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05/07/2016

For the week 5/2-5/6

[Posted 11:00 PM ET, Friday]

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Edition 891

[35-36 pages if you print it out]

Washington and Wall Street

Some of us will long remember Tuesday.  Even Donald Trump himself admitted he didn’t see it coming.

For weeks it seemed that it would be all about California and its primary on June 7.  Would this put Trump over the magic 1,237 delegate number needed to avoid a brokered convention, or would Trump and the Republican Party, and the financial markets, face a period of intense uncertainty?

Well, Trump rolled in Indiana on Tuesday, winning most if not all of the 57 delegates up for grabs, Senator Ted Cruz immediately dropped out (John Kasich the following day) and suddenly Trump was the presumptive Republican nominee.  It was the culmination of a startling and tumultuous 11 months since Trump first announced he was running last June, and it promises to make the next six months even more so.  Buckle your seat belts.  It’s going to be a bumpy ride.

It didn’t help that on Thursday, House Speaker Paul Ryan (Wis.), the nation’s highest-ranking GOP official and Mitt Romney’s running mate in 2012, said he wasn’t prepared to support Trump just yet until he changes his tone and demonstrates he shares the party’s values, whatever they are these days.

Asked by CNN anchor Jake Tapper whether he backs Trump, Ryan responded: “I’m just not ready to do that at this point.  I’m not there right now.  And I hope to, though, and I want to.  But I think what is required is that we unify the party.  And I think the bulk of the burden on unifying the party will have to come from our presumptive nominee....

“This is the party of Lincoln, of Reagan, of Jack Kemp.  And we don’t always nominate a Lincoln and a Reagan every four years, but we hope that our nominee aspires to be Lincoln – and Reagan-esque,” Ryan said, adding that he also hopes the candidate “advances the principles of our party and appeals to a wide, vast majority of Americans.”

Earlier, though, Senate Majority Leader Mitch McConnell and RNC Chairman Reince Preibus said they would support Trump.  But the GOP’s only two living presidents – George H.W. Bush and George W. Bush – said they would not endorse the man, while its past nominees – Mitt Romney and John McCain – said they would not attend the Republican convention in Cleveland.  McCain, however, did say he would support Trump.

Then Friday we learned Ryan and Trump will meet next Thursday, with Trump sitting down with other Republican House leaders at that time.

I have a ton of stuff below on this topic, with lots of opinion on this historic week.  But for now....

Gerald F. Seib / Wall Street Journal

“At the dawn of the current presidential campaign – when Republican leaders were thrilled to have an A-team of reliably conservative candidates on the field, when they had a game plan for a quick and orderly nomination process, and when they were giddy at the prospect of facing a flawed Democratic candidate carrying years’ worth of baggage – nobody could have seen the primary-season climax that arrived Tuesday.

“Donald Trump, who was something between a curiosity and an after-though at the outset, won the Indiana primary, a victory quickly followed by the withdrawal of his last serious opponent, Sen. Ted Cruz, from the race.  Mr. Trump now will be the Republican nominee for president – the most unexpected outcome of a primary contest since Jimmy Carter emerged from obscurity to win the Democratic nomination four decades ago.

“Mr. Trump reached that milestone on a day of striking ugliness, when he essentially accused Mr. Cruz’s father of cavorting with a presidential assassin, and Mr. Cruz in return called Mr. Trump a ‘pathological liar’ a ‘narcissist’ and a ‘serial philanderer.’  The Democrats’ attack ads for the fall are practically writing themselves.

“All told, the day offered merely the latest in a string of once-unimaginable tremors that have shaken the system and the Republican Party.  Nobody – party leaders, journalists, fellow candidates, even Mr. Trump himself – foresaw what has transpired.

“The Democrats are shaken and shaking, too, of course.  Hillary Clinton’s weak showing in Indiana, along with a series of other recent states, is further evidence that the Democratic Party’s initial story line – which was supposed to be one of Clinton inevitability and ease of nomination – was no closer to accurate.

“The difference is that the Democrats still appear to be grinding on toward the expected outcome, while Republicans have done the opposite.”

Turning to Wall Street and the U.S. economy, I admit I was wrong.  With Friday’s tepid jobs report for April, 160,000 (while February and March were revised down a combined 19,000), below the Street forecast of 200,000, there is no way the Federal Reserve is hiking the funds rate a second time at its June 14-15 meeting as I thought could be the case.  I was basing my forecast on strong jobs data for both April and May and this seals it.  Plus the British referendum on staying in or leaving the European Union was always going to be an excuse for the Fed to hold off anyway as that vote is June 23.

For the first four months of 2016, the average jobs gain has been 192,000, less than 2015’s average of 229,000.

But the report did contain a nice 0.3% rise in average hourly earnings, back to a 2.5% pace over the last 12 months, which is encouraging, though still far below the normal 4% you would see if it was a robust recovery.

U6, the measurement of underemployment, ticked down from 9.8% to 9.7%, the best since 2008.

Separately, worker productivity – the output of goods and services for each hour of labor – continues to worsen.  As Harriet Torry of the Wall Street Journal reported:

“The current economic expansion, which wraps up its seventh year next month, has been driven largely by rising employment rather than gains in productivity.  Since the economic recovery began in mid-2009, output per hour worked has expanded at an average annual rate of 1.3%.  That was the worst performance over a seven-year stretch since the late-1970s to mid-1980s, which were marked by back-to-back recessions.”

Productivity actually declined in the first quarter at a 1% seasonally adjusted annual rate, as released by the Labor Department this week.

In other economic news, March construction spending was less than expected, up 0.3%, while factory orders for the month rose a better than forecast 1.1%.

The April ISM reading on manufacturing came in less than expected at 50.8 (50 being the dividing line between growth and contraction), while the service sector reading was a solid 55.7, with a figure on new orders at a robust 59.9.

Back to the Fed and its easy money (ditto that of central bankers around the world), speaking at an investment conference, billionaire former hedge fund manager Stanley Druckenmiller warned that the Federal Reserve’s low-rate policy is creating vast long-run risks for the U.S. economy.  Druckenmiller said the “longest period ever of easy monetary policies” has caused groups to borrow at a quick clip and then use the funds in ways that are not economically productive.  For example, he noted that “most of the debt today has been used for financial engineering,” in the form of stock buybacks and other methods that are a boon for corporate profits and shareholders, but you contrast this with other periods, such as the 1990s when debt was used to craft the building blocks of the Internet.  [Financial Times]

Finally, in his monthly investment outlook, Bill Gross of Janus Capital (formerly of PIMCO) had some interesting thoughts on the impact of technology as an imminent threat to both blue- and white-collar workers, which he believes will require the introduction of a government-funded universal basic income program.

No details on how this would be funded or what it would look like, but Gross’ main point is that the days are near when technology will make many of our jobs obsolete.

“Technology and robotization are changing the world for the better but those trends are not creating many quality jobs,” he wrote.  “Our new age economy – especially that of developed nations with aging demographics – is gradually putting more and more people out of work.”

“Transportation is a visible example as computer-driven vehicles soon will displace many truckers and bus/taxi drivers,” Gross writes.  “Millions of jobs will be lost over the next 10-to-15 years.  But medicine, manufacturing and even service intensive jobs are also at risk.  Investment managers, too.”

Finally, I didn’t comment last time on the Wall Street adage “sell in May and go away” (5/1 thru 10/31) because it just doesn’t hold water anymore.  In the old days, the Street was nowhere near as connected to global markets and news events as it is today, and right there that should discount the saying. Far too many variables compared to, say, 20 years ago.

Plus this year we have the Brexit issue, covered below, that could shock the markets (or propel them forward), an important Fed meeting beforehand, a crazy political season, and geopolitical threats all over the place; this while central bankers are simply running out of policy tricks. 

Actually, you should just go away.  Or at least wait until Labor Day to see how the presidential election is shaping up.  We’ll know then if we made it out of what could be a ‘hot’ summer on a number of fronts, both here and abroad.

And remember...stocks are far from undervalued.  They are clearly the opposite by most historic standards.

Europe and Asia

Before I get to some important big picture items, namely the Greek debt issue (part XXLV), Brexit and the migration crisis, some economic data for the eurozone.

The final purchasing managers’ index reading on manufacturing for the eurozone for April came in at 51.7 vs. 51.6 in March, while the reading on the service sector was unchanged at 53.1, as reported by Markit.

For the key players....

Germany was at 51.8 on the manufacturing front; 53.6 services (an 11-month low).

France was a godawful 48.0 for manufacturing (12-month low and down from 49.6 in March), and just 50.2 on services.

Italy was 53.9 manufacturing; 53.1 services.

Spain was 53.5 manufacturing; 55.2 services.

Non-euro U.K. was 49.2 manufacturing, the worst since March 2013 and down from 50.7, while the service sector reading was only 52.3, down from 53.7 and the worst since Feb. 2013.

March retail sales for the eurozone fell 0.5% over February, up 2.1% year-over-year.

Chris Williamson, chief economist at Markit:

“The (manufacturing) PMI has now edged higher for two successive months, but has improved only marginally from what was a worryingly low base earlier in the year.

“The survey is signaling an anemic annual rate of growth of manufacturing production of less than 1%, which is half the pace seen in the months leading up to the recent slowdown.

“Prices also continue to fall, both in terms of raw material costs and average prices charged for goods leaving the factory gate, albeit at reduced rates compared to prior months.

“The survey data therefore so far show no signs of ECB (European Central Bank) stimulus or the weaker euro helping to revive the manufacturing sector, at least for the euro area as a whole.  Hopes are therefore pinned on recent signs of increased bank lending and more aggressive quantitative easing providing the much needed boost.”

On the Greek debt negotiation front, this is a critical weekend as the Greek parliament votes on Sunday to overhaul the country’s tax and pension system ahead of a meeting Prime Minister Alexis Tsipras is having Monday with eurozone finance ministers and the creditors.

Tsipras told his central committee on Friday that the government was in the “final stretch” of talks to conclude a bailout review and that reforms were necessary to prevent Greece’s social security system from imploding.

If the measure fails to gain approval in parliament, though, no telling what this means, especially for Tsipras just eight months after he was re-elected as prime minister.  Greece was struck by a two-day labor strike on Friday, as public sector workers brought the country’s rail, bus and tram networks to a standstill in protest against further austerity measures.

As for Brexit, JPMorgan said on Thursday that an analysis of various opinion polls had the campaign to keep Britain in the European Union 4 percentage points ahead of the “Out” campaign, though that lead has halved since February.

Britain’s economy slowed in April and may stall as consumers worry about the referendum.  Markit projects second-quarter GDP may rise just 0.1% vs. 0.4% in the first three months of the year (quarter-over-quarter).

An estimated 20,000 manufacturing jobs were lost in the U.K. in Q1.

Robert Samuelson / Washington Post

“Countries usually don’t knowingly commit economic suicide, but in Britain, millions seem ready to give it a try.  On June 23, the United Kingdom will vote to decide whether to quit the European Union, the 28-nation economic bloc with a population of 508 million and a gross domestic product of almost $17 trillion.  Let’s not be coy: Leaving the E.U. would be an act of national insanity.

“It would weaken the U.K. economy, one of Europe’s strongest.  The E.U. absorbs 44 percent of Britain’s exports; these might suffer because trade barriers, now virtually nonexistent between the U.K. and other E.U. members, would probably rise.  Meanwhile, Britain would become less attractive as a production platform for the rest of Europe, so that new foreign direct investment in the U.K. – now $1.5 trillion – would fall.

“Also threatened would be London’s status as Europe’s major financial center, home (for example) to 78 percent of E.U. foreign exchange trading.  With the U.K. out of the E.U., some banking activities might move to Frankfurt or other cities.  This would be a big blow....

“A study from the Organization for Economic Cooperation and Development (OECD), after making assumptions about U.K. trade and investment, concluded ‘Brexit’ could ‘shave off’ $3,200 from average British household income by 2020....

“What would Britain get for all this?  Good question.

“There are three main complaints against the E.U., says Nile Gardiner, who was an aide to British Prime Minister Margaret Thatcher and now works at the conservative Heritage Foundation.

“First, the outpouring of regulations from Brussels – the seat of the E.U. – has compromised Britain’s sovereignty.  On some issues, the European Court of Justice can overrule British courts.

“Second, the E.U.’s liberal migration rules may expose Britain to terrorists or overburden its welfare system.  (Once people become E.U. citizens, they are allowed to live or work anywhere in the bloc.)

“Finally, the E.U. imposes costs on Britain – an annual contribution to the E.U. budget plus the costs of regulations....

“Still, most complaints seem exaggerated.  The U.K.’s net annual contribution to the E.U. budget is about 0.5 percent of Britain’s GDP.  That’s hardly crushing. Some E.U. regulations may be overkill, but Britain’s labor and product markets are among the least regulated of advanced countries.

“As for immigrants, studies ‘show that these workers pay more in taxes than they receive in benefits,’ says Frances Burwell of the Atlantic Council. ‘They’ve come to work.’....

“Brexit is an absurdity.  But it is a potentially destructive absurdity.  It creates more uncertainty in a world awash in uncertainty. This would weaken an already sputtering global economy by giving firms and consumers another reason to pull back on spending.

“It would be better for the U.K. to stay in the E.U.  It would also be better for the E.U., because Britain provides political and intellectual balance. Finally, it would be better for the United States, which doesn’t need a major ally – Britain – to go delusional.”

Euro Bits

--Irish politicians ended 10 weeks of deadlock on Friday as Enda Kenny has won a second successive term as prime minister (Taoiseach), but at the head of a minority government led by his center-right Fine Gael party.  I’m a little surprised this got done.  We’ll see how long it lasts.

--French President Francois Hollande’s approval ratings fell to a fresh low in a survey by Elabe.  Only 16% trust Hollande to efficiently tackle France’s problems, down from 18% last month and 58% when he was elected in May 2012. This comes after some decent news on the economic front (save for this week’s manufacturing PMI).

--Friday, London elected a Muslim mayor, Sadiq Khan, in a rather remarkable triumph over racial and religious tensions that, in the words of the Financial Times, “have bedeviled other European capitals.”

Khan thus becomes the first directly elected Muslim mayor of an important western city.  The win reaffirms London’s multicultural image.

Khan, of the opposition Labour Party, is the son of a Pakistani bus driver and his seamstress wife; one of eight children raised in public housing in south London.  He defeated his Conservative rival, Zac Goldsmith, an Eton-educated billionaire’s son, handily.  It sounds like Goldsmith ran a really stupid, racist campaign.  Some of his fellow Conservative party members are ticked off Goldsmith blew any headway the party was making with London’s Muslim communities.

--British new car registrations (sales) rose to their highest level in 13 years last month, up 2% compared with a year ago to 189,505 vehicles, according to the Society of Motor Manufacturers and Traders.

On the migration front, I’ll jump to the chase.  It’s going to be a long three months coming up, especially if Turkey’s president, who is facing a slew of issues internally (covered below), abandons a refugee deal with the EU that leaders have credited with stopping the influx of migrants from entering Europe through Greece, though the flows have shifted some to Italy.

Erdogan said he is not bowing to Brussels’ demand that he reform anti-terrorism laws in order for Ankara to gain visa-free travel in the EU for Turks.  The president explained the harsh laws were necessary after Turkey has been targeted non-stop by both Islamic State and Kurdish militants and he is not changing them.  [This will formally come to a head in June.]

Meanwhile, Italy and Germany expressed their opposition to Austria’s crackdown at the Brenner Pass, where Austria is constructing an 820-foot long checkpoint.  Italian Prime Minister Matteo Renzi and German Chancellor Angela Merkel say this contravenes the Schengen accord, which governs passport-free travel between member states.  Speaking at a joint press conference with Renzi, Merkel said, “We need to remain loyal to each other.”

Thousands of migrants that first land in Italy use the Brenner pass to head to countries like Germany and Sweden with their more generous welfare benefits.  Others want to settle in Vienna.  That isn’t going well there, as I’ve written over the past year.

Renzi said that about 26,000 migrants have reached Italy via sea thus far in 2016, about 1,000 more than in the same period in 2015.

Eurostats released some migrant data for 2015 and asylum applicants considered to be unaccompanied minors jumped to almost 90,000, vs. what had been a steady 11,000 to 13,000 from 2008-2013, which then almost doubled to 23,000 in 2014, and then practically quadrupled last year.

35,300 of the nearly 90K were processed in Sweden, or 40% of all those registered in the EU Member States, followed by Germany (14,400), Hungary (8,800) and Austria (8,300).  Males comprised 91% of unaccompanied minors, with over half of them aged 16 to 17.

Turning to Asia, the Caixin/Markit manufacturing PMI, which measures private firm activity, came in at 49.4 for April vs. 49.7 in March.  The low on the Caixin number was 47.2 back in September and it has been in negative territory since Dec. 2014.  The official government reading of large, state-owned enterprises, was 50.1 vs. 50.2 in March.

On the service sector side, the Caixin/Markit reading was 51.8, down from 52.2 in March, while the government reading was 53.5 in April vs. 53.8 the prior month.

As for China’s debt issue....

Editorial / The Economist

“China was right to turn on the credit taps to prop up growth after the global financial crisis.  It was wrong not to turn them off again.  The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch.  Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown.

“China will not be an exception to that rule.  Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending.  The reality is grimmer.  Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax.  China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis.  With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years.  But not forever.

“When the debt cycle turns, both asset prices and the real economy will be in for a shock.  That won’t be fun for anyone.”

Elsewhere, Japan’s manufacturing PMI for April was an abysmal 48.2, Taiwan’s 49.7, and South Korea’s 50.0, hitting this level for the first time in months.

Street Bytes

--The Dow Jones and S&P 500 fell for a second consecutive week, down -0.2% and 0.4%, respectively, while Nasdaq declined a third straight, down 0.8%.

--U.S. Treasury Yields

6-mo. 0.38%  2-yr. 0.73%  10-yr. 1.78%  30-yr. 2.63%

The yield on the 10-year fell Friday morning to 1.70% after release of the jobs report, before the Treasury market got hit with a rally in the dollar.

--The oil price hung around $45 a second straight week, with West Texas Intermediate closing at $44.66, making it four in a row over $40, though this time it was largely because of the raging wildfires in the heart of Canada’s oil-sands region that drastically curbed production (along with fighting in Libya near oil facilities there).

While no operations reported direct fire damage in Canada as yet, efforts to protect themselves led to a reduction of around 500,000 to 650,000 barrels a day (reports are sketchy), or as much as one-quarter of Canada’s 2.5 million barrels in total oil sands production; much of which is sent to refineries in the U.S.

The impact should be short term, but, if production currently threatened was halted, it would be enough to nearly wipe out the world’s oversupply, according to energy analyst Tim Pickering.  [Wall Street Journal]

Separately, there are no proposals on the table for OPEC to revive limits on crude output at its upcoming June meeting after last month’s failure to freeze production.

Personally, I said I would wait to see if oil stayed above $40 for four straight weeks before saying the bottom was in and, yes, the $26 low is the bottom.  But I’m far from convinced oil isn’t about to take another header.

--Oil services companies Halliburton and Baker Hughes abandoned their planned merger (as I wrote was going to be the case weeks ago) after the government’s antitrust folks moved to block the deal between the second- and third-largest players in the sector.

I mean as everyone has said recently, there was no way this one was being approved, and it shouldn’t have.

[The Justice Department argued the merger would eliminate head-to-head competition in as many as 23 product lines.]

But what people can’t believe, as I pointed out earlier, is how stupid Halliburton’s attorneys were because a $3.5 billion...with a ‘b’...termination fee was structured into the proposed deal. 

I mean that is just throwing $3.5bn away!  I sure as heck hope those responsible have now been fired. 

--According to Kelley Blue Book, U.S. consumers bought 1.5 million cars in April, besting the record for the month set in 2005.  Sales rose 3.6% to an annual rate of 17.4 million.  Last year the industry set a record with sales of 17.5 million.

Fiat Chrysler’s sales rose 6% on record Jeep sales, while Ford rode an April record for SUV sales, up 4%.  Ford sold 65,000 Explorers.

General Motors, though, blamed its 3.5% drop on a strategy of cutting low-profit sales to rental car companies.

Toyota’s sales rose 3.8%, thanks to a monthly record from its RAV4 small SUV. 

Honda set a record for the month, up 14.4%, with both cars and SUVs selling well, while Nissan also set an April record, up 12.8%.  Hyundai sales declined 8.5% from a record April last year.

VW sales dropped 10% as it continues to deal with its emissions-cheating scandal.

--BMW AG warned on future sales, with CEO Harald Kruger citing moderating growth in China, political turmoil in Europe and weakening demand in the U.S.

“We expect that the trend in the U.S. will continue until the summer,” after BMW’s first-quarter sales here fell 11% year-over-year.  The company is boosting production of SUVs in the U.S. and cutting back on sedans.

BMW did still earn a profit of $1.90 billion in the quarter, while it also said it is investing heavily in the development of a self-driving car it hopes to launch by 2030.

--Then there is Tesla Motors.  The company reported revenue of $1.15 billion and an adjusted loss per share of 57 cents Wednesday, narrowly exceeding expectations.

But CEO Elon Musk made some big promises.  Tesla now expects to deliver 500,000 vehicles by 2018, two years earlier than its previous goal, as the company affirmed Model 3 production will begin late next year after preorders handily beat the most optimistic forecasts.  [325,000 in the first few days, according to the company.  400,000 as of today.]

But the thing is, Tesla has never, ever, met a production deadline and quality control issues have plagued the rollout of the Model X SUV, which came to market years after first planned.  Then we learned two key manufacturing executives were leaving the company.  [Weeks before, Apple announced it had tapped Chris Porritt, a top Tesla engineer, to its secretive electric car team.  Short-seller Jim Chanos, in slamming Tesla’s prospects, has been citing a “flood” of executives leaving the company.]

Musk is setting this absurd sales goal because as he admitted he needs to raise additional capital, like at least another $1.5bn; this after he said in February the company wouldn’t need to.  Tesla is also using Model 3 deposits to pay down its asset-backed line of credit, even though the deposit is fully refundable.

Tesla delivered 14,810 Model S sedans and Model X vehicles in the January-March period, lower than expected, though the company said it remains on track to deliver 80,000 to 90,000 cars this year.  So from 90,000 to 500,000 in two years?!

For Tesla to come close to this, in 2017, it will need to produce more cars than the entire global electric-car industry made in 2015...234,000, according to BNEF.

In response to the above, shares dropped 5% on Thursday as investors expressed skepticism over Musk’s production plans, but this was after shares rose 7% Wednesday in after-hours trading.

I’m with Jim Chanos.  I’d ‘short’ the crap out of this one.  You just need a strong stomach because the Teslarians are like the Huns.  [Or White Walkers, for you “Game of Thrones” fans.]

--Meanwhile, Japanese auto supplier Takata’s deadly air bag crisis ballooned into the largest recall in U.S. history Wednesday as the company agreed in a deal with auto-safety regulators to recall another 35 million to 40 million air bag inflators.

About 28.8 million inflators have already been recalled, with eleven deaths linked to the defective parts.

This is a travesty.  For information go to Safercar.gov/rs/takata.

--CBS Corp. reported first quarter earnings rose 20%, boosted by the broadcast of Super Bowl 50 as revenue increased a solid 10% to $3.85 billion.  CEO Leslie Moonves said the company was “salivating” ahead of the “upfront season” when television networks sell the majority of their advertising for the coming fall season.  Even without football, the network had a 12% jump in advertising dollars.

Local broadcast revenue grew 8.9% owing to the political spend.

--I literally wrote years ago that I couldn’t give a damn about Puerto Rico’s debt crisis for one reason.  It would have zero...zero...impact on our markets.  And despite it heating up, it hasn’t!  It is just not relevant...and nothing compared to the impact on sentiment another round in the Greek debt crisis would have.  [Or Brexit.]

No, the real impact isn’t on the markets, but rather the fact Puerto Rico is imploding and its residents are fleeing here!   

Governor Alejandro Garcia Padilla invoked the commonwealth’s new debt-moratorium law to suspend payments on $422 million in bonds due Monday.  “Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice,” Padilla declared.

The bigger date is July 1, when another $2 billion debt payment from various agencies comes due.

But where it also impacts the U.S. is on items like Zika, Puerto Rico being a hotbed of it.  With the government totally broke, needless to say funds aren’t being directed to combat the virus and that means more get infected there and then travel here to spread it.

So now there is talk of a taxpayer funded bailout through Congress and if that happens, I’m not going to raise hell over it.  The amount that would be spent is minimal compared to the myriad of ways we have wasted sums many times over...like in Iraq and Afghanistan, for starters.

But, again, I have zero sympathy for any who lost money here.  The Wall Street Journal has a line, “The island’s debt is held by mutual funds, hedge funds, bond insurers and individual investors, who were attracted in part by tax benefits and high yields.”

Well Puerto Rico’s problems have been known for years.  Why should I care about these investors?  You shouldn’t either.

But the numbers of refugees most impacts Florida, followed by Texas, and they have the ability to vote right away, too.

--Berkshire Hathaway reported first-quarter profit grew 8%, largely because of the accounting for its Duracell acquisition, but profits fell at its BNSF railroad and at its insurance units.

Chairman Warren Buffett, though, referred to attacks on his part-owned Coca-Cola by public health campaigners as being “quite spurious” in laying the blame for obesity and diabetes at the doors of Coke; Buffett being a renowned Cherry Coke drinker.

One attendee at Berkshire’s annual confab in Omaha last weekend accused him of dodging the issue of fizzy drinks, citing a Tufts University study that linked them to 184,000 deaths annually worldwide.

“I’ve not seen evidence that convinces me I’ll be more likely to make it to 100 if I suddenly switched to water and broccoli,” said the 85-year-old Buffett.  He added, “I like fudge a lot, too, and peanut brittle and I am a very happy guy.  If you were happy every day...you are going to live longer as well.” 

Buffett also ripped the fees charged by hedge funds, saying: “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities.”

--Macau’s April casino numbers weren’t as bad as expected, though nonetheless revenue dropped a 23rd consecutive month, down 9.5% year-over-year.  March’s figure was -16.3%.

The business has been cratering since China’s anti-corruption campaign went into full swing which, coupled with the slowing economy, did a number on the world’s largest gambling hub.

I always saw Macau as a good overall barometer of the Chinese economy, but the anti-corruption campaign brought an artificial factor into the equation.  The numbers no longer speak to the economy as much as reform or lack thereof in the Communist Party hierarchy.

I’ve been to Macau a couple of times and am well aware of the deserved crackdown on some aspects of the trade, such as the “junkets,” which are totally Mob run.  But the people should be allowed to do what they want.

So for now I’ll just watch and we’ll see what happens when some further capacity comes online later this year, such as the $4.1bn Wynn Palace and Sands China’s Parisian.

--Hong Kong’s retail business took a beating, with first-quarter sales plunging 12.5% in another sign of the impact of mainland visitors spending less.

--Shares in Chinese internet giant Baidu fell about 8% after reports the company’s search system was being investigated by Chinese authorities following the death of a student, a cancer patient who sought treatment in a hospital whose treatment program appeared on Baidu’s search engine.

Baidu charges advertisers for ranking them high in its searches, which is what Google does, too, by the way.

The student opted for a form of immunotherapy that resulted in him losing critical time for cure and he died last month.

--Meanwhile, Apple Inc. CEO Tim Cook said Monday in an interview with CNBC’s Jim Cramer that slowing consumer spending in China hasn’t shaken his confidence in the company’s prospects there.

A week earlier, Apple announced sales in mainland China fell 11% in the first quarter vs. year ago levels; though in 2015, the new big-screen iPhone 6s had just come out so it’s not a fair comparison.

But Cook, like just about everyone else, is missing the big picture when discussing China.

Cook told Cramer: “I could not be more optimistic about China. The long-term thesis is intact. There’s been nothing like it in the history of the world.”

Cook points out that five years ago, there were 50 million people in China’s middle class, while five years from now, there will be 500 million, many of them wanting an iPhone, Cook said.

But as I’ve pounded the table on, Beijing can pull the plug at any moment for political reasons, just as it has on some of Apple’s streaming services recently.  Why wouldn’t it push home-grown products too?

A week ago, investor Carl Icahn, in selling his entire stake, told CNBC: “You worry a little bit – and maybe more than a little – about China’s attitude.”  The Chinese government could “come in and make it very difficult for Apple to sell there.”

I knew that long ago, but the rest of Wall Street is gradually catching on. 

Shares in Apple hit their lowest level on Friday since June 2014.

--Global demand for air travel rose 5.3 percent in March, which was actually the slowest rate since June 2015, with the load factor, the measure of how full planes are, dropping 0.5 percentage points to 79.6 percent of capacity, according to the International Air Transport Association (IATA).

--Former United Continental Holdings chief executive Jeff Smisek, who left last September under a cloud and an investigation into alleged corruption, received a severance package totaling $36.8 million, per a filing made by the airline last weekend with the Securities and Exchange Commission.

It was initially estimated Smisek would depart with a golden parachute of at least $8.4 million and possibly double that amount.  His pay package included $94,500 for unused vacation, which is also beyond outrageous.

Smisek was embroiled in a federal investigation looking into corruption at the Port Authority of New York and New Jersey, which controls the regions airports.

--Speaking of severance packages, Yahoo Inc. chief Marissa Mayer will walk away with a $55-million severance package if the company’s auction of its Internet operations culminates in her ouster from the top job.

Yahoo’s board is still contemplating takeover offers.  Mayer sure as heck doesn’t deserve this kind of parting package.  More like a year’s supply of Good Humor whammy sticks would be appropriate.

[Separately, Katie Couric is eyeing an exit from Yahoo after 2 ½ perky years as global anchor at Yahoo News.]

--Brazil’s manufacturing PMI in April, as measured by Markit, was a godawful 42.6 vs. 46.0 in March, while the services reading was an unfathomable 37.4 vs. 38.6.  More below.

--Tribune Publishing Company formally rejected Gannett Company’s unsolicited bid for Tribune of two weeks ago.

Tribune, which owns newspapers including the Los Angeles Times and the Chicago Tribune, said Gannett’s offer understated the company’s true value.  Gannett probably isn’t giving up.

--Sports Authority initially said it would close 140 stores as part of a bankruptcy filing, but now it looks like the entire chain, 450 stores, is going to be shuttered, resulting in the loss of 14,500 full- and part-time employees.

10 years ago, when it was acquired by a hedge fund, it was the nation’s largest sporting goods retailer.  But the debt associated with the leveraged buyout killed them.

So SA joins Circuit City, Borders, Radio Shack, American Apparel and others...victims of online shopping as well as their own poor management and crooked private-equity types.

--As if Venezuelans weren’t suffering enough already, now the largest private company and producer of 80% of the beer consumed there has begun shutting its doors.  It is estimated beer will run out this weekend.

Empresas Polar SA blames the government, which hasn’t allocated the dollars needed for Polar to be able to pay for imported raw materials such as malted barley.

President Nicolas Maduro’s government controls access to dollars, limiting companies’ ability to pay suppliers abroad.

Polar employed 6,500, and when the beer runs out, an additional 3,500 will be without work, the company says.

Maduro accuses Polar of waging economic war against his government, the same government that has now taken over 1,200 companies.

--California Gov. Jerry Brown signed a bunch of bills that will raise the smoking age in the state from 18 to 21, restrict the use of e-cigarettes in public places and expand no-smoking areas at public schools.  The tobacco industry has threatened to seek a referendum vote to overturn the legislation.

According to the National Survey on Drug Use and Health, some 90% of tobacco users start before the age of 21, and about 80% first try tobacco before age 18.

Those in military service are exempted from the bill.

Coincidentally, the Food and Drug Administration made final sweeping new rules regulating e-cigarettes for the first time.  The new regs would ban the sale of them to Americans under 18 and would require that people show photo ID to prove their age, measures already mandated in some states.

Perhaps most importantly, producers of cigars and e-cigarettes will be required to register with the F.D.A., and provide the agency with a detailed accounting of the products’ ingredients, as well as detail the manufacturing process.

--Last week “60 Minutes” had a segment on the growing Fintech industry that is targeting millennials, who don’t like to go to full-service banks or brokerage firms and just want to bank and invest online.

So this week the FTC announced it is probing PayPal’s fast-growing payment app Venmo. Customers and big bank bosses including JPMorgan Chase’s Jamie Dimon and Bank of America’s Brian Moynihan have complained about lax data protection at financial upstarts.  This is just the start, trust me.

--According to a study released Tuesday by researchers at Johns Hopkins University, medical errors constitute the third leading cause of death in the United States; an estimated 250,000 annually as of 2013...far higher than a 1999 estimate of 44,000 to 98,000.

Only cardiovascular disease, which killed 611,000 in 2013, and cancer, at 585,000, were higher.

Some experts dispute the medical errors number. I wouldn’t.

--SeaWorld Entertainment Inc. reported a modest increase in revenue of 3% for the first quarter as attendance grew 2.6%, but the company dampened expectations for the rest of 2016, calling it a “transitional year.”

Attendance rose at some parks, including San Diego, but declined at the Florida locations amid all the controversies surrounding SeaWorld...plus a decrease in visitors from financially troubled Brazil.

--The Broadway show “Hamilton,” the story of Texas Rangers outfielder Josh Hamilton and his battle with addiction, has been nominated for 16 Tony Awards, the most in Broadway history.

--A Frenchman is demanding $541,000 in compensation because he suffered from “bore out,” not burn out.  Frederic Desnard, 44, accused his ex-employer, a prestigious perfumes company, of subjecting him to being bored stiff.  Desnard said he was stripped of his managerial role and instead given mind-numbingly dull tasks over a four-year period.

--Did you ever examine the label of your bottle of Extra Virgin Olive Oil?  Go ahead, do it.  A bottle I’m looking at, Salvati, is actually 85% sunflower oil, only 15% extra virgin olive oil.  It’s like that “60 Minutes” report on the industry from a few months ago, it’s a total sham; especially that which is manufactured in Italy...though independent producers there are now trying to squeeze out the Mob.

So I bring this up because the Australian government just conducted a study of imported “extra virgin olive oil” sold in Aussie supermarkets and 85 percent failed to meet the voluntary standards.  Yup, a global scam.

I’m going to buy olive oil only made in California from here on because they seem to have the best handle on true standards. [Lord knows what you are getting in restaurants, the bottles on the table, I can’t help but muse.]

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: Another awful week.  In the battle over Aleppo, the nation’s largest city and once the commercial center before it was reduced to rubble, the Syrian government is refusing UN appeals to deliver aid to 905,000 people, according to UN humanitarian adviser Jan Egeland.

“We seem to be having new possible besieged areas on our watch, we are having hundreds of relief workers unable to move in Aleppo,” he told reporters.  “It is a disgrace to see that while the population of Aleppo is bleeding their options to flee have never been more difficult than now.”  [Irish Independent]

Over 300 civilians have been killed in the city in just the past two weeks, with non-stop attacks on civilian areas and hospitals.  The rebels launched a major offensive, with the head of the Syrian Observatory for Human Rights saying it was “the most violent in Aleppo in over a year.”

Attempts at a ceasefire have failed and there can be no resumption of talks in Geneva without one taking hold. 

Syrian President Bashar al-Assad said his goal is a final victory over Aleppo, a statement the U.S. condemned.  Assad sent a telegram to Russian President Putin saying his army would not accept anything less than “attaining final victory” and “crushing the aggression” by rebels.  [Reuters]

Also this week, Syria denied it was responsible for airstrikes that killed more than 30 at a refugee camp for displaced Syrians near the Turkish border, many of whom had fled their homes in Aleppo.  Just sickening.  It’s a war crime.  Activists and residents said it was clearly Russian or Syrian warplanes responsible for Thursday’s attack.  14 children in a tent serving as a makeshift school were killed.

Every American should know this story.  Every American should understand how Barack Obama could have largely stopped this war in 2012.  As I have documented in these pages, well over 350,000 lives would have been saved and the refugee crisis in Europe averted. 

Meanwhile, ISIS said it has advanced in the strategic Shaer gas fields in Syria’s central Homs province.

Secretary of State John Kerry said the Syrian conflict is “in many ways out of control.”

No [kidding], Mr. Secretary.  It’s been that way since four years ago.

The Syrian Observatory also said this week that ISIS has executed 4,144 people after 22 months of its “caliphate.”

In Iraq, an Islamic State offensive involving some 145 militants repeatedly broke through Kurdish lines with truck bombs and mortar fire early Tuesday morning, killing a California-based Navy SEAL, Charles Keating IV* of Phoenix, two miles from the front lines, U.S. officials announced that day.

In response, the U.S. Air Force launched 25 airstrikes and reportedly killed 90 ISIS fighters.

The IS attack appeared aimed at pushing back the encirclement of Mosul, ISIS’ self-declared capital in Iraq and the largest city under its control.

*Keating was the grandson of the late Arizona financier Charles H. Keating Jr., who was involved in the savings and loan scandal of the late 1980s that cost the government billions and tarnished the reputation of conservative lawmakers, including that of Arizona Sen. John McCain.

Keating was the third U.S. soldier to die in Iraq since the Obama administration began targeting ISIS in August 2014.

Last weekend, there was another most disturbing event.  Protesters loyal to Moqtada al-Sadr broke into the Green Zone and stormed the Iraqi parliament, occupying it for a day before withdrawing on Sunday at Sadr’s orders.

Sadr issued a statement, demanding that Parliament meet soon and approve a new cabinet.  If not, he said, he will push for the disbanding of the government and call for early elections.

Editorial / Washington Post

“Two persistent failings of U.S. foreign policy have been an overdependence on individual leaders, who frequently fail to deliver on American expectations, and a reluctance to accept that an established status quo can’t hold.  The Obama administration has committed both those errors in Iraq – and it has done so more than once.

“In its zeal to withdraw all U.S. troops in time for President Obama’s reelection campaign in 2012, the administration threw its weight behind then-Prime Minister Nouri al-Maliki, with disastrous consequences.  Mr. Maliki’s Shiite sectarianism fractured the fragile political system and opened the way for the Islamic State.  In 2014, having pushed for Mr. Maliki’s removal, the administration bet on Haider al-Abadi; now, in its impatience to reduce the Islamic State before Mr. Obama leaves office, it clings to a prime minister who has proved unable to govern the country or reconcile its warring factions.

“Mr. Abadi’s impotence was revealed most dramatically over the weekend, when Shiite supporters of anti-American firebrand Moqtada al-Sadr stormed into Baghdad’s walled-off Green Zone and invaded the parliament. Nominally, the protesters were supporting one of Mr. Abadi’s aims, to create a new, technocratic cabinet to replace a corrupt system of dividing ministries according to party and sectarian lines.  But Mr. Abadi denounced the invasion, which showed him as unable to control either the political insurgents or the established parties that have repeatedly rejected his reform proposals.”

Just a few days before, Vice President Biden was in Baghdad in a show of support for Abadi.

“But already (Abadi) has proved incapable of addressing Iraq’s fundamental political problem, which is the schism among the Shiite, Sunni and Kurdish communities.  That brings us to the Obama administration’s second error: an unwillingness to accept that Iraq cannot survive under its present system of governance, which centralizes power in Baghdad,” at the expense of the Kurds and the Sunnis.

“Continuing to center U.S. support on a single Iraqi leader, whether it is Mr. Abadi or someone else, is a recipe for more failure.”

In a major development in Turkey, Prime Minister Ahmet Davutoglu, a close ally of President Erdogan, and a friend of the West, will soon leave office, as announced by Erdogan.  This comes amid a disagreement between the two men over Erdogan’s drive for more power.  It is expected the prime minister will stay in office until a coming special party congress.

Faced with multiple challenges, this is not good.  Terrorist attacks by Islamic State fighters, a war with Kurdish militants, and a flood of refugees.

But now Erdogan continues to become increasingly authoritarian and he’s on the verge of consolidating even more power.

Under the constitution, the prime minister has the most power, but Erdogan has been trying to change this so that the president holds it.  But since he was elected president, and Davutoglu became prime minister in 2014, Erdogan has clearly been the kingmaker and main face of the country.

Tensions between the two apparently boiled over this week when the prime minister was stripped of his power to choose provincial party leaders.

But while Erdogan wants to make changes to the constitution, his A.K. Party (or A.K.P.), doesn’t have enough seats in Parliament to push through his wishes or call a national referendum on a new constitution.  Most opinion polls show the public opposes what Erdogan is attempting to do. It was last June that the A.K.P. lost its majority.

Iran: The Iranian state news media reported that supporters of President Hassan Rouhani won more seats in parliamentary runoff elections, but they failed to win enough of the 68 contested seats to secure a majority (some news reports have this wrong...claiming Rouhani’s forces did gain one).

So without a majority, the moderates’ ability to carry out significant reforms, both politically and socially, are limited. Rouhani’s supporters admitted clashes between their lawmakers and the hard-liners were bound to increase.

State media says supporters of Rouhani hold 122 of 290 seats in Parliament, and the conservative hard-liners 84.  82 are held by ‘independents’ who normally side with Iran’s conservative clerics, particularly Supreme Leader Ayatollah Ali Khamenei.  Results in two other seats were unknown as of this report from Sunday.

Meanwhile, the New York Times is reporting that President Obama’s foreign-policy guru, Ben Rhodes, who I absolutely despise, brags in an article for the Sunday Magazine that he helped create a false narrative to sell Americans on the Iranian nuclear deal, flat out lying that U.S. officials were dealing with “moderates” in Tehran.

Reporter David Samuels writes of Rhodes: “He is adept at constructing overarching plotlines with heroes and villains, their conflicts supported by flurries of carefully chosen adjectives, quotations and leaks from named and unnamed senior officials.  He is the master shaper and retailer of Obama’s foreign-policy narratives.”

Asked about his misleading version of the deal, Rhodes said, “In the absence of rational discourse, we are going to discourse the [expletive] out of this.”

Obama, the article says, misled the public with the idea that negotiations began because of the “moderate” faction’s rise in 2013.

Leon Panetta, then secretary of defense, confirms in the article that the hard-line regime, and its military arm, was still in charge...as it is today...which is why I led with the parliamentary run-off news.

John Podhoretz / New York Post

“Congratulations, liberals of the Washington press corps and elite organizations: You’re a bunch of suckers.  We all know this because the Obama White House just told us so.

“In an astounding New York Times piece by David Samuels, senior White House officials gleefully confess they use friendly reporters and nonprofits as public-relations tools in the selling of President Obama’s foreign policy – and can do it almost at will because these tools are ignorant, will believe what they’re told, will essentially take dictation and are happy to be used just to get the information necessary for a tweet or two.

“Their greatest triumph, according to Samuels, was selling a misleading narrative about the nuclear deal with Iran – the parameters of which were set a year before the administration claimed and had nothing to do with the fact that a supposedly more accommodating government had risen to power.

“The mastermind of the Obama machine is Ben Rhodes, a New Yorker who joined the Obama campaign as a speechwriter in 2007 and has risen to become the most influential foreign-policy hand in the White House.

“Rhodes drips with contempt for almost everyone but his boss.  He consigns all those who do not share every particular of the Obama-Rhodes foreign-policy perspective to a gelatinous mass called ‘the Blob’ – including, Samuels writes, Hillary Clinton.

“He thinks as little of them as he does of the journalists he and his team must spoon-feed.  ‘The average reporter we talk to is 27 years old, and their only reporting experience consists of being around political campaigns,’ Rhodes says.  ‘They literally know nothing.’....

“The Iran deal, you may recall, was wildly unpopular with the American people.  To ensure senators didn’t cast a two-thirds vote against it and kill it, the White House set up a digital response ‘war room’ whose purpose was relentlessly to make the case that a vote against the deal was a vote for war....

“The storyline they peddled was that the Iran deal had been negotiated in a furious round of back-and-forthing in 2014 and 2015, with the United States getting far better terms out of Iran than it expected due to the flexibility of a newly moderate government in Tehran.

“It was, Samuels says, a deliberately misleading narrative....

“Why on earth was such conduct remotely acceptable?  Because, Samuels makes clear, Rhodes and Obama believe they’re the only sensible thinkers in America and that there’s no way to get the right things done other than to spin them.  ‘I mean, I’d prefer a sober, reasoned public debate, after which members of Congress reflect and take a vote,’ he tells Samuels. ‘But that’s impossible.’

“Impossible?  There was a sober, reasoned public debate over the Iran deal.  Its opponents were deadly serious.  In the end, 58 senators voted against it on sober, reasoned grounds.

“What the Samuels piece shows is that the Obama administration chose to attempt to get its way not by winning an argument but by bringing an almost fathomless cynicism to bear in manipulating its own clueless liberal fan club.”

Saudi Arabia: Employees at the Saudi Binladin Group, a construction giant, launched violent protests after not being paid salaries for months amid a large round of reported layoffs.  While the company hasn’t made any announcements on the layoffs, a Saudi newspaper quoted an unnamed source as saying the company has terminated employment for 50,000 foreign workers and issued them exit visas.  But many of these workers aren’t leaving until they are paid back wages.

The Binladin Group is one of the world’s largest construction firms, founded in 1931 and headquartered in Jiddah.  Osama bin Laden was a renegade son of the construction firms’ founder, Mohammed bin Laden, and was disowned by the family in the 1990s.

But the firm has been barred by the Saudi government from receiving any new contracts after a probe found the company was partly responsible for a crane collapse in Mecca’s Grand Mosque last year that killed 111 people days before the hajj pilgrimage.

North Korea: In preparation for the once-in-a-generation Worker’s Party of Korea congress, Pyongyang went on lockdown, with weddings and funerals banned and free movement in and out of the capital forbidden, as well as a pickup in inspections and property searches.

The last party congress was held in 1980, during which Kim Jong-un’s father – Kim Jong-il – was confirmed as the successor to the state’s founder, Kim Il-sung.

Kim Jong-un is expected to use the congress to consolidate his power, declare North Korea a nuclear state and outline a vision for the economy and the military.

The party’s official newspaper said: “The [DPRK] proudly joined the ranks of advanced nuclear and space powers while demonstrating the might of the invincible politico-ideological, military and youth power and is now dashing ahead toward a socialist economic power and highly civilized nation.”

Late word from Reuters... Kim reportedly told the Congress on Friday that “unprecedented results have been accomplished” with the “great success” of its January test of a nuclear weapon and the February rocket launch of a satellite into space.  A new nuclear test is possible in the next few days.

China: According to a new Pew Research Center survey, half of Americans still believe China’s emergence as a world power is a major threat to the United States.  55 percent of U.S. citizens interviewed said they wanted the United States to remain the sole military superpower in the world.  Almost a quarter saw China as an adversary, the same number as Russia.

Separately, Moscow and Beijing announced they would hold their first computer-assisted missile defense drill this month.  Russia’s Defense Ministry said the exercise will use “the combined operations of Russian and Chinese air and missile defense task forces” to provide protection “from accidental or provocative ballistic or cruise missile attacks.”

Moscow and Beijing have issued a joint appeal to the United States not to install a new anti-missile system in South Korea, with both Russia and China’s foreign ministers viewing this as a security threat.  Chinese FM Wang Yi said, “This move goes beyond the defensive needs of the relevant countries.  If it is deployed it will directly impact China’s and Russia’s respective strategic security.” 

“Not only does it threaten the resolution of the peninsula’s nuclear issue, it quite possibly could pour oil on the fire of an already tense situation, and even destroy strategic equilibrium on the peninsula,” said Yi.

Meanwhile, Australia is blocking a Chinese consortium attempt to buy a historic Aussie company that owns more than 1 percent of the country’s landmass, highlighting growing unease over Beijing’s appetite for foreign agricultural assets.

S. Kidman & Co., founded in 1899 by cattle king Sidney Kidman, controls pastoral leases of more than 100,000 sq. km of outback and owns 185,000 cattle.

Russia: NATO is preparing to put four battalions – a force of about 4,000 troops – in Poland and the Baltic countries as part of an effort to reinforce its border with Moscow.  The U.S., Germany and Britain will likely provide the forces.

The move is in response to Russia’s increased activity around the Baltics, including snap exercises right up against the borders, “with a lot of troops,” according to the Pentagon.  U.S. Deputy Secretary of Defense Robert Work called it “extraordinarily provocative behavior.”

Russia, in turn, argues its buildup and exercises are in response to NATO’s buildup and revealed plans to add three new army divisions near the borders, all three motor rifle units with up to 10,000 men, according to TASS.

Separately, Russia continues to buzz a U.S. warship in the Baltic Sea.

Gen. Philip Breedlove, the top military commander for NATO, said in an interview with the Wall Street Journal, “We see that Russia has not accepted the hand of partnership but has chosen a path of belligerence.  We need to readdress where we’re heading.”

Unfortunately, Breedlove is stepping down this month after three years in the top job at NATO.  He has been an outspoken critic of what he calls a revanchist Russia, repeatedly warning of the dangers in failing to respond to Russian aggression.

Breedlove is to be replaced by Gen. Curtis Scaparrotti, the current commander of U.S. Forces in Korea.  He is not expected to be as outspoken as Breedlove.

And then you had an incident on Thursday in Moscow, where nationalist activists (hooligans), attacked the award ceremony for high-school students who had participated in a history contest, organized by the prominent human rights group Memorial.

The group called the Pro-Kremlin People’s Liberation Front (NOD) shouted insults and sprayed green disinfectant and ammonia at the event attendees as they tried to enter the building.

According to representatives of Memorial, when police arrived, they failed to take action against NOD.

Unbelievable.  Putin’s spokesman, Dmitry Peskov, condemned the attack.

Brazil: President Dilma Rousseff insists she is an “innocent victim” and vowed to “keep fighting,” in an interview with the BBC.  The Senate is to decide whether to start an impeachment trial next week.  Recent polls suggest a majority of the 81 senators will vote in favor of one.  If that happens Rousseff will be suspended from office for 180 days.

With such a timetable, it is unlikely she would be presiding over the opening ceremonies for the Olympic Games in Rio.

Finally, a judge ordered mobile phone providers to block the popular WhatsApp messaging application across the country for 72 hours, a decision apparently aimed at forcing the service to turn over user data, thought to be related to a drug investigation.  Roughly half of Brazil’s 200 million people use WhatsApp, which is owned by Facebook.  It was the second time authorities have shut it down.

Venezuela: Jackson Diehl / Washington Post

“The encouraging news from Latin America is that the leftist populists who for 15 years undermined the region’s democratic institutions and wrecked its economies are being pushed out – not by coups and juntas, but by democratic and constitutional means.  Cristina Fernandez de Kirchner of Argentina is already gone, vanquished in a presidential election, and Brazil’s Dilma Rousseff is likely to be impeached in the coming days.

“The tipping point is the place where the movement began in the late 1990s: Venezuela, a country of 30 million that despite holding the world’s largest oil reserves has descended into a dystopia where food, medicine, water and electric power are critically scarce.  Riots and looting broke out in several blacked-out cities last week, forcing the deployment of troops.  A nation that 35 years ago was the richest in Latin America is now appealing to its neighbors for humanitarian deliveries to prevent epidemics and hunger

“The regime that fostered this nightmare, headed by Hugo Chavez until his death in 2013, is on the way out: It cannot survive the economic crisis and mass discontent it has created. The question is whether the change will come relatively peacefully or through an upheaval that could turn Venezuela into a failed state and destabilize much of the region around it....

“Gangs of regime thugs now roam the streets on motorcycles and attack opposition gatherings.  Meanwhile, the government is essentially shutting itself down: Last week (President Nicolas) Maduro ordered that state employees, who make up more than 30 percent of the workforce, would henceforth labor only two days a week, supposedly in order to save energy.

“Remarkably, most of the Western hemisphere is studiously ignoring this meltdown. The Obama administration and Washington’s Latin America watchers are obsessed with the president’s pet project, the opening to Cuba.”

This is all going to change in the next 30-60 days, is my guess.

Random Musings

--Indiana Primary Results

Republicans

Donald Trump 53%, Ted Cruz 37%, John Kasich 7.5%

Delegates (1,237 needed for nomination)

Trump 1,068; Cruz 564; Kasich 153

Democrats

Bernie Sanders 53%, Hillary Clinton 47%

Delegates (2,383 needed for nomination)

Clinton 2,205 (including superdelegates), Sanders 1,401

I was going to list a lot of upcoming poll numbers, like a SurveyUSA poll for KUSA that found Trump has a 54%-20% lead over Cruz in California, but it doesn’t matter anymore.

On the other hand, Clinton leads Sanders in California 57-38.  She also beats Trump 56-34 in a general election matchup there, with California not siding with a Republican for president since George H.W. Bush in 1988.

In a CNN/ORC national poll, prior to Indiana, Clinton leads Trump 54-41.

A Rasmussen Reports poll, however, has Trump over Clinton 41-39, though I don’t believe this for a minute.  [September would be a different story, perhaps.]  Rasmussen had Romney ahead of Obama days before the Nov. 2012 vote.

--Opinion....

Editorial / Wall Street Journal

“Mr. Trump’s Tuesday victory in Indiana shows that he was able to transform his wins in the recent eastern primaries into momentum that overwhelmed Mr. Cruz, despite a strong effort from the Senator in the Hoosier State.  It wasn’t enough to overcome the consolidation of Republican support by the New York businessman....

“Mr. Trump won Indiana among most demographic, income and ideological groups, while Mr. Cruz carried ‘very conservative’ voters and people with post-graduate degrees.  Mr. Trump won 46% of women to Mr. Cruz’s 42%.

“Now as the presumptive nominee for the Republican Party, it is past time for Mr. Trump to start acting like it.  He says that it’s time for the GOP to ‘unify.’  But most of the responsibility for unification is now his.

“It is up to Mr. Trump to prevent the emergence of a third-party challenge by convincing his conservative detractors that it is not necessary.  That would include behaving in a way that reduces his epic unfavorable numbers with many voters....

“Despite the vulnerabilities shown again in her Indiana loss to Bernie Sanders, Mr. Trump isn’t going to beat Hillary Clinton with an insult campaign.  Mr. Trump could start by doing some homework on issues he would have to deal with as President. He cannot expect undecided voters to simply trust that he’ll do that if he becomes President.”

Editorial / Wall Street Journal, part II...two days later...

“The GOP electorate had its chance to reconsider Mr. Trump after his Wisconsin defeat a month ago.  Instead the voters rallied behind him for seven straight wins with a majority in each state.

“The most hopeful way to look at this is that GOP voters see Mr. Trump as the vehicle for American revival.  They are at heart nationalists who see the U.S. in retreat abroad and the economy failing to raise wages at home, and they are revolting against both.  Unlike the Japanese or the French, they aren’t going to accept decline without a fight.

“In that sense they hope Mr. Trump will be another Ronald Reagan, who can storm Washington and overturn the status quo.  This may be one reason so many of Mr. Trump’s voters are older Americans who recall the failures of the 1970s and the Reagan revival that followed.

“The problem is that Mr. Trump is no Gipper, who had spent 40 years developing a philosophy of limited government and the U.S. national interest.  As his letters show, he had superb instincts about the major issues of his day and was a brilliant political strategist.  Mr. Trump is a clever political tactician, but his policy and rhetorical jaunts don’t lead to anything coherent we can detect beyond his desire to ‘do great deals.’

“This might be a silver lining if he wins in November, assuming Republicans keep their House and Senate majorities.  Congress would write the tax and health-care reform bills, and our guess is Mr. Trump would accept nearly anything once he got his ‘wall’ at the border.  An economic growth revival is more likely with President Trump than President Clinton.

“The New Yorker’s foreign-policy instincts are far more troubling.  He shares President Obama’s desire to retreat from global leadership even if he couches retreat in ‘America First’ clothing and a larger defense budget.  He’d have to deploy far more military force than he claims to subdue Islamic State, and he is naïve about the challenge to Europe posed by Vladimir Putin.  His trade policies are reckless and would either be rebuffed by the world or lead to a global recession....

“The upshot is that Mr. Trump would be the highest variable presidential nominee in history.  He has a chance to win, but he could also alienate or frighten so many voters that he loses in a landslide and takes the GOP House and Senate majorities along for the slide.  Republicans across the country will have to make their own calculations about supporting Mr. Trump, but one priority should be limiting the down-ballot damage from a Trump washout.”

Edward Luce / Financial Times

“American politics will never be the same again.  Less than eleven months ago, Donald Trump launched his presidential bid. The rest of us collapsed laughing.  Now he is the Republican nominee.

“For the first time in modern history, one of the two parties will nominate a person explicitly opposed to globalization and free trade.  Rarely in democratic history has a deeply established party, indeed the ‘Grand Old Party,’ so totally inverted its worldview – let alone with such alacrity....

“Forget Republican versus Democrat. It will be insurgent versus establishment, shoot-from-the-lip versus political correctness, disruption versus business-as-usual and nationalist populism against conventional internationalism.

“Not least, it will also be a matchup between a candidate who has never held elected office against one whose life has been spent in preparation for this moment.”

Jeffrey Blehar / New York Post

“After Donald Trump’s victory over Ted Cruz Tuesday night, absent a particularly well-timed act of spontaneous human combustion the unthinkable has happened: Trump will be the GOP nominee facing off against Hillary Clinton in November 2016.

“Whether you consider this a welcome development or are as horrified about it as I am, the question to ask is: Why did the Republicans so-called ‘Establishment’ fail to rally behind Ted Cruz, the last man standing between Trump and the nomination?....

“Quite simply, it all comes down to Cruz.

“The seeds of this were sown long ago, when Cruz first arrived in the Senate.  He rather infamously set about building his national profile among the conservative base by positioning himself as a scourge of the dreaded ‘Establishment.’

“Many, if not most, of his moves were acts of cynicism rather than principle: Cruz’s most famous gambit, the knowingly futile government shutdown he pushed in 2013 to ‘repeal ObamaCare’ was transparently designed to convince low-information Republican voters he was Washington’s only ‘real conservative,’ not like those lily-livered sellouts and compromisers he shared a party with.  A presidential run was clearly part of the plan....

“Once Trump got in and began dominating...Cruz fell back upon a simple assumption: The Establishment may not have loved him, but surely they would eventually fall in line behind him rather than back a vulgar, know-nothing like Trump who promised down-ballot disaster in November.

“It was a grave miscalculation.  Former Speaker John Boehner has happily labelled Cruz ‘Lucifer in the flesh.’  Former Sen. Judd Gregg (R-NH) recently vowed he’d back Trump, but could never support Cruz: ‘a person of little character.’

“I’m pretty sure Long Island congressman Pete King has said things about Cruz that aren’t printable on these pages.

“Other grandees of the Republican  Party, from Bob Dole to Newt Gingrich, have said the same as well.

“Why?  First, because Cruz forgot that the people he’d been savaging in his own party for attempting to keep the federal government running with a Democratic president and Senate were humans, not cardboard cutouts.  Cruz assumed the establishment types he’d spent the last three years labelling liars, frauds and crypto-Democrats would turn around when faced with the choice between him and Trump and say ‘ah yes, strictly business, no hard feelings.’

“That’s not how people actually work.”

Editorial / Washington Post

“Donald Trump is seemingly about to accumulate all, or nearly all, of the 1,237 delegates needed to win the GOP presidential nomination on the first ballot.  In the face of this not quite entirely inevitable but quite entirely odious prospect, the thing to do is declare your unequivocal opposition and fight it.  Alas, some leading Republicans, such as House Veterans’ Affairs Committee Chairman Bill Shuster (Pa.), have endorsed Trump.  Others are calibrating their responses, as politicians are wont to do.

“These include Indiana Gov. Mike Pence, who leavened his endorsement of Sen. Ted Cruz (Tex.) with praise for Mr. Trump’s supposed tapping of legitimate voter concerns and a protestation that ‘I’m not against anybody.’  The category also contains some people who should know better, such as Senate Foreign Relations Committee Chairman Bob Corker (Tenn.), who did not endorse Mr. Trump but observed, apropos the candidate’s unserious April 27 foreign policy address: ‘I think when somebody transitions and gives a serious speech about something, I think giving an ‘atta boy’ is an appropriate thing to do.’

“And then there’s Sen. Marco Rubio (Fla.), last seen trading crude insults with Mr. Trump, en route to a humiliating primary defeat in his home state on March 15.  In those days, Mr. Rubio choked up when asked if he’d keep his promise to support the GOP nominee, even if it should be Mr. Trump; he declared it was getting ‘harder every day’ to do so.  On April 20, however, it seemed to be getting easier again: ‘I’ve always said I’m going to support the Republican nominee, and that’s especially true now that it’s apparent that Hillary Clinton is going to be the Democratic candidate’ – as if it hadn’t been apparent five weeks earlier, or as if Mr. Rubio would have been more sanguine at the prospect of Sen. Bernie Sanders (I-Vt.) in the White House....

“Who knows why Republican politicians equivocate about the most repugnant political phenomenon in recent American history.  Opportunism?  Cluelessness?  A sincere wish to influence the process for the better?  Any of those, or a combination, would be preferable to a fourth alternative: actual approval of what Mr. Trump stands for – though plainly there is some of that, too.

“Someday, everyone involved in American politics will be called upon to account for his or her behavior during Mr. Trump’s run for the White House.  The Republican Party chairman, Reince Priebus, forged one route months ago when he cheerfully pronounced: ‘Winning is the antidote to a  lot of things.’ It will be instructive to watch which politicians now follow Mr. Priebus to the moral poorhouse, and which have the gumption to chart a different course.”

George F. Will / Washington Post

“Donald Trump’s damage to the Republican Party, although already extensive, has barely begun.  Republican quislings will multiply, slinking into support of the most anti-conservative presidential aspirant in their party’s history. These collaborationists will render themselves ineligible to participate in the party’s reconstruction....

“In losing disastrously, Trump probably would create down-ballot carnage sufficient to end even Republican control of the House.  Ticket splitting is becoming rare in polarized America; In 2012, only 5.7 percent of voters supported a presidential candidate and a congressional candidate of opposite parties.  At least half a dozen Republican senators seeking reelection and Senate aspirants can hope to win if the person at the top of the Republican ticket loses their state by, say, only four points, but not if he loses by 10.  A Democratic Senate probably would guarantee a Supreme Court with a liberal cast for a generation....

“(Republicans) working to purge (Trump) and his manner from public life will reap the considerable satisfaction of preserving the identity of their 162-year-old party while working to see that they forgo only four years of the enjoyment of executive power.  Six times since 1945 a party has tried, and five times failed, to secure a third consecutive presidential term. The one success – the Republicans’ 1988 election of George H.W. Bush – produced a one-term president.  If Clinton gives her party its first 12 consecutive White House years since 1945, Republicans can help Nebraska Sen. Ben Sasse, or someone else who has honorably recoiled from Trump, confine her to a single term.”

--Back to Gerald F. Seib / Wall Street Journal:

“Trump may have expanded the party, but not in the way its leaders once imagined.  In fact, he has done it in the opposite fashion, energizing legions of older, working-class whites and, national polling indicates, probably driving away more Latino voters in the process.

“The party’s master plan after losing the 2012 election to President Barack Obama and his coalition heavy with Hispanics and young voters was to go after that coalition harder.  The idea was to appeal to Hispanics by ramping up support from Republicans in Congress for immigration reform that would provide some kind of path to legal status for at least some undocumented aliens.

“Mr. Trump arrived and said that idea of moving to a softer line on immigration wasn’t merely wrong but 180 degrees wrong.  He proposed expelling immigrants rather than drawing them in, and that message swamped the party’s official blueprint.  Republicans are left with a party that has a newly energized base of older white voters but, most likely, smaller appeal among Hispanics.  The Trump proposition is that the advantages of the former will outweigh the disadvantages of the latter.  It’s an enormous gamble.”

--John Podhoretz / New York Post

“President Obama has made America safe for liberalism again – or, at least, the world ‘liberal.’  That was made stunningly evident on Tuesday night in Indiana.

“Fully 67 percent of Democrats who went to the polls there identified themselves as ‘liberals.’  In 2008, only 39 percent of Indiana Democrats called themselves liberal. That same year, 44 percent of Democrats used the world ‘moderate’ to describe themselves. This year, only 29 percent said they were ‘moderate.’

“So among Democrats, liberals have almost doubled in number over the past eight years, while moderates have declined by a third.

“The same kind of change showed itself in Wisconsin a few weeks ago, where liberals made up 68 percent of the electorate, as opposed to 47 percent in 2008.  Moderates were 40 percent then; now, 28 percent.

“The same can be said for Ohio, Florida, Texas and Georgia, where liberals made huge gains at the expense of moderates....

“What happened?  First, Obama embraced the word rather than running from it.  And second, the financial meltdown came four months after Obama wrapped up the 2008 primary, which by itself seemed to render obsolete the once-powerful category of ‘socially liberal but fiscally conservative’ Democrat.

“The crisis engendered by the meltdown united the Democratic left behind Obama’s unprecedented efforts to use government as a tool both for economic recovery ($2.7 trillion in new spending over 16 months) and wholesale change (ObamaCare).

“At the same time, those young people who inclined toward liberalism and were coming of voting age in the Obama era found themselves in an environment in which the only voices speaking out for fiscal restraint were at the same time allied with conservative social causes they viewed as comically retrogressive at best and monstrously bigoted at worst.

“So any disappointment these larval liberals may have felt with the outcome of Obama’s own fiscal policies – the slow-as-molasses economic recovery, the non-existent first-time jobs – could only find an outlet for their frustration farther to the left than Obama.

“They blamed capitalism and began to embrace the concept of socialism – the word, not the theory, really, since its true meaning most of them barely understand and whose horrific real-world consequences they are too young to have seen firsthand.

“In 2011, the Pew Research Center found that 49 percent of Americans ages 18-29 viewed ‘socialism’ favorably, while just 43 percent had a negative view.  In 2015, Gallup found that 69 percent of young Americans would be willing to vote for a self-described socialist for president....

“America is a liberal country. For now, it need not stay one.  But conservatives have to stop imagining it otherwise.  They must see things as they really are before they can work to change minds for the better.”

--We will have plenty of time to analyze the Electoral College map, which initially doesn’t look promising to Trump given recent election returns.  What we know now is that it is likely to come down to Florida, Ohio, Pennsylvania and Michigan, and one or two others like Virginia.

--According to the U.S. Customs and Border Protection, child migration across the southern border is on par with 2014 levels, when a wave of kids – many unaccompanied, arrived, swamping border authorities.

As Mike Lillis of The Hill writes: “The new figures raise the specter of another increase this summer.  That would almost certainly inflame another political showdown in a volatile presidential year.”

--A federal judge in San Diego on Friday determined Donald Trump will testify after the presidential election in a class-action lawsuit accusing his now-defunct Trump University of defrauding students.

I’m still expecting a “60 Minutes” piece on this sham in the coming weeks, though I wouldn’t be surprised to see the network wait until the new season begins after Labor Day.

--In his mini-press conference on Friday, President Obama told the press that it needs to closely scrutinize Trump’s record and past comments, saying, “I just want to emphasize that we are in serious times and this is a serious job.”

Watching this live, I wanted to throw up.

--Kimberley A. Strassel / Wall Street Journal

“Maybe it should be a verb: To be Guccifered. Though maybe, in Hillary Clinton’s case, it would be better phrased as a crime.  As in: ‘They got her on a Guccifer.’

“Guccifer is the nom de Internet of the Romanian hacker Marcel Lehal Lazar.  Few people realize it, but the Eastern European anti-hero is why the world knows that Hillary Clinton maintained a private email server while secretary of state. This week he may have made Mrs. Clinton’s road to the White House a lot rougher.

“It’s a case study in why governments have rules about online security.  Guccifer’s specialty was hacking top officials and their relatives – with an eye toward mayhem and humiliation.  He hacked the account of Dorothy Bush Koch and circulated photos of her father, former President George H.W. Bush, in the hospital.  He hacked years of Colin Powell’s correspondence, including personal financial information. He went after FBI and Secret Service agents, senators and the wealthy.

“In March of 2013, Guccifer released hacked AOL email correspondence of Clinton crony Sidney Blumenthal, revealing numerous memos he’d sent to Hillary while she was the nation’s top diplomat.  Mr. Blumenthal had sent these notes to Mrs. Clinton at a private, nongovernmental email address.  Security experts tut-tutted about the risks, though the assumption was that Mrs. Clinton used the private account for the occasional interaction with friends or political operatives.  It wasn’t until early 2015 that the nation found out Hillary was using the home-brew server to conduct every bit of her state business....

“What matters is that Guccifer knew, at least by March of 2013, that the third-highest official in the executive branch of the most powerful nation of the world was using a private server.  Does anyone think a man devoted to hacking politicians and Federal Reserve bankers would ignore that opportunity?”

The Clinton team went ballistic after the NBC News interview with Guccifer, with spokesman Brian Fallon claiming no one should believe “the claims made by this criminal from his prison cell.”

Strassel:

“The bigger point is that an unemployed taxi driver in Romania, using nothing more than a desktop computer, was able to infiltrate Mr. Blumenthal’s account and discover that a woman privy to America’s closest-held secrets was using a home-brew server.

“The Chinese are bright – even brighter than Romanian taxi drivers.  They employ hackers whose only job is to infiltrate the U.S. government.  Those hackers have supercomputers at their service.  They have lists upon lists of relatives and friends and aides of powerful people.  When they break into accounts, they don’t publicize it.

“And yet we are to believe that the Chinese never found their way to clintonemail.com?”

The FBI has interviewed senior aides to Hillary Clinton, including longtime aide Huma Abedin, as various reports had it on Thursday.

But, while Republicans and some former law-enforcement officials have said her conduct could be criminal, as I’ve been writing since day one of this issue, I do not see Clinton being indicted.

--Michael Goodwin / New York Post

“Mark the date, remember the moment.  The corruption eruption in New York is reaching new heights – and depths.

“From City Hall to Albany, the sewer runneth over.  It is no longer adequate to talk of a few bad apples.  We are suffering through a bumper crop of rottenness.

“In normal times, the fall of Sheldon Silver, sentenced yesterday to 12 years in federal prison, would be drama enough.  Yet the former Democratic leader of the Assembly is joined in infamy by Dean Skelos, the former Republican leader of the state Senate, whose sentencing comes up next week on the con-man calendar.

“The comeuppance of the bosses of both legislative houses and both parties in the same year is, as far as I can tell, unprecedented in modern times....

“Yet the Silver-Skelos scandal is just part of the worst of times.

“Mayor de Blasio is in a serious jam, as both state and federal prosecutors have his fundraising-and-favors operation in their cross hairs.  Another sordid chapter would be written if the mayor himself is hit with criminal charges.

“Then there’s Gov. Cuomo, who looked as if he had escaped a federal probe only to see a close friend and former aide suddenly land in very hot water about money paid to him by companies with state business.  There’s no telling where the case will lead.”

Personally, I love it.  But as Mr. Goodwin notes, “We the people certainly are victims – of our own stupidity and cupidity.

“First, we have developed the very bad habit of electing people of low moral character....

“Second, this deregulation of public morals is not the whole story. The other part is greed – ours.

“Too many voters survey the corruption pattern and don’t conclude that they want an honest mayor or governor or representative.  They conclude that they want someone who will take care of them. They want their own crook.”

--I watched President Obama’s performance at the White House correspondents’ dinner, ostensibly to see if he would crack any jokes on foreign policy (he didn’t), and then caught comedian Larry Wilmore’s incredibly unfunny monologue.

I don’t watch him on Comedy Central, but saw more than a few interviews with the guy prior to last Saturday to know he was going to have a racial act, that started out by welcoming guests to “Negro night.”

His last line, though, got the most attention. “So, Mr. President,” he said, “if I’m going to keep it one hundred: Yo, Barry, you did it, my nigga.”

Wilmore explained this last line to the Washington Post’s Krissah Thompson:

“As African Americans, if you’re not in our shoes, you don’t get to have that experience.  I wanted to express what it feels like.  When you’re inside of it – this is what you get to experience.

“And when I think of the words that have been used against us and how we have turned them around, I thought of Obama and how he as an icon has turned upside-down [ideas of] black leadership and the conceptions of that.  For me to turn this word upside down on this occasion was almost like a private moment we would share in this very public way.”

Whatever.  At one point, CNN’s Don Lemon flipped Wilmore off (not realizing he was on camera).  No further comment needed from moi.

--Rong-Gong Lin II / Los Angeles Times

“Southern California’s section of the San Andreas fault is ‘locked, loaded and ready to roll,’ a leading earthquake scientist said Wednesday at the National Earthquake Conference in Long Beach.

“The San Andreas fault is one of California’s most dangerous, and is the state’s longest fault.  Yet for Southern California, the last big earthquake to strike the southern San Andreas was in 1857, when a magnitude 7.9 earthquake ruptured an astonishing 185 miles between Monterey County and the San Gabriel Mountains near Los Angeles.

“It has been quiet since then – too quiet, said Thomas Jordan, director of the Southern California Earthquake Center.

“ ‘The springs on the San Andreas system have been wound very, very tight.  And the southern San Andreas fault, in particular, looks like it’s locked, loaded and ready to go,’ Jordan said in the opening keynote talk.”

Jordan’s main point is that California must focus on becoming resilient to a potential magnitude 8, praising the efforts of Los Angeles to require earthquake retrofits on apartments and concrete buildings by law sooner than later.

A 2008 U.S. Geological Survey warned a magnitude 7.8 earthquake on the southern San Andreas fault would cause more than 1,800 deaths and $200 billion in damage and severe, long-lasting disruptions.

---

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

God bless America.

---

Gold $1289
Oil $44.66

Returns for the week 5/2-5/6

Dow Jones  -0.2%  [17740]
S&P 500  -0.4%  [2057]
S&P MidCap  -0.6%
Russell 2000  -1.4%
Nasdaq  -0.8%  [4736]

Returns for the period 1/1/16-5/6/16

Dow Jones  +1.8%
S&P 500  +0.7%
S&P MidCap  +3.9%
Russell 2000  -1.9%
Nasdaq  -5.4%

Bulls  40.2
Bears  21.7  [Source: Investors Intelligence]

Dr. Bortrum posted a new column.

Have a great week.  Happy Mother’s Day!

Brian Trumbore



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Week in Review

05/07/2016

For the week 5/2-5/6

[Posted 11:00 PM ET, Friday]

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

Edition 891

[35-36 pages if you print it out]

Washington and Wall Street

Some of us will long remember Tuesday.  Even Donald Trump himself admitted he didn’t see it coming.

For weeks it seemed that it would be all about California and its primary on June 7.  Would this put Trump over the magic 1,237 delegate number needed to avoid a brokered convention, or would Trump and the Republican Party, and the financial markets, face a period of intense uncertainty?

Well, Trump rolled in Indiana on Tuesday, winning most if not all of the 57 delegates up for grabs, Senator Ted Cruz immediately dropped out (John Kasich the following day) and suddenly Trump was the presumptive Republican nominee.  It was the culmination of a startling and tumultuous 11 months since Trump first announced he was running last June, and it promises to make the next six months even more so.  Buckle your seat belts.  It’s going to be a bumpy ride.

It didn’t help that on Thursday, House Speaker Paul Ryan (Wis.), the nation’s highest-ranking GOP official and Mitt Romney’s running mate in 2012, said he wasn’t prepared to support Trump just yet until he changes his tone and demonstrates he shares the party’s values, whatever they are these days.

Asked by CNN anchor Jake Tapper whether he backs Trump, Ryan responded: “I’m just not ready to do that at this point.  I’m not there right now.  And I hope to, though, and I want to.  But I think what is required is that we unify the party.  And I think the bulk of the burden on unifying the party will have to come from our presumptive nominee....

“This is the party of Lincoln, of Reagan, of Jack Kemp.  And we don’t always nominate a Lincoln and a Reagan every four years, but we hope that our nominee aspires to be Lincoln – and Reagan-esque,” Ryan said, adding that he also hopes the candidate “advances the principles of our party and appeals to a wide, vast majority of Americans.”

Earlier, though, Senate Majority Leader Mitch McConnell and RNC Chairman Reince Preibus said they would support Trump.  But the GOP’s only two living presidents – George H.W. Bush and George W. Bush – said they would not endorse the man, while its past nominees – Mitt Romney and John McCain – said they would not attend the Republican convention in Cleveland.  McCain, however, did say he would support Trump.

Then Friday we learned Ryan and Trump will meet next Thursday, with Trump sitting down with other Republican House leaders at that time.

I have a ton of stuff below on this topic, with lots of opinion on this historic week.  But for now....

Gerald F. Seib / Wall Street Journal

“At the dawn of the current presidential campaign – when Republican leaders were thrilled to have an A-team of reliably conservative candidates on the field, when they had a game plan for a quick and orderly nomination process, and when they were giddy at the prospect of facing a flawed Democratic candidate carrying years’ worth of baggage – nobody could have seen the primary-season climax that arrived Tuesday.

“Donald Trump, who was something between a curiosity and an after-though at the outset, won the Indiana primary, a victory quickly followed by the withdrawal of his last serious opponent, Sen. Ted Cruz, from the race.  Mr. Trump now will be the Republican nominee for president – the most unexpected outcome of a primary contest since Jimmy Carter emerged from obscurity to win the Democratic nomination four decades ago.

“Mr. Trump reached that milestone on a day of striking ugliness, when he essentially accused Mr. Cruz’s father of cavorting with a presidential assassin, and Mr. Cruz in return called Mr. Trump a ‘pathological liar’ a ‘narcissist’ and a ‘serial philanderer.’  The Democrats’ attack ads for the fall are practically writing themselves.

“All told, the day offered merely the latest in a string of once-unimaginable tremors that have shaken the system and the Republican Party.  Nobody – party leaders, journalists, fellow candidates, even Mr. Trump himself – foresaw what has transpired.

“The Democrats are shaken and shaking, too, of course.  Hillary Clinton’s weak showing in Indiana, along with a series of other recent states, is further evidence that the Democratic Party’s initial story line – which was supposed to be one of Clinton inevitability and ease of nomination – was no closer to accurate.

“The difference is that the Democrats still appear to be grinding on toward the expected outcome, while Republicans have done the opposite.”

Turning to Wall Street and the U.S. economy, I admit I was wrong.  With Friday’s tepid jobs report for April, 160,000 (while February and March were revised down a combined 19,000), below the Street forecast of 200,000, there is no way the Federal Reserve is hiking the funds rate a second time at its June 14-15 meeting as I thought could be the case.  I was basing my forecast on strong jobs data for both April and May and this seals it.  Plus the British referendum on staying in or leaving the European Union was always going to be an excuse for the Fed to hold off anyway as that vote is June 23.

For the first four months of 2016, the average jobs gain has been 192,000, less than 2015’s average of 229,000.

But the report did contain a nice 0.3% rise in average hourly earnings, back to a 2.5% pace over the last 12 months, which is encouraging, though still far below the normal 4% you would see if it was a robust recovery.

U6, the measurement of underemployment, ticked down from 9.8% to 9.7%, the best since 2008.

Separately, worker productivity – the output of goods and services for each hour of labor – continues to worsen.  As Harriet Torry of the Wall Street Journal reported:

“The current economic expansion, which wraps up its seventh year next month, has been driven largely by rising employment rather than gains in productivity.  Since the economic recovery began in mid-2009, output per hour worked has expanded at an average annual rate of 1.3%.  That was the worst performance over a seven-year stretch since the late-1970s to mid-1980s, which were marked by back-to-back recessions.”

Productivity actually declined in the first quarter at a 1% seasonally adjusted annual rate, as released by the Labor Department this week.

In other economic news, March construction spending was less than expected, up 0.3%, while factory orders for the month rose a better than forecast 1.1%.

The April ISM reading on manufacturing came in less than expected at 50.8 (50 being the dividing line between growth and contraction), while the service sector reading was a solid 55.7, with a figure on new orders at a robust 59.9.

Back to the Fed and its easy money (ditto that of central bankers around the world), speaking at an investment conference, billionaire former hedge fund manager Stanley Druckenmiller warned that the Federal Reserve’s low-rate policy is creating vast long-run risks for the U.S. economy.  Druckenmiller said the “longest period ever of easy monetary policies” has caused groups to borrow at a quick clip and then use the funds in ways that are not economically productive.  For example, he noted that “most of the debt today has been used for financial engineering,” in the form of stock buybacks and other methods that are a boon for corporate profits and shareholders, but you contrast this with other periods, such as the 1990s when debt was used to craft the building blocks of the Internet.  [Financial Times]

Finally, in his monthly investment outlook, Bill Gross of Janus Capital (formerly of PIMCO) had some interesting thoughts on the impact of technology as an imminent threat to both blue- and white-collar workers, which he believes will require the introduction of a government-funded universal basic income program.

No details on how this would be funded or what it would look like, but Gross’ main point is that the days are near when technology will make many of our jobs obsolete.

“Technology and robotization are changing the world for the better but those trends are not creating many quality jobs,” he wrote.  “Our new age economy – especially that of developed nations with aging demographics – is gradually putting more and more people out of work.”

“Transportation is a visible example as computer-driven vehicles soon will displace many truckers and bus/taxi drivers,” Gross writes.  “Millions of jobs will be lost over the next 10-to-15 years.  But medicine, manufacturing and even service intensive jobs are also at risk.  Investment managers, too.”

Finally, I didn’t comment last time on the Wall Street adage “sell in May and go away” (5/1 thru 10/31) because it just doesn’t hold water anymore.  In the old days, the Street was nowhere near as connected to global markets and news events as it is today, and right there that should discount the saying. Far too many variables compared to, say, 20 years ago.

Plus this year we have the Brexit issue, covered below, that could shock the markets (or propel them forward), an important Fed meeting beforehand, a crazy political season, and geopolitical threats all over the place; this while central bankers are simply running out of policy tricks. 

Actually, you should just go away.  Or at least wait until Labor Day to see how the presidential election is shaping up.  We’ll know then if we made it out of what could be a ‘hot’ summer on a number of fronts, both here and abroad.

And remember...stocks are far from undervalued.  They are clearly the opposite by most historic standards.

Europe and Asia

Before I get to some important big picture items, namely the Greek debt issue (part XXLV), Brexit and the migration crisis, some economic data for the eurozone.

The final purchasing managers’ index reading on manufacturing for the eurozone for April came in at 51.7 vs. 51.6 in March, while the reading on the service sector was unchanged at 53.1, as reported by Markit.

For the key players....

Germany was at 51.8 on the manufacturing front; 53.6 services (an 11-month low).

France was a godawful 48.0 for manufacturing (12-month low and down from 49.6 in March), and just 50.2 on services.

Italy was 53.9 manufacturing; 53.1 services.

Spain was 53.5 manufacturing; 55.2 services.

Non-euro U.K. was 49.2 manufacturing, the worst since March 2013 and down from 50.7, while the service sector reading was only 52.3, down from 53.7 and the worst since Feb. 2013.

March retail sales for the eurozone fell 0.5% over February, up 2.1% year-over-year.

Chris Williamson, chief economist at Markit:

“The (manufacturing) PMI has now edged higher for two successive months, but has improved only marginally from what was a worryingly low base earlier in the year.

“The survey is signaling an anemic annual rate of growth of manufacturing production of less than 1%, which is half the pace seen in the months leading up to the recent slowdown.

“Prices also continue to fall, both in terms of raw material costs and average prices charged for goods leaving the factory gate, albeit at reduced rates compared to prior months.

“The survey data therefore so far show no signs of ECB (European Central Bank) stimulus or the weaker euro helping to revive the manufacturing sector, at least for the euro area as a whole.  Hopes are therefore pinned on recent signs of increased bank lending and more aggressive quantitative easing providing the much needed boost.”

On the Greek debt negotiation front, this is a critical weekend as the Greek parliament votes on Sunday to overhaul the country’s tax and pension system ahead of a meeting Prime Minister Alexis Tsipras is having Monday with eurozone finance ministers and the creditors.

Tsipras told his central committee on Friday that the government was in the “final stretch” of talks to conclude a bailout review and that reforms were necessary to prevent Greece’s social security system from imploding.

If the measure fails to gain approval in parliament, though, no telling what this means, especially for Tsipras just eight months after he was re-elected as prime minister.  Greece was struck by a two-day labor strike on Friday, as public sector workers brought the country’s rail, bus and tram networks to a standstill in protest against further austerity measures.

As for Brexit, JPMorgan said on Thursday that an analysis of various opinion polls had the campaign to keep Britain in the European Union 4 percentage points ahead of the “Out” campaign, though that lead has halved since February.

Britain’s economy slowed in April and may stall as consumers worry about the referendum.  Markit projects second-quarter GDP may rise just 0.1% vs. 0.4% in the first three months of the year (quarter-over-quarter).

An estimated 20,000 manufacturing jobs were lost in the U.K. in Q1.

Robert Samuelson / Washington Post

“Countries usually don’t knowingly commit economic suicide, but in Britain, millions seem ready to give it a try.  On June 23, the United Kingdom will vote to decide whether to quit the European Union, the 28-nation economic bloc with a population of 508 million and a gross domestic product of almost $17 trillion.  Let’s not be coy: Leaving the E.U. would be an act of national insanity.

“It would weaken the U.K. economy, one of Europe’s strongest.  The E.U. absorbs 44 percent of Britain’s exports; these might suffer because trade barriers, now virtually nonexistent between the U.K. and other E.U. members, would probably rise.  Meanwhile, Britain would become less attractive as a production platform for the rest of Europe, so that new foreign direct investment in the U.K. – now $1.5 trillion – would fall.

“Also threatened would be London’s status as Europe’s major financial center, home (for example) to 78 percent of E.U. foreign exchange trading.  With the U.K. out of the E.U., some banking activities might move to Frankfurt or other cities.  This would be a big blow....

“A study from the Organization for Economic Cooperation and Development (OECD), after making assumptions about U.K. trade and investment, concluded ‘Brexit’ could ‘shave off’ $3,200 from average British household income by 2020....

“What would Britain get for all this?  Good question.

“There are three main complaints against the E.U., says Nile Gardiner, who was an aide to British Prime Minister Margaret Thatcher and now works at the conservative Heritage Foundation.

“First, the outpouring of regulations from Brussels – the seat of the E.U. – has compromised Britain’s sovereignty.  On some issues, the European Court of Justice can overrule British courts.

“Second, the E.U.’s liberal migration rules may expose Britain to terrorists or overburden its welfare system.  (Once people become E.U. citizens, they are allowed to live or work anywhere in the bloc.)

“Finally, the E.U. imposes costs on Britain – an annual contribution to the E.U. budget plus the costs of regulations....

“Still, most complaints seem exaggerated.  The U.K.’s net annual contribution to the E.U. budget is about 0.5 percent of Britain’s GDP.  That’s hardly crushing. Some E.U. regulations may be overkill, but Britain’s labor and product markets are among the least regulated of advanced countries.

“As for immigrants, studies ‘show that these workers pay more in taxes than they receive in benefits,’ says Frances Burwell of the Atlantic Council. ‘They’ve come to work.’....

“Brexit is an absurdity.  But it is a potentially destructive absurdity.  It creates more uncertainty in a world awash in uncertainty. This would weaken an already sputtering global economy by giving firms and consumers another reason to pull back on spending.

“It would be better for the U.K. to stay in the E.U.  It would also be better for the E.U., because Britain provides political and intellectual balance. Finally, it would be better for the United States, which doesn’t need a major ally – Britain – to go delusional.”

Euro Bits

--Irish politicians ended 10 weeks of deadlock on Friday as Enda Kenny has won a second successive term as prime minister (Taoiseach), but at the head of a minority government led by his center-right Fine Gael party.  I’m a little surprised this got done.  We’ll see how long it lasts.

--French President Francois Hollande’s approval ratings fell to a fresh low in a survey by Elabe.  Only 16% trust Hollande to efficiently tackle France’s problems, down from 18% last month and 58% when he was elected in May 2012. This comes after some decent news on the economic front (save for this week’s manufacturing PMI).

--Friday, London elected a Muslim mayor, Sadiq Khan, in a rather remarkable triumph over racial and religious tensions that, in the words of the Financial Times, “have bedeviled other European capitals.”

Khan thus becomes the first directly elected Muslim mayor of an important western city.  The win reaffirms London’s multicultural image.

Khan, of the opposition Labour Party, is the son of a Pakistani bus driver and his seamstress wife; one of eight children raised in public housing in south London.  He defeated his Conservative rival, Zac Goldsmith, an Eton-educated billionaire’s son, handily.  It sounds like Goldsmith ran a really stupid, racist campaign.  Some of his fellow Conservative party members are ticked off Goldsmith blew any headway the party was making with London’s Muslim communities.

--British new car registrations (sales) rose to their highest level in 13 years last month, up 2% compared with a year ago to 189,505 vehicles, according to the Society of Motor Manufacturers and Traders.

On the migration front, I’ll jump to the chase.  It’s going to be a long three months coming up, especially if Turkey’s president, who is facing a slew of issues internally (covered below), abandons a refugee deal with the EU that leaders have credited with stopping the influx of migrants from entering Europe through Greece, though the flows have shifted some to Italy.

Erdogan said he is not bowing to Brussels’ demand that he reform anti-terrorism laws in order for Ankara to gain visa-free travel in the EU for Turks.  The president explained the harsh laws were necessary after Turkey has been targeted non-stop by both Islamic State and Kurdish militants and he is not changing them.  [This will formally come to a head in June.]

Meanwhile, Italy and Germany expressed their opposition to Austria’s crackdown at the Brenner Pass, where Austria is constructing an 820-foot long checkpoint.  Italian Prime Minister Matteo Renzi and German Chancellor Angela Merkel say this contravenes the Schengen accord, which governs passport-free travel between member states.  Speaking at a joint press conference with Renzi, Merkel said, “We need to remain loyal to each other.”

Thousands of migrants that first land in Italy use the Brenner pass to head to countries like Germany and Sweden with their more generous welfare benefits.  Others want to settle in Vienna.  That isn’t going well there, as I’ve written over the past year.

Renzi said that about 26,000 migrants have reached Italy via sea thus far in 2016, about 1,000 more than in the same period in 2015.

Eurostats released some migrant data for 2015 and asylum applicants considered to be unaccompanied minors jumped to almost 90,000, vs. what had been a steady 11,000 to 13,000 from 2008-2013, which then almost doubled to 23,000 in 2014, and then practically quadrupled last year.

35,300 of the nearly 90K were processed in Sweden, or 40% of all those registered in the EU Member States, followed by Germany (14,400), Hungary (8,800) and Austria (8,300).  Males comprised 91% of unaccompanied minors, with over half of them aged 16 to 17.

Turning to Asia, the Caixin/Markit manufacturing PMI, which measures private firm activity, came in at 49.4 for April vs. 49.7 in March.  The low on the Caixin number was 47.2 back in September and it has been in negative territory since Dec. 2014.  The official government reading of large, state-owned enterprises, was 50.1 vs. 50.2 in March.

On the service sector side, the Caixin/Markit reading was 51.8, down from 52.2 in March, while the government reading was 53.5 in April vs. 53.8 the prior month.

As for China’s debt issue....

Editorial / The Economist

“China was right to turn on the credit taps to prop up growth after the global financial crisis.  It was wrong not to turn them off again.  The country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch.  Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown.

“China will not be an exception to that rule.  Problem loans have doubled in two years and, officially, are already 5.5% of banks’ total lending.  The reality is grimmer.  Roughly two-fifths of new debt is swallowed by interest on existing loans; in 2014, 16% of the 1,000 biggest Chinese firms owed more in interest than they earned before tax.  China requires more and more credit to generate less and less growth: it now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis.  With the government’s connivance, debt levels can probably keep climbing for a while, perhaps even for a few more years.  But not forever.

“When the debt cycle turns, both asset prices and the real economy will be in for a shock.  That won’t be fun for anyone.”

Elsewhere, Japan’s manufacturing PMI for April was an abysmal 48.2, Taiwan’s 49.7, and South Korea’s 50.0, hitting this level for the first time in months.

Street Bytes

--The Dow Jones and S&P 500 fell for a second consecutive week, down -0.2% and 0.4%, respectively, while Nasdaq declined a third straight, down 0.8%.

--U.S. Treasury Yields

6-mo. 0.38%  2-yr. 0.73%  10-yr. 1.78%  30-yr. 2.63%

The yield on the 10-year fell Friday morning to 1.70% after release of the jobs report, before the Treasury market got hit with a rally in the dollar.

--The oil price hung around $45 a second straight week, with West Texas Intermediate closing at $44.66, making it four in a row over $40, though this time it was largely because of the raging wildfires in the heart of Canada’s oil-sands region that drastically curbed production (along with fighting in Libya near oil facilities there).

While no operations reported direct fire damage in Canada as yet, efforts to protect themselves led to a reduction of around 500,000 to 650,000 barrels a day (reports are sketchy), or as much as one-quarter of Canada’s 2.5 million barrels in total oil sands production; much of which is sent to refineries in the U.S.

The impact should be short term, but, if production currently threatened was halted, it would be enough to nearly wipe out the world’s oversupply, according to energy analyst Tim Pickering.  [Wall Street Journal]

Separately, there are no proposals on the table for OPEC to revive limits on crude output at its upcoming June meeting after last month’s failure to freeze production.

Personally, I said I would wait to see if oil stayed above $40 for four straight weeks before saying the bottom was in and, yes, the $26 low is the bottom.  But I’m far from convinced oil isn’t about to take another header.

--Oil services companies Halliburton and Baker Hughes abandoned their planned merger (as I wrote was going to be the case weeks ago) after the government’s antitrust folks moved to block the deal between the second- and third-largest players in the sector.

I mean as everyone has said recently, there was no way this one was being approved, and it shouldn’t have.

[The Justice Department argued the merger would eliminate head-to-head competition in as many as 23 product lines.]

But what people can’t believe, as I pointed out earlier, is how stupid Halliburton’s attorneys were because a $3.5 billion...with a ‘b’...termination fee was structured into the proposed deal. 

I mean that is just throwing $3.5bn away!  I sure as heck hope those responsible have now been fired. 

--According to Kelley Blue Book, U.S. consumers bought 1.5 million cars in April, besting the record for the month set in 2005.  Sales rose 3.6% to an annual rate of 17.4 million.  Last year the industry set a record with sales of 17.5 million.

Fiat Chrysler’s sales rose 6% on record Jeep sales, while Ford rode an April record for SUV sales, up 4%.  Ford sold 65,000 Explorers.

General Motors, though, blamed its 3.5% drop on a strategy of cutting low-profit sales to rental car companies.

Toyota’s sales rose 3.8%, thanks to a monthly record from its RAV4 small SUV. 

Honda set a record for the month, up 14.4%, with both cars and SUVs selling well, while Nissan also set an April record, up 12.8%.  Hyundai sales declined 8.5% from a record April last year.

VW sales dropped 10% as it continues to deal with its emissions-cheating scandal.

--BMW AG warned on future sales, with CEO Harald Kruger citing moderating growth in China, political turmoil in Europe and weakening demand in the U.S.

“We expect that the trend in the U.S. will continue until the summer,” after BMW’s first-quarter sales here fell 11% year-over-year.  The company is boosting production of SUVs in the U.S. and cutting back on sedans.

BMW did still earn a profit of $1.90 billion in the quarter, while it also said it is investing heavily in the development of a self-driving car it hopes to launch by 2030.

--Then there is Tesla Motors.  The company reported revenue of $1.15 billion and an adjusted loss per share of 57 cents Wednesday, narrowly exceeding expectations.

But CEO Elon Musk made some big promises.  Tesla now expects to deliver 500,000 vehicles by 2018, two years earlier than its previous goal, as the company affirmed Model 3 production will begin late next year after preorders handily beat the most optimistic forecasts.  [325,000 in the first few days, according to the company.  400,000 as of today.]

But the thing is, Tesla has never, ever, met a production deadline and quality control issues have plagued the rollout of the Model X SUV, which came to market years after first planned.  Then we learned two key manufacturing executives were leaving the company.  [Weeks before, Apple announced it had tapped Chris Porritt, a top Tesla engineer, to its secretive electric car team.  Short-seller Jim Chanos, in slamming Tesla’s prospects, has been citing a “flood” of executives leaving the company.]

Musk is setting this absurd sales goal because as he admitted he needs to raise additional capital, like at least another $1.5bn; this after he said in February the company wouldn’t need to.  Tesla is also using Model 3 deposits to pay down its asset-backed line of credit, even though the deposit is fully refundable.

Tesla delivered 14,810 Model S sedans and Model X vehicles in the January-March period, lower than expected, though the company said it remains on track to deliver 80,000 to 90,000 cars this year.  So from 90,000 to 500,000 in two years?!

For Tesla to come close to this, in 2017, it will need to produce more cars than the entire global electric-car industry made in 2015...234,000, according to BNEF.

In response to the above, shares dropped 5% on Thursday as investors expressed skepticism over Musk’s production plans, but this was after shares rose 7% Wednesday in after-hours trading.

I’m with Jim Chanos.  I’d ‘short’ the crap out of this one.  You just need a strong stomach because the Teslarians are like the Huns.  [Or White Walkers, for you “Game of Thrones” fans.]

--Meanwhile, Japanese auto supplier Takata’s deadly air bag crisis ballooned into the largest recall in U.S. history Wednesday as the company agreed in a deal with auto-safety regulators to recall another 35 million to 40 million air bag inflators.

About 28.8 million inflators have already been recalled, with eleven deaths linked to the defective parts.

This is a travesty.  For information go to Safercar.gov/rs/takata.

--CBS Corp. reported first quarter earnings rose 20%, boosted by the broadcast of Super Bowl 50 as revenue increased a solid 10% to $3.85 billion.  CEO Leslie Moonves said the company was “salivating” ahead of the “upfront season” when television networks sell the majority of their advertising for the coming fall season.  Even without football, the network had a 12% jump in advertising dollars.

Local broadcast revenue grew 8.9% owing to the political spend.

--I literally wrote years ago that I couldn’t give a damn about Puerto Rico’s debt crisis for one reason.  It would have zero...zero...impact on our markets.  And despite it heating up, it hasn’t!  It is just not relevant...and nothing compared to the impact on sentiment another round in the Greek debt crisis would have.  [Or Brexit.]

No, the real impact isn’t on the markets, but rather the fact Puerto Rico is imploding and its residents are fleeing here!   

Governor Alejandro Garcia Padilla invoked the commonwealth’s new debt-moratorium law to suspend payments on $422 million in bonds due Monday.  “Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice,” Padilla declared.

The bigger date is July 1, when another $2 billion debt payment from various agencies comes due.

But where it also impacts the U.S. is on items like Zika, Puerto Rico being a hotbed of it.  With the government totally broke, needless to say funds aren’t being directed to combat the virus and that means more get infected there and then travel here to spread it.

So now there is talk of a taxpayer funded bailout through Congress and if that happens, I’m not going to raise hell over it.  The amount that would be spent is minimal compared to the myriad of ways we have wasted sums many times over...like in Iraq and Afghanistan, for starters.

But, again, I have zero sympathy for any who lost money here.  The Wall Street Journal has a line, “The island’s debt is held by mutual funds, hedge funds, bond insurers and individual investors, who were attracted in part by tax benefits and high yields.”

Well Puerto Rico’s problems have been known for years.  Why should I care about these investors?  You shouldn’t either.

But the numbers of refugees most impacts Florida, followed by Texas, and they have the ability to vote right away, too.

--Berkshire Hathaway reported first-quarter profit grew 8%, largely because of the accounting for its Duracell acquisition, but profits fell at its BNSF railroad and at its insurance units.

Chairman Warren Buffett, though, referred to attacks on his part-owned Coca-Cola by public health campaigners as being “quite spurious” in laying the blame for obesity and diabetes at the doors of Coke; Buffett being a renowned Cherry Coke drinker.

One attendee at Berkshire’s annual confab in Omaha last weekend accused him of dodging the issue of fizzy drinks, citing a Tufts University study that linked them to 184,000 deaths annually worldwide.

“I’ve not seen evidence that convinces me I’ll be more likely to make it to 100 if I suddenly switched to water and broccoli,” said the 85-year-old Buffett.  He added, “I like fudge a lot, too, and peanut brittle and I am a very happy guy.  If you were happy every day...you are going to live longer as well.” 

Buffett also ripped the fees charged by hedge funds, saying: “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities.”

--Macau’s April casino numbers weren’t as bad as expected, though nonetheless revenue dropped a 23rd consecutive month, down 9.5% year-over-year.  March’s figure was -16.3%.

The business has been cratering since China’s anti-corruption campaign went into full swing which, coupled with the slowing economy, did a number on the world’s largest gambling hub.

I always saw Macau as a good overall barometer of the Chinese economy, but the anti-corruption campaign brought an artificial factor into the equation.  The numbers no longer speak to the economy as much as reform or lack thereof in the Communist Party hierarchy.

I’ve been to Macau a couple of times and am well aware of the deserved crackdown on some aspects of the trade, such as the “junkets,” which are totally Mob run.  But the people should be allowed to do what they want.

So for now I’ll just watch and we’ll see what happens when some further capacity comes online later this year, such as the $4.1bn Wynn Palace and Sands China’s Parisian.

--Hong Kong’s retail business took a beating, with first-quarter sales plunging 12.5% in another sign of the impact of mainland visitors spending less.

--Shares in Chinese internet giant Baidu fell about 8% after reports the company’s search system was being investigated by Chinese authorities following the death of a student, a cancer patient who sought treatment in a hospital whose treatment program appeared on Baidu’s search engine.

Baidu charges advertisers for ranking them high in its searches, which is what Google does, too, by the way.

The student opted for a form of immunotherapy that resulted in him losing critical time for cure and he died last month.

--Meanwhile, Apple Inc. CEO Tim Cook said Monday in an interview with CNBC’s Jim Cramer that slowing consumer spending in China hasn’t shaken his confidence in the company’s prospects there.

A week earlier, Apple announced sales in mainland China fell 11% in the first quarter vs. year ago levels; though in 2015, the new big-screen iPhone 6s had just come out so it’s not a fair comparison.

But Cook, like just about everyone else, is missing the big picture when discussing China.

Cook told Cramer: “I could not be more optimistic about China. The long-term thesis is intact. There’s been nothing like it in the history of the world.”

Cook points out that five years ago, there were 50 million people in China’s middle class, while five years from now, there will be 500 million, many of them wanting an iPhone, Cook said.

But as I’ve pounded the table on, Beijing can pull the plug at any moment for political reasons, just as it has on some of Apple’s streaming services recently.  Why wouldn’t it push home-grown products too?

A week ago, investor Carl Icahn, in selling his entire stake, told CNBC: “You worry a little bit – and maybe more than a little – about China’s attitude.”  The Chinese government could “come in and make it very difficult for Apple to sell there.”

I knew that long ago, but the rest of Wall Street is gradually catching on. 

Shares in Apple hit their lowest level on Friday since June 2014.

--Global demand for air travel rose 5.3 percent in March, which was actually the slowest rate since June 2015, with the load factor, the measure of how full planes are, dropping 0.5 percentage points to 79.6 percent of capacity, according to the International Air Transport Association (IATA).

--Former United Continental Holdings chief executive Jeff Smisek, who left last September under a cloud and an investigation into alleged corruption, received a severance package totaling $36.8 million, per a filing made by the airline last weekend with the Securities and Exchange Commission.

It was initially estimated Smisek would depart with a golden parachute of at least $8.4 million and possibly double that amount.  His pay package included $94,500 for unused vacation, which is also beyond outrageous.

Smisek was embroiled in a federal investigation looking into corruption at the Port Authority of New York and New Jersey, which controls the regions airports.

--Speaking of severance packages, Yahoo Inc. chief Marissa Mayer will walk away with a $55-million severance package if the company’s auction of its Internet operations culminates in her ouster from the top job.

Yahoo’s board is still contemplating takeover offers.  Mayer sure as heck doesn’t deserve this kind of parting package.  More like a year’s supply of Good Humor whammy sticks would be appropriate.

[Separately, Katie Couric is eyeing an exit from Yahoo after 2 ½ perky years as global anchor at Yahoo News.]

--Brazil’s manufacturing PMI in April, as measured by Markit, was a godawful 42.6 vs. 46.0 in March, while the services reading was an unfathomable 37.4 vs. 38.6.  More below.

--Tribune Publishing Company formally rejected Gannett Company’s unsolicited bid for Tribune of two weeks ago.

Tribune, which owns newspapers including the Los Angeles Times and the Chicago Tribune, said Gannett’s offer understated the company’s true value.  Gannett probably isn’t giving up.

--Sports Authority initially said it would close 140 stores as part of a bankruptcy filing, but now it looks like the entire chain, 450 stores, is going to be shuttered, resulting in the loss of 14,500 full- and part-time employees.

10 years ago, when it was acquired by a hedge fund, it was the nation’s largest sporting goods retailer.  But the debt associated with the leveraged buyout killed them.

So SA joins Circuit City, Borders, Radio Shack, American Apparel and others...victims of online shopping as well as their own poor management and crooked private-equity types.

--As if Venezuelans weren’t suffering enough already, now the largest private company and producer of 80% of the beer consumed there has begun shutting its doors.  It is estimated beer will run out this weekend.

Empresas Polar SA blames the government, which hasn’t allocated the dollars needed for Polar to be able to pay for imported raw materials such as malted barley.

President Nicolas Maduro’s government controls access to dollars, limiting companies’ ability to pay suppliers abroad.

Polar employed 6,500, and when the beer runs out, an additional 3,500 will be without work, the company says.

Maduro accuses Polar of waging economic war against his government, the same government that has now taken over 1,200 companies.

--California Gov. Jerry Brown signed a bunch of bills that will raise the smoking age in the state from 18 to 21, restrict the use of e-cigarettes in public places and expand no-smoking areas at public schools.  The tobacco industry has threatened to seek a referendum vote to overturn the legislation.

According to the National Survey on Drug Use and Health, some 90% of tobacco users start before the age of 21, and about 80% first try tobacco before age 18.

Those in military service are exempted from the bill.

Coincidentally, the Food and Drug Administration made final sweeping new rules regulating e-cigarettes for the first time.  The new regs would ban the sale of them to Americans under 18 and would require that people show photo ID to prove their age, measures already mandated in some states.

Perhaps most importantly, producers of cigars and e-cigarettes will be required to register with the F.D.A., and provide the agency with a detailed accounting of the products’ ingredients, as well as detail the manufacturing process.

--Last week “60 Minutes” had a segment on the growing Fintech industry that is targeting millennials, who don’t like to go to full-service banks or brokerage firms and just want to bank and invest online.

So this week the FTC announced it is probing PayPal’s fast-growing payment app Venmo. Customers and big bank bosses including JPMorgan Chase’s Jamie Dimon and Bank of America’s Brian Moynihan have complained about lax data protection at financial upstarts.  This is just the start, trust me.

--According to a study released Tuesday by researchers at Johns Hopkins University, medical errors constitute the third leading cause of death in the United States; an estimated 250,000 annually as of 2013...far higher than a 1999 estimate of 44,000 to 98,000.

Only cardiovascular disease, which killed 611,000 in 2013, and cancer, at 585,000, were higher.

Some experts dispute the medical errors number. I wouldn’t.

--SeaWorld Entertainment Inc. reported a modest increase in revenue of 3% for the first quarter as attendance grew 2.6%, but the company dampened expectations for the rest of 2016, calling it a “transitional year.”

Attendance rose at some parks, including San Diego, but declined at the Florida locations amid all the controversies surrounding SeaWorld...plus a decrease in visitors from financially troubled Brazil.

--The Broadway show “Hamilton,” the story of Texas Rangers outfielder Josh Hamilton and his battle with addiction, has been nominated for 16 Tony Awards, the most in Broadway history.

--A Frenchman is demanding $541,000 in compensation because he suffered from “bore out,” not burn out.  Frederic Desnard, 44, accused his ex-employer, a prestigious perfumes company, of subjecting him to being bored stiff.  Desnard said he was stripped of his managerial role and instead given mind-numbingly dull tasks over a four-year period.

--Did you ever examine the label of your bottle of Extra Virgin Olive Oil?  Go ahead, do it.  A bottle I’m looking at, Salvati, is actually 85% sunflower oil, only 15% extra virgin olive oil.  It’s like that “60 Minutes” report on the industry from a few months ago, it’s a total sham; especially that which is manufactured in Italy...though independent producers there are now trying to squeeze out the Mob.

So I bring this up because the Australian government just conducted a study of imported “extra virgin olive oil” sold in Aussie supermarkets and 85 percent failed to meet the voluntary standards.  Yup, a global scam.

I’m going to buy olive oil only made in California from here on because they seem to have the best handle on true standards. [Lord knows what you are getting in restaurants, the bottles on the table, I can’t help but muse.]

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: Another awful week.  In the battle over Aleppo, the nation’s largest city and once the commercial center before it was reduced to rubble, the Syrian government is refusing UN appeals to deliver aid to 905,000 people, according to UN humanitarian adviser Jan Egeland.

“We seem to be having new possible besieged areas on our watch, we are having hundreds of relief workers unable to move in Aleppo,” he told reporters.  “It is a disgrace to see that while the population of Aleppo is bleeding their options to flee have never been more difficult than now.”  [Irish Independent]

Over 300 civilians have been killed in the city in just the past two weeks, with non-stop attacks on civilian areas and hospitals.  The rebels launched a major offensive, with the head of the Syrian Observatory for Human Rights saying it was “the most violent in Aleppo in over a year.”

Attempts at a ceasefire have failed and there can be no resumption of talks in Geneva without one taking hold. 

Syrian President Bashar al-Assad said his goal is a final victory over Aleppo, a statement the U.S. condemned.  Assad sent a telegram to Russian President Putin saying his army would not accept anything less than “attaining final victory” and “crushing the aggression” by rebels.  [Reuters]

Also this week, Syria denied it was responsible for airstrikes that killed more than 30 at a refugee camp for displaced Syrians near the Turkish border, many of whom had fled their homes in Aleppo.  Just sickening.  It’s a war crime.  Activists and residents said it was clearly Russian or Syrian warplanes responsible for Thursday’s attack.  14 children in a tent serving as a makeshift school were killed.

Every American should know this story.  Every American should understand how Barack Obama could have largely stopped this war in 2012.  As I have documented in these pages, well over 350,000 lives would have been saved and the refugee crisis in Europe averted. 

Meanwhile, ISIS said it has advanced in the strategic Shaer gas fields in Syria’s central Homs province.

Secretary of State John Kerry said the Syrian conflict is “in many ways out of control.”

No [kidding], Mr. Secretary.  It’s been that way since four years ago.

The Syrian Observatory also said this week that ISIS has executed 4,144 people after 22 months of its “caliphate.”

In Iraq, an Islamic State offensive involving some 145 militants repeatedly broke through Kurdish lines with truck bombs and mortar fire early Tuesday morning, killing a California-based Navy SEAL, Charles Keating IV* of Phoenix, two miles from the front lines, U.S. officials announced that day.

In response, the U.S. Air Force launched 25 airstrikes and reportedly killed 90 ISIS fighters.

The IS attack appeared aimed at pushing back the encirclement of Mosul, ISIS’ self-declared capital in Iraq and the largest city under its control.

*Keating was the grandson of the late Arizona financier Charles H. Keating Jr., who was involved in the savings and loan scandal of the late 1980s that cost the government billions and tarnished the reputation of conservative lawmakers, including that of Arizona Sen. John McCain.

Keating was the third U.S. soldier to die in Iraq since the Obama administration began targeting ISIS in August 2014.

Last weekend, there was another most disturbing event.  Protesters loyal to Moqtada al-Sadr broke into the Green Zone and stormed the Iraqi parliament, occupying it for a day before withdrawing on Sunday at Sadr’s orders.

Sadr issued a statement, demanding that Parliament meet soon and approve a new cabinet.  If not, he said, he will push for the disbanding of the government and call for early elections.

Editorial / Washington Post

“Two persistent failings of U.S. foreign policy have been an overdependence on individual leaders, who frequently fail to deliver on American expectations, and a reluctance to accept that an established status quo can’t hold.  The Obama administration has committed both those errors in Iraq – and it has done so more than once.

“In its zeal to withdraw all U.S. troops in time for President Obama’s reelection campaign in 2012, the administration threw its weight behind then-Prime Minister Nouri al-Maliki, with disastrous consequences.  Mr. Maliki’s Shiite sectarianism fractured the fragile political system and opened the way for the Islamic State.  In 2014, having pushed for Mr. Maliki’s removal, the administration bet on Haider al-Abadi; now, in its impatience to reduce the Islamic State before Mr. Obama leaves office, it clings to a prime minister who has proved unable to govern the country or reconcile its warring factions.

“Mr. Abadi’s impotence was revealed most dramatically over the weekend, when Shiite supporters of anti-American firebrand Moqtada al-Sadr stormed into Baghdad’s walled-off Green Zone and invaded the parliament. Nominally, the protesters were supporting one of Mr. Abadi’s aims, to create a new, technocratic cabinet to replace a corrupt system of dividing ministries according to party and sectarian lines.  But Mr. Abadi denounced the invasion, which showed him as unable to control either the political insurgents or the established parties that have repeatedly rejected his reform proposals.”

Just a few days before, Vice President Biden was in Baghdad in a show of support for Abadi.

“But already (Abadi) has proved incapable of addressing Iraq’s fundamental political problem, which is the schism among the Shiite, Sunni and Kurdish communities.  That brings us to the Obama administration’s second error: an unwillingness to accept that Iraq cannot survive under its present system of governance, which centralizes power in Baghdad,” at the expense of the Kurds and the Sunnis.

“Continuing to center U.S. support on a single Iraqi leader, whether it is Mr. Abadi or someone else, is a recipe for more failure.”

In a major development in Turkey, Prime Minister Ahmet Davutoglu, a close ally of President Erdogan, and a friend of the West, will soon leave office, as announced by Erdogan.  This comes amid a disagreement between the two men over Erdogan’s drive for more power.  It is expected the prime minister will stay in office until a coming special party congress.

Faced with multiple challenges, this is not good.  Terrorist attacks by Islamic State fighters, a war with Kurdish militants, and a flood of refugees.

But now Erdogan continues to become increasingly authoritarian and he’s on the verge of consolidating even more power.

Under the constitution, the prime minister has the most power, but Erdogan has been trying to change this so that the president holds it.  But since he was elected president, and Davutoglu became prime minister in 2014, Erdogan has clearly been the kingmaker and main face of the country.

Tensions between the two apparently boiled over this week when the prime minister was stripped of his power to choose provincial party leaders.

But while Erdogan wants to make changes to the constitution, his A.K. Party (or A.K.P.), doesn’t have enough seats in Parliament to push through his wishes or call a national referendum on a new constitution.  Most opinion polls show the public opposes what Erdogan is attempting to do. It was last June that the A.K.P. lost its majority.

Iran: The Iranian state news media reported that supporters of President Hassan Rouhani won more seats in parliamentary runoff elections, but they failed to win enough of the 68 contested seats to secure a majority (some news reports have this wrong...claiming Rouhani’s forces did gain one).

So without a majority, the moderates’ ability to carry out significant reforms, both politically and socially, are limited. Rouhani’s supporters admitted clashes between their lawmakers and the hard-liners were bound to increase.

State media says supporters of Rouhani hold 122 of 290 seats in Parliament, and the conservative hard-liners 84.  82 are held by ‘independents’ who normally side with Iran’s conservative clerics, particularly Supreme Leader Ayatollah Ali Khamenei.  Results in two other seats were unknown as of this report from Sunday.

Meanwhile, the New York Times is reporting that President Obama’s foreign-policy guru, Ben Rhodes, who I absolutely despise, brags in an article for the Sunday Magazine that he helped create a false narrative to sell Americans on the Iranian nuclear deal, flat out lying that U.S. officials were dealing with “moderates” in Tehran.

Reporter David Samuels writes of Rhodes: “He is adept at constructing overarching plotlines with heroes and villains, their conflicts supported by flurries of carefully chosen adjectives, quotations and leaks from named and unnamed senior officials.  He is the master shaper and retailer of Obama’s foreign-policy narratives.”

Asked about his misleading version of the deal, Rhodes said, “In the absence of rational discourse, we are going to discourse the [expletive] out of this.”

Obama, the article says, misled the public with the idea that negotiations began because of the “moderate” faction’s rise in 2013.

Leon Panetta, then secretary of defense, confirms in the article that the hard-line regime, and its military arm, was still in charge...as it is today...which is why I led with the parliamentary run-off news.

John Podhoretz / New York Post

“Congratulations, liberals of the Washington press corps and elite organizations: You’re a bunch of suckers.  We all know this because the Obama White House just told us so.

“In an astounding New York Times piece by David Samuels, senior White House officials gleefully confess they use friendly reporters and nonprofits as public-relations tools in the selling of President Obama’s foreign policy – and can do it almost at will because these tools are ignorant, will believe what they’re told, will essentially take dictation and are happy to be used just to get the information necessary for a tweet or two.

“Their greatest triumph, according to Samuels, was selling a misleading narrative about the nuclear deal with Iran – the parameters of which were set a year before the administration claimed and had nothing to do with the fact that a supposedly more accommodating government had risen to power.

“The mastermind of the Obama machine is Ben Rhodes, a New Yorker who joined the Obama campaign as a speechwriter in 2007 and has risen to become the most influential foreign-policy hand in the White House.

“Rhodes drips with contempt for almost everyone but his boss.  He consigns all those who do not share every particular of the Obama-Rhodes foreign-policy perspective to a gelatinous mass called ‘the Blob’ – including, Samuels writes, Hillary Clinton.

“He thinks as little of them as he does of the journalists he and his team must spoon-feed.  ‘The average reporter we talk to is 27 years old, and their only reporting experience consists of being around political campaigns,’ Rhodes says.  ‘They literally know nothing.’....

“The Iran deal, you may recall, was wildly unpopular with the American people.  To ensure senators didn’t cast a two-thirds vote against it and kill it, the White House set up a digital response ‘war room’ whose purpose was relentlessly to make the case that a vote against the deal was a vote for war....

“The storyline they peddled was that the Iran deal had been negotiated in a furious round of back-and-forthing in 2014 and 2015, with the United States getting far better terms out of Iran than it expected due to the flexibility of a newly moderate government in Tehran.

“It was, Samuels says, a deliberately misleading narrative....

“Why on earth was such conduct remotely acceptable?  Because, Samuels makes clear, Rhodes and Obama believe they’re the only sensible thinkers in America and that there’s no way to get the right things done other than to spin them.  ‘I mean, I’d prefer a sober, reasoned public debate, after which members of Congress reflect and take a vote,’ he tells Samuels. ‘But that’s impossible.’

“Impossible?  There was a sober, reasoned public debate over the Iran deal.  Its opponents were deadly serious.  In the end, 58 senators voted against it on sober, reasoned grounds.

“What the Samuels piece shows is that the Obama administration chose to attempt to get its way not by winning an argument but by bringing an almost fathomless cynicism to bear in manipulating its own clueless liberal fan club.”

Saudi Arabia: Employees at the Saudi Binladin Group, a construction giant, launched violent protests after not being paid salaries for months amid a large round of reported layoffs.  While the company hasn’t made any announcements on the layoffs, a Saudi newspaper quoted an unnamed source as saying the company has terminated employment for 50,000 foreign workers and issued them exit visas.  But many of these workers aren’t leaving until they are paid back wages.

The Binladin Group is one of the world’s largest construction firms, founded in 1931 and headquartered in Jiddah.  Osama bin Laden was a renegade son of the construction firms’ founder, Mohammed bin Laden, and was disowned by the family in the 1990s.

But the firm has been barred by the Saudi government from receiving any new contracts after a probe found the company was partly responsible for a crane collapse in Mecca’s Grand Mosque last year that killed 111 people days before the hajj pilgrimage.

North Korea: In preparation for the once-in-a-generation Worker’s Party of Korea congress, Pyongyang went on lockdown, with weddings and funerals banned and free movement in and out of the capital forbidden, as well as a pickup in inspections and property searches.

The last party congress was held in 1980, during which Kim Jong-un’s father – Kim Jong-il – was confirmed as the successor to the state’s founder, Kim Il-sung.

Kim Jong-un is expected to use the congress to consolidate his power, declare North Korea a nuclear state and outline a vision for the economy and the military.

The party’s official newspaper said: “The [DPRK] proudly joined the ranks of advanced nuclear and space powers while demonstrating the might of the invincible politico-ideological, military and youth power and is now dashing ahead toward a socialist economic power and highly civilized nation.”

Late word from Reuters... Kim reportedly told the Congress on Friday that “unprecedented results have been accomplished” with the “great success” of its January test of a nuclear weapon and the February rocket launch of a satellite into space.  A new nuclear test is possible in the next few days.

China: According to a new Pew Research Center survey, half of Americans still believe China’s emergence as a world power is a major threat to the United States.  55 percent of U.S. citizens interviewed said they wanted the United States to remain the sole military superpower in the world.  Almost a quarter saw China as an adversary, the same number as Russia.

Separately, Moscow and Beijing announced they would hold their first computer-assisted missile defense drill this month.  Russia’s Defense Ministry said the exercise will use “the combined operations of Russian and Chinese air and missile defense task forces” to provide protection “from accidental or provocative ballistic or cruise missile attacks.”

Moscow and Beijing have issued a joint appeal to the United States not to install a new anti-missile system in South Korea, with both Russia and China’s foreign ministers viewing this as a security threat.  Chinese FM Wang Yi said, “This move goes beyond the defensive needs of the relevant countries.  If it is deployed it will directly impact China’s and Russia’s respective strategic security.” 

“Not only does it threaten the resolution of the peninsula’s nuclear issue, it quite possibly could pour oil on the fire of an already tense situation, and even destroy strategic equilibrium on the peninsula,” said Yi.

Meanwhile, Australia is blocking a Chinese consortium attempt to buy a historic Aussie company that owns more than 1 percent of the country’s landmass, highlighting growing unease over Beijing’s appetite for foreign agricultural assets.

S. Kidman & Co., founded in 1899 by cattle king Sidney Kidman, controls pastoral leases of more than 100,000 sq. km of outback and owns 185,000 cattle.

Russia: NATO is preparing to put four battalions – a force of about 4,000 troops – in Poland and the Baltic countries as part of an effort to reinforce its border with Moscow.  The U.S., Germany and Britain will likely provide the forces.

The move is in response to Russia’s increased activity around the Baltics, including snap exercises right up against the borders, “with a lot of troops,” according to the Pentagon.  U.S. Deputy Secretary of Defense Robert Work called it “extraordinarily provocative behavior.”

Russia, in turn, argues its buildup and exercises are in response to NATO’s buildup and revealed plans to add three new army divisions near the borders, all three motor rifle units with up to 10,000 men, according to TASS.

Separately, Russia continues to buzz a U.S. warship in the Baltic Sea.

Gen. Philip Breedlove, the top military commander for NATO, said in an interview with the Wall Street Journal, “We see that Russia has not accepted the hand of partnership but has chosen a path of belligerence.  We need to readdress where we’re heading.”

Unfortunately, Breedlove is stepping down this month after three years in the top job at NATO.  He has been an outspoken critic of what he calls a revanchist Russia, repeatedly warning of the dangers in failing to respond to Russian aggression.

Breedlove is to be replaced by Gen. Curtis Scaparrotti, the current commander of U.S. Forces in Korea.  He is not expected to be as outspoken as Breedlove.

And then you had an incident on Thursday in Moscow, where nationalist activists (hooligans), attacked the award ceremony for high-school students who had participated in a history contest, organized by the prominent human rights group Memorial.

The group called the Pro-Kremlin People’s Liberation Front (NOD) shouted insults and sprayed green disinfectant and ammonia at the event attendees as they tried to enter the building.

According to representatives of Memorial, when police arrived, they failed to take action against NOD.

Unbelievable.  Putin’s spokesman, Dmitry Peskov, condemned the attack.

Brazil: President Dilma Rousseff insists she is an “innocent victim” and vowed to “keep fighting,” in an interview with the BBC.  The Senate is to decide whether to start an impeachment trial next week.  Recent polls suggest a majority of the 81 senators will vote in favor of one.  If that happens Rousseff will be suspended from office for 180 days.

With such a timetable, it is unlikely she would be presiding over the opening ceremonies for the Olympic Games in Rio.

Finally, a judge ordered mobile phone providers to block the popular WhatsApp messaging application across the country for 72 hours, a decision apparently aimed at forcing the service to turn over user data, thought to be related to a drug investigation.  Roughly half of Brazil’s 200 million people use WhatsApp, which is owned by Facebook.  It was the second time authorities have shut it down.

Venezuela: Jackson Diehl / Washington Post

“The encouraging news from Latin America is that the leftist populists who for 15 years undermined the region’s democratic institutions and wrecked its economies are being pushed out – not by coups and juntas, but by democratic and constitutional means.  Cristina Fernandez de Kirchner of Argentina is already gone, vanquished in a presidential election, and Brazil’s Dilma Rousseff is likely to be impeached in the coming days.

“The tipping point is the place where the movement began in the late 1990s: Venezuela, a country of 30 million that despite holding the world’s largest oil reserves has descended into a dystopia where food, medicine, water and electric power are critically scarce.  Riots and looting broke out in several blacked-out cities last week, forcing the deployment of troops.  A nation that 35 years ago was the richest in Latin America is now appealing to its neighbors for humanitarian deliveries to prevent epidemics and hunger

“The regime that fostered this nightmare, headed by Hugo Chavez until his death in 2013, is on the way out: It cannot survive the economic crisis and mass discontent it has created. The question is whether the change will come relatively peacefully or through an upheaval that could turn Venezuela into a failed state and destabilize much of the region around it....

“Gangs of regime thugs now roam the streets on motorcycles and attack opposition gatherings.  Meanwhile, the government is essentially shutting itself down: Last week (President Nicolas) Maduro ordered that state employees, who make up more than 30 percent of the workforce, would henceforth labor only two days a week, supposedly in order to save energy.

“Remarkably, most of the Western hemisphere is studiously ignoring this meltdown. The Obama administration and Washington’s Latin America watchers are obsessed with the president’s pet project, the opening to Cuba.”

This is all going to change in the next 30-60 days, is my guess.

Random Musings

--Indiana Primary Results

Republicans

Donald Trump 53%, Ted Cruz 37%, John Kasich 7.5%

Delegates (1,237 needed for nomination)

Trump 1,068; Cruz 564; Kasich 153

Democrats

Bernie Sanders 53%, Hillary Clinton 47%

Delegates (2,383 needed for nomination)

Clinton 2,205 (including superdelegates), Sanders 1,401

I was going to list a lot of upcoming poll numbers, like a SurveyUSA poll for KUSA that found Trump has a 54%-20% lead over Cruz in California, but it doesn’t matter anymore.

On the other hand, Clinton leads Sanders in California 57-38.  She also beats Trump 56-34 in a general election matchup there, with California not siding with a Republican for president since George H.W. Bush in 1988.

In a CNN/ORC national poll, prior to Indiana, Clinton leads Trump 54-41.

A Rasmussen Reports poll, however, has Trump over Clinton 41-39, though I don’t believe this for a minute.  [September would be a different story, perhaps.]  Rasmussen had Romney ahead of Obama days before the Nov. 2012 vote.

--Opinion....

Editorial / Wall Street Journal

“Mr. Trump’s Tuesday victory in Indiana shows that he was able to transform his wins in the recent eastern primaries into momentum that overwhelmed Mr. Cruz, despite a strong effort from the Senator in the Hoosier State.  It wasn’t enough to overcome the consolidation of Republican support by the New York businessman....

“Mr. Trump won Indiana among most demographic, income and ideological groups, while Mr. Cruz carried ‘very conservative’ voters and people with post-graduate degrees.  Mr. Trump won 46% of women to Mr. Cruz’s 42%.

“Now as the presumptive nominee for the Republican Party, it is past time for Mr. Trump to start acting like it.  He says that it’s time for the GOP to ‘unify.’  But most of the responsibility for unification is now his.

“It is up to Mr. Trump to prevent the emergence of a third-party challenge by convincing his conservative detractors that it is not necessary.  That would include behaving in a way that reduces his epic unfavorable numbers with many voters....

“Despite the vulnerabilities shown again in her Indiana loss to Bernie Sanders, Mr. Trump isn’t going to beat Hillary Clinton with an insult campaign.  Mr. Trump could start by doing some homework on issues he would have to deal with as President. He cannot expect undecided voters to simply trust that he’ll do that if he becomes President.”

Editorial / Wall Street Journal, part II...two days later...

“The GOP electorate had its chance to reconsider Mr. Trump after his Wisconsin defeat a month ago.  Instead the voters rallied behind him for seven straight wins with a majority in each state.

“The most hopeful way to look at this is that GOP voters see Mr. Trump as the vehicle for American revival.  They are at heart nationalists who see the U.S. in retreat abroad and the economy failing to raise wages at home, and they are revolting against both.  Unlike the Japanese or the French, they aren’t going to accept decline without a fight.

“In that sense they hope Mr. Trump will be another Ronald Reagan, who can storm Washington and overturn the status quo.  This may be one reason so many of Mr. Trump’s voters are older Americans who recall the failures of the 1970s and the Reagan revival that followed.

“The problem is that Mr. Trump is no Gipper, who had spent 40 years developing a philosophy of limited government and the U.S. national interest.  As his letters show, he had superb instincts about the major issues of his day and was a brilliant political strategist.  Mr. Trump is a clever political tactician, but his policy and rhetorical jaunts don’t lead to anything coherent we can detect beyond his desire to ‘do great deals.’

“This might be a silver lining if he wins in November, assuming Republicans keep their House and Senate majorities.  Congress would write the tax and health-care reform bills, and our guess is Mr. Trump would accept nearly anything once he got his ‘wall’ at the border.  An economic growth revival is more likely with President Trump than President Clinton.

“The New Yorker’s foreign-policy instincts are far more troubling.  He shares President Obama’s desire to retreat from global leadership even if he couches retreat in ‘America First’ clothing and a larger defense budget.  He’d have to deploy far more military force than he claims to subdue Islamic State, and he is naïve about the challenge to Europe posed by Vladimir Putin.  His trade policies are reckless and would either be rebuffed by the world or lead to a global recession....

“The upshot is that Mr. Trump would be the highest variable presidential nominee in history.  He has a chance to win, but he could also alienate or frighten so many voters that he loses in a landslide and takes the GOP House and Senate majorities along for the slide.  Republicans across the country will have to make their own calculations about supporting Mr. Trump, but one priority should be limiting the down-ballot damage from a Trump washout.”

Edward Luce / Financial Times

“American politics will never be the same again.  Less than eleven months ago, Donald Trump launched his presidential bid. The rest of us collapsed laughing.  Now he is the Republican nominee.

“For the first time in modern history, one of the two parties will nominate a person explicitly opposed to globalization and free trade.  Rarely in democratic history has a deeply established party, indeed the ‘Grand Old Party,’ so totally inverted its worldview – let alone with such alacrity....

“Forget Republican versus Democrat. It will be insurgent versus establishment, shoot-from-the-lip versus political correctness, disruption versus business-as-usual and nationalist populism against conventional internationalism.

“Not least, it will also be a matchup between a candidate who has never held elected office against one whose life has been spent in preparation for this moment.”

Jeffrey Blehar / New York Post

“After Donald Trump’s victory over Ted Cruz Tuesday night, absent a particularly well-timed act of spontaneous human combustion the unthinkable has happened: Trump will be the GOP nominee facing off against Hillary Clinton in November 2016.

“Whether you consider this a welcome development or are as horrified about it as I am, the question to ask is: Why did the Republicans so-called ‘Establishment’ fail to rally behind Ted Cruz, the last man standing between Trump and the nomination?....

“Quite simply, it all comes down to Cruz.

“The seeds of this were sown long ago, when Cruz first arrived in the Senate.  He rather infamously set about building his national profile among the conservative base by positioning himself as a scourge of the dreaded ‘Establishment.’

“Many, if not most, of his moves were acts of cynicism rather than principle: Cruz’s most famous gambit, the knowingly futile government shutdown he pushed in 2013 to ‘repeal ObamaCare’ was transparently designed to convince low-information Republican voters he was Washington’s only ‘real conservative,’ not like those lily-livered sellouts and compromisers he shared a party with.  A presidential run was clearly part of the plan....

“Once Trump got in and began dominating...Cruz fell back upon a simple assumption: The Establishment may not have loved him, but surely they would eventually fall in line behind him rather than back a vulgar, know-nothing like Trump who promised down-ballot disaster in November.

“It was a grave miscalculation.  Former Speaker John Boehner has happily labelled Cruz ‘Lucifer in the flesh.’  Former Sen. Judd Gregg (R-NH) recently vowed he’d back Trump, but could never support Cruz: ‘a person of little character.’

“I’m pretty sure Long Island congressman Pete King has said things about Cruz that aren’t printable on these pages.

“Other grandees of the Republican  Party, from Bob Dole to Newt Gingrich, have said the same as well.

“Why?  First, because Cruz forgot that the people he’d been savaging in his own party for attempting to keep the federal government running with a Democratic president and Senate were humans, not cardboard cutouts.  Cruz assumed the establishment types he’d spent the last three years labelling liars, frauds and crypto-Democrats would turn around when faced with the choice between him and Trump and say ‘ah yes, strictly business, no hard feelings.’

“That’s not how people actually work.”

Editorial / Washington Post

“Donald Trump is seemingly about to accumulate all, or nearly all, of the 1,237 delegates needed to win the GOP presidential nomination on the first ballot.  In the face of this not quite entirely inevitable but quite entirely odious prospect, the thing to do is declare your unequivocal opposition and fight it.  Alas, some leading Republicans, such as House Veterans’ Affairs Committee Chairman Bill Shuster (Pa.), have endorsed Trump.  Others are calibrating their responses, as politicians are wont to do.

“These include Indiana Gov. Mike Pence, who leavened his endorsement of Sen. Ted Cruz (Tex.) with praise for Mr. Trump’s supposed tapping of legitimate voter concerns and a protestation that ‘I’m not against anybody.’  The category also contains some people who should know better, such as Senate Foreign Relations Committee Chairman Bob Corker (Tenn.), who did not endorse Mr. Trump but observed, apropos the candidate’s unserious April 27 foreign policy address: ‘I think when somebody transitions and gives a serious speech about something, I think giving an ‘atta boy’ is an appropriate thing to do.’

“And then there’s Sen. Marco Rubio (Fla.), last seen trading crude insults with Mr. Trump, en route to a humiliating primary defeat in his home state on March 15.  In those days, Mr. Rubio choked up when asked if he’d keep his promise to support the GOP nominee, even if it should be Mr. Trump; he declared it was getting ‘harder every day’ to do so.  On April 20, however, it seemed to be getting easier again: ‘I’ve always said I’m going to support the Republican nominee, and that’s especially true now that it’s apparent that Hillary Clinton is going to be the Democratic candidate’ – as if it hadn’t been apparent five weeks earlier, or as if Mr. Rubio would have been more sanguine at the prospect of Sen. Bernie Sanders (I-Vt.) in the White House....

“Who knows why Republican politicians equivocate about the most repugnant political phenomenon in recent American history.  Opportunism?  Cluelessness?  A sincere wish to influence the process for the better?  Any of those, or a combination, would be preferable to a fourth alternative: actual approval of what Mr. Trump stands for – though plainly there is some of that, too.

“Someday, everyone involved in American politics will be called upon to account for his or her behavior during Mr. Trump’s run for the White House.  The Republican Party chairman, Reince Priebus, forged one route months ago when he cheerfully pronounced: ‘Winning is the antidote to a  lot of things.’ It will be instructive to watch which politicians now follow Mr. Priebus to the moral poorhouse, and which have the gumption to chart a different course.”

George F. Will / Washington Post

“Donald Trump’s damage to the Republican Party, although already extensive, has barely begun.  Republican quislings will multiply, slinking into support of the most anti-conservative presidential aspirant in their party’s history. These collaborationists will render themselves ineligible to participate in the party’s reconstruction....

“In losing disastrously, Trump probably would create down-ballot carnage sufficient to end even Republican control of the House.  Ticket splitting is becoming rare in polarized America; In 2012, only 5.7 percent of voters supported a presidential candidate and a congressional candidate of opposite parties.  At least half a dozen Republican senators seeking reelection and Senate aspirants can hope to win if the person at the top of the Republican ticket loses their state by, say, only four points, but not if he loses by 10.  A Democratic Senate probably would guarantee a Supreme Court with a liberal cast for a generation....

“(Republicans) working to purge (Trump) and his manner from public life will reap the considerable satisfaction of preserving the identity of their 162-year-old party while working to see that they forgo only four years of the enjoyment of executive power.  Six times since 1945 a party has tried, and five times failed, to secure a third consecutive presidential term. The one success – the Republicans’ 1988 election of George H.W. Bush – produced a one-term president.  If Clinton gives her party its first 12 consecutive White House years since 1945, Republicans can help Nebraska Sen. Ben Sasse, or someone else who has honorably recoiled from Trump, confine her to a single term.”

--Back to Gerald F. Seib / Wall Street Journal:

“Trump may have expanded the party, but not in the way its leaders once imagined.  In fact, he has done it in the opposite fashion, energizing legions of older, working-class whites and, national polling indicates, probably driving away more Latino voters in the process.

“The party’s master plan after losing the 2012 election to President Barack Obama and his coalition heavy with Hispanics and young voters was to go after that coalition harder.  The idea was to appeal to Hispanics by ramping up support from Republicans in Congress for immigration reform that would provide some kind of path to legal status for at least some undocumented aliens.

“Mr. Trump arrived and said that idea of moving to a softer line on immigration wasn’t merely wrong but 180 degrees wrong.  He proposed expelling immigrants rather than drawing them in, and that message swamped the party’s official blueprint.  Republicans are left with a party that has a newly energized base of older white voters but, most likely, smaller appeal among Hispanics.  The Trump proposition is that the advantages of the former will outweigh the disadvantages of the latter.  It’s an enormous gamble.”

--John Podhoretz / New York Post

“President Obama has made America safe for liberalism again – or, at least, the world ‘liberal.’  That was made stunningly evident on Tuesday night in Indiana.

“Fully 67 percent of Democrats who went to the polls there identified themselves as ‘liberals.’  In 2008, only 39 percent of Indiana Democrats called themselves liberal. That same year, 44 percent of Democrats used the world ‘moderate’ to describe themselves. This year, only 29 percent said they were ‘moderate.’

“So among Democrats, liberals have almost doubled in number over the past eight years, while moderates have declined by a third.

“The same kind of change showed itself in Wisconsin a few weeks ago, where liberals made up 68 percent of the electorate, as opposed to 47 percent in 2008.  Moderates were 40 percent then; now, 28 percent.

“The same can be said for Ohio, Florida, Texas and Georgia, where liberals made huge gains at the expense of moderates....

“What happened?  First, Obama embraced the word rather than running from it.  And second, the financial meltdown came four months after Obama wrapped up the 2008 primary, which by itself seemed to render obsolete the once-powerful category of ‘socially liberal but fiscally conservative’ Democrat.

“The crisis engendered by the meltdown united the Democratic left behind Obama’s unprecedented efforts to use government as a tool both for economic recovery ($2.7 trillion in new spending over 16 months) and wholesale change (ObamaCare).

“At the same time, those young people who inclined toward liberalism and were coming of voting age in the Obama era found themselves in an environment in which the only voices speaking out for fiscal restraint were at the same time allied with conservative social causes they viewed as comically retrogressive at best and monstrously bigoted at worst.

“So any disappointment these larval liberals may have felt with the outcome of Obama’s own fiscal policies – the slow-as-molasses economic recovery, the non-existent first-time jobs – could only find an outlet for their frustration farther to the left than Obama.

“They blamed capitalism and began to embrace the concept of socialism – the word, not the theory, really, since its true meaning most of them barely understand and whose horrific real-world consequences they are too young to have seen firsthand.

“In 2011, the Pew Research Center found that 49 percent of Americans ages 18-29 viewed ‘socialism’ favorably, while just 43 percent had a negative view.  In 2015, Gallup found that 69 percent of young Americans would be willing to vote for a self-described socialist for president....

“America is a liberal country. For now, it need not stay one.  But conservatives have to stop imagining it otherwise.  They must see things as they really are before they can work to change minds for the better.”

--We will have plenty of time to analyze the Electoral College map, which initially doesn’t look promising to Trump given recent election returns.  What we know now is that it is likely to come down to Florida, Ohio, Pennsylvania and Michigan, and one or two others like Virginia.

--According to the U.S. Customs and Border Protection, child migration across the southern border is on par with 2014 levels, when a wave of kids – many unaccompanied, arrived, swamping border authorities.

As Mike Lillis of The Hill writes: “The new figures raise the specter of another increase this summer.  That would almost certainly inflame another political showdown in a volatile presidential year.”

--A federal judge in San Diego on Friday determined Donald Trump will testify after the presidential election in a class-action lawsuit accusing his now-defunct Trump University of defrauding students.

I’m still expecting a “60 Minutes” piece on this sham in the coming weeks, though I wouldn’t be surprised to see the network wait until the new season begins after Labor Day.

--In his mini-press conference on Friday, President Obama told the press that it needs to closely scrutinize Trump’s record and past comments, saying, “I just want to emphasize that we are in serious times and this is a serious job.”

Watching this live, I wanted to throw up.

--Kimberley A. Strassel / Wall Street Journal

“Maybe it should be a verb: To be Guccifered. Though maybe, in Hillary Clinton’s case, it would be better phrased as a crime.  As in: ‘They got her on a Guccifer.’

“Guccifer is the nom de Internet of the Romanian hacker Marcel Lehal Lazar.  Few people realize it, but the Eastern European anti-hero is why the world knows that Hillary Clinton maintained a private email server while secretary of state. This week he may have made Mrs. Clinton’s road to the White House a lot rougher.

“It’s a case study in why governments have rules about online security.  Guccifer’s specialty was hacking top officials and their relatives – with an eye toward mayhem and humiliation.  He hacked the account of Dorothy Bush Koch and circulated photos of her father, former President George H.W. Bush, in the hospital.  He hacked years of Colin Powell’s correspondence, including personal financial information. He went after FBI and Secret Service agents, senators and the wealthy.

“In March of 2013, Guccifer released hacked AOL email correspondence of Clinton crony Sidney Blumenthal, revealing numerous memos he’d sent to Hillary while she was the nation’s top diplomat.  Mr. Blumenthal had sent these notes to Mrs. Clinton at a private, nongovernmental email address.  Security experts tut-tutted about the risks, though the assumption was that Mrs. Clinton used the private account for the occasional interaction with friends or political operatives.  It wasn’t until early 2015 that the nation found out Hillary was using the home-brew server to conduct every bit of her state business....

“What matters is that Guccifer knew, at least by March of 2013, that the third-highest official in the executive branch of the most powerful nation of the world was using a private server.  Does anyone think a man devoted to hacking politicians and Federal Reserve bankers would ignore that opportunity?”

The Clinton team went ballistic after the NBC News interview with Guccifer, with spokesman Brian Fallon claiming no one should believe “the claims made by this criminal from his prison cell.”

Strassel:

“The bigger point is that an unemployed taxi driver in Romania, using nothing more than a desktop computer, was able to infiltrate Mr. Blumenthal’s account and discover that a woman privy to America’s closest-held secrets was using a home-brew server.

“The Chinese are bright – even brighter than Romanian taxi drivers.  They employ hackers whose only job is to infiltrate the U.S. government.  Those hackers have supercomputers at their service.  They have lists upon lists of relatives and friends and aides of powerful people.  When they break into accounts, they don’t publicize it.

“And yet we are to believe that the Chinese never found their way to clintonemail.com?”

The FBI has interviewed senior aides to Hillary Clinton, including longtime aide Huma Abedin, as various reports had it on Thursday.

But, while Republicans and some former law-enforcement officials have said her conduct could be criminal, as I’ve been writing since day one of this issue, I do not see Clinton being indicted.

--Michael Goodwin / New York Post

“Mark the date, remember the moment.  The corruption eruption in New York is reaching new heights – and depths.

“From City Hall to Albany, the sewer runneth over.  It is no longer adequate to talk of a few bad apples.  We are suffering through a bumper crop of rottenness.

“In normal times, the fall of Sheldon Silver, sentenced yesterday to 12 years in federal prison, would be drama enough.  Yet the former Democratic leader of the Assembly is joined in infamy by Dean Skelos, the former Republican leader of the state Senate, whose sentencing comes up next week on the con-man calendar.

“The comeuppance of the bosses of both legislative houses and both parties in the same year is, as far as I can tell, unprecedented in modern times....

“Yet the Silver-Skelos scandal is just part of the worst of times.

“Mayor de Blasio is in a serious jam, as both state and federal prosecutors have his fundraising-and-favors operation in their cross hairs.  Another sordid chapter would be written if the mayor himself is hit with criminal charges.

“Then there’s Gov. Cuomo, who looked as if he had escaped a federal probe only to see a close friend and former aide suddenly land in very hot water about money paid to him by companies with state business.  There’s no telling where the case will lead.”

Personally, I love it.  But as Mr. Goodwin notes, “We the people certainly are victims – of our own stupidity and cupidity.

“First, we have developed the very bad habit of electing people of low moral character....

“Second, this deregulation of public morals is not the whole story. The other part is greed – ours.

“Too many voters survey the corruption pattern and don’t conclude that they want an honest mayor or governor or representative.  They conclude that they want someone who will take care of them. They want their own crook.”

--I watched President Obama’s performance at the White House correspondents’ dinner, ostensibly to see if he would crack any jokes on foreign policy (he didn’t), and then caught comedian Larry Wilmore’s incredibly unfunny monologue.

I don’t watch him on Comedy Central, but saw more than a few interviews with the guy prior to last Saturday to know he was going to have a racial act, that started out by welcoming guests to “Negro night.”

His last line, though, got the most attention. “So, Mr. President,” he said, “if I’m going to keep it one hundred: Yo, Barry, you did it, my nigga.”

Wilmore explained this last line to the Washington Post’s Krissah Thompson:

“As African Americans, if you’re not in our shoes, you don’t get to have that experience.  I wanted to express what it feels like.  When you’re inside of it – this is what you get to experience.

“And when I think of the words that have been used against us and how we have turned them around, I thought of Obama and how he as an icon has turned upside-down [ideas of] black leadership and the conceptions of that.  For me to turn this word upside down on this occasion was almost like a private moment we would share in this very public way.”

Whatever.  At one point, CNN’s Don Lemon flipped Wilmore off (not realizing he was on camera).  No further comment needed from moi.

--Rong-Gong Lin II / Los Angeles Times

“Southern California’s section of the San Andreas fault is ‘locked, loaded and ready to roll,’ a leading earthquake scientist said Wednesday at the National Earthquake Conference in Long Beach.

“The San Andreas fault is one of California’s most dangerous, and is the state’s longest fault.  Yet for Southern California, the last big earthquake to strike the southern San Andreas was in 1857, when a magnitude 7.9 earthquake ruptured an astonishing 185 miles between Monterey County and the San Gabriel Mountains near Los Angeles.

“It has been quiet since then – too quiet, said Thomas Jordan, director of the Southern California Earthquake Center.

“ ‘The springs on the San Andreas system have been wound very, very tight.  And the southern San Andreas fault, in particular, looks like it’s locked, loaded and ready to go,’ Jordan said in the opening keynote talk.”

Jordan’s main point is that California must focus on becoming resilient to a potential magnitude 8, praising the efforts of Los Angeles to require earthquake retrofits on apartments and concrete buildings by law sooner than later.

A 2008 U.S. Geological Survey warned a magnitude 7.8 earthquake on the southern San Andreas fault would cause more than 1,800 deaths and $200 billion in damage and severe, long-lasting disruptions.

---

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

God bless America.

---

Gold $1289
Oil $44.66

Returns for the week 5/2-5/6

Dow Jones  -0.2%  [17740]
S&P 500  -0.4%  [2057]
S&P MidCap  -0.6%
Russell 2000  -1.4%
Nasdaq  -0.8%  [4736]

Returns for the period 1/1/16-5/6/16

Dow Jones  +1.8%
S&P 500  +0.7%
S&P MidCap  +3.9%
Russell 2000  -1.9%
Nasdaq  -5.4%

Bulls  40.2
Bears  21.7  [Source: Investors Intelligence]

Dr. Bortrum posted a new column.

Have a great week.  Happy Mother’s Day!

Brian Trumbore