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05/14/2016

For the week 5/9-5/13

[Posted 11:30 PM ET, Friday]

Note: 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. Thank you to Claude B. for his ongoing contribution this week.

Edition 892

Washington and Wall Street

First off, I’m not commenting on Donald Trump’s latest self-made gaffe, then lie, concerning a 1991 recording of comments to a reporter where he pretended to be someone else, John Miller; no relation to former reliever Stu Miller, who was once blown off the pitcher’s mound during the 1961 All-Star Game at Candlestick Park...but I digress.

No, I have plenty on The Donald and Hillary down below, though I’m glad, as a Republican who has twice voted ‘third party,’ that Trump and House Speaker Paul Ryan, no relation to former catcher Mike Ryan, who hit .193 for his 11-year major league career (1964-74), got along well enough in their first meeting on Thursday.

It’s just that I’m already really tired of this race and wish we could fast-forward to post-Labor Day and the debates, which will obviously be must-see television.  The ratings will be huuuge!  I hope some of you are already stocking up on beer (in my case, domestic) as well as Chex Mix.

But in actuality, I wish I could go away and disappear from it all...until eight years from now as I eagerly await Ivanka’s candidacy.  Queen Ivanka.  It has a nice ring to it for this crazy, yet amazingly successful, melting pot of ours.

Anyway, there was little economic data on the week, but the one big report that came out, April retail sales, was highly encouraging, up 1.3%, and, importantly, up 0.6% ex-autos and gas. This latter figure is up a solid 4.4% year over year.

The Atlanta Fed’s GDPNow indicator, when taking the latest numbers on retail trade into account, pegs second-quarter GDP at 2.8%, annualized, this after Q1 growth was just 0.5% (first estimate).  But add the two together and we are essentially at another 2%-ish growth mark for 2016.  Nothing changes, year in and year out.

The thing is we aren’t spending money at the malls, as I discuss in detail with some of the earnings reports below.  It’s on travel, meals and home improvement. 

Coincidentally, prior to the release of Friday’s retail sales data, economist Robert Samuelson of the Washington Post wrote some of the following:

“American consumers aren’t what they used to be – and that helps explain the plodding economic recovery.  It gets no respect despite creating 14 million jobs and lasting almost seven years. The great gripe is that economic growth has been held to about 2 percent a year, well below historical standards. This sluggishness reflects a profound psychological transformation of American shoppers, who have dampened their consumption spending, affecting about two-thirds of the economy.  To be blunt: We have sobered up.

“This, as much as any campaign proposal, may shape our economic future. There’s an Old Consumer and a New Consumer, divided by the Great Recession.  The Old Consumer borrowed eagerly and spent freely. The New Consumer saves soberly and spends prudently. Of course, there are millions of exceptions to these generalizations.  Before the recession, not everyone was a credit addict; now, not everyone is a disciplined saver.  Still, vast changes in beliefs and habits have occurred.

“A Gallup poll shows just how vast.  In 2001, Gallup began asking: ‘Are you the type of person who more enjoys spending money or who more enjoys saving money?’  Early responses were almost evenly split; in 2006, 50 percent preferred saving and 45 percent favored spending.  After the 2008-2009 financial crisis the gap widened spectacularly.  In 2016, 65 percent said saving and only 33 percent spending.

“What’s happening is the opposite of the credit boom that caused the financial crisis. Then, Americans skimped on saving and binged on borrowing.  This stimulated the economy.  Now, the reverse is happening.  Americans are repaying old debt, avoiding new debt and saving more.  Although consumer spending has hardly collapsed, it provides less stimulus than before.  (A conspicuous exception: light-vehicle sales, which hit a record 17.4 million in 2015).

“Consider the personal savings rate: the difference between Americans’ after-tax income and their spending.  If a household has income of $50,000 and spends $45,000, its savings rate is 10 percent.  Here are actual figures.  From 1990 to 2005, the savings rate dropped form 7.8 percent to 2.6 percent.  Since then, the savings rate has risen; it was 5.1 percent in 2015....

“In theory, it’s easy to replace lost consumer demand. In practice, it’s not so easy.  Businesses could build more factories and shopping malls.  But with weaker consumer spending, do we need them?  More exports would help, but economies abroad are weak....

“Whatever happens, the public and politicians should take note: This legacy of the Great Recession will endure.  It has left a deep psychological scar that won’t soon heal.”

Europe and Asia

Eurostat, the statistical arm of the European Union, released its flash estimate for first-quarter GDP and for the eurozone, GDP was up 0.5% over the fourth quarter, which was up 0.3%.  Annualized growth was 2.1%, but no one really believes the EA19 will continue at that pace, at least this year.  More likely growth will be around 1.5%, which is the current year over year pace.

Germany saw Q1 GDP rise a solid 0.7%, but the government expects this pace to moderate in Q2.  Year over year, GDP is up 1.6%.  Separately, industrial production in March was down 1.3% over February (which was down 0.7%).  But March factory orders rose 1.9% with a rebound in exports, up 4.3% (eurozone orders up 1.1%, non-eurozone up 6.2%).

France’s Q1 GDP rose 0.5% (1.3% year over year).  Industrial production in March was down 0.8%.

[Industrial production in the EA19 overall was down 0.8% in March vs. February.]

Italy reported GDP of 0.3%, but just 1.0% yoy.  The government recently downgraded its growth estimate for the year from 1.6% to 1.2%.

Spain had robust GDP growth of 0.8% in the first quarter, up 3.4% yoy.

But Greece contracted 0.4%, after rising 0.1% in Q4.  Year over year, GDP in Greece is -1.3%.

In non-euro U.K., GDP was 0.4% in Q1, while construction output was down 3.6% in March, the worst month since Dec. 2012, according to the Office of National Statistics, which pegged annual output at -4.5%.  Not good.

But here it’s all about Brexit and the June 23  ‘In’ / ‘Out’ referendum on EU membership that is rapidly coming up.  The Bank of England said this week that even if Britain votes to stay, growth is set to moderate to 2% from an earlier estimate of 2.2%.

One thing is clear concerning the Brexit debate.  All the polls show it’s too close to call and British Prime Minister David Cameron isn’t making it any easier with some of his gaffes. 

Former U.K. cabinet minister, and friend, Iain Duncan Smith accused Cameron of giving in to German Chancellor Angela Merkel by dropping a call for an emergency immigration brake from his requirements for a renegotiation of EU membership terms.

“I know that right up until the midnight hour, there was a strong line in there about restricting the flow of migrants from the European Union – an emergency brake on overall migration,” Duncan Smith told the Sun newspaper.  “It was dropped because the Germans said if that is in the speech, we will have to attack it.”

A day earlier, Cameron said in a speech to the nation a British exit from the EU might jeopardize peace in Europe.

Britain is “better off, safer and stronger” in the EU and that isolationism “has never served this country well.”

Cameron said he has “helped reconcile countries which were at each other’s throats for decades.”

“Can we be so sure that peace and stability on our continent are assured beyond any shadow of doubt?” he asked.  “Is that a risk worth taking?  I would never be so rash as to make that assumption.

“Britain has a fundamental national interest in maintaining common purpose in Europe to avoid future conflict between European countries.”

Cameron added that leaving the EU “will inflict real damage” on the country and its economy.  “Britain will suffer an immediate economic shock and be permanently poorer for the long term.”

Polls show support for the U.K. leaving the European Union is increasing among business people, according to a survey put out by the British Chambers of Commerce.  About 54% of “senior” business people said they’ll choose to remain in the bloc, down from 60% in February, with backing for a “Leave” vote rising to 37% from 30%.

A YouGov poll found 42% of voters’ back In and 40% Out.  A poll in the London Independent has the public split 50/50, but the Out crowd could be more passionate in going to the polls.

Finally, in a survey of 6,000 people in Belgium, France, Germany, Hungary, Italy, Poland, Spain and Sweden for Ipsos-MORI, 45% said they wanted their own vote on whether to remain in the EU, and a third would opt to leave if given the chance.

Back to Greece and its ongoing bailout discussions, last weekend parliament voted 153 to 144 to approve a new round of broad reforms of the country’s pension and income tax systems as part of the process for convincing Greece’s creditors to shell out more aid from the 86bn euro third bailout.

Prime Minister Alexis Tsipras said, “Our [government’s] mission is to put Greece back on its feet and on a path to growth.”  But an activist said, “This law may be voted through parliament but it’s not going to be put into practice.”

But the bill does protect current pensions and introduces a new “national” pension of 384 euro a month after 20 years of work.

IMF chief Christine Lagarde said that all sides were near agreement on the package.

And in a sign there may be movement on real debt relief, yields on Greece’s 10-year bond dipped below 8 percent for the first time since December to 7.25%. Eurozone finance ministers have pledged to revisit the question at their next meeting May 24, when they are also expected to sign off on Greece’s new reform package.

Options on the debt side include capping interest payments, extending maturities, and imposing a moratorium on repayments.  But Germany is adamant against any outright haircut on the debt.

Greece’s debt stands at 176.9% of GDP as of the end of 2015.  [By contrast the U.S. is at 74% on its public debt.]  More on this topic next week.

On the migration front, Turkey officially refused to change its anti-terror laws to satisfy European Union demands as part of its effort to secure visa-free travel to Europe for Turkish citizens.

The EU says Turkey must narrow its definition of “terrorist” and “terrorist act” to secure a visa waiver. The EU is concerned that journalists and political dissenters will be targeted, and, indeed, some of the former have been.

But Turkish President Erdogan was adamant, pointing to one policy as an example of the idiocy of some of the EU requests.  The EU asked Turkey to submit details of housing and education projects for refugees in order for aid to be released.

“Are you kidding us?  What projects?” Erdogan said.  “There will be no projects; there are 25 camps out there.”

EU governments will act on the measure by mid-year, as well as the European parliament.

But while the number of migrants flowing from Turkey to Greece has slowed considerably (though this could be short-lived), there are growing signs a new crush will emerge in Italy, crossing from the likes of Libya.

And so it is that Austria is preparing for the surge at the Brenner Pass, as I’ve written the past few weeks, a spot that connects the north of Italy to the heart of Europe.

Austria’s government has been making plans for an extensive fence in this scenic gorge, but the barrier would only go up in the event of a surge.  If this comes to pass, then tens of thousands, maybe hundreds, will be corralled in Italy and Greece.

The response by Austria is largely a result of recent elections that have propelled the right-wing, anti-immigrant Freedom Party to the forefront.  Norbert Hofer, leader of the party, finished first in last month’s first round of presidential elections and is well-positioned for the May 22 runoff.

And so it was that longtime Austrian Chancellor Werner Faymann resigned on Monday, becoming one of the most prominent casualties of the migration crisis.

Faymann, 56, a center-left politician, had been chancellor since 2008, but he said he was giving up his post as head of the Social Democratic Party because he had lost their support.  There is an interim government now, but with the next regular parliamentary elections not scheduled until 2018, a call for early elections seems a certainty.  [The presidency is largely ceremonial, but these days should it become Hofer, he has quite a bullhorn and it was Faymann’s moderate position on migrants that did him in as the position among a growing proportion of the people hardens.]

And even though Austria only has a population of 8.5 million, it is a bellwether for the rest of Europe and right-wing movements such as Marine Le Pen’s National Front in France, as well as Denmark’s anti-immigrant Danish People’s Party and Germany’s Alternative for Germany that recently made strong gains in state elections there and now polls 15% nationwide, making it the most successful right-wing party in Germany since World War II.

Gideon Rachman / Financial Times...on the potential impact of Donald Trump on European politics.

“The far right has not yet formed a government in western Europe. But it has changed the debate and forced mainstream politicians to embrace some of their themes.

“I fear that the same thing will happen with Mr. Trump.  The odds are that the ‘Republican’ (if that is what he is) will lose to Hillary Clinton in November. But the Trump campaign has already changed U.S. and world politics – and it will make an even deeper imprint in the next six months of campaigning.

“Themes and ideas that were on the fringes have now entered the political mainstream, and they will not disappear if and when Mr. Trump loses.

“What are those ideas?  I would highlight five.  First, a rejection of globalization and free trade....

“The second theme is nationalism, epitomized by Mr. Trump’s slogan of ‘America First.’  In Europe, nationalism implies a rejection of the EU.  But the global implications of American nationalism are much more serious since the U.S. underpins the whole international security system and issues the world’s reserve currency, the dollar.

“A third idea is the embrace of the notion of a ‘clash of civilizations’ between the west and Islam.... Mr. Trump, with his talk of temporarily banning all Muslims from entering the U.S., has essentially embraced the idea of inevitable conflict between the west and the Islamic world....

“A fourth theme is a relentless assault on the ‘elite,’ including Washington, Wall Street and the universities.  A populist distrust of elites has been a perennial theme in U.S. politics for decades, if not centuries.  But growing inequality, immigration and the financial crisis have driven anti-elite rhetoric to new levels.  As a New York billionaire, Mr. Trump is an unlikely tribune of the common man. But he has played the card effectively during the campaign.

“A fifth and related trend is the denunciation of the mainstream media as untrustworthy and an embrace of alternative, conspiratorial narratives that are flourishing on the internet....

“Some in the U.S. may still flinch at the idea that a leading American politician belongs in the same ideological camp as France’s National Front, a party with roots in fascism.  But (founder, now exiled Jean-Marie) Le Pen obviously sees the parallel and has tweeted his support for Mr. Trump, adding ‘May God protect him’.  In fact, in some respects Mr. Trump’s platform is more extreme than that of the French far right.  Neither of the Le Pens [Ed. the other being Marine] has ever proposed banning all Muslims from entering France....

“Many liberal Americans are still inclined to treat the Trump phenomenon as a nightmare from which they hope to wake up in November.  But that seems highly unlikely. Mr. Trump has now amply demonstrated the political potency of the ideas that he is promoting.  A rising generation of nationalists, in the U.S. and Europe, will profit from his breakthrough.”

Turning to Asia....China’s exports in April fell 1.8% in $ terms, after rising 11.5% in March. Imports were down 10.9%, following a 7.6% decline the prior month.

Exports to the U.S. fell 9.3% in April year over year, but were up 6.4% to Southeast Asia and up 3.2% to the EU, though it is clear global demand is still soft, plus the of fake invoicing remains.  For example, imports from Hong Kong were said to be up 204% last month.  Really?  Impossible.  The fake invoices are used to disguise money flows, though the government reported foreign exchange outflows were just $13.3bn in April vs. $37bn in March.  [The Institute of International Finance estimates China’s net outflows were more like $25bn in April, unchanged from March.]

As the Wall Street Journal noted: “Over-invoicing for goods gives a company or individual the opportunity to skirt capital controls and shift money offshore.  Authorities have responded to evidence of the activity by clamping down on the myriad of illicit channels used, from curbing purchases of overseas insurance products to stopping friends and family members from pooling their $50,000-a-year quotas to get large sums of money out.”

[Government foreign-exchange data showed that China’s reserves rose in dollar terms by $7.1bn to $3.2tn, but this was driven by a softening dollar.  If the dollar strengthened, capital outflows would resume in a big way, or so it works in theory.]

As for China’s exploding debt, vice premier Zhang Gaoli said this week that China will reduce leverage in the economy through efforts including bankruptcies, and it is not resorting to large-scale stimulus after record credit growth in the first quarter.

Monday, the People’s Daily, the Communist party’s flagship newspaper, published a front-page interview with an “authoritative figure” who warned the country’s soaring debt could lead to “systemic financial risks.”

“A tree cannot reach the sky,” the figure said.  “Any mishandling [of the situation] will lead to systemic financial risks, negative economic growth and evaporate people’s savings. That’s deadly.”

But it seems impossible to take the steps needed to reduce the debt while keeping growth in the 6.5% to 7% targeted range, especially if you’re going to let large industrial companies with all their excess capacity and losses go under.

Meanwhile, Hong Kong’s economy shrank in the first quarter for the first time since 2014, with GDP contracting 0.4% compared with the fourth quarter, far worse than expected.  Year on year, growth was just 0.8%.  Hong Kong continues to be hammered by the slowdown on the mainland and a dwindling number of tourists.  According to the World Travel & Tourism Council, tourism revenues in Hong Kong fell 8.4% last year.

Street Bytes

--The Dow Jones and S&P 500 fell a third consecutive week, down 1.2% and 0.5%, respectively, while Nasdaq suffered its fourth straight week of declines, off 0.4%.

It didn’t help that retailers were hit hard, which led to questions on the state of the economy, and even when Friday’s retail sales report should have provided some succor it didn’t.  [That just might be the first time I’ve used ‘succor’ in over 17 years.  A solid word, kind of tangy, if I may say so myself.]

But the week was about Apple as much as anything else when it came to the Street. Apple shares  slid to $89.50 on Thursday, their lowest level since June 2014 and off the all-time high of $133 last July.  At Thursday’s lows, Apple slipped to No. 2 behind Alphabet (Google) in terms of market value.  But Apple closed the week at $90.50 and Alphabet declined a few bucks, so Apple finished with a market value of $495.8bn vs. Alphabet’s $488bn.

--U.S. Treasury Yields

6-mo. 0.36%   2-yr. 0.75%  10-yr. 1.70%  30-yr. 2.55%

The reading on April producer prices came in at 0.2%, 0.1% ex-food and energy.  For the last 12 months the PPI is 0.0%, 0.9% on core.  Next week an important reading, maybe, on consumer prices.

But despite the stronger than expected number on retail sales, no one expects the Fed to raise interest rates at its June 14-15 meeting.  And it’s then absurd to think they will move in September given the election.  So maybe during the winter baseball meetings in 2017 or 2018.

--Oil rallied on news of another supply outage in Nigeria, an OPEC member, as well as a surprise decline in inventories, as reported by the U.S. Energy Information Administration.

Consultant Andy Lipow of Lipow Oil Associates told the Financial Times, “The trend is pretty clear that gasoline demand is headed for an all-time record in 2016.”

U.S. demand last week was 9.65m barrels a day, the highest since last summer and approaching record levels.  Additionally, despite the devastating wildfires in northern Alberta, U.S. imports of Canadian oil rose slightly last week to 2.95m b/d.*  Shippers maintained supplies by drawing down oil stored in tanks in Alberta.

*The fires did shut in 1.2m b/d of production.

As for Nigeria, it was dealing with both a leak in a major pipeline and attacks on a Chevron platform by a new militant group.  Nigeria’s oil exports fell to 1.5m b/d, the lowest level in two decades.

On top of the above, the International Energy Agency said in its monthly oil market report for April that first-quarter demand was higher than previously anticipated, up 1.4m b/d.  30% of the increase represented India alone.  The IEA left unchanged its 2016 forecast for a still robust 1.2m b/d, taking total consumption of oil products to 95.9m b/d.

OPEC crude output jumped to 32.8m b/d – the highest since Aug. 2008, thanks to a jump in Iranian flows, which hit 3.6m b/d, a level last reached in Nov. 2011, with exports from the country hitting 2m b/d, a jump from 1.4m b/d in March.

--Houston-based Linn Energy became the biggest U.S. casualty of the collapse in oil prices as the producer filed for bankruptcy on Wednesday. 

Linn is seeking to restructure reported debts of $9.2bn to “provide a platform for future growth,” according to the CEO.  Those borrowings are the largest among about 70 North American exploration and production companies that have gone bankrupt in the downturn.

The company plans to continue normal operations during the restructuring process.

--Meanwhile in Saudi Arabia, Oil Minister Ali al-Naimi is leaving his post after almost 21 years.  The 80-year-old told a gathering of oil executives in Houston last weekend, “During my seven decades in the industry, I’ve seen oil at under $2 a barrel and $147, and much volatility in between.  I’ve witnessed gluts and scarcity. I’ve seen multiple booms and busts.”

Al-Naimi’s departure is the latest sign of how 30-year-old Deputy Crown Prince Mohammed bin Salman is taking over economic policy in the kingdom.  Khalid Al-Falih, chairman of Saudi Arabian Oil Co., the state-owned producer, Aramco, will take over the top spot.  Oil accounts for more than 70% of government revenue.

Prince Mohammed has insisted Saudi Arabia will continue to defend its market share and won’t agree to any production freeze without the participation of the other major producers, read Iran in particular.

So the kingdom will continue to try to squeeze U.S. shale production, while at the same time, Mohammed works on an ambitious plan to overhaul the economy and shift away from oil.

--Macy’s stock plunged 15% to a 4 ½ year low on Wednesday after it reported profits and sales well below expectations for the quarter, and then slashed its expectations for the year.  Seven out of the last 10 quarters Macy’s has registered a decline in same-store sales; -5.6% for February thru April.

Q1 income tumbled 40% and revenue fell 7.4%.

CEO Terry Lundgren said in a release: “We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us.”

But as analyst Neil Saunders told the New York Times: “The blunt truth is that Macy’s does not give consumers a reason to visit its stores.  In many locations shops are simply not up to par; they are poorly merchandised, hard to shop, lack any inspiration, and have fairly mediocre customer service.”

Another analyst said Amazon.com would displace Macy’s as the No. 1 clothing retailer by 2017.

Macy’s kicked things off for major retailers and, coupled with others that followed, raised new concerns about the consumer and trends.  Sales had accelerated early in the year after a rough Christmas, but then something happened in mid-March.

Earlier this week, Gap Inc. issued a profit warning as its attempted turnaround sputtered, with Fitch cutting its credit rating to junk.

Consumers are spending, but as noted above its directed elsewhere, not department stores. And for clothing they are choosing discounters or Amazon.

But it does need to be said that Macy’s is still making a decent buck, $115 million, or 37 cents per share.  It’s that revenue decrease of 7% that’s a killer.

Meanwhile, Nordstrom reported earnings for the quarter ended April 30 that were sharply lower than expectations, while comp store sales fell 1.7%, compared with the same period last year.  Co-president Blake Nordstrom said: “As the pace of change in retail continues to accelerate, we remain committed to serving customers by taking steps that will continue to meet their expectations while driving profitable growth.”

Kohl’s shares fell 9% after the company reported same-store sales fell 4%.

--Crop prices have been rallying as rising exports are expected to eat into the glut by next year.  U.S. soybean inventories are forecast to fall by 24%.  But the USDA forecast ballooning supplies for corn and wheat, though in the case of the former it wasn’t as big as traders forecast.

--As reported by the Wall Street Journal and Dealogic, “More than $395.4 billion in U.S. mergers...have fallen apart in 2016, felled by exacting regulators, rocky markets or reluctant targets.  That will be a record even if no other deals stumble for the rest of the year.”

For investment banks this is deadly.  Last year they feasted on the fees generated by a record-setting $4.6 trillion in announced deals.

But with the collapse of just three this year – Pfizer’s takeover of Allergan, Halliburton’s purchase of Baker Hughes, and the Staples-Office Depot merger – the banks are losing out on more than $300 million in advisory fees.

--Meanwhile, hedge fund manager Kenneth C. Griffin of Citadel made $1.7 billion in 2015, No. 1 in his industry according to Alpha magazine along with James H. Simons; this at a time many hedge funds were closing shop, while others lost their investors $billions.

By comparison, JPMorgan Chase’s Jamie Dimon took home just $27 million in cash and prizes.

--The CEO of LendingClub Corp., Renaud Laplanche, was pushed out after the board said it found conflicts of interest with the company’s lending practices and the CEO’s lack of disclosure surrounding a personal investment.

LendingClub was the biggest and most successful in a wave of online lenders that originated since the financial crisis.

It is very confusing what was going on with various loans, including Laplanche’s failure to fully disclose a personal interest he held in an outside fund while the company was contemplating making an investment in same.

The SEC announced it is reviewing the company’s past disclosures to investors.  The Treasury Department has warned of the fragility of the business models for all the online lenders, a day after revelations of LendingClub’s problems.  Treasury’s white paper has been nine months in the making.

Big investors buy packages of loans from LendingClub and other online lenders.  I told you just last week that the whole FinTech sector, writ large, would implode.  With LendingClub it has started.

--As for the squelching, again, of the Staples-Office Depot combination, this one pisses me off.  It should have been allowed to go through.  [The Halliburton-Baker Hughes combo, on the other hand, absolutely not.]

Editorial / Wall Street Journal

“When regulators sue to stop a business combination, they usually claim they’re helping the little guy. But lawyers at the Federal Trade Commission aren’t even pretending that their successful case against the merger of Office Depot and Staples had anything to do with average consumers.  And neither is the federal judge who this week bought their astonishing argument.

“Stuck in a declining market, Staples and Office Depot have been reporting reduced sales.  Government lawyers might have noticed that people are using less paper and ink these days.  Then there are those little competitors called Amazon, Costco and Wal-Mart. Such competition is why the government couldn’t argue with a straight face that a merged company would force higher prices on individual consumers or small businesses. So the government claimed that the victims of the proposed merger would be huge corporations that buy in bulk.

“Amazon’s unit selling to this market is already a billion-dollar business, but the feds asked the court to believe there would be little competition for large corporate accounts.  As if Amazon and others couldn’t react to new opportunities if the combined firm started mistreating corporate giants....

“An FTC press release hailed the victory on behalf of ‘large businesses that buy office supplies.’  Washington lawyers are celebrating that they broke up another deal that made business sense, for the benefit of companies that wouldn’t have been harmed and don’t need protection.  Your government at work.”

--Facebook denied a report in Gizmodo that said the social media giant has a team that is in charge of its “trending” news list that routinely suppressed conservative points of view.  Previously, Gizmodo reported Facebook employees asked CEO Mark Zuckerberg if the company had a responsibility to “help prevent President Trump in 2017.”    Facebook denied it would ever try to manipulate elections.

Republican Sen. John Thune (S.D.) sent a letter to Zuckerberg asking him to explain how Facebook polices bias.

As the New York Times’ Farhad Manjoo wrote: “The biggest worry is that Facebook doesn’t seem to recognize its own power, and doesn’t think of itself as a news organization with a well-developed sense of institutional ethics and responsibility, or even a potential for bias....

“Most of the engineers, designers and others who decide what people see on Facebook will remain forever unknown to its audience.”

That sucks.  For all the bias many of us see in the mainstream media, you do know there are institutional rules and norms as to what’s acceptable and what’s not.  They aren’t always followed, but they are there.

Facebook, though, “declined to discuss whether any editorial guidelines governed its algorithms, including the system that determines what people see in News Feed.  Those algorithms could have profound implications for society.”

The Wall Street Journal reported on Friday that “Facebook exerts more editorial control than it previously disclosed over the ‘trending’ news feature, newly posted documents show....

“(The) documents underscore tensions between Facebook’s view of itself as an open platform for the exchange of ideas and the way it often functions as a traditional publisher, by selecting and highlighting certain news stories over others....

“According to the guidelines, Facebook’s curators shape computer-generated lists to select and present highlighted topics, including the ‘correct angle’ for a topic, the proper photo and the primary link to a news source.  They also include suggestions on ‘blacklisting’ items from the trending list because they duplicate other items, they are ‘stale,’ or they come with a ‘low quality hashtag.’  Under certain conditions, curators also can add topics not identified by Facebook’s software.”

Late Thursday, Zuckerberg said he plans to invite “leading conservatives and people from across the political spectrum” to discuss concerns about how Facebook presents news.

Separately, a Beijing court ruled in favor of Facebook and against a Chinese company that had registered “face book” as a separate trademark.

The court said the firm had “violated moral principles” with “obvious intention to duplicate and copy from another high-profile trademark.”

Facebook remains blocked in China but Mark Zuckerberg was recently in the country on a charm offensive.

--Apple invested $1 billion in Didi Chuxing, China’s biggest ride-hailing service, in one of the largest-ever strategic investments for the iPhone maker.  Its last big acquisition was of Beats, the headphone maker and music service, for $3 billion in 2014.

Apple’s sales in China were down 26% in the recent quarter, as it spends $billions on its secret car project that the Didi investment is somehow related to.

--I’ve said I would “short the crap out of Tesla” so I have to pass along the following from the Los Angeles Times’ Michael Hiltzik, writing this week:

“Here’s a dose of reality about Tesla’s heavily hyped mass-market Model 3 electric car: The company hasn’t yet finalized the design for the Model 3, hasn’t selected its parts suppliers, isn’t sure it can produce and deliver the car in volume and on time, and still needs to do ‘extensive testing’ to make sure the car can meet quality standards and government regulations....

“These warnings don’t come from a disgruntled onlooker, but from the one source immune to Tesla hype: its own financial reporting to the Securities and Exchange Commission.  The company’s latest quarterly report, issued Tuesday, bristles with risk disclosures that provide a counterweight of realism to the breathless claims the company makes when it doesn’t have to swear to them.

“For instance, in a first-quarter ‘update’ issued to customers and shareholders on May 4, Tesla reported having received more than 325,000 deposits for the Model 3 at $1,000 each.  Based on the projected retail price of $35,000 plus add-ons, this implied $14 billion in future sales, ‘making the Model 3 introduction the biggest consumer product launch ever.’

“Tuesday’s quarterly report [5/3], however, reminds shareholders that the Model 3 doesn’t yet exist in final form and hasn’t, in fact, been launched.  Until at least late 2017, the earliest date when the cars can start coming off the production line, the model is subject to ‘unanticipated deviations from the expected price point, vehicle features or performance characteristics.’  Translation: The Model 3 might cost more than $35,000 and not quite deliver the acceleration or driving range claimed at the March 31 announcement event.

“The car may not make the delivery deadline, either: ‘We may experience delays in realizing our projected timelines and cost and volume targets for the production, launch and ramp of our Model 3 vehicle,’ the company says.  And since customer deposits are fully refundable prior to sale, demand for the car could be a lot softer than it looks.”

Yes, a lot of the filing for the SEC is boilerplate, and having spent a long time on Wall Street myself I understand this, but as Michael Hiltzik notes, “Tesla isn’t just any company. It’s a highly speculative play that hasn’t racked up a significant performance history, and it has lost money every year.  Indeed, Tuesday’s filing reported a loss of $282.3 million for the three months ended March 31, up from a loss of $154.2 million for the same period last year.”

Remember, the Model S and Model X suffered long production delays and have seen numerous recalls.  I said from day one that the gull-wing doors on the Model X were beyond idiotic.  They are proving to be so.

TSLA shares were off just a smidge this week to $207.60, but that is well off the July 20 high of $286.65.  The stock is going to $90 by this time next year, if not sooner.  [And now I’ve set a marker for the archives, boys and girls.]

--Nissan agreed to buy a 34 percent stake in Mitsubishi Motors, the latter needing capital to survive a scandal over inflated fuel economy data.

The stake makes Nissan – itself the recipient of rescue funding in 1999 when Renault stepped in – the single largest shareholder in Mitsubishi.

--Walt Disney Co.’s revenue and earnings for its fiscal second quarter ending April 2 fell short of Street expectations and the shares cratered 5%.  Disney had met or beat analysts’ earnings-per-share expectations every quarter since 2011.

Overall revenue rose 4% in the quarter to $12.97 billion, while net income grew 2% to $2.14 billion.  Revenue at its movie studio grew 22% thanks to a string of blockbuster hits including “Star Wars: The Force Awakens,” “Zootopia” and “The Jungle Book.”

Average spending at Disney’s theme parks rose a solid 8%, though total revenue for the parks and resorts business grew 4%.  The company is opening $5.5bn Shanghai Disneyland on June 16, 17 years in the making.

Television revenue, though, was flat, with ESPN suffering a 13% drop in advertising sales, with subscriber numbers falling.  Part of the revenue shortfall was due to the college football playoff games falling in the previous quarter, while in 2015 it was in the fiscal second quarter.

Disney also took an unexpected $147 million write-down as it decided to dump its videogame-and-toy franchise “Infinity” and lay off close to 300 people who worked at it.

--Gold demand rose 21 percent in the first quarter of the year, according to the World Gold Council.  Record ETF buying was the reason. But jewelry demand remains weak, falling 19 percent in the quarter.

--For steel junkies, I have a piece on the market impact, if any, on my “Wall Street History” link.

--Austria’s billionaire Reimann family reached an agreement to buy Krispy Kreme Doughnuts for a 25% premium, or $1.35 billion.

In December, the family’s JAB Holding acquired Keurig Green Mountain, the single-serve coffee maker, for $13.9 billion.

--Shake Shack shares rose sharply, nearly 10%, after the burger joint reported a same-store sales increase of 9.9%, significantly higher than the expectations of a 5.3% increase.  Total revenue increased 43.4% to $54.2 million.  I’m drooling and can’t find my bib.

--In its spring auction, Sotheby’s had a disappointing sale of older art (the stuff I like...including Impressionism) on Monday, $145 million, with a third of its offerings going unsold, but then on Wednesday, it received $242.2 million for contemporary art (the stuff I don’t like), better than expected.

--University of Ottawa Professor Amir Attaran, who specializes in public health, said in an article published this week in the Harvard Public Health Review that the Rio Olympics should be postponed or moved because of the Zika outbreak, warning the influx of an estimated 500,000 visitors will result in the avoidable birth of malformed babies.

“What I’m asking for is a bit of delayed gratification so that babies aren’t born permanently disabled.”

Prof. Attaran argues that Zika is far worse than the IOC is willing to admit.

The International Olympic Committee said that it sees no need to cancel, delay or move the Games.

I saw Attaran on CNN Thursday and I totally agree with him as to the dangers, especially as he brought up the Guillain-Barre syndrome angle, yours truly, as I’ve written before, having a family member who came down with it years ago (and thankfully recovered...but many don’t).

But at this point, no way the Games are being canceled.

And yet, as I go to post, Puerto Rico has confirmed its first birth defect from Zika, a sickening tragedy.  The problem is there isn’t anyone in the world who knows what the condition of these babies will be in, say, two years.  Let alone the cost in places like Puerto Rico, or Brazil, to care for them.

Your heart breaks every time you see a Zika baby.  They don’t deserve this. 

--Morley Safer, the longest-serving correspondent on CBS’ “60 Minutes,” is retiring this week.

Safer, 84, joined the show in 1970 after working for CBS News for six years.  He has filed more than 900 reports.

“It’s been a wonderful run, but the time has come to say goodbye to all of my friends at CBS and the dozens of people who kept me on the air,” Safer said in a statement.  “But most of all I thank the millions of people who have been loyal to our broadcast.”

CBS is airing a one-hour tribute following the regular edition on Sunday.

I mean who didn’t like Morley Safer?!  Thank you, Mr. Safer, for your excellent work.

--Michael Strahan left “Live! with Kelly and Michael” on Friday, with Kelly Ripa clearly favoring her friend, Anderson Cooper, as the replacement.  “Live” takes in some $50 million in revenue and is highly profitable despite paying out $20 million to one of the true jerks on the planet, Ms. Ripa.

Foreign Affairs

Iraq/Syia/ISIS/Russia/Turkey: A tentative, short-term truce in the Syrian battleground city of Aleppo expired Thursday with no new last-minute extension, this as world powers are to meet in Vienna next week to try to advance peace talks that are hanging by a thread.

13 Iranian soldiers were killed near Aleppo in what appears to be the heaviest loss of Iranian life in Syria since it deployed forces to support Syrian President Assad five years ago.

In the Damascus region, aid was due to be delivered to the rebel-held town of Daraya, the first since 2012, according to the Red Cross.

The United Nations says more than 486,000 people are living under siege in Syria, more than half of them in areas besieged by the government.

Turkey vowed to cleanse the Syrian side of the border of ISIS extremists after the town of Kilis came under repeated deadly rocket fire.  Kilis is where many Syrians have sought refuge on the Turkish border.  Turkey claimed it killed 55 ISIS fighters in northern Syria last Saturday, in retaliation for weeks of rocket attacks on Kilis.

The Israeli Air Force reportedly struck a weapons convoy headed to Hizbullah fighters in Syria, the attack allegedly on the Syrian-Lebanese border on Tuesday.  This wouldn’t be Israel’s first incursion in Syria to stop the transfer of weapons.

But in a major blow to the terrorist organization at weeks end, Hizbullah’s top commander, Mustafa Badreddine, was killed in a large explosion near Damascus airport.  Badreddine was behind all Hizbullah military operations in Syria since 2011.

Badreddine had also been charged with leading the assassination of former Lebanese PM Rafik Hariri in Beirut in 2005.

At first Hizbullah blamed Israel, but a later statement on its main web site did not mention it.

Aside from this big news, though, the major developments this week involved the violence in Iraq, where a series of bombings in Baghdad by ISIS killed 93 on Wednesday; the deadliest attacks of the year.

In Tikrit on Friday, suspected ISIS gunmen sprayed fire on a restaurant, killing 12, and then a suicide bomber in another area killed at least four more.

Earlier, 20 Iraqi soldiers were killed in yet another ISIS attack.  Gee, I guess ISIS is “on the run.”

Meanwhile, as the Washington Post’s Liz Sly writes in an extensive report this week, U.S. officials are no longer putting a time frame on the long-planned offensive to retake the ISIS stronghold of Mosul, the battle for which is now a year overdue. As Ms. Sly writes:

“The recent dramatic storming of Baghdad’s fortified Green Zone by supporters of the Shiite cleric Moqtada al-Sadr offered one example of the kind of conflicts that could erupt in Iraq well before the militants are defeated,” as former ambassador to Syria, Robert Ford, notes.

“The Americans are so happy every time a village falls, they lose sight of the forest while looking at all the trees,” he said.

Editorial / Army Times

“Gen. Joe Dunford, chairman of the Joint Chiefs of Staff, pinned Purple Hearts on four fellow Marines on April 22 at a remote outpost in northern Iraq.  They and four other Marines were wounded in an attack by the Islamic State group that killed their buddy, Staff Sgt. Louis Cardin.

“Less than a week later, Dunford was seated before the Senate Armed Service Committee, serving as a lightning rod for lawmakers’ frustration with the White House’s refusal to recognize that U.S. troops deployed to help in the fight against ISIS were on a combat mission.

“Dunford wouldn’t answer for the White House, but he didn’t mince words in expressing his view: Cardin ‘was killed in combat, senator,’ he told the Republican from Alaska, Dan Sullivan.

“So too was Master Sgt. Joshua Wheeler, a Special Forces soldier killed in Iraq last October as part of Operation Inherent Resolve.

“Defense Secretary Ash Carter had his chairman’s back, also telling lawmakers the U.S. troops were killed in combat.

“ ‘Why,’ Sullivan asked during the back and forth, ‘can’t we level with the American people’ and say that U.S. troops in harm’s way in the Middle East are in combat?’

“Why indeed....

“(The) administration is trying to have it both ways and appear to be keeping the U.S. out of war while steadily building up forces in the region, increasing the number of troops deployed to combat zones, dropping bombs on enemy forces and, when necessary, engaging them in direct action....

“The Pentagon has even created an Operation Inherent Resolve campaign medal for troops who have deployed as part of the mission to crush ISIS.

“Where those fights are being waged, American forces are targets from the moment they arrive.  That they are tasked to train local forces to defeat ISIS and other enemies makes U.S. forces all the more vulnerable.  The dangers were made clear again on May 3, when Navy Special Warfare Operator 1st Class (SEAL) Charlie Keating was killed on a quick-reaction mission to aid U.S. military advisers under attack in Iraq.

“Calling it a training mission is cold comfort to the parents, spouses and children of the deployed troops. They know what happened to Cardin, Wheeler and Keating. They’ve seen the reports on how the Islamic State treats those captured.  They know hostilities are growing and sense, rightly or wrongly, that a greater showdown may be in the offing and that U.S. forces very well may be in the middle of it.

“The more the White House insists these troops are not part of a combat mission, the more distrust it breeds in the ranks and among the public. It’s viewed as the sort of condescending semantics Washington plays to deny the obvious.  That can serve only to erode support for the mission....

“When U.S. and allied troops are on Islamic State turf with the mission of wiping it from existence, they are on a combat mission. Calling it anything else is wrong.”

Iran: Iran’s army claimed this week that the Russian S-300 air defense system was operational, though this is not known for sure.  Defense Minister General Hossein Dehghan also said Iran would start manufacturing its own air defense system this year that would be “able to destroy several targets at once.”

And Iran continues to conduct ballistic missile tests, with Tehran earlier this week claiming it successfully tested one with a range of 1,240 miles, well within the reach of all of Israel.  At some point these missiles could carry nuclear warheads.  But then Gen. Dehghan said Iran had not test-fired such a missile as media was citing.

Last week I wrote of the Sunday Times magazine piece on Obama foreign policy adviser Benjamin Rhodes, where, by his own admission, he said he manipulated the news media, flat-out lied, to sell the Iranian nuclear deal.

Richard Cohen / Washington Post

“The lie exposes a truth.  Obama wanted the deal (almost) no matter what.  He had not been beckoned into the talks by more reasonable Iranians, but had initiated them with the previous regime.  In other words, he wanted the talks more than the Iranians did – a negotiating position of great weakness.  It explains why nothing in the agreement thwarts Iranian efforts to support terrorism in the Middle East or continue to make mayhem in Iraq.  It lowers the odds that Iran will continue to adhere to the agreement.

“Rhodes, who had scant background in foreign affairs before typing his way into the heart of the president, is now so close to Obama that ‘I don’t know anymore where I begin and Obama ends.’  (One more interview like this and he’s going to find out.)  Many say Rhodes and the president have a ‘mind meld,’ and so the reader authoritatively learns of the centrality of Iran to the president’s thinking.  If Obama can reach some understanding with Iran, he can rid himself of the pesky Middle East and pivot – a word that comes to mind – elsewhere. Whatever the case, American boots will not hit the ground unless it is to protect vital American interests – the sole standard for measuring success....

“Rhodes calls the foreign establishment ‘the Blob’ and he, like the president, dismisses its fusty thinking and crows the cleverness of their own, especially – and amazingly – the success of their Syria policy. Their only standard is the number of Americans who have died there – very few.  That is commendable, but it is false to assert by implication that an alternative policy would have done otherwise.  The intervention in Libya cost zero American lives; so too the ones in Kosovo and Bosnia. The United States could have implemented a no-fly zone in Syrian skies.  It could have grounded the Assad regime’s helicopters, which drop barrel bombs on civilians, eviscerating them with nails, pellets and scrap.

“No one knows anymore how many have died in Syria’s civil war – maybe as many as 400,000.  [Ed. the new figures I’ve been using.]  More than 4 million people have fled the country, swamping Europe and coming pretty close to destabilizing governments.  The continent has turned sour, inhospitable to migrants yet hospitable to right-wing groups last seen in black-and-white newsreels.  Russia now arguably has more influence in the Middle East than the United States does, and Iran and its proxies are everywhere.  The United States hasn’t pivoted.  It’s plotzed.

“If this is success, what constitutes failure?  When Obama and his mind-melded sidekick proclaim their own brilliance and the failure of almost everyone else, what are they talking about?”

Egypt: Islamic State-linked Sinai province group claimed responsibility for an attack on a minibus filled with plainclothes policemen south of Cairo, killing eight.

Afghanistan: A horrible accident between a fuel tanker and two buses on a major highway here killed a staggering 73.  The crash was reportedly caused by reckless driving, according to officials.  There were 125 passengers on the two buses.

China: The Permanent Court of Arbitration in The Hague is expected to rule against China in the next few weeks in a case brought by the Philippines against China’s island-building in the South China Sea.  Ahead of the ruling, China is stepping up its propaganda machine.  A Chinese ambassador, Liu Xiaoming, accused the United States and Britain of meddling in the disputes in the region and escalating tensions.

“Some countries outside the South China Sea claim to be taking no side in sovereignty disputes, but they are actually doing all they can to get involved.  The military vessels and planes they send to the region and the accusations they throw at China only encourage certain countries in the region to behave even more recklessly, increasing the tension,” he said.  [South China Morning Post]

This week China scrambled two fighter jets to shadow a United States Navy warship that sailed close to a disputed reef, a move denounced as “provocative” and “illegal” by Beijing.

As for the coming court ruling, the Philippines is contesting China’s claim to more than 80 percent of the South China Sea.  It is going to be interesting to see what Washington does when the court rules against China, seeing as China will ignore the decision and continue with its buildup.

Speaking of the Philippines, voters there elected Rodrigo Duterte as its new president, a right-winger who is a populist demagogue who succeeds a pillar of the old elite, Benigno Aquino III, who has presided over a strong economy and the upgrading of the military alliance with the U.S.

But poverty and corruption remain deeply rooted and Duterte was able to win with just 39 percent of the vote, a plurality in the Philippines’ electoral system.

Editorial / Washington Post

“Some (of Duterte’s promises) are clearly undeliverable: The president-elect said he would eliminate violent crime in six months.  Some could be dismissed as hyperbole, such as the pledges to litter Manila Bay with the bodies of criminals and to ride a Jet Ski to plant a flag on Scarborough Shoal, the disputed territory 150 miles offshore seized by China in 2012.

“However, there is more than rhetoric to Mr. Duterte’s menace.  Human Rights Watch dubbed him the ‘death squad mayor’ for more than 1,000 extrajudicial executions of alleged criminals, including some street children, during his 20 years as mayor in Davao.  Far from offering excuses, Mr. Duterte has embraced that record and promised to repeat it on a national scale; he says he will murder suspects himself and then grant himself a presidential pardon.”

Oh brother.  Plus Duterte has expressed doubts about the alliance with Washington and hinted he is ready to strike a deal with China.

Separately, I have been writing of Chinese President Xi’s increasingly authoritarian nature, especially in terms of the press and censorship. 

Editorial / Wall Street Journal

“The Journal reported Wednesday that Chinese government officials are warning economists, analysts and business reporters who point out problems such as capital outflows and rising bad loans that they should be more upbeat.  This could mean the economy is in worse shape than previously thought. And it shows that the government’s obsession with restoring authoritarian control over all aspects of life is spiraling, well, out of control.

“The penalty for negativism is not spelled out, but after what happened to Wang Xiaolu there is no need. A reporter for the financial magazine Caijing, he accurately reported last year that the authorities would soon scale back measures to prop up the stock market.  Mr. Wang was detained and forced to confess his ‘crime’ on state television.

“Without the free flow of information China can’t build a functioning market economy. The regime’s Western apologists, among them many business leaders, long claimed that things would get better because there were no communists left in the Communist Party.

“Yet since he came to power in 2012, General Secretary Xi Jinping has put politics in command, as Mao Zedong put it 50 years ago.  Mr. Xi urged Party members to ‘embrace the spirit of Mao’ and make ideology the priority....

“Officials harass foreign companies by holding up licensing and certification, antitrust actions, attacks in the state-run media, and a range of disciplinary actions including fines and detention of executives....

“Optimists hoped that Mr. Xi would prove a reformer in the mode of Deng Xiaoping.  But Deng had a ‘go for growth’ mentality and was willing to tolerate some liberalization of information flows to make China prosperous.  Mr. Xi seems determined to restore levels of control last seen under Mao, with predictable economic consequences.”

On a lighter note, Britain’s Queen Elizabeth was caught on camera saying Chinese officials were “very rude” during last year’s state visit by President Xi Jinping.  The Queen made her remarks to Metropolitan Police Commander Lucy D’Orsi, who the monarch was told had overseen security during Xi’s visit in October.

Discussing the treatment of Britain’s ambassador to China, the Queen said: “They were very rude to (him).”

D’Orsi replied: “They were...it was very rude and undiplomatic I thought.”

North Korea: State news media published a list of officials newly selected for senior posts and at least one name came as a surprise: Ri Yong-gil, a prominent general.

In February, South Korean officials said Gen. Ri had been executed on corruption charges.  But Tuesday we learned he was not only alive, he was a member of the Central Committee of the North’s ruling Workers’ Party, as well as its Central Military Commission.

The appointments were made during the Workers’ Party congress that ended Monday.  Kim Jong-un used the congress to cement his grip on power, Kim now being called “the supreme leader of our party, state and military.”  The new post was leader of the party, as he already held the top posts in the military and government.

During the party confab, it was announced that North Korea will act like a “responsible nuclear power,” while working for “the denuclearization of the world.”

But the North made no commitment to denuclearize itself.  It also continued to demand the United States stop its annual joint military drills with South Korea.

David E. Sanger and Choe Sang-Hun / New York Times

“After years of trying to separate fact from propaganda about North Korea’s nuclear program, American and South Korean intelligence officials say they have concluded that the country can now mount a small nuclear warhead on short- and medium-range missiles capable of hitting much of Japan and South Korea....

“The assessment of the North’s new capabilities is not based on direct evidence from inside its nuclear program, senior officials said, but draws on intelligence gleaned from high-level defectors, analysis of propaganda images and data collected from North Korean missile and nuclear tests, which have accelerated over the past six months.

“While some intelligence agencies suggested as early as 2013 that the North had learned enough about rocket engineering and the miniaturization of nuclear warheads to mount one on  a shorter-range missile, there is a new consensus and greater confidence in that view in both Washington and Seoul, the officials said.”

Victor Cha, who was  a senior official on President George W. Bush’s National Security Council, said American policy had been ‘concerned about not overreacting to every North Korean provocation, and that made sense when their capabilities were not all that formidable.

“ ‘But now they have been in a spiral of escalation, and we are underreacting when their capabilities are accelerating.’” [Sanger / Sang-Hun]

Russia: Britain said its fighter jets were scrambled to intercept three Russian military transport aircraft approaching the Baltic States on Thursday.  The Typhoon fighters, based in Estonia, intercepted the Russian aircraft that had failed to transmit a recognized identification code and were unresponsive.  Defense Secretary Michael Fallon said in a statement: “We were able to instantly respond to this act of Russian aggression – demonstration of our commitment to NATO’s collective defense.”

Meanwhile, the U.S. activated a land-based missile defense station in Romania, which will form part of a larger European shield that has Moscow fuming.

The U.S. says the Aegis system is designed to protect NATO from short- and medium-range missiles, particularly from the Middle East.

But Russia sees it as a security threat – a claim denied by NATO.  Russia’s foreign ministry warned on Wednesday that the system violated a treaty on nuclear forces, the INF (Intermediate-Range Nuclear Forces) Treaty of 1987.

Then on Friday, Vladimir Putin said Russia will “neutralize emerging threats.” 

Separately, Germany blamed Russia for a huge cyberattack on its parliament last year and has said the Kremlin could be planning further assaults on its institutions; a highly unusual public warning out of Berlin.

The attack last year sought to install software that would have granted attackers permanent access to computers used by MPs and staff.

We need Germany to finally get really mad.  And I’d start by arresting former Chancellor Gerhard Schroder...a true bastard and traitor (and Putin buddy, if you didn’t know).

On a different matter, from an extensive report by the New York Times’ Rebecca R. Ruiz and Michael Schwirtzmay:

“Dozens of Russia athletes at the 2014 Winter Olympics in Sochi, including at least 15 medal winners, were part of a state-run doping program, meticulously planned for years to ensure dominance at the Games, according to the director of the country’s antidoping laboratory at the time.

“The director, Grigory Rodchenkov [Ed. he also appeared last Sunday on “60 Minutes”], who ran the laboratory that handled testing for thousands of Olympians, said he developed a three-drug cocktail of banned substances that he mixed with liquor and provided to dozens of Russian athletes, helping to facilitate one of the most elaborate – and successful – doping ploys in sports history.

“It involved some of Russia’s biggest stars of the Games, including 14 members of its cross-country ski team and two veteran bobsledders who won two golds....

“Russian antidoping experts and members of the intelligence services surreptitiously replaced urine samples tainted by performance-enhancing drugs with clean urine collected months earlier...

“By the end of the Games, Rodchenkov estimated, as many as 100 dirty urine samples were expunged.

“None of the athletes were caught doping.  More important, Russia won the most medals of the Games, easily surpassing its main rival, the United States.”

The Times approached Russian officials to respond, with Sports Minister Vitaly Mutko calling the revelations “a continuation of the information attack on Russian sport.”

In November, Russia was suspended from international track and field competition, including for the Rio Olympics.  Leaders of the sport’s global governing body will decide soon whether to lift a ban ahead of the Games.

Brazil: Speaking of the Olympics, President Dilma Rousseff will not be presiding over the Games in Rio, having just been suspended this week for up to 180 days while she is put on trial for breaking budget laws amid a sprawling corruption scandal.  Rousseff, a leftist in office since 2011, was replaced by her vice president, centrist Michel Temer, who took over after the Senate voted 55-22 to proceed with an impeachment trial.  He is technically “interim” president as the trial is held.  [The trial must take place in the allotted time, which expires November 8.]

Rousseff vowed to fight on.  “I may have made mistakes but I did not commit any crime,” she said, calling the impeachment “fraudulent” and “a coup.”

But the size of the vote to put her on trial shows she is unlikely to be acquitted as a two-thirds majority is required to convict Rousseff and remove her permanently from office.

Brazil’s economy is in a depression, and with the Games looming amid the Zika crisis, Temer must act quickly on a number of fronts.  His first step was to name Henrique Meirelles as his finance minister, a man who had a stellar reputation as central bank governor between 2003 and 2010, when the Brazilian economy boomed.

Britain: Prime Minister David Cameron was caught on-mic telling the Queen that Nigeria and Afghanistan are “fantastically corrupt” countries, which is one of his worst gaffes.

Cameron was speaking ahead of his anti-corruption summit being held in London.

So Cameron is seen in footage with the Queen and other top figures, clearly telling her: “We’ve got some leaders of some fantastically corrupt countries coming to Britain... Nigeria and Afghanistan, possibly the two most corrupt countries in the world.”

Granted, Transparency International in its latest Corruption Perceptions Index ranks Nigeria 136 and Afghanistan worst at 166.  But the current leaders of both have vowed to fight corruption.

For Cameron, the timing of his remarks could not be worse, not only for the Brexit vote, but should he lose that one, the effort to remain as leader of the Conservatives.

Random Musings

--Tuesday, May 10 primary results....

Republicans

West Virginia: Donald Trump 77%, Ted Cruz 9%

Nebraska: Trump 61%, Cruz 18%, Kasich 11%

Delegates

Trump 1134 (1237 needed for the nomination)
Cruz 564

Democrats

West Virginia: Bernie Sanders 52%, Hillary Clinton 36%

Delegates

Clinton 2240, including superdelegates (2383 needed for the nomination)
Sanders 1473

--In a major first look at some key states in November, Quinnipiac University’s polling shows Donald Trump doing much better in one-on-one matchups with Hillary Clinton than we had been led to believe.

Florida...Clinton leads 43-42 (obviously within margin of error)
Pennsylvania...Clinton leads 43-42
Ohio...Trump leads 43-39

Not that it matters anymore, but Sanders beats Trump in all three.

It also needs to be mentioned that Quinnipiac has been the worst in predicting primary outcomes for both the Republicans and Democrats.

However, a new Reuters/Ipsos national poll released on Wednesday has Clinton with just a 41-40 lead, with 19% undecided.  What is staggering about this one is that the gap was 13 points just a week earlier, though that was when Cruz and Kasich dropped out, with most of their supporters then moving over.

--Michael Goodwin / New York Post

“Big Media’s fixation on the defections of Big-Name Republicans is the latest proof that both groups remain stubbornly disconnected from real Americans.  If Trump had been dependent on the support of Mitt Romney or Sen. Lindsey Graham or assorted pundits and donors, he never would have gotten 10 million primary votes.

“He launched a rocket-fueled revolution, defeated 16 rivals and became the presumptive nominee by running against the entire national establishment, not to mention conventional wisdom and both political parties.

“Now he’s doomed if Romney doesn’t back him?  Nonsense....

“By all means, endorsements are generally a good thing for candidates, and party unity is usually regarded as an essential starting point.  But the claim that Trump must finally conform to all the traditional norms repeats the false assumptions that led the media and most Republicans to miss Trump’s astonishing appeal in the first place.

“He is a phenomenon, much as Barack Obama was in 2008, and he could do to Clinton what Obama did to her then.  Obama was fresh, and she was tired.  Now Trump is fresh, and Clinton is even more tired.

“One result is that the campaign will be fought on his turf.  The issues most associated with him – immigration, terrorism, trade, jobs – dominated the GOP primaries.

“Indeed, try to imagine the last year without Trump. Who would have set the GOP agenda, what issues would have led the way, and how would voters have responded? Would turnout have hit record levels when so many Republican voters feel betrayed by their own party leaders?

“Trump stirred the drink from day one and the ability to set the terms of the contest is usually the hallmark of a winning campaign. That’s what he’s done so far, and that’s what he’ll try to do in the fall....

“Her big advantage is the Electoral College, and she will try to shut him down by relentlessly playing the women’s and racial cards. And it’s certain Trump will hand her gaffe gifts and display an embarrassing lack of detailed knowledge.

“We know all that already, yet still they are tied in the states that matter most.  She may win and he may lose, but neither The New York Times nor Mitt Romney will make a whit of difference.”

--Trump is being criticized, and rightly so, for his sudden decision not to release his tax returns before the election, which were he to stick to this position would make him the first major-party nominee since Gerald Ford in 1976 not to release even one year of actual returns.

Trump continues to fall back on his stance that since he is undergoing an audit, they will be released when the audit is complete, but late Wednesday he seemed to backtrack a little again in saying, in essence, he didn’t expect the audit to be complete until after the election.

Aaron Elstein / Crain’s New York Business

“Trump’s tax returns would tell us about how the presumptive GOP presidential nominee really ticks more than any other document, which is precisely why he doesn’t want them made public.  The returns would go a long way to revealing just how wealthy this self-proclaimed billionaire really is.  Trump once said in a court deposition that his wealth ‘goes up and down with markets and with attitudes and with feelings, even my own feelings.’  But you can’t fudge a tax return – unless, of course, you’re willing to risk getting caught for fraud.”

Among the questions Mr. Elstein wants answered:

“Have you sheltered any income in offshore entities?  Do you control any shell companies?

“How many of your personal expenses have you billed to your company, the Trump Organization?  Such expenses must be taxed like income, so have they been?  Likewise, celebrities often deduct expense associated with promoting and maintaining their image. How do you handle this, considering that your brand and company are closely connected?....

“In your financial statement filed last year with the Federal Election Commission, you claim that you made $362 million in income in 2014.  However, Fortune demonstrated that figure overlooks a flood of expenses and is actually revenue.  How much did you really make in 2014 and other years, and why don’t you want voters to know?”

--Sheldon G. Adelson / Washington Post...on endorsing Donald Trump

“For nearly eight years, Republicans have fought tooth and nail against President Obama and his policies. We waged battles over debt, government spending, Obamacare and the Iran nuclear deal – an issue of paramount importance to me personally and to many others around the world.

“We gained some victories, but on too many issues Obama achieved his goals, if not necessarily America’s goals.  As Republicans, we know that getting a person in the White House with an ‘R’ behind his name is the only way things will get better.

“That opportunity still exists.  We must not cut off our noses to spite our faces....

“I’ve spent time talking to Donald Trump.  Do I agree with him on every issue?  No.  But it’s unlikely that any American agrees with his or her preferred candidate on every issue.

“After the 2012 election cycle, I was asked frequently what I would look for in a future presidential contender. While I had some personal preferences because of friendships with some of the 2016 candidates, I kept coming back to the issue of executive experience....

“(Trump) is a candidate with actual CEO experience, shaped and molded by the commitment and risk of his own money rather than the public’s....

“You may not like Trump’s style or what he says on Twitter, but this country needs strong executive leadership more today than at almost any point in its history....

“Republicans have the candidate who the people decided is our winner from a field of 17 viable contenders.  It’s time for all Republicans to mount up and back our nominee.”

--What will the FBI and federal prosecutors do with Hillary Clinton’s email probe and what will it mean for the Attorney General and Justice Department? As Julian Hattem of The Hill puts it:

“If Clinton doesn’t face charges, (AG Loretta Lynch and Justice) will certainly come under criticism from conservatives who will suspect President Obama’s administration of covering up for a former Cabinet member.

“Yet if charges are brought, Democrats are just as sure to question the motives of FBI Director James Comey, a Republican who worked for the Bush administration.”

But now that the FBI has reportedly interviewed multiple Clinton aides, and is supposedly interviewing her in the coming days, there seems little reason not to act one way or another by the summer.

Except Comey himself said on Wednesday: “In any investigation, especially one of intense public interest...we want to do it well, and we want to do it promptly.  So I feel pressure to do both of those things.  As between the two, we will always choose ‘well.’”  Read it could easily be delayed until after November. [Byron Tau / Wall Street Journal]

Sen. John Cornyn (Tex.), the No. 2 Senate Republican, has requested a special prosecutor but Justice has declined to appoint one and doing so would take the case beyond the election anyway.

Trump faces a legal challenge of his own with the civil fraud case in California over Trump University beginning in November, but his testimony won’t be until after Nov. 8.

--Bret Stephens / Wall Street Journal

“The best hope for what’s left of a serious conservative movement in America is the election in November of a Democratic president, held in check by a Republican Congress.  Conservatives can survive liberal administrations, especially those whose predictable failures lead to healthy restorations – think Carter, then Reagan. What isn’t survivable is a Republican president who is part Know Nothing, part Smoot-Hawley and part John Birch.  The stain of a Trump administration would cripple the conservative cause for a generation.

“This is the reality that wavering Republicans need to understand before casting their lot with a presumptive nominee they abhor only slightly less than his likely opponent.  If the next presidency is going to be a disaster, why should the GOP want to own it?....

“Conservatives are also supposed to believe that it’s folly to put hope before experience; that leopards never change their spots. So what’s with the magical thinking that, nomination in hand, Mr. Trump will suddenly pivot to magnanimity and statesmanship?  Where’s the evidence that, as president, Mr. Trump will endorse conservative ideas on tax, trade, regulation, welfare, social, judicial or foreign policy, much less personal comportment?

“For conservatives, a Democratic victory in November means the loss of another election, with all the policy reversals that entails.  That may be dispiriting, but elections will come again.  A Trump presidency means losing the Republican Party. Conservatives need to accept that most conservative of wisdoms – sometimes, losing is winning, especially when it offers an education in the importance of political hygiene.”

--George Will / Washington Post...on the numbers issue Trump faces (I do not agree with some of Will’s conclusions).

“In 2012, 93 percent of self-described Republicans who voted did so for Mitt Romney.  Trump probably cannot receive 80 percent of what probably will be, because of discouragement and revulsion, a smaller Republican turnout.  Romney lost 73 percent of the Hispanic vote; Trump is viewed unfavorably by 82 percent of Hispanics and very unfavorably by 62 percent.  Trump probably will receive significantly less than Romney’s ruinous 27 percent of this vote.  And because of demographic trends and Trump’s motivating policies and insults, Hispanic turnout probably will be significantly larger than in 2012, as the white percentage of the electorate continues to shrink.  Romney won just 37 percent of young voters (18-29); Trump is unlikely even to match this.  Although Romney won 53 percent of married women, he received just 44 percent of the total female vote.  Today, Trump trails Hillary Clinton among women by 19 points (35 percent to 54 percent), and most women probably do not yet know that he testifies to the excellence of his penis....Or that his idea of masculinity is to boast about conquests of women ‘often seemingly very happily married’ and that ‘I have been able to date (screw).’....

“(Trump’s) metabolic urge to be scabrous guarantees that Republican candidates everywhere will be badgered by questions about what they think about what he says.  What they say will determine how many of them lose with him, and how many deserve to.”

--On the top of the above-mentioned story on Facebook that it suppressed conservative news on its “trending” feature, Facebook employees have donated $114,000 to Hillary Clinton, compared to Marco Rubio, who received the second-most donations from employees of the social media giant at $16,600, as reported by The Hill and per the candidates’ report to the Federal Election Commission.

But this only reflects itemized contributions, so it’s not a perfect reflection of the number of Facebook employees who donated.  As in candidates don’t have to give information on contributions less than $200 and Bernie Sanders has a vast majority of his more than $182 million in this latter category, or as The Hill’s Mario Trujillo reports, “only about $66 million of those donations include information about the people who donated.”

--Stephen F. Hayes / The Weekly Standard

“Clinton and Trump are the least popular major-party candidates in the history of polling.  Hillary Clinton is viewed ‘very unfavorably’ by 37 percent of Americans; Trump is viewed ‘very unfavorably’ by a staggering 53 percent.

“Senator Ben Sasse, a newly elected Republican from Nebraska, is one of only a few elected conservatives to demonstrate any political courage.  In an open letter to Americans ‘who think both leading presidential candidates are dishonest and have little chance of leading America forward,’ Sasse argued against defeatism and complacency.

“ ‘There are dumpster fires in my town more popular than these two ‘leaders.’  With Clinton and Trump, the fix is in. Heads, they win; tails, you lose. Why are we confined to these two terrible options? This is America. If both choices stink, we reject them and go bigger. That’s what we do.  Remember: our Founders didn’t want entrenched political parties. So why should we accept this terrible choice?’

“Yes, why?”

--As reported by Bloomberg, Trump is seriously considering former House Speaker Newt Gingrich as his running mate, a choice that makes eminent sense except it won’t do anything for him in terms of attracting minorities.  Another prospect who ticks off many of the boxes is Ohio Sen. Rob Portman.

--Former New York Senate Majority Leader Dean Skelos was sentenced to five years in prison on charges he used his office to extort money and gain a job for his son.  The son was sentenced to 6 ½ years.

Last week it was former Assembly Speaker Sheldon Silver who received a 12-year term in another bribery case.

Investigations into New York City Mayor Bill de Blasio and New York Gov. Andrew Cuomo’s office continue.  Heh heh.

--AAA’s Foundation for Traffic Safety released a study that found that drivers can have a low level of THC, the active ingredient in marijuana, in their blood and be unsafe behind the wheel, while others with relatively high levels may not be a hazard. 

As Mary Wisniewski of the Chicago Tribune writes: “Marijuana is not metabolized in the system in the same way as alcohol.  So while a person with a blood-alcohol level of .08 or higher is considered too drunk to drive, it’s not possible to say the same thing absent other evidence about a person testing at 5 nanograms per milliliter of blood of THC – the level used to find impairment by Colorado, Montana and Washington, the study found.”

The report is important because12 states have laws forbidding any level of marijuana in the system while driving.  Illinois is one state considering raising the level to 5ng/ml., but what does this really mean?

THC is also difficult to measure since the AAA study found it takes two hours, on average, to collect blood from a suspect driver and levels can decline rapidly for occasional users, while frequent pot users can exhibit high levels long after use, thus making it difficult to develop fair guidelines, per the study.

AAA is urging states to develop behavioral and physiological evidence through field sobriety tests.

Meanwhile, AAA released a second study Tuesday that showed fatal crashes involving drivers who recently used marijuana had doubled in Washington after that state legalized the drug in Dec. 2012; jumping to 17 percent from 8 percent between 2013 and 2014.

--Lastly, as reported by the Wall Street Journal, “Astronomers using NASA’s Kepler Space Telescope announced Tuesday they have confirmed the existence of 1,284 newly discovered planets around distant stars....

“Nine of these newly verified worlds are potentially habitable, orbiting their stars in a zone warm enough for water to pool as a liquid, which is considered essential for life as we know it.”

But what if I don’t want life as we know it?  Give me something different. 

---

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

God bless America.

---

Gold $1273
Oil $46.21

Returns for the week 5/9-5/13

Dow Jones  -1.2%  [17535]
S&P 500  -0.5%  [2046]
S&P MidCap  -0.8%
Russell 2000  -1.1%
Nasdaq  -0.4%  [4717]

Returns for the period 1/1/16-5/13/16

Dow Jones  +0.6%
S&P 500  +0.1%
S&P MidCap  +3.0%
Russell 2000  -2.9%
Nasdaq  -5.8%

Bulls  39.2
Bears  21.6  [Source: Investors Intelligence]

88-year-old Dr. Bortrum fired a 35 at the world famous Summit Municipal golf course the other day.  As Ronald Reagan would have said, ‘Not bad, not bad at all.’

Have a great week.

Brian Trumbore



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Week in Review

05/14/2016

For the week 5/9-5/13

[Posted 11:30 PM ET, Friday]

Note: 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. Thank you to Claude B. for his ongoing contribution this week.

Edition 892

Washington and Wall Street

First off, I’m not commenting on Donald Trump’s latest self-made gaffe, then lie, concerning a 1991 recording of comments to a reporter where he pretended to be someone else, John Miller; no relation to former reliever Stu Miller, who was once blown off the pitcher’s mound during the 1961 All-Star Game at Candlestick Park...but I digress.

No, I have plenty on The Donald and Hillary down below, though I’m glad, as a Republican who has twice voted ‘third party,’ that Trump and House Speaker Paul Ryan, no relation to former catcher Mike Ryan, who hit .193 for his 11-year major league career (1964-74), got along well enough in their first meeting on Thursday.

It’s just that I’m already really tired of this race and wish we could fast-forward to post-Labor Day and the debates, which will obviously be must-see television.  The ratings will be huuuge!  I hope some of you are already stocking up on beer (in my case, domestic) as well as Chex Mix.

But in actuality, I wish I could go away and disappear from it all...until eight years from now as I eagerly await Ivanka’s candidacy.  Queen Ivanka.  It has a nice ring to it for this crazy, yet amazingly successful, melting pot of ours.

Anyway, there was little economic data on the week, but the one big report that came out, April retail sales, was highly encouraging, up 1.3%, and, importantly, up 0.6% ex-autos and gas. This latter figure is up a solid 4.4% year over year.

The Atlanta Fed’s GDPNow indicator, when taking the latest numbers on retail trade into account, pegs second-quarter GDP at 2.8%, annualized, this after Q1 growth was just 0.5% (first estimate).  But add the two together and we are essentially at another 2%-ish growth mark for 2016.  Nothing changes, year in and year out.

The thing is we aren’t spending money at the malls, as I discuss in detail with some of the earnings reports below.  It’s on travel, meals and home improvement. 

Coincidentally, prior to the release of Friday’s retail sales data, economist Robert Samuelson of the Washington Post wrote some of the following:

“American consumers aren’t what they used to be – and that helps explain the plodding economic recovery.  It gets no respect despite creating 14 million jobs and lasting almost seven years. The great gripe is that economic growth has been held to about 2 percent a year, well below historical standards. This sluggishness reflects a profound psychological transformation of American shoppers, who have dampened their consumption spending, affecting about two-thirds of the economy.  To be blunt: We have sobered up.

“This, as much as any campaign proposal, may shape our economic future. There’s an Old Consumer and a New Consumer, divided by the Great Recession.  The Old Consumer borrowed eagerly and spent freely. The New Consumer saves soberly and spends prudently. Of course, there are millions of exceptions to these generalizations.  Before the recession, not everyone was a credit addict; now, not everyone is a disciplined saver.  Still, vast changes in beliefs and habits have occurred.

“A Gallup poll shows just how vast.  In 2001, Gallup began asking: ‘Are you the type of person who more enjoys spending money or who more enjoys saving money?’  Early responses were almost evenly split; in 2006, 50 percent preferred saving and 45 percent favored spending.  After the 2008-2009 financial crisis the gap widened spectacularly.  In 2016, 65 percent said saving and only 33 percent spending.

“What’s happening is the opposite of the credit boom that caused the financial crisis. Then, Americans skimped on saving and binged on borrowing.  This stimulated the economy.  Now, the reverse is happening.  Americans are repaying old debt, avoiding new debt and saving more.  Although consumer spending has hardly collapsed, it provides less stimulus than before.  (A conspicuous exception: light-vehicle sales, which hit a record 17.4 million in 2015).

“Consider the personal savings rate: the difference between Americans’ after-tax income and their spending.  If a household has income of $50,000 and spends $45,000, its savings rate is 10 percent.  Here are actual figures.  From 1990 to 2005, the savings rate dropped form 7.8 percent to 2.6 percent.  Since then, the savings rate has risen; it was 5.1 percent in 2015....

“In theory, it’s easy to replace lost consumer demand. In practice, it’s not so easy.  Businesses could build more factories and shopping malls.  But with weaker consumer spending, do we need them?  More exports would help, but economies abroad are weak....

“Whatever happens, the public and politicians should take note: This legacy of the Great Recession will endure.  It has left a deep psychological scar that won’t soon heal.”

Europe and Asia

Eurostat, the statistical arm of the European Union, released its flash estimate for first-quarter GDP and for the eurozone, GDP was up 0.5% over the fourth quarter, which was up 0.3%.  Annualized growth was 2.1%, but no one really believes the EA19 will continue at that pace, at least this year.  More likely growth will be around 1.5%, which is the current year over year pace.

Germany saw Q1 GDP rise a solid 0.7%, but the government expects this pace to moderate in Q2.  Year over year, GDP is up 1.6%.  Separately, industrial production in March was down 1.3% over February (which was down 0.7%).  But March factory orders rose 1.9% with a rebound in exports, up 4.3% (eurozone orders up 1.1%, non-eurozone up 6.2%).

France’s Q1 GDP rose 0.5% (1.3% year over year).  Industrial production in March was down 0.8%.

[Industrial production in the EA19 overall was down 0.8% in March vs. February.]

Italy reported GDP of 0.3%, but just 1.0% yoy.  The government recently downgraded its growth estimate for the year from 1.6% to 1.2%.

Spain had robust GDP growth of 0.8% in the first quarter, up 3.4% yoy.

But Greece contracted 0.4%, after rising 0.1% in Q4.  Year over year, GDP in Greece is -1.3%.

In non-euro U.K., GDP was 0.4% in Q1, while construction output was down 3.6% in March, the worst month since Dec. 2012, according to the Office of National Statistics, which pegged annual output at -4.5%.  Not good.

But here it’s all about Brexit and the June 23  ‘In’ / ‘Out’ referendum on EU membership that is rapidly coming up.  The Bank of England said this week that even if Britain votes to stay, growth is set to moderate to 2% from an earlier estimate of 2.2%.

One thing is clear concerning the Brexit debate.  All the polls show it’s too close to call and British Prime Minister David Cameron isn’t making it any easier with some of his gaffes. 

Former U.K. cabinet minister, and friend, Iain Duncan Smith accused Cameron of giving in to German Chancellor Angela Merkel by dropping a call for an emergency immigration brake from his requirements for a renegotiation of EU membership terms.

“I know that right up until the midnight hour, there was a strong line in there about restricting the flow of migrants from the European Union – an emergency brake on overall migration,” Duncan Smith told the Sun newspaper.  “It was dropped because the Germans said if that is in the speech, we will have to attack it.”

A day earlier, Cameron said in a speech to the nation a British exit from the EU might jeopardize peace in Europe.

Britain is “better off, safer and stronger” in the EU and that isolationism “has never served this country well.”

Cameron said he has “helped reconcile countries which were at each other’s throats for decades.”

“Can we be so sure that peace and stability on our continent are assured beyond any shadow of doubt?” he asked.  “Is that a risk worth taking?  I would never be so rash as to make that assumption.

“Britain has a fundamental national interest in maintaining common purpose in Europe to avoid future conflict between European countries.”

Cameron added that leaving the EU “will inflict real damage” on the country and its economy.  “Britain will suffer an immediate economic shock and be permanently poorer for the long term.”

Polls show support for the U.K. leaving the European Union is increasing among business people, according to a survey put out by the British Chambers of Commerce.  About 54% of “senior” business people said they’ll choose to remain in the bloc, down from 60% in February, with backing for a “Leave” vote rising to 37% from 30%.

A YouGov poll found 42% of voters’ back In and 40% Out.  A poll in the London Independent has the public split 50/50, but the Out crowd could be more passionate in going to the polls.

Finally, in a survey of 6,000 people in Belgium, France, Germany, Hungary, Italy, Poland, Spain and Sweden for Ipsos-MORI, 45% said they wanted their own vote on whether to remain in the EU, and a third would opt to leave if given the chance.

Back to Greece and its ongoing bailout discussions, last weekend parliament voted 153 to 144 to approve a new round of broad reforms of the country’s pension and income tax systems as part of the process for convincing Greece’s creditors to shell out more aid from the 86bn euro third bailout.

Prime Minister Alexis Tsipras said, “Our [government’s] mission is to put Greece back on its feet and on a path to growth.”  But an activist said, “This law may be voted through parliament but it’s not going to be put into practice.”

But the bill does protect current pensions and introduces a new “national” pension of 384 euro a month after 20 years of work.

IMF chief Christine Lagarde said that all sides were near agreement on the package.

And in a sign there may be movement on real debt relief, yields on Greece’s 10-year bond dipped below 8 percent for the first time since December to 7.25%. Eurozone finance ministers have pledged to revisit the question at their next meeting May 24, when they are also expected to sign off on Greece’s new reform package.

Options on the debt side include capping interest payments, extending maturities, and imposing a moratorium on repayments.  But Germany is adamant against any outright haircut on the debt.

Greece’s debt stands at 176.9% of GDP as of the end of 2015.  [By contrast the U.S. is at 74% on its public debt.]  More on this topic next week.

On the migration front, Turkey officially refused to change its anti-terror laws to satisfy European Union demands as part of its effort to secure visa-free travel to Europe for Turkish citizens.

The EU says Turkey must narrow its definition of “terrorist” and “terrorist act” to secure a visa waiver. The EU is concerned that journalists and political dissenters will be targeted, and, indeed, some of the former have been.

But Turkish President Erdogan was adamant, pointing to one policy as an example of the idiocy of some of the EU requests.  The EU asked Turkey to submit details of housing and education projects for refugees in order for aid to be released.

“Are you kidding us?  What projects?” Erdogan said.  “There will be no projects; there are 25 camps out there.”

EU governments will act on the measure by mid-year, as well as the European parliament.

But while the number of migrants flowing from Turkey to Greece has slowed considerably (though this could be short-lived), there are growing signs a new crush will emerge in Italy, crossing from the likes of Libya.

And so it is that Austria is preparing for the surge at the Brenner Pass, as I’ve written the past few weeks, a spot that connects the north of Italy to the heart of Europe.

Austria’s government has been making plans for an extensive fence in this scenic gorge, but the barrier would only go up in the event of a surge.  If this comes to pass, then tens of thousands, maybe hundreds, will be corralled in Italy and Greece.

The response by Austria is largely a result of recent elections that have propelled the right-wing, anti-immigrant Freedom Party to the forefront.  Norbert Hofer, leader of the party, finished first in last month’s first round of presidential elections and is well-positioned for the May 22 runoff.

And so it was that longtime Austrian Chancellor Werner Faymann resigned on Monday, becoming one of the most prominent casualties of the migration crisis.

Faymann, 56, a center-left politician, had been chancellor since 2008, but he said he was giving up his post as head of the Social Democratic Party because he had lost their support.  There is an interim government now, but with the next regular parliamentary elections not scheduled until 2018, a call for early elections seems a certainty.  [The presidency is largely ceremonial, but these days should it become Hofer, he has quite a bullhorn and it was Faymann’s moderate position on migrants that did him in as the position among a growing proportion of the people hardens.]

And even though Austria only has a population of 8.5 million, it is a bellwether for the rest of Europe and right-wing movements such as Marine Le Pen’s National Front in France, as well as Denmark’s anti-immigrant Danish People’s Party and Germany’s Alternative for Germany that recently made strong gains in state elections there and now polls 15% nationwide, making it the most successful right-wing party in Germany since World War II.

Gideon Rachman / Financial Times...on the potential impact of Donald Trump on European politics.

“The far right has not yet formed a government in western Europe. But it has changed the debate and forced mainstream politicians to embrace some of their themes.

“I fear that the same thing will happen with Mr. Trump.  The odds are that the ‘Republican’ (if that is what he is) will lose to Hillary Clinton in November. But the Trump campaign has already changed U.S. and world politics – and it will make an even deeper imprint in the next six months of campaigning.

“Themes and ideas that were on the fringes have now entered the political mainstream, and they will not disappear if and when Mr. Trump loses.

“What are those ideas?  I would highlight five.  First, a rejection of globalization and free trade....

“The second theme is nationalism, epitomized by Mr. Trump’s slogan of ‘America First.’  In Europe, nationalism implies a rejection of the EU.  But the global implications of American nationalism are much more serious since the U.S. underpins the whole international security system and issues the world’s reserve currency, the dollar.

“A third idea is the embrace of the notion of a ‘clash of civilizations’ between the west and Islam.... Mr. Trump, with his talk of temporarily banning all Muslims from entering the U.S., has essentially embraced the idea of inevitable conflict between the west and the Islamic world....

“A fourth theme is a relentless assault on the ‘elite,’ including Washington, Wall Street and the universities.  A populist distrust of elites has been a perennial theme in U.S. politics for decades, if not centuries.  But growing inequality, immigration and the financial crisis have driven anti-elite rhetoric to new levels.  As a New York billionaire, Mr. Trump is an unlikely tribune of the common man. But he has played the card effectively during the campaign.

“A fifth and related trend is the denunciation of the mainstream media as untrustworthy and an embrace of alternative, conspiratorial narratives that are flourishing on the internet....

“Some in the U.S. may still flinch at the idea that a leading American politician belongs in the same ideological camp as France’s National Front, a party with roots in fascism.  But (founder, now exiled Jean-Marie) Le Pen obviously sees the parallel and has tweeted his support for Mr. Trump, adding ‘May God protect him’.  In fact, in some respects Mr. Trump’s platform is more extreme than that of the French far right.  Neither of the Le Pens [Ed. the other being Marine] has ever proposed banning all Muslims from entering France....

“Many liberal Americans are still inclined to treat the Trump phenomenon as a nightmare from which they hope to wake up in November.  But that seems highly unlikely. Mr. Trump has now amply demonstrated the political potency of the ideas that he is promoting.  A rising generation of nationalists, in the U.S. and Europe, will profit from his breakthrough.”

Turning to Asia....China’s exports in April fell 1.8% in $ terms, after rising 11.5% in March. Imports were down 10.9%, following a 7.6% decline the prior month.

Exports to the U.S. fell 9.3% in April year over year, but were up 6.4% to Southeast Asia and up 3.2% to the EU, though it is clear global demand is still soft, plus the of fake invoicing remains.  For example, imports from Hong Kong were said to be up 204% last month.  Really?  Impossible.  The fake invoices are used to disguise money flows, though the government reported foreign exchange outflows were just $13.3bn in April vs. $37bn in March.  [The Institute of International Finance estimates China’s net outflows were more like $25bn in April, unchanged from March.]

As the Wall Street Journal noted: “Over-invoicing for goods gives a company or individual the opportunity to skirt capital controls and shift money offshore.  Authorities have responded to evidence of the activity by clamping down on the myriad of illicit channels used, from curbing purchases of overseas insurance products to stopping friends and family members from pooling their $50,000-a-year quotas to get large sums of money out.”

[Government foreign-exchange data showed that China’s reserves rose in dollar terms by $7.1bn to $3.2tn, but this was driven by a softening dollar.  If the dollar strengthened, capital outflows would resume in a big way, or so it works in theory.]

As for China’s exploding debt, vice premier Zhang Gaoli said this week that China will reduce leverage in the economy through efforts including bankruptcies, and it is not resorting to large-scale stimulus after record credit growth in the first quarter.

Monday, the People’s Daily, the Communist party’s flagship newspaper, published a front-page interview with an “authoritative figure” who warned the country’s soaring debt could lead to “systemic financial risks.”

“A tree cannot reach the sky,” the figure said.  “Any mishandling [of the situation] will lead to systemic financial risks, negative economic growth and evaporate people’s savings. That’s deadly.”

But it seems impossible to take the steps needed to reduce the debt while keeping growth in the 6.5% to 7% targeted range, especially if you’re going to let large industrial companies with all their excess capacity and losses go under.

Meanwhile, Hong Kong’s economy shrank in the first quarter for the first time since 2014, with GDP contracting 0.4% compared with the fourth quarter, far worse than expected.  Year on year, growth was just 0.8%.  Hong Kong continues to be hammered by the slowdown on the mainland and a dwindling number of tourists.  According to the World Travel & Tourism Council, tourism revenues in Hong Kong fell 8.4% last year.

Street Bytes

--The Dow Jones and S&P 500 fell a third consecutive week, down 1.2% and 0.5%, respectively, while Nasdaq suffered its fourth straight week of declines, off 0.4%.

It didn’t help that retailers were hit hard, which led to questions on the state of the economy, and even when Friday’s retail sales report should have provided some succor it didn’t.  [That just might be the first time I’ve used ‘succor’ in over 17 years.  A solid word, kind of tangy, if I may say so myself.]

But the week was about Apple as much as anything else when it came to the Street. Apple shares  slid to $89.50 on Thursday, their lowest level since June 2014 and off the all-time high of $133 last July.  At Thursday’s lows, Apple slipped to No. 2 behind Alphabet (Google) in terms of market value.  But Apple closed the week at $90.50 and Alphabet declined a few bucks, so Apple finished with a market value of $495.8bn vs. Alphabet’s $488bn.

--U.S. Treasury Yields

6-mo. 0.36%   2-yr. 0.75%  10-yr. 1.70%  30-yr. 2.55%

The reading on April producer prices came in at 0.2%, 0.1% ex-food and energy.  For the last 12 months the PPI is 0.0%, 0.9% on core.  Next week an important reading, maybe, on consumer prices.

But despite the stronger than expected number on retail sales, no one expects the Fed to raise interest rates at its June 14-15 meeting.  And it’s then absurd to think they will move in September given the election.  So maybe during the winter baseball meetings in 2017 or 2018.

--Oil rallied on news of another supply outage in Nigeria, an OPEC member, as well as a surprise decline in inventories, as reported by the U.S. Energy Information Administration.

Consultant Andy Lipow of Lipow Oil Associates told the Financial Times, “The trend is pretty clear that gasoline demand is headed for an all-time record in 2016.”

U.S. demand last week was 9.65m barrels a day, the highest since last summer and approaching record levels.  Additionally, despite the devastating wildfires in northern Alberta, U.S. imports of Canadian oil rose slightly last week to 2.95m b/d.*  Shippers maintained supplies by drawing down oil stored in tanks in Alberta.

*The fires did shut in 1.2m b/d of production.

As for Nigeria, it was dealing with both a leak in a major pipeline and attacks on a Chevron platform by a new militant group.  Nigeria’s oil exports fell to 1.5m b/d, the lowest level in two decades.

On top of the above, the International Energy Agency said in its monthly oil market report for April that first-quarter demand was higher than previously anticipated, up 1.4m b/d.  30% of the increase represented India alone.  The IEA left unchanged its 2016 forecast for a still robust 1.2m b/d, taking total consumption of oil products to 95.9m b/d.

OPEC crude output jumped to 32.8m b/d – the highest since Aug. 2008, thanks to a jump in Iranian flows, which hit 3.6m b/d, a level last reached in Nov. 2011, with exports from the country hitting 2m b/d, a jump from 1.4m b/d in March.

--Houston-based Linn Energy became the biggest U.S. casualty of the collapse in oil prices as the producer filed for bankruptcy on Wednesday. 

Linn is seeking to restructure reported debts of $9.2bn to “provide a platform for future growth,” according to the CEO.  Those borrowings are the largest among about 70 North American exploration and production companies that have gone bankrupt in the downturn.

The company plans to continue normal operations during the restructuring process.

--Meanwhile in Saudi Arabia, Oil Minister Ali al-Naimi is leaving his post after almost 21 years.  The 80-year-old told a gathering of oil executives in Houston last weekend, “During my seven decades in the industry, I’ve seen oil at under $2 a barrel and $147, and much volatility in between.  I’ve witnessed gluts and scarcity. I’ve seen multiple booms and busts.”

Al-Naimi’s departure is the latest sign of how 30-year-old Deputy Crown Prince Mohammed bin Salman is taking over economic policy in the kingdom.  Khalid Al-Falih, chairman of Saudi Arabian Oil Co., the state-owned producer, Aramco, will take over the top spot.  Oil accounts for more than 70% of government revenue.

Prince Mohammed has insisted Saudi Arabia will continue to defend its market share and won’t agree to any production freeze without the participation of the other major producers, read Iran in particular.

So the kingdom will continue to try to squeeze U.S. shale production, while at the same time, Mohammed works on an ambitious plan to overhaul the economy and shift away from oil.

--Macy’s stock plunged 15% to a 4 ½ year low on Wednesday after it reported profits and sales well below expectations for the quarter, and then slashed its expectations for the year.  Seven out of the last 10 quarters Macy’s has registered a decline in same-store sales; -5.6% for February thru April.

Q1 income tumbled 40% and revenue fell 7.4%.

CEO Terry Lundgren said in a release: “We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us.”

But as analyst Neil Saunders told the New York Times: “The blunt truth is that Macy’s does not give consumers a reason to visit its stores.  In many locations shops are simply not up to par; they are poorly merchandised, hard to shop, lack any inspiration, and have fairly mediocre customer service.”

Another analyst said Amazon.com would displace Macy’s as the No. 1 clothing retailer by 2017.

Macy’s kicked things off for major retailers and, coupled with others that followed, raised new concerns about the consumer and trends.  Sales had accelerated early in the year after a rough Christmas, but then something happened in mid-March.

Earlier this week, Gap Inc. issued a profit warning as its attempted turnaround sputtered, with Fitch cutting its credit rating to junk.

Consumers are spending, but as noted above its directed elsewhere, not department stores. And for clothing they are choosing discounters or Amazon.

But it does need to be said that Macy’s is still making a decent buck, $115 million, or 37 cents per share.  It’s that revenue decrease of 7% that’s a killer.

Meanwhile, Nordstrom reported earnings for the quarter ended April 30 that were sharply lower than expectations, while comp store sales fell 1.7%, compared with the same period last year.  Co-president Blake Nordstrom said: “As the pace of change in retail continues to accelerate, we remain committed to serving customers by taking steps that will continue to meet their expectations while driving profitable growth.”

Kohl’s shares fell 9% after the company reported same-store sales fell 4%.

--Crop prices have been rallying as rising exports are expected to eat into the glut by next year.  U.S. soybean inventories are forecast to fall by 24%.  But the USDA forecast ballooning supplies for corn and wheat, though in the case of the former it wasn’t as big as traders forecast.

--As reported by the Wall Street Journal and Dealogic, “More than $395.4 billion in U.S. mergers...have fallen apart in 2016, felled by exacting regulators, rocky markets or reluctant targets.  That will be a record even if no other deals stumble for the rest of the year.”

For investment banks this is deadly.  Last year they feasted on the fees generated by a record-setting $4.6 trillion in announced deals.

But with the collapse of just three this year – Pfizer’s takeover of Allergan, Halliburton’s purchase of Baker Hughes, and the Staples-Office Depot merger – the banks are losing out on more than $300 million in advisory fees.

--Meanwhile, hedge fund manager Kenneth C. Griffin of Citadel made $1.7 billion in 2015, No. 1 in his industry according to Alpha magazine along with James H. Simons; this at a time many hedge funds were closing shop, while others lost their investors $billions.

By comparison, JPMorgan Chase’s Jamie Dimon took home just $27 million in cash and prizes.

--The CEO of LendingClub Corp., Renaud Laplanche, was pushed out after the board said it found conflicts of interest with the company’s lending practices and the CEO’s lack of disclosure surrounding a personal investment.

LendingClub was the biggest and most successful in a wave of online lenders that originated since the financial crisis.

It is very confusing what was going on with various loans, including Laplanche’s failure to fully disclose a personal interest he held in an outside fund while the company was contemplating making an investment in same.

The SEC announced it is reviewing the company’s past disclosures to investors.  The Treasury Department has warned of the fragility of the business models for all the online lenders, a day after revelations of LendingClub’s problems.  Treasury’s white paper has been nine months in the making.

Big investors buy packages of loans from LendingClub and other online lenders.  I told you just last week that the whole FinTech sector, writ large, would implode.  With LendingClub it has started.

--As for the squelching, again, of the Staples-Office Depot combination, this one pisses me off.  It should have been allowed to go through.  [The Halliburton-Baker Hughes combo, on the other hand, absolutely not.]

Editorial / Wall Street Journal

“When regulators sue to stop a business combination, they usually claim they’re helping the little guy. But lawyers at the Federal Trade Commission aren’t even pretending that their successful case against the merger of Office Depot and Staples had anything to do with average consumers.  And neither is the federal judge who this week bought their astonishing argument.

“Stuck in a declining market, Staples and Office Depot have been reporting reduced sales.  Government lawyers might have noticed that people are using less paper and ink these days.  Then there are those little competitors called Amazon, Costco and Wal-Mart. Such competition is why the government couldn’t argue with a straight face that a merged company would force higher prices on individual consumers or small businesses. So the government claimed that the victims of the proposed merger would be huge corporations that buy in bulk.

“Amazon’s unit selling to this market is already a billion-dollar business, but the feds asked the court to believe there would be little competition for large corporate accounts.  As if Amazon and others couldn’t react to new opportunities if the combined firm started mistreating corporate giants....

“An FTC press release hailed the victory on behalf of ‘large businesses that buy office supplies.’  Washington lawyers are celebrating that they broke up another deal that made business sense, for the benefit of companies that wouldn’t have been harmed and don’t need protection.  Your government at work.”

--Facebook denied a report in Gizmodo that said the social media giant has a team that is in charge of its “trending” news list that routinely suppressed conservative points of view.  Previously, Gizmodo reported Facebook employees asked CEO Mark Zuckerberg if the company had a responsibility to “help prevent President Trump in 2017.”    Facebook denied it would ever try to manipulate elections.

Republican Sen. John Thune (S.D.) sent a letter to Zuckerberg asking him to explain how Facebook polices bias.

As the New York Times’ Farhad Manjoo wrote: “The biggest worry is that Facebook doesn’t seem to recognize its own power, and doesn’t think of itself as a news organization with a well-developed sense of institutional ethics and responsibility, or even a potential for bias....

“Most of the engineers, designers and others who decide what people see on Facebook will remain forever unknown to its audience.”

That sucks.  For all the bias many of us see in the mainstream media, you do know there are institutional rules and norms as to what’s acceptable and what’s not.  They aren’t always followed, but they are there.

Facebook, though, “declined to discuss whether any editorial guidelines governed its algorithms, including the system that determines what people see in News Feed.  Those algorithms could have profound implications for society.”

The Wall Street Journal reported on Friday that “Facebook exerts more editorial control than it previously disclosed over the ‘trending’ news feature, newly posted documents show....

“(The) documents underscore tensions between Facebook’s view of itself as an open platform for the exchange of ideas and the way it often functions as a traditional publisher, by selecting and highlighting certain news stories over others....

“According to the guidelines, Facebook’s curators shape computer-generated lists to select and present highlighted topics, including the ‘correct angle’ for a topic, the proper photo and the primary link to a news source.  They also include suggestions on ‘blacklisting’ items from the trending list because they duplicate other items, they are ‘stale,’ or they come with a ‘low quality hashtag.’  Under certain conditions, curators also can add topics not identified by Facebook’s software.”

Late Thursday, Zuckerberg said he plans to invite “leading conservatives and people from across the political spectrum” to discuss concerns about how Facebook presents news.

Separately, a Beijing court ruled in favor of Facebook and against a Chinese company that had registered “face book” as a separate trademark.

The court said the firm had “violated moral principles” with “obvious intention to duplicate and copy from another high-profile trademark.”

Facebook remains blocked in China but Mark Zuckerberg was recently in the country on a charm offensive.

--Apple invested $1 billion in Didi Chuxing, China’s biggest ride-hailing service, in one of the largest-ever strategic investments for the iPhone maker.  Its last big acquisition was of Beats, the headphone maker and music service, for $3 billion in 2014.

Apple’s sales in China were down 26% in the recent quarter, as it spends $billions on its secret car project that the Didi investment is somehow related to.

--I’ve said I would “short the crap out of Tesla” so I have to pass along the following from the Los Angeles Times’ Michael Hiltzik, writing this week:

“Here’s a dose of reality about Tesla’s heavily hyped mass-market Model 3 electric car: The company hasn’t yet finalized the design for the Model 3, hasn’t selected its parts suppliers, isn’t sure it can produce and deliver the car in volume and on time, and still needs to do ‘extensive testing’ to make sure the car can meet quality standards and government regulations....

“These warnings don’t come from a disgruntled onlooker, but from the one source immune to Tesla hype: its own financial reporting to the Securities and Exchange Commission.  The company’s latest quarterly report, issued Tuesday, bristles with risk disclosures that provide a counterweight of realism to the breathless claims the company makes when it doesn’t have to swear to them.

“For instance, in a first-quarter ‘update’ issued to customers and shareholders on May 4, Tesla reported having received more than 325,000 deposits for the Model 3 at $1,000 each.  Based on the projected retail price of $35,000 plus add-ons, this implied $14 billion in future sales, ‘making the Model 3 introduction the biggest consumer product launch ever.’

“Tuesday’s quarterly report [5/3], however, reminds shareholders that the Model 3 doesn’t yet exist in final form and hasn’t, in fact, been launched.  Until at least late 2017, the earliest date when the cars can start coming off the production line, the model is subject to ‘unanticipated deviations from the expected price point, vehicle features or performance characteristics.’  Translation: The Model 3 might cost more than $35,000 and not quite deliver the acceleration or driving range claimed at the March 31 announcement event.

“The car may not make the delivery deadline, either: ‘We may experience delays in realizing our projected timelines and cost and volume targets for the production, launch and ramp of our Model 3 vehicle,’ the company says.  And since customer deposits are fully refundable prior to sale, demand for the car could be a lot softer than it looks.”

Yes, a lot of the filing for the SEC is boilerplate, and having spent a long time on Wall Street myself I understand this, but as Michael Hiltzik notes, “Tesla isn’t just any company. It’s a highly speculative play that hasn’t racked up a significant performance history, and it has lost money every year.  Indeed, Tuesday’s filing reported a loss of $282.3 million for the three months ended March 31, up from a loss of $154.2 million for the same period last year.”

Remember, the Model S and Model X suffered long production delays and have seen numerous recalls.  I said from day one that the gull-wing doors on the Model X were beyond idiotic.  They are proving to be so.

TSLA shares were off just a smidge this week to $207.60, but that is well off the July 20 high of $286.65.  The stock is going to $90 by this time next year, if not sooner.  [And now I’ve set a marker for the archives, boys and girls.]

--Nissan agreed to buy a 34 percent stake in Mitsubishi Motors, the latter needing capital to survive a scandal over inflated fuel economy data.

The stake makes Nissan – itself the recipient of rescue funding in 1999 when Renault stepped in – the single largest shareholder in Mitsubishi.

--Walt Disney Co.’s revenue and earnings for its fiscal second quarter ending April 2 fell short of Street expectations and the shares cratered 5%.  Disney had met or beat analysts’ earnings-per-share expectations every quarter since 2011.

Overall revenue rose 4% in the quarter to $12.97 billion, while net income grew 2% to $2.14 billion.  Revenue at its movie studio grew 22% thanks to a string of blockbuster hits including “Star Wars: The Force Awakens,” “Zootopia” and “The Jungle Book.”

Average spending at Disney’s theme parks rose a solid 8%, though total revenue for the parks and resorts business grew 4%.  The company is opening $5.5bn Shanghai Disneyland on June 16, 17 years in the making.

Television revenue, though, was flat, with ESPN suffering a 13% drop in advertising sales, with subscriber numbers falling.  Part of the revenue shortfall was due to the college football playoff games falling in the previous quarter, while in 2015 it was in the fiscal second quarter.

Disney also took an unexpected $147 million write-down as it decided to dump its videogame-and-toy franchise “Infinity” and lay off close to 300 people who worked at it.

--Gold demand rose 21 percent in the first quarter of the year, according to the World Gold Council.  Record ETF buying was the reason. But jewelry demand remains weak, falling 19 percent in the quarter.

--For steel junkies, I have a piece on the market impact, if any, on my “Wall Street History” link.

--Austria’s billionaire Reimann family reached an agreement to buy Krispy Kreme Doughnuts for a 25% premium, or $1.35 billion.

In December, the family’s JAB Holding acquired Keurig Green Mountain, the single-serve coffee maker, for $13.9 billion.

--Shake Shack shares rose sharply, nearly 10%, after the burger joint reported a same-store sales increase of 9.9%, significantly higher than the expectations of a 5.3% increase.  Total revenue increased 43.4% to $54.2 million.  I’m drooling and can’t find my bib.

--In its spring auction, Sotheby’s had a disappointing sale of older art (the stuff I like...including Impressionism) on Monday, $145 million, with a third of its offerings going unsold, but then on Wednesday, it received $242.2 million for contemporary art (the stuff I don’t like), better than expected.

--University of Ottawa Professor Amir Attaran, who specializes in public health, said in an article published this week in the Harvard Public Health Review that the Rio Olympics should be postponed or moved because of the Zika outbreak, warning the influx of an estimated 500,000 visitors will result in the avoidable birth of malformed babies.

“What I’m asking for is a bit of delayed gratification so that babies aren’t born permanently disabled.”

Prof. Attaran argues that Zika is far worse than the IOC is willing to admit.

The International Olympic Committee said that it sees no need to cancel, delay or move the Games.

I saw Attaran on CNN Thursday and I totally agree with him as to the dangers, especially as he brought up the Guillain-Barre syndrome angle, yours truly, as I’ve written before, having a family member who came down with it years ago (and thankfully recovered...but many don’t).

But at this point, no way the Games are being canceled.

And yet, as I go to post, Puerto Rico has confirmed its first birth defect from Zika, a sickening tragedy.  The problem is there isn’t anyone in the world who knows what the condition of these babies will be in, say, two years.  Let alone the cost in places like Puerto Rico, or Brazil, to care for them.

Your heart breaks every time you see a Zika baby.  They don’t deserve this. 

--Morley Safer, the longest-serving correspondent on CBS’ “60 Minutes,” is retiring this week.

Safer, 84, joined the show in 1970 after working for CBS News for six years.  He has filed more than 900 reports.

“It’s been a wonderful run, but the time has come to say goodbye to all of my friends at CBS and the dozens of people who kept me on the air,” Safer said in a statement.  “But most of all I thank the millions of people who have been loyal to our broadcast.”

CBS is airing a one-hour tribute following the regular edition on Sunday.

I mean who didn’t like Morley Safer?!  Thank you, Mr. Safer, for your excellent work.

--Michael Strahan left “Live! with Kelly and Michael” on Friday, with Kelly Ripa clearly favoring her friend, Anderson Cooper, as the replacement.  “Live” takes in some $50 million in revenue and is highly profitable despite paying out $20 million to one of the true jerks on the planet, Ms. Ripa.

Foreign Affairs

Iraq/Syia/ISIS/Russia/Turkey: A tentative, short-term truce in the Syrian battleground city of Aleppo expired Thursday with no new last-minute extension, this as world powers are to meet in Vienna next week to try to advance peace talks that are hanging by a thread.

13 Iranian soldiers were killed near Aleppo in what appears to be the heaviest loss of Iranian life in Syria since it deployed forces to support Syrian President Assad five years ago.

In the Damascus region, aid was due to be delivered to the rebel-held town of Daraya, the first since 2012, according to the Red Cross.

The United Nations says more than 486,000 people are living under siege in Syria, more than half of them in areas besieged by the government.

Turkey vowed to cleanse the Syrian side of the border of ISIS extremists after the town of Kilis came under repeated deadly rocket fire.  Kilis is where many Syrians have sought refuge on the Turkish border.  Turkey claimed it killed 55 ISIS fighters in northern Syria last Saturday, in retaliation for weeks of rocket attacks on Kilis.

The Israeli Air Force reportedly struck a weapons convoy headed to Hizbullah fighters in Syria, the attack allegedly on the Syrian-Lebanese border on Tuesday.  This wouldn’t be Israel’s first incursion in Syria to stop the transfer of weapons.

But in a major blow to the terrorist organization at weeks end, Hizbullah’s top commander, Mustafa Badreddine, was killed in a large explosion near Damascus airport.  Badreddine was behind all Hizbullah military operations in Syria since 2011.

Badreddine had also been charged with leading the assassination of former Lebanese PM Rafik Hariri in Beirut in 2005.

At first Hizbullah blamed Israel, but a later statement on its main web site did not mention it.

Aside from this big news, though, the major developments this week involved the violence in Iraq, where a series of bombings in Baghdad by ISIS killed 93 on Wednesday; the deadliest attacks of the year.

In Tikrit on Friday, suspected ISIS gunmen sprayed fire on a restaurant, killing 12, and then a suicide bomber in another area killed at least four more.

Earlier, 20 Iraqi soldiers were killed in yet another ISIS attack.  Gee, I guess ISIS is “on the run.”

Meanwhile, as the Washington Post’s Liz Sly writes in an extensive report this week, U.S. officials are no longer putting a time frame on the long-planned offensive to retake the ISIS stronghold of Mosul, the battle for which is now a year overdue. As Ms. Sly writes:

“The recent dramatic storming of Baghdad’s fortified Green Zone by supporters of the Shiite cleric Moqtada al-Sadr offered one example of the kind of conflicts that could erupt in Iraq well before the militants are defeated,” as former ambassador to Syria, Robert Ford, notes.

“The Americans are so happy every time a village falls, they lose sight of the forest while looking at all the trees,” he said.

Editorial / Army Times

“Gen. Joe Dunford, chairman of the Joint Chiefs of Staff, pinned Purple Hearts on four fellow Marines on April 22 at a remote outpost in northern Iraq.  They and four other Marines were wounded in an attack by the Islamic State group that killed their buddy, Staff Sgt. Louis Cardin.

“Less than a week later, Dunford was seated before the Senate Armed Service Committee, serving as a lightning rod for lawmakers’ frustration with the White House’s refusal to recognize that U.S. troops deployed to help in the fight against ISIS were on a combat mission.

“Dunford wouldn’t answer for the White House, but he didn’t mince words in expressing his view: Cardin ‘was killed in combat, senator,’ he told the Republican from Alaska, Dan Sullivan.

“So too was Master Sgt. Joshua Wheeler, a Special Forces soldier killed in Iraq last October as part of Operation Inherent Resolve.

“Defense Secretary Ash Carter had his chairman’s back, also telling lawmakers the U.S. troops were killed in combat.

“ ‘Why,’ Sullivan asked during the back and forth, ‘can’t we level with the American people’ and say that U.S. troops in harm’s way in the Middle East are in combat?’

“Why indeed....

“(The) administration is trying to have it both ways and appear to be keeping the U.S. out of war while steadily building up forces in the region, increasing the number of troops deployed to combat zones, dropping bombs on enemy forces and, when necessary, engaging them in direct action....

“The Pentagon has even created an Operation Inherent Resolve campaign medal for troops who have deployed as part of the mission to crush ISIS.

“Where those fights are being waged, American forces are targets from the moment they arrive.  That they are tasked to train local forces to defeat ISIS and other enemies makes U.S. forces all the more vulnerable.  The dangers were made clear again on May 3, when Navy Special Warfare Operator 1st Class (SEAL) Charlie Keating was killed on a quick-reaction mission to aid U.S. military advisers under attack in Iraq.

“Calling it a training mission is cold comfort to the parents, spouses and children of the deployed troops. They know what happened to Cardin, Wheeler and Keating. They’ve seen the reports on how the Islamic State treats those captured.  They know hostilities are growing and sense, rightly or wrongly, that a greater showdown may be in the offing and that U.S. forces very well may be in the middle of it.

“The more the White House insists these troops are not part of a combat mission, the more distrust it breeds in the ranks and among the public. It’s viewed as the sort of condescending semantics Washington plays to deny the obvious.  That can serve only to erode support for the mission....

“When U.S. and allied troops are on Islamic State turf with the mission of wiping it from existence, they are on a combat mission. Calling it anything else is wrong.”

Iran: Iran’s army claimed this week that the Russian S-300 air defense system was operational, though this is not known for sure.  Defense Minister General Hossein Dehghan also said Iran would start manufacturing its own air defense system this year that would be “able to destroy several targets at once.”

And Iran continues to conduct ballistic missile tests, with Tehran earlier this week claiming it successfully tested one with a range of 1,240 miles, well within the reach of all of Israel.  At some point these missiles could carry nuclear warheads.  But then Gen. Dehghan said Iran had not test-fired such a missile as media was citing.

Last week I wrote of the Sunday Times magazine piece on Obama foreign policy adviser Benjamin Rhodes, where, by his own admission, he said he manipulated the news media, flat-out lied, to sell the Iranian nuclear deal.

Richard Cohen / Washington Post

“The lie exposes a truth.  Obama wanted the deal (almost) no matter what.  He had not been beckoned into the talks by more reasonable Iranians, but had initiated them with the previous regime.  In other words, he wanted the talks more than the Iranians did – a negotiating position of great weakness.  It explains why nothing in the agreement thwarts Iranian efforts to support terrorism in the Middle East or continue to make mayhem in Iraq.  It lowers the odds that Iran will continue to adhere to the agreement.

“Rhodes, who had scant background in foreign affairs before typing his way into the heart of the president, is now so close to Obama that ‘I don’t know anymore where I begin and Obama ends.’  (One more interview like this and he’s going to find out.)  Many say Rhodes and the president have a ‘mind meld,’ and so the reader authoritatively learns of the centrality of Iran to the president’s thinking.  If Obama can reach some understanding with Iran, he can rid himself of the pesky Middle East and pivot – a word that comes to mind – elsewhere. Whatever the case, American boots will not hit the ground unless it is to protect vital American interests – the sole standard for measuring success....

“Rhodes calls the foreign establishment ‘the Blob’ and he, like the president, dismisses its fusty thinking and crows the cleverness of their own, especially – and amazingly – the success of their Syria policy. Their only standard is the number of Americans who have died there – very few.  That is commendable, but it is false to assert by implication that an alternative policy would have done otherwise.  The intervention in Libya cost zero American lives; so too the ones in Kosovo and Bosnia. The United States could have implemented a no-fly zone in Syrian skies.  It could have grounded the Assad regime’s helicopters, which drop barrel bombs on civilians, eviscerating them with nails, pellets and scrap.

“No one knows anymore how many have died in Syria’s civil war – maybe as many as 400,000.  [Ed. the new figures I’ve been using.]  More than 4 million people have fled the country, swamping Europe and coming pretty close to destabilizing governments.  The continent has turned sour, inhospitable to migrants yet hospitable to right-wing groups last seen in black-and-white newsreels.  Russia now arguably has more influence in the Middle East than the United States does, and Iran and its proxies are everywhere.  The United States hasn’t pivoted.  It’s plotzed.

“If this is success, what constitutes failure?  When Obama and his mind-melded sidekick proclaim their own brilliance and the failure of almost everyone else, what are they talking about?”

Egypt: Islamic State-linked Sinai province group claimed responsibility for an attack on a minibus filled with plainclothes policemen south of Cairo, killing eight.

Afghanistan: A horrible accident between a fuel tanker and two buses on a major highway here killed a staggering 73.  The crash was reportedly caused by reckless driving, according to officials.  There were 125 passengers on the two buses.

China: The Permanent Court of Arbitration in The Hague is expected to rule against China in the next few weeks in a case brought by the Philippines against China’s island-building in the South China Sea.  Ahead of the ruling, China is stepping up its propaganda machine.  A Chinese ambassador, Liu Xiaoming, accused the United States and Britain of meddling in the disputes in the region and escalating tensions.

“Some countries outside the South China Sea claim to be taking no side in sovereignty disputes, but they are actually doing all they can to get involved.  The military vessels and planes they send to the region and the accusations they throw at China only encourage certain countries in the region to behave even more recklessly, increasing the tension,” he said.  [South China Morning Post]

This week China scrambled two fighter jets to shadow a United States Navy warship that sailed close to a disputed reef, a move denounced as “provocative” and “illegal” by Beijing.

As for the coming court ruling, the Philippines is contesting China’s claim to more than 80 percent of the South China Sea.  It is going to be interesting to see what Washington does when the court rules against China, seeing as China will ignore the decision and continue with its buildup.

Speaking of the Philippines, voters there elected Rodrigo Duterte as its new president, a right-winger who is a populist demagogue who succeeds a pillar of the old elite, Benigno Aquino III, who has presided over a strong economy and the upgrading of the military alliance with the U.S.

But poverty and corruption remain deeply rooted and Duterte was able to win with just 39 percent of the vote, a plurality in the Philippines’ electoral system.

Editorial / Washington Post

“Some (of Duterte’s promises) are clearly undeliverable: The president-elect said he would eliminate violent crime in six months.  Some could be dismissed as hyperbole, such as the pledges to litter Manila Bay with the bodies of criminals and to ride a Jet Ski to plant a flag on Scarborough Shoal, the disputed territory 150 miles offshore seized by China in 2012.

“However, there is more than rhetoric to Mr. Duterte’s menace.  Human Rights Watch dubbed him the ‘death squad mayor’ for more than 1,000 extrajudicial executions of alleged criminals, including some street children, during his 20 years as mayor in Davao.  Far from offering excuses, Mr. Duterte has embraced that record and promised to repeat it on a national scale; he says he will murder suspects himself and then grant himself a presidential pardon.”

Oh brother.  Plus Duterte has expressed doubts about the alliance with Washington and hinted he is ready to strike a deal with China.

Separately, I have been writing of Chinese President Xi’s increasingly authoritarian nature, especially in terms of the press and censorship. 

Editorial / Wall Street Journal

“The Journal reported Wednesday that Chinese government officials are warning economists, analysts and business reporters who point out problems such as capital outflows and rising bad loans that they should be more upbeat.  This could mean the economy is in worse shape than previously thought. And it shows that the government’s obsession with restoring authoritarian control over all aspects of life is spiraling, well, out of control.

“The penalty for negativism is not spelled out, but after what happened to Wang Xiaolu there is no need. A reporter for the financial magazine Caijing, he accurately reported last year that the authorities would soon scale back measures to prop up the stock market.  Mr. Wang was detained and forced to confess his ‘crime’ on state television.

“Without the free flow of information China can’t build a functioning market economy. The regime’s Western apologists, among them many business leaders, long claimed that things would get better because there were no communists left in the Communist Party.

“Yet since he came to power in 2012, General Secretary Xi Jinping has put politics in command, as Mao Zedong put it 50 years ago.  Mr. Xi urged Party members to ‘embrace the spirit of Mao’ and make ideology the priority....

“Officials harass foreign companies by holding up licensing and certification, antitrust actions, attacks in the state-run media, and a range of disciplinary actions including fines and detention of executives....

“Optimists hoped that Mr. Xi would prove a reformer in the mode of Deng Xiaoping.  But Deng had a ‘go for growth’ mentality and was willing to tolerate some liberalization of information flows to make China prosperous.  Mr. Xi seems determined to restore levels of control last seen under Mao, with predictable economic consequences.”

On a lighter note, Britain’s Queen Elizabeth was caught on camera saying Chinese officials were “very rude” during last year’s state visit by President Xi Jinping.  The Queen made her remarks to Metropolitan Police Commander Lucy D’Orsi, who the monarch was told had overseen security during Xi’s visit in October.

Discussing the treatment of Britain’s ambassador to China, the Queen said: “They were very rude to (him).”

D’Orsi replied: “They were...it was very rude and undiplomatic I thought.”

North Korea: State news media published a list of officials newly selected for senior posts and at least one name came as a surprise: Ri Yong-gil, a prominent general.

In February, South Korean officials said Gen. Ri had been executed on corruption charges.  But Tuesday we learned he was not only alive, he was a member of the Central Committee of the North’s ruling Workers’ Party, as well as its Central Military Commission.

The appointments were made during the Workers’ Party congress that ended Monday.  Kim Jong-un used the congress to cement his grip on power, Kim now being called “the supreme leader of our party, state and military.”  The new post was leader of the party, as he already held the top posts in the military and government.

During the party confab, it was announced that North Korea will act like a “responsible nuclear power,” while working for “the denuclearization of the world.”

But the North made no commitment to denuclearize itself.  It also continued to demand the United States stop its annual joint military drills with South Korea.

David E. Sanger and Choe Sang-Hun / New York Times

“After years of trying to separate fact from propaganda about North Korea’s nuclear program, American and South Korean intelligence officials say they have concluded that the country can now mount a small nuclear warhead on short- and medium-range missiles capable of hitting much of Japan and South Korea....

“The assessment of the North’s new capabilities is not based on direct evidence from inside its nuclear program, senior officials said, but draws on intelligence gleaned from high-level defectors, analysis of propaganda images and data collected from North Korean missile and nuclear tests, which have accelerated over the past six months.

“While some intelligence agencies suggested as early as 2013 that the North had learned enough about rocket engineering and the miniaturization of nuclear warheads to mount one on  a shorter-range missile, there is a new consensus and greater confidence in that view in both Washington and Seoul, the officials said.”

Victor Cha, who was  a senior official on President George W. Bush’s National Security Council, said American policy had been ‘concerned about not overreacting to every North Korean provocation, and that made sense when their capabilities were not all that formidable.

“ ‘But now they have been in a spiral of escalation, and we are underreacting when their capabilities are accelerating.’” [Sanger / Sang-Hun]

Russia: Britain said its fighter jets were scrambled to intercept three Russian military transport aircraft approaching the Baltic States on Thursday.  The Typhoon fighters, based in Estonia, intercepted the Russian aircraft that had failed to transmit a recognized identification code and were unresponsive.  Defense Secretary Michael Fallon said in a statement: “We were able to instantly respond to this act of Russian aggression – demonstration of our commitment to NATO’s collective defense.”

Meanwhile, the U.S. activated a land-based missile defense station in Romania, which will form part of a larger European shield that has Moscow fuming.

The U.S. says the Aegis system is designed to protect NATO from short- and medium-range missiles, particularly from the Middle East.

But Russia sees it as a security threat – a claim denied by NATO.  Russia’s foreign ministry warned on Wednesday that the system violated a treaty on nuclear forces, the INF (Intermediate-Range Nuclear Forces) Treaty of 1987.

Then on Friday, Vladimir Putin said Russia will “neutralize emerging threats.” 

Separately, Germany blamed Russia for a huge cyberattack on its parliament last year and has said the Kremlin could be planning further assaults on its institutions; a highly unusual public warning out of Berlin.

The attack last year sought to install software that would have granted attackers permanent access to computers used by MPs and staff.

We need Germany to finally get really mad.  And I’d start by arresting former Chancellor Gerhard Schroder...a true bastard and traitor (and Putin buddy, if you didn’t know).

On a different matter, from an extensive report by the New York Times’ Rebecca R. Ruiz and Michael Schwirtzmay:

“Dozens of Russia athletes at the 2014 Winter Olympics in Sochi, including at least 15 medal winners, were part of a state-run doping program, meticulously planned for years to ensure dominance at the Games, according to the director of the country’s antidoping laboratory at the time.

“The director, Grigory Rodchenkov [Ed. he also appeared last Sunday on “60 Minutes”], who ran the laboratory that handled testing for thousands of Olympians, said he developed a three-drug cocktail of banned substances that he mixed with liquor and provided to dozens of Russian athletes, helping to facilitate one of the most elaborate – and successful – doping ploys in sports history.

“It involved some of Russia’s biggest stars of the Games, including 14 members of its cross-country ski team and two veteran bobsledders who won two golds....

“Russian antidoping experts and members of the intelligence services surreptitiously replaced urine samples tainted by performance-enhancing drugs with clean urine collected months earlier...

“By the end of the Games, Rodchenkov estimated, as many as 100 dirty urine samples were expunged.

“None of the athletes were caught doping.  More important, Russia won the most medals of the Games, easily surpassing its main rival, the United States.”

The Times approached Russian officials to respond, with Sports Minister Vitaly Mutko calling the revelations “a continuation of the information attack on Russian sport.”

In November, Russia was suspended from international track and field competition, including for the Rio Olympics.  Leaders of the sport’s global governing body will decide soon whether to lift a ban ahead of the Games.

Brazil: Speaking of the Olympics, President Dilma Rousseff will not be presiding over the Games in Rio, having just been suspended this week for up to 180 days while she is put on trial for breaking budget laws amid a sprawling corruption scandal.  Rousseff, a leftist in office since 2011, was replaced by her vice president, centrist Michel Temer, who took over after the Senate voted 55-22 to proceed with an impeachment trial.  He is technically “interim” president as the trial is held.  [The trial must take place in the allotted time, which expires November 8.]

Rousseff vowed to fight on.  “I may have made mistakes but I did not commit any crime,” she said, calling the impeachment “fraudulent” and “a coup.”

But the size of the vote to put her on trial shows she is unlikely to be acquitted as a two-thirds majority is required to convict Rousseff and remove her permanently from office.

Brazil’s economy is in a depression, and with the Games looming amid the Zika crisis, Temer must act quickly on a number of fronts.  His first step was to name Henrique Meirelles as his finance minister, a man who had a stellar reputation as central bank governor between 2003 and 2010, when the Brazilian economy boomed.

Britain: Prime Minister David Cameron was caught on-mic telling the Queen that Nigeria and Afghanistan are “fantastically corrupt” countries, which is one of his worst gaffes.

Cameron was speaking ahead of his anti-corruption summit being held in London.

So Cameron is seen in footage with the Queen and other top figures, clearly telling her: “We’ve got some leaders of some fantastically corrupt countries coming to Britain... Nigeria and Afghanistan, possibly the two most corrupt countries in the world.”

Granted, Transparency International in its latest Corruption Perceptions Index ranks Nigeria 136 and Afghanistan worst at 166.  But the current leaders of both have vowed to fight corruption.

For Cameron, the timing of his remarks could not be worse, not only for the Brexit vote, but should he lose that one, the effort to remain as leader of the Conservatives.

Random Musings

--Tuesday, May 10 primary results....

Republicans

West Virginia: Donald Trump 77%, Ted Cruz 9%

Nebraska: Trump 61%, Cruz 18%, Kasich 11%

Delegates

Trump 1134 (1237 needed for the nomination)
Cruz 564

Democrats

West Virginia: Bernie Sanders 52%, Hillary Clinton 36%

Delegates

Clinton 2240, including superdelegates (2383 needed for the nomination)
Sanders 1473

--In a major first look at some key states in November, Quinnipiac University’s polling shows Donald Trump doing much better in one-on-one matchups with Hillary Clinton than we had been led to believe.

Florida...Clinton leads 43-42 (obviously within margin of error)
Pennsylvania...Clinton leads 43-42
Ohio...Trump leads 43-39

Not that it matters anymore, but Sanders beats Trump in all three.

It also needs to be mentioned that Quinnipiac has been the worst in predicting primary outcomes for both the Republicans and Democrats.

However, a new Reuters/Ipsos national poll released on Wednesday has Clinton with just a 41-40 lead, with 19% undecided.  What is staggering about this one is that the gap was 13 points just a week earlier, though that was when Cruz and Kasich dropped out, with most of their supporters then moving over.

--Michael Goodwin / New York Post

“Big Media’s fixation on the defections of Big-Name Republicans is the latest proof that both groups remain stubbornly disconnected from real Americans.  If Trump had been dependent on the support of Mitt Romney or Sen. Lindsey Graham or assorted pundits and donors, he never would have gotten 10 million primary votes.

“He launched a rocket-fueled revolution, defeated 16 rivals and became the presumptive nominee by running against the entire national establishment, not to mention conventional wisdom and both political parties.

“Now he’s doomed if Romney doesn’t back him?  Nonsense....

“By all means, endorsements are generally a good thing for candidates, and party unity is usually regarded as an essential starting point.  But the claim that Trump must finally conform to all the traditional norms repeats the false assumptions that led the media and most Republicans to miss Trump’s astonishing appeal in the first place.

“He is a phenomenon, much as Barack Obama was in 2008, and he could do to Clinton what Obama did to her then.  Obama was fresh, and she was tired.  Now Trump is fresh, and Clinton is even more tired.

“One result is that the campaign will be fought on his turf.  The issues most associated with him – immigration, terrorism, trade, jobs – dominated the GOP primaries.

“Indeed, try to imagine the last year without Trump. Who would have set the GOP agenda, what issues would have led the way, and how would voters have responded? Would turnout have hit record levels when so many Republican voters feel betrayed by their own party leaders?

“Trump stirred the drink from day one and the ability to set the terms of the contest is usually the hallmark of a winning campaign. That’s what he’s done so far, and that’s what he’ll try to do in the fall....

“Her big advantage is the Electoral College, and she will try to shut him down by relentlessly playing the women’s and racial cards. And it’s certain Trump will hand her gaffe gifts and display an embarrassing lack of detailed knowledge.

“We know all that already, yet still they are tied in the states that matter most.  She may win and he may lose, but neither The New York Times nor Mitt Romney will make a whit of difference.”

--Trump is being criticized, and rightly so, for his sudden decision not to release his tax returns before the election, which were he to stick to this position would make him the first major-party nominee since Gerald Ford in 1976 not to release even one year of actual returns.

Trump continues to fall back on his stance that since he is undergoing an audit, they will be released when the audit is complete, but late Wednesday he seemed to backtrack a little again in saying, in essence, he didn’t expect the audit to be complete until after the election.

Aaron Elstein / Crain’s New York Business

“Trump’s tax returns would tell us about how the presumptive GOP presidential nominee really ticks more than any other document, which is precisely why he doesn’t want them made public.  The returns would go a long way to revealing just how wealthy this self-proclaimed billionaire really is.  Trump once said in a court deposition that his wealth ‘goes up and down with markets and with attitudes and with feelings, even my own feelings.’  But you can’t fudge a tax return – unless, of course, you’re willing to risk getting caught for fraud.”

Among the questions Mr. Elstein wants answered:

“Have you sheltered any income in offshore entities?  Do you control any shell companies?

“How many of your personal expenses have you billed to your company, the Trump Organization?  Such expenses must be taxed like income, so have they been?  Likewise, celebrities often deduct expense associated with promoting and maintaining their image. How do you handle this, considering that your brand and company are closely connected?....

“In your financial statement filed last year with the Federal Election Commission, you claim that you made $362 million in income in 2014.  However, Fortune demonstrated that figure overlooks a flood of expenses and is actually revenue.  How much did you really make in 2014 and other years, and why don’t you want voters to know?”

--Sheldon G. Adelson / Washington Post...on endorsing Donald Trump

“For nearly eight years, Republicans have fought tooth and nail against President Obama and his policies. We waged battles over debt, government spending, Obamacare and the Iran nuclear deal – an issue of paramount importance to me personally and to many others around the world.

“We gained some victories, but on too many issues Obama achieved his goals, if not necessarily America’s goals.  As Republicans, we know that getting a person in the White House with an ‘R’ behind his name is the only way things will get better.

“That opportunity still exists.  We must not cut off our noses to spite our faces....

“I’ve spent time talking to Donald Trump.  Do I agree with him on every issue?  No.  But it’s unlikely that any American agrees with his or her preferred candidate on every issue.

“After the 2012 election cycle, I was asked frequently what I would look for in a future presidential contender. While I had some personal preferences because of friendships with some of the 2016 candidates, I kept coming back to the issue of executive experience....

“(Trump) is a candidate with actual CEO experience, shaped and molded by the commitment and risk of his own money rather than the public’s....

“You may not like Trump’s style or what he says on Twitter, but this country needs strong executive leadership more today than at almost any point in its history....

“Republicans have the candidate who the people decided is our winner from a field of 17 viable contenders.  It’s time for all Republicans to mount up and back our nominee.”

--What will the FBI and federal prosecutors do with Hillary Clinton’s email probe and what will it mean for the Attorney General and Justice Department? As Julian Hattem of The Hill puts it:

“If Clinton doesn’t face charges, (AG Loretta Lynch and Justice) will certainly come under criticism from conservatives who will suspect President Obama’s administration of covering up for a former Cabinet member.

“Yet if charges are brought, Democrats are just as sure to question the motives of FBI Director James Comey, a Republican who worked for the Bush administration.”

But now that the FBI has reportedly interviewed multiple Clinton aides, and is supposedly interviewing her in the coming days, there seems little reason not to act one way or another by the summer.

Except Comey himself said on Wednesday: “In any investigation, especially one of intense public interest...we want to do it well, and we want to do it promptly.  So I feel pressure to do both of those things.  As between the two, we will always choose ‘well.’”  Read it could easily be delayed until after November. [Byron Tau / Wall Street Journal]

Sen. John Cornyn (Tex.), the No. 2 Senate Republican, has requested a special prosecutor but Justice has declined to appoint one and doing so would take the case beyond the election anyway.

Trump faces a legal challenge of his own with the civil fraud case in California over Trump University beginning in November, but his testimony won’t be until after Nov. 8.

--Bret Stephens / Wall Street Journal

“The best hope for what’s left of a serious conservative movement in America is the election in November of a Democratic president, held in check by a Republican Congress.  Conservatives can survive liberal administrations, especially those whose predictable failures lead to healthy restorations – think Carter, then Reagan. What isn’t survivable is a Republican president who is part Know Nothing, part Smoot-Hawley and part John Birch.  The stain of a Trump administration would cripple the conservative cause for a generation.

“This is the reality that wavering Republicans need to understand before casting their lot with a presumptive nominee they abhor only slightly less than his likely opponent.  If the next presidency is going to be a disaster, why should the GOP want to own it?....

“Conservatives are also supposed to believe that it’s folly to put hope before experience; that leopards never change their spots. So what’s with the magical thinking that, nomination in hand, Mr. Trump will suddenly pivot to magnanimity and statesmanship?  Where’s the evidence that, as president, Mr. Trump will endorse conservative ideas on tax, trade, regulation, welfare, social, judicial or foreign policy, much less personal comportment?

“For conservatives, a Democratic victory in November means the loss of another election, with all the policy reversals that entails.  That may be dispiriting, but elections will come again.  A Trump presidency means losing the Republican Party. Conservatives need to accept that most conservative of wisdoms – sometimes, losing is winning, especially when it offers an education in the importance of political hygiene.”

--George Will / Washington Post...on the numbers issue Trump faces (I do not agree with some of Will’s conclusions).

“In 2012, 93 percent of self-described Republicans who voted did so for Mitt Romney.  Trump probably cannot receive 80 percent of what probably will be, because of discouragement and revulsion, a smaller Republican turnout.  Romney lost 73 percent of the Hispanic vote; Trump is viewed unfavorably by 82 percent of Hispanics and very unfavorably by 62 percent.  Trump probably will receive significantly less than Romney’s ruinous 27 percent of this vote.  And because of demographic trends and Trump’s motivating policies and insults, Hispanic turnout probably will be significantly larger than in 2012, as the white percentage of the electorate continues to shrink.  Romney won just 37 percent of young voters (18-29); Trump is unlikely even to match this.  Although Romney won 53 percent of married women, he received just 44 percent of the total female vote.  Today, Trump trails Hillary Clinton among women by 19 points (35 percent to 54 percent), and most women probably do not yet know that he testifies to the excellence of his penis....Or that his idea of masculinity is to boast about conquests of women ‘often seemingly very happily married’ and that ‘I have been able to date (screw).’....

“(Trump’s) metabolic urge to be scabrous guarantees that Republican candidates everywhere will be badgered by questions about what they think about what he says.  What they say will determine how many of them lose with him, and how many deserve to.”

--On the top of the above-mentioned story on Facebook that it suppressed conservative news on its “trending” feature, Facebook employees have donated $114,000 to Hillary Clinton, compared to Marco Rubio, who received the second-most donations from employees of the social media giant at $16,600, as reported by The Hill and per the candidates’ report to the Federal Election Commission.

But this only reflects itemized contributions, so it’s not a perfect reflection of the number of Facebook employees who donated.  As in candidates don’t have to give information on contributions less than $200 and Bernie Sanders has a vast majority of his more than $182 million in this latter category, or as The Hill’s Mario Trujillo reports, “only about $66 million of those donations include information about the people who donated.”

--Stephen F. Hayes / The Weekly Standard

“Clinton and Trump are the least popular major-party candidates in the history of polling.  Hillary Clinton is viewed ‘very unfavorably’ by 37 percent of Americans; Trump is viewed ‘very unfavorably’ by a staggering 53 percent.

“Senator Ben Sasse, a newly elected Republican from Nebraska, is one of only a few elected conservatives to demonstrate any political courage.  In an open letter to Americans ‘who think both leading presidential candidates are dishonest and have little chance of leading America forward,’ Sasse argued against defeatism and complacency.

“ ‘There are dumpster fires in my town more popular than these two ‘leaders.’  With Clinton and Trump, the fix is in. Heads, they win; tails, you lose. Why are we confined to these two terrible options? This is America. If both choices stink, we reject them and go bigger. That’s what we do.  Remember: our Founders didn’t want entrenched political parties. So why should we accept this terrible choice?’

“Yes, why?”

--As reported by Bloomberg, Trump is seriously considering former House Speaker Newt Gingrich as his running mate, a choice that makes eminent sense except it won’t do anything for him in terms of attracting minorities.  Another prospect who ticks off many of the boxes is Ohio Sen. Rob Portman.

--Former New York Senate Majority Leader Dean Skelos was sentenced to five years in prison on charges he used his office to extort money and gain a job for his son.  The son was sentenced to 6 ½ years.

Last week it was former Assembly Speaker Sheldon Silver who received a 12-year term in another bribery case.

Investigations into New York City Mayor Bill de Blasio and New York Gov. Andrew Cuomo’s office continue.  Heh heh.

--AAA’s Foundation for Traffic Safety released a study that found that drivers can have a low level of THC, the active ingredient in marijuana, in their blood and be unsafe behind the wheel, while others with relatively high levels may not be a hazard. 

As Mary Wisniewski of the Chicago Tribune writes: “Marijuana is not metabolized in the system in the same way as alcohol.  So while a person with a blood-alcohol level of .08 or higher is considered too drunk to drive, it’s not possible to say the same thing absent other evidence about a person testing at 5 nanograms per milliliter of blood of THC – the level used to find impairment by Colorado, Montana and Washington, the study found.”

The report is important because12 states have laws forbidding any level of marijuana in the system while driving.  Illinois is one state considering raising the level to 5ng/ml., but what does this really mean?

THC is also difficult to measure since the AAA study found it takes two hours, on average, to collect blood from a suspect driver and levels can decline rapidly for occasional users, while frequent pot users can exhibit high levels long after use, thus making it difficult to develop fair guidelines, per the study.

AAA is urging states to develop behavioral and physiological evidence through field sobriety tests.

Meanwhile, AAA released a second study Tuesday that showed fatal crashes involving drivers who recently used marijuana had doubled in Washington after that state legalized the drug in Dec. 2012; jumping to 17 percent from 8 percent between 2013 and 2014.

--Lastly, as reported by the Wall Street Journal, “Astronomers using NASA’s Kepler Space Telescope announced Tuesday they have confirmed the existence of 1,284 newly discovered planets around distant stars....

“Nine of these newly verified worlds are potentially habitable, orbiting their stars in a zone warm enough for water to pool as a liquid, which is considered essential for life as we know it.”

But what if I don’t want life as we know it?  Give me something different. 

---

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

God bless America.

---

Gold $1273
Oil $46.21

Returns for the week 5/9-5/13

Dow Jones  -1.2%  [17535]
S&P 500  -0.5%  [2046]
S&P MidCap  -0.8%
Russell 2000  -1.1%
Nasdaq  -0.4%  [4717]

Returns for the period 1/1/16-5/13/16

Dow Jones  +0.6%
S&P 500  +0.1%
S&P MidCap  +3.0%
Russell 2000  -2.9%
Nasdaq  -5.8%

Bulls  39.2
Bears  21.6  [Source: Investors Intelligence]

88-year-old Dr. Bortrum fired a 35 at the world famous Summit Municipal golf course the other day.  As Ronald Reagan would have said, ‘Not bad, not bad at all.’

Have a great week.

Brian Trumbore