Tacitus, quoting an enemy of Rome about its brutal conquests.  The same could be said today of Bashar Assad and his ally Russian President Vladimir Putin in Syria.

“At this moment, Syrian and Russian forces, together with Iranian and Hizbullah militia fighters, are preparing to finish their siege of Aleppo. The 275,000 people who reportedly remain in the city are being told to flee.  Thousands will do so, choosing to become refugees.  The poor souls who remain in Aleppo will suffer a surge in relentless, indiscriminate bombing.  And when Mr. Assad, Mr. Putin and their allies have slaughtered all that stand in their way, they will proclaim peace in the bloody sands of the Syrian desert.

“The collapse of the most recent cessation of hostilities is not surprising.  It failed, as did the Obama administration’s previous efforts to work with Russia and Syria, because as former Secretary of State George Shultz once said, ‘diplomacy not backed by strength will always be ineffectual at best, dangerous at worst.’....

“The war in Syria has claimed more than 400,000 lives, displaced half the country’s population, and inflamed sectarian tensions across the Middle East.  But as bad as this conflict is now, it can get much worse – and likely will.  It will produce millions more refugees, undermining regional stability and straining the social fabric of Western nations.  It will strengthen an anti-American alliance of Russia and Iran.  U.S. credibility with our closest security partners in the Middle East will further erode.  And it will provide ISIS, or its successor groups, fertile ground to radicalize Muslims, recruit and inspire them to fight, and provide them with dangerous battlefield experience.

“This is where the conflict in Syria is headed, and the administration still has no strategy to do anything about it.  Its diplomacy is toothless.  And there appears to be no Plan B.”

Charles Krauthammer / Washington Post

“After endless concessions to Russian demands meant to protect and preserve the genocidal regime of Syrian President Bashar al-Assad, last month we finally capitulated to a deal in which we essentially joined Russia in that objective. But such is Vladimir Putin’s contempt for our president that he wouldn’t stop there.

“He blatantly violated his own cease-fire with an air campaign of such spectacular savagery – targeting hospitals, water-pumping stations and a humanitarian aid convoy – that even Barack Obama and John Kerry could no longer deny that Putin is seeking not compromise but conquest.  And is prepared to kill everyone in rebel-held Aleppo to achieve it.  Obama, left with no options – and astonishingly, having prepared none – looks on.

“At the outset of the war, we could have bombed Assad’s airfields and destroyed his aircraft, eliminating the regime’s major strategic advantage – control of the air.

“Five years later, we can’t.  Russia is there.  Putin has just installed S-300 antiaircraft missiles near Tartus.  Yet, none of the rebels have any air assets.  This is a warning and deterrent to the only power that could do something – the United States.

“Obama did nothing before.  He will surely do nothing now.  For Americans, the shame is palpable.  Russia’s annexation of Crimea may be an abstraction, but that stunned, injured little boy in Aleppo is not.

“ ‘What is Aleppo?’ famously asked Gary Johnson.  Answer: the burial ground of the Obama fantasy of benign disengagement.

“What’s left of the Obama legacy?  Even Democrats are running away from ObamaCare.  And who will defend his foreign policy of lofty speech and cynical abdication?”

Daniel Henninger / Wall Street Journal

“ ‘Aleppo’ is about to enter the expanding global dictionary of shame.  The Syrian city and its population are on the brink of becoming an annihilated ruin.  One of Aleppo’s greatest casualties will be the foreign-policy reputation of the Obama presidency.

“It’s not merely that the U.S. has done so little directly to help the Syrian rebels. The more fundamental failure is that Mr. Obama has refused to permit the arming of people who are willing to fight on their own behalf against a dictator committed to the mass slaughter of innocent civilians.”

Editorial / Wall Street Journal

“Much of the city of Aleppo lies in ruins after days of airstrikes by Russian and Assad regime forces, and buried in the wreckage is whatever is left of the Obama Administration’s Syria policy.  If it’s any consolation to the 275,000 souls trapped in the city, John Kerry has regrets.  That much is clear from a leaked recording of a conversation the Secretary of State had with a group of Syrian civilians engaged in humanitarian work during last month’s U.N. General Assembly.  Mr. Kerry complained that ‘the Russians don’t care about international law, and we do.’ He noted that ‘a lot of Americans don’t believe that we should be fighting and sending young Americans over to die in another country.’

“Above all, he lamented that his diplomatic efforts to end Syria’s war were never backed by a credible threat of American military strikes.  ‘I think you’re looking at three people, four people in the Administration who have all argued for use of force, and I lost the argument,’ Mr. Kerry said.

“The Secretary is right that President Obama doomed whatever chances the U.S. had of shaping a better outcome in Syria when Mr. Obama made clear that nothing, including chemical attacks against civilians, could induce him to deploy even modest forces to ground Bashar Assad’s air force or establish no-fly/no-drive zones.

“Then again, it’s hard to credit Mr. Kerry as the scorned voice of reason within the Administration when, until last week, he was the most vocal advocate of making common cause with Moscow in Syria.”

Thanassis Cambanis / Defense One

“For at least a year before the summer of 2016, civilians and fighters in rebel-held East Aleppo prepared for a siege they believed was both avoidable and inevitable.  Correctly, it turns out, they calculated that the opposition’s bankrollers and arms suppliers – the United States, Turkey, Saudi Arabia, and other ‘friends of Syria’ – cared little for the well-being of civilians in rebel-held areas.  Through the spring, contacts inside Aleppo prepared for the siege, expending minimal effort on appeals to the international community, which they assumed would be futile.

“For all the world-weary resignation of the opposition fighters and other residents of rebel Aleppo, they have a well-earned pride in what they’ve done.  They’ve maintained their hold on half of the jewel of Syria, and under withering assault, have cobbled together an alternative to Bashar al-Assad’s rule.  ‘From the beginning of the revolution, we held Aleppo as the role model of the liberated city, that holds free elections, has an elected city council, and elected local committees that truly represent the people,’ Osama Taljo, a member of the rebel city council in East Aleppo, explained over the phone after the siege began in earnest.  ‘We insisted to make out of Aleppo an exemplar of the free Syria that we aspire to.’

“Unfortunately, Aleppo has become an exemplar of something else: Western indifference to human suffering and, perhaps more surprisingly, fecklessness in the face of a swelling strategic threat that transcends one catastrophic war.”

Editorial / The Economist

“Aleppo is the symbol of the worst sort of external intervention.  Russia is helping Syrian troops, and their Iranian and Shia allies, pound the besieged Sunni rebels.  It looks like an attempt to take the entire city before Barack Obama leaves office next year, convinced that he will do nothing to stop them. The deliberate brutality, in which hospitals are repeatedly attacked, will only feed Sunni resentment and extremism; so will Russia’s insistence that Mr. Assad should remain in charge of any future power-sharing government.

[As for Iraq]

“Mosul, by contrast, could yet become a model for defeating the jihadists and creating a saner politics that recognizes Sunni Arabs’ stake in Iraq.  Iraqi, Kurdish and local Sunni forces are closing on the city, with American support; the jihadists are fraying.  The operation to retake Mosul is due to begin this month and may give Mr. Obama a farewell triumph.  The loss of Mosul would deal a blow to IS; it was from there that Abu Bakr al-Baghdadi, the IS leader, declared his caliphate.  Much can go wrong in Mosul.  Nobody knows how hard IS will fight.  There are worries that the Iraqi government has not done enough to prepare for a mass exodus of civilians; so that it will be unable to prevent an armed free-for-all by Shia, Kurdish and rival Sunni militias.  But for all of its violence and chaos, Iraq offers real hope.  Its politics are more open than those of most Arab countries, with a feisty press and an obstreperous parliament.  Cross-sectarian alliances are starting to form.  Shia politicians want to shake off their image sa clients of Iran, while Sunni Arab ones are moving away from the politics of rejection and the dream of reconquering Baghdad....

“Mosul offers a chance to convince beleaguered Sunnis that there is a better alternative to the nihilism of jihad.  If Iraqi politics only feeds their sense of dispossession, expect the violence to go on.  What happens in Mosul matters beyond Iraq; it could even give hope to poor, benighted Aleppo.”

Hardly.

Afghanistan: There has been a major battle taking place between the Taliban and U.S.-backed Afghan forces over Afghanistan’s fourth-largest city, Kunduz, in the northern part of the country and the U.N. is warning about a humanitarian crisis as more than 10,000 residents have fled, most without the time to bring their possessions with them.

The Taliban nearly seized the city on Monday in a surprise offensive, before U.S. and Afghan Special Forces countered.  Some of the Taliban have been driven back, other fighters remain.

China, part II: As the country becomes increasingly assertive in foreign affairs and is challenging the geopolitical balance of power in the region, there is growing unease among China’s own people, as noted in a new Pew Research Center report.

For example: 56% of Chinese believe the country should “Deal with its own problems,” vs. 22% who say the priority should be to “Help other countries deal with their problems.”

More than three-quarters thought their way of life needed to be protected from foreign influence, as Beijing has repeatedly warned against the same – in particular the infiltration of “western anti-China forces” in all aspects of society.

52% feel the “U.S. is trying to prevent China from becoming as powerful,” while 45% believe “U.S. power and influence is a major threat.”

50%, though, have a favorable view of the U.S.

Corrupt officials are viewed by 83% as a top concern, 77% the gap between rich and poor, 75% crime, 74% safety of medicine (interesting) and 74% safety of food (ditto).  73% water pollution, 70% air pollution.  [South China Morning Post]

Separately, last week I talked about China’s party congress next year, which is when President Xi Jinping would normally announce his successor in 2022.

But as Chris Buckley in the New York Times reported on Sunday, Xi may not follow the script for transferring power and delay the designation of his successor until after the congress, which would stir speculation he plans on remaining in power beyond the normal two terms (10 years).

Russia: Vladimir Putin on Monday suspended a treaty with Washington on cleaning up weapons-grade plutonium, a further signal he is willing to use nuclear disarmament as a new bargaining chip with the U.S.  [This isn’t a huge deal in terms of a threat, but it’s very symbolic.]

Regarding last month’s State Duma elections, in a survey by the independent Levada Center, just 46% of Russians believe the vote was carried out fairly.  31% said it was unfair, 22% refused to answer.

Official turnout was an historically low 48%.  Some believe the true turnout was just 37%.

Finally, Friday, Russia’s Defense Ministry denied it flew into Finland’s airspace, as Finland claims it did.  Russian Su-27 military planes were conducting training flights, so they say.

Colombia: President Juan Manuel Santos won the Nobel Peace Prize for his efforts in reaching a peace deal with the Farc rebel group after 52 years of conflict that killed 260,000 people.

But in a shocker, the deal was rejected by Colombians in a referendum last Sunday, by just 54,000 votes out of almost 13 million (50.2%) as turnout was low, only 38%.

Santos had said there was no “Plan B” and now he has appointed a team of senior officials to launch talks with the opposition on changes to the peace deal that would be acceptable to all sides.

Former President Alvaro Uribe led the ‘No’ campaign and the main sticking points are twofold: that those rebels who committed serious crimes should serve prison sentences and that some Farc leaders be banned from politics.

For its part, Farc thus far has said it wants to secure a peace agreement.

Many blame Santos for conducting the negotiations in secret for nearly five years and then extending one deadline after another to accommodate Farc’s demands.  Having Raul Castro involved didn’t help, as he helped moderate the talks in Havana.  Farc, for example, aside from avoiding prison sentences, was going to receive unelected seats in Congress and control of 31 radio stations.

What seems clear by the vote is that a majority, slim as it is, don’t trust Santos.  The vote will also put a halt to Santos’ economic expansion plans as he was looking for a boom in foreign investment in mining, oil and agriculture.

Technically, the referendum is not binding, as noted by Colombia’s Constitutional Court, which gave Santos the right to negotiate and sign a deal on his own, but Santos said on many occasions that a majority of Colombians had to approve the deal for its implementation.

Cuba: Josh Rogin / Washington Post

“In pursuing his historic opening of relations with Cuba, President Obama has frequently pushed legal and political boundaries.  Now congressional Republicans are up in arms about another such initiative: an airline travel agreement they say exposes the United States to dangerous security gaps at Cuban airports.

“Congressional committees charged with overseeing the Department of Homeland Security and Transportation Security Administration have engaged in a months-long feud with the administration over security vulnerabilities at 10 Cuban airports that have begun direct flights to the United States.  The lawmakers say the lapses increase the risk of terrorists, criminals, drugs and spies entering the United States.

“The security dogs that can be seen at Cuban airports are ‘mangy street dogs’ that were fraudulently posed as trained animals, the TSA’s top official for the Caribbean, Larry Mizell, told congressional officials behind closed doors in March, according to these officials.

“He also told them that there are few body scanners at the Cuban airports and that those in place are Chinese-made versions for which no reliability data exists.”

Direct flights began in August and no TSA personnel can be stationed at the Cuban airports.  “All of the local airport employees for the U.S. carriers are being hired, vetted and paid by the Cuban regime, lawmakers said, and the United States has not been given information that resulted from their vetting or how it was conducted.”

I have absolutely zero desire to ever step foot on Cuba.  I’ll go back to Beirut before going there.

Philippines: Wacko President Rodrigo Duterte told President Obama he “can go to hell” in a speech Tuesday that was his strongest tirade yet against the U.S. over its criticism of his deadly anti-drug campaign that has left more than 3,000 suspected drug dealers and pushers dead in three months.

Duterte also lashed out anew at the European Union, which has harshly criticized him over the crackdown, saying the EU “better choose purgatory, hell is filed up.”

In  a later speech, Duterte said, “Eventually I might, in my time, I will break up with America.  I would rather go to Russia and to China.”

At the same time, the leader has said he would not abrogate a 1951 Mutual Defense Treaty with the U.S. and will maintain the alliance with the U.S.  [Associated Press]

Of the 3,000+ deaths, police said on October 3 they had shot dead 1,375 people in operations, while a further 2,066 “deaths under investigation” are believed to be attributed to vigilante groups.  [Reuters]

Random Musings

--Presidential Polls....

In a CNN/ORC national poll, Hillary Clinton tops Donald Trump 47% to 42%, among likely voters, with Libertarian nominee Gary Johnson at 7% and Green Party nominee Jill Stein 2%.

A Fox News national poll from Friday (obviously before the Trump audio tape), has Clinton up 44-42, with Johnson at 6% and Stein at 2%.

In state polling, Clinton had an 11-point lead over Trump in a four-way race in Colorado, 49% to 38%, per a Monmouth Poll.  Her lead in Virginia was 7 points, 42-35 in the same survey.

A Quinnipiac survey looked at four swing states.  Clinton leads in Florida, 46-41; Clinton has a 46-43 lead in North Carolina (within margin of error).  [A Bloomberg poll in the state had it 44-43, Clinton.]  Quinnipiac found Pennsylvania also within the margin of error, with Clinton up 45-41.

But Quinnipiac had Trump leading Clinton in Ohio, 47-42.

--Edward Luce / Financial Times...on the Veep Debate...

“There were moments when watching a high-school chess tournament would have been more interesting.  Yet Tuesday night’s vice-presidential exchange offered cues for how Donald Trump should handle the second big debate next Sunday.

“Mr. Trump, who tweeted 49 times during the event – roughly every two minutes – might have learnt a thing or two from how his deputy dealt with it.  In contrast to Mr. Trump, Mike Pence kept calm, rarely butted in and declined to rise to the bait.  Contrary to what one would expect, the normally serene Tim Kaine, Hillary Clinton’s running mate, played the attack dog.

“It was not a role that came naturally.  Every time Mr. Kaine interrupted, which was often, Mr. Pence came off as more self-possessed.  It was almost a mirror image of the roles adopted by Mr. Trump and Mrs. Clinton last week.  By that measure Mr. Kaine was the loser.

“That said, on factual points Mr. Kaine clearly had the better of it.  There was something very 2016 about Mr. Pence shaking his head every time Mr. Kaine quoted one of Mr. Trump’s lines as if it were inconceivable he could say something so mean-spirited – yet still coming across as the winner because he is more polished on television.

“With the help of a weak moderator, Mr. Pence dodged almost every charge Mr. Kaine levelled against Mr. Trump. In some cases he simply ignored the Trump quote.  In others he denied it (‘that is absolutely not accurate,’ Mr. Pence said when asked to defend Mr. Trump’s vow to stop Muslims entering the U.S.).

“In still others, he made things up.  Mr. Pence said Vladimir Putin was a ‘small and bullying’ leader to whom Mrs. Clinton had failed to stand up.  Mr. Pence made no acknowledgment of Mr. Trump’s oft-expressed admiration for the Russian president – or even his own previously stated view that Mr. Putin was a stronger leader than Barack Obama.  It was the perfect etch-a-sketch performance.”

John Podhoretz / New York Post

“Tim Kaine just did something remarkable: He made Dan Quayle look good by comparison.

“The Democratic vice-presidential nominee turned in the worst major debate performance since Lloyd Bentsen quashed Quayle like a bug in 1988 when the 41-year-old Indiana Republican made the mistake of trying to liken himself to John F. Kennedy when it came to Senatorial experience.

“Tim Kaine was no Lloyd Bentsen. This time the Republican guy from Indiana – Mike Pence, Donald Trump’s running mate – crushed the Democrat.  Pence never delivered a knockout blow, he just jabbed and parred and ducked and weaved.  Kaine kept trying to deliver roundhouses, but almost every time he swung and missed and fell on his posterior as he did it.

“He seemed determined to bait Mike Pence, but his constant interruptions and preachy assertions that Pence couldn’t possibly defend his running mate succeeded only in making him look annoying and insubstantial.

“Pence’s ju-jitsu was masterful.  After Kaine said Trump was running an ‘insult-driven campaign,’ Pence asserted Kaine’s accusation was itself a mark of an ‘insult-driven campaign’ run by Hillary Clinton – and continued to use the line against Kaine throughout the campaign.

“From the first minute, Pence found an almost perfect tone – calm, reasonable, fluent, and understated....Like Kaine, he came well-prepared but unlike Kaine, he wore his preparation lightly....

“Most striking was Pence’s harsh critique of Putin and Russia.  His powerful condemnation went entirely against Donald Trump’s extraordinarily conciliatory and friendly rhetoric.  It seemed clear that Pence went into the debate determined to defend the Donald Trump he would prefer to the Donald Trump that actually exists....

“The coming days will likely see an onslaught against Pence for his prevarications about Trump, and after the fact-checking and the split-screen revelations of his dishonesty, his triumph tonight may seem far less impressive by the end of the week.

“And these veep contests aren’t worth a warm pitcher of spit anyway.  Quayle may have been crushed in 1988, but don’t forget his running mate, George H.W. Bush, won in November by 8 points.  Quayle got to be vice president.  All anyone remembers about Lloyd Bentsen is that he won a meaningless debate.”

Chris Cillizza / Washington Post

“Winners...Mike Pence: From the very beginning, Pence was the more comfortable of the two men on the debate stage.  Pence repeatedly turned to the camera when he answered questions, making clear he understood that the real audience wasn’t in the room but watching on TV. The Indiana governor was calm, cool and collected throughout – a stark contrast to the fast-talking (and seemingly nervous) Kaine.  Did Pence respond to Kaine’s dozens of attacks on Donald Trump?  Only sort of.  What Pence seemed to be doing was making the case for Pence-ism, a, dare I say it, compassionate conservatism – a case for Pence 2020 or 2024.  Regardless, Trump will very much take it, as Pence’s performance will offer a reset of sorts for a campaign that is scrambling badly due to self-inflicted wounds from the nominee.  Win or lose next month, Pence did himself real good in the eyes of the Republican world on Tuesday night.”

Mr. Cillizza said another winner was “People who want to end VP debates...Remember that there wasn’t even a vice presidential debate until 1976, and even after that there was no vice presidential debate in 1980!”

“Losers...Tim Kaine: Someone must have told the Virginia senator he needed to always be on his front foot in the debate, always be the aggressor.  It didn’t work.  Kaine started the debate talking so quickly and trying to load so many Trump attacks into every answer that it made it virtually impossible to grasp any one attack....When he wasn’t trying to stuff 10 pounds of attack in a five-pound bag in his answers, he was relentlessly interrupting Pence.  Every single time Pence started to level an attack against Hillary Clinton, Kaine immediately began to talk over him. I’m not sure if that was on purpose or not, but it didn’t come across well – at all.”

Editorial / Washington Post

“Tuesday night’s vice presidential debate was more of a proxy war between this year’s presidential candidates than a contest about the capabilities of the two men on stage.  In that sense, it was an unfair fight: Gov. Mike Pence had to defend the indefensible Donald Trump.  To a large extent, he did so by conjuring a candidate who does not exist – a Reaganesque supporter of a muscular foreign policy, small government and traditional Christian values.  It was as if he was defending the running mate he wished he had.

“To the extent that Mr. Pence succeeded Tuesday evening, it was in landing blows on Hillary Clinton while declining to defend Mr. Trump’s proposals and record....

“Mr. Pence played down Mr. Trump’s promises to deport millions of undocumented immigrants and his well-documented skepticism of NATO.  He frequently insisted that Mr. Trump would be ‘strong’ where President Obama and Ms. Clinton are ‘weak,’ attacking them for ‘Russian aggression’ under their watch, but he dodged when Mr. Kaine pointed out that Mr. Trump has cozied up to Russian dictator Vladimir Putin....

“Repeatedly over the course of Tuesday’s debate, Mr. Kaine exclaimed that he could not believe Mr. Pence could defend Mr. Trump’s behavior and record.  In a way, Mr. Kaine was right – a polished Mr. Pence largely did not.”

--Michael Goodwin / New York Post

“News flash: President Obama didn’t learn anything in eight years in the White House.  And he’s proud of it.

“As Obama admitted in an interview with New York magazine: ‘If you go back and you read speeches I made when I was running for the U.S. Senate in 2003, or if you go back further and you look at statements I made when I was on the Harvard Law Review, my worldview is pretty consistent.’

“The comment was a point of pride, which makes it doubly tragic.  Once the smartest man in the room, always the smartest man in the room.

“Never mind that the world is on fire, that America is polarized, angry and scared. Or that ObamaCare is a sick patient, that the economy is growing at a snail’s pace and that many cities are racial war zones.

“It’s not Obama’s fault.  None of it. He would do it all again.

“With voters fixated on his successor, Obama is fixated on his legacy.  A large part of his effort on the way out the door is explaining what he did, and insisting that what he did was right. Always....

“For example, the president says his secret sauce was that he ‘trusted my judgment’ but didn’t ‘trust the noise out there,’ meaning Republicans, talk radio, cable TV and pretty much everybody else who didn’t agree with him.

“At some point, he said, he concluded his critics were ‘not even trying to be fair-minded in their assessments or recommendations,’ and he found that liberating because he could ignore them.

“Whether it was enforcing his red line in Syria, which he didn’t, or substituting executive orders for congressional action, he expressed no regret.  He was right and everybody else was wrong.

“It’s a remarkable notion, yet plainly a trend when government is the largest special interest, one that uses and abuses its power to look out for itself.  Especially under liberals, it only admits failure to demand more power.

“This is no small feat.  Consider that way back in the reign of George W. Bush, it was universally accepted that a president ought to be held accountable for national problems.  A war that didn’t work out as planned, a natural disaster or an economic one all fell on the head of the occupant of the Oval Office.

“But Obama and his apologists cleverly reversed the dynamic.  Now the American public is to blame when things go wrong.”

--Editorial / Wall Street Journal

“Who would have believed it?  Donald Trump has driven his political opponents to embrace the cause of tax reform so the wealthy have fewer loopholes to exploit.  That seems to be the inescapable logic of the media and Clinton campaign’s reaction to the weekend story that Mr. Trump may have used large income losses to reduce his tax payments.

“The New York Times reported Saturday that it had received an anonymous gift in the mail of three pages from three of Mr. Trump’s state tax returns from 1995. The real-estate and casino magnate, who was having well-known business problems at the time, reported a loss of $916 million on those New Jersey, New York and Connecticut returns.

“The Times concludes from these losses and after consulting those it called ‘tax experts’ that the resulting tax deduction ‘could have allowed him to legally avoid paying any federal income taxes for up to 18 years.’  Cue the synthetic shock and outrage.

“Note that word ‘legally.’  No one, not even the Clinton campaign, is claiming Mr. Trump broke any tax laws 20 years ago.  Had he done so you can bet the IRS would have noticed, since the tax agency doesn’t routinely ignore tax losses that large....

“But even average taxpayers who declare self-employment income know that business losses are deductible, often across several years.  This reflects that the cycle of business investment and sales isn’t confined to a calendar tax year....

“(Mr. Trump, however,) invited this October surprise by refusing to release his tax returns. Had he done so last year, when we advised him to, the debate over the details would have burned itself out.  The smart play in politics is transparency to give your opponents nowhere to go.

“The Clintons can count on a protective press corps to ignore or forgive their email and Clinton Foundation deceptions, but Republicans will never get that break.  Mitt Romney made the same mistake by waiting to release his 2011 tax return until September 2012, and George W. Bush almost lost in 2000 when someone disclosed his drunk-driving conviction shortly before Election Day.  Don’t Republicans understand that their secrets will always be exposed, and at the most damaging moment?

“Mr. Trump hasn’t helped his cause by boasting about how ‘smart’ he is for paying little tax.  This is the vainglorious Trump who can’t stand to be criticized.  He should be saying instead that the tax code is dumb.  He could say he’s fortunate to have the means to hire lawyers and accountants who can maneuver through the tax maze to cut his payments.  But he knows most Americans aren’t so lucky....

“Mr. Trump has made so many campaign mistakes that it’s a miracle he’s still competitive.  He owes this to the fact that a majority of Americans clearly don’t want to vote for Mrs. Clinton.  But the hour is late, and if he wants to win he has to stop pursuing defensive, egotistical sideshows and focus on his plans to make America better.”

[Of course, again, the above was written before Friday’s bombshell.]

--Kimberley A. Strassel / Wall Street Journal

“There is such a thing as a political goof. It should not be confused with a cosmic political error, mind-boggling in its inanity, inexplicable on any level, the electoral equivalent of stuffing your opponent’s ballot box.

“An example of the latter is Donald Trump’s failure to jump on ObamaCare as an excellent path to the White House.

“We are one month from an election, and President Barack Obama’s signature achievement is cratering, destroying millions of pocketbooks in its wake.  States are reporting premium increases of 60%, 70%, 80%.  Insurers, sagging under losses, are fleeing.  Nearly a third of U.S. counties are now down to a single ObamaCare plan. Seventeen of 23 ObamaCare co-ops have imploded.  Tennessee’s insurance commissioner warns her state’s exchange market is ‘very near collapse.’ The law’s supporters are flailing, incapable of defending it during this public death spiral.  Ezekiel Emanuel, the physician who was one of the architects of the law, was left stammering on Megyn Kelly’s Fox News show this week.  Dr. Emanuel said that these premium increases are a one-time ‘correction.’  He hilariously blamed Republicans for refusing to bail out the system.  Bill Clinton, who is becoming ever more honest in his dotage, went on an extended riff about how his party’s health-care system was the ‘craziest thing in the world.’....

“For Republicans, ObamaCare has proved to be a political winner....

“Yet Mr. Trump is almost entirely, and eerily, silent on the topic.  In his prepared speeches, he gives ObamaCare a rote and glancing reference, part of a promise to repeal it.  Trump news releases fly daily about the Clintons’ corruption and the problems with the North American Free Trade Agreement.  But there is nary a whisper about the health-care system that is melting down across the country.  Where are the ads?  Where is the big speech?”

Editorial / Wall Street Journal

“When Bill Clinton emerges as an ObamaCare critic and even President Obama admits in a recent interview that his entitlement has ‘got real problems,’ the discipline of the law’s apologists must be fading.   The question is whether Republicans can capitalize to improve U.S. health care from its ObamaCare bottom.

“For years liberals have depicted the law as an end-of-history achievement, dismissing genuine problems as partisan inventions.  ObamaCare remains as unpopular today as when Democrats rammed it through Congress in 2010, but they claimed it could never be repealed or changed.  Now its dysfunction is so acute that even the co-author of the HillaryCare fiasco of 1993-94 is finding fault....

“The balance of political power will be crucial in 2017 because ObamaCare will have to be rewritten.  Mr. Trump’s opportunity would be that ObamaCare legally empowers the Health and Human Services Secretary to loosen regulations if a President concludes that they ‘destabilize’ health markets.  As for Mrs. Clinton, she’d need GOP help in Congress unless she wants to preside over a bigger mess.”

Charles Krauthammer / Washington Post

“The Democrats will eventually push to junk ObamaCare for a full-fledged, government-run, single-payer system.  Republicans will seek to junk it for a more market-based pre-ObamaCare-like alternative.  Either way, the singular domestic achievement of this presidency dies.”

--The Chicago Tribune endorsed Gary Johnson, saying in part: “We reject the cliché that a citizen who chooses a principled third-party candidate is squandering his or her vote.”

There was a time when Johnson could have made major waves this fall, but then he exposed himself with his gaffes.

--New Hampshire Republican Sen. Kelly Ayotte was ripped for a comment in a debate this week where she said Donald Trump is “absolutely” a role model for children.  She tried to walk it back, but Democrats had a field day.  In one tweet, Sen. Elizabeth Warren (D-Mass.) said: “Think about it: @realDonaldTrump calls Latinos rapists, African Americans thugs & women fat pigs, & Kelly Ayotte thinks he’s a role model.”

Ayotte’s Democratic opponent, Gov. Maggie Hassan, scheduled a press call to talk up the issue.  The race is tight.  As are four other states that could decide the Senate: Pennsylvania, Indiana, North Carolina and Nevada. 

[Ayotte’s statement is yet another that looks even worse after today and the Trump debacle.]

--Paul Sperry / New York Post

“Veteran FBI agents say FBI Director James Comey has permanently damaged the bureau’s reputation for uncompromising investigations with his ‘cowardly’ whitewash of former Secretary of State Hillary Clinton’s mishandling of classified information using an unauthorized private e-mail server.

“Feeling the heat from congressional critics, Comey last week argued that the case was investigated by career FBI agents, ‘So if I blew it, they blew it, too.’

“But agents say Comey tied investigators’ hands by agreeing to unheard-of ground rules and other demands by the lawyers for Clinton and her aides that limited their investigation.

“ ‘In my 25 years with the bureau, I never had any ground rules in my interviews,’ said retired agent Dennis V. Hughes, the first chief of the FBI’s computer-investigations unit.

“Instead of going to prosecutors and insisting on using grand jury leverage to compel testimony and seize evidence, Comey allowed immunity for several key witnesses, including potential targets.

“The immunity agreements came with outrageous side deals, including preventing agents from searching for any documents on a Dell laptop owned by former Clinton chief of staff Cheryl Mills generated after Jan. 31, 2015, when she communicated with the server administrator who destroyed subpoenaed emails.

“Comey also agreed to have Mills’ laptop destroyed after the restricted search, denying Congress the chance to look at it and making the FBI an accomplice to the destruction of evidence.”

And it goes on and on...or as Paul Sperry writes, Comey has “turned the FBI into the Federal Bureau of Immunity,” bowing to election pressure.

But speaking of emails...Byron Tau / Wall Street Journal:

“Newly disclosed emails show top Obama administration officials were in close contact with Hillary Clinton’s nascent presidential campaign in early 2015 about the potential fallout from revelations that the former secretary of state used a private email server. Their discussion included a request from the White House communications director to her counterpart at the State Department to see if it was possible to arrange for Secretary of State John Kerry to void questions during media appearances about Mrs. Clinton’s email arrangement.  In another instance, a top State Department official assured an attorney for Mrs. Clinton that, contrary to media reports, a department official hadn’t told Congress that Mrs. Clinton erred in using a private email account.”

--The FBI charged a government contractor, Harold Thomas Martin, of stealing classified secrets while he was working with the National Security Agency.  Martin was arrested in late August, but the FBI just announced it Wednesday.  The contractor, Booz Allen Hamilton Holding Corp. also employed Edward Snowden.

The theft was uncovered after an entity calling itself Shadow Brokers claimed online to have a large cache of files that appeared to be NSA spying tools, which Shadow Brokers was looking to sell.  The tools are used to penetrate the computer systems of foreign governments.

As of today, however, the FBI has yet to determine Martin’s motives or intent for taking the information.  He has been in custody since his arrest.

Shares in Booz Allen took a hit. The company said it had fired Martin and was cooperating fully with the government.

Separately, the Justice Department announced this week that two Russians and a U.S. citizen were detained on Thursday, charged with illegally exporting technology used in military devices to Russia.

Prosecutors allege the three conspired to obtain cutting-edge microelectronics from U.S. companies and export them, first to Finland, then Russia to conceal the final destination.  One of the men was arrested in Brooklyn, the other two in Denver.

--Southern Californians have a right to be concerned following the earthquake swarm in a  seismic zone just south of where the San Andreas fault ends.

Rong-Gong Lin II / Los Angeles Times

“(The zone where the quakes hit) is composed of a web of faults that scientists fear could one day wake up the nearby San Andreas from its long slumber.

“The San Andreas fault’s southernmost stretch has not ruptured since about 1680 – more than 330 years ago, scientists estimate.   And a big earthquake happens on average in this area once every 150 or 200 years, so experts think the region is long overdue for a major quake....

“Experts said it’s important to understand that the chance of the swarm triggering a big one, while small, was real.”

--U.S. traffic fatalities surged in the first six months of 2016, a whopping 10.4%, as reported by the National Highway Traffic Safety Administration.  The pace far exceeds the 3.3% increase in miles traveled over the same period, ergo, sure seems like distracted driving is a main cause of the rise in deaths (17,700 Jan. thru June).  That’s just way too many.

--This was a surprise...New York City Mayor Bill de Blasio’s job approval rating rose to 40%, in the latest Wall Street Journal/NBC 4 New York/Marist poll, up from 35% in April, an all-time low.

--De Blasio is helped by New York’s crime statistics.  The NYPD said last month was the safest September on record.  For the first nine months, there were also 10 fewer murders than in the same period last year.  The mayor said, “The amount of stop-and-frisk activity since its height in 2001 is down 97%.  So affirming once again the clear reduction in the use of stop-and-frisk accompanied by the consistent reduction in crime.”

--Melody Petersen / Los Angeles Times

“Many thousands of Californians are dying every year from infections they caught while in hospitals.  But you’d never know that from their death certificates.

“Sharley McMullen of Manhattan Beach came down with a fever just hours after being wheeled out of a Torrance Memorial Medical Center operating room on May 4, 2014.  A missionary’s daughter who worked as a secretary at Cape Canaveral, Fla., at the height of the space race, McMullen, 72, was there for treatment of a bleeding stomach ulcer.  Soon, though, she was fighting for her life.

“On her medical chart, a doctor scribbled ‘CRKP,’ an ominous abbreviation for one of the world’s most lethal superbugs, underlining it three times.

“Doctors tried antibiotic after antibiotic.  But after five weeks in the hospital, mostly in intensive care and on morphine because of the pain, McMullen died.

“Her death certificate does not mention the hospital-acquired infection or CRKP, however.  Instead, her doctor wrote that McMullen had died from respiratory failure and septic shock caused by her ulcer.

“The doctor’s conclusion outraged Shawn Chen, McMullen’s daughter.

“ ‘It should say she died of an infection she got in the hospital,’ said Chen.  ‘She was so hardy.  She would have made it through if it wasn’t for this infection.’”

The CDC estimates that 75,000 Americans die from hospital-acquired infections during their hospitalizations each year.

But now experts say this figure is underestimated.

Ms. Petersen’s extensive story talked of a boy, 15, who “unexpectedly died a couple days after having an MRI at Children’s Hospital of Orange County in Orange in 2006.”

He picked up MRSA, with the parents believing “the pad patients lay on in the MRI machine was contaminated with the bacteria.”

But the bacteria wasn’t on his death certificate.  Instead the doctor wrote that contributing causes to the “adult respiratory distress syndrome” were septic shock and pneumonia.

--The train that crashed into the Hoboken, N.J., train station the other day was found to be going 21 mph, twice the posted speed of 10 mph.  Still no explanation as to how the engineer let this happen.

--I have nothing to say on Hurricane Matthew, as it still poses a significant danger.  But to those who say it was overhyped, remember my adage, ‘wait 24 hours.’  Good luck to my friends in Kiawah, S.C.  I hope I am down there again in December.

--Finally, I was reading a review of a book on Confederate Gen. Braxton Bragg in the Wall Street Journal  (“Braxton Bragg: The Most Hated Man of the Confederacy” by Earl J. Hess), and the reviewer, Russell S. Bonds, refers to a Pvt. Sam Watkins of the 1st Tennessee Regiment, who wrote a memoir “Company Aytch.”

Russell Bonds: “Like many Civil War generals, Bragg showed himself to be, as Mr. Hess puts it, a man who ‘could win fights but not win campaigns.’

“ ‘More depends on a good General than the lives of many privates,’ Sam Watkins said in closing his own remembrance of Braxton Bragg.  ‘The private loses his life, the General his country.’”

---

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

God bless America.

---

Gold closed at $1258...down $60 on the week
Oil $49.55

Returns for the week 10/3-10/7

Dow Jones  -0.4%  [18240]
S&P 500  -0.7%  [2153]
S&P MidCap  -1.2%
Russell 2000  -1.2%
Nasdaq  -0.4%  [5292]

Returns for the period 1/1/16-10/7/16

Dow Jones  +4.7%
S&P 500  +5.4%
S&P MidCap  +9.7%
Russell 2000  +8.9%
Nasdaq  +5.7%

Bulls  46.7
Bears  22.8  [Source:: Investors Intelligence]

Have a great week.

Dr. Bortrum posted a new column.

Brian Trumbore



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Week in Review

10/08/2016

For the week 10/3-10/7

[Posted: 11:30 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.

Edition 913

Washington and Wall Street

What a presidential campaign.  What a freakin’ mess.  Just hours before I go to post, we learn of a 2005 Access Hollywood audio/video tape of Donald Trump and Billy Bush engaging in “locker-room banter” about women, with Trump using some totally disgusting terms, and then an hour after this, WikiLeaks releases excerpts from Hillary Clinton’s Wall Street speeches, that her campaign had heretofore refused to, and we learn what we all knew already, frankly, that Clinton’s whole campaign against Bernie Sanders was a fraud.  She did indeed say some nice things about Wall Street, and took positions on issues from immigration to the Keystone pipeline that then ran counter to what she uttered on the campaign trail.

How Trump and Clinton handle this in Sunday’s debate will make for good theater.  But for now, some leading Republicans within hours were rushing for the exits; like House Speaker Paul Ryan who announced Trump had been disinvited from their first joint campaign appearance at an event in Wisconsin on Saturday, while Republican Sen. Mark Kirk called for Trump to drop out, others beginning to echo the same as I write.

But this all happens as a topic I’ve been leading with for weeks, the dangerous geopolitical position our country is in, gets even more so.

Here’s the deal. President Obama is attempting to run out the clock and it’s not working.  We are perilously close to a full-out conflict with Russia.

The cyberattacks that the Kremlin has launched against Democratic Party organizations in an attempt to influence our election are so fierce that the White House, and intelligence community, was forced to publicly accuse Russia of being behind them, a major step.

The U.S. Dept. of Homeland Security and the Office of the Director of National Intelligence on Friday issued a joint statement that read in part: “The U.S. Intelligence Community is confident that the Russian Government directed the recent compromises of e-mails from U.S. persons and institutions, including from U.S. political organizations.  The recent disclosures of alleged hacked e-mails on sites like DCLeaks.com and WikiLeaks and by the Guccifer 2.0 online persona are consistent with the methods and motivations of Russian-directed efforts.  These thefts and disclosures are intended to interfere with the U.S. election process.  Such activity is not new to Moscow – the Russians have used similar tactics and techniques across Europe and Eurasia, for example, to influence public opinion there.”

Kremlin spokesman Dmitry Peskov said such accusations were “nonsense,” as reported by Interfax news agency.

But at the same time, this week Russian moved the sophisticated S-300 anti-aircraft missile system into Syria, for which there is only one target...the United States (and perhaps the fighter jets of the U.S.-led coalition operating in that theater).

There was also a story on Friday, via Estonia, and later confirmed by U.S. intelligence sources, that Russia has moved nuclear-capable missiles into Kaliningrad, the tiny Russian enclave that sits between Poland and Lithuania.

Now I’ve written of Kaliningrad before, including last Dec. 12, noting then that Russia was conducting “nuclear strike drills.”  But with today’s report, you wonder if Russia is about to blackmail the Baltics to see how much they can get away with, knowing how President Obama isn’t anxious to engage Putin in his final days.  Wouldn’t want to screw up his legacy!

But Syria is the real focus.

Dmitri Trenin / Financial Times...Trenin is director of the Carnegie Moscow Center

“Syria, for most of 2016 the site of U.S.-Russian collaboration, could easily turn into a battlefield between the two – with the proxies first taking aim at the principals, and the principals then shooting back not at the proxies, but at each other.

“This is an exceptionally disturbing prospect that should keep people in Moscow and Washington awake at night.  But the new highly asymmetrical relationship between the two powers leaves almost no room for mutual respect.”

I have far more on Syria below, but for now, we wait to see the fallout from the Trump/Clinton disclosures and the reaction on Sunday.

I was going to lead with Tuesday’s vice-presidential candidate debate, but instead I cover it in the politics section.  Let’s just say that while Sen. Tim Kaine didn’t have a good performance and Gov. Mike Pence did, I’m on record as liking both selections when they were made.  I know I’m not the only one who watched and thought our country would survive either being in the Oval Office. But I’m not sure we will with the heads of their respective tickets.

---

On the economic front, the September jobs report was just fine.  The nonfarm payroll figure of 156,000 was below expectations, and the unemployment rate ticked up to 5.0%, the highest since April, but the latter was because more people were entering the labor force and looking for work.

The economy has been generating 178,000 jobs a month on average in 2016, which is solid, though this is down from 2015’s 229,000.

The underemployment rate, U6, was unchanged a third straight month at 9.7%.

Average hourly wages rose 0.2% in September and are up 2.6% year over year, approaching the more normal 3% for an expansion, albeit a putrid one.   [The Atlanta Fed’s GDPNow indicator for third-quarter GDP is down to 2.1%, from 3.8% on Aug. 5.]

The September ISM reading on manufacturing was better than expected, 51.5, with the new orders index up to 55.1, far better than August’s reading of 49.1.  The non-manufacturing figure for last month was also better than expected...far better...at 57.1 vs. 51.4 in August, which is now seen as an outlier.

August construction spending was down 0.7%, a miss, but factory orders rose 0.2%, better than forecast.

Loretta Mester, the president of the Cleveland Fed, told CNBC following release of the jobs report that the U.S. was at full employment and that it “makes sense” to move rates up another quarter-point.  So that’s a vote for December.  I’m not changing my long-held forecast of December as well.

Speaking of that month, the National Retail Federation issued its forecast for the holiday shopping season, which includes November and December, up 3.6%, which contrasts with 3% in 2015, a 10-year average of 2.5%, and 3.4% since the recovery began in 2009.

The International Monetary Fund lowered its 2016 U.S. growth forecast to 1.6% from 2.2%, its July estimate, and for advanced economies as a whole to 1.6%.

The IMF now expects emerging and developing economies to grow by 4.2% this year as a group, resulting in overall global growth of 3.1%, which it forecasts to rise to 3.4% in 2017.

But as the IMF’s chief economist Maurice Obstfeld notes, “political repercussions are likely to depress global growth further.”

The IMF said growth in China would be 6.6% this year and 6.2% in 2017, while it would be 7.6% both years in India.

The U.K., in dealing with Brexit, will grow 1.8% this year but only 1.3% in 2017.

Europe and Asia

This was the week that British Prime Minister Theresa May and members of her Cabinet added some color to the Brexit timetable and the strategy, as May addressed her Conservative Party’s annual conference in Birmingham and in various forums over the ensuing days.

May said the U.K. will begin the process of withdrawal from the European Union in the first quarter of 2017, and that she’ll introduce a bill next year to convert all EU laws into U.K. legislation on the day that Brexit is completed.

“It’s important that we have this in place by the time we leave the European Union so that there’s a smooth transition,” May said.  “It makes it very clear to the British people who’ve voted for us to leave the European Union that that’s exactly what we’re doing.”

Subsequent governments would then be able to repeal or amend individual laws.  The bill will be introduced to Parliament between May 2017 and May 2018.

What became clear is that the government will pursue “a hard Brexit.”  The U.K. will surrender membership of the EU’s single market for trade in return for more power over immigration, law-making and the country’s budget.

The British pound immediately dropped back to lows not seen since the day of the EU vote in June.  It would then go lower.

Nissan Motor Co. CEO Carlos Ghosn was emblematic of the attitude in corporate boardrooms when he said he may not be able to make new investments in Britain without a government pledge for compensation in the event of adverse consequences stemming from Brexit. Vodafone Group Plc said it would consider moving its headquarters to the continent to preserve the EU’s single market access.

Article 50, the formal mechanism for leaving the EU, will be triggered by the end of March but this does not commit the U.K. to any particular interpretation, and many options will be open as negotiations, which will take two years, minimum, proceed, which is hardly good for business as it will only add to the uncertainty.

Theresa May said in her speech on Sunday: “We are going to be a fully independent, sovereign country, a country that is no longer part of a political union with supranational institutions that can override national parliaments and courts.  That means we are going, once more, to have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration.”

Trade Secretary Liam Fox, a longtime opponent of the EU, addressed the delegates: “In case you haven’t noticed, the sky didn’t fall on June 24.  The prime minister has said clearly that Brexit means Brexit, and for those who believe it can be indefinitely postponed, or that there might be a second referendum, or that we might stay by some back-door mechanism, let me tell you: Theresa May is not someone who is known for saying anything other than what she absolutely means.”

Pro-European members of the party urged a more pragmatic approach be applied.

May also addressed voter concerns that drove the surprise Brexit vote.

“Just listen to the way a lot of politicians and commentators talk about the public.  They find their patriotism distasteful, their concerns about immigration parochial, their views about crime illiberal, their attachment to their job security inconvenient.  They find the fact that more than 17 million people voted to leave the European Union simply bewildering.”

What was the reaction on the continent? Chancellor Angela Merkel warned German companies that EU principles, including freedom of movement, will be prioritized before their narrow sectoral interests in the coming negotiations.

The chancellor emphasized that safeguarding the EU’s fundamental principles – including allowing EU workers to move freely in the bloc – would hold sway in the negotiations.

Meanwhile, back to the British pound, a few days after Bank of America Merrill Lynch warned that trading conditions in the currency markets were creaking and that traders were “complacent” over the risks of market shocks, you had a flash crash overnight on Thursday/Friday, as the pound fell more than 6% against the U.S. dollar in two minutes to $1.1841.  [The pound before Brexit was $1.48, and the low in the immediate aftermath of the vote was $1.279 before it rebounded back into the $1.30s.  Now this.]

At first there was speculation the move was caused by a mistaken “fat finger” trade or a rogue automated algorithm. While sterling quickly rebounded, it still closed Friday at $1.24, the lowest since May 1985.

But after traders had a chance to think about things, they decided that the big culprit was the tough stance taken by French President Francois Hollande on Brexit negotiations, as reported by the Financial Times, and that many algorithmic traders these days include tracking news websites in their systems. The FT story was first published the same minute as the move lower began.

“The U.K. has decided to do a Brexit, I believe even a hard Brexit.  Well, then we must go all the way through the U.K.’s willingness to leave the EU,” Hollande said.

Hollande was merely echoing Angela Merkel’s warning that there would be no special treatment for the U.K. without accepting the four basic principles of the bloc – freedom of goods, services, capital and people.

Separately, European Central Bank chief Mario Draghi said he remains committed to using the full force of the ECB’s monetary firepower to meet its growth and inflation targets. This came amid talk the central bank was contemplating “tapering” its asset purchases.

Gideon Rachman / Financial Times

“As soon as Britain triggers Article 50, the EU can simply run the clock down – knowing that the U.K. will be in an increasingly difficult situation, the longer the negotiations drag on without agreement.  At the end of two years, Britain will be out of the EU – and would face tariffs on manufactured goods and the loss of ‘passporting’ rights that allow financial services firms based in the City to do business across the bloc.  The economic damage from this kind of ‘hard Brexit’ would be severe, blowing a hole in the government finances as tax revenues from the City shrink, ushering in a new period of austerity.

“The most ardent Brexiters claim that this is all scaremongering.  Why, they ask, would the EU contemplate the restoration of tariffs when this could be damaging to its own economic interests?  The Leavers can answer that question by looking in the mirror.  It is clear that the main motivation of the pro-Brexit camp in Britain is political, not economic.  And the same will be true of the EU side in the negotiations....

“Some in Britain speak blithely of relying on the rules of the World Trade Organization after Britain has left the EU.  They ignore the fact that Britain is a member of the WTO under the auspices of the EU.  Creating an entirely separate British WTO membership requires another set of complex negotiations.

“That is a much bigger problem for Britain than the EU, since the longer the process is dragged out, the longer Britain is likely to be suspended in a legal limbo that will discourage long-term investment.  For that reason it was absolutely vital that Mrs. May should get some clarity on what happens after two years of negotiations – if and when the EU and the U.K. have failed to reach a definitive new deal.  The obvious solution would have been for Britain to remain inside the EU’s single market, but outside the EU until such time as a new deal was struck.  By failing to get that assurance, the British government has severely weakened its position – even before negotiations start.  So why has Mrs. May been so reckless? The short answer is politics.  If the prime minister had delayed triggering Article 50 any longer she might have faced a revolt from Conservative MPs, who would have feared that she was backsliding on Brexit.  By making her announcement just before the Tory party conference, she has also guaranteed herself some favorable headlines and applause in the conference hall.”

Editorial / The Economist

“The centerpiece of the deal ought to be to secure maximum access to Europe’s single market.  Brexiters say that, once outside, Britain would eventually negotiate low or no tariffs on its trade with the EU.  Yet, even if it did, tariffs are less than half the problem.  Without harmonized regulations, British firms will discover that their products do not meet European requirements, and vice versa.  And it is unlikely that a trade deal between Britain and the EU would cover services, including the financial sort that are among Britain’s biggest exports.  A study by the Treasury before the referendum estimated that the hit to GDP within two years of Brexit would be nearly twice as large if Britain left the single market than if it remained a member.

“Mrs. May seems to want to carve out a special deal with the EU, in which Britain limits immigration and determines product standards – on, say, food-labelling – while still operating fully in the single market.  Perhaps the negotiations will show that this is possible.  However, the signs are that she is overestimating the EU’s willingness to give ground.  Each country has a veto over Britain’s status.  On almost every issue, from immigration to financial services, at least one of them will be reluctant to surrender its advantages....

“A Brexit of some sort looms and Mrs. May will determine its course.  If Britain is not to suffer a car crash, she must ignore the back-seat drivers and fix her eyes firmly on the road ahead.”

---

Lots of economic data on the Eurozone this week, as well as the U.K.

The final composite reading for September, as put out by IHS Markit, was 52.6 vs. 52.9 in August, the worst of the year, with the manufacturing PMI being 52.6 vs. 51.7 (50 being the dividing line between growth and contraction) and the services reading at 52.2 vs. 52.8 in August, a 21-month low.

Germany had a manufacturing PMI of 54.3 last month, 50.9 on services.

France was at 49.7 mfg., a 7-mo. high, with services at 53.3, a 15-mo. high.

Spain was at 52.3 mfg., 54.7 services.

Italy 51.0 mfg., 50.7 services.

Greece 49.2 mfg.

A separate retail PMI for the Eurozone came in at 49.6 for Sept. vs. 51.0 in August.

Chris Williamson, Chief Economist at IHS Markit:

“While the PMI surveys suggest the eurozone economy continued to grow at a 0.3% rate in the third quarter [qtr. over qtr.], there are signs that momentum is waning.  September’s expansion was the smallest since the start of last year.

“The slowing rate of growth across the region in part reflects growing caution among businesses in terms of their spending due to worries about the economic outlook, linked in many cases to political uncertainty.  We see this trend persisting into next year, as the impact of Brexit is exacerbated by uncertainty surrounding elections in France and Germany alongside ongoing political unrest in Italy and Spain.

“While we see the eurozone economy expanding by 1.6% in 2016, even this modest growth is looking unattainable in 2017 given the heightened political uncertainty that lies ahead.

“Of the four largest euro states, only France is showing signs of its upturn gaining momentum, with growth trending lower in Germany, Italy and Spain.  The latter remains the stand-out performer, however, with the PMI pointing to 0.6% GDP growth in the third quarter, double the 0.3% rate of expansion signaled for both France and Germany.  Italy is perhaps the greatest concern, with the PMI indicating a near stalling of economic growth to just 0.1% in the third quarter.”

In the U.K., the manufacturing PMI was 55.4 last month, the best since June 2014, while the reading on services was 52.6.  The weaker pound is helping exporters big time.

Car sales were up 1.6% in September, year over year, to a new record for the month.

Eurobits....

--The Euro bond market (as well as here) was hit this week with the rumors that Draghi tried to dispel, that central banks are nearing a retreat from their extraordinary stimulus measures.  The yield on the German 10-year went from -0.12% to 0.02%; that of the Italian 10-year from 1.18% to 1.38%.

--On the migration front...Italy’s crisis is flaring anew as boats rescued over 6,000 people in the Mediterranean in just one day, piling more pressure on Prime Minister Matteo Renzi’s government, which has been struggling to keep up with the never-ending flows. According to the International Organization for Migration, some 138,000 migrants have arrived by sea to Italy so far this year, a slight increase over the same period last year.  The vast majority are not from Syria (Turkey largely sticking to its deal with the EU to stem the flow through Greece and the Balkans), but rather from Africa, with Nigeria and Eritrea being the top nationalities this year.

For his part, Turkish President Tayyip Erdogan criticized the European Union, saying the bloc had failed to fulfill its pledge to provide 3 billion euros of aid for migrants as part of the landmark deal to stem refugee flows to Europe.

“The year is coming to a close,” Erdogan said.  “They promise but do not deliver.”

The European Commission has said disbursements under the deal are based on projects and not to be paid in a lump sum.

In Hungary, hardline leader Viktor Orban’s bid to strike a blow against Brussels and it’s laxity on migration faltered as his referendum on whether Hungary should accept EU migrant quotas was declared invalid when it failed to meet the turnout threshold of 50% to make it official.

98% of Hungarians who did cast ballots voted No to the quotas.  I would have been right there with them. [Remember, I have a relation or two there.  Slovakia as well.]

Walter Russell Mead / Wall Street Journal

“On migration, Europe has fumbled as badly as it has in managing its money.  This is a colossal failure, brought about by a synthesis of cultural blindness and geopolitical fantasy.

“Just as Europe’s leaders have discounted the geopolitical dimension of their relationship with Russia, so too they have ignored the gathering storms to their south and east.  The combination of demographic explosion, authoritarianism and state failure in much of the Middle East, North Africa and sub-Saharan Africa ensures that wave after wave of desperate people will knock on Europe’s door for the foreseeable future.  Syria is the tragedy of the moment, but developments in Turkey, Egypt, Pakistan and elsewhere could just as easily send new masses of refugees and migrants across the Mediterranean.

“With anti-immigrant feeling growing across the continent, even as the wave of migrants threatens to grow, the EU is unable either to manage the flow or address its causes.  Europeans are deeply and bitterly divided today about how to handle the unprecedented flow of refugees and migrants, but the problem isn’t going away.

“Europe must regain control of its frontiers; its citizens must believe that their union can prevent an unending flow of migrants across the sea and over land.  This means more naval power in the Mediterranean and expanded surveillance of Europe’s frontiers.  It also means building up European hard-power capacities (including intelligence and military options) to better manage events in North Africa and the Middle East that affect vital European interests....

“To recover its elan and continental identity, Europe needs to stop pretending that history is over – that the stark old realities of international politics have given way to irresistible liberal progress.  Europe must instead embrace the national states and cultures at its historic heart and exploit their creative power; it must rebuild its military capacities; and it must proceed with a clear-eyed focus on European interests in a dangerous world.”

As in Syria in 2012, it’s too late in Europe.

---

In Asia, it was Golden Week in China, a week-long holiday in many respects, such as in the financial markets were closed, so there was a dearth of economic data.  The official services PMI did come in at 53.7 for September vs. 53.5 in August (the manufacturing PMI having been earlier reported at 50.4).

In Japan, the manufacturing PMI last month was 50.4 vs. 49.5, while the reading on services was a poor 48.2 (49.6 in August).

Taiwan’s manufacturing PMI for September was a decent 52.2, a 24-month high. Exports in the month, however, were down 1.8% year over year, when a gain had been expected.

India’s PMI on manufacturing was 52.1. 

[Russia 51.1, Brazil 46.0 / 46.1 on services...to round out the topic, knowing that Russia and Brazil are not in Asia.  Didn’t want you thinking I was pulling a Gary Johnson.  “True or false, Mr. Johnson.  Brazil is in Asia.”  “Ah, is that an acronym?”]

Back to China, Jamil Anderlini had an extensive piece in the Financial Times last weekend on the troubling surge of popularity in the country for Mao Zedong.

“Experts estimate that Mao was responsible for between 40 million and 70 million deaths in peacetime – more than Hitler and Stalin combined.  However, while Hitler, Stalin and most of the other totalitarian dictators of the 20th century were repudiated after their deaths, Mao remains a central figure in modern China....

“This whitewashing of Mao’s legacy is a risky strategy.  Thanks to the party’s tight control over education, media and all public discourse, most people in China know very little of Mao’s terrible mistakes.  Indeed, the dictator is more popular today than at any time since his death.  Last year nearly 17 million people made pilgrimages to his home town – Shaoshan – in rural central China.  In the mid-1980s, barely 60,000 undertook the journey.

“China has also seen the rise of a vocal political movement of ‘neo-Maoists’ – militant leftists who espouse many of the utopian egalitarian ideas that China’s current leaders have largely abandoned....

“Many of the people visiting Mao’s remains [in Tiananmen Square] have been left behind by China’s economic boom in recent decades. They see Mao as a symbol of a simpler, fairer society – a time when everyone was poorer but at least they were equally poor.  Those who have studied the resurgence in Mao’s popularity in China see it as part of a broader global phenomenon that encompasses the appeal of Donald Trump in the U.S., Brexit in the U.K. and populist politicians on the left and right in Europe.  At a time of sharp dislocation and intense resentment towards elites, people in many countries are attracted by nostalgia and tradition.  For ordinary people in China, that means Mao and the classless society he envisioned....

“(President Xi) himself has done possibly more than anyone to foster the current Maoist revival....quoting him extensively and even echoing some of his ideas....

“Xi’s embrace of Mao is...puzzling because of the danger inherent in reminding people of the concepts he stood for.  After all, Mao was a romantic revolutionary who called on workers and peasants to take up arms and overthrow the ossified authoritarian system that concentrated wealth in the hands of the powerful.  And while it still calls itself communist, the Chinese government has abandoned almost all of the economic and social ideals that Mao espoused. Xi himself, like many of his colleagues, has supported free-market reforms that Mao would have loathed.

“There is no doubt that Mao would be horrified by modern China, with its stark inequality, rampant commercialism and the lack of rights for workers and peasant farmers....

“What China has today is ‘exactly the worst kind of capitalism that Mao warned would result from revisionism,’ and ‘a new socialist revolution is the only method to reverse the restoration of capitalism,’ the group warned in its manifesto.  It pledged to mobilize the masses and said the best chance of success lay in fomenting rebellion among workers and peasants in China’s large cities....

“A decade ago, even the suggestion of a Maoist revolutionary uprising would have seemed preposterous.  But those who have studied the neo-Maoist phenomenon say these groups pose a big threat to the modern Communist party.”

Street Bytes

--Stocks finished down on the week, with the Dow Jones losing 0.4% to 18240, the S&P 500 0.7% and Nasdaq 0.4%.  Earnings reports start flooding in this coming week.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.83%  10-yr. 1.72%  30-yr. 2.45%

The yield on the 10-year rose 13 basis points from 1.59% the prior week on the growing certainty of a December rate hike.

--The International Monetary Fund warned the world is suffering from a debt hangover eight years after the financial crisis. 

Current debt levels now sit at a record 225 percent of world gross domestic product, with two-thirds of the liabilities being in the private sector, while the rest is public debt, which has increased to 85 percent of GDP from below 70 percent.

Slow global growth is making it difficult to pay off the obligations, “setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown,” the fund said.

--The price of crude rose to above $50 for the first time since June (West Texas Intermediate), partly because inventories in the U.S. unexpectedly declined a fifth consecutive week, as reported by the Energy Information Administration, and there are reports that the global oversupply of oil has ended. 

But WTI then finished the week at $49.55, so we still haven’t had a weekly close over $50 since July 2015.

That said, for now the bulls are winning out on hope OPEC members stick to a tentative agreement to reduce production, as recently reached in Algiers, though this won’t be formalized until an OPEC meeting in November.

--Gold, on the other hand, plummeted to levels not seen since June, or the time of the Brexit referendum, as investors eye a rate hike, while demand remains weak in India and China.

In theory, higher U.S. rates make other yield-bearing assets more attractive than gold.  Expectations of a move by the Federal Reserve has also boosted the dollar, which is negative for the precious metal.

But the biggest impact, longer term, is a lessening in demand for gold, with net sales volumes to retail investors in the U.S. of gold and silver coins falling 40-50% in the third quarter, according to Thomson Reuters.

Back to India, Henry Sanderson of the Wall Street Journal reports that imports of gold there fell 43% in September due to weak retail demand.

--General Motors said September sales were down 0.6% in September year on year, but predicted a solid finish to the year.  GM estimated that the seasonally adjusted annual selling rate for overall U.S. light vehicles in September was 17.8m units, or 17.4m on a calendar year basis, compared with nearly 17.5m for calendar 2015.

Ford, on the other hand, announced its sales fell 8%.  Fleet sales (including rental car and commercial) were down 21%.

Fiat Chrysler reported sales were down 1%, while Honda said U.S. sales declined 0.1% from the year ago period.  Toyota’s rose 1%, and VW, still being hammered by the emissions scandal, saw an 8% decline.

--Globally, it appears Mercedes-Benz is the new leader in the sale of luxury cars, as the German car maker had its best sales month in its history in September, 211,286 vehicles, up 12% on a year earlier and the first time it has ever crossed the 200,000 mark in a month.

BMW, which had been first, doesn’t report until next week but analysts are looking at a figure around 190,000.  And through the first eight months it trailed Mercedes, 1.32m cars to 1.28m.

--Last weekend, Tesla reported that deliveries of its Model S sedan and Model X SUV hit 24,500 from July to September, up 70% from the second quarter, but the electric-car maker will still have a tough time meeting its earlier forecast of 80,000-90,000 deliveries for all of 2016.  [The company basically said it is on target for 75,000.]

Meanwhile, a Goldman Sachs analyst, David Tamberrino, in downgrading Tesla shares from “buy” to “neutral,” said, “We now see incremental risk to the business related to management’s willingness to deploy capital for M&A, and we believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to shares.”

Tesla’s tie-up with SolarCity – the solar-panel maker chaired by Elon Musk, “implies increased corporate leverage and exacerbated cash burn,” according to Tamberrino.  [Financial Times]

So the bull/bear debate on this one continues.  I’m a bear.

One other issue.  An automotive news site, Daily Kanban, reported that Tesla’s Fremont, Calif., factory is only allowed to produce 25 vehicles an hour in 2017 under a California permit that regulates the facility’s paint shop, which would place Tesla well below production targets outlined last month.  219,000 vs. the stated goal of 360,000 next year.

--Honeywell unexpectedly cut its sales and earnings outlooks for the year amid a drop off in orders for its commercial aircraft business, which sent chills through the aerospace and defense sector, as the stock fell 8% on the news.  United Technologies and GE were among those issues falling in sympathy.

CFO Thomas Szlosek said in a call with analysts: “As we’re seeing across the aerospace industry, conditions are more difficult than anticipated in both the business jet and aftermarket businesses.

“Weakness in the oil and gas industry is impacting both business jet flying and our commercial helicopter business which resides in defense and space.”

Aerospace accounted for nearly 40% of total group sales last year.

--Former President Bill Clinton blasted ObamaCare at a rally for Hillary, calling it “the craziest thing in the world.”  Clinton said the core principles were unworkable.

“You’ve got this crazy system where all of a sudden 25 million more people have healthcare and then the people who are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half,” said Bill.  “It’s the craziest thing in the world.”

Wife Hillary has vowed to build on ObamaCare, while acknowledging rising premiums and drug costs.

Needless to say, Trump’s campaign seized on Bill’s comments.  A spokesman for Trump, Jason Miller, said in a statement: “With premiums continuing to skyrocket, state insurance markets collapsing and businesses struggling to comply with its job-killing mandates, even Democrats like Bill Clinton are coming to realize just what bad public policy ObamaCare really is.”

[Minnesota is allowing the health insurers in its ObamaCare market to raise rates by at least 50 percent next year...5-0...after the individual market there was on the brink of collapse.  This follows increases this year of 14 to 49 percent.]

Far more on the topic below.

--Shares in Twitter have recently soared on word it was looking to sell, and Salesforce.com was among those interested, Salesforce CEO Marc Benioff looking to secure a trove of data as well as a prized consumer brand.

Benioff sees Twitter as an “unpolished jewel” with untapped potential in e-commerce and advertising.

So this was early in the week, with others like Alphabet’s Google, Apple and Disney also said to be in the mix.

But then on Thursday, shares in Twitter plunged $5.00, 20%, to below $20, on a report that Google wasn’t interested in buying the company, nor, according to website Recode, Disney or Apple.

And when it comes to Salesforce, its shareholders are not pleased with talk of an acquisition.

--The Wall Street Journal reported that Snapchat is looking to go public in the first quarter of next year, with the company eyeing a reported price tag of at least $25 billion.  Now called Snap Inc., it could bring in about $500 million in sales this year, almost 10 times that of last year, and plans to exceed $1 billion in revenue in 2017, but it’s not known if it’s profitable.

Snap would use the money raised, perhaps $2 billion, to further its expansion plans.  It has already grown from a few hundred employees to more than 1,000 this year

--Walmart announced at its annual investor day that earnings next year would be flat and it was slowing the pace of store openings in the U.S., causing the shares to fall about 3%.  Analysts had been forecasting an earnings gain, while store openings would slow to 55 in 2017, far fewer than the 230 it opened last year.

--British budget carrier EasyJet PLC announced profits will plummet 29% after terrorist attacks slowed bookings and the Brexit vote led to a steep drop in the value of the British pound.

EasyJet is an example of the problems of Brexit in that it is attempting to obtain an EU operating license to help assure traffic rights to the EU, a rather serious issue in that its ability to fly certain routes could be impacted.

--Ericsson AB plans to cut 3,000 jobs in Sweden, a fifth of the workforce in its home country, as it tries to cope with shifting technology and stagnant demand for its wireless-network equipment.  This is a big blow there. 

--ING Groep (sic) NV plans to cut 5,800 jobs in Belgium and the Netherlands over five years as the Dutch lender accelerates its digital transformation, with plans to invest about $1 billion in the venture.  2,300 of the cuts will be in the Netherlands and 3,500 in Belgium.

--Since Hanjin Shipping Co. filed for bankruptcy in August, its 40-foot-long steel cargo boxes have been piling up around the world, including 15,000 piled up in and around the ports of Long Beach and Los Angeles, as reported by the Orange County Register.  No one knows what to do with them.  Most of these are leased.  One container company, Seaco Global Ltd. out of London, leased about 50,000.  One of the many problems is there aren’t enough trailers to store and move them as ports reject them, or take them in until storage yards near the ports are filled, but you need the right equipment to remove the containers from the chassis.

In other words, it’s a mess.

--Zika as a hot-button topic has been pushed to the side but the number of children born with microcephaly-related brain damage is rising across the country, over 200.  Now researchers at Johns Hopkins working with scientists in Colombia have discovered evidence that Zika causes neurological problems in adults.  With Hurricane Matthew, concerns in Florida will no doubt grow again.

--Outdoor-gear retailer Cabela’s is being acquired by privately-held Bass Pro Shops for $4.5 billion, in what seems like a terrific fit.  The combined company will own 184 stores in the United States and Canada.

But for the residents of Sidney, Nebraska, the deal is disconcerting as it is the headquarters of Cabela’s. The area has more jobs (about 8,000) than residents (6,800), as reported by Sara Germano of the Wall Street Journal, with about 2,000 employed by Cabela’s (many commuting to the town from within 60 miles).

Bass Pro Shops’ headquarters is in Springfield, Mo., which is where the combined company’s HQ will be, though Bass said it “intends to continue to maintain important bases of operations in Sidney.”

Meanwhile, a big winner was activist investor Paul Singer, who bought an 11 percent stake in Cabela’s last October, pressing for a sale, and he ended up making roughly 70% on his firm’s investment.

--Janus Capital Group Inc. sold itself to a British rival, Henderson Group PLC for $2.6 billion in an all-share deal for Janus.  Henderson said the purchase will expand its global audience. The new firm – Janus Henderson Global Investors PLC will have more than $320 billion in assets.

Janus faced investor withdrawals from some of its funds as the pressure on active managers grows, the funds charging more for their services vs. the index, passively managed, variety.

Investors pulled $166 billion out of actively managed U.S. stock funds in the first eight months of the year, according to Morningstar, while moving $110 billion into passively managed ones; benefiting the likes of Vanguard and BlackRock.

Janus, of course, is the home of Bill Gross, who joined the group in 2014 after abruptly leaving PIMCO.

--I noted a while back I went to Dollar Tree for, among other things, Calder horseradish sauce, for, err, a dollar.  But my local store hasn’t carried it in a long time, despite my pleas to management, and now Richard H., who hails from nearby Chatham, has been scouting other Dollar Tree locations for me and coming up dry, too.  Much appreciated, Richard.  [Horseradish sauce is good for cleansing the liver, so they say.]

--The U.S. Agriculture Department pegged the size of the nation’s hog and pig herd on Sept. 1 at a record 70.851 million head.  Mmmm, that’s a lot of bacon, sports fans.  [The size of the herd, though, does a number on prices with hog futures down 9% the week of Sept. 26.]

--“Saturday Night Live’s” season premiere last week registered its best ratings since the season opener in 2008, up 29% over last year as well.  Alec Baldwin’s impersonation of Donald Trump clearly helped.  This is the 42nd season for SNL.

But with Friday’s revelations, how will they handle both candidates this week?

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The U.N.’s top diplomat for the Syrian crisis, Staffan de Mistura, the Italian aristocrat tapped by the U.N. to bring peace to the land, offered to personally escort hundreds of al-Qaeda fighters out of Aleppo if it would end hostilities, warning that the city will be completely destroyed by Christmas if current levels of fighting continue.

Al-Nusra (operating under the new name Jabhat Fateh al-Sham) offered no immediate response, but it was met by anger by rebel groups in eastern Aleppo.

Mr. de Mistura warned hundreds of thousands of refugees would be fleeing the remains of the city in the coming months, and that if the fighting continued, “Thousands of Syrian civilians, not terrorists, will be killed and thousands and thousands of them may try to become refugees in order to escape from this.

“This is what you, we, the world, will be seeing when we will be trying to celebrate Christmas or the end of the year if this continues at this rate.”

Russia and Syria have long claimed their goal is to drive al-Nusra and other terrorist groups out of Aleppo, but the West has accused Vladimir Putin and Bashar Assad of using terrorism as a pretext to pummel the rebels, the true opposition to Assad’s regime.

Stupidly, de Mistura seems to be siding with the regime; believing if al-Nusra (al-Qaeda) left, then Assad and Russia would cease their attacks on the city.  But Syrian government forces continued to advance against the rebels, making their biggest gains in years, hours after announcing they would ease their aerial bombardment for humanitarian reasons.

“The military command has decided to reduce the number of air and artillery strikes on terrorist positions to allow civilians who want to leave to reach safe areas,” the statement said.

“Anyone who does not take advantage of the opportunity to lay down their arms or leave will meet their inevitable fate,” it added.

The government statement was immediately ridiculed as a “PR gimmick” by analysts.  [Agence France Presse]

According to the Syrian Observatory, more than 270 have been killed in rebel-held areas since Syria launched its offensive two weeks ago.

Meanwhile, the Russian military warned the United States against striking Syrian forces, which Washington isn’t doing, except for one U.S.-led coalition air strike that accidently killed more than 60 Syrian government soldiers last month.

How bad a mess is Syria?  I was struck by two separate headlines in Friday’s Wall Street Journal.

“Turkey and Iran Draw Closer, Despite Syrian War.”  “In Syria Crisis, Russia Expands Alliance With Iran, Increases Missile Presence.”

In the first instance, Iranian proxies have been battling Turkish-backed rebels for control of Aleppo.  But Iran’s foreign minister visited Ankara for the second time in months for talks on how to improve bilateral ties.  What the two share is their issue with the separatist insurgency by the PKK Kurdistan Workers’ Party, with Iran now seeing a revival of a dormant PKK insurgency in its own Kurdish regions.

In the case of the second headline, it’s about Russia improving contacts with Tehran as Moscow seeks a more permanent presence in the Middle East.

But as I noted in the opening, the biggest story of the week is Russia’s announcement it had deployed an S-300 missile system to its Tartus naval base in Syria.  The Russian Defense Ministry said: “The missile battery is intended to ensure the safety of the naval base...It is unclear why the deployment of the S-300 caused such alarm among our Western partners.”

Monday, the U.S. announced it is “suspending its participation in bilateral channels with Russia.”

“Everybody’s patience with Russia has run out,” White House Press Secretary Josh Earnest told reporters while addressing the decision.

David Ignatius / Washington Post

“As cease-fire talks collapsed over the past two weeks, the Russians have struck hospitals, bread lines at bakeries, civilian neighborhoods. The message, says one U.S. analyst, is: ‘Surrender and you can eat again.’

“Here’s a U.S. intelligence official’s chilling assessment: ‘The Syrian regime and its Russian backers have adopted a calculated approach of exacerbating the dire humanitarian situation in Aleppo as a weapon of war.  Their apparent goal is to make living conditions in the city so intolerable that the opposition has no choice but to capitulate.’

“Think about those analytical words: The Russians have made civilian suffering ‘a weapon of war.’”

Sen. John McCain / Wall Street Journal

“ ‘They make a desert and call it peace,’ wrote Roman historian Tacitus, quoting an enemy of Rome about its brutal conquests.  The same could be said today of Bashar Assad and his ally Russian President Vladimir Putin in Syria.

“At this moment, Syrian and Russian forces, together with Iranian and Hizbullah militia fighters, are preparing to finish their siege of Aleppo. The 275,000 people who reportedly remain in the city are being told to flee.  Thousands will do so, choosing to become refugees.  The poor souls who remain in Aleppo will suffer a surge in relentless, indiscriminate bombing.  And when Mr. Assad, Mr. Putin and their allies have slaughtered all that stand in their way, they will proclaim peace in the bloody sands of the Syrian desert.

“The collapse of the most recent cessation of hostilities is not surprising.  It failed, as did the Obama administration’s previous efforts to work with Russia and Syria, because as former Secretary of State George Shultz once said, ‘diplomacy not backed by strength will always be ineffectual at best, dangerous at worst.’....

“The war in Syria has claimed more than 400,000 lives, displaced half the country’s population, and inflamed sectarian tensions across the Middle East.  But as bad as this conflict is now, it can get much worse – and likely will.  It will produce millions more refugees, undermining regional stability and straining the social fabric of Western nations.  It will strengthen an anti-American alliance of Russia and Iran.  U.S. credibility with our closest security partners in the Middle East will further erode.  And it will provide ISIS, or its successor groups, fertile ground to radicalize Muslims, recruit and inspire them to fight, and provide them with dangerous battlefield experience.

“This is where the conflict in Syria is headed, and the administration still has no strategy to do anything about it.  Its diplomacy is toothless.  And there appears to be no Plan B.”

Charles Krauthammer / Washington Post

“After endless concessions to Russian demands meant to protect and preserve the genocidal regime of Syrian President Bashar al-Assad, last month we finally capitulated to a deal in which we essentially joined Russia in that objective. But such is Vladimir Putin’s contempt for our president that he wouldn’t stop there.

“He blatantly violated his own cease-fire with an air campaign of such spectacular savagery – targeting hospitals, water-pumping stations and a humanitarian aid convoy – that even Barack Obama and John Kerry could no longer deny that Putin is seeking not compromise but conquest.  And is prepared to kill everyone in rebel-held Aleppo to achieve it.  Obama, left with no options – and astonishingly, having prepared none – looks on.

“At the outset of the war, we could have bombed Assad’s airfields and destroyed his aircraft, eliminating the regime’s major strategic advantage – control of the air.

“Five years later, we can’t.  Russia is there.  Putin has just installed S-300 antiaircraft missiles near Tartus.  Yet, none of the rebels have any air assets.  This is a warning and deterrent to the only power that could do something – the United States.

“Obama did nothing before.  He will surely do nothing now.  For Americans, the shame is palpable.  Russia’s annexation of Crimea may be an abstraction, but that stunned, injured little boy in Aleppo is not.

“ ‘What is Aleppo?’ famously asked Gary Johnson.  Answer: the burial ground of the Obama fantasy of benign disengagement.

“What’s left of the Obama legacy?  Even Democrats are running away from ObamaCare.  And who will defend his foreign policy of lofty speech and cynical abdication?”

Daniel Henninger / Wall Street Journal

“ ‘Aleppo’ is about to enter the expanding global dictionary of shame.  The Syrian city and its population are on the brink of becoming an annihilated ruin.  One of Aleppo’s greatest casualties will be the foreign-policy reputation of the Obama presidency.

“It’s not merely that the U.S. has done so little directly to help the Syrian rebels. The more fundamental failure is that Mr. Obama has refused to permit the arming of people who are willing to fight on their own behalf against a dictator committed to the mass slaughter of innocent civilians.”

Editorial / Wall Street Journal

“Much of the city of Aleppo lies in ruins after days of airstrikes by Russian and Assad regime forces, and buried in the wreckage is whatever is left of the Obama Administration’s Syria policy.  If it’s any consolation to the 275,000 souls trapped in the city, John Kerry has regrets.  That much is clear from a leaked recording of a conversation the Secretary of State had with a group of Syrian civilians engaged in humanitarian work during last month’s U.N. General Assembly.  Mr. Kerry complained that ‘the Russians don’t care about international law, and we do.’ He noted that ‘a lot of Americans don’t believe that we should be fighting and sending young Americans over to die in another country.’

“Above all, he lamented that his diplomatic efforts to end Syria’s war were never backed by a credible threat of American military strikes.  ‘I think you’re looking at three people, four people in the Administration who have all argued for use of force, and I lost the argument,’ Mr. Kerry said.

“The Secretary is right that President Obama doomed whatever chances the U.S. had of shaping a better outcome in Syria when Mr. Obama made clear that nothing, including chemical attacks against civilians, could induce him to deploy even modest forces to ground Bashar Assad’s air force or establish no-fly/no-drive zones.

“Then again, it’s hard to credit Mr. Kerry as the scorned voice of reason within the Administration when, until last week, he was the most vocal advocate of making common cause with Moscow in Syria.”

Thanassis Cambanis / Defense One

“For at least a year before the summer of 2016, civilians and fighters in rebel-held East Aleppo prepared for a siege they believed was both avoidable and inevitable.  Correctly, it turns out, they calculated that the opposition’s bankrollers and arms suppliers – the United States, Turkey, Saudi Arabia, and other ‘friends of Syria’ – cared little for the well-being of civilians in rebel-held areas.  Through the spring, contacts inside Aleppo prepared for the siege, expending minimal effort on appeals to the international community, which they assumed would be futile.

“For all the world-weary resignation of the opposition fighters and other residents of rebel Aleppo, they have a well-earned pride in what they’ve done.  They’ve maintained their hold on half of the jewel of Syria, and under withering assault, have cobbled together an alternative to Bashar al-Assad’s rule.  ‘From the beginning of the revolution, we held Aleppo as the role model of the liberated city, that holds free elections, has an elected city council, and elected local committees that truly represent the people,’ Osama Taljo, a member of the rebel city council in East Aleppo, explained over the phone after the siege began in earnest.  ‘We insisted to make out of Aleppo an exemplar of the free Syria that we aspire to.’

“Unfortunately, Aleppo has become an exemplar of something else: Western indifference to human suffering and, perhaps more surprisingly, fecklessness in the face of a swelling strategic threat that transcends one catastrophic war.”

Editorial / The Economist

“Aleppo is the symbol of the worst sort of external intervention.  Russia is helping Syrian troops, and their Iranian and Shia allies, pound the besieged Sunni rebels.  It looks like an attempt to take the entire city before Barack Obama leaves office next year, convinced that he will do nothing to stop them. The deliberate brutality, in which hospitals are repeatedly attacked, will only feed Sunni resentment and extremism; so will Russia’s insistence that Mr. Assad should remain in charge of any future power-sharing government.

[As for Iraq]

“Mosul, by contrast, could yet become a model for defeating the jihadists and creating a saner politics that recognizes Sunni Arabs’ stake in Iraq.  Iraqi, Kurdish and local Sunni forces are closing on the city, with American support; the jihadists are fraying.  The operation to retake Mosul is due to begin this month and may give Mr. Obama a farewell triumph.  The loss of Mosul would deal a blow to IS; it was from there that Abu Bakr al-Baghdadi, the IS leader, declared his caliphate.  Much can go wrong in Mosul.  Nobody knows how hard IS will fight.  There are worries that the Iraqi government has not done enough to prepare for a mass exodus of civilians; so that it will be unable to prevent an armed free-for-all by Shia, Kurdish and rival Sunni militias.  But for all of its violence and chaos, Iraq offers real hope.  Its politics are more open than those of most Arab countries, with a feisty press and an obstreperous parliament.  Cross-sectarian alliances are starting to form.  Shia politicians want to shake off their image sa clients of Iran, while Sunni Arab ones are moving away from the politics of rejection and the dream of reconquering Baghdad....

“Mosul offers a chance to convince beleaguered Sunnis that there is a better alternative to the nihilism of jihad.  If Iraqi politics only feeds their sense of dispossession, expect the violence to go on.  What happens in Mosul matters beyond Iraq; it could even give hope to poor, benighted Aleppo.”

Hardly.

Afghanistan: There has been a major battle taking place between the Taliban and U.S.-backed Afghan forces over Afghanistan’s fourth-largest city, Kunduz, in the northern part of the country and the U.N. is warning about a humanitarian crisis as more than 10,000 residents have fled, most without the time to bring their possessions with them.

The Taliban nearly seized the city on Monday in a surprise offensive, before U.S. and Afghan Special Forces countered.  Some of the Taliban have been driven back, other fighters remain.

China, part II: As the country becomes increasingly assertive in foreign affairs and is challenging the geopolitical balance of power in the region, there is growing unease among China’s own people, as noted in a new Pew Research Center report.

For example: 56% of Chinese believe the country should “Deal with its own problems,” vs. 22% who say the priority should be to “Help other countries deal with their problems.”

More than three-quarters thought their way of life needed to be protected from foreign influence, as Beijing has repeatedly warned against the same – in particular the infiltration of “western anti-China forces” in all aspects of society.

52% feel the “U.S. is trying to prevent China from becoming as powerful,” while 45% believe “U.S. power and influence is a major threat.”

50%, though, have a favorable view of the U.S.

Corrupt officials are viewed by 83% as a top concern, 77% the gap between rich and poor, 75% crime, 74% safety of medicine (interesting) and 74% safety of food (ditto).  73% water pollution, 70% air pollution.  [South China Morning Post]

Separately, last week I talked about China’s party congress next year, which is when President Xi Jinping would normally announce his successor in 2022.

But as Chris Buckley in the New York Times reported on Sunday, Xi may not follow the script for transferring power and delay the designation of his successor until after the congress, which would stir speculation he plans on remaining in power beyond the normal two terms (10 years).

Russia: Vladimir Putin on Monday suspended a treaty with Washington on cleaning up weapons-grade plutonium, a further signal he is willing to use nuclear disarmament as a new bargaining chip with the U.S.  [This isn’t a huge deal in terms of a threat, but it’s very symbolic.]

Regarding last month’s State Duma elections, in a survey by the independent Levada Center, just 46% of Russians believe the vote was carried out fairly.  31% said it was unfair, 22% refused to answer.

Official turnout was an historically low 48%.  Some believe the true turnout was just 37%.

Finally, Friday, Russia’s Defense Ministry denied it flew into Finland’s airspace, as Finland claims it did.  Russian Su-27 military planes were conducting training flights, so they say.

Colombia: President Juan Manuel Santos won the Nobel Peace Prize for his efforts in reaching a peace deal with the Farc rebel group after 52 years of conflict that killed 260,000 people.

But in a shocker, the deal was rejected by Colombians in a referendum last Sunday, by just 54,000 votes out of almost 13 million (50.2%) as turnout was low, only 38%.

Santos had said there was no “Plan B” and now he has appointed a team of senior officials to launch talks with the opposition on changes to the peace deal that would be acceptable to all sides.

Former President Alvaro Uribe led the ‘No’ campaign and the main sticking points are twofold: that those rebels who committed serious crimes should serve prison sentences and that some Farc leaders be banned from politics.

For its part, Farc thus far has said it wants to secure a peace agreement.

Many blame Santos for conducting the negotiations in secret for nearly five years and then extending one deadline after another to accommodate Farc’s demands.  Having Raul Castro involved didn’t help, as he helped moderate the talks in Havana.  Farc, for example, aside from avoiding prison sentences, was going to receive unelected seats in Congress and control of 31 radio stations.

What seems clear by the vote is that a majority, slim as it is, don’t trust Santos.  The vote will also put a halt to Santos’ economic expansion plans as he was looking for a boom in foreign investment in mining, oil and agriculture.

Technically, the referendum is not binding, as noted by Colombia’s Constitutional Court, which gave Santos the right to negotiate and sign a deal on his own, but Santos said on many occasions that a majority of Colombians had to approve the deal for its implementation.

Cuba: Josh Rogin / Washington Post

“In pursuing his historic opening of relations with Cuba, President Obama has frequently pushed legal and political boundaries.  Now congressional Republicans are up in arms about another such initiative: an airline travel agreement they say exposes the United States to dangerous security gaps at Cuban airports.

“Congressional committees charged with overseeing the Department of Homeland Security and Transportation Security Administration have engaged in a months-long feud with the administration over security vulnerabilities at 10 Cuban airports that have begun direct flights to the United States.  The lawmakers say the lapses increase the risk of terrorists, criminals, drugs and spies entering the United States.

“The security dogs that can be seen at Cuban airports are ‘mangy street dogs’ that were fraudulently posed as trained animals, the TSA’s top official for the Caribbean, Larry Mizell, told congressional officials behind closed doors in March, according to these officials.

“He also told them that there are few body scanners at the Cuban airports and that those in place are Chinese-made versions for which no reliability data exists.”

Direct flights began in August and no TSA personnel can be stationed at the Cuban airports.  “All of the local airport employees for the U.S. carriers are being hired, vetted and paid by the Cuban regime, lawmakers said, and the United States has not been given information that resulted from their vetting or how it was conducted.”

I have absolutely zero desire to ever step foot on Cuba.  I’ll go back to Beirut before going there.

Philippines: Wacko President Rodrigo Duterte told President Obama he “can go to hell” in a speech Tuesday that was his strongest tirade yet against the U.S. over its criticism of his deadly anti-drug campaign that has left more than 3,000 suspected drug dealers and pushers dead in three months.

Duterte also lashed out anew at the European Union, which has harshly criticized him over the crackdown, saying the EU “better choose purgatory, hell is filed up.”

In  a later speech, Duterte said, “Eventually I might, in my time, I will break up with America.  I would rather go to Russia and to China.”

At the same time, the leader has said he would not abrogate a 1951 Mutual Defense Treaty with the U.S. and will maintain the alliance with the U.S.  [Associated Press]

Of the 3,000+ deaths, police said on October 3 they had shot dead 1,375 people in operations, while a further 2,066 “deaths under investigation” are believed to be attributed to vigilante groups.  [Reuters]

Random Musings

--Presidential Polls....

In a CNN/ORC national poll, Hillary Clinton tops Donald Trump 47% to 42%, among likely voters, with Libertarian nominee Gary Johnson at 7% and Green Party nominee Jill Stein 2%.

A Fox News national poll from Friday (obviously before the Trump audio tape), has Clinton up 44-42, with Johnson at 6% and Stein at 2%.

In state polling, Clinton had an 11-point lead over Trump in a four-way race in Colorado, 49% to 38%, per a Monmouth Poll.  Her lead in Virginia was 7 points, 42-35 in the same survey.

A Quinnipiac survey looked at four swing states.  Clinton leads in Florida, 46-41; Clinton has a 46-43 lead in North Carolina (within margin of error).  [A Bloomberg poll in the state had it 44-43, Clinton.]  Quinnipiac found Pennsylvania also within the margin of error, with Clinton up 45-41.

But Quinnipiac had Trump leading Clinton in Ohio, 47-42.

--Edward Luce / Financial Times...on the Veep Debate...

“There were moments when watching a high-school chess tournament would have been more interesting.  Yet Tuesday night’s vice-presidential exchange offered cues for how Donald Trump should handle the second big debate next Sunday.

“Mr. Trump, who tweeted 49 times during the event – roughly every two minutes – might have learnt a thing or two from how his deputy dealt with it.  In contrast to Mr. Trump, Mike Pence kept calm, rarely butted in and declined to rise to the bait.  Contrary to what one would expect, the normally serene Tim Kaine, Hillary Clinton’s running mate, played the attack dog.

“It was not a role that came naturally.  Every time Mr. Kaine interrupted, which was often, Mr. Pence came off as more self-possessed.  It was almost a mirror image of the roles adopted by Mr. Trump and Mrs. Clinton last week.  By that measure Mr. Kaine was the loser.

“That said, on factual points Mr. Kaine clearly had the better of it.  There was something very 2016 about Mr. Pence shaking his head every time Mr. Kaine quoted one of Mr. Trump’s lines as if it were inconceivable he could say something so mean-spirited – yet still coming across as the winner because he is more polished on television.

“With the help of a weak moderator, Mr. Pence dodged almost every charge Mr. Kaine levelled against Mr. Trump. In some cases he simply ignored the Trump quote.  In others he denied it (‘that is absolutely not accurate,’ Mr. Pence said when asked to defend Mr. Trump’s vow to stop Muslims entering the U.S.).

“In still others, he made things up.  Mr. Pence said Vladimir Putin was a ‘small and bullying’ leader to whom Mrs. Clinton had failed to stand up.  Mr. Pence made no acknowledgment of Mr. Trump’s oft-expressed admiration for the Russian president – or even his own previously stated view that Mr. Putin was a stronger leader than Barack Obama.  It was the perfect etch-a-sketch performance.”

John Podhoretz / New York Post

“Tim Kaine just did something remarkable: He made Dan Quayle look good by comparison.

“The Democratic vice-presidential nominee turned in the worst major debate performance since Lloyd Bentsen quashed Quayle like a bug in 1988 when the 41-year-old Indiana Republican made the mistake of trying to liken himself to John F. Kennedy when it came to Senatorial experience.

“Tim Kaine was no Lloyd Bentsen. This time the Republican guy from Indiana – Mike Pence, Donald Trump’s running mate – crushed the Democrat.  Pence never delivered a knockout blow, he just jabbed and parred and ducked and weaved.  Kaine kept trying to deliver roundhouses, but almost every time he swung and missed and fell on his posterior as he did it.

“He seemed determined to bait Mike Pence, but his constant interruptions and preachy assertions that Pence couldn’t possibly defend his running mate succeeded only in making him look annoying and insubstantial.

“Pence’s ju-jitsu was masterful.  After Kaine said Trump was running an ‘insult-driven campaign,’ Pence asserted Kaine’s accusation was itself a mark of an ‘insult-driven campaign’ run by Hillary Clinton – and continued to use the line against Kaine throughout the campaign.

“From the first minute, Pence found an almost perfect tone – calm, reasonable, fluent, and understated....Like Kaine, he came well-prepared but unlike Kaine, he wore his preparation lightly....

“Most striking was Pence’s harsh critique of Putin and Russia.  His powerful condemnation went entirely against Donald Trump’s extraordinarily conciliatory and friendly rhetoric.  It seemed clear that Pence went into the debate determined to defend the Donald Trump he would prefer to the Donald Trump that actually exists....

“The coming days will likely see an onslaught against Pence for his prevarications about Trump, and after the fact-checking and the split-screen revelations of his dishonesty, his triumph tonight may seem far less impressive by the end of the week.

“And these veep contests aren’t worth a warm pitcher of spit anyway.  Quayle may have been crushed in 1988, but don’t forget his running mate, George H.W. Bush, won in November by 8 points.  Quayle got to be vice president.  All anyone remembers about Lloyd Bentsen is that he won a meaningless debate.”

Chris Cillizza / Washington Post

“Winners...Mike Pence: From the very beginning, Pence was the more comfortable of the two men on the debate stage.  Pence repeatedly turned to the camera when he answered questions, making clear he understood that the real audience wasn’t in the room but watching on TV. The Indiana governor was calm, cool and collected throughout – a stark contrast to the fast-talking (and seemingly nervous) Kaine.  Did Pence respond to Kaine’s dozens of attacks on Donald Trump?  Only sort of.  What Pence seemed to be doing was making the case for Pence-ism, a, dare I say it, compassionate conservatism – a case for Pence 2020 or 2024.  Regardless, Trump will very much take it, as Pence’s performance will offer a reset of sorts for a campaign that is scrambling badly due to self-inflicted wounds from the nominee.  Win or lose next month, Pence did himself real good in the eyes of the Republican world on Tuesday night.”

Mr. Cillizza said another winner was “People who want to end VP debates...Remember that there wasn’t even a vice presidential debate until 1976, and even after that there was no vice presidential debate in 1980!”

“Losers...Tim Kaine: Someone must have told the Virginia senator he needed to always be on his front foot in the debate, always be the aggressor.  It didn’t work.  Kaine started the debate talking so quickly and trying to load so many Trump attacks into every answer that it made it virtually impossible to grasp any one attack....When he wasn’t trying to stuff 10 pounds of attack in a five-pound bag in his answers, he was relentlessly interrupting Pence.  Every single time Pence started to level an attack against Hillary Clinton, Kaine immediately began to talk over him. I’m not sure if that was on purpose or not, but it didn’t come across well – at all.”

Editorial / Washington Post

“Tuesday night’s vice presidential debate was more of a proxy war between this year’s presidential candidates than a contest about the capabilities of the two men on stage.  In that sense, it was an unfair fight: Gov. Mike Pence had to defend the indefensible Donald Trump.  To a large extent, he did so by conjuring a candidate who does not exist – a Reaganesque supporter of a muscular foreign policy, small government and traditional Christian values.  It was as if he was defending the running mate he wished he had.

“To the extent that Mr. Pence succeeded Tuesday evening, it was in landing blows on Hillary Clinton while declining to defend Mr. Trump’s proposals and record....

“Mr. Pence played down Mr. Trump’s promises to deport millions of undocumented immigrants and his well-documented skepticism of NATO.  He frequently insisted that Mr. Trump would be ‘strong’ where President Obama and Ms. Clinton are ‘weak,’ attacking them for ‘Russian aggression’ under their watch, but he dodged when Mr. Kaine pointed out that Mr. Trump has cozied up to Russian dictator Vladimir Putin....

“Repeatedly over the course of Tuesday’s debate, Mr. Kaine exclaimed that he could not believe Mr. Pence could defend Mr. Trump’s behavior and record.  In a way, Mr. Kaine was right – a polished Mr. Pence largely did not.”

--Michael Goodwin / New York Post

“News flash: President Obama didn’t learn anything in eight years in the White House.  And he’s proud of it.

“As Obama admitted in an interview with New York magazine: ‘If you go back and you read speeches I made when I was running for the U.S. Senate in 2003, or if you go back further and you look at statements I made when I was on the Harvard Law Review, my worldview is pretty consistent.’

“The comment was a point of pride, which makes it doubly tragic.  Once the smartest man in the room, always the smartest man in the room.

“Never mind that the world is on fire, that America is polarized, angry and scared. Or that ObamaCare is a sick patient, that the economy is growing at a snail’s pace and that many cities are racial war zones.

“It’s not Obama’s fault.  None of it. He would do it all again.

“With voters fixated on his successor, Obama is fixated on his legacy.  A large part of his effort on the way out the door is explaining what he did, and insisting that what he did was right. Always....

“For example, the president says his secret sauce was that he ‘trusted my judgment’ but didn’t ‘trust the noise out there,’ meaning Republicans, talk radio, cable TV and pretty much everybody else who didn’t agree with him.

“At some point, he said, he concluded his critics were ‘not even trying to be fair-minded in their assessments or recommendations,’ and he found that liberating because he could ignore them.

“Whether it was enforcing his red line in Syria, which he didn’t, or substituting executive orders for congressional action, he expressed no regret.  He was right and everybody else was wrong.

“It’s a remarkable notion, yet plainly a trend when government is the largest special interest, one that uses and abuses its power to look out for itself.  Especially under liberals, it only admits failure to demand more power.

“This is no small feat.  Consider that way back in the reign of George W. Bush, it was universally accepted that a president ought to be held accountable for national problems.  A war that didn’t work out as planned, a natural disaster or an economic one all fell on the head of the occupant of the Oval Office.

“But Obama and his apologists cleverly reversed the dynamic.  Now the American public is to blame when things go wrong.”

--Editorial / Wall Street Journal

“Who would have believed it?  Donald Trump has driven his political opponents to embrace the cause of tax reform so the wealthy have fewer loopholes to exploit.  That seems to be the inescapable logic of the media and Clinton campaign’s reaction to the weekend story that Mr. Trump may have used large income losses to reduce his tax payments.

“The New York Times reported Saturday that it had received an anonymous gift in the mail of three pages from three of Mr. Trump’s state tax returns from 1995. The real-estate and casino magnate, who was having well-known business problems at the time, reported a loss of $916 million on those New Jersey, New York and Connecticut returns.

“The Times concludes from these losses and after consulting those it called ‘tax experts’ that the resulting tax deduction ‘could have allowed him to legally avoid paying any federal income taxes for up to 18 years.’  Cue the synthetic shock and outrage.

“Note that word ‘legally.’  No one, not even the Clinton campaign, is claiming Mr. Trump broke any tax laws 20 years ago.  Had he done so you can bet the IRS would have noticed, since the tax agency doesn’t routinely ignore tax losses that large....

“But even average taxpayers who declare self-employment income know that business losses are deductible, often across several years.  This reflects that the cycle of business investment and sales isn’t confined to a calendar tax year....

“(Mr. Trump, however,) invited this October surprise by refusing to release his tax returns. Had he done so last year, when we advised him to, the debate over the details would have burned itself out.  The smart play in politics is transparency to give your opponents nowhere to go.

“The Clintons can count on a protective press corps to ignore or forgive their email and Clinton Foundation deceptions, but Republicans will never get that break.  Mitt Romney made the same mistake by waiting to release his 2011 tax return until September 2012, and George W. Bush almost lost in 2000 when someone disclosed his drunk-driving conviction shortly before Election Day.  Don’t Republicans understand that their secrets will always be exposed, and at the most damaging moment?

“Mr. Trump hasn’t helped his cause by boasting about how ‘smart’ he is for paying little tax.  This is the vainglorious Trump who can’t stand to be criticized.  He should be saying instead that the tax code is dumb.  He could say he’s fortunate to have the means to hire lawyers and accountants who can maneuver through the tax maze to cut his payments.  But he knows most Americans aren’t so lucky....

“Mr. Trump has made so many campaign mistakes that it’s a miracle he’s still competitive.  He owes this to the fact that a majority of Americans clearly don’t want to vote for Mrs. Clinton.  But the hour is late, and if he wants to win he has to stop pursuing defensive, egotistical sideshows and focus on his plans to make America better.”

[Of course, again, the above was written before Friday’s bombshell.]

--Kimberley A. Strassel / Wall Street Journal

“There is such a thing as a political goof. It should not be confused with a cosmic political error, mind-boggling in its inanity, inexplicable on any level, the electoral equivalent of stuffing your opponent’s ballot box.

“An example of the latter is Donald Trump’s failure to jump on ObamaCare as an excellent path to the White House.

“We are one month from an election, and President Barack Obama’s signature achievement is cratering, destroying millions of pocketbooks in its wake.  States are reporting premium increases of 60%, 70%, 80%.  Insurers, sagging under losses, are fleeing.  Nearly a third of U.S. counties are now down to a single ObamaCare plan. Seventeen of 23 ObamaCare co-ops have imploded.  Tennessee’s insurance commissioner warns her state’s exchange market is ‘very near collapse.’ The law’s supporters are flailing, incapable of defending it during this public death spiral.  Ezekiel Emanuel, the physician who was one of the architects of the law, was left stammering on Megyn Kelly’s Fox News show this week.  Dr. Emanuel said that these premium increases are a one-time ‘correction.’  He hilariously blamed Republicans for refusing to bail out the system.  Bill Clinton, who is becoming ever more honest in his dotage, went on an extended riff about how his party’s health-care system was the ‘craziest thing in the world.’....

“For Republicans, ObamaCare has proved to be a political winner....

“Yet Mr. Trump is almost entirely, and eerily, silent on the topic.  In his prepared speeches, he gives ObamaCare a rote and glancing reference, part of a promise to repeal it.  Trump news releases fly daily about the Clintons’ corruption and the problems with the North American Free Trade Agreement.  But there is nary a whisper about the health-care system that is melting down across the country.  Where are the ads?  Where is the big speech?”

Editorial / Wall Street Journal

“When Bill Clinton emerges as an ObamaCare critic and even President Obama admits in a recent interview that his entitlement has ‘got real problems,’ the discipline of the law’s apologists must be fading.   The question is whether Republicans can capitalize to improve U.S. health care from its ObamaCare bottom.

“For years liberals have depicted the law as an end-of-history achievement, dismissing genuine problems as partisan inventions.  ObamaCare remains as unpopular today as when Democrats rammed it through Congress in 2010, but they claimed it could never be repealed or changed.  Now its dysfunction is so acute that even the co-author of the HillaryCare fiasco of 1993-94 is finding fault....

“The balance of political power will be crucial in 2017 because ObamaCare will have to be rewritten.  Mr. Trump’s opportunity would be that ObamaCare legally empowers the Health and Human Services Secretary to loosen regulations if a President concludes that they ‘destabilize’ health markets.  As for Mrs. Clinton, she’d need GOP help in Congress unless she wants to preside over a bigger mess.”

Charles Krauthammer / Washington Post

“The Democrats will eventually push to junk ObamaCare for a full-fledged, government-run, single-payer system.  Republicans will seek to junk it for a more market-based pre-ObamaCare-like alternative.  Either way, the singular domestic achievement of this presidency dies.”

--The Chicago Tribune endorsed Gary Johnson, saying in part: “We reject the cliché that a citizen who chooses a principled third-party candidate is squandering his or her vote.”

There was a time when Johnson could have made major waves this fall, but then he exposed himself with his gaffes.

--New Hampshire Republican Sen. Kelly Ayotte was ripped for a comment in a debate this week where she said Donald Trump is “absolutely” a role model for children.  She tried to walk it back, but Democrats had a field day.  In one tweet, Sen. Elizabeth Warren (D-Mass.) said: “Think about it: @realDonaldTrump calls Latinos rapists, African Americans thugs & women fat pigs, & Kelly Ayotte thinks he’s a role model.”

Ayotte’s Democratic opponent, Gov. Maggie Hassan, scheduled a press call to talk up the issue.  The race is tight.  As are four other states that could decide the Senate: Pennsylvania, Indiana, North Carolina and Nevada. 

[Ayotte’s statement is yet another that looks even worse after today and the Trump debacle.]

--Paul Sperry / New York Post

“Veteran FBI agents say FBI Director James Comey has permanently damaged the bureau’s reputation for uncompromising investigations with his ‘cowardly’ whitewash of former Secretary of State Hillary Clinton’s mishandling of classified information using an unauthorized private e-mail server.

“Feeling the heat from congressional critics, Comey last week argued that the case was investigated by career FBI agents, ‘So if I blew it, they blew it, too.’

“But agents say Comey tied investigators’ hands by agreeing to unheard-of ground rules and other demands by the lawyers for Clinton and her aides that limited their investigation.

“ ‘In my 25 years with the bureau, I never had any ground rules in my interviews,’ said retired agent Dennis V. Hughes, the first chief of the FBI’s computer-investigations unit.

“Instead of going to prosecutors and insisting on using grand jury leverage to compel testimony and seize evidence, Comey allowed immunity for several key witnesses, including potential targets.

“The immunity agreements came with outrageous side deals, including preventing agents from searching for any documents on a Dell laptop owned by former Clinton chief of staff Cheryl Mills generated after Jan. 31, 2015, when she communicated with the server administrator who destroyed subpoenaed emails.

“Comey also agreed to have Mills’ laptop destroyed after the restricted search, denying Congress the chance to look at it and making the FBI an accomplice to the destruction of evidence.”

And it goes on and on...or as Paul Sperry writes, Comey has “turned the FBI into the Federal Bureau of Immunity,” bowing to election pressure.

But speaking of emails...Byron Tau / Wall Street Journal:

“Newly disclosed emails show top Obama administration officials were in close contact with Hillary Clinton’s nascent presidential campaign in early 2015 about the potential fallout from revelations that the former secretary of state used a private email server. Their discussion included a request from the White House communications director to her counterpart at the State Department to see if it was possible to arrange for Secretary of State John Kerry to void questions during media appearances about Mrs. Clinton’s email arrangement.  In another instance, a top State Department official assured an attorney for Mrs. Clinton that, contrary to media reports, a department official hadn’t told Congress that Mrs. Clinton erred in using a private email account.”

--The FBI charged a government contractor, Harold Thomas Martin, of stealing classified secrets while he was working with the National Security Agency.  Martin was arrested in late August, but the FBI just announced it Wednesday.  The contractor, Booz Allen Hamilton Holding Corp. also employed Edward Snowden.

The theft was uncovered after an entity calling itself Shadow Brokers claimed online to have a large cache of files that appeared to be NSA spying tools, which Shadow Brokers was looking to sell.  The tools are used to penetrate the computer systems of foreign governments.

As of today, however, the FBI has yet to determine Martin’s motives or intent for taking the information.  He has been in custody since his arrest.

Shares in Booz Allen took a hit. The company said it had fired Martin and was cooperating fully with the government.

Separately, the Justice Department announced this week that two Russians and a U.S. citizen were detained on Thursday, charged with illegally exporting technology used in military devices to Russia.

Prosecutors allege the three conspired to obtain cutting-edge microelectronics from U.S. companies and export them, first to Finland, then Russia to conceal the final destination.  One of the men was arrested in Brooklyn, the other two in Denver.

--Southern Californians have a right to be concerned following the earthquake swarm in a  seismic zone just south of where the San Andreas fault ends.

Rong-Gong Lin II / Los Angeles Times

“(The zone where the quakes hit) is composed of a web of faults that scientists fear could one day wake up the nearby San Andreas from its long slumber.

“The San Andreas fault’s southernmost stretch has not ruptured since about 1680 – more than 330 years ago, scientists estimate.   And a big earthquake happens on average in this area once every 150 or 200 years, so experts think the region is long overdue for a major quake....

“Experts said it’s important to understand that the chance of the swarm triggering a big one, while small, was real.”

--U.S. traffic fatalities surged in the first six months of 2016, a whopping 10.4%, as reported by the National Highway Traffic Safety Administration.  The pace far exceeds the 3.3% increase in miles traveled over the same period, ergo, sure seems like distracted driving is a main cause of the rise in deaths (17,700 Jan. thru June).  That’s just way too many.

--This was a surprise...New York City Mayor Bill de Blasio’s job approval rating rose to 40%, in the latest Wall Street Journal/NBC 4 New York/Marist poll, up from 35% in April, an all-time low.

--De Blasio is helped by New York’s crime statistics.  The NYPD said last month was the safest September on record.  For the first nine months, there were also 10 fewer murders than in the same period last year.  The mayor said, “The amount of stop-and-frisk activity since its height in 2001 is down 97%.  So affirming once again the clear reduction in the use of stop-and-frisk accompanied by the consistent reduction in crime.”

--Melody Petersen / Los Angeles Times

“Many thousands of Californians are dying every year from infections they caught while in hospitals.  But you’d never know that from their death certificates.

“Sharley McMullen of Manhattan Beach came down with a fever just hours after being wheeled out of a Torrance Memorial Medical Center operating room on May 4, 2014.  A missionary’s daughter who worked as a secretary at Cape Canaveral, Fla., at the height of the space race, McMullen, 72, was there for treatment of a bleeding stomach ulcer.  Soon, though, she was fighting for her life.

“On her medical chart, a doctor scribbled ‘CRKP,’ an ominous abbreviation for one of the world’s most lethal superbugs, underlining it three times.

“Doctors tried antibiotic after antibiotic.  But after five weeks in the hospital, mostly in intensive care and on morphine because of the pain, McMullen died.

“Her death certificate does not mention the hospital-acquired infection or CRKP, however.  Instead, her doctor wrote that McMullen had died from respiratory failure and septic shock caused by her ulcer.

“The doctor’s conclusion outraged Shawn Chen, McMullen’s daughter.

“ ‘It should say she died of an infection she got in the hospital,’ said Chen.  ‘She was so hardy.  She would have made it through if it wasn’t for this infection.’”

The CDC estimates that 75,000 Americans die from hospital-acquired infections during their hospitalizations each year.

But now experts say this figure is underestimated.

Ms. Petersen’s extensive story talked of a boy, 15, who “unexpectedly died a couple days after having an MRI at Children’s Hospital of Orange County in Orange in 2006.”

He picked up MRSA, with the parents believing “the pad patients lay on in the MRI machine was contaminated with the bacteria.”

But the bacteria wasn’t on his death certificate.  Instead the doctor wrote that contributing causes to the “adult respiratory distress syndrome” were septic shock and pneumonia.

--The train that crashed into the Hoboken, N.J., train station the other day was found to be going 21 mph, twice the posted speed of 10 mph.  Still no explanation as to how the engineer let this happen.

--I have nothing to say on Hurricane Matthew, as it still poses a significant danger.  But to those who say it was overhyped, remember my adage, ‘wait 24 hours.’  Good luck to my friends in Kiawah, S.C.  I hope I am down there again in December.

--Finally, I was reading a review of a book on Confederate Gen. Braxton Bragg in the Wall Street Journal  (“Braxton Bragg: The Most Hated Man of the Confederacy” by Earl J. Hess), and the reviewer, Russell S. Bonds, refers to a Pvt. Sam Watkins of the 1st Tennessee Regiment, who wrote a memoir “Company Aytch.”

Russell Bonds: “Like many Civil War generals, Bragg showed himself to be, as Mr. Hess puts it, a man who ‘could win fights but not win campaigns.’

“ ‘More depends on a good General than the lives of many privates,’ Sam Watkins said in closing his own remembrance of Braxton Bragg.  ‘The private loses his life, the General his country.’”

---

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

God bless America.

---

Gold closed at $1258...down $60 on the week
Oil $49.55

Returns for the week 10/3-10/7

Dow Jones  -0.4%  [18240]
S&P 500  -0.7%  [2153]
S&P MidCap  -1.2%
Russell 2000  -1.2%
Nasdaq  -0.4%  [5292]

Returns for the period 1/1/16-10/7/16

Dow Jones  +4.7%
S&P 500  +5.4%
S&P MidCap  +9.7%
Russell 2000  +8.9%
Nasdaq  +5.7%

Bulls  46.7
Bears  22.8  [Source:: Investors Intelligence]

Have a great week.

Dr. Bortrum posted a new column.

Brian Trumbore