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Week in Review

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10/29/2016

For the week 10/24-10/28

[Posted 11:30 PM ET, Friday]

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Edition 916

Washington and Wall Street

It was already an extraordinary week but in the past 10 hours it became more so as around 1:00 p.m., we learned that the FBI was reopening its investigation into Hillary Clinton’s emails, with Director James Comey sending a letter to congressional leaders from both parties explaining that emails had surfaced in an unrelated case, an FBI investigation into illicit messages from Anthony Weiner, the estranged husband of top Clinton aide Huma Abedin; emails pertinent to the previously closed probe into Clinton’s private email server.  Some of the newly discovered emails were found on a computer belonging to Weiner.

Comey’s letter said the FBI would review the material to determine if it improperly contained classified information, though at this time further details, such as if the emails were from Clinton’s server, aren’t known.  Comey just said they appear to be “pertinent,” while the FBI had not examined what might be thousands of them.  As I go to post, Comey, in an internal email to bureau employees, said he felt obligated to inform Congress, and “we don’t know the significance of this newly discovered collection of emails.”

Tonight, Hillary Clinton held a brief press conference, saying: “We are 11 days out from perhaps the most important national election of our lifetimes.  Voting is already underway in our country, so the American people deserve to get the full and complete facts immediately.”

Clinton, in taking just three questions, revealed the FBI had not contacted her before or since Comey sent the letter to lawmakers Friday afternoon.

For his part, Donald Trump seized on the development at a rally in Manchester, N.H.

“Hillary Clinton’s corruption is on a scale that we have never seen before.  We must not let her take her criminal scheme into the Oval Office.  I have great respect for the fact that the FBI and the Department of Justice are now willing to have the courage to right the horrible mistake that they made.”  [New York Times, The Hill]

Before this bombshell, I was preparing to open by saying something to the effect that while we’ve been viewing the emails from WikiLeaks, presumably stolen by the Russians, as bad as they were in detailing the behind the scenes operation of the Clinton campaign and the Clinton Foundation, there hadn’t been a ‘smoking gun.’

But then that emerged this week in the form of a Doug Band memo, Band being a former longtime aide to Bill Clinton and intimately involved in the foundation, as well as the founder of a consulting firm, Teneo.

I was also going to talk about how Donald Trump largely stayed on message this week, following the opening of his Gettysburg Address last Saturday, where he once again got hopelessly off it.

Given what we’ve all been through with this godawful election, we can only expect more surprises in these final 11 days.  Buckle your seat belts.  It’s going to be a bumpy landing as we come down to Nov. 8.

Clinton Inc.

Bob Fredericks / New York Post

“The head of a for-profit university that donated up to $5 million to the Clinton Foundation was rewarded with an invite to a high-profile State Department dinner at the request of then-Secretary of State Hillary Clinton.

“Doug Becker, CEO of Laureate International University, got his senior VP, Joseph Duffey, into the meeting of world-class academics at the August 2009 dinner because Becker was someone ‘who Bill likes a lot’ and his school was ‘the fastest growing college network in the world,’ Clinton wrote in an email to her chief of staff revealed on WikiLeaks.

“ ‘It’s a for-profit model that should be represented.’

“Roughly nine months later, the university signed Bubba to a sweet deal as an ‘honorary chancellor,’ paying him $17.6 million over five years until the contract ended in 2015 as his wife launched her presidential run.

“Analysts said Duffey’s presence at the dinner likely opened doors to the school that otherwise might have remained closed.

“ ‘A lot of these private-education guys, they’re looking to get into events like this one,’ Sam Pitroda, a higher-education expert who was at the dinner, told the Washington Post.”

Meanwhile, the Laureate schools have fewer grads making payments on their loans than the nationwide average, while the graduation rate at one school in San Diego is 33%, with the average student graduate holding $43,400 in government loans.

“Hillary Clinton also has bad-mouthed for-profits – even though Becker donated thousands to her presidential campaigns.”

Then there is the case of Doug Band.

Editorial / New York Post

“If there were still any doubt, the latest WikiLeaks disclosure makes it undeniable: Everything we’ve heard about Bill and Hillary Clinton’s sleazy drive to enrich themselves is true.

“In a way, we have daughter Chelsea to thank for the revelation.

“It was her suspicion that her father’s cronies were using their Clinton Foundation connections to ‘hustle business’ for themselves that led to an in-house legal review.

“And in a 2011 memo to the review team, former presidential aide Doug Band openly boasted about how he’d raised millions for the foundation from his business clients – and even more for Bill Clinton personally.

“In fact, Band’s 13-page memo actually described the arrangement he’d set up as ‘Bill Clinton Inc.’ – ‘dedicating myself’ to helping the Clintons use their government service to feather their own nest.

“And what a gravy train: Band’s clients at his Teneo consulting firm were pressed to give millions to the foundation – and millions more to Bill.

“At that point, Teneo had raised $8 million for the foundation and $3 million in paid speeches for Bill.  Plus, Band boasted, it had also set up ‘more than $50 million in for-profit’ business deals for the ex-president, with contracts worth $66 million more.

“And that doesn’t even include loads of ‘in-kind’ freebies, like vacations and private jets.

“Band denied profiting personally from these deals (apart from all the high-priced business he got from his Clinton connection, that is). He would even later whine about his inability to cash in like Bill.

“The foundation claims there was no unsavory link between its donors and Hillary’s job as secretary of state.  Yet other email dumps and press investigations show beyond a doubt that giving to Clinton causes could win you face time with the secretary, help placing people in State Department jobs – and even preferential treatment in lucrative Haiti-relief work....

“Even a foundation internal investigator concluded that corporations were ‘paying Teneo for connections with Clinton’ – not to mention with the secretary of state and potential future president.

“Meanwhile, when top Hillary aide Huma Abedin needed help making ends meet (her hubby’s career having nose-dived) she wound up with her own Teneo job as well as a foundation salary – even as she remained at State....

“This whole circle of enrichment was a one-hand-washes-the-other arrangement.  All nice and cozy – and mutually lucrative.

“What more proof do we need that as far as Bill and Hillary Clinton are concerned, the rules don’t apply to them?”

Kimberley A. Strassel / Wall Street Journal

“In an election season that has been full of surprises, let’s hope the electorate understands that there is at least one thing of which it can be certain: A Hillary Clinton presidency will be built, from the ground up, on self-dealing, crony favors, and an utter disregard for the law. This isn’t a guess.  It is spelled out, in black and white, in the latest bombshell revelation from WikiLeaks.  It comes in the form of a memo written in 2011 by longtime Clinton errand boy Doug Band, who for years worked simultaneously at the Clinton Foundation and at the head of his lucrative consulting business, Teneo.

“It is astonishingly detailed proof that the Clintons do not draw any lines between their ‘charitable’ work, their political activity, their government jobs or (and most important) their personal enrichment.  Every other American is expected to keep these pursuits separate, as required by tax law, anticorruption law and campaign-finance law.  For the Clintons, it is all one and the same – the rules be damned.

“The memo came near the end of a 2011 review by law firm Simpson Thacher & Bartlett into Clinton Foundation practices.  Chelsea Clinton had grown concerned about the audacious mixing of public and private, and the review was designed to ensure that the foundation didn’t lose its charitable tax status.  Mr. Band, Teneo boss and epicenter of what he calls ‘Bill Clinton Inc.,’ clearly felt under assault and was eager to brag up the ways in which his business had concurrently benefited the foundation, Clinton political causes and the Clinton bank account.  The memoed result is a remarkably candid look at the sleazy inner workings of the Clinton grifters-in-chief....

The memo removes any doubt that the foundation is little more than an unregistered super PAC working on the Clintons’ behalf.  Donors to the charity are simultaneously tapped to give Bill speech requests and other business arrangements, including the $3.5 million he was paid annually to serve as ‘honorary chairman’ of Laureate International Universities....

“It’s now 2016 and Bill’s most favorite candidate is running for the presidency.   There’s no question foundation donors are being ‘leveraged’ for Mrs. Clinton.

“The obvious question is where are the prosecutors?... Every election lawyer in the country lives in fear of stepping over the lines governing fundraising and election vehicles.  The Clintons recognize no lines.

“Here’s the lasting takeaway: The Clintons spent their White House years explaining endless sleazy financial deals, and even capping their exit with a scandal over whether Bill was paid to pardon financier Marc Rich.  They know the risks. And yet they geared up the foundation and these seedy practices even as Mrs. Clinton was making her first bid for the presidency.  They continued them as she sat as secretary of state.  They continue them still, as she nears the White House.

“This is how the Clintons operate.  They don’t change.  Anyone who pulls the lever for Mrs. Clinton takes responsibility for setting up the nation for all the blatant corruption that will follow.”

Editorial / Wall Street Journal

“The Band memo reveals exactly what critics of the Clintons have long said: They make little distinction between the private and public aspects of their lives, between the pursuit of personal enrichment, the operation of a nonprofit, and participation in U.S. politics.

“Mr. Band writes that he and his colleague Justin Cooper ‘have, for the past ten years, served as the primary contact and  point of management for President Clinton’s activities – which span from political activity (e.g., campaigning on behalf of candidates for elected office), to business activity (e.g., providing advisory services to business entities with which he has a consulting arrangement), to Foundation activity.’

“This excerpt and all the potential conflicts it describes, plus Chelsea’s warning about business ‘hustling’ at foundation events, would seem more than ample cause to trigger an IRS audit of the foundation. For that matter, why aren’t the IRS and prosecutors already on the case?  Any normal foundation has to keep records to show it is separating its nonprofit activity from any for-profit business.

“Mr. Band’s memo confirms that donors were not seeking merely to help the sick and the poor.  He explains that the Clinton Foundation had ‘engaged an array of fundraising consultants’ over the past decade but ‘these engagements have not resulted in significant new dollars for the Foundation.’ In other words, it wasn’t working as a conventional charity....

“Why exactly were donors writing checks?  The Band memo makes clear that donations untied to additional Clinton or Teneo services weren’t all that appealing to potential supporters.  This is significant, because the large grant-making foundations in the U.S. are almost entirely run by Clinton voters.  So you know they weren’t turned off by the brand name. They’d contribute more if they thought they were also buying goodwill and influence with a current Secretary of State and a potential future President.

“We don’t applaud WikiLeaks or the theft of information, and these hacks deserve a firm U.S. government response.  But the emails are public and they will confirm for many Americans their worst suspicions about the people who run their government.

“It’s also worth noting that in the vast digital trove of Mr. Podesta’s stolen emails we haven’t noticed emails from Mrs. Clinton.  Perhaps they don’t exist. But American voters shouldn’t worry merely about the emails released before the election.  What emails or memos exist that these hackers, Russian or not, could be withholding for leverage after the election with another President Clinton?

“The Clinton campaign has suggested that Donald Trump has praised Vladimir Putin because the Russian has something on the Republican.  The question is what do any number of possible bad actors know about Bill and Hillary Clinton’s mixing of business, charity and politics?”

As for The Donald....

Trump’s dysfunctional campaign was perhaps best encapsulated in last Saturday’s speech at Gettysburg.

Michael Goodwin / New York Post

“Abe Lincoln’s legacy is safe, and not just because Donald Trump talked too long Saturday. It’s that he said too little that was new or uplifting.

“Running out of time to change the campaign’s dynamics, Trump’s team picked Gettysburg for a speech it touted as a possible turning point in the presidential race, just as the 1863 battle there had turned the Civil War.

“But the candidate seemed to have other ideas about the proposition at hand. The result was a mash-up of conflicting themes instead of a clarion call to arms.

“Part complaint, part appeal to better angels, part a contract with voters and part a list of things to do, the speech never gelled into a coherent vision. By trying to do too many things, it didn’t do any well.

“After starting with a perfunctory reference to Lincoln’s address, and to his own status as a political outsider, Trump dedicated 10 precious minutes to a sour restatement of grievances against a ‘rigged system.’

“The usual suspects – a dishonest media, voter fraud, Hillary Clinton’s corruption, a crooked FBI and the ‘liars’ who accused him of groping – were soundly thrashed. The women who lied will be sued, he promised, and giant media mergers would be broken up, too.

“It was a stale, dark opening that clouded the 20 minutes of solid policy promises that followed.  As such, the reset needs a reset.

“The problem is not just dwindling time, but also a shrinking pool of persuadable voters.  National polls consistently show he is stuck at about 40 percent, and that many white suburban women who usually vote Republican are not with him.

“If Trump was talking directly to them, I missed it.  As is often the case, he focused on feeding red meat to his core supporters instead of adding to them with a broader appeal.”

The substance that followed the opening, which was boilerplate Republican ideals this campaign season, was lost in the bitterness.  Once again, the media took the bait and ran with it for their headlines, message lost.

On ObamaCare, Trump missed the boat virtually the entire campaign until recently.  I was writing last spring, when we were beginning to hear of large premium increases for 2017, that this would be a critical campaign issue but Trump largely ignored it save for a throwaway line or two.

But with the latest enrollment period set to begin, the average 25 percent premium increases you’re hearing about on the federal marketplace next year directly hits the 16% of people with ObamaCare plans who do not currently receive subsidies.

Rates will vary widely by state, with steeper hikes in Arizona, which is facing a 116% hike (145% in Phoenix, according to the Kaiser Family Foundation), while Indiana will see a 3% decline.

Editorial / Wall Street Journal

“President Obama took a health-care victory lap last week in Miami, celebrating ‘all the progress that we’ve made in controlling costs’ and portraying the law’s critics as ‘false and politically motivated.’ Does that apply to the actuaries at the Health and Human Services Department too?  On Monday they reported that ObamaCare premiums will soar 25% on average next year, and this is ‘progress’ all right, in the wrong direction.

“That headline number understates the extent of the trouble.  Liberals used to dismiss insurance premium shock by saying that the subsidies will offset any increase and, anyhow, beneficiaries can shop around for a cheaper plan.  But the 25% figure refers to the rate spike for the second-cheapest ‘silver’ plan for each exchange from state to state, which is a key benchmark in the subsidy formula.  In other words, these are the mid-level insurance plans that are performing the best, not the average increase of all ObamaCare coverage....

“In a normal election year, the presidential candidates might debate solutions, but, well, you know.  For the time being, perhaps Mr. Obama could show a little more intellectual humility when confronted with evidence of his own failures.  But, well, you know.”

Foreign policy....and the choice....

Mark Helprin / Wall Street Journal

“By all means, take Mosul, and continue on until ISIS is no more.

“But ISIS, also known as Islamic State, is and has been the wrong focus. Were it not holding hostage the scattered populations it controls in urban areas, a properly directed military coalition of two or three Western powers, or the United States alone, could roll it up in a week.  Even as things are, and despite the chaos and cross-loyalties in the present theater of war, with competent diplomacy and military force ISIS could be crushed in a matter of months.  The key is NATO’s activation under Article 5 in behalf of alliance member Turkey, which, if only technically, has nonetheless come sufficiently under attack to do so.

“With air support from American and French carriers in the Mediterranean, the U.S. Air Force at Incirlik and Gulf bases, and the Turkish, Saudi, and Gulf States air forces, in very short order Turkish divisions from the north could link up with Saudi, Jordanian and an Egyptian expeditionary force from the south, stiffened by American, British, and other NATO units where needed, to cut Syria in half. With Kurds and Iraqis closing from the east, this would simultaneously surround ISIS and confine the Syrian regime in a truncated enclave shielded by its Russian patrons.

“The primary purpose of such action, however, would not be to defeat ISIS.  Though at the moment ISIS is undeniably the most publicity-rich and barbaric of the jihadist movements, in relation to its structure and resources its ambitions to unify the Islamic world has – as in the case of bin Laden, Nasser, and the Mahdi of the Sudan – doomed it from the start....

“Much more befitting the power and history of the U.S. and its allies would be to sever and destroy the toxic, threatening bridge that Iran has built from Afghanistan to the Mediterranean, with, astoundingly, the patronage of the United States. Anchored by soon-to-be-nuclear Iran, an integrated politico-religious-military front including Shiite-directed Iraq, Syria and Lebanon will emerge in the near future if current trajectories remain undisturbed.

“This entity will have a population almost half that of the United States; the immense oil wealth of Iran and Iraq; ports on the Mediterranean, the Persian Gulf, and Indian Ocean; nuclear weapons; ICBMs; and, until it will no longer need Russia, for which it has no brief, the mischievous and destructive cooperation of Vladimir Putin.

“If, under the discipline of an Iran drunk with its successful bamboozling of the West, this power turns its eyes south to Jordan and Saudi Arabia, the Middle East will be entirely transformed....

“Now we are blinded to Iran in favor of ISIS – in its horror and sensationalism the matador’s red cape that distracts from the truly mortal threat, the sword. We know that the Iranians are skillfully using this dynamic. The question is, given Mr. Obama’s seemingly inexplicable yet indefatigable sponsorship of Iran, and his slow-motion approach to ISIS, is he using it as well?”

Sam Nunn / Wall Street Journal

“America’s Founding Fathers were determined to avoid a concentration of power in any one person or branch of government. When it comes to the authority to launch nuclear weapons, however, there are no checks or balances. Millions of lives and perhaps the fate of the planet rests on the judgment of a single person, the commander in chief.  When voters choose America’s next president on Nov. 8, this is what’s at stake.

“Nine nations possess nuclear weapons.  In a military confrontation, leaders will have little warning of a potential nuclear attack and only minutes to respond.  Sophisticated hackers could deceive warning systems or disrupt command-and-control processes.  Moscow and Washington still posture their nuclear forces so that they can be ordered to fire in minutes, a dangerously outdated strategy from the Cold War.  Once a missile is in the air, even if fired by mistake, there is no way to order it back....

“America’s next president must think carefully about these challenges.  How would he or she approach a crisis with only minutes to decide how to respond?  What would he or she do if confronted with a warning, potentially false, of a nuclear attack on the U.S.?  Despite the erosion of trust between America and Russia, the citizens of our two nations have an existential stake in the judgment of both of our leaders.

“Several years ago I sat around a conference table in Moscow with Americans and Russians, including President Vladimir Putin.  I expressed concern that neither he nor the American president would have more than a few minutes to decide whether to use nuclear weapons if warned of an attack.  The two countries’ militaries, I suggested, should work together to give their presidents more time to weigh the options.  Mr. Putin made clear that he was fully aware of Russia’s short nuclear window.  ‘Senator Nunn,’ he added, ‘at some point it becomes automatic.’

“What about moral considerations?  William Swing, a retired Episcopal bishop, recently offered, in a memo sent to about a dozen leaders, a powerful reminder of the importance of this year’s presidential choice: ‘Whoever wins will have his or her hand on the weapons that could end life, as we know it, on this planet.  We are not so much voting for a president as choosing a god.  When you put your hand on the nuclear trigger and become the single agent of the Earth’s destruction that is power beyond human imagining.’

“Is any human prepared or qualified to make this fateful decision for mankind? I think not.  Yet this is the responsibility of the commander in chief.  Temperament, composure and sound judgment are essential.  So is understanding America’s adversaries and allies and, most important, possessing the leadership qualities required to reduce the risk that such a terrible call will ever have to be made.”

As you can imagine, Sen. Nunn believes Hillary Clinton has the “judgement and skills to take on this awesome responsibility....She knows – like Ronald Reagan and Mikhail Gorbachev did – that nuclear war cannot be won and must never be fought.

“Donald Trump, on the other hand, has unfortunately demonstrated that he is an apprentice in the nuclear arena.  Worse, he has no appetite for learning.  Mr. Trump seems not to care what he doesn’t know, and he apparently listens to no one. His colossal ego and disdain for military leaders are far from comforting.

“In apparently off-the-cuff statements, Mr. Trump has suggested that the world would be safer if more nations, including Saudi Arabia, Japan and South Korea, had nuclear weapons and were willing to use them. This is dangerously off base.  Mr. Trump has even suggested that he might deploy nuclear weapons against terrorists, seemingly unaware of the devastating damage this would inevitably inflict on thousands of innocent victims.

“What Mr. Trump hasn’t thought through – or doesn’t understand – is that adding to the number of nuclear states dramatically increases the risk of proliferation....

“The absence of checks and balances in the nuclear age has haunted the world for decades. The risk of conflict can be reduced, but there is no substitute for a president with good judgment who seeks sound advice from experienced military and civilian leaders.  I believe that Hillary Clinton is the right choice on Nov. 8 to be America’s president and commander in chief.”

Benny Avni / New York Post

“Donald Trump often describes President Obama’s response to foreign threats as a ‘disaster’ and has vowed to restore America’s military deterrence.  So does Hillary Clinton.  ‘We need to respond to evolving threats from states like Russia, China, Iran and North Korea,’ she said in August at the American Legion in Cincinnati.  ‘We need a military that is ready and agile so it can meet the full range of threats and operate on short notice across every domain,’ she added.

“After eight years of retreat, that may prove a tall order.

“Russia, for one, increasingly provokes American allies in Europe and elsewhere.  Since April, Russian fighter planes have buzzed American planes and warships with barely a protest.  On Friday, a Russian armada, led by the aircraft carrier Kuznetsov, provocatively sailed the English Channel.  American and British ships watched.

“China, meanwhile, steadily turns man-made islands into naval military fortresses, transforming the South China Sea into its private lake – much to the chagrin of our allies, who’ve relied on American defense treaties for decades.  Beijing also restricts commercial flights over disputed areas and constantly confronts Japanese fishermen in the East China Sea, where Tokyo has administered several territories for a long time.

“Washington advises Pacific allies to use international arbitration to regain sovereignty back from increasingly belligerent China. But when a Hague court ruled for the Philippines recently on one such dispute, China simply ignored the verdict.

“This week, Manila’s new president, Rodrigo Duterte, announced his ‘separation’ from the U.S. and swore allegiance, instead, to China and Russia.

“The next president must demonstrate that there’s a new sheriff in town, starting by significantly upping military budgets....

“To be sure, no president wants to turn every minor incident into war.  James Jeffrey, a former Ambassador to Iraq who worked under Presidents George W. Bush and Obama, gives the latter fairly high marks.  ‘He can leave office and say, ‘I didn’t start any war, I killed Osama bin Laden and, maybe soon, I defeated ISIS in Mosul.’ And that will probably be right,’ Jeffrey says.

“But Obama, Jeffrey adds, has a blind spot on Iran....

“After numerous incidents in the Persian Gulf in which small speedy boats belonging to Iran’s Islamic Revolutionary Guard Corps have buzzed large American ships, this new incident [Ed. the missiles fired at the ships by the Iranian-back Houthis in Yemen] seems different, Jeffrey says.  It actually threatened American lives.  If any had been lost, it would necessitate a forceful response.

“For Iran, there are political and other benefits in ‘slapping America in the face,’ Jeffrey says.  Especially if Tehran believes that ‘President Obama would do nothing against an Iranian provocation, because he is afraid it would cancel the nuclear deal.’

“And, he adds, Tehran is afraid that a president Hillary Clinton or Donald Trump will be much tougher on Iran, which explains the timing.

“Washington should warn Iran through diplomatic channels that the response to such provocations will not be a strike against proxies but against Iran’s own Revolutionary Guards, Jeffrey says.

“Climbing out from the hole we put ourselves in may exact a high cost, but without it, America – and the rest of the world – may find things sharply change for the worse.”

On voting...Robert J. Samuelson / Washington Post

“There was a time when ticket splitting was common.  Voters would support one party’s candidate for president and the other’s for Congress.  At its peak in 1972, ticket splitters represented 30 percent of voters, reports political scientist Alan Abramowitz of Emory University.  Since then, the practice has gone into eclipse.  In 2012, only 11 percent of the electorate were ticket splitters.

“And yet...

“To bring this nasty and bizarre campaign to meaningful conclusion, what this country needs is an outburst of ticket splitting.  Republicans should vote for Hillary Clinton, and Democrats should back Republican House and Senate candidates.  This will strike most people as counterintuitive, if not foolish, but there are three good reasons for doing so.

“The first is to make a statement about the outcome.  Neither party deserves complete victory.  Both nominated widely distrusted candidates.  In the latest NBC-Wall Street Journal poll (taken before last week’s final debate), only 40 percent of respondents viewed Clinton positively; a mere 29 percent felt that way about Donald Trump.  Parties shouldn’t be rewarded when their popular support is so thin.

“The second reason is related: to avoid misinterpretation.  Assuming Clinton wins, she and others will claim that the Democrats have a ‘mandate.’  They don’t.  Her triumph would be more a repudiation of Trump than an endorsement of her policies....

“The final reason is the most consequential – and the most hypothetical.  Divided government, driven by ticket splitting, might actually produce better government.

“How could that be?  Superficially, the opposite would seem more likely.  Divided government would mean paralyzed government; it’s more gridlock....

“But that’s not inevitable.  For starters, we would have a new cast of characters.  Clinton, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are all ‘transactional politicians’ – they want to get things done – as well as fierce partisans.  They also know that the gridlock of the past eight years hasn’t done either party much good.  All this creates reasons to reach mutually acceptable agreements....

“The overriding need of the next president and Congress is for both parties to rebuild their political centers, which – almost certainly – still command the backing of public opinion.  Revitalized centrist politics does not guarantee good legislation, but it stands a better chance of producing publicly acceptable legislation.  Even this may be a long shot, but it’s our best shot.”

Turning to Wall Street...

We had our first look at third-quarter GDP on Friday and it came in at a 2.9% annual rate, stronger than the second quarter’s 1.4% and above expectations of 2.5% (the Atlanta Fed’s GDPNow indicator pegged it at 2.1%, which it could still get down to after two revisions...or it could be revised higher...)

So Q3 was the fastest growth rate in two years, but if you average things out, the economy is growing at the same 2%ish annual rate since the recession ended in mid-2009, or the weakest expansion dating back to 1949.

Among the components in the report, consumer spending slowed to 2.1% after a 4.3% gain in the second quarter.

The key was exports, which add to GDP, increasing at a 10% clip in the quarter, the best gain in nearly three years, with the shipment of agricultural products, especially soybeans, being a key.

The core personal-consumption expenditures figure for Q3 came in at 1.7%, this being the Federal Reserve’s preferred benchmark, and thus still shy of its 2% target (though core CPI is, ditto wages).

Speaking of the Fed, it meets next week and it will hold the line on interest rates, but no doubt will issue a statement with language pointing distinctly to December 13-14 for the first rate hike since Dec. 2015.

GDP (annualized)

Q3 2016...2.9%
Q2 2016...1.4%
Q1 2016...0.8%
Q4 2015...0.9%

In other economic news....

September new home sales came in basically as expected at a 593,000 annualized pace. 

The S&P/Case-Shiller home price index for August showed a gain of 0.2% over the prior month, up 5.1% for the 12 months in the 20-city index, with Portland and Seattle showing the largest one-year price gains, 11.8% and 11.4%, respectively, while the New York metro area has seen an increase of just 1.8% over the same period.

September durable goods fell 0.1%, and were -1.2% ex-transportation and aircraft.

Europe and Asia

I was writing months ago that investors were totally missing the boat on Brexit.  There has been a sense of complacency in some circles, but certainly not in corporate boardrooms, that after the initial shock, things didn’t seem so bad, and, indeed, the economic news from the eurozone and the U.K. has been fine.

My point has been, though...Brexit hasn’t started!  Oh, corporations are already planning for the worst, and in many cases holding off on spending and expansion plans for the simple reason they don’t know what the rules will be, and won’t for some time to come.  The actual negotiations don’t begin until next spring, and while many in Britain want the benefits of a single European market, but without the EU’s open-door policy on immigration and movement of peoples from within the union, many investors don’t seem to get it...even as European governments are telling Britain very firmly, ‘If you think you’re getting both, you’re nuts!’

So reality is hitting London’s all-important (nay critical) financial sector as the U.K.’s trade minister, Mark Garnier, said this week that “passporting,” which allows London-based lenders and insurance companies to sell their services anywhere in the single market, is unlikely to continue once the U.K. leaves the EU.  Garnier, in an interview, said ideally the banks would receive some kind of “equivalence,” but in return the British banks would have to accept all future EU regulations as they are handed down from Brussels.

Let’s just say negotiations are going to be a mess, and this is but one issue of hundreds.

But internally in Britain, the exploding debate will be how manufacturers and small business are treated at the expense of the financial sector, as the government no doubt will try to carve out exceptions for one, probably to the detriment of the other.  Just remember the financial sector contributes about 10 percent to Britain’s GDP.

But if you are a global bank, you can’t really afford to sit around for two years while negotiations are completed.

Meanwhile, Britons are more concerned with controlling immigration than maintaining access to the single market, with over half, 58%, of respondents to a Survation Ltd. for ITV poll saying they approve of Prime Minister Theresa May’s handling of the divorce, while only a quarter disapprove.

As for Mrs. May, she has promised U.K. lawmakers they will be able to have a series of debates on how the government should approach leaving the EU before she begins formal negotiations, making time available before and after the Christmas recess, but, she said, “The government must not show its hand in detail as we enter into these negotiations.”

As for the Euro economy...

IHS Markit released its ‘flash’ readings on manufacturing and the service economy for the eurozone, with the composite reading at 53.7 for October vs. 52.6 for September (50 being the dividing line between growth and contraction).  The manufacturing figure is 53.3 vs. 52.6, and for services 53.5 vs. 52.2, all solid and of course post-Brexit.

The flash readings also look at Germany and France.  For the former the comp. was 55.1 vs. 52.8 last month, manufacturing 55.1 vs. 54.3, and services 54.1 vs. 50.9.  For France the comp. was 52.2 vs. 52.7 in September, manufacturing 51.3 vs. 49.7, and services 52.1 vs. 53.3.

Separately, business confidence in Germany is at its highest level since April 2014, with inflation, according to Destatis, running at a 0.7% annualized rate.

In France, GDP for the third quarter was 0.2% over the prior quarter, 1.1% year over year, or below the government’s forecast of 1.5% for 2016, less than expected and another nail in the coffin for President Francois Hollande, who said he would decide whether or not to seek a second term by mid-December, France’s big election next spring.

Third-quarter GDP and inflation figures for the eurozone overall will be released on Monday.

Chris Williamson, chief economist, at IHS Markit:

“The eurozone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come.  With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year.

“October’s PMI is consistent with a quarterly GDP growth rate of 0.4%, led by a 0.5% pace of expansion in Germany....

“Policymakers will be encouraged by signs of both stronger economic growth and rising price pressures, and the prospect of a robust fourth quarter will fuel further speculation of a possible tapering of QE purchases by the ECB.”

Ah yes, rising price pressures and tapering.  Check out the euro bond market this week.

The yield on the 10-year German bund rose from 0.00% to 0.16% (touching 0.22% early Friday).  The yield on the French 10-year rose from 0.28% to 0.46% and Italy’s from 1.37% to 1.58%.

Separately, Eurostat released the latest debt levels across Euroland, with government debt to GDP in the second quarter of 2016 at 91.2%, a slight improvement from 92.1% Q2 2015.

You have figures of 70.1% in Germany, 89.1% in the U.K., 98.2% in France, 100.2% in Spain, 131.7% in Portugal, 135.5% in Italy, and 179.2% in Greece.

More Eurobits....

Italy’s retail sales for August were down 0.2% year over year, not good for Prime Minister Matteo Renzi as he faces his critical December referendum.

Spain’s GDP for the third quarter was up 0.7% over the second quarter, more solid performance, with inflation rising 0.8% in October after a lengthy stretch of deflation.  And the unemployment rate is finally back below 20%, 18.9%, for the first time in 7 years (Q4 2009).

Add it all up and it’s the perfect backdrop for Prime Minister Mariano Rajoy to finally gain a second term, which he is slated to do on Saturday, after the Socialists finally acquiesced and decided to stand aside, thus letting acting PM Rajoy attain a parliamentary majority that will end a 10-month political impasse that had Rajoy overseeing a caretaker government.

The Socialists were concerned that if another vote was held in December, as planned, they would have lost further support and that Podemos, the anti-establishment insurgents, would become the main rival to Rajoy’s center-right People’s Party as the Socialists dropped to third.

All the above aside, Rajoy will be heading a weak government with major issues to confront, including Catalan independence.

In the U.K., third-quarter GDP was 0.5%, 2.3% year over year, better than expected.

Germany’s economics ministry has reopened its review of a $730 million Chinese acquisition of Aixtron SE, a German chip-equipment manufacturer, in the latest sign of government alarm about a wave of Chinese takeovers.  Good.

William Wilkes / Wall Street Journal

“The planned purchase of Aixtron is part of a raft of Chinese acquisitions of German technology firms that has stirred concern in the government.  On a visit to China in June, German Chancellor Angela Merkel voiced frustration over an asymmetrical situation that lets China buy high-tech expertise in Germany’s open market, then use that know-how to build protected champions for its own markets.”

Merkel’s deputy, Sigmar Gabriel, called for European Union measures to give national governments expanded powers to block or impose conditions on shareholdings of non-EU companies.  EU Digital Economy Commissioner Guenther Oettinger, a German who’s a member of Merkel’s party, agrees.

“It’s absolutely right to initiate this debate at the European level,” Oettinger said in an interview.  “Everybody has to play by the same rules.  Clearly, there are many countries, including big ones such as China, that make market access or corporate takeovers difficult or effectively impossible.”  [Bloomberg]

Gabriel heads Germany’s Social Democrats, the junior partner in Merkel’s governing coalition.

Chinese entities have announced or completed acquisitions of German companies worth a record $12.3 billion this year, almost eight times the level of 2015, according to data compiled by Bloomberg. At the same time, well, you know how difficult China makes it to obtain access to its market and corporations.

On the migration front, the big story was the dismantlement of the Calais refugee camp in northern France, where as many as 8,000 refugees, most of them from Sudan, Afghanistan and Eritrea, had made their home, hoping to eventually reach Britain, across the English Channel.  But the virulently anti-immigrant attitudes in the region that led to razor wire around the undersea tunnel and now the port (financed by the British government), along with a heavy French police presence, made it virtually impossible to escape to the U.K.

Politically for French President Hollande, the Calais camp, aka “the Jungle,” was killing him as the far-right and conservatives pointed to the mess, with locals crying about a severe drop in property values and declining business, so the government bulldozed it this week, with, at last report, about 6,000 of the migrants being bussed to reception centers across France, while over 1,200 unaccompanied children were put in a provisional reception center in Calais.  Britain took in an additional 200 unaccompanied children.  As a rule, Britain will not take adults, who under EU rules are supposed to apply for asylum in their country of arrival.

Editorial / The Economist

“Calais has long taken on a broader meaning.  The shocking sight of a muddy, foul-smelling camp in the heart of rich Europe has come to symbolize the continent’s ambivalence to the refugee crisis.  In theory, the EU was supposed to share responsibility for the asylum-seekers who arrived en masse from Syria, via Greece, last year.  In practice, Germany has been by far the most generous, with 477,000 people applying for asylum in 2015 alone – over five times the number of refugees who applied for asylum last year in France, and next to just 39,000 in Britain.

“France, in reality, has found itself to be a country of transit rather than a destination, and as such a reluctant gatekeeper for the British.  Around Calais, exasperation about the camp has stirred support for the far-right National Front.  It has also been exploited for broader political ends ahead of France’s presidential election next spring.”

Well imagine what is happening in some towns and cities that have been selected to receive the 6,000 or so adult refugees.  Paris officials said 1,000 immediately showed up at a Paris migrant camp in north Paris, the population going from 2,000 to 3,000 overnight.  But the rest were bussed to various destinations and the locals aren’t happy (though there are some charitable types, I hasten to add, who welcomed the influx).  Let’s just say it remains a powerful issue for Marine Le Pen, as well as Alain Juppe and Nicolas Sarkozy.

Turning to Asia, Japan’s flash manufacturing PMI for October was 51.7 vs. 50.4 in September, but exports last month were down 6.9%, however, this was better than August’s minus 9.6%.  September imports fell 16.3%, but better than the 17.2% decline the prior month.

Japan’s core CPI was down 0.5% in September, year over year, while household spending declined 2.1% yoy last month, the 7th straight monthly decline.

In South Korea, GDP rose 0.7% in the third quarter over the second, up 2.7% year over year, which was down from Q2’s 3.3% pace.

Street Bytes

--With one trading day left in the month, October has been incredibly quiet on Wall Street; witness the movement in the Dow Jones the past two weeks... +0.04%, +0.1%.  With the flood of earnings reports continuing, earnings are now expected to rise in the third quarter for the first time in five quarters, when earlier a decline had been forecast.  But we’re talking a small gain of around 1%, while revenues are now estimated to rise about 2.5%.  The forecast for the fourth quarter is an increase in eps of 6%.

--U.S. Treasury Yields

6-mo. 0.48%  2-yr. 0.85%  10-yr. 1.85%  30-yr. 2.62%

As noted earlier, the yield on the 10-year is at its highest level since May.

--Crude inventories fell this week according to the Energy Information Agency, which should have been bullish seeing as a gain was expected, but then Iraq balked at joining efforts to trim output to prop up prices, OPEC’s second-largest producer saying it should be exempt from cutting production because it is embroiled in a war.  Iraq currently produces more than 4.7 million barrels a day and production could rise further as the government is urging international companies to boost production at its fields.

Russia has also refused to commit to joining the plan to freeze or cut output as announced in Algeria last month, so on the week, oil fell back to $48.66, down from the previous week’s close of $51.00.

Separately, General Electric Co. is in talks to merge its oil-and-gas business with Baker Hughes Inc., according to the Wall Street Journal.  A deal could be in the neighborhood of $20 billion.

--Exxon Mobil reported a 38% decline in quarterly profit for Q3 to $2.7 billion, while the company said it may be forced to recognize that as much as 4.6 billion barrels of its reserves is no longer profitable to produce, a bone of contention with regulators; most of the questionable holdings in Canada’s oil sands.

CEO Rex Tillerson also said the operating environment “remains challenging.”  Revenue fell 13% to $58.68 billion, below estimates.

Exxon slashed its capital and explorations spending 45% from a year ago to $4.19 billion, bringing the year’s decline to 39%.

Rival Chevron Corp. said its quarterly profit fell 35% as revenue declined more than expected, though earnings were above the Street’s estimates and the shares rallied.

Chevron has been slashing capital spending while previously announcing job cuts of 8,000, or up to 12% of its workforce.  This is helping the bottom line, which resulted in a profit of $1.3 billion, which while less than the year ago period, was the first profit after three quarters of losses.  Revenue declined 12% to $30.14 billion.

--AT&T confirmed it is acquiring Time Warner for $85.4 billion, as it sets out to build a digital video platform to rival Netflix, among other things, with AT&T looking to transform the telecoms group into one of the world’s biggest media companies.

But I’m not going to write much on this for now as the merger faces major regulatory hurdles and Time Warner shares are well below the $107.50-per share price offered by AT&T, closing the week at $87.50, which gives you a clue as to the odds of this deal closing. 

Rupert Murdoch’s 21st Century Fox issued a statement calling for the deal to be reviewed.  “A deal of this size and scope, and the impact it will have on consumers, should receive the highest level of regulatory scrutiny,” it said.

Randall Stephenson, AT&T CEO, is confident, however, that the deal will be approved, noting there are few examples of Washington blocking the combination of two companies with different businesses.

AT&T is looking to take advantage of Time Warner’s HBO and Warner Bros. studio to move quickly to build a new video product to offset the decline of AT&T’s DirectTV business.  AT&T is launching a new video service next month, a $35 bundle, that would deliver content over the internet rather than traditional cable or satellite distributors.

--Apple Inc. posted its first annual revenue decline in 15 years, but forecast a return to growth in the current quarter with stronger sales of its iPhone 7.

For its fiscal fourth quarter ending Sept. 24, however, Apple reported its third consecutive decline in revenue and profit, with net income falling 19% to $9 billion, while revenue fell 9% to $46.9 billion, prior to the launch of the iPhone 7, which went on sale a week before the end of the quarter.

The iPhone accounted for 63% of revenues in the fiscal year, but the company sold 45.5 million, 2.5m fewer than a year earlier.

Apple also reported profits in China fell by almost 20%, which sure as heck shouldn’t be a surprise to loyal readers of this space as Apple loses out to local rivals such as Huawei and Vivo.  Revenue in China fell 17% to $48.5bn, after the country became Apple’s second-largest market by sales, after the Americas, in 2015.  [Watch the South China Sea for clues as to where Apple sales go from here.  That’s your edge as an investor/short seller.]

This year, Europe has become No. 2 as it was the only territory where iPhone sales continued to grow.  Sales of all Apple products in Europe, though, were flat.

What should be worrisome for Apple shareholders is the fact the company doesn’t seem to be cashing in much after the problems with Samsung’s Galaxy Note 7, now off the market.  Apple is also trying to convince investors that its tepid holiday sales outlook has to do with supply constraints, not demand.

So Apple tried to focus attention on growth in Apple’s services arm, which includes iTunes and the App Store, with revenue up 24%.

From the Financial Times’ Lex column:

“Tim Cook touted the iPhone’s ‘gorgeous new finishes’ during Apple’s quarterly results conference call on Tuesday evening. The earnings themselves do not come in ‘jet black’ and ‘rose gold’ but there seems to be a similarly inordinate amount of time spent on their superficial appearance.

“First, Apple applied some heavy timing gloss.  It released the new iPhone seven days earlier than last year.  Even with this artificial boost to the September-end quarter, iPhone revenues still fell 13 percent.

“Stealing from the future like this should hurt Apple’s next quarter but the company is doubling down by adding an extra week to the December-end quarter.  Apple expects to make about $77bn in revenue in that quarter compared with about $75bn last year, setting it up for another all-time record.  Strip out the extra week, however, and it looks like another decline.

“These fine details matter due to fears that a saturated smartphone market and a lack of dazzling new products are killing the growth prospects of the world’s largest public company....

“Instead of hardware, Apple has chosen more gloss: emphasizing its credentials as a services company.  For the second quarter in a row, the group’s press release highlighted record services revenue, which grew at 24 percent a year.  Services are actually the only product line that grew at all so no wonder Apple wanted to highlight it. This is a perfectly reasonable tactical move – the company deserves more credit for its sticky software revenues – but it is also totally inadequate as a strategic next step of substance.”

Separately, a new report by market analyst IDC said smartwatch shipments declined by nearly 52% year-on-year, with Apple shipping out just over one million units in the third quarter, while during the same period in 2015, it shipped 3.9 million, Apple the market leader in the category.

I said from day one this was a stupid product.

--Amazon shares fell 5% in after-hours trading on Thursday following release of its third quarter earnings, which missed expectations badly, 52 cents when the Street was expecting 78. Net income was $252 million.

Investment in distribution warehouses, video content from top tier directors and actors and expenses related to virtual assistant Alexa helped push up operating costs 29%.

Amazon announced it had opened 18 fulfilment centers during the quarter, which is rather remarkable.  CFO Brian Olsavsky said, “We’re in a period of ramping up investment in the second half of 2016.  It is a big undertaking as far as space is concerned.”

Sales increased 29% to $32.7bn, meeting consensus, with sales in North America up 26% and international rising 28%.

Revenue from Amazon Web Services soared 55% to $3.2bn, while the operating margin at AWS increased to 31.6%.

For the holiday season, Amazon gave broad targets, with expected operating income of zero to $1.3bn.

The company is clearly spending a lot on Alexa, which founder and CEO Jeff Bezos said has more than 3,000 skills.  “Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful – wait until you see some of the surprises the team is working on now.”  [Hopefully Alexa can get Russia to stand down in Europe.]

--Google’s corporate parent – Alphabet Inc. – said the company earned $5.1 billion, up 27% from the year ago period.  After subtracting commissions, revenue climbed 21% to $18.3bn.  Both figures beat analyst projections.

YouTube has emerged as the rising star in Google’s cast of services.  While Alphabet doesn’t disclose how much money the online video site is making, RBC Capital analyst Mark Mahaney estimates YouTube’s annual revenue has reached $10bn and is increasing by as much as 40% a year.  That’s remarkable.  YouTube’s audience has surpassed 1 billion, with 80% of the viewers outside the U.S.  More than half its video clips are watched on mobile devices.

--Deutsche Bank surprised to the upside on earnings for the third quarter, $300 million, though the bank said it raised its litigation reserves to $6.5bn as CEO John Cryan pledged to redouble restructuring efforts on Thursday, warning that the bank faces tough times ahead as it finalizes talks with U.S. officials over its looming multi-$billion fine.

But on the positive side, Deutsche profited from bond trading and the bank expects the fourth quarter business in this area to exceed last year’s pace.

--Italy’s Monte dei Paschi di Siena, viewed as Europe’s most troubled big bank, vowed to slash its workforce by 2,600 (10%), shut hundreds of branches (as many as 500 of 2,000) and sell off a key business ahead of a 5bn euro recapitalization effort

--Caterpillar Inc. cut its earnings view for 2016, citing lower-than-expected equipment sales in the second half of the year that could continue well into 2017, with revenues in the recent quarter falling 16%, $10.96bn to $9.16bn.

Looking ahead to next year, the company said “the balance of risk, particularly during the first half of the year, is likely on the negative side.” What’s needed for improvement are higher commodity prices, or at least stability.  Outgoing CEO Doug Oberhelman also cited global economic uncertainty, such as the Brexit vote.

But it was Oberhelman’s oversized bet on mining equipment and building up the capacity for same that sunk the company in recent years after China’s growth rate slowed.  The plunge in oil prices didn’t help either.  Caterpillar, aside from eliminating a previously announced 10,000 jobs, will be closing or consolidating 20 plants by the end of 2018.

--General Motors doubled net income and notched record revenue in the third quarter, owing to strong truck sales in the U.S., but the company remains concerned about Brexit as GM tries to record its first annual profit in Europe since 1998.

GM smashed Wall Street’s earnings and revenue expectations, with the latter up 10% to $42.83 billion and the former up to $2.77 billion.  Sales were also helped by a surge in China, aided by a government incentive program, with operating income there of $459 million, but it lost $142 million in Europe and it looks for losses of as much as $300 million there in the fourth quarter.

GM also lost $121 million in South America.

--Ford Motor Co.’s profit fell 56% to $957 million in the third quarter, down from $2.2bn in the year ago period.  Earnings beat the Street, though.

Ford saw record-setting U.S. sales as its SUVs and pickups remain highly popular, but as sales peak, Ford is feeling the impact, with North America sales nonetheless down 11% in the quarter and revenue dropping 8%, with the company previously announcing temporary closures of four plants in the region this month to bring production in line with demand.

Overall, Ford’s revenue fell 6% to $35.9 billion.  Worldwide sales fell 4%, down in every market except Asia, where it earned $131 million.

Ford’s North America pretax profit was $1.3bn, down 55%, and the company lost $295 million in South America, but eked out a $138m profit in Europe, its best third quarter there since 2007.  However, the company said the Brexit vote will cost Ford $200m this year.

Ford also said its profits will likely fall next year before rebounding in 2018.

--Tesla unexpectedly reported its first quarterly profit since 2013, better than what the Street forecast, with revenues rising 145% to $2.3bn from $937m.

Tesla also reaffirmed its plans to deliver 50,000 vehicles in the second half of 2016.

But the small income, $21.9m, nonetheless will help the company if it wants to raise money and get approval for the SolarCity deal.  Tesla said it had $3.08 billion in cash as of Sept. 30, compared with $3.25bn at the end of the second quarter.

The shares, which rallied 6% on the news initially, fell back to unchanged by the end of the day and were down a bit by Friday’s close.

Meanwhile, Consumer Reports’ annual performance rating of brands places Tesla at No. 25 of 29 for reliability, with reviewers saying the Model X SUV “has been plagued with malfunctions,” including with the “falcon-wing doors” that had become its signature.  I told you when this model was first rolled out that these doors were idiotic and would be problematic.

Jack Fisher, director of automotive testing for Consumer Reports, said in an interview with the Los Angeles Times’ Drew Harwell, “It shouldn’t come as a surprise to anyone that there’s been mechanical problems with the Tesla Model X.  They’ve taken this very basic platform with the Model X and added so many overly complicated features: The front doors are power automated. The middle-row seats are on power sliders,” Fisher said.  “All those things add up in a way that can bring the platform down.”

Even Elon Musk conceded back in February, “In retrospect, it would’ve been a better decision to do fewer things with the first version of Model X.  I think there was some hubris there with the X.”

--A federal judge formally approved a $14.7 billion settlement of Volkswagen’s emissions cheating case, paving the way for the company to make amends to 475,000 U.S. owners of VWs and Audis.  Motorists can now have their cars bought back or modified by Volkswagen and receive additional cash compensation of up to $10,000.

So now the whole process actually begins...buybacks and compensation.

Separately, Volkswagen AG reported sharply higher profit in the first three months to Sept. 30 and raised its outlook for the year, though its luxury car maker Audi AG warned of lower profits.

--United Parcel Service said changes in fuel surcharges and strength in the dollar dragged on revenue growth in the third quarter, though sales were slightly ahead of expectations, rising 5% to $14.9bn, with domestic package revenue up 4.8% and international up 2.2%.

--3M lowered guidance for the year as the maker of Post-it Notes and Scotch tape says like-for-like currency sales growth will be flat for 2016.

3M, like other U.S. multinationals, generates about two-thirds of its revenues from overseas, and it’s been dealing with the strong dollar and slowing global growth.

--Boeing raised revenue guidance for the full year while beating analyst estimates on profits, though revenues were down 8% for the third quarter due to the “timing of aircraft deliveries,” according to the company.

Boeing projected full-year revenues would be $500m higher than previously expected.

--Shares in Southwest Airlines fell 8% after the nation’s largest domestic carrier reported a bigger than expected drop in revenues and profits for the quarter, the former down 3%, slightly below expectations.

--T-Mobile U.S. shares popped on Monday after the wireless network reported better-than-expected subscriber growth, adding 851,000 of the lucrative “postpaid” phone customers, who are billed for their wireless service on a recurring monthly basis.  This compared to a gain of 646,000 in the second quarter, and beat the 442,000 added by Verizon in the same period.  CEO John Legere crowed, “That’s 14 quarters in a row that T-Mobile has won share from the competition.”

Profits grew to $366m from $138m a year ago, with earnings topping the Street.

--The print media business continues to get more depressing by the week, with the Wall Street Journal looking for a “substantial” number of employees to take buyouts.

Spending on newspaper advertising in the U.S. is projected to fall 11% this year, to about $12.5bn, according to the Interpublic Group’s Magna.  [New York Times]

--TD Ameritrade, the largest U.S. discount brokerage by trade executions, announced it would pay $2.7bn for Scottrade’s brokerage business, while TD Ameritrade’s largest stakeholder, Toronto-Dominion Bank, agreed to buy Scottrade’s online bank for $1.3bn in cash, adding to its branch network that in the U.S. stretches from Maine to Florida.

This is one move that seems to make eminent sense.

--Anheuser-Busch InBev’s first results since completion of the takeover of SABMiller showed a 0.9% fall in sales volumes in the third quarter, which was a little better than expected, but earnings of $4.03bn fell shy.  The company blamed “very weak results in Brazil,” where volume was down 4.5%

The SABMiller acquisition created a global brewing giant that brought together brands such as Budweiser, Stella Artois, Beck’s and Castle, a brand popular in Africa.  [Can’t say I’ve had this last one.]

Earlier this week, No. 2 brewer by sales, Heineken, saw a 2% rise in sales volumes.

--Coca-Cola’s sales lost some pop in the third quarter as the strong dollar hit the top line, but the company kept its full-year earnings outlook unchanged.

While net revenue fell 7%, if you strip out foreign exchange and structural items, sales rose 3%, which is solid.

--Shares in Under Armour took a major hit, about 13%, after the company said it wouldn’t meet its growth target spelled out 13 months earlier at an investor forum.

While revenue increased 22% in the third quarter, it was the smallest increase since 2010, and with the shares trading at a lofty multiple, it was time to reset expectations.

--Qualcomm, the world’s largest mobile chip company, agreed to pay $47bn for NXP, Europe’s most valuable chipmaker, as consolidation in the industry continues.  This is also the largest tech acquisition ever in Europe.

Since the smartphone market has showed signs of maturing, Qualcomm, which relies on mobile for 90% of its revenues, needed to diversity and NXP is the leading provider of chips for the automotive sector, which gives Qualcomm a market in electric and autonomous vehicles.  NXP is also big in the “internet of things” device market.

Qualcomm will also be tapping its overseas cash reserves of $28.6bn to help pay for the deal.

--Twitter Inc.’s quarterly revenue growth slowed sharply in the third quarter but beat analysts’ expectations, while the company said it would cut 9% of its global workforce, so the shares rose some but are still now near their lows.

Revenue rose 8% to $616 million, but the company had reported a 20% rise in the previous quarter and 58% last year.

Twitter said its user base ticked up to 317 million average monthly active users in the quarter from 313 million in the second.  As former NBA star Derrick Coleman would have said, ‘Whoopty-damn-do.’

As to the layoffs, CFO Anthony Noto said, “We’re getting more disciplined about how we invest in the business.”  Twitter decided to shut down the Vine app.

--According to data from Standard Media Index, broadcast television spend fell 13.2 percent in September vs. a year ago, when revenue was soaring due to the huge amounts of ad spending from DraftKings and FanDuel.  But last month they spent $100 million less across broadcast and cable than they did a year earlier.

While ESPN remained on top in September in the cable world, its revenue was down 10% year over year, while the three big news networks gained from the presidential election: Fox News up 16%, CNN 25% and MSNBC 28%.

To be fair regarding the broadcast networks, some of the fall in September was attributable to a post-Olympics hangover.

--Speaking of the Olympics, Comcast, owner of the NBC TV networks, said revenues at NBCUniversal rose more than 20% during the third quarter, with advertising sales at NBC’s broadcasting unit soaring more than 90% thanks to demand for Olympic TV spots as well as political campaign spending.

--Sonic Corp.’s same-store sales dropped 2% in the recent quarter, with the CEO saying low commodity costs, aggressive promotion and pricing hurt profits in 2017.

--Same-store sales at Burger King rose only 1.7% in the third quarter, compared to 6.2% during the same period a year ago; Burger King part of Restaurant Brands International. Same-store sales for the U.S. and Canada actually fell 0.5%.  The other big brand under the RBI umbrella, Tim Horton’s, reported sales growth of 1.7% from 5.4% a year ago, with U.S. sales up 4.5%.

Food deflation is hurting the business, and more and more people seem to be eating in.

--Shares in Chipotle Mexican Grill Inc. fell anew after the burrito chain reported same-store sales fell a worse-than-expected 21.9% in the third quarter, though this is better than prior quarters following the E. coli outbreak nearly a year ago.  CEO Steve Ells told investors on Tuesday, “While we’re on the road to recovery, we’re not satisfied.”

Chipotle said it would slow its new restaurant openings in 2017 to between 195 to 210, down from 220 to 235 targeted for this year.

The fourth quarter’s comparisons should be better since the E. coli outbreak hit during the year-ago period.

--Arby’s, a fast-food chain I’ve actually been frequenting more than ever (because it’s near my Dollar Tree...Richard H., now DLTR is out of Liquid Plumber...), is test-marketing venison sandwiches in six states; heavy deer hunting areas in Wisconsin, Minnesota, Michigan, Pennsylvania, Tennessee and Georgia.

Boy, you all know venison is ‘tough’ and I’m trying to picture how they can cook it just right on a mass scale, though Arby’s Chief Marketing Officer told USA TODAY that the sandwich is “100% deer meat,” with premium cut top and bottom round steaks from the hind quarter of the deer.

Well, good luck.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The United States said Thursday that up to 900 ISIS extremists have been killed in the offensive to retake Mosul, with camps around the city filling with fleeing civilians.  Iraq said that as of Thursday, 11,700 people had been displaced since the operation began.  But the camps have room for only about 60,000 currently, when hundreds of thousands are expected once the final assault on Mosul begins.  There were reports ISIS has massacred hundreds of men and boys in the city while whole families are being rounded up as human shields.

Tens of thousands of Iraqi fighters continue advancing on Mosul, backed by U.S. air and ground support, and allied with Kurdish Peshmerga fighters.

The U.S. estimates there are between 3,500 and 5,000 ISIS forces in Mosul and another 2,000 in the broader area. 

For its part, Turkey, which has troops deployed north of Mosul, inside Iraqi territory, is concerned that any use of Shiite militias in the Mosul campaign, which is inevitable, will lead to sectarian strife in the mainly Sunni region, thus exacerbating the exodus of refugees to Turkey.

Separately, last weekend’s counterattack by ISIS on Kirkuk took three days to repel and resulted in at least 100 deaths.

Meanwhile, U.S. Defense Secretary Ash Carter very publicly said this week that the U.S. wanted to launch an offensive against ISIL’s Syrian stronghold of Raqqa soon, even before the Mosul offensive is concluded, as ISIS fighters move from Mosul to Raqqa, and because the West believes the terrorists are planning major attacks from the Raqqa headquarters.  But the force being assembled to take on Raqqa is nowhere near as large, or organized, as the forces operating in the Mosul theater.  Turkey could yet play a major role in an offensive against Raqqa, even though it is in opposition to the Kurds that currently comprise the main force.

As for Aleppo, Syrian rebels announced at week’s end a big offensive aimed at breaking the government’s siege of the rebel-held east.  Rebels have been firing “hundreds” of missiles into western Aleppo, killing 15 civilians, while about 275,000 people remain besieged in the east by pro-government forces, with Syria and Russia renewing air strikes after a lull that lasted a few days.  Since the big assault began on the east of the city a month ago, the regime, backed by Russia, has killed about 500, with 2,000 injured and virtually zero medical care available as the U.N. has been unable to get aid in. 

[A study by the World Bank, analyzing satellite imagery, estimates that 30% of the residential buildings in Aleppo have already been destroyed, with damage accelerating.  Amnesty International estimated that in one week in September, 90 locations were damaged or destroyed in an area about the size of Manhattan.  More than 10,450 have died in the city since the civil war began in March 2011.]

As for Turkey, it said it will press its military offensive in Syria until ISIS is driven from a town near its border, while forces aligned with the Assad regime have warned Turkey not to advance any further.

Among the atrocities this week in Syria, a school was hit by Syrian or Russian warplanes in the village of Hass, near Idlib, that killed 14 Syrian children.  I did not see this particular picture but there is one out there showing a lifeless child, still clutching their black school bag.  Just writing this makes one want to cry.

The Syrian regime was also accused of dropping barrel bombs on U.S. and Turkey-backed rebels.

Iran: A senior Iranian official accused European governments of not being fully committed to implementation of the nuclear deal, saying they were stymieing investment.  Asghar Fakhrieh Kashan, deputy transport minister, told the Financial Times that “unacceptable” terms were being placed on contracts for areas such as in the energy sector.

“Iran will not accept any clauses in trade agreements which insert political risks alongside commercial risks.”

While western and Asian businesses have flocked to Tehran since the nuke deal was signed, few big contracts have been finalized.

The government is under pressure to deliver the economic dividends of the accord as President Rouhani runs for a second term next year.  He is facing stiff resistance from hardliners in the regime who argue the nuclear deal has brought little benefit.

The U.S. did give clearance last month for Boeing to sell 80 aircraft and Airbus 17 to Iran Air.

Afghanistan: The Taliban killed at least 20 civilians after they were abducted in a remote central province, police officials said.

In neighboring Pakistan, ISIS claimed responsibility for a horrific attack on a police academy in Quetta that killed at least 60, with Pakistani officials saying the militants (who may have instead been part of an al-Qaeda offshoot) probably crossed over from Afghanistan or were in contact with handlers on the Afghan side of the border.  [Quetta is just 150 miles from the Afghan city of Kandahar, long a staging ground for insurgent activities and a base for the Taliban.]

Israel: As reported by Reuters and the Jerusalem Post, Saudi Arabia, which normally provides $20 million a month to the Palestinian budget, has reportedly not made any contributions since, as the Saudis, Egypt and other Arab nations pile pressure on Palestinian Authority President Mahmoud Abbas to resolve divisions in his Fatah party and with rival Hamas.   There are concerns Palestinian democracy is under threat.  Abbas, 81, has been in power since 2005 and the issue is what would happen if he dies in office.

A key figure, residing in the UAE in self-imposed exile, is former Fatah security chief Mohammed Dahlan, 55, who some Fatah officials want to reconcile with Abbas, but Abbas is showing no inclination to do so. Dahlan is largely respected throughout the Arab world.

Egypt: A senior Egyptian military official was assassinated outside his home near Cairo on Saturday.  Maj. Adel Ragaai had been responsible for an operation last year that destroyed the tunnels running between Egypt and the Gaza Strip.  In retaliation, Egypt’s air force struck a number of ISIS outposts in the northern Sinai peninsula, early Sunday, killing around 70 militants.

Russia: At a televised news conference on Thursday, President Vladimir Putin said the Kremlin has no preference in the U.S. presidential election, but he said Donald Trump seems to reflect the needs of average people “who don’t like that power is being transferred by inheritance.”  Putin added that while Trump “is, of course, extravagant... He simply represents the interests of simple people who criticize those who have been in power for decades.”

But Putin also said the Kremlin would welcome any candidate who expressed a desire for “normalizing relations between the U.S. and Russia.”

As for Russia’s impact on the vote, Putin said, “Does anybody seriously think that Russia could somehow influence the choice of the American people? Is it a banana republic or something?  America is a great power.”

And Putin said the West is propagating a “fictional, mythical” military threat Moscow poses to the world.

But tensions continue to ratchet up, whether it’s over Syria or Ukraine.

On a different issue, Russia canceled a request to refuel a flotilla of its Syria-bound warships at a Spanish port on Wednesday, amid mounting criticism leveled at Madrid from NATO.  The big issue is that the battle group, led by Russia’s lone aircraft carrier – the elderly Admiral Kuznetsov – is no doubt being deployed to increase the number of Russian airstrikes in Syria, thus exacerbating the humanitarian catastrophe in places like Aleppo.

While up in the Baltics, Russia moved two new warships into the Baltic Sea, with Sweden and Poland immediately protesting the move.  The warships are armed with long-range cruise missiles to counter NATO’s buildup in the region, Russian media reported on Wednesday.  It would seem the two ships are to become part of a newly formed division in Kaliningrad, Russia’s European enclave that I’ve warned could be the ultimate flashpoint.  No one should be surprised if there are nuclear weapons there today, Moscow having moved ballistic missiles to Kaliningrad recently, right on the border with Poland and Lithuania.  The warships certainly have nuclear capable missiles as well, though most seem to think they do not have nukes on the ships currently.

China: The Communist Party elevated President Xi Jinping further, as he’ll now be referred to as the “core” of its leadership ahead of the party’s five-yearly congress late next year.  This will give Xi greater influence over reshuffles of the top ranks.

The move came after the end of the Central Committee’s four-day sixth plenum in Beijing that also announced the party congress would be held “in the second half of 2017 in Beijing,” which marks the start of formal preparations that will be all consuming the next 12 months.

The “core” title was used by Deng Xiaoping in 1989 to describe Mao Zedong, himself and his successor Jiang Zemin, but it was not granted to Jiang’s successor and Xi’s predecessor, Hu Jintao.  The significance of this, as pointed out in the South China Morning Post, was that Hu was referred to as the “general secretary” of the leadership, and technically was the “first among equals” with the other eight Politburo Standing Committee members.

So recall, as I wrote a number of weeks ago, Xi will now have the final say in replacing up to 11 seats on the 25-strong Politburo, as well as on up to five members of the Politburo Standing Committee who are expected to retire.

On a different issue, no country in the world has greater income inequality than China, and Forbes now lists 400 billionaires in the country, up from 335 a year ago.  Total wealth held by the 400 is $947 billion.  Wang Jianlin, chairman of Dalian Wanda Group, is worth $33 billion.  Alibaba founder Jack Ma is second at $28.2bn.

And another...Vietnam customs officials seized nearly one ton of ivory hidden in a timber shipment from Kenya, the third major illegal haul of previous tusks in less than a month, with most of it headed for China.  Ivory products are also hot in Vietnam, though the trade is officially banned.  3.5 tons of ivory have been discovered this month at Ho Chi Minh City’s port.

North Korea: James Clapper, the National Intelligence Director, told an audience in Washington on Tuesday that persuading North Korea to abandon its nuclear weapons program is “probably a lost cause” and the best the U.S. could hope for was a cap on capabilities.  Clapper described the government in Pyongyang as “paranoid,” seeing nuclear weapons as “their ticket to survival.”

“So the notion of giving up their nuclear capability, whatever it is, is a non-starter with them,” he said.  [BBC News]

Philippines: On a visit to Japan, Philippine President Rodrigo Duterte said on Thursday that his country could join naval exercises with Japan, but repeated there would be no more war games with the United States, telling Japanese Prime Minister Shinzo Abe that the reason why he resented the U.S. was because Washington treated the Philippines like “dogs on a leash” and lectured about human rights in connection with his campaign against drugs.

Separately, Duterte said on Friday that a voice from God told him to stop swearing.  Well isn’t that special.

Venezuela: Hundreds of thousands of opposition supporters rallied across the country on Wednesday against Socialist President Nicolas Maduro, whom they accuse of being a dictator after he blocked a recall referendum to vote him out.  The people are desperate and one would expect the protests to turn increasingly violent.

Random Musings

Presidential Polls....prior to Friday’s bombshell....

A CNN/ORC national poll of likely voters had Hillary Clinton with 49%, Donald Trump 44%, Gary Johnson 3% and Jill Stein 2%.  Trump led among men 48-45, while Clinton led with women 53-41.  White college graduates favored Clinton 52-41, white non-college folks were behind Trump 62-32.

A Fox News national poll released Thursday had Trump trailing Clinton by just three, 44-41, Johnson 7, Stein 3.  In this one Clinton leads among women 48-38, while Trump leads among men 44-39.  Trump is viewed unfavorably by 56%, Clinton by 53%.

A USA TODAY/Suffolk University national poll has Clinton leading Trump 47-38 (Johnson 4, Stein 2).  51% of likely voters express at least some concern about the possibility of violence on Election Day, with more than four in 10 of Trump supporters saying they won’t recognize the legitimacy of Clinton as president, because they say she wouldn’t have won fair and square.

A poll released Wednesday by the AP-GfK shockingly had the election at 51-37.  Just want this one in there for the record.

Last weekend, an ABC News/Washington Post tracking poll had Clinton leading Trump 50-38, with Johnson at 5% and Stein 2%.  But the margin in this one was already down to four today.

In state polls...

A Bloomberg Politics survey of Florida voters has Trump ahead of Clinton 45-43 (Johnson 4, Stein 2).

Earlier, a CBS News Battleground Tracker poll had Clinton leading in Florida 46-43.

The CBS Battleground survey also had Trump leading Clinton in Texas by the same 46-43 margin.

The above also showed more than 80 percent of Republicans in Texas and Florida think there is widespread voter fraud and 72 percent of Republicans in those states think Trump would win the election if it were not for fraud.

A Monmouth University Poll of North Carolina likely voters has 47% for Clinton and 46% for Trump, with 4% for Johnson.  In late August, the same poll had it 44-42, Clinton, with Johnson at 7.  33% have a favorable opinion of Trump, 54% unfavorable.  35% have a favorable opinion of Clinton, 55% unfavorable.

[Republican Sen. Richard Burr has widened his lead in the state to 49-43 over Democratic state legislator Deborah Ross.  GOP incumbent Gov. Pat McCrory holds a 48-47 lead over Democratic Attorney General Roy Cooper.]

A Quinnipiac University poll has Clinton ahead of Trump in North Carolina 47-43 (Johnson 5)

In a Monmouth University poll of Arizona voters, Trump edges Clinton 46-45, Johnson 4.

[Republican Sen. John McCain leads Congresswoman Ann Kirkpatrick 50-40 in their race.]

A Wall Street Journal/NBC News/Marist poll finds Trump and Clinton tied in Nevada at 43%, with Gary Johnson drawing 10% (Jill Stein not being on the ballot here).

The WSJ/NBC/Marist survey has Clinton leading Trump in New Hampshire 45-36, Johnson 10, Stein 4.

Quinnipiac also had the following state polls....

In Georgia, Trump 44, Clinton 43, Johnson 8.

In Iowa, a 44-44 tie (Johnson 4).

In Virginia, 50-38 Clinton.

--Trump raised just $28.9 million for his campaign committee in the first 19 days of October, compared with Clinton’s $57.2 million.

The Emails and other stuff, part deux....

The Wall Street Journal reported that Virginia Gov. Terry McAuliffe, a longtime Clinton confidant, helped steer $675,000 to the election campaign of the wife of an FBI agent who went on to lead the probe into Hillary’s use of a private email server.

McAuliffe’s political action committee donated $467,500 to the state Senate campaign of the wife of Andrew McCabe, currently a deputy director of the FBI.  Jill McCabe received $208,000 from the Virginia Democratic Party, which McAuliffe essentially controls.

The thing is, the Journal reports the money didn’t start flowing until two months after the FBI started its investigation into Clinton in July 2015.  Andrew McCabe was also given a big promotion around the same time, and shortly thereafter another one, to the second-highest position in the Bureau.

The FBI told the Journal there is nothing fishy about the chain of events, and that McCabe only met McAuliffe once, when the governor persuaded Jill McCabe to run.

Editorial / Wall Street Journal

“All of (the above) asks voters to believe that Mr. McCabe as the No. 3 official at the FBI had nothing to do with the biggest, most sensitive case at that agency.  This strains credulity.  Before he became No. 3 at the FBI Mr. McCabe ran the bureau’s Washington, D.C. field office that provided resources to the Clinton probe.  Campaign-finance records show that 98% of the McAuliffe donations to Mrs. McCabe came after the FBI launched its Clinton probe.

“Director Comey, the self-styled Boy Scout, somehow didn’t think any of this would look suspicious? Add this to the list of special treatment for Mrs. Clinton: no grand jury, grants of immunity to her aides, no interview until the last minute, a special exonerating public declaration, and a pre-Labor Day dump of damaging FBI notes.

“The contrast couldn’t be greater with the FBI and Justice Department determination to convict retired Gen. James Cartwright – former vice chairman of the Joint Chiefs of Staff – of a felony for lying to the FBI.  The general told a federal court last week he regretted he didn’t tell the bureau the truth about conversations he’d had with reporters about a secret cyberattack disrupting Iran’s nuclear program. He could serve up to five years in prison.

“ ‘People who gain access to classified information after promising not to disclose it must be held accountable when they willfully violate that promise,’ said U.S. Attorney Rod Rosenstein in a press release....

“This is comical coming from the same folks who gave away immunity deals like candy in their probe of Mrs. Clinton.  Gen. Cartwright wasn’t even the original source of the Iran leaks.  The general says he confirmed details the reporters already had in an effort to prevent them from publishing information that could harm America’s national security.

“Though Mrs. Clinton didn’t leak to reporters, her personal server exposed national secrets to potential hackers, and she gave a number of people (including some of her attorneys) without proper clearances access to that information. When Gen. Cartwright became the subject of an investigation, he was stripped of his security clearance – which never happened to Mrs. Clinton.

“Maybe the general should have run for the Democratic nomination.  Enough red flags have been raised about the McCabe-Comey investigation of Mrs. Clinton that it deserves to be the subject of an investigation by Congress.  Let’s get some of the FBI agents under oath and see what they think of the Comey procedures. If it’s all on the up and up, they have nothing to fear from public transparency.”

--Daniel Henninger / Wall Street Journal

“If Democrats regain control of the Senate, would you be happy with Elizabeth Warren and Bernie Sanders as co-presidents of the United States?  Ignore the Senate and voters will pay a price even bigger than a Clinton presidency.  Do not for a moment think Elizabeth Warren is barnstorming the country now only to elect Hillary Clinton.  She’s getting out the vote to make sure Elizabeth Warren is in position next year to co-run the government from Capitol Hill.

“Sens. Warren and Sanders remember what happened in 2008.  The Democratic presidential primaries that year were the historic battlegrounds for control of the Democratic Party’s direction.  The Clinton machine, which had captured the party’s policy and donor apparatus, was considered unbeatable.  Until a freshman Illinois senator pulled progressives together into an astonishing political force that overthrew the Clintons.

“That happened because progressives didn’t like what they believed the Clintons represented – cynical centrism – and they don’t like it now. There is no way the left now lets the Clinton Foundation and the politics it embodies recapture control of the party.

“Elizabeth Warren, the Democrats’ Madame Defarge, and Bernie Sanders, winner of 22 millennial-fueled primaries, are going to guarantee the revolution’s purity in any Clinton presidency.”

For starters, Sen. Warren and her supporters have a hit list of those they will oppose being placed in a Clinton administration; especially the next Treasury Secretary.  But also Warren will extend her veto over departments of Justice, Labor, Education and the regulatory agencies.  “The Warren wing will appoint the people who, as they did in the Obama years, tell the rest of America what to do.  Under this system, your role is to salute – or get sued by federal lawyers.

“It is assumed that in return for dropping his opposition to Mrs. Clinton, the Vermont socialist will become chairman of the Senate budget committee....

“A few days ago, Hillary Clinton said to a campaign rally, ‘I could listen to Elizabeth Warren go on all day.’ Whether the country wants to remains to be seen.”

I know I’ve been waking up in the middle of the night in a cold sweat over the prospect.

--John Podhoretz / New York Post

“When the news hit on Tuesday that the Trump campaign has washed its hands of fund-raising efforts two weeks before the election, the humiliation of the traditional Republican Party at the hands of Donald Trump was all but complete.

“His refusal to help fill party coffers just as the last push for voters commences – which is an expensive process and requires cash on hand – is the perfect capper to 16 months in which Trump has gleefully terrorized weak-kneed Republican officials, forced them to comply with his wishes and then screwed them.

“And it’s probably not the capper, not really; with 12 days to go until the election, who knows what final blows Trump will deliver to the kneecaps of Republican National Chairman Reince Priebus and all the elected Republican officials who have been doing the ‘yes, I endorsed you but I don’t really like you’ two-step?

“Loyalty is a one-way street in Trump World.  Priebus has likely sacrificed his future being loyal to Trump in the present, since the candidate to whom he has sworn his allegiance is now effectively turning on the Republican Party’s efforts to elect candidates down-ticket – which is Priebus’ primary responsibility as RNC chair.

“Priebus has no right to be surprised.  From the moment the mogul came down the escalator, Trump has played him like a piano....

“Trump owned Priebus so badly that his consistent aggression against Priebus’ close friend Paul Ryan earned not so much as a syllable of public complaint or distancing.  He owned Priebus so lock, stock and barrel that the suggestion of any effort to use existing Republican Party rules to challenge Trump’s domination of the Republican National Convention led to the mouse-like Priebus suddenly roaring lion-like about financial punishments and excommunications for anyone who dared cross the nominee....

“As the last days approach, Priebus and others are left to wonder whether Trump is going to follow the ideological wishes of his campaign chairman Steve Bannon and try to burn the Republican Party down so that Bannon and others like him can more easily occupy the ruins.  Now there’s nothing they can do to prevent the arson, and there’s nowhere for them to go to avoid being singed themselves.

“All this was possible from the minute Trump became a candidate. Priebus knew it, because otherwise he wouldn’t have thought it necessary to court Trump so assiduously in the summer of 2015. That was his first mistake, and, in politics, very likely his last.”

--U.S. officials and security analysts believe last Friday’s massive internet attack that briefly blocked access to dozens of popular sites was not the work of a foreign government, but rather a “nonstate actor,” according to National Intelligence Director James Clapper. Clapper said whoever was behind it used a vast collection of internet-linked devices to create a flood of traffic that then overwhelmed a key cog in the Net, Dynamic Network Services Ind., known as Dyn, a service that handles the domain name system for corporate clients.

--Newt Gingrich on Megyn Kelly’s show Tuesday night.

“You want to go back through the tapes of your show recently?” Gingrich asked.  “You are fascinated with sex and you don’t care about public policy.”

“Me?  Really?” Kelly asks.

“That’s what I get out of watching you tonight,” said Gingrich.

“You know what, Mr. Speaker?  I am not fascinated by sex,” Kelly said, “but I am fascinated by the protection of women and understanding what we’re getting in the Oval Office, and I think the American voters would like to know...”

“And therefore we’re going to send Bill Clinton back to the East Wing because you are worried about sexual predators,” Gingrich interrupted.

“Listen, it’s not about me,” Kelly said.  “It’s about the women and men of America, and the polls show us that the women of America in particular, are very concerned about these allegations.”

Please, Lord, make it stop!!!

Separately, it was reported by the Wall Street Journal that Kelly is asking for an average salary north of $20 million for her next contract at Fox; the current one, which pays her $15 million annually, expiring in July.  $20 mil would put her on par with Bill O’Reilly.

Rupert Murdoch said in an interview that while Ms. Kelly is important to the network, “it’s up to her....We have a deep bench of talent, many of whom would give their right arm for her spot.”

--George Will / Washington Post

“When the Jimmy Carter/Walter Mondale ticket lost 44 states in 1980, Mondale used his elegant concession remarks to herald ‘a chance to rejoice’: ‘Today, all across this nation – in high school cafeterias, in town halls, and churches, and synagogues – the American people quietly wielded their staggering power....Tonight we celebrate above all the process we call American freedom.’  Today, such political grace notes are rare as the nation slouches toward its first dyspeptic landslide – an electoral-vote avalanche for a candidate regretted by a majority of the electorate.

“Abraham Lincoln was elected in 1860 with the lowest percentage of the popular vote (39.9) of any electoral winner in history.  He received fewer than the combined votes for two Democratic rivals, the Northerner Stephen Douglas and the Southerner John Breckinridge.  This did not prevent Lincoln from becoming the nation’s greatest president.  Majorities, however helpful, are not necessary.  In 14 of the 39 elections since 1860 the winner did not get a majority of the popular vote, including Woodrow Wilson (twice), Harry S. Truman, John F. Kennedy and Bill Clinton (twice), Democrats all.

“Carter’s 50.1 percent of the popular vote in 1976 was the only time in the 40 years after 1964 that a Democratic presidential candidate would win a majority of the popular vote....In the past four elections (2000-2012), no loser has fallen below 45 percent of the vote and no winner has reached 53 percent.”

--According to a new Gallup poll, 76% of Americans said they have “a great deal” of respect for police in their area, up 12 percentage points from last year, even as there have been ongoing protests over police shootings of black men across the country.

But you’ve had the fatal attacks on police officers in Dallas, Baton Rouge and the other day two officers in Palm Springs.

As William Johnson, executive director of the National Association of Police Organizations, which represents 240,000 law-enforcements officers, told the Wall Street Journal: “The public understands that there are incidents where things go horribly wrong.  They also understand that policing in the U.S. is the best in the world.”

--Charles Lane of the Washington Post had a piece on California Prop. 62, a referendum to abolish California’s death penalty and replace it with life without parole for the 749 current occupants of death row.  Surprisingly, given California’s political makeup, the proposition may not pass, as four of five polls show ‘no’ up by an average of 50 to 37.

Nationally, a Pew Research Center survey shows that 49% of the public favors the death penalty for murder, while 42% oppose it.  A new Gallup poll found 60% support, which is actually a smaller majority than in previous years.

I want it expanded to include crimes such as massive insurance fraud.  To me the key is premeditation.

Meanwhile, President Obama commuted the sentences of 98 more inmates this week, his eighth round of commutations this year to a total of 872 since taking office – more than the past 11 presidents combined.  According to the Department of Justice, “only non-violent, low-level offenders, who have served at least 10 years of their federal sentence, demonstrated good behavior and have no significant criminal history or a history of violence are eligible.” [The Hill]

--The Justice Department, with cooperation from authorities in India, announced charges against 61 people in the U.S. and India, as well as entities in the latter that represented a network of call centers that scammed at least 15,000 victims out of more than $250 million; the callers claiming to be officials with the IRS or immigration services that presented those who answered with an ultimatum.  Pay us or you’ll be arrested or deported.

--In a surprise, seven defendants led by Ammon and Ryan Bundy were acquitted Thursday of federal conspiracy and weapons charges stemming from the takeover of a federally owned wildlife sanctuary in Oregon last winter, a blow to government prosecutors, who had argued the Bundys and five of their followers used force and threats of violence to occupy the reserve. But the jury went with the defendants’ argument this was a case of government overreach and that they posed no threat to the public.

--The Roman Catholic Church has banned the scattering of ashes of the dead, with new Vatican guidelines forbidding a list of increasingly popular means of commemorating loved ones, from scattering ashes at sea to having them turned into jewelry or put in a locket, dismissing them as New Age practices and “pantheism.”

In instruction approved by Pope Francis, us Catholics are even forbidden from keeping the ashes of a loved one in an urn at home, and the Church rules out dividing people’s ashes between members of the family. 

I had forgotten the Catholic Church forbade cremation until 1963, but now the Pope is insisting ashes should only be kept in a “sacred place,” such as a cemetery.

I have to admit, I was thinking of a certain golf course in Ireland, and I think I could get away with that.  I mean I always wanted to be somewhere that I knew would be around a century or two from now, which would preclude wherever the Mets are playing at the time.

--We note the passing of Tom Hayden, the 1960s radical who was at the vanguard of the anti-Vietnam War movement and was prosecuted for his role in the violent clashes at the 1968 Democratic National Convention.  Hayden later married actress Jane Fonda and the two traveled around the country denouncing the war and backing liberal candidates and causes.  Hayden was 76.

--The latest Living Planet report by the World Wildlife Fund (WWF) and the Zoological Society of London (ZSL) estimates that by 2020 populations of vertebrates will have fallen by 67 percent since 1970.

“Extinction rates are now running at 100 times their natural level because of deforestation, hunting, pollution, overfishing and climate change.”

Mike Barrett, director of science and policy at WWF-UK, said, “For the first time since the demise of the dinosaurs 65 million years ago, we face a global mass extinction of wildlife.  You can see it happening all around. I haven’t seen a living wild hedgehog in the British countryside for years, and you used to see them all the time....

“But we can stop this.  While on the one hand we’re the first species to change the planet, we’ve also never had a better understanding of how environmental systems work and how forests, oceans and climate all interact.”

Freshwater species are faring the worst, with declines of 81% between 1970 and 2012.

--I’ve noted in the past how I have a lot of relatives in the Greensburg/Latrobe, Penn., area and the other day my brother passed on a piece from the Pittsburgh Tribune-Review concerning Greensburg’s fire chief,  J. Edward Hutchinson (“Hutch”), who is 95!  He has been the city’s fire chief for more than six decades, but has opted out of running for another term.  Congratulations, Hutch.  Enjoy your retirement.

--Finally, from the New York Post:

“A team of astronomers believes that strange signals emanating from a cluster of stars are actually aliens trying to tell the universe they exist.

“The study, which appeared in the Publications of the Astronomical Society of the Pacific, analyzed the odd beams of light from 234 stars – a fraction of the 2.5 million that were observed.

“The bizarre beacons led the paper’s authors, Ermanno F. Borra and Eric Trottier from Laval University in Quebec, to conclude that it’s ‘probably’ aliens.

“ ‘We find that the detected signals have exactly the shape of an [extraterrestrial intelligence] signal predicted in the previous publication and are therefore in agreement with this hypothesis,’ wrote Borra and Trottier.

Yet another reason to always sleep with one eye open, boys and girls, just as we do here at StocksandNews.

---

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

God bless America.

---

Gold $1276
Oil $48.66

Returns for the week 10/24-10/28

Dow Jones  +0.1%  [18161]
S&P 500  -0.7%  [2126]
S&P MidCap  -1.8%
Russell 2000  -2.5%
Nasdaq  -1.3%  [5190]

Returns for the period 1/1/16-10/28/16

Dow Jones  +4.2%
S&P 500  +4.0%
S&P MidCap  +7.2%
Russell 2000  +4.6%
Nasdaq  +3.7%

Bulls 47.1
Bears 23.1  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

10/29/2016

For the week 10/24-10/28

[Posted 11:30 PM ET, Friday]

Note: StocksandNews has significant ongoing costs and your help is greatly appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ  07974.

Edition 916

Washington and Wall Street

It was already an extraordinary week but in the past 10 hours it became more so as around 1:00 p.m., we learned that the FBI was reopening its investigation into Hillary Clinton’s emails, with Director James Comey sending a letter to congressional leaders from both parties explaining that emails had surfaced in an unrelated case, an FBI investigation into illicit messages from Anthony Weiner, the estranged husband of top Clinton aide Huma Abedin; emails pertinent to the previously closed probe into Clinton’s private email server.  Some of the newly discovered emails were found on a computer belonging to Weiner.

Comey’s letter said the FBI would review the material to determine if it improperly contained classified information, though at this time further details, such as if the emails were from Clinton’s server, aren’t known.  Comey just said they appear to be “pertinent,” while the FBI had not examined what might be thousands of them.  As I go to post, Comey, in an internal email to bureau employees, said he felt obligated to inform Congress, and “we don’t know the significance of this newly discovered collection of emails.”

Tonight, Hillary Clinton held a brief press conference, saying: “We are 11 days out from perhaps the most important national election of our lifetimes.  Voting is already underway in our country, so the American people deserve to get the full and complete facts immediately.”

Clinton, in taking just three questions, revealed the FBI had not contacted her before or since Comey sent the letter to lawmakers Friday afternoon.

For his part, Donald Trump seized on the development at a rally in Manchester, N.H.

“Hillary Clinton’s corruption is on a scale that we have never seen before.  We must not let her take her criminal scheme into the Oval Office.  I have great respect for the fact that the FBI and the Department of Justice are now willing to have the courage to right the horrible mistake that they made.”  [New York Times, The Hill]

Before this bombshell, I was preparing to open by saying something to the effect that while we’ve been viewing the emails from WikiLeaks, presumably stolen by the Russians, as bad as they were in detailing the behind the scenes operation of the Clinton campaign and the Clinton Foundation, there hadn’t been a ‘smoking gun.’

But then that emerged this week in the form of a Doug Band memo, Band being a former longtime aide to Bill Clinton and intimately involved in the foundation, as well as the founder of a consulting firm, Teneo.

I was also going to talk about how Donald Trump largely stayed on message this week, following the opening of his Gettysburg Address last Saturday, where he once again got hopelessly off it.

Given what we’ve all been through with this godawful election, we can only expect more surprises in these final 11 days.  Buckle your seat belts.  It’s going to be a bumpy landing as we come down to Nov. 8.

Clinton Inc.

Bob Fredericks / New York Post

“The head of a for-profit university that donated up to $5 million to the Clinton Foundation was rewarded with an invite to a high-profile State Department dinner at the request of then-Secretary of State Hillary Clinton.

“Doug Becker, CEO of Laureate International University, got his senior VP, Joseph Duffey, into the meeting of world-class academics at the August 2009 dinner because Becker was someone ‘who Bill likes a lot’ and his school was ‘the fastest growing college network in the world,’ Clinton wrote in an email to her chief of staff revealed on WikiLeaks.

“ ‘It’s a for-profit model that should be represented.’

“Roughly nine months later, the university signed Bubba to a sweet deal as an ‘honorary chancellor,’ paying him $17.6 million over five years until the contract ended in 2015 as his wife launched her presidential run.

“Analysts said Duffey’s presence at the dinner likely opened doors to the school that otherwise might have remained closed.

“ ‘A lot of these private-education guys, they’re looking to get into events like this one,’ Sam Pitroda, a higher-education expert who was at the dinner, told the Washington Post.”

Meanwhile, the Laureate schools have fewer grads making payments on their loans than the nationwide average, while the graduation rate at one school in San Diego is 33%, with the average student graduate holding $43,400 in government loans.

“Hillary Clinton also has bad-mouthed for-profits – even though Becker donated thousands to her presidential campaigns.”

Then there is the case of Doug Band.

Editorial / New York Post

“If there were still any doubt, the latest WikiLeaks disclosure makes it undeniable: Everything we’ve heard about Bill and Hillary Clinton’s sleazy drive to enrich themselves is true.

“In a way, we have daughter Chelsea to thank for the revelation.

“It was her suspicion that her father’s cronies were using their Clinton Foundation connections to ‘hustle business’ for themselves that led to an in-house legal review.

“And in a 2011 memo to the review team, former presidential aide Doug Band openly boasted about how he’d raised millions for the foundation from his business clients – and even more for Bill Clinton personally.

“In fact, Band’s 13-page memo actually described the arrangement he’d set up as ‘Bill Clinton Inc.’ – ‘dedicating myself’ to helping the Clintons use their government service to feather their own nest.

“And what a gravy train: Band’s clients at his Teneo consulting firm were pressed to give millions to the foundation – and millions more to Bill.

“At that point, Teneo had raised $8 million for the foundation and $3 million in paid speeches for Bill.  Plus, Band boasted, it had also set up ‘more than $50 million in for-profit’ business deals for the ex-president, with contracts worth $66 million more.

“And that doesn’t even include loads of ‘in-kind’ freebies, like vacations and private jets.

“Band denied profiting personally from these deals (apart from all the high-priced business he got from his Clinton connection, that is). He would even later whine about his inability to cash in like Bill.

“The foundation claims there was no unsavory link between its donors and Hillary’s job as secretary of state.  Yet other email dumps and press investigations show beyond a doubt that giving to Clinton causes could win you face time with the secretary, help placing people in State Department jobs – and even preferential treatment in lucrative Haiti-relief work....

“Even a foundation internal investigator concluded that corporations were ‘paying Teneo for connections with Clinton’ – not to mention with the secretary of state and potential future president.

“Meanwhile, when top Hillary aide Huma Abedin needed help making ends meet (her hubby’s career having nose-dived) she wound up with her own Teneo job as well as a foundation salary – even as she remained at State....

“This whole circle of enrichment was a one-hand-washes-the-other arrangement.  All nice and cozy – and mutually lucrative.

“What more proof do we need that as far as Bill and Hillary Clinton are concerned, the rules don’t apply to them?”

Kimberley A. Strassel / Wall Street Journal

“In an election season that has been full of surprises, let’s hope the electorate understands that there is at least one thing of which it can be certain: A Hillary Clinton presidency will be built, from the ground up, on self-dealing, crony favors, and an utter disregard for the law. This isn’t a guess.  It is spelled out, in black and white, in the latest bombshell revelation from WikiLeaks.  It comes in the form of a memo written in 2011 by longtime Clinton errand boy Doug Band, who for years worked simultaneously at the Clinton Foundation and at the head of his lucrative consulting business, Teneo.

“It is astonishingly detailed proof that the Clintons do not draw any lines between their ‘charitable’ work, their political activity, their government jobs or (and most important) their personal enrichment.  Every other American is expected to keep these pursuits separate, as required by tax law, anticorruption law and campaign-finance law.  For the Clintons, it is all one and the same – the rules be damned.

“The memo came near the end of a 2011 review by law firm Simpson Thacher & Bartlett into Clinton Foundation practices.  Chelsea Clinton had grown concerned about the audacious mixing of public and private, and the review was designed to ensure that the foundation didn’t lose its charitable tax status.  Mr. Band, Teneo boss and epicenter of what he calls ‘Bill Clinton Inc.,’ clearly felt under assault and was eager to brag up the ways in which his business had concurrently benefited the foundation, Clinton political causes and the Clinton bank account.  The memoed result is a remarkably candid look at the sleazy inner workings of the Clinton grifters-in-chief....

The memo removes any doubt that the foundation is little more than an unregistered super PAC working on the Clintons’ behalf.  Donors to the charity are simultaneously tapped to give Bill speech requests and other business arrangements, including the $3.5 million he was paid annually to serve as ‘honorary chairman’ of Laureate International Universities....

“It’s now 2016 and Bill’s most favorite candidate is running for the presidency.   There’s no question foundation donors are being ‘leveraged’ for Mrs. Clinton.

“The obvious question is where are the prosecutors?... Every election lawyer in the country lives in fear of stepping over the lines governing fundraising and election vehicles.  The Clintons recognize no lines.

“Here’s the lasting takeaway: The Clintons spent their White House years explaining endless sleazy financial deals, and even capping their exit with a scandal over whether Bill was paid to pardon financier Marc Rich.  They know the risks. And yet they geared up the foundation and these seedy practices even as Mrs. Clinton was making her first bid for the presidency.  They continued them as she sat as secretary of state.  They continue them still, as she nears the White House.

“This is how the Clintons operate.  They don’t change.  Anyone who pulls the lever for Mrs. Clinton takes responsibility for setting up the nation for all the blatant corruption that will follow.”

Editorial / Wall Street Journal

“The Band memo reveals exactly what critics of the Clintons have long said: They make little distinction between the private and public aspects of their lives, between the pursuit of personal enrichment, the operation of a nonprofit, and participation in U.S. politics.

“Mr. Band writes that he and his colleague Justin Cooper ‘have, for the past ten years, served as the primary contact and  point of management for President Clinton’s activities – which span from political activity (e.g., campaigning on behalf of candidates for elected office), to business activity (e.g., providing advisory services to business entities with which he has a consulting arrangement), to Foundation activity.’

“This excerpt and all the potential conflicts it describes, plus Chelsea’s warning about business ‘hustling’ at foundation events, would seem more than ample cause to trigger an IRS audit of the foundation. For that matter, why aren’t the IRS and prosecutors already on the case?  Any normal foundation has to keep records to show it is separating its nonprofit activity from any for-profit business.

“Mr. Band’s memo confirms that donors were not seeking merely to help the sick and the poor.  He explains that the Clinton Foundation had ‘engaged an array of fundraising consultants’ over the past decade but ‘these engagements have not resulted in significant new dollars for the Foundation.’ In other words, it wasn’t working as a conventional charity....

“Why exactly were donors writing checks?  The Band memo makes clear that donations untied to additional Clinton or Teneo services weren’t all that appealing to potential supporters.  This is significant, because the large grant-making foundations in the U.S. are almost entirely run by Clinton voters.  So you know they weren’t turned off by the brand name. They’d contribute more if they thought they were also buying goodwill and influence with a current Secretary of State and a potential future President.

“We don’t applaud WikiLeaks or the theft of information, and these hacks deserve a firm U.S. government response.  But the emails are public and they will confirm for many Americans their worst suspicions about the people who run their government.

“It’s also worth noting that in the vast digital trove of Mr. Podesta’s stolen emails we haven’t noticed emails from Mrs. Clinton.  Perhaps they don’t exist. But American voters shouldn’t worry merely about the emails released before the election.  What emails or memos exist that these hackers, Russian or not, could be withholding for leverage after the election with another President Clinton?

“The Clinton campaign has suggested that Donald Trump has praised Vladimir Putin because the Russian has something on the Republican.  The question is what do any number of possible bad actors know about Bill and Hillary Clinton’s mixing of business, charity and politics?”

As for The Donald....

Trump’s dysfunctional campaign was perhaps best encapsulated in last Saturday’s speech at Gettysburg.

Michael Goodwin / New York Post

“Abe Lincoln’s legacy is safe, and not just because Donald Trump talked too long Saturday. It’s that he said too little that was new or uplifting.

“Running out of time to change the campaign’s dynamics, Trump’s team picked Gettysburg for a speech it touted as a possible turning point in the presidential race, just as the 1863 battle there had turned the Civil War.

“But the candidate seemed to have other ideas about the proposition at hand. The result was a mash-up of conflicting themes instead of a clarion call to arms.

“Part complaint, part appeal to better angels, part a contract with voters and part a list of things to do, the speech never gelled into a coherent vision. By trying to do too many things, it didn’t do any well.

“After starting with a perfunctory reference to Lincoln’s address, and to his own status as a political outsider, Trump dedicated 10 precious minutes to a sour restatement of grievances against a ‘rigged system.’

“The usual suspects – a dishonest media, voter fraud, Hillary Clinton’s corruption, a crooked FBI and the ‘liars’ who accused him of groping – were soundly thrashed. The women who lied will be sued, he promised, and giant media mergers would be broken up, too.

“It was a stale, dark opening that clouded the 20 minutes of solid policy promises that followed.  As such, the reset needs a reset.

“The problem is not just dwindling time, but also a shrinking pool of persuadable voters.  National polls consistently show he is stuck at about 40 percent, and that many white suburban women who usually vote Republican are not with him.

“If Trump was talking directly to them, I missed it.  As is often the case, he focused on feeding red meat to his core supporters instead of adding to them with a broader appeal.”

The substance that followed the opening, which was boilerplate Republican ideals this campaign season, was lost in the bitterness.  Once again, the media took the bait and ran with it for their headlines, message lost.

On ObamaCare, Trump missed the boat virtually the entire campaign until recently.  I was writing last spring, when we were beginning to hear of large premium increases for 2017, that this would be a critical campaign issue but Trump largely ignored it save for a throwaway line or two.

But with the latest enrollment period set to begin, the average 25 percent premium increases you’re hearing about on the federal marketplace next year directly hits the 16% of people with ObamaCare plans who do not currently receive subsidies.

Rates will vary widely by state, with steeper hikes in Arizona, which is facing a 116% hike (145% in Phoenix, according to the Kaiser Family Foundation), while Indiana will see a 3% decline.

Editorial / Wall Street Journal

“President Obama took a health-care victory lap last week in Miami, celebrating ‘all the progress that we’ve made in controlling costs’ and portraying the law’s critics as ‘false and politically motivated.’ Does that apply to the actuaries at the Health and Human Services Department too?  On Monday they reported that ObamaCare premiums will soar 25% on average next year, and this is ‘progress’ all right, in the wrong direction.

“That headline number understates the extent of the trouble.  Liberals used to dismiss insurance premium shock by saying that the subsidies will offset any increase and, anyhow, beneficiaries can shop around for a cheaper plan.  But the 25% figure refers to the rate spike for the second-cheapest ‘silver’ plan for each exchange from state to state, which is a key benchmark in the subsidy formula.  In other words, these are the mid-level insurance plans that are performing the best, not the average increase of all ObamaCare coverage....

“In a normal election year, the presidential candidates might debate solutions, but, well, you know.  For the time being, perhaps Mr. Obama could show a little more intellectual humility when confronted with evidence of his own failures.  But, well, you know.”

Foreign policy....and the choice....

Mark Helprin / Wall Street Journal

“By all means, take Mosul, and continue on until ISIS is no more.

“But ISIS, also known as Islamic State, is and has been the wrong focus. Were it not holding hostage the scattered populations it controls in urban areas, a properly directed military coalition of two or three Western powers, or the United States alone, could roll it up in a week.  Even as things are, and despite the chaos and cross-loyalties in the present theater of war, with competent diplomacy and military force ISIS could be crushed in a matter of months.  The key is NATO’s activation under Article 5 in behalf of alliance member Turkey, which, if only technically, has nonetheless come sufficiently under attack to do so.

“With air support from American and French carriers in the Mediterranean, the U.S. Air Force at Incirlik and Gulf bases, and the Turkish, Saudi, and Gulf States air forces, in very short order Turkish divisions from the north could link up with Saudi, Jordanian and an Egyptian expeditionary force from the south, stiffened by American, British, and other NATO units where needed, to cut Syria in half. With Kurds and Iraqis closing from the east, this would simultaneously surround ISIS and confine the Syrian regime in a truncated enclave shielded by its Russian patrons.

“The primary purpose of such action, however, would not be to defeat ISIS.  Though at the moment ISIS is undeniably the most publicity-rich and barbaric of the jihadist movements, in relation to its structure and resources its ambitions to unify the Islamic world has – as in the case of bin Laden, Nasser, and the Mahdi of the Sudan – doomed it from the start....

“Much more befitting the power and history of the U.S. and its allies would be to sever and destroy the toxic, threatening bridge that Iran has built from Afghanistan to the Mediterranean, with, astoundingly, the patronage of the United States. Anchored by soon-to-be-nuclear Iran, an integrated politico-religious-military front including Shiite-directed Iraq, Syria and Lebanon will emerge in the near future if current trajectories remain undisturbed.

“This entity will have a population almost half that of the United States; the immense oil wealth of Iran and Iraq; ports on the Mediterranean, the Persian Gulf, and Indian Ocean; nuclear weapons; ICBMs; and, until it will no longer need Russia, for which it has no brief, the mischievous and destructive cooperation of Vladimir Putin.

“If, under the discipline of an Iran drunk with its successful bamboozling of the West, this power turns its eyes south to Jordan and Saudi Arabia, the Middle East will be entirely transformed....

“Now we are blinded to Iran in favor of ISIS – in its horror and sensationalism the matador’s red cape that distracts from the truly mortal threat, the sword. We know that the Iranians are skillfully using this dynamic. The question is, given Mr. Obama’s seemingly inexplicable yet indefatigable sponsorship of Iran, and his slow-motion approach to ISIS, is he using it as well?”

Sam Nunn / Wall Street Journal

“America’s Founding Fathers were determined to avoid a concentration of power in any one person or branch of government. When it comes to the authority to launch nuclear weapons, however, there are no checks or balances. Millions of lives and perhaps the fate of the planet rests on the judgment of a single person, the commander in chief.  When voters choose America’s next president on Nov. 8, this is what’s at stake.

“Nine nations possess nuclear weapons.  In a military confrontation, leaders will have little warning of a potential nuclear attack and only minutes to respond.  Sophisticated hackers could deceive warning systems or disrupt command-and-control processes.  Moscow and Washington still posture their nuclear forces so that they can be ordered to fire in minutes, a dangerously outdated strategy from the Cold War.  Once a missile is in the air, even if fired by mistake, there is no way to order it back....

“America’s next president must think carefully about these challenges.  How would he or she approach a crisis with only minutes to decide how to respond?  What would he or she do if confronted with a warning, potentially false, of a nuclear attack on the U.S.?  Despite the erosion of trust between America and Russia, the citizens of our two nations have an existential stake in the judgment of both of our leaders.

“Several years ago I sat around a conference table in Moscow with Americans and Russians, including President Vladimir Putin.  I expressed concern that neither he nor the American president would have more than a few minutes to decide whether to use nuclear weapons if warned of an attack.  The two countries’ militaries, I suggested, should work together to give their presidents more time to weigh the options.  Mr. Putin made clear that he was fully aware of Russia’s short nuclear window.  ‘Senator Nunn,’ he added, ‘at some point it becomes automatic.’

“What about moral considerations?  William Swing, a retired Episcopal bishop, recently offered, in a memo sent to about a dozen leaders, a powerful reminder of the importance of this year’s presidential choice: ‘Whoever wins will have his or her hand on the weapons that could end life, as we know it, on this planet.  We are not so much voting for a president as choosing a god.  When you put your hand on the nuclear trigger and become the single agent of the Earth’s destruction that is power beyond human imagining.’

“Is any human prepared or qualified to make this fateful decision for mankind? I think not.  Yet this is the responsibility of the commander in chief.  Temperament, composure and sound judgment are essential.  So is understanding America’s adversaries and allies and, most important, possessing the leadership qualities required to reduce the risk that such a terrible call will ever have to be made.”

As you can imagine, Sen. Nunn believes Hillary Clinton has the “judgement and skills to take on this awesome responsibility....She knows – like Ronald Reagan and Mikhail Gorbachev did – that nuclear war cannot be won and must never be fought.

“Donald Trump, on the other hand, has unfortunately demonstrated that he is an apprentice in the nuclear arena.  Worse, he has no appetite for learning.  Mr. Trump seems not to care what he doesn’t know, and he apparently listens to no one. His colossal ego and disdain for military leaders are far from comforting.

“In apparently off-the-cuff statements, Mr. Trump has suggested that the world would be safer if more nations, including Saudi Arabia, Japan and South Korea, had nuclear weapons and were willing to use them. This is dangerously off base.  Mr. Trump has even suggested that he might deploy nuclear weapons against terrorists, seemingly unaware of the devastating damage this would inevitably inflict on thousands of innocent victims.

“What Mr. Trump hasn’t thought through – or doesn’t understand – is that adding to the number of nuclear states dramatically increases the risk of proliferation....

“The absence of checks and balances in the nuclear age has haunted the world for decades. The risk of conflict can be reduced, but there is no substitute for a president with good judgment who seeks sound advice from experienced military and civilian leaders.  I believe that Hillary Clinton is the right choice on Nov. 8 to be America’s president and commander in chief.”

Benny Avni / New York Post

“Donald Trump often describes President Obama’s response to foreign threats as a ‘disaster’ and has vowed to restore America’s military deterrence.  So does Hillary Clinton.  ‘We need to respond to evolving threats from states like Russia, China, Iran and North Korea,’ she said in August at the American Legion in Cincinnati.  ‘We need a military that is ready and agile so it can meet the full range of threats and operate on short notice across every domain,’ she added.

“After eight years of retreat, that may prove a tall order.

“Russia, for one, increasingly provokes American allies in Europe and elsewhere.  Since April, Russian fighter planes have buzzed American planes and warships with barely a protest.  On Friday, a Russian armada, led by the aircraft carrier Kuznetsov, provocatively sailed the English Channel.  American and British ships watched.

“China, meanwhile, steadily turns man-made islands into naval military fortresses, transforming the South China Sea into its private lake – much to the chagrin of our allies, who’ve relied on American defense treaties for decades.  Beijing also restricts commercial flights over disputed areas and constantly confronts Japanese fishermen in the East China Sea, where Tokyo has administered several territories for a long time.

“Washington advises Pacific allies to use international arbitration to regain sovereignty back from increasingly belligerent China. But when a Hague court ruled for the Philippines recently on one such dispute, China simply ignored the verdict.

“This week, Manila’s new president, Rodrigo Duterte, announced his ‘separation’ from the U.S. and swore allegiance, instead, to China and Russia.

“The next president must demonstrate that there’s a new sheriff in town, starting by significantly upping military budgets....

“To be sure, no president wants to turn every minor incident into war.  James Jeffrey, a former Ambassador to Iraq who worked under Presidents George W. Bush and Obama, gives the latter fairly high marks.  ‘He can leave office and say, ‘I didn’t start any war, I killed Osama bin Laden and, maybe soon, I defeated ISIS in Mosul.’ And that will probably be right,’ Jeffrey says.

“But Obama, Jeffrey adds, has a blind spot on Iran....

“After numerous incidents in the Persian Gulf in which small speedy boats belonging to Iran’s Islamic Revolutionary Guard Corps have buzzed large American ships, this new incident [Ed. the missiles fired at the ships by the Iranian-back Houthis in Yemen] seems different, Jeffrey says.  It actually threatened American lives.  If any had been lost, it would necessitate a forceful response.

“For Iran, there are political and other benefits in ‘slapping America in the face,’ Jeffrey says.  Especially if Tehran believes that ‘President Obama would do nothing against an Iranian provocation, because he is afraid it would cancel the nuclear deal.’

“And, he adds, Tehran is afraid that a president Hillary Clinton or Donald Trump will be much tougher on Iran, which explains the timing.

“Washington should warn Iran through diplomatic channels that the response to such provocations will not be a strike against proxies but against Iran’s own Revolutionary Guards, Jeffrey says.

“Climbing out from the hole we put ourselves in may exact a high cost, but without it, America – and the rest of the world – may find things sharply change for the worse.”

On voting...Robert J. Samuelson / Washington Post

“There was a time when ticket splitting was common.  Voters would support one party’s candidate for president and the other’s for Congress.  At its peak in 1972, ticket splitters represented 30 percent of voters, reports political scientist Alan Abramowitz of Emory University.  Since then, the practice has gone into eclipse.  In 2012, only 11 percent of the electorate were ticket splitters.

“And yet...

“To bring this nasty and bizarre campaign to meaningful conclusion, what this country needs is an outburst of ticket splitting.  Republicans should vote for Hillary Clinton, and Democrats should back Republican House and Senate candidates.  This will strike most people as counterintuitive, if not foolish, but there are three good reasons for doing so.

“The first is to make a statement about the outcome.  Neither party deserves complete victory.  Both nominated widely distrusted candidates.  In the latest NBC-Wall Street Journal poll (taken before last week’s final debate), only 40 percent of respondents viewed Clinton positively; a mere 29 percent felt that way about Donald Trump.  Parties shouldn’t be rewarded when their popular support is so thin.

“The second reason is related: to avoid misinterpretation.  Assuming Clinton wins, she and others will claim that the Democrats have a ‘mandate.’  They don’t.  Her triumph would be more a repudiation of Trump than an endorsement of her policies....

“The final reason is the most consequential – and the most hypothetical.  Divided government, driven by ticket splitting, might actually produce better government.

“How could that be?  Superficially, the opposite would seem more likely.  Divided government would mean paralyzed government; it’s more gridlock....

“But that’s not inevitable.  For starters, we would have a new cast of characters.  Clinton, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are all ‘transactional politicians’ – they want to get things done – as well as fierce partisans.  They also know that the gridlock of the past eight years hasn’t done either party much good.  All this creates reasons to reach mutually acceptable agreements....

“The overriding need of the next president and Congress is for both parties to rebuild their political centers, which – almost certainly – still command the backing of public opinion.  Revitalized centrist politics does not guarantee good legislation, but it stands a better chance of producing publicly acceptable legislation.  Even this may be a long shot, but it’s our best shot.”

Turning to Wall Street...

We had our first look at third-quarter GDP on Friday and it came in at a 2.9% annual rate, stronger than the second quarter’s 1.4% and above expectations of 2.5% (the Atlanta Fed’s GDPNow indicator pegged it at 2.1%, which it could still get down to after two revisions...or it could be revised higher...)

So Q3 was the fastest growth rate in two years, but if you average things out, the economy is growing at the same 2%ish annual rate since the recession ended in mid-2009, or the weakest expansion dating back to 1949.

Among the components in the report, consumer spending slowed to 2.1% after a 4.3% gain in the second quarter.

The key was exports, which add to GDP, increasing at a 10% clip in the quarter, the best gain in nearly three years, with the shipment of agricultural products, especially soybeans, being a key.

The core personal-consumption expenditures figure for Q3 came in at 1.7%, this being the Federal Reserve’s preferred benchmark, and thus still shy of its 2% target (though core CPI is, ditto wages).

Speaking of the Fed, it meets next week and it will hold the line on interest rates, but no doubt will issue a statement with language pointing distinctly to December 13-14 for the first rate hike since Dec. 2015.

GDP (annualized)

Q3 2016...2.9%
Q2 2016...1.4%
Q1 2016...0.8%
Q4 2015...0.9%

In other economic news....

September new home sales came in basically as expected at a 593,000 annualized pace. 

The S&P/Case-Shiller home price index for August showed a gain of 0.2% over the prior month, up 5.1% for the 12 months in the 20-city index, with Portland and Seattle showing the largest one-year price gains, 11.8% and 11.4%, respectively, while the New York metro area has seen an increase of just 1.8% over the same period.

September durable goods fell 0.1%, and were -1.2% ex-transportation and aircraft.

Europe and Asia

I was writing months ago that investors were totally missing the boat on Brexit.  There has been a sense of complacency in some circles, but certainly not in corporate boardrooms, that after the initial shock, things didn’t seem so bad, and, indeed, the economic news from the eurozone and the U.K. has been fine.

My point has been, though...Brexit hasn’t started!  Oh, corporations are already planning for the worst, and in many cases holding off on spending and expansion plans for the simple reason they don’t know what the rules will be, and won’t for some time to come.  The actual negotiations don’t begin until next spring, and while many in Britain want the benefits of a single European market, but without the EU’s open-door policy on immigration and movement of peoples from within the union, many investors don’t seem to get it...even as European governments are telling Britain very firmly, ‘If you think you’re getting both, you’re nuts!’

So reality is hitting London’s all-important (nay critical) financial sector as the U.K.’s trade minister, Mark Garnier, said this week that “passporting,” which allows London-based lenders and insurance companies to sell their services anywhere in the single market, is unlikely to continue once the U.K. leaves the EU.  Garnier, in an interview, said ideally the banks would receive some kind of “equivalence,” but in return the British banks would have to accept all future EU regulations as they are handed down from Brussels.

Let’s just say negotiations are going to be a mess, and this is but one issue of hundreds.

But internally in Britain, the exploding debate will be how manufacturers and small business are treated at the expense of the financial sector, as the government no doubt will try to carve out exceptions for one, probably to the detriment of the other.  Just remember the financial sector contributes about 10 percent to Britain’s GDP.

But if you are a global bank, you can’t really afford to sit around for two years while negotiations are completed.

Meanwhile, Britons are more concerned with controlling immigration than maintaining access to the single market, with over half, 58%, of respondents to a Survation Ltd. for ITV poll saying they approve of Prime Minister Theresa May’s handling of the divorce, while only a quarter disapprove.

As for Mrs. May, she has promised U.K. lawmakers they will be able to have a series of debates on how the government should approach leaving the EU before she begins formal negotiations, making time available before and after the Christmas recess, but, she said, “The government must not show its hand in detail as we enter into these negotiations.”

As for the Euro economy...

IHS Markit released its ‘flash’ readings on manufacturing and the service economy for the eurozone, with the composite reading at 53.7 for October vs. 52.6 for September (50 being the dividing line between growth and contraction).  The manufacturing figure is 53.3 vs. 52.6, and for services 53.5 vs. 52.2, all solid and of course post-Brexit.

The flash readings also look at Germany and France.  For the former the comp. was 55.1 vs. 52.8 last month, manufacturing 55.1 vs. 54.3, and services 54.1 vs. 50.9.  For France the comp. was 52.2 vs. 52.7 in September, manufacturing 51.3 vs. 49.7, and services 52.1 vs. 53.3.

Separately, business confidence in Germany is at its highest level since April 2014, with inflation, according to Destatis, running at a 0.7% annualized rate.

In France, GDP for the third quarter was 0.2% over the prior quarter, 1.1% year over year, or below the government’s forecast of 1.5% for 2016, less than expected and another nail in the coffin for President Francois Hollande, who said he would decide whether or not to seek a second term by mid-December, France’s big election next spring.

Third-quarter GDP and inflation figures for the eurozone overall will be released on Monday.

Chris Williamson, chief economist, at IHS Markit:

“The eurozone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come.  With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year.

“October’s PMI is consistent with a quarterly GDP growth rate of 0.4%, led by a 0.5% pace of expansion in Germany....

“Policymakers will be encouraged by signs of both stronger economic growth and rising price pressures, and the prospect of a robust fourth quarter will fuel further speculation of a possible tapering of QE purchases by the ECB.”

Ah yes, rising price pressures and tapering.  Check out the euro bond market this week.

The yield on the 10-year German bund rose from 0.00% to 0.16% (touching 0.22% early Friday).  The yield on the French 10-year rose from 0.28% to 0.46% and Italy’s from 1.37% to 1.58%.

Separately, Eurostat released the latest debt levels across Euroland, with government debt to GDP in the second quarter of 2016 at 91.2%, a slight improvement from 92.1% Q2 2015.

You have figures of 70.1% in Germany, 89.1% in the U.K., 98.2% in France, 100.2% in Spain, 131.7% in Portugal, 135.5% in Italy, and 179.2% in Greece.

More Eurobits....

Italy’s retail sales for August were down 0.2% year over year, not good for Prime Minister Matteo Renzi as he faces his critical December referendum.

Spain’s GDP for the third quarter was up 0.7% over the second quarter, more solid performance, with inflation rising 0.8% in October after a lengthy stretch of deflation.  And the unemployment rate is finally back below 20%, 18.9%, for the first time in 7 years (Q4 2009).

Add it all up and it’s the perfect backdrop for Prime Minister Mariano Rajoy to finally gain a second term, which he is slated to do on Saturday, after the Socialists finally acquiesced and decided to stand aside, thus letting acting PM Rajoy attain a parliamentary majority that will end a 10-month political impasse that had Rajoy overseeing a caretaker government.

The Socialists were concerned that if another vote was held in December, as planned, they would have lost further support and that Podemos, the anti-establishment insurgents, would become the main rival to Rajoy’s center-right People’s Party as the Socialists dropped to third.

All the above aside, Rajoy will be heading a weak government with major issues to confront, including Catalan independence.

In the U.K., third-quarter GDP was 0.5%, 2.3% year over year, better than expected.

Germany’s economics ministry has reopened its review of a $730 million Chinese acquisition of Aixtron SE, a German chip-equipment manufacturer, in the latest sign of government alarm about a wave of Chinese takeovers.  Good.

William Wilkes / Wall Street Journal

“The planned purchase of Aixtron is part of a raft of Chinese acquisitions of German technology firms that has stirred concern in the government.  On a visit to China in June, German Chancellor Angela Merkel voiced frustration over an asymmetrical situation that lets China buy high-tech expertise in Germany’s open market, then use that know-how to build protected champions for its own markets.”

Merkel’s deputy, Sigmar Gabriel, called for European Union measures to give national governments expanded powers to block or impose conditions on shareholdings of non-EU companies.  EU Digital Economy Commissioner Guenther Oettinger, a German who’s a member of Merkel’s party, agrees.

“It’s absolutely right to initiate this debate at the European level,” Oettinger said in an interview.  “Everybody has to play by the same rules.  Clearly, there are many countries, including big ones such as China, that make market access or corporate takeovers difficult or effectively impossible.”  [Bloomberg]

Gabriel heads Germany’s Social Democrats, the junior partner in Merkel’s governing coalition.

Chinese entities have announced or completed acquisitions of German companies worth a record $12.3 billion this year, almost eight times the level of 2015, according to data compiled by Bloomberg. At the same time, well, you know how difficult China makes it to obtain access to its market and corporations.

On the migration front, the big story was the dismantlement of the Calais refugee camp in northern France, where as many as 8,000 refugees, most of them from Sudan, Afghanistan and Eritrea, had made their home, hoping to eventually reach Britain, across the English Channel.  But the virulently anti-immigrant attitudes in the region that led to razor wire around the undersea tunnel and now the port (financed by the British government), along with a heavy French police presence, made it virtually impossible to escape to the U.K.

Politically for French President Hollande, the Calais camp, aka “the Jungle,” was killing him as the far-right and conservatives pointed to the mess, with locals crying about a severe drop in property values and declining business, so the government bulldozed it this week, with, at last report, about 6,000 of the migrants being bussed to reception centers across France, while over 1,200 unaccompanied children were put in a provisional reception center in Calais.  Britain took in an additional 200 unaccompanied children.  As a rule, Britain will not take adults, who under EU rules are supposed to apply for asylum in their country of arrival.

Editorial / The Economist

“Calais has long taken on a broader meaning.  The shocking sight of a muddy, foul-smelling camp in the heart of rich Europe has come to symbolize the continent’s ambivalence to the refugee crisis.  In theory, the EU was supposed to share responsibility for the asylum-seekers who arrived en masse from Syria, via Greece, last year.  In practice, Germany has been by far the most generous, with 477,000 people applying for asylum in 2015 alone – over five times the number of refugees who applied for asylum last year in France, and next to just 39,000 in Britain.

“France, in reality, has found itself to be a country of transit rather than a destination, and as such a reluctant gatekeeper for the British.  Around Calais, exasperation about the camp has stirred support for the far-right National Front.  It has also been exploited for broader political ends ahead of France’s presidential election next spring.”

Well imagine what is happening in some towns and cities that have been selected to receive the 6,000 or so adult refugees.  Paris officials said 1,000 immediately showed up at a Paris migrant camp in north Paris, the population going from 2,000 to 3,000 overnight.  But the rest were bussed to various destinations and the locals aren’t happy (though there are some charitable types, I hasten to add, who welcomed the influx).  Let’s just say it remains a powerful issue for Marine Le Pen, as well as Alain Juppe and Nicolas Sarkozy.

Turning to Asia, Japan’s flash manufacturing PMI for October was 51.7 vs. 50.4 in September, but exports last month were down 6.9%, however, this was better than August’s minus 9.6%.  September imports fell 16.3%, but better than the 17.2% decline the prior month.

Japan’s core CPI was down 0.5% in September, year over year, while household spending declined 2.1% yoy last month, the 7th straight monthly decline.

In South Korea, GDP rose 0.7% in the third quarter over the second, up 2.7% year over year, which was down from Q2’s 3.3% pace.

Street Bytes

--With one trading day left in the month, October has been incredibly quiet on Wall Street; witness the movement in the Dow Jones the past two weeks... +0.04%, +0.1%.  With the flood of earnings reports continuing, earnings are now expected to rise in the third quarter for the first time in five quarters, when earlier a decline had been forecast.  But we’re talking a small gain of around 1%, while revenues are now estimated to rise about 2.5%.  The forecast for the fourth quarter is an increase in eps of 6%.

--U.S. Treasury Yields

6-mo. 0.48%  2-yr. 0.85%  10-yr. 1.85%  30-yr. 2.62%

As noted earlier, the yield on the 10-year is at its highest level since May.

--Crude inventories fell this week according to the Energy Information Agency, which should have been bullish seeing as a gain was expected, but then Iraq balked at joining efforts to trim output to prop up prices, OPEC’s second-largest producer saying it should be exempt from cutting production because it is embroiled in a war.  Iraq currently produces more than 4.7 million barrels a day and production could rise further as the government is urging international companies to boost production at its fields.

Russia has also refused to commit to joining the plan to freeze or cut output as announced in Algeria last month, so on the week, oil fell back to $48.66, down from the previous week’s close of $51.00.

Separately, General Electric Co. is in talks to merge its oil-and-gas business with Baker Hughes Inc., according to the Wall Street Journal.  A deal could be in the neighborhood of $20 billion.

--Exxon Mobil reported a 38% decline in quarterly profit for Q3 to $2.7 billion, while the company said it may be forced to recognize that as much as 4.6 billion barrels of its reserves is no longer profitable to produce, a bone of contention with regulators; most of the questionable holdings in Canada’s oil sands.

CEO Rex Tillerson also said the operating environment “remains challenging.”  Revenue fell 13% to $58.68 billion, below estimates.

Exxon slashed its capital and explorations spending 45% from a year ago to $4.19 billion, bringing the year’s decline to 39%.

Rival Chevron Corp. said its quarterly profit fell 35% as revenue declined more than expected, though earnings were above the Street’s estimates and the shares rallied.

Chevron has been slashing capital spending while previously announcing job cuts of 8,000, or up to 12% of its workforce.  This is helping the bottom line, which resulted in a profit of $1.3 billion, which while less than the year ago period, was the first profit after three quarters of losses.  Revenue declined 12% to $30.14 billion.

--AT&T confirmed it is acquiring Time Warner for $85.4 billion, as it sets out to build a digital video platform to rival Netflix, among other things, with AT&T looking to transform the telecoms group into one of the world’s biggest media companies.

But I’m not going to write much on this for now as the merger faces major regulatory hurdles and Time Warner shares are well below the $107.50-per share price offered by AT&T, closing the week at $87.50, which gives you a clue as to the odds of this deal closing. 

Rupert Murdoch’s 21st Century Fox issued a statement calling for the deal to be reviewed.  “A deal of this size and scope, and the impact it will have on consumers, should receive the highest level of regulatory scrutiny,” it said.

Randall Stephenson, AT&T CEO, is confident, however, that the deal will be approved, noting there are few examples of Washington blocking the combination of two companies with different businesses.

AT&T is looking to take advantage of Time Warner’s HBO and Warner Bros. studio to move quickly to build a new video product to offset the decline of AT&T’s DirectTV business.  AT&T is launching a new video service next month, a $35 bundle, that would deliver content over the internet rather than traditional cable or satellite distributors.

--Apple Inc. posted its first annual revenue decline in 15 years, but forecast a return to growth in the current quarter with stronger sales of its iPhone 7.

For its fiscal fourth quarter ending Sept. 24, however, Apple reported its third consecutive decline in revenue and profit, with net income falling 19% to $9 billion, while revenue fell 9% to $46.9 billion, prior to the launch of the iPhone 7, which went on sale a week before the end of the quarter.

The iPhone accounted for 63% of revenues in the fiscal year, but the company sold 45.5 million, 2.5m fewer than a year earlier.

Apple also reported profits in China fell by almost 20%, which sure as heck shouldn’t be a surprise to loyal readers of this space as Apple loses out to local rivals such as Huawei and Vivo.  Revenue in China fell 17% to $48.5bn, after the country became Apple’s second-largest market by sales, after the Americas, in 2015.  [Watch the South China Sea for clues as to where Apple sales go from here.  That’s your edge as an investor/short seller.]

This year, Europe has become No. 2 as it was the only territory where iPhone sales continued to grow.  Sales of all Apple products in Europe, though, were flat.

What should be worrisome for Apple shareholders is the fact the company doesn’t seem to be cashing in much after the problems with Samsung’s Galaxy Note 7, now off the market.  Apple is also trying to convince investors that its tepid holiday sales outlook has to do with supply constraints, not demand.

So Apple tried to focus attention on growth in Apple’s services arm, which includes iTunes and the App Store, with revenue up 24%.

From the Financial Times’ Lex column:

“Tim Cook touted the iPhone’s ‘gorgeous new finishes’ during Apple’s quarterly results conference call on Tuesday evening. The earnings themselves do not come in ‘jet black’ and ‘rose gold’ but there seems to be a similarly inordinate amount of time spent on their superficial appearance.

“First, Apple applied some heavy timing gloss.  It released the new iPhone seven days earlier than last year.  Even with this artificial boost to the September-end quarter, iPhone revenues still fell 13 percent.

“Stealing from the future like this should hurt Apple’s next quarter but the company is doubling down by adding an extra week to the December-end quarter.  Apple expects to make about $77bn in revenue in that quarter compared with about $75bn last year, setting it up for another all-time record.  Strip out the extra week, however, and it looks like another decline.

“These fine details matter due to fears that a saturated smartphone market and a lack of dazzling new products are killing the growth prospects of the world’s largest public company....

“Instead of hardware, Apple has chosen more gloss: emphasizing its credentials as a services company.  For the second quarter in a row, the group’s press release highlighted record services revenue, which grew at 24 percent a year.  Services are actually the only product line that grew at all so no wonder Apple wanted to highlight it. This is a perfectly reasonable tactical move – the company deserves more credit for its sticky software revenues – but it is also totally inadequate as a strategic next step of substance.”

Separately, a new report by market analyst IDC said smartwatch shipments declined by nearly 52% year-on-year, with Apple shipping out just over one million units in the third quarter, while during the same period in 2015, it shipped 3.9 million, Apple the market leader in the category.

I said from day one this was a stupid product.

--Amazon shares fell 5% in after-hours trading on Thursday following release of its third quarter earnings, which missed expectations badly, 52 cents when the Street was expecting 78. Net income was $252 million.

Investment in distribution warehouses, video content from top tier directors and actors and expenses related to virtual assistant Alexa helped push up operating costs 29%.

Amazon announced it had opened 18 fulfilment centers during the quarter, which is rather remarkable.  CFO Brian Olsavsky said, “We’re in a period of ramping up investment in the second half of 2016.  It is a big undertaking as far as space is concerned.”

Sales increased 29% to $32.7bn, meeting consensus, with sales in North America up 26% and international rising 28%.

Revenue from Amazon Web Services soared 55% to $3.2bn, while the operating margin at AWS increased to 31.6%.

For the holiday season, Amazon gave broad targets, with expected operating income of zero to $1.3bn.

The company is clearly spending a lot on Alexa, which founder and CEO Jeff Bezos said has more than 3,000 skills.  “Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful – wait until you see some of the surprises the team is working on now.”  [Hopefully Alexa can get Russia to stand down in Europe.]

--Google’s corporate parent – Alphabet Inc. – said the company earned $5.1 billion, up 27% from the year ago period.  After subtracting commissions, revenue climbed 21% to $18.3bn.  Both figures beat analyst projections.

YouTube has emerged as the rising star in Google’s cast of services.  While Alphabet doesn’t disclose how much money the online video site is making, RBC Capital analyst Mark Mahaney estimates YouTube’s annual revenue has reached $10bn and is increasing by as much as 40% a year.  That’s remarkable.  YouTube’s audience has surpassed 1 billion, with 80% of the viewers outside the U.S.  More than half its video clips are watched on mobile devices.

--Deutsche Bank surprised to the upside on earnings for the third quarter, $300 million, though the bank said it raised its litigation reserves to $6.5bn as CEO John Cryan pledged to redouble restructuring efforts on Thursday, warning that the bank faces tough times ahead as it finalizes talks with U.S. officials over its looming multi-$billion fine.

But on the positive side, Deutsche profited from bond trading and the bank expects the fourth quarter business in this area to exceed last year’s pace.

--Italy’s Monte dei Paschi di Siena, viewed as Europe’s most troubled big bank, vowed to slash its workforce by 2,600 (10%), shut hundreds of branches (as many as 500 of 2,000) and sell off a key business ahead of a 5bn euro recapitalization effort

--Caterpillar Inc. cut its earnings view for 2016, citing lower-than-expected equipment sales in the second half of the year that could continue well into 2017, with revenues in the recent quarter falling 16%, $10.96bn to $9.16bn.

Looking ahead to next year, the company said “the balance of risk, particularly during the first half of the year, is likely on the negative side.” What’s needed for improvement are higher commodity prices, or at least stability.  Outgoing CEO Doug Oberhelman also cited global economic uncertainty, such as the Brexit vote.

But it was Oberhelman’s oversized bet on mining equipment and building up the capacity for same that sunk the company in recent years after China’s growth rate slowed.  The plunge in oil prices didn’t help either.  Caterpillar, aside from eliminating a previously announced 10,000 jobs, will be closing or consolidating 20 plants by the end of 2018.

--General Motors doubled net income and notched record revenue in the third quarter, owing to strong truck sales in the U.S., but the company remains concerned about Brexit as GM tries to record its first annual profit in Europe since 1998.

GM smashed Wall Street’s earnings and revenue expectations, with the latter up 10% to $42.83 billion and the former up to $2.77 billion.  Sales were also helped by a surge in China, aided by a government incentive program, with operating income there of $459 million, but it lost $142 million in Europe and it looks for losses of as much as $300 million there in the fourth quarter.

GM also lost $121 million in South America.

--Ford Motor Co.’s profit fell 56% to $957 million in the third quarter, down from $2.2bn in the year ago period.  Earnings beat the Street, though.

Ford saw record-setting U.S. sales as its SUVs and pickups remain highly popular, but as sales peak, Ford is feeling the impact, with North America sales nonetheless down 11% in the quarter and revenue dropping 8%, with the company previously announcing temporary closures of four plants in the region this month to bring production in line with demand.

Overall, Ford’s revenue fell 6% to $35.9 billion.  Worldwide sales fell 4%, down in every market except Asia, where it earned $131 million.

Ford’s North America pretax profit was $1.3bn, down 55%, and the company lost $295 million in South America, but eked out a $138m profit in Europe, its best third quarter there since 2007.  However, the company said the Brexit vote will cost Ford $200m this year.

Ford also said its profits will likely fall next year before rebounding in 2018.

--Tesla unexpectedly reported its first quarterly profit since 2013, better than what the Street forecast, with revenues rising 145% to $2.3bn from $937m.

Tesla also reaffirmed its plans to deliver 50,000 vehicles in the second half of 2016.

But the small income, $21.9m, nonetheless will help the company if it wants to raise money and get approval for the SolarCity deal.  Tesla said it had $3.08 billion in cash as of Sept. 30, compared with $3.25bn at the end of the second quarter.

The shares, which rallied 6% on the news initially, fell back to unchanged by the end of the day and were down a bit by Friday’s close.

Meanwhile, Consumer Reports’ annual performance rating of brands places Tesla at No. 25 of 29 for reliability, with reviewers saying the Model X SUV “has been plagued with malfunctions,” including with the “falcon-wing doors” that had become its signature.  I told you when this model was first rolled out that these doors were idiotic and would be problematic.

Jack Fisher, director of automotive testing for Consumer Reports, said in an interview with the Los Angeles Times’ Drew Harwell, “It shouldn’t come as a surprise to anyone that there’s been mechanical problems with the Tesla Model X.  They’ve taken this very basic platform with the Model X and added so many overly complicated features: The front doors are power automated. The middle-row seats are on power sliders,” Fisher said.  “All those things add up in a way that can bring the platform down.”

Even Elon Musk conceded back in February, “In retrospect, it would’ve been a better decision to do fewer things with the first version of Model X.  I think there was some hubris there with the X.”

--A federal judge formally approved a $14.7 billion settlement of Volkswagen’s emissions cheating case, paving the way for the company to make amends to 475,000 U.S. owners of VWs and Audis.  Motorists can now have their cars bought back or modified by Volkswagen and receive additional cash compensation of up to $10,000.

So now the whole process actually begins...buybacks and compensation.

Separately, Volkswagen AG reported sharply higher profit in the first three months to Sept. 30 and raised its outlook for the year, though its luxury car maker Audi AG warned of lower profits.

--United Parcel Service said changes in fuel surcharges and strength in the dollar dragged on revenue growth in the third quarter, though sales were slightly ahead of expectations, rising 5% to $14.9bn, with domestic package revenue up 4.8% and international up 2.2%.

--3M lowered guidance for the year as the maker of Post-it Notes and Scotch tape says like-for-like currency sales growth will be flat for 2016.

3M, like other U.S. multinationals, generates about two-thirds of its revenues from overseas, and it’s been dealing with the strong dollar and slowing global growth.

--Boeing raised revenue guidance for the full year while beating analyst estimates on profits, though revenues were down 8% for the third quarter due to the “timing of aircraft deliveries,” according to the company.

Boeing projected full-year revenues would be $500m higher than previously expected.

--Shares in Southwest Airlines fell 8% after the nation’s largest domestic carrier reported a bigger than expected drop in revenues and profits for the quarter, the former down 3%, slightly below expectations.

--T-Mobile U.S. shares popped on Monday after the wireless network reported better-than-expected subscriber growth, adding 851,000 of the lucrative “postpaid” phone customers, who are billed for their wireless service on a recurring monthly basis.  This compared to a gain of 646,000 in the second quarter, and beat the 442,000 added by Verizon in the same period.  CEO John Legere crowed, “That’s 14 quarters in a row that T-Mobile has won share from the competition.”

Profits grew to $366m from $138m a year ago, with earnings topping the Street.

--The print media business continues to get more depressing by the week, with the Wall Street Journal looking for a “substantial” number of employees to take buyouts.

Spending on newspaper advertising in the U.S. is projected to fall 11% this year, to about $12.5bn, according to the Interpublic Group’s Magna.  [New York Times]

--TD Ameritrade, the largest U.S. discount brokerage by trade executions, announced it would pay $2.7bn for Scottrade’s brokerage business, while TD Ameritrade’s largest stakeholder, Toronto-Dominion Bank, agreed to buy Scottrade’s online bank for $1.3bn in cash, adding to its branch network that in the U.S. stretches from Maine to Florida.

This is one move that seems to make eminent sense.

--Anheuser-Busch InBev’s first results since completion of the takeover of SABMiller showed a 0.9% fall in sales volumes in the third quarter, which was a little better than expected, but earnings of $4.03bn fell shy.  The company blamed “very weak results in Brazil,” where volume was down 4.5%

The SABMiller acquisition created a global brewing giant that brought together brands such as Budweiser, Stella Artois, Beck’s and Castle, a brand popular in Africa.  [Can’t say I’ve had this last one.]

Earlier this week, No. 2 brewer by sales, Heineken, saw a 2% rise in sales volumes.

--Coca-Cola’s sales lost some pop in the third quarter as the strong dollar hit the top line, but the company kept its full-year earnings outlook unchanged.

While net revenue fell 7%, if you strip out foreign exchange and structural items, sales rose 3%, which is solid.

--Shares in Under Armour took a major hit, about 13%, after the company said it wouldn’t meet its growth target spelled out 13 months earlier at an investor forum.

While revenue increased 22% in the third quarter, it was the smallest increase since 2010, and with the shares trading at a lofty multiple, it was time to reset expectations.

--Qualcomm, the world’s largest mobile chip company, agreed to pay $47bn for NXP, Europe’s most valuable chipmaker, as consolidation in the industry continues.  This is also the largest tech acquisition ever in Europe.

Since the smartphone market has showed signs of maturing, Qualcomm, which relies on mobile for 90% of its revenues, needed to diversity and NXP is the leading provider of chips for the automotive sector, which gives Qualcomm a market in electric and autonomous vehicles.  NXP is also big in the “internet of things” device market.

Qualcomm will also be tapping its overseas cash reserves of $28.6bn to help pay for the deal.

--Twitter Inc.’s quarterly revenue growth slowed sharply in the third quarter but beat analysts’ expectations, while the company said it would cut 9% of its global workforce, so the shares rose some but are still now near their lows.

Revenue rose 8% to $616 million, but the company had reported a 20% rise in the previous quarter and 58% last year.

Twitter said its user base ticked up to 317 million average monthly active users in the quarter from 313 million in the second.  As former NBA star Derrick Coleman would have said, ‘Whoopty-damn-do.’

As to the layoffs, CFO Anthony Noto said, “We’re getting more disciplined about how we invest in the business.”  Twitter decided to shut down the Vine app.

--According to data from Standard Media Index, broadcast television spend fell 13.2 percent in September vs. a year ago, when revenue was soaring due to the huge amounts of ad spending from DraftKings and FanDuel.  But last month they spent $100 million less across broadcast and cable than they did a year earlier.

While ESPN remained on top in September in the cable world, its revenue was down 10% year over year, while the three big news networks gained from the presidential election: Fox News up 16%, CNN 25% and MSNBC 28%.

To be fair regarding the broadcast networks, some of the fall in September was attributable to a post-Olympics hangover.

--Speaking of the Olympics, Comcast, owner of the NBC TV networks, said revenues at NBCUniversal rose more than 20% during the third quarter, with advertising sales at NBC’s broadcasting unit soaring more than 90% thanks to demand for Olympic TV spots as well as political campaign spending.

--Sonic Corp.’s same-store sales dropped 2% in the recent quarter, with the CEO saying low commodity costs, aggressive promotion and pricing hurt profits in 2017.

--Same-store sales at Burger King rose only 1.7% in the third quarter, compared to 6.2% during the same period a year ago; Burger King part of Restaurant Brands International. Same-store sales for the U.S. and Canada actually fell 0.5%.  The other big brand under the RBI umbrella, Tim Horton’s, reported sales growth of 1.7% from 5.4% a year ago, with U.S. sales up 4.5%.

Food deflation is hurting the business, and more and more people seem to be eating in.

--Shares in Chipotle Mexican Grill Inc. fell anew after the burrito chain reported same-store sales fell a worse-than-expected 21.9% in the third quarter, though this is better than prior quarters following the E. coli outbreak nearly a year ago.  CEO Steve Ells told investors on Tuesday, “While we’re on the road to recovery, we’re not satisfied.”

Chipotle said it would slow its new restaurant openings in 2017 to between 195 to 210, down from 220 to 235 targeted for this year.

The fourth quarter’s comparisons should be better since the E. coli outbreak hit during the year-ago period.

--Arby’s, a fast-food chain I’ve actually been frequenting more than ever (because it’s near my Dollar Tree...Richard H., now DLTR is out of Liquid Plumber...), is test-marketing venison sandwiches in six states; heavy deer hunting areas in Wisconsin, Minnesota, Michigan, Pennsylvania, Tennessee and Georgia.

Boy, you all know venison is ‘tough’ and I’m trying to picture how they can cook it just right on a mass scale, though Arby’s Chief Marketing Officer told USA TODAY that the sandwich is “100% deer meat,” with premium cut top and bottom round steaks from the hind quarter of the deer.

Well, good luck.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The United States said Thursday that up to 900 ISIS extremists have been killed in the offensive to retake Mosul, with camps around the city filling with fleeing civilians.  Iraq said that as of Thursday, 11,700 people had been displaced since the operation began.  But the camps have room for only about 60,000 currently, when hundreds of thousands are expected once the final assault on Mosul begins.  There were reports ISIS has massacred hundreds of men and boys in the city while whole families are being rounded up as human shields.

Tens of thousands of Iraqi fighters continue advancing on Mosul, backed by U.S. air and ground support, and allied with Kurdish Peshmerga fighters.

The U.S. estimates there are between 3,500 and 5,000 ISIS forces in Mosul and another 2,000 in the broader area. 

For its part, Turkey, which has troops deployed north of Mosul, inside Iraqi territory, is concerned that any use of Shiite militias in the Mosul campaign, which is inevitable, will lead to sectarian strife in the mainly Sunni region, thus exacerbating the exodus of refugees to Turkey.

Separately, last weekend’s counterattack by ISIS on Kirkuk took three days to repel and resulted in at least 100 deaths.

Meanwhile, U.S. Defense Secretary Ash Carter very publicly said this week that the U.S. wanted to launch an offensive against ISIL’s Syrian stronghold of Raqqa soon, even before the Mosul offensive is concluded, as ISIS fighters move from Mosul to Raqqa, and because the West believes the terrorists are planning major attacks from the Raqqa headquarters.  But the force being assembled to take on Raqqa is nowhere near as large, or organized, as the forces operating in the Mosul theater.  Turkey could yet play a major role in an offensive against Raqqa, even though it is in opposition to the Kurds that currently comprise the main force.

As for Aleppo, Syrian rebels announced at week’s end a big offensive aimed at breaking the government’s siege of the rebel-held east.  Rebels have been firing “hundreds” of missiles into western Aleppo, killing 15 civilians, while about 275,000 people remain besieged in the east by pro-government forces, with Syria and Russia renewing air strikes after a lull that lasted a few days.  Since the big assault began on the east of the city a month ago, the regime, backed by Russia, has killed about 500, with 2,000 injured and virtually zero medical care available as the U.N. has been unable to get aid in. 

[A study by the World Bank, analyzing satellite imagery, estimates that 30% of the residential buildings in Aleppo have already been destroyed, with damage accelerating.  Amnesty International estimated that in one week in September, 90 locations were damaged or destroyed in an area about the size of Manhattan.  More than 10,450 have died in the city since the civil war began in March 2011.]

As for Turkey, it said it will press its military offensive in Syria until ISIS is driven from a town near its border, while forces aligned with the Assad regime have warned Turkey not to advance any further.

Among the atrocities this week in Syria, a school was hit by Syrian or Russian warplanes in the village of Hass, near Idlib, that killed 14 Syrian children.  I did not see this particular picture but there is one out there showing a lifeless child, still clutching their black school bag.  Just writing this makes one want to cry.

The Syrian regime was also accused of dropping barrel bombs on U.S. and Turkey-backed rebels.

Iran: A senior Iranian official accused European governments of not being fully committed to implementation of the nuclear deal, saying they were stymieing investment.  Asghar Fakhrieh Kashan, deputy transport minister, told the Financial Times that “unacceptable” terms were being placed on contracts for areas such as in the energy sector.

“Iran will not accept any clauses in trade agreements which insert political risks alongside commercial risks.”

While western and Asian businesses have flocked to Tehran since the nuke deal was signed, few big contracts have been finalized.

The government is under pressure to deliver the economic dividends of the accord as President Rouhani runs for a second term next year.  He is facing stiff resistance from hardliners in the regime who argue the nuclear deal has brought little benefit.

The U.S. did give clearance last month for Boeing to sell 80 aircraft and Airbus 17 to Iran Air.

Afghanistan: The Taliban killed at least 20 civilians after they were abducted in a remote central province, police officials said.

In neighboring Pakistan, ISIS claimed responsibility for a horrific attack on a police academy in Quetta that killed at least 60, with Pakistani officials saying the militants (who may have instead been part of an al-Qaeda offshoot) probably crossed over from Afghanistan or were in contact with handlers on the Afghan side of the border.  [Quetta is just 150 miles from the Afghan city of Kandahar, long a staging ground for insurgent activities and a base for the Taliban.]

Israel: As reported by Reuters and the Jerusalem Post, Saudi Arabia, which normally provides $20 million a month to the Palestinian budget, has reportedly not made any contributions since, as the Saudis, Egypt and other Arab nations pile pressure on Palestinian Authority President Mahmoud Abbas to resolve divisions in his Fatah party and with rival Hamas.   There are concerns Palestinian democracy is under threat.  Abbas, 81, has been in power since 2005 and the issue is what would happen if he dies in office.

A key figure, residing in the UAE in self-imposed exile, is former Fatah security chief Mohammed Dahlan, 55, who some Fatah officials want to reconcile with Abbas, but Abbas is showing no inclination to do so. Dahlan is largely respected throughout the Arab world.

Egypt: A senior Egyptian military official was assassinated outside his home near Cairo on Saturday.  Maj. Adel Ragaai had been responsible for an operation last year that destroyed the tunnels running between Egypt and the Gaza Strip.  In retaliation, Egypt’s air force struck a number of ISIS outposts in the northern Sinai peninsula, early Sunday, killing around 70 militants.

Russia: At a televised news conference on Thursday, President Vladimir Putin said the Kremlin has no preference in the U.S. presidential election, but he said Donald Trump seems to reflect the needs of average people “who don’t like that power is being transferred by inheritance.”  Putin added that while Trump “is, of course, extravagant... He simply represents the interests of simple people who criticize those who have been in power for decades.”

But Putin also said the Kremlin would welcome any candidate who expressed a desire for “normalizing relations between the U.S. and Russia.”

As for Russia’s impact on the vote, Putin said, “Does anybody seriously think that Russia could somehow influence the choice of the American people? Is it a banana republic or something?  America is a great power.”

And Putin said the West is propagating a “fictional, mythical” military threat Moscow poses to the world.

But tensions continue to ratchet up, whether it’s over Syria or Ukraine.

On a different issue, Russia canceled a request to refuel a flotilla of its Syria-bound warships at a Spanish port on Wednesday, amid mounting criticism leveled at Madrid from NATO.  The big issue is that the battle group, led by Russia’s lone aircraft carrier – the elderly Admiral Kuznetsov – is no doubt being deployed to increase the number of Russian airstrikes in Syria, thus exacerbating the humanitarian catastrophe in places like Aleppo.

While up in the Baltics, Russia moved two new warships into the Baltic Sea, with Sweden and Poland immediately protesting the move.  The warships are armed with long-range cruise missiles to counter NATO’s buildup in the region, Russian media reported on Wednesday.  It would seem the two ships are to become part of a newly formed division in Kaliningrad, Russia’s European enclave that I’ve warned could be the ultimate flashpoint.  No one should be surprised if there are nuclear weapons there today, Moscow having moved ballistic missiles to Kaliningrad recently, right on the border with Poland and Lithuania.  The warships certainly have nuclear capable missiles as well, though most seem to think they do not have nukes on the ships currently.

China: The Communist Party elevated President Xi Jinping further, as he’ll now be referred to as the “core” of its leadership ahead of the party’s five-yearly congress late next year.  This will give Xi greater influence over reshuffles of the top ranks.

The move came after the end of the Central Committee’s four-day sixth plenum in Beijing that also announced the party congress would be held “in the second half of 2017 in Beijing,” which marks the start of formal preparations that will be all consuming the next 12 months.

The “core” title was used by Deng Xiaoping in 1989 to describe Mao Zedong, himself and his successor Jiang Zemin, but it was not granted to Jiang’s successor and Xi’s predecessor, Hu Jintao.  The significance of this, as pointed out in the South China Morning Post, was that Hu was referred to as the “general secretary” of the leadership, and technically was the “first among equals” with the other eight Politburo Standing Committee members.

So recall, as I wrote a number of weeks ago, Xi will now have the final say in replacing up to 11 seats on the 25-strong Politburo, as well as on up to five members of the Politburo Standing Committee who are expected to retire.

On a different issue, no country in the world has greater income inequality than China, and Forbes now lists 400 billionaires in the country, up from 335 a year ago.  Total wealth held by the 400 is $947 billion.  Wang Jianlin, chairman of Dalian Wanda Group, is worth $33 billion.  Alibaba founder Jack Ma is second at $28.2bn.

And another...Vietnam customs officials seized nearly one ton of ivory hidden in a timber shipment from Kenya, the third major illegal haul of previous tusks in less than a month, with most of it headed for China.  Ivory products are also hot in Vietnam, though the trade is officially banned.  3.5 tons of ivory have been discovered this month at Ho Chi Minh City’s port.

North Korea: James Clapper, the National Intelligence Director, told an audience in Washington on Tuesday that persuading North Korea to abandon its nuclear weapons program is “probably a lost cause” and the best the U.S. could hope for was a cap on capabilities.  Clapper described the government in Pyongyang as “paranoid,” seeing nuclear weapons as “their ticket to survival.”

“So the notion of giving up their nuclear capability, whatever it is, is a non-starter with them,” he said.  [BBC News]

Philippines: On a visit to Japan, Philippine President Rodrigo Duterte said on Thursday that his country could join naval exercises with Japan, but repeated there would be no more war games with the United States, telling Japanese Prime Minister Shinzo Abe that the reason why he resented the U.S. was because Washington treated the Philippines like “dogs on a leash” and lectured about human rights in connection with his campaign against drugs.

Separately, Duterte said on Friday that a voice from God told him to stop swearing.  Well isn’t that special.

Venezuela: Hundreds of thousands of opposition supporters rallied across the country on Wednesday against Socialist President Nicolas Maduro, whom they accuse of being a dictator after he blocked a recall referendum to vote him out.  The people are desperate and one would expect the protests to turn increasingly violent.

Random Musings

Presidential Polls....prior to Friday’s bombshell....

A CNN/ORC national poll of likely voters had Hillary Clinton with 49%, Donald Trump 44%, Gary Johnson 3% and Jill Stein 2%.  Trump led among men 48-45, while Clinton led with women 53-41.  White college graduates favored Clinton 52-41, white non-college folks were behind Trump 62-32.

A Fox News national poll released Thursday had Trump trailing Clinton by just three, 44-41, Johnson 7, Stein 3.  In this one Clinton leads among women 48-38, while Trump leads among men 44-39.  Trump is viewed unfavorably by 56%, Clinton by 53%.

A USA TODAY/Suffolk University national poll has Clinton leading Trump 47-38 (Johnson 4, Stein 2).  51% of likely voters express at least some concern about the possibility of violence on Election Day, with more than four in 10 of Trump supporters saying they won’t recognize the legitimacy of Clinton as president, because they say she wouldn’t have won fair and square.

A poll released Wednesday by the AP-GfK shockingly had the election at 51-37.  Just want this one in there for the record.

Last weekend, an ABC News/Washington Post tracking poll had Clinton leading Trump 50-38, with Johnson at 5% and Stein 2%.  But the margin in this one was already down to four today.

In state polls...

A Bloomberg Politics survey of Florida voters has Trump ahead of Clinton 45-43 (Johnson 4, Stein 2).

Earlier, a CBS News Battleground Tracker poll had Clinton leading in Florida 46-43.

The CBS Battleground survey also had Trump leading Clinton in Texas by the same 46-43 margin.

The above also showed more than 80 percent of Republicans in Texas and Florida think there is widespread voter fraud and 72 percent of Republicans in those states think Trump would win the election if it were not for fraud.

A Monmouth University Poll of North Carolina likely voters has 47% for Clinton and 46% for Trump, with 4% for Johnson.  In late August, the same poll had it 44-42, Clinton, with Johnson at 7.  33% have a favorable opinion of Trump, 54% unfavorable.  35% have a favorable opinion of Clinton, 55% unfavorable.

[Republican Sen. Richard Burr has widened his lead in the state to 49-43 over Democratic state legislator Deborah Ross.  GOP incumbent Gov. Pat McCrory holds a 48-47 lead over Democratic Attorney General Roy Cooper.]

A Quinnipiac University poll has Clinton ahead of Trump in North Carolina 47-43 (Johnson 5)

In a Monmouth University poll of Arizona voters, Trump edges Clinton 46-45, Johnson 4.

[Republican Sen. John McCain leads Congresswoman Ann Kirkpatrick 50-40 in their race.]

A Wall Street Journal/NBC News/Marist poll finds Trump and Clinton tied in Nevada at 43%, with Gary Johnson drawing 10% (Jill Stein not being on the ballot here).

The WSJ/NBC/Marist survey has Clinton leading Trump in New Hampshire 45-36, Johnson 10, Stein 4.

Quinnipiac also had the following state polls....

In Georgia, Trump 44, Clinton 43, Johnson 8.

In Iowa, a 44-44 tie (Johnson 4).

In Virginia, 50-38 Clinton.

--Trump raised just $28.9 million for his campaign committee in the first 19 days of October, compared with Clinton’s $57.2 million.

The Emails and other stuff, part deux....

The Wall Street Journal reported that Virginia Gov. Terry McAuliffe, a longtime Clinton confidant, helped steer $675,000 to the election campaign of the wife of an FBI agent who went on to lead the probe into Hillary’s use of a private email server.

McAuliffe’s political action committee donated $467,500 to the state Senate campaign of the wife of Andrew McCabe, currently a deputy director of the FBI.  Jill McCabe received $208,000 from the Virginia Democratic Party, which McAuliffe essentially controls.

The thing is, the Journal reports the money didn’t start flowing until two months after the FBI started its investigation into Clinton in July 2015.  Andrew McCabe was also given a big promotion around the same time, and shortly thereafter another one, to the second-highest position in the Bureau.

The FBI told the Journal there is nothing fishy about the chain of events, and that McCabe only met McAuliffe once, when the governor persuaded Jill McCabe to run.

Editorial / Wall Street Journal

“All of (the above) asks voters to believe that Mr. McCabe as the No. 3 official at the FBI had nothing to do with the biggest, most sensitive case at that agency.  This strains credulity.  Before he became No. 3 at the FBI Mr. McCabe ran the bureau’s Washington, D.C. field office that provided resources to the Clinton probe.  Campaign-finance records show that 98% of the McAuliffe donations to Mrs. McCabe came after the FBI launched its Clinton probe.

“Director Comey, the self-styled Boy Scout, somehow didn’t think any of this would look suspicious? Add this to the list of special treatment for Mrs. Clinton: no grand jury, grants of immunity to her aides, no interview until the last minute, a special exonerating public declaration, and a pre-Labor Day dump of damaging FBI notes.

“The contrast couldn’t be greater with the FBI and Justice Department determination to convict retired Gen. James Cartwright – former vice chairman of the Joint Chiefs of Staff – of a felony for lying to the FBI.  The general told a federal court last week he regretted he didn’t tell the bureau the truth about conversations he’d had with reporters about a secret cyberattack disrupting Iran’s nuclear program. He could serve up to five years in prison.

“ ‘People who gain access to classified information after promising not to disclose it must be held accountable when they willfully violate that promise,’ said U.S. Attorney Rod Rosenstein in a press release....

“This is comical coming from the same folks who gave away immunity deals like candy in their probe of Mrs. Clinton.  Gen. Cartwright wasn’t even the original source of the Iran leaks.  The general says he confirmed details the reporters already had in an effort to prevent them from publishing information that could harm America’s national security.

“Though Mrs. Clinton didn’t leak to reporters, her personal server exposed national secrets to potential hackers, and she gave a number of people (including some of her attorneys) without proper clearances access to that information. When Gen. Cartwright became the subject of an investigation, he was stripped of his security clearance – which never happened to Mrs. Clinton.

“Maybe the general should have run for the Democratic nomination.  Enough red flags have been raised about the McCabe-Comey investigation of Mrs. Clinton that it deserves to be the subject of an investigation by Congress.  Let’s get some of the FBI agents under oath and see what they think of the Comey procedures. If it’s all on the up and up, they have nothing to fear from public transparency.”

--Daniel Henninger / Wall Street Journal

“If Democrats regain control of the Senate, would you be happy with Elizabeth Warren and Bernie Sanders as co-presidents of the United States?  Ignore the Senate and voters will pay a price even bigger than a Clinton presidency.  Do not for a moment think Elizabeth Warren is barnstorming the country now only to elect Hillary Clinton.  She’s getting out the vote to make sure Elizabeth Warren is in position next year to co-run the government from Capitol Hill.

“Sens. Warren and Sanders remember what happened in 2008.  The Democratic presidential primaries that year were the historic battlegrounds for control of the Democratic Party’s direction.  The Clinton machine, which had captured the party’s policy and donor apparatus, was considered unbeatable.  Until a freshman Illinois senator pulled progressives together into an astonishing political force that overthrew the Clintons.

“That happened because progressives didn’t like what they believed the Clintons represented – cynical centrism – and they don’t like it now. There is no way the left now lets the Clinton Foundation and the politics it embodies recapture control of the party.

“Elizabeth Warren, the Democrats’ Madame Defarge, and Bernie Sanders, winner of 22 millennial-fueled primaries, are going to guarantee the revolution’s purity in any Clinton presidency.”

For starters, Sen. Warren and her supporters have a hit list of those they will oppose being placed in a Clinton administration; especially the next Treasury Secretary.  But also Warren will extend her veto over departments of Justice, Labor, Education and the regulatory agencies.  “The Warren wing will appoint the people who, as they did in the Obama years, tell the rest of America what to do.  Under this system, your role is to salute – or get sued by federal lawyers.

“It is assumed that in return for dropping his opposition to Mrs. Clinton, the Vermont socialist will become chairman of the Senate budget committee....

“A few days ago, Hillary Clinton said to a campaign rally, ‘I could listen to Elizabeth Warren go on all day.’ Whether the country wants to remains to be seen.”

I know I’ve been waking up in the middle of the night in a cold sweat over the prospect.

--John Podhoretz / New York Post

“When the news hit on Tuesday that the Trump campaign has washed its hands of fund-raising efforts two weeks before the election, the humiliation of the traditional Republican Party at the hands of Donald Trump was all but complete.

“His refusal to help fill party coffers just as the last push for voters commences – which is an expensive process and requires cash on hand – is the perfect capper to 16 months in which Trump has gleefully terrorized weak-kneed Republican officials, forced them to comply with his wishes and then screwed them.

“And it’s probably not the capper, not really; with 12 days to go until the election, who knows what final blows Trump will deliver to the kneecaps of Republican National Chairman Reince Priebus and all the elected Republican officials who have been doing the ‘yes, I endorsed you but I don’t really like you’ two-step?

“Loyalty is a one-way street in Trump World.  Priebus has likely sacrificed his future being loyal to Trump in the present, since the candidate to whom he has sworn his allegiance is now effectively turning on the Republican Party’s efforts to elect candidates down-ticket – which is Priebus’ primary responsibility as RNC chair.

“Priebus has no right to be surprised.  From the moment the mogul came down the escalator, Trump has played him like a piano....

“Trump owned Priebus so badly that his consistent aggression against Priebus’ close friend Paul Ryan earned not so much as a syllable of public complaint or distancing.  He owned Priebus so lock, stock and barrel that the suggestion of any effort to use existing Republican Party rules to challenge Trump’s domination of the Republican National Convention led to the mouse-like Priebus suddenly roaring lion-like about financial punishments and excommunications for anyone who dared cross the nominee....

“As the last days approach, Priebus and others are left to wonder whether Trump is going to follow the ideological wishes of his campaign chairman Steve Bannon and try to burn the Republican Party down so that Bannon and others like him can more easily occupy the ruins.  Now there’s nothing they can do to prevent the arson, and there’s nowhere for them to go to avoid being singed themselves.

“All this was possible from the minute Trump became a candidate. Priebus knew it, because otherwise he wouldn’t have thought it necessary to court Trump so assiduously in the summer of 2015. That was his first mistake, and, in politics, very likely his last.”

--U.S. officials and security analysts believe last Friday’s massive internet attack that briefly blocked access to dozens of popular sites was not the work of a foreign government, but rather a “nonstate actor,” according to National Intelligence Director James Clapper. Clapper said whoever was behind it used a vast collection of internet-linked devices to create a flood of traffic that then overwhelmed a key cog in the Net, Dynamic Network Services Ind., known as Dyn, a service that handles the domain name system for corporate clients.

--Newt Gingrich on Megyn Kelly’s show Tuesday night.

“You want to go back through the tapes of your show recently?” Gingrich asked.  “You are fascinated with sex and you don’t care about public policy.”

“Me?  Really?” Kelly asks.

“That’s what I get out of watching you tonight,” said Gingrich.

“You know what, Mr. Speaker?  I am not fascinated by sex,” Kelly said, “but I am fascinated by the protection of women and understanding what we’re getting in the Oval Office, and I think the American voters would like to know...”

“And therefore we’re going to send Bill Clinton back to the East Wing because you are worried about sexual predators,” Gingrich interrupted.

“Listen, it’s not about me,” Kelly said.  “It’s about the women and men of America, and the polls show us that the women of America in particular, are very concerned about these allegations.”

Please, Lord, make it stop!!!

Separately, it was reported by the Wall Street Journal that Kelly is asking for an average salary north of $20 million for her next contract at Fox; the current one, which pays her $15 million annually, expiring in July.  $20 mil would put her on par with Bill O’Reilly.

Rupert Murdoch said in an interview that while Ms. Kelly is important to the network, “it’s up to her....We have a deep bench of talent, many of whom would give their right arm for her spot.”

--George Will / Washington Post

“When the Jimmy Carter/Walter Mondale ticket lost 44 states in 1980, Mondale used his elegant concession remarks to herald ‘a chance to rejoice’: ‘Today, all across this nation – in high school cafeterias, in town halls, and churches, and synagogues – the American people quietly wielded their staggering power....Tonight we celebrate above all the process we call American freedom.’  Today, such political grace notes are rare as the nation slouches toward its first dyspeptic landslide – an electoral-vote avalanche for a candidate regretted by a majority of the electorate.

“Abraham Lincoln was elected in 1860 with the lowest percentage of the popular vote (39.9) of any electoral winner in history.  He received fewer than the combined votes for two Democratic rivals, the Northerner Stephen Douglas and the Southerner John Breckinridge.  This did not prevent Lincoln from becoming the nation’s greatest president.  Majorities, however helpful, are not necessary.  In 14 of the 39 elections since 1860 the winner did not get a majority of the popular vote, including Woodrow Wilson (twice), Harry S. Truman, John F. Kennedy and Bill Clinton (twice), Democrats all.

“Carter’s 50.1 percent of the popular vote in 1976 was the only time in the 40 years after 1964 that a Democratic presidential candidate would win a majority of the popular vote....In the past four elections (2000-2012), no loser has fallen below 45 percent of the vote and no winner has reached 53 percent.”

--According to a new Gallup poll, 76% of Americans said they have “a great deal” of respect for police in their area, up 12 percentage points from last year, even as there have been ongoing protests over police shootings of black men across the country.

But you’ve had the fatal attacks on police officers in Dallas, Baton Rouge and the other day two officers in Palm Springs.

As William Johnson, executive director of the National Association of Police Organizations, which represents 240,000 law-enforcements officers, told the Wall Street Journal: “The public understands that there are incidents where things go horribly wrong.  They also understand that policing in the U.S. is the best in the world.”

--Charles Lane of the Washington Post had a piece on California Prop. 62, a referendum to abolish California’s death penalty and replace it with life without parole for the 749 current occupants of death row.  Surprisingly, given California’s political makeup, the proposition may not pass, as four of five polls show ‘no’ up by an average of 50 to 37.

Nationally, a Pew Research Center survey shows that 49% of the public favors the death penalty for murder, while 42% oppose it.  A new Gallup poll found 60% support, which is actually a smaller majority than in previous years.

I want it expanded to include crimes such as massive insurance fraud.  To me the key is premeditation.

Meanwhile, President Obama commuted the sentences of 98 more inmates this week, his eighth round of commutations this year to a total of 872 since taking office – more than the past 11 presidents combined.  According to the Department of Justice, “only non-violent, low-level offenders, who have served at least 10 years of their federal sentence, demonstrated good behavior and have no significant criminal history or a history of violence are eligible.” [The Hill]

--The Justice Department, with cooperation from authorities in India, announced charges against 61 people in the U.S. and India, as well as entities in the latter that represented a network of call centers that scammed at least 15,000 victims out of more than $250 million; the callers claiming to be officials with the IRS or immigration services that presented those who answered with an ultimatum.  Pay us or you’ll be arrested or deported.

--In a surprise, seven defendants led by Ammon and Ryan Bundy were acquitted Thursday of federal conspiracy and weapons charges stemming from the takeover of a federally owned wildlife sanctuary in Oregon last winter, a blow to government prosecutors, who had argued the Bundys and five of their followers used force and threats of violence to occupy the reserve. But the jury went with the defendants’ argument this was a case of government overreach and that they posed no threat to the public.

--The Roman Catholic Church has banned the scattering of ashes of the dead, with new Vatican guidelines forbidding a list of increasingly popular means of commemorating loved ones, from scattering ashes at sea to having them turned into jewelry or put in a locket, dismissing them as New Age practices and “pantheism.”

In instruction approved by Pope Francis, us Catholics are even forbidden from keeping the ashes of a loved one in an urn at home, and the Church rules out dividing people’s ashes between members of the family. 

I had forgotten the Catholic Church forbade cremation until 1963, but now the Pope is insisting ashes should only be kept in a “sacred place,” such as a cemetery.

I have to admit, I was thinking of a certain golf course in Ireland, and I think I could get away with that.  I mean I always wanted to be somewhere that I knew would be around a century or two from now, which would preclude wherever the Mets are playing at the time.

--We note the passing of Tom Hayden, the 1960s radical who was at the vanguard of the anti-Vietnam War movement and was prosecuted for his role in the violent clashes at the 1968 Democratic National Convention.  Hayden later married actress Jane Fonda and the two traveled around the country denouncing the war and backing liberal candidates and causes.  Hayden was 76.

--The latest Living Planet report by the World Wildlife Fund (WWF) and the Zoological Society of London (ZSL) estimates that by 2020 populations of vertebrates will have fallen by 67 percent since 1970.

“Extinction rates are now running at 100 times their natural level because of deforestation, hunting, pollution, overfishing and climate change.”

Mike Barrett, director of science and policy at WWF-UK, said, “For the first time since the demise of the dinosaurs 65 million years ago, we face a global mass extinction of wildlife.  You can see it happening all around. I haven’t seen a living wild hedgehog in the British countryside for years, and you used to see them all the time....

“But we can stop this.  While on the one hand we’re the first species to change the planet, we’ve also never had a better understanding of how environmental systems work and how forests, oceans and climate all interact.”

Freshwater species are faring the worst, with declines of 81% between 1970 and 2012.

--I’ve noted in the past how I have a lot of relatives in the Greensburg/Latrobe, Penn., area and the other day my brother passed on a piece from the Pittsburgh Tribune-Review concerning Greensburg’s fire chief,  J. Edward Hutchinson (“Hutch”), who is 95!  He has been the city’s fire chief for more than six decades, but has opted out of running for another term.  Congratulations, Hutch.  Enjoy your retirement.

--Finally, from the New York Post:

“A team of astronomers believes that strange signals emanating from a cluster of stars are actually aliens trying to tell the universe they exist.

“The study, which appeared in the Publications of the Astronomical Society of the Pacific, analyzed the odd beams of light from 234 stars – a fraction of the 2.5 million that were observed.

“The bizarre beacons led the paper’s authors, Ermanno F. Borra and Eric Trottier from Laval University in Quebec, to conclude that it’s ‘probably’ aliens.

“ ‘We find that the detected signals have exactly the shape of an [extraterrestrial intelligence] signal predicted in the previous publication and are therefore in agreement with this hypothesis,’ wrote Borra and Trottier.

Yet another reason to always sleep with one eye open, boys and girls, just as we do here at StocksandNews.

---

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

God bless America.

---

Gold $1276
Oil $48.66

Returns for the week 10/24-10/28

Dow Jones  +0.1%  [18161]
S&P 500  -0.7%  [2126]
S&P MidCap  -1.8%
Russell 2000  -2.5%
Nasdaq  -1.3%  [5190]

Returns for the period 1/1/16-10/28/16

Dow Jones  +4.2%
S&P 500  +4.0%
S&P MidCap  +7.2%
Russell 2000  +4.6%
Nasdaq  +3.7%

Bulls 47.1
Bears 23.1  [Source: Investors Intelligence]

Have a great week.

Brian Trumbore